<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
SCHEDULE 13D
(AMENDMENT NO. 2)
(PURSUANT TO SECTION 13(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934)
------------------------
AMDAHL CORPORATION
(ISSUER)
FUJITSU INTERNATIONAL, INC.
FUJITSU LIMITED
(BIDDERS)
------------------------
COMMON STOCK, PAR VALUE $.05 PER SHARE
(TITLE OF CLASS OF SECURITIES)
------------------------
023905 10 2
(CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------
TAKASHI TAKAYA
DIRECTOR AND GROUP PRESIDENT
CORPORATE PLANNING AND BUSINESS DEVELOPMENT
FUJITSU LIMITED
MARUNOUCHI CENTER BUILDING
6-1, MARUNOUCHI 1-CHOME
CHIYODA-KU, TOKYO 100, JAPAN
TELEPHONE: 81-3-3216-0570
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDER)
------------------------
COPY TO:
ROBERT S. TOWNSEND, ESQ.
MORRISON & FOERSTER LLP
425 MARKET STREET
SAN FRANCISCO, CALIFORNIA 94105-2482
TELEPHONE: (415) 268-7080
------------------------
CALCULATION OF FILING FEE
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<TABLE>
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TRANSACTION VALUATION* AMOUNT OF FILING FEE**
- --------------------------------------------------------------------------------------------
$911,139,864 $182,228
</TABLE>
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* For purposes of calculating the filing fee only. This calculation assumes (i)
the purchase of (x) 123,032,555 shares of common stock, par value $.05 per
share, of the subject company ("Shares") issued and outstanding as of July
29, 1997, according to the subject company (including Shares presumed to be
issued at the end of the most recent purchase period under the subject
company's employee stock purchase plan), less 51,811,664 Shares owned by the
Purchaser and its affiliates, and (y) options to purchase 4,707,431 Shares
issued and outstanding as of July 29, 1997 that will vest prior to the
expiration of the Offer and that have exercise prices of less than $12.00;
and (ii) the offer price of $12.00 per share.
** The amount of the filing fee, calculated in accordance with Regulation
240.0-11 of the Securities Exchange Act of 1934, is equal to 1/50 of 1% of
the Transaction Valuation.
[ ] 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.
<TABLE>
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AMOUNT PREVIOUSLY PAID: NONE FILING PARTY: N/A
FORM OR REGISTRATION NO.: N/A DATE FILED: N/A
</TABLE>
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<TABLE>
<C> <S> <C>
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1 NAME OF REPORTING PERSONS Fujitsu International, Inc.: 94-3277284
S.S OR I.R.S IDENTIFICATION NOS. Fujitsu Limited: 13-2503640
OF ABOVE PERSONS
- ----------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF MEMBER OF A GROUP (a) [ ]
(b) [ ]
- ----------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ----------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS
AF, WC, BK and/or OO
- ----------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
- ----------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Fujitsu International, Inc.: Delaware
Fujitsu Limited: Japan
- ----------------------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
51,811,664
- ----------------------------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) [ ]
EXCLUDES CERTAIN SHARES
- ----------------------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
42.14% of Outstanding Shares (using the number of outstanding Amdahl Corporation
Common Shares on July 29, 1997, as advised by Amdahl Corporation for
computational purposes)
- ----------------------------------------------------------------------------------------------
10 TYPE OF PERSON REPORTING
CO
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</TABLE>
<PAGE> 3
INTRODUCTION
This Tender Offer Statement on Schedule 14D-1 and Amendment No. 2 to
Schedule 13D (this "Statement") relates to the offer by Fujitsu International,
Inc. (the "Purchaser"), a Delaware corporation and a wholly owned subsidiary of
Fujitsu Limited, a Japanese corporation (the "Parent"), to purchase any and all
outstanding shares of common stock, par value $.05 per share (the "Shares"), of
Amdahl Corporation, a Delaware corporation (the "Company"), at a price of $12.00
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 August 5,
1997 (the "Offer to Purchase"), and in the related Letter of Transmittal (which
together, as amended or supplemented from time to time, constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of
July 30, 1997 (the "Merger Agreement"), by and among the Purchaser, the Parent
and the Company. The Merger Agreement provides, among other things, for the
making of the Offer by the Purchaser, and further provides that, following the
purchase of Shares pursuant to the Offer and as soon as practicable after the
satisfaction or waiver of certain other conditions, the Purchaser will be merged
with and into the Company (the "Merger"), with the Company continuing as the
surviving corporation and becoming a wholly owned subsidiary of the Parent. At
the effective time of the Merger, each issued and outstanding Share (except for
Shares held in the treasury of the Company or by any subsidiary of the Company,
Shares registered in the name of the Parent or the Purchaser and Shares held by
stockholders who shall have properly demanded and perfected appraisal rights in
accordance with Section 262 of the General Corporation Law of the State of
Delaware) will automatically be canceled and converted into the right to receive
$12.00 in cash, (or any higher per Share price paid for Shares pursuant to the
Offer), net to the holder, without interest. See "SPECIAL FACTORS -- The Merger
Agreement."
The information contained in this Offer to Purchase concerning the Company,
including, without limitation, information concerning the background of the
Offer and the Merger, the deliberations, approvals and recommendation of the
Company's Board of Directors, acting through the members of such Board who are
independent of the Parent and the Purchaser and who constitute a majority of the
directors in office (the "Disinterested Board"), in connection with the Offer
and the Merger, the opinion of the Disinterested Board's financial advisor and
the Company's capital structure and projected and historical financial
information, was supplied by the Company. The Purchaser and the Parent take no
responsibility for the accuracy of such information.
Copies of the Offer to Purchase and the Letter of Transmittal are annexed
hereto as Exhibits (a)(1) and (a)(2), respectively. This Statement is being
filed on behalf of Parent and the Purchaser for purposes of the Schedule 14D-1
Tender Offer Statement (the "Schedule 14D-1").
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Amdahl Corporation, a Delaware
corporation with its principal executive offices at 1250 East Arques Avenue,
Sunnyvale, California 94086.
(b) The class of equity securities being sought is all of the outstanding
shares of common stock, par value $.05 per share (the "Shares"), of the Company.
The information set forth in the Offer to Purchase under "INTRODUCTION" is
incorporated herein by reference.
(c) The information concerning the principal market in which the Shares are
traded and certain high and low sales prices for the Shares in such principal
market set forth in the Offer to Purchase under "THE TENDER OFFER -- 5. Price
Range of Shares; Dividends" is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) This Statement is being filed on behalf of the Parent and the
Purchaser for purposes of the Schedule 14D-1 and for purposes of Amendment No. 2
to Schedule 13D. The information concerning the name, state or other place of
organization, principal business and address of the principal office of each of
the Purchaser and the Parent, and the information concerning the name, business
address, present principal occupation or employment and the name, principal
business and address of any corporation or other organization in which such
employment or occupation is conducted, material occupations, positions, offices
or employments during the last five years and citizenship of each of the
executive officers and directors of the Purchaser and the Parent are set forth
in the Offer to Purchase under "INTRODUCTION," "THE TENDER OFFER -- 8. Certain
Information Concerning the Parent and the Purchaser" and "Schedule I --
<PAGE> 4
Information Concerning the Directors and Executive Officers of the Parent and
the Purchaser" and is incorporated herein by reference.
(e)-(f) During the last five years neither the Parent, the Purchaser, nor,
to the best knowledge of the Parent and the Purchaser, any of the persons listed
in "Schedule I -- Information Concerning the Directors and Executive Officers of
the Parent and the Purchaser" of the Offer to Purchase, (i) has been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors),
or (ii) was a party to a civil proceeding of a judicial or administrative body
of competent jurisdiction and as a result of such proceeding was or is subject
to a judgment, decree, or final order enjoining future violation of, or
prohibiting activities subject to, federal or state securities laws or finding
any violation of such laws.
(g) The information set forth "THE TENDER OFFER -- 8. Certain Information
Concerning the Parent and the Purchaser" and "Schedule I -- Information
Concerning the Directors and Executive Officers of the Parent and the Purchaser"
of the Offer to Purchase is incorporated herein by reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in "INTRODUCTION," "SPECIAL
FACTORS --Background of the Offer and the Merger; Past Contacts, Transactions
and Negotiations with the Company," "SPECIAL FACTORS -- Interests of Certain
Persons in the Offer and the Merger" and "THE TENDER OFFER -- 8. Certain
Information Concerning the Parent and the Purchaser" of the Offer to Purchase is
incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c) The information set forth in "SPECIAL FACTORS -- Financing the
Offer and the Merger" of the Offer to Purchase is incorporated herein by
reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(b) The information set forth in "INTRODUCTION," "SPECIAL
FACTORS -- Purpose and Structure of the Offer and the Merger; Reasons of the
Parent and the Purchaser for the Offer and the Merger," "SPECIAL
FACTORS -- Plans for the Company after the Offer and the Merger" and "SPECIAL
FACTORS -- The Merger Agreement" of the Offer to Purchase is incorporated herein
by reference.
(c) The information set forth in "SPECIAL FACTORS -- The Merger Agreement"
and "SPECIAL FACTORS -- Plans for the Company after the Offer and the Merger" of
the Offer to Purchase is incorporated herein by reference.
(d)-(e) The information set forth in "SPECIAL FACTORS -- Purpose and
Structure of the Offer and the Merger; Reasons of the Parent and the Purchaser
for the Offer and the Merger," "SPECIAL FACTORS -- Plans for the Company after
the Offer and the Merger," "SPECIAL FACTORS -- The Merger Agreement," "SPECIAL
FACTORS -- Certain Effects of the Offer and the Merger," "THE TENDER OFFER -- 6.
Effect of the Offer on the Market for the Shares" and "THE TENDER OFFER -- 9.
Dividends and Distributions" of the Offer to Purchase is incorporated herein by
reference.
(f)-(g) The information set forth in "SPECIAL FACTORS -- Plans for the
Company after the Offer and the Merger," "SPECIAL FACTORS -- Certain Effects of
the Offer and the Merger" and "THE TENDER OFFER -- 6. Effect of the Offer on the
Market for the Shares" of the Offer to Purchase is incorporated herein by
reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) The information set forth in "INTRODUCTION," "SPECIAL
FACTORS -- Interests of Certain Persons in the Offer and the Merger," "SPECIAL
FACTORS -- Beneficial Ownership of Shares," "THE TENDER OFFER -- 8. Certain
Information Concerning the Parent and the Purchaser" and "Schedule I --
Information Concerning the Directors and Executive Officers of the Parent and
the Purchaser" of the Offer to Purchase is incorporated herein by reference.
(b) The information set forth in "THE TENDER OFFER -- 7. Certain
Information Concerning the Company" of the Offer to Purchase is incorporated by
reference.
<PAGE> 5
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth in "INTRODUCTION," "SPECIAL FACTORS -- Background
of the Offer and the Merger; Past Contacts, Transactions and Negotiations with
the Company," "SPECIAL FACTORS -- Purpose and Structure of the Offer and the
Merger; Reasons of the Parent and the Purchaser for the Offer and the Merger,"
"SPECIAL FACTORS -- Plans for the Company after the Offer and the Merger,"
"SPECIAL FACTORS -- Interests of Certain Persons in the Offer and the Merger,"
"SPECIAL FACTORS -- The Merger Agreement," "SPECIAL FACTORS -- Certain Effects
of the Offer and the Merger," "THE TENDER OFFER -- 6. Effect of the Offer on the
Market for Shares" and "THE TENDER OFFER -- 7. Certain Information Concerning
the Company, of the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in "INTRODUCTION," "SPECIAL FACTORS -- Background
of the Offer and the Merger; Past Contacts, Transactions and Negotiations with
the Company," "SPECIAL FACTORS -- Opinion of Financial Advisor to the
Disinterested Board," "SPECIAL FACTORS -- Report of Financial Advisor to the
Parent" and "THE TENDER OFFER -- 12. Fees and Expenses" of the Offer to Purchase
is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in "THE TENDER OFFER -- 8. Certain Information
Concerning the Parent and the Purchaser" of the Offer to Purchase is
incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in "SPECIAL FACTORS -- Background of the
Offer and the Merger; Past Contacts, Transactions and Negotiations with the
Company," "SPECIAL FACTORS -- Interests of Certain Persons in the Offer and the
Merger" and "SPECIAL FACTORS -- The Merger Agreement" of the Offer to Purchase
is incorporated herein by reference.
(b)-(c) The information set forth in "THE TENDER OFFER -- 11. Certain Legal
Matters; Regulatory Approvals" of the Offer to Purchase is incorporated herein
by reference.
(d) The information set forth in "SPECIAL FACTORS -- Certain Effects of the
Offer and the Merger" and "THE TENDER OFFER -- 6. Effect of the Offer on the
Market for the Shares" of the Offer to Purchase is incorporated herein by
reference.
(e) The information set forth in "THE TENDER OFFER -- 11. Certain Legal
Matters; Regulatory Approvals" of the Offer to Purchase is incorporated herein
by reference.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively, is incorporated herein by reference.
<PAGE> 6
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
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<S> <C>
(a)(1) Form of Offer to Purchase, dated August 5, 1997.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Letter from Lehman Brothers Inc. to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(4) Form of Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees to Clients.
(a)(5) Form of Notice of Guaranteed Delivery.
(a)(6) Form of Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Summary Advertisement as published in The Wall Street Journal on August 5, 1997.
(a)(8) Text of Joint Press Release, dated July 30, 1997, issued by Fujitsu Limited and
Amdahl Corporation.(1)
(a)(9) Text of Joint Press Release, dated August 5, 1997, issued by Fujitsu Limited and
Amdahl Corporation.
(b) Not applicable.
(c)(1) Agreement and Plan of Merger, dated as of July 30, 1997, by and among Fujitsu
Limited, Fujitsu International, Inc. and Amdahl Corporation (incorporated herein
by reference to Exhibit III to the Offer to Purchase filed as Exhibit (a)(1)
hereto).
(c)(2) Confidentiality Agreement, dated June 30, 1997, between Fujitsu Limited and Amdahl
Corporation.(1)
(c)(3) Letter Agreement, dated July 9, 1997, between Fujitsu Limited and Amdahl
Corporation.(1)
(c)(4) Amdahl/Fujitsu 1982 Agreement, dated March 4, 1982, between Fujitsu Limited and
Amdahl Corporation.
(c)(5) Letter Agreement, dated April 3, 1984, between Fujitsu Limited and Amdahl
Corporation.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
</TABLE>
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(1) Filed as an Exhibit to Amendment No. 1 to the Schedule 13D filed by Fujitsu
Limited with the Securities and Exchange Commission on July 31, 1997 and
incorporated herein by reference.
<PAGE> 7
SIGNATURE
After due inquiry and to the best of the undersigned's knowledge and
belief, the undersigned certifies that the information set forth in this
statement is true, correct and complete.
Dated: August 5, 1997
Fujitsu Limited
By: /s/ KAZUTO KOJIMA
------------------------------------
Name: Kazuto Kojima
Title: Director and Group President
Marketing Group and International
Computer Business Group
Fujitsu International, Inc.
By: /s/ KAZUTO KOJIMA
------------------------------------
Name: Kazuto Kojima
Title: President
<PAGE> 8
EXHIBIT LIST
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
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<S> <C> <C>
(a)(1) Form of Offer to Purchase, dated August 5, 1997..........................
(a)(2) Form of Letter of Transmittal............................................
(a)(3) Form of Letter from Lehman Brothers Inc. to Brokers, Dealers, Commercial
Banks Trust Companies and Other Nominees.................................
(a)(4) Form of Letter from Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees to Clients............................................
(a)(5) Form of Notice of Guaranteed Delivery....................................
(a)(6) Form of Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9......................................................
(a)(7) Summary Advertisement as published in The Wall Street Journal on August
5, 1997..................................................................
(a)(8) Text of Joint Press Release, dated July 30, 1997, issued by Fujitsu
Limited and Amdahl Corporation(1)........................................
(a)(9) Text of Joint Press Release, dated August 5, 1997, issued by Fujitsu
Limited and Amdahl Corporation...........................................
(b) Not applicable.
(c)(1) Agreement and Plan of Merger, dated as of July 30, 1997, by and among
Fujitsu Limited, Fujitsu International, Inc. and Amdahl Corporation
(incorporated herein by reference to Exhibit III to the Offer to Purchase
filed as Exhibit (a)(1) hereto)..........................................
(c)(2) Confidentiality Agreement, dated June 30, 1997, between Fujitsu Limited
and Amdahl Corporation(1)................................................
(c)(3) Letter Agreement, dated July 9, 1997, between Fujitsu Limited and Amdahl
Corporation(1)...........................................................
(c)(4) Amdahl/Fujitsu 1982 Agreement, dated March 4, 1982, between Fujitsu
Limited and Amdahl Corporation...........................................
(c)(5) Letter Agreement, dated April 3, 1984, between Fujitsu Limited and Amdahl
Corporation..............................................................
(d) Not applicable...........................................................
(e) Not applicable...........................................................
(f) Not applicable...........................................................
</TABLE>
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(1) Filed as an Exhibit to Amendment No. 1 to the Schedule 13D filed by Fujitsu
Limited with the Securities and Exchange Commission on July 31, 1997 and
incorporated herein by reference.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
AMDAHL CORPORATION
AT
$12.00 NET PER SHARE
BY
FUJITSU INTERNATIONAL, INC.
A WHOLLY OWNED SUBSIDIARY OF
FUJITSU LIMITED
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
FRIDAY, SEPTEMBER 5, 1997, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES THAT, WHEN ADDED TO THOSE SHARES HELD BY FUJITSU LIMITED (THE "PARENT")
AS OF THE EXPIRATION OF THE OFFER, REPRESENTS AT LEAST 51% OF THE OUTSTANDING
SHARES, (II) THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIODS
UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND
THE EXON-FLORIO ACT, AND (III) RECEIPT OF ANY REQUISITE APPROVALS OF THE
EUROPEAN COMMISSION AND THE BANK OF JAPAN. THE OFFER ALSO IS SUBJECT TO THE
OTHER TERMS AND CONDITIONS DESCRIBED IN THIS OFFER TO PURCHASE. SEE SECTIONS 10
AND 11.
THE BOARD OF DIRECTORS OF AMDAHL CORPORATION (THE "COMPANY"), ACTING THROUGH
THE MEMBERS OF THE BOARD WHO ARE INDEPENDENT OF THE PARENT AND FUJITSU
INTERNATIONAL, INC. (THE "PURCHASER") AND WHO CONSTITUTE A MAJORITY OF THE
DIRECTORS IN OFFICE, HAS UNANIMOUSLY APPROVED THE OFFER, THE MERGER AND THE
MERGER AGREEMENT DESCRIBED HEREIN AND UNANIMOUSLY DETERMINED THAT THE OFFER, THE
MERGER AND THE MERGER AGREEMENT ARE FAIR TO AND IN THE BEST INTERESTS OF THE
COMPANY AND THE COMPANY'S STOCKHOLDERS (OTHER THAN THE PARENT AND ITS
AFFILIATES) AND UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT
THE OFFER AND TENDER THEIR SHARES TO THE PURCHASER.
------------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
shares of common stock, par value $.05 per share (the "Shares") of the Company
should either (i) complete and sign the enclosed Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal, have such stockholder's signature thereon guaranteed if required by
Instruction 1 to the Letter of Transmittal, and mail or deliver the Letter of
Transmittal (or such facsimile) and any other required documents together with
the certificates for such Shares to the Depositary, or tender such Shares
pursuant to the procedure for book-entry transfer set forth in Section 3, or
(ii) request such stockholder's broker, dealer, commercial bank, trust company
or other nominee to effect the transaction for such stockholder. A stockholder
having Shares registered in the name of a broker, dealer, commercial bank, trust
company or other nominee must contact such broker, dealer, commercial bank,
trust company or other nominee if such stockholder desires to tender such
Shares.
A stockholder who desires to tender Shares and whose certificates evidencing
such Shares are not immediately available, or who cannot comply with the
procedures for book-entry transfer described in this Offer to Purchase on a
timely basis, may tender such Shares by following the procedures for guaranteed
delivery set forth in Section 3.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
set forth on the back cover of this Offer to Purchase. Additional copies of this
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery
and other related materials may be obtained from the Information Agent or from
brokers, dealers, commercial banks or trust companies.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE FAIRNESS OR MERITS OF THIS TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF
THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
------------------------
The Dealer Manager for the Offer is:
LEHMAN BROTHERS
------------------------
August 5, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
INTRODUCTION.......................................................................... 1
SPECIAL FACTORS....................................................................... 3
Background of the Offer and the Merger; Past Contacts, Transactions and Negotiations
with the Company................................................................. 3
Recommendation of the Company's Board of Directors; Fairness of the Offer and the
Merger........................................................................... 9
Opinion of Financial Advisor to the Disinterested Board............................. 10
Report of Financial Advisor to the Parent........................................... 15
Purpose and Structure of the Offer and the Merger; Reasons of the Parent and the
Purchaser for the Offer and the Merger........................................... 18
Plans for the Company after the Offer and the Merger................................ 19
Interests of Certain Persons in the Offer and the Merger............................ 19
Beneficial Ownership of Shares...................................................... 24
The Merger Agreement................................................................ 25
Financing the Offer and the Merger.................................................. 31
Certain Effects of the Offer and the Merger......................................... 31
Certain Federal Income Tax Consequences............................................. 32
Dissenters' Rights.................................................................. 33
THE TENDER OFFER...................................................................... 35
Section 1. Terms of the Offer....................................................... 35
Section 2. Acceptance for Payment and Payment....................................... 36
Section 3. Procedure for Tendering Shares........................................... 38
Section 4. Withdrawal Rights........................................................ 40
Section 5. Price Range of Shares; Dividends......................................... 41
Section 6. Effect of the Offer on the Market for the Shares......................... 42
Section 7. Certain Information Concerning the Company............................... 42
Section 8. Certain Information Concerning the Parent and the Purchaser.............. 46
Section 9. Dividends and Distributions.............................................. 49
Section 10. Certain Conditions to the Offer......................................... 50
Section 11. Certain Legal Matters; Regulatory Approvals............................. 52
Section 12. Fees and Expenses....................................................... 57
Section 13. Miscellaneous........................................................... 57
SCHEDULE I Information Concerning the Directors and Executive Officers of the Parent
and the Purchaser
SCHEDULE II Information Concerning the Directors and Executive Officers of the Company
EXHIBIT I Opinion of Morgan Stanley & Co. Incorporated
EXHIBIT II Financial Statements of the Company
EXHIBIT III Agreement and Plan of Merger
EXHIBIT IV Section 262 of the Delaware General Corporation Law
</TABLE>
ii
<PAGE> 3
To the Holders of Common Stock of
AMDAHL CORPORATION:
INTRODUCTION
Fujitsu International, Inc. (the "Purchaser"), a Delaware corporation and a
wholly owned subsidiary of Fujitsu Limited, a corporation organized under the
laws of Japan (the "Parent"), hereby offers to purchase any and all outstanding
shares of common stock, par value $.05 per share (the "Shares"), of Amdahl
Corporation, a Delaware corporation (the "Company"), at a price of $12.00 per
Share, net to the seller in cash (the "Offer Price"), without interest, upon the
terms and subject to the conditions set forth in this Offer to Purchase and in
the related Letter of Transmittal (which together, as amended or supplemented
from time to time, constitute the "Offer").
Tendering stockholders 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 by the Purchaser
pursuant to the Offer. The Purchaser will pay all charges and expenses of Lehman
Brothers Inc., as dealer manager (in such capacity, the "Dealer Manager"), The
Bank of New York, as depositary (in such capacity, the "Depositary"), and
MacKenzie Partners, Inc., as information agent (in such capacity, the
"Information Agent"), incurred in connection with the Offer.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of July 30, 1997 (the "Merger Agreement"), by and among the Parent, the
Purchaser and the Company. The Merger Agreement provides, among other things,
for the making of the Offer by the Purchaser, and further provides that,
following the purchase of Shares pursuant to the Offer and as soon as
practicable after the satisfaction or waiver of certain other conditions, the
Purchaser will be merged with and into the Company (the "Merger"), with the
Company continuing as the surviving corporation (the "Surviving Corporation")
and becoming a wholly owned subsidiary of the Parent. At the effective time of
the Merger (the "Effective Time"), each issued and outstanding Share (except for
Shares held in the treasury of the Company or by any subsidiary thereof, Shares
registered in the name of the Parent or the Purchaser, and Shares held by
stockholders who shall have properly demanded and perfected appraisal rights in
accordance with Section 262 of the Delaware General Corporation Law (the
"DGCL")) will automatically be canceled and converted into the right to receive
$12.00 in cash (or any higher per Share price paid for Shares pursuant to the
Offer), net to the holder, without interest. See "SPECIAL FACTORS -- The Merger
Agreement." The Offer, the Merger and the other transactions contemplated by the
Merger Agreement are sometimes referred to herein collectively as the
"Transactions."
THE BOARD OF DIRECTORS OF THE COMPANY, ACTING THROUGH THE MEMBERS OF THE
BOARD WHO ARE INDEPENDENT OF THE PARENT AND THE PURCHASER AND WHO CONSTITUTE A
MAJORITY OF THE DIRECTORS IN OFFICE (THE "DISINTERESTED BOARD"), HAS UNANIMOUSLY
APPROVED THE OFFER, THE MERGER AND THE MERGER AGREEMENT AND UNANIMOUSLY
DETERMINED THAT THE OFFER, THE MERGER AND THE MERGER AGREEMENT ARE FAIR TO AND
IN THE BEST INTERESTS OF THE COMPANY AND THE COMPANY'S STOCKHOLDERS (OTHER THAN
THE PARENT AND ITS AFFILIATES), AND UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES TO THE PURCHASER. SEE
"SPECIAL FACTORS -- RECOMMENDATION OF THE COMPANY BOARD OF DIRECTORS; FAIRNESS
OF THE OFFER AND THE MERGER."
MORGAN STANLEY & CO. INCORPORATED ("MORGAN STANLEY"), FINANCIAL ADVISOR TO
THE DISINTERESTED BOARD, HAS DELIVERED A WRITTEN OPINION TO THE DISINTERESTED
BOARD, DATED JULY 30, 1997 (THE "MORGAN STANLEY OPINION"), TO THE EFFECT THAT,
AS OF THAT DATE, THE CONSIDERATION TO BE RECEIVED BY HOLDERS OF SHARES (OTHER
THAN THE PARENT AND ITS AFFILIATES) PURSUANT TO THE MERGER AGREEMENT IS FAIR,
FROM A FINANCIAL POINT OF VIEW, TO SUCH HOLDERS. SEE "SPECIAL FACTORS -- OPINION
OF FINANCIAL ADVISOR TO THE
<PAGE> 4
DISINTERESTED BOARD." THE FULL TEXT OF THE MORGAN STANLEY OPINION IS
ATTACHED HERETO AS EXHIBIT I. STOCKHOLDERS ARE URGED TO READ SUCH OPINION
CAREFULLY AND IN ITS ENTIRETY FOR ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITS OF THE REVIEW OF MORGAN STANLEY.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES THAT, WHEN ADDED TO THOSE SHARES HELD BY THE PARENT AS OF THE EXPIRATION
OF THE OFFER, REPRESENTS AT LEAST 51% OF THE OUTSTANDING SHARES (THE "MINIMUM
CONDITION"), (II) THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING
PERIODS UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS
AMENDED, AND THE REGULATIONS THEREUNDER (THE "HSR ACT"), AND THE EXON-FLORIO
AMENDMENTS TO THE OMNIBUS TRADE AND COMPETITION ACT OF 1988 AND THE 1992
BYRD-EXON AMENDMENTS TO THE DEFENSE PRODUCTION ACT (COLLECTIVELY, AS THE SAME
MAY BE SUPPLEMENTED OR AMENDED, THE "EXON-FLORIO ACT"), AND (III) RECEIPT OF ANY
REQUISITE APPROVALS OF THE EUROPEAN COMMISSION AND THE BANK OF JAPAN. THE OFFER
ALSO IS SUBJECT TO THE OTHER TERMS AND CONDITIONS DESCRIBED IN THIS OFFER TO
PURCHASE. SEE SECTIONS 10 AND 11.
The purpose of the Offer is for the Parent and the Purchaser to acquire the
entire equity interest in the Company. The Parent currently owns 51,811,664
Shares, which constitute approximately 42.14% of the outstanding Shares (based
on the number of Shares outstanding at July 29, 1997, as advised by the
Company). The Purchaser owns no Shares as of the date hereof. If necessary or
desirable in connection with the Merger, the Parent may contribute or transfer
to the Purchaser the record and/or beneficial ownership of some or all of its
Shares.
The obligation of each of the Parent, the Purchaser and the Company to
consummate the Merger is subject to a number of conditions, including approval
by the stockholders of the Company if such approval is required by applicable
law. See "SPECIAL FACTORS -- The Merger Agreement" and Section 11. If the
Purchaser acquires pursuant to the Offer such number of Shares that, when added
to the Shares currently held by the Parent, constitutes a majority of the
outstanding Shares, the Parent and the Purchaser will have sufficient voting
power in any vote by the stockholders of the Company to approve and adopt the
Merger Agreement and the Merger without the vote of any other stockholder. If
the Purchaser acquires pursuant to the Offer such number of Shares that, when
added to the Shares currently held by the Parent, constitutes at least 90% of
the outstanding Shares, the Parent and the Purchaser intend to cause the Merger
to be approved and consummated without any action by, or any further prior
notice to, the other stockholders of the Company, pursuant to the short-form
merger provisions of the DGCL.
The Company has advised the Purchaser that, as of July 29, 1997, (i) the
number of Shares issued and outstanding was 122,957,555, plus such number of
Shares (not to exceed 95,000 Shares) that may have been issued since July 24,
1997, pursuant to the Company's Employee Stock Purchase Plan (the "Company Stock
Purchase Plan"), (ii) there were outstanding options (the "Options") to purchase
an aggregate of 10,324,954 Shares held under the Company Option Plans (as
defined herein) and (iii) 5,505,927 Shares were available for issuance under the
Company's Stock Purchase Plan. As of July 29, 1997, all of the executive
officers and directors of the Company as a group owned 698,724 Shares and held
Options to purchase 1,810,698 Shares (whether or not vested). The Company has
advised the Purchaser that, to the best of the Company's knowledge, and subject
to applicable securities laws, all of the directors constituting the
Disinterested Board and all of the executive officers of the Company presently
intend to tender pursuant to the Offer all Shares owned by such persons. See
"SPECIAL FACTORS -- Interest of Certain Persons in the Offer and the Merger."
Accordingly, based on issued and outstanding Shares, including those held by
executive officers and directors of the Company (as described above), and on
outstanding options to purchase Shares that will vest prior to the Expiration
Date (assuming the Offer expires on September 5, 1997 and assuming the exercise
of those options with exercise prices less than $12.00), in each case as of July
29, 1997, the Minimum Condition
2
<PAGE> 5
will be satisfied if, in addition to the Shares held by the executive officers
and directors of the Company, approximately 11,230,000 Shares are validly
tendered in the Offer and not withdrawn.
The Company has on the date of this Offer to Purchase filed with the
Securities and Exchange Commission (the "SEC") a Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9"), which is being mailed to
stockholders concurrently herewith. In addition, on the date hereof the
Purchaser and the Parent have filed with the SEC a Tender Offer Statement on
Schedule 14D-1 (the "Schedule 14D-1"), and the Parent, the Purchaser and the
Company have filed with the SEC a Transaction Statement on Schedule 13E-3 (the
"Schedule 13E-3"). Such Schedules may be obtained as described in Section 13.
The information contained in this Offer to Purchase concerning the Company,
including, without limitation, information concerning the background of the
Offer and the Merger, the deliberations, approvals and recommendation of the
Company's Board of Directors, acting through the Disinterested Board, in
connection with the Offer and the Merger, the opinion of the Disinterested
Board's financial advisor and the Company's capital structure and projected and
historical financial information, was supplied by the Company. The Purchaser and
the Parent take no responsibility for the accuracy of such information.
No appraisal rights are available in connection with the Offer; however,
stockholders may have appraisal rights in connection with the Merger, regardless
of whether the Merger is consummated with or without a vote of the Company's
stockholders. See "SPECIAL FACTORS -- Dissenters' Rights."
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
SPECIAL FACTORS
BACKGROUND OF THE OFFER AND MERGER; PAST CONTACTS, TRANSACTIONS AND NEGOTIATIONS
WITH THE COMPANY
Company Overview
The Company competes in the highly cyclical and competitive computer
industry, including the large-scale computer system and related storage products
and services segment. This industry typically is characterized by rapid
technological change, short product life cycles, frequent product enhancements
and price reductions, and intense competition. In addition, in recent years the
focus of structural design and customer demands for computer systems has
migrated from centralized large-scale computing systems to distributed systems
employing numerous smaller processors. As a result of these and other factors,
in 1993 the Company began a restructuring of its worldwide operations to address
the competitive conditions in the markets for large-scale computing systems. In
1995 and 1996 the Company acquired several computer services businesses to
expand its services offerings.
Although the restructuring and the acquisitions described above have made
positive contributions to the Company's results of operations, the Company's
overall financial health has deteriorated as it has suffered substantial
cumulative losses during recent years. Net income fell from $75 million in
fiscal 1994 to a net loss of $327 million in fiscal 1996. See Section 7.
Relationship Between the Company and the Parent and its Subsidiaries
The Parent has been a stockholder of the Company since 1972 and has owned a
significant portion of the outstanding Shares since April 1984, when it
purchased approximately 6,000,000 Shares in a single transaction. Since that
time and from time to time, the Parent has purchased additional Shares for
investment purposes. Currently the Parent holds 51,811,664 Shares, representing
42.14% of the outstanding Shares (based on the number of Shares outstanding on
July 29, 1997, as advised by the Company).
3
<PAGE> 6
In addition to being a stockholder of the Company, the Parent is also a
major supplier, manufacturer and developer of the Company's computer equipment
components and products, has extended a loan to the Company and distributes
certain of the Company's products. The Company also performs certain development
activities on behalf of the Parent. Transactions occurring in connection with
these relationships are described below.(1)
Overview of the Company's Purchases from the Parent. The Company purchases
from the Parent certain finished products and substantially all of its
large-scale integrated semiconductor components and high-density printed circuit
boards. The Company also purchased from the Parent certain subassemblies for
previous models of computer systems. The Company's primary hardware products are
manufactured by the Parent in accordance with the Company's specifications.
Since January 1, 1994, total amounts paid by the Company to the Parent for
computer products, subassemblies and components are:
<TABLE>
<CAPTION>
AMOUNT PAID
YEAR (IN THOUSANDS)
------------------------------------------------------- --------------
<S> <C>
1997 (as of June 30, 1997)............................. $120,366
1996................................................... $160,092
1995................................................... $282,913
1994................................................... $218,925
</TABLE>
In addition to amounts paid, at June 30, 1997 the Company was committed to
purchase computer products, subassemblies and components from the Parent
totaling approximately $51,071,000 (the final price of such purchase is subject
to adjustment if the U.S. dollar to Japanese yen exchange rate fluctuates
outside of specified ranges).
Overview of Sales of Equipment to the Parent. The Parent and its
subsidiaries purchase from the Company Millennium processors and other computer
hardware for distribution in Brazil, Japan, Malaysia and Spain pursuant to
distribution agreements. Since January 1, 1994, total sales to the Parent and
its subsidiaries for such products are:
<TABLE>
<CAPTION>
AMOUNT PAID
YEAR (IN THOUSANDS)
------------------------------------------------------- --------------
<S> <C>
1997 (as of June 30, 1997)............................. $ 6,854
1996................................................... $ 23,325
1995................................................... $ 37,290
1994................................................... $ 38,682
</TABLE>
Large-Scale Processors. Pursuant to a memorandum of understanding, dated
December 9, 1993, the Company and the Parent cooperate in the development of the
Company's next generation of IBM System/390 compatible processor (i.e., the
Millennium processor). Under the memorandum of understanding, the Parent has
primary responsibility for the design and manufacture of these systems. The
memorandum of understanding does not specify fixed payment amounts, but does
provide a preliminary pricing structure for purchases by the Company of
equipment developed under the memorandum of understanding. The parties entered
into a related agreement, dated February 17, 1997, pursuant to which the Parent
agreed to subcontract a portion of
- ---------------
1Financial information with respect to transactions between the Parent and the
Company is taken from the Company's financial records. Due to differences in
currency conversion rates, the timing of payments and receipts by the payor and
the recipient, and other differences arising from differences in U.S. and
Japanese Generally Acceptable Accounting Principles ("GAAP") (see Section 8 for
a description of the differences between U.S. and Japanese GAAP), the amounts
appearing in the Parent's financial records regarding transactions between the
Parent and the Company will not necessarily be the same as corresponding
transaction amounts appearing in the Company's financial records. In the opinion
of the Parent, the aggregate amounts which are reflected in the Company's
financial records and those that would be reflected in the Parent's financial
records if maintained under the same accounting principles, including U.S. GAAP,
would not materially differ.
4
<PAGE> 7
the Parent's development responsibilities to the Company. In consideration of
such subcontracted work, the Parent has paid the Company an aggregate of
$6,371,000 through June 30, 1997. An additional $11,819,000 is scheduled to be
paid under this agreement, subject to the delivery of certain deliverables.
Pursuant to an agreement dated September 27, 1996, the Parent paid the
Company $2,000,000 for the right to directly sell to customers in Japan up to a
specified number of units of the Millennium processors made by the Parent in
Japan. The Parent also agreed to a per unit royalty for sales in excess of the
specified number of units. In return, the Company clarified its intention not to
appoint anyone other than the Parent as a distributor of the Millennium products
in Japan.
Storage Products. Pursuant to an agreement dated January 26, 1995, the
Parent and the Company agreed to jointly develop a next generation file
subsystem storage product to be sold under the product name "Spectris" in
certain of the Company's markets and "F6493" in certain of the Parent's markets.
The Parent bore all key development responsibilities under the agreement, which
initially did not provide for any monetary payments by either party. Pursuant to
an amendment dated March 12, 1996, the Parent agreed to reimburse the Company up
to $24,000,000 in 1996 for certain specific engineering development activities
performed by the Company due to unanticipated engineering and other technical
difficulties experienced in product development. In 1996 and the first quarter
of 1997, the Parent paid an aggregate of $24,000,000 to the Company pursuant to
this agreement, as amended. The parties entered into a second amendment, dated
January 8, 1997, which reallocated certain development responsibilities among
themselves. In connection with such reallocation on January 8, 1997, the parties
entered into an agreement subcontracting a portion of the Parent's
responsibilities to the Company, in consideration for which the Parent has paid
the Company an aggregate of $2,532,000 through June 30, 1997. An additional
$7,596,000 is scheduled to be paid to the Company in 1997, subject to the
delivery of certain deliverables.
In 1996, the Parent and the Company agreed to develop of an enhanced
version of the Spectris storage product. On March 28, 1997, the Parent agreed to
compensate the Company as a result of changes to development schedules requested
by the Parent with respect to the development of such products. As of June 30,
1997, a total of $12,200,000 has been paid to the Company under such agreement.
Under a similar agreement, dated June 27, 1997, the Parent agreed to pay an
additional $6,000,000 in 1997.
Pursuant to a license agreement, dated March 21, 1997, in consideration of
the Parent's payment of $4,700,000, the Company granted the Parent a license for
certain storage system software for use in conjunction with the Parent's
proprietary operating system.
Software Diagnostic Tools. Pursuant to two license agreements, dated
December 20, 1995, the Parent agreed to pay the Company one-time fee of
$14,800,000 in the aggregate for the right and license to use certain software
diagnostic tools developed by the Company. The licenses granted to the Parent
were non-exclusive except with respect to Japan, where no one other than the
Company and the Parent has the right to use such tools.
Loan Agreement. On January 27, 1994, the Company entered into an agreement
(the "Loan Agreement") with the Parent under which the Parent agreed to lend the
Company an aggregate amount not to exceed $100,000,000. Amounts owed to the
Parent under the Loan Agreement are subordinate to certain other indebtedness of
the Company. Amounts outstanding under the Loan Agreement bear interest at a
rate equal to the applicable London Interbank Offered Rate plus 1.25%. Although
the loan was to be repaid by January 28, 1997, the Company renegotiated the
terms of the Loan Agreement to extend the repayment date to January 28, 1998.
The amendment also reduced the Parent's loan commitment to the outstanding
principal amount of $80,000,000, none of which can be prepaid. As of June 30,
1997, the aggregate principal amount outstanding under the Loan Agreement was
$80,000,000. The Company's interest expense associated with the loan was
$2,796,000 in 1997 (as of June 30, 1997), $5,680,000 in 1996, $5,745,000 in 1995
and $4,238,000 in 1994.
Other Agreements and Relationships. The Company and the Parent are parties
to an agreement, dated March 4, 1982, and amended on April 3, 1984 (such
amendment hereinafter the "1984 Letter Agreement") (the full text of such
agreement and amendment have been filed as exhibits to the Schedule 14D-1), that
5
<PAGE> 8
provides for the modification of certain licensing agreements between the
Company and the Parent upon the occurrence of any one of a number of triggering
events. One such triggering event is the issuance by the Company of additional
Shares or securities convertible into Shares to persons other than the Parent,
unless the Company offers the Parent the opportunity to purchase such portion of
the proposed issuance as is proportionate to the Parent's ownership of Shares
prior to the proposed issuance. The Parent's limited right of proportionate
participation does not extend to issues of stock with certain limited voting
rights nor is the Parent entitled by virtue of the agreement to purchase more
than 49.5% of any proposed new issuance.
Pursuant to the 1984 Letter Agreement, the Parent and its majority-owned
subsidiaries were restricted from acquiring more than 49.5% of the outstanding
capital stock of the Company (calculated on a fully diluted basis). This
standstill agreement was in effect during the ten year period commencing in
April, 1984, and, therefore, no longer restricted the Parent's ability to
acquire capital stock of the Company after April, 1994.
The Company and the Parent are parties to a more recent standstill
agreement, dated July 9, 1997, that, among other things, restricts the Parent's
ability to acquire securities of the Company. This agreement is more fully
described in the subsection below entitled "Background and Negotiations relating
to the Offer and the Merger."
Other Relationships. As of January 1, 1994, three nominees of the Parent,
Keizo Fukagawa, Takamitsu Tsuchimoto and Kazuto Kojima were serving as directors
of the Company. On August 1, 1996, Mr. Tsuchimoto resigned from the Board and
was replaced by Takeshi Maruyama, and on November 1, 1996, Mr. Fukagawa resigned
from the Board and was replaced by Takashi Takaya. As described below, on June
29, 1997, each of Messrs. Maruyama, Kojima and Takaya resigned from the Board of
Directors of the Company. In addition, George R. Packard, Ph.D and Mr. J. Sidney
Webb were initially proposed as a director by the Parent in 1984 and 1987
respectively, and have served continuously since their election. Dr. Packard and
Mr. Webb serve as consultants or are otherwise affiliated with the Parent or its
subsidiaries and received pursuant to consulting agreements the following annual
retainer fees in each of 1994, 1995 and 1996: Dr. Packard -- between $60,000 and
$70,000 per year during such years; Mr. Webb -- $40,000 for each such years.
Background and Negotiations relating to the Offer and the Merger
In the fourth quarter of 1996, the Company's management concluded that the
declining prices and gross margins in the Company's products business would
continue and that, based on the level of research and development spending
incurred by the Company and competitive pressure on prices, it would be
difficult for the Company to achieve adequate profitability and there were
significant risks that the Company could experience losses in future fiscal
periods. The Company's management commenced a review of the Company's products
business, including the Company's strategy of marketing products supplied by the
Parent, with a view to restoring such business to profitability.
On November 6, 1996, Mr. John C. Lewis, Chairman of the Board, President
and Chief Executive Officer of the Company, wrote a letter to the Parent's
President regarding the Company's strategy for the future. In his letter, Mr.
Lewis summarized management's analysis of the issues facing the profitability of
the Company's products business, and proposed three options for the future
direction of the Company and the restoration to profitability of the Company's
products business: (i) resolve the issues relating to the profitability of the
products business while preserving the close partnership between the Company and
the Parent, with the Company remaining as an independent corporation; (ii) the
acquisition by the Parent of all of the outstanding Shares; or (iii) a sale of
all or part of the Company to a third party.
On November 15, 1996, Mr. Lewis met with representatives of the Parent in
California. The matters covered by Mr. Lewis's November 6 letter were discussed,
and representatives of the Parent indicated that the Parent was not currently
interested in discussing further the acquisition by the Parent of all of the
outstanding Shares or a sale of all or part of the Company to a third party. It
was agreed that the companies would focus on working together to resolve the
issues facing the profitability of the Company's products business while
preserving the then existing relationship between the companies.
6
<PAGE> 9
On November 21, 1996, representatives of the Company and the Parent met by
videoconference to discuss issues related to the profitability of the Company's
products business, including issues related to the pricing of products
manufactured by the Parent for the Company and other related matters.
During the first quarter of 1997, representatives of the Company and the
Parent held several discussions concerning the profitability of the Company's
products business and agreed to take a number of steps to address the continuing
issues affecting the profitability of the Company's products business. In March
1997, the Parent agreed to reduce the prices charged to the Company for products
manufactured by the Parent in response to competitive pressure on prices and to
increase the amount that the Parent reimbursed the Company for certain specific
engineering development activities performed by the Company due to unanticipated
engineering and other technical difficulties experienced in product development.
As described above, the Parent also agreed to compensate the Company as a result
of changes to development schedules requested by the Parent for storage products
currently being developed by the Parent for the Company under existing joint
development programs. At the time of entering into such agreements, the Parent
believed that the issues raised by Mr. Lewis in November 1996 had been
sufficiently addressed.
On March 14, 1997, Mr. Lewis met with representatives of the Parent in
Japan. At this meeting they discussed the outlook for the Company's financial
performance in the first quarter of 1997 and the current state of the business
relationship between the two companies. Mr. Lewis raised again the option of a
possible acquisition by the Parent of all of the outstanding Shares. The
representatives of the Parent did not respond to this proposal.
In March 1997, representatives of Morgan Stanley met with the Company's
management to discuss options available to the Company to enhance stockholder
value, including the feasibility of a spin-off or sale of either the Company's
products business or its software and services business.
From April 29 through May 1, 1997, representatives of the Company and the
Parent met in Sunnyvale, California, in connection with the Company's annual
meeting of stockholders. At the April 29 and May 1 meetings, the representatives
discussed the pricing of products manufactured by the Parent for the Company and
other issues related to the profitability of the Company's products businesses
in the second quarter. On April 30, Mr. Lewis and Mr. Kojima acknowledged that
the process of meeting to discuss how to improve each quarter's profitability
was only a short-term measure and discussed long-term strategic approaches to
restoring the Company's products business to profitability. Mr. Lewis suggested
that the Parent consider assuming full financial responsibility for developing
products, or acquiring all of the outstanding Shares. Mr. Kojima indicated that
the Parent would consider the possibility of an acquisition of all of the
outstanding Shares.
At the meeting of the Company's Board of Directors held on May 1, 1997, Mr.
Lewis noted the continued deterioration of the Company's financial situation and
the competitive conditions in the markets for large-scale computing systems, and
expressed the belief that the Company should consider a significant transaction
to strengthen its financial and competitive position. Mr. Lewis proposed that
the Company could either (i) continue its current efforts to become profitable
and grow its business, (ii) engage in discussions with the Parent to acquire all
of the outstanding Shares, (iii) attempt to sell all or a part of the Company's
business to a third party, or (iv) spin-off one or more of the Company's
principal lines of business to its stockholders. Mr. Lewis asked the
representatives of the Parent on the Company's Board of Directors to ask the
Parent to consider these options in light of the Company's financial situation
and competitive conditions noted by Mr. Lewis at that meeting.
Following the May 1, 1997 meeting of the Company's Board of Directors, the
Parent commenced an internal review of the alternative transactions proposed by
Mr. Lewis at such meeting. On June 5, 1997, Mr. Kojima and other employees of
the Parent met with Mr. Lewis to discuss the alternative transactions proposed
by Mr. Lewis.
Commencing on June 6 and throughout June 1997, representatives of the
Company and the Parent held continued discussions regarding the profitability of
the Company's product business for the second quarter. The Parent and the
Company discussed a number of issues related to the Parent's reimbursement to
the
7
<PAGE> 10
Company for certain specific engineering development activities performed by the
Company. However, no new agreements were reached and no amounts were paid or
credited to the Company by the Parent with respect to these issues in the second
quarter of 1997 in excess of those required by the existing arrangements
described above. The Parent and the Company also discussed potential payments
from the Parent to the Company as a result of changes to development schedules
requested by the Parent in the second quarter for storage products being
developed by the Parent for the Company under existing joint development
programs. The parties entered into the June 27, 1997 agreement described above
pursuant to which the Parent agreed to pay the Company additional compensation
for such changes to the development schedules.
To facilitate the Parent's consideration of a potential transaction with
the Company (a "Potential Transaction"), the Parent determined that it was
necessary to cause its own employees who were directors of the Company to resign
from the Company's Board of Directors. On June 18, 1997, Mr. Kojima, a director
of the Company, telephoned Mr. Lewis to discuss such potential resignations. On
June 29, 1997, Messrs. Maruyama, Kojima and Takaya, each an employee of the
Parent, resigned from the Board of Directors of the Company.
On June 30, 1997, Mr. Lewis convened a meeting of the remaining members of
the Company's Board of Directors. Mr. Lewis informed the directors that he
believed that the Parent would make a proposal to acquire all of the outstanding
Shares. Because Dr. Packard and Mr. Webb had from time to time received
consulting fees from entities affiliated with the Parent, they recused
themselves from all further discussions of the Board regarding a Potential
Transaction between the Company and the Parent. It was discussed and agreed that
because the five remaining directors, Messrs. Lewis, Hallman, Heizer, Malkiel
and Reinhold, were each independent of the Parent and collectively constituted a
majority of the directors then in office, such remaining five directors would
constitute the "Disinterested Board" and act in the matter if an offer were made
by the Parent. At the June 30, 1997 meeting, the Disinterested Board considered
its options, including the retention of independent financial and legal
advisors, and resolved to retain Morgan Stanley to act as its financial adviser,
and Brobeck Phleger & Harrison LLP ("Brobeck") to act as its legal counsel in
connection with a possible sale of the Company.
On June 30, 1997, in connection with its consideration of a Potential
Transaction, the Parent entered into a confidentiality agreement with the
Company. Under such agreement, in connection with the Parent's consideration of
a Potential Transaction, the Company agreed to provide the Parent with certain
information concerning the business, financial condition, operations, assets and
liabilities of the Company (the "Confidential Information"). The Parent agreed
not to disclose any of the Confidential Information and to use such information
solely for the purpose of evaluating a Potential Transaction with the Company.
During the weeks of June 23 and 30, 1997, the Parent held discussions with
Lehman Brothers Japan Inc. (collectively, with Lehman Brothers Inc., "Lehman
Brothers") regarding the potential engagement of Lehman Brothers as financial
advisor to the Parent in connection with a Potential Transaction. Pursuant to an
engagement letter, dated June 30, 1997, the Parent engaged Lehman Brothers to
act as its financial advisor in connection with a Potential Transaction.
On July 2, 1997, representatives of the Parent, the Parent's legal counsel,
Morrison & Foerster LLP ("Morrison"), Lehman Brothers, and the Parent's
accountants met with representatives of the Company, Brobeck, Morgan Stanley,
and the Company's accountants in San Francisco, California, to discuss the
timetable for a Potential Transaction, including the due diligence procedures to
be conducted in the event the Parent determined that it would instruct its
financial, legal and accounting advisors to conduct due diligence with respect
to the Company's business and operations.
From July 7 through July 18, 1997, the Parent's financial, legal and
accounting advisors performed their primary due diligence investigations of the
Company by reviewing legal documents, accounting work papers and records,
financial information and other information related to the Company. Such
documents, records and information were provided in writing or orally by
representatives of the Company. On July 9 and 10, 1997, the financial and
accounting advisors of both the Parent and the Company met with the senior
management of the Company to discuss the outlook for each segment of the
Company's business. Additional due diligence by the Parent's financial, legal
and accounting advisors continued through July 30, 1997.
8
<PAGE> 11
At a telephonic meeting of the Disinterested Board held on July 8, 1997,
Morgan Stanley was asked to perform an analysis of the value of the Company and
its constituent businesses, including the values to stockholders that could be
achieved by spinning-off either the products business or the software and
services business, and to analyze the feasibility of such alternatives.
On July 9, 1997 the Company and the Parent entered into a letter agreement
(the "Standstill Agreement") pursuant to which the Parent agreed, for a period
ending on the earlier of July 9, 1998 or the occurrence of one of a set of
"Significant Events" (as defined therein), not to (i) acquire, or to offer or
agree to acquire, directly or indirectly, voting securities, rights in respect
thereof or assets of the Company or any division or subsidiary, (ii) participate
in any solicitation of proxies from the Company's stockholders, (iii) publicly
announce or offer to enter into any extraordinary transactions involving the
Company or any of its securities or assets, (iv) form or participate in a
"group" as defined in the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or (v) request the Company or any of its representatives to
waive or amend any of the foregoing restrictions, without the Company's or the
Company's Board of Directors' prior written consent. The Company requested this
Standstill Agreement in order to be able to negotiate with the Parent without
concern that the Parent might proceed to acquire additional shares of the
Company without the consent of the Company.
On July 11, 1997, representatives of Morgan Stanley contacted
representatives of Lehman Brothers to inquire whether the Parent was interested
in selling its ownership interest in the Company to a third party. On July 14,
1997, after consultation with the Parent, representatives of Lehman Brothers
responded that the Parent was not interested in selling its ownership interest
in the Company to a third party.
On July 14, 1997, a draft of the Merger Agreement was delivered to the
Company for its review. From July 16, 1997 through July 30, the Parent and the
Company, acting through their respective counsel, Morrison and Brobeck,
negotiated the terms of the Merger Agreement. Initially the Parent proposed
certain provisions be included in the Merger Agreement, that, if included, would
have conditioned the Parent's obligations to consummate the Merger on the
tendering in the Offer of a sufficient number of Shares to allow the Purchaser
to avail itself of the short-form merger procedures of the DGCL for 90%-owned
subsidiaries. See "-- Purpose and Structure of the Offer and the Merger; Reasons
of the Parent and the Purchaser for the Offer and the Merger." The Parent also
requested that the agreement include certain restrictions on the Company's
ability to enter into discussions with other parties concerning an acquisition
of the Company. These positions were continuously rejected by the Company and
ultimately the Parent agreed to lessen the Minimum Condition from 90% to 51% and
to withdraw its demands for such restrictions.
At a meeting of the Disinterested Board held on July 15, 1997, Morgan
Stanley reported their preliminary estimates of valuation based on the analysis
that Morgan Stanley was asked on July 8, 1997 to perform. Morgan Stanley at that
time noted that it was unlikely that a spin-off of either the products business
or the software and services business, could be effected on a tax-free basis,
nor could any such spin-off be effected without the support of the Parent. In
addition, Morgan Stanley noted that the value of the products business depended
on assumptions concerning new or additional financial responsibilities and
contractual agreements that might be undertaken by the Parent and that the value
of the software and services business was adversely impacted by its recent
unprofitability.
On July 25, 1997, in Tokyo, Japan (July 24, 1997, New York City time),
Lehman Brothers made a presentation to certain officers and employees of the
Parent which analyzed the potential value of the Company based on Lehman
Brothers' due diligence activities, including a review of the Company's past and
projected financial performance.
By a letter dated July 25, 1997 (the "Proposal Letter"), the Parent
informed the Company's board of directors that the Parent was willing to start
negotiations with the Board concerning a possible acquisition by the Parent of
the remaining equity interest in the Company not already owned by the Parent at
a per Share price of $10.57. The Parent indicated in the letter that its ability
to proceed with the acquisition would be subject to several conditions,
including the execution of a definitive merger agreement on mutually agreeable
terms, the approval of the acquisition by the Disinterested Board and the
receipt of all required government approvals.
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At a telephonic meeting of the Disinterested Board held on the afternoon of
July 25, 1997, the Disinterested Board discussed the Parent's proposal. The
Disinterested Board discussed alternatives reasonably available to the Company
with the Company's management and Brobeck and Morgan Stanley. Following such
meeting, a representative of Morgan Stanley, acting on the instructions of the
Disinterested Board, notified a representative of Lehman Brothers that the
Disinterested Board regarded the Parent's offer as inadequate. Mr. Lewis also
informed Mr. Kojima that the Disinterested Board regarded the Parent's offer as
inadequate, but that the Company was willing to meet with the Parent and its
advisors on July 28 to discuss a Potential Transaction based upon a higher
price.
On July 27, 1997, representatives of the Parent traveled to San Francisco,
California intending to discuss the Potential Transaction with representatives
of the Company. Discussions between the parties, their legal counsel and
financial advisors commenced on the morning of July 28, 1997, and continued
until a definitive agreement with respect to the Potential Transaction was
reached on July 30, 1997.
On the morning of July 28, 1997, representatives of the Parent, Lehman
Brothers, and Morrison met with representatives of the Company, Morgan Stanley,
and Brobeck in San Francisco, California, to negotiate the terms of a Potential
Transaction. During that meeting, Morgan Stanley presented its financial
justification for a higher valuation and indicated that the Company was
considering an alternative transaction involving a spin-off of its products
business to its stockholders. Representatives of Lehman Brothers expressed the
Parent's viewpoint that such a sale or spin-off would not be feasible because of
duplication of existing administrative costs, interdependencies that exist
between the Company's products business and services and software business, and
the industry trend to integrate rather than separate products operations and
services and software operations. Immediately following such meeting,
representatives of Morgan Stanley and representatives of Lehman Brothers met
with each other to further discuss the terms of a Potential Transaction between
the Parent and the Company. At such meetings, management and the representatives
of Morgan Stanley indicated that the Parent needed to propose a higher price for
the Disinterested Board to consider at its meeting scheduled for that evening.
Mr. Kojima telephoned Mr. Lewis on the afternoon of July 28, 1997, and
indicated that the Parent would be willing to increase its purchase price to
$11.50 per Share. As previously communicated through each parties' financial
advisors, Mr. Kojima confirmed to Mr. Lewis that the Parent did not intend to
sell its Shares to a third party. Mr. Kojima also stated that the Parent was not
currently willing to support an alternative transaction involving a spin-off or
sale of one or more of the Company's principal lines of business, for the
reasons previously communicated by Lehman Brothers, and that it may be
inappropriate to assume that the Parent would increase or continue to provide
payments through new or additional short-term agreements in excess of amounts
the Parent is obligated to provide under existing contracts.
At a telephonic meeting of the Disinterested Board held on the evening of
July 28, 1997, the Disinterested Board discussed the Parent's revised proposal.
Morgan Stanley advised the Disinterested Board that, based on its discussions
with representatives of Lehman Brothers, Morgan Stanley believed that it was
unlikely that the Parent would pay more than $12.00 per Share.
On the morning of July 29, 1997, Mr. Lewis and Mr. Kojima met in San Jose,
California. Concurrently, the legal and financial advisors of the Company and
the Parent discussed the Potential Transaction. As a result of these
discussions, Mr. Kojima telephoned Mr. Lewis in the afternoon and advised Mr.
Lewis that the Parent was willing to increase the purchase price to $12.00 per
Share (which represented a $2.20 (22.4%), $2.50 (26.3%), and $2.67 (28.6%)
premium above the average closing market prices for the 30-, 60-, and 90-trading
days, respectively, preceding July 30, 1997) and that such offer was the
Parent's highest and final offer. Mr. Kojima also stated to Mr. Lewis that he
believed that it was of utmost importance to both parties to complete
negotiations and announce a transaction before the Shares began trading on the
American Stock Exchange (the "AMEX") on July 30, 1997.
At a telephonic meeting of the Disinterested Board held on the evening of
July 29, 1997, the Disinterested Board discussed the Parent's revised proposal.
The Disinterested Board agreed to reconvene the next day, at which time a
definitive Merger Agreement would be reviewed and an oral opinion from Morgan
Stanley would be presented as to the fairness to the Company's stockholders
(other than the Parent and its
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<PAGE> 13
affiliates) from a financial point of view of the proposed consideration of
$12.00 per Share to be received by the stockholders pursuant to the Offer and
the Merger.
On the evening of July 29, 1997, and the morning of July 30, 1997,
representatives of the Company, and Brobeck met in San Francisco, California, to
finalize the Merger Agreement with representatives of the Parent and Morrison.
The Company asked the AMEX and the London Stock Exchange ("LSE") to suspend
trading in the Shares on the morning of July 30, 1997, pending an announcement
by the Company.
At a telephonic meeting of the Disinterested Board held at 6 a.m.
(California time) on July 30, 1997, Morgan Stanley reviewed in detail its
financial analysis of the proposed Offer and Merger. At the conclusion of its
presentation, Morgan Stanley delivered to the Disinterested Board its oral
opinion (which was subsequently confirmed in writing) to the effect that the
proposed consideration to be received by the Company's stockholders (other than
the Parent and its affiliates) in the Offer and the Merger is fair from a
financial point of view to the stockholders (other than the Parent and its
affiliates). The Disinterested Board also reviewed the draft of the Merger
Agreement that had been distributed to them by facsimile. The Disinterested
Board heard a legal presentation by a representative of Brobeck with respect to
its members' fiduciary duties and the terms of the proposed Offer and Merger.
The Disinterested Board discussed the terms of the Merger Agreement and
requested certain changes, which were subsequently agreed to by the Parent.
Based on such discussions, presentations and opinion, the Disinterested Board
unanimously (i) approved the Offer, the Merger and the Merger Agreement, in
substantially the form presented to the Disinterested Board, and the
transactions contemplated by the Merger Agreement, (ii) determined that the
terms of the Offer and the Merger are fair to and in the best interests of the
Company and its stockholders (other than the Parent and its affiliates) and
(iii) recommended that the Company's stockholders accept the Offer and tender
their Shares pursuant to the Offer and approve and adopt the Merger Agreement
and the transactions contemplated thereby.
On July 30, 1997 (New York time), at a special meeting of the Board of
Directors of the Parent held in Tokyo, Japan, the Board of Directors of the
Parent approved the Merger Agreement and the Transactions. On July 30, 1997, the
Board of Directors of the Purchaser approved, by unanimous written consent of
such directors, the Merger Agreement and the Transactions.
On July 30, 1997, the Company, the Parent and the Purchaser finalized and
executed the Merger Agreement and issued a joint press release announcing
approval of the Merger Agreement.
On August 5, 1997, Purchaser commenced the Offer.
Certain Litigation. Shortly after the July 30, 1997 public announcement
that the Parent proposed to acquire those Shares of the Company that it did not
already own, several putative class actions were filed in various courts
challenging the fairness of the proposed transaction to Company stockholders.
See Section 11.
RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS; FAIRNESS OF THE OFFER AND
THE MERGER
The Company
The Company's Board of Directors, acting through the members of the Board
who are independent of the Parent and the Purchaser and who constitute a
majority of the directors in office (referred to herein as the "Disinterested
Board"), has unanimously approved the Offer, the Merger and the Merger Agreement
and unanimously determined that the Offer, the Merger and the Merger Agreement
are fair to and in the best interests of the Company and its stockholders (other
than the Parent and its affiliates), and unanimously recommends that all
stockholders of the Company accept the Offer and tender their shares to the
Purchaser. See "-- Background of the Offer and the Merger; Past Contacts,
Transactions and Negotiations with the Company." In reaching such conclusions,
the Company Board of Directors, acting through the Disinterested Board,
considered a number of factors, including, without limitation, the following:
1. The declining prices and gross margins in the Company's products
business, and the view of the Company's management that such business, as
currently structured with responsibility for product development divided
between the Parent and the Company, would make it difficult for the Company
to
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<PAGE> 14
achieve adequate profitability and included significant risks that the
Company could experience losses in future fiscal periods. In this
connection, the Disinterested Board considered the financial payments
provided by the Parent since the fourth quarter of 1996, as well as
indications by representatives of the Parent that it may be inappropriate
to assume that the Parent would increase or continue to provide payments
through new or additional short-term agreements in excess of amounts the
Parent is obligated to provide under existing contracts.
2. Various uncertainties associated with the Company's prospects and
long-term viability as an independent company in light of the deterioration
of the Company's overall financial health in recent years, as evidenced by
six consecutive fiscal quarters of net losses, and the adverse effect of
such uncertainties on the Company's customer relationships and on the
Company's ability to attract and retain key employees.
3. The Parent's statements that it did not intend to sell its Shares
to a third party.
4. The fact that the $12.00 per Share price to be received by the
Company's stockholders in both the Offer and the Merger represents a
premium of 19.3% over the closing market price of $10.06 on July 24, 1997,
the last full trading day prior to the date that the Parent delivered the
Proposal Letter to the Board of Directors, and premiums of 22.4%, 26.3% and
28.6% over the average closing market prices for the 30-, 60- and
90-trading days, respectively, prior to July 30, 1997, and that such price
would be payable in cash, thus eliminating any uncertainties in valuing the
consideration to be received by the Company's stockholders.
5. The financial and other terms and conditions of the Offer and the
Merger Agreement.
6. The fact that the Merger Agreement contains no restrictions on the
Company entering into discussions with any other party concerning an
acquisition of the Company, and allows the Company to terminate the
Agreement under certain circumstances to accept a more desirable
transaction without paying any breakup or other amounts. Thus, if a better
offer were made for the Company, the Board would be free to withdraw its
recommendation of the Offer and recommend such better offer.
7. A review of possible values realizable by the Company's
stockholders through a possible spin-off or sale of one or more of the
Company's principal lines of business, and management's conclusion that,
given the current state of the Company's principal lines of business, such
alternative transaction would not currently be practicable, particularly in
light of the Parent's indication that it is not currently willing to
support a spin-off or sale of one or more of the Company's principal lines
of business.
8. The opinion of Morgan Stanley, dated July 30, 1997, that, as of
such date, the proposed consideration to be received by the Company's
stockholders pursuant to the Offer and the Merger was fair to such
stockholders (other than the Parent and its affiliates) from a financial
point of view. A copy of Morgan Stanley's written opinion is attached to
this Offer to Purchase as Exhibit I and is incorporated herein by
reference. Such opinion should be read in its entirety for a description of
the procedures followed, assumptions and qualifications made, matters
considered and limitations of the review undertaken by Morgan Stanley. In
connection with delivering its opinion, Morgan Stanley made a presentation
to the Disinterested Board at its meeting on July 30, 1997, as to various
financial and other matters underlying such opinion. See "-- Opinion of
Financial Advisor to Disinterested Board."
9. The likelihood that the proposed Merger would be consummated,
including the fact that the Offer and the Merger would not be subject to
any financing condition and that the Parent has represented that the funds
necessary to consummate the Offer and the Merger will be provided and has
agreed to cause the Purchaser to fully perform all of the Purchaser's
obligations under the Merger Agreement.
10. The arm's-length negotiations between representatives of the
Disinterested Board and the Parent leading to the belief of the
Disinterested Board that $12.00 per Share represented the highest price
reasonably available to the Company given the facts and circumstances
described above.
In view of the wide variety of factors considered by the Disinterested
Board, they did not find it practical to, and did not, quantify or otherwise
assign relative weights to the foregoing factors or determine that any
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<PAGE> 15
factor was of particular importance. Rather, the Disinterested Board viewed its
position and recommendation as being based on the totality of the information
presented to and considered by it.
Having considered all the foregoing, and other relevant factors, the Board
of Directors, acting through the Disinterested Board, concluded that the Offer
and the Merger, taken together, was the best available alternative for the
Company, its stockholders and other constituencies and was fair to and in the
best interests of the Company's stockholders (other than Parent and its
affiliates).
The Parent and the Purchaser
Neither the Parent nor the Purchaser participated in the Disinterested
Board's evaluation of the fairness of the Offer and the Merger.
The Parent and the Purchaser believe that the consideration to be received
by the stockholders of the Company (other than the Parent and the Purchaser),
pursuant to the Offer and the Merger, is fair to such stockholders. The Parent
and the Purchaser base their belief on the following factors: (i) the Company's
Board of Directors, in reviewing the fairness of the Offer and the Merger, acted
through the members of the Company's Board of Directors who are independent of
the Parent, which directors constitute a majority of the members of the Board of
Directors of the Company in office (referred to herein as the Disinterested
Board); (ii) the Disinterested Board retained and was advised by independent
legal and financial advisors, and the receipt by the Disinterested Board of the
Morgan Stanley Opinion to the effect that the consideration to be received by
stockholders of the Company (other than the Parent and its affiliates) pursuant
to the Merger Agreement was as of the date of such opinion fair to such
stockholders from a financial point of view; (iii) the Disinterested Board
determined that the Offer, the Merger and the Merger Agreement are fair to, and
in the best interests of, the stockholders of the Company (other than the Parent
and its affiliates), approved the Merger Agreement and the Transactions and
recommended that the stockholders of the Company accept the Offer and approve
the Merger; (iv) the parties' awareness that, pursuant to the Standstill
Agreement, the Parent generally would be unable to acquire any additional Shares
prior to July 9, 1998 (assuming no earlier occurrence of a "Significant Event,"
as defined in the Standstill Agreement), other than with the consent of the
Company or the Board of Directors of the Company; (v) the $12.00 per Share price
to be paid in the Offer and the Merger and the other terms and conditions of the
Merger Agreement resulted from active arm's-length bargaining between
representatives and independent advisors of the Disinterested Board, on the one
hand, and the Parent, on the other (see "-- Background of the Offer and the
Merger; Past Contacts, Transactions and Negotiations with the Company"); (vi)
the consideration to be paid in the Offer and the Merger represents a premium
over the reported closing price for the Shares on July 24, 1997 (the date prior
to the date of delivery of the Proposal Letter); and (vii) the historical
financial performance of the Company and its financial results, which include
substantial net losses. The Parent and the Purchaser have reviewed the factors
considered by the Disinterested Board in support of their decisions, as
described on the Schedule 14D-9 and above, and have no basis to question their
consideration of or reliance on such factors. In reaching their conclusions, the
Parent and the Purchaser also considered generally the current and historical
market prices for the Shares.
Neither the Parent nor the Purchaser found it practicable to assign, nor
did either of them assign, relative weights to the individual factors considered
in reaching their conclusions as to fairness.
OPINION OF FINANCIAL ADVISOR TO THE DISINTERESTED BOARD
On July 1, 1997, the Disinterested Board retained Morgan Stanley to act as
its financial advisor in connection with its evaluation of the Potential
Transaction (or such other offers as may be received) and the other alternatives
available to the Company.
At the July 30, 1997 meeting of the Disinterested Board, Morgan Stanley
delivered its oral opinion to the Disinterested Board that, as of such date and
subject to the various considerations set forth in its opinion, the
consideration to be received by the holders of Shares (other than the Parent and
its affiliates) pursuant to the Merger Agreement was fair from a financial point
of view to such holders. Morgan Stanley subsequently
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<PAGE> 16
delivered to the Disinterested Board the Morgan Stanley Opinion dated July 30,
1997 confirming its oral opinion.
THE FULL TEXT OF THE MORGAN STANLEY OPINION, WHICH SETS FORTH THE
ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND REVIEW UNDERTAKEN
BY MORGAN STANLEY, IS ATTACHED HERETO AS EXHIBIT I AND IS INCORPORATED HEREIN BY
REFERENCE. HOLDERS OF SHARES ARE URGED TO, AND SHOULD, READ THE MORGAN STANLEY
OPINION CAREFULLY AND IN ITS ENTIRETY. THE MORGAN STANLEY OPINION IS DIRECTED TO
THE BOARD OF DIRECTORS AND ADDRESSES ONLY THE FAIRNESS FROM A FINANCIAL POINT OF
VIEW OF THE CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF SHARES (OTHER THAN
THE PARENT AND ITS AFFILIATES) PURSUANT TO THE MERGER AGREEMENT, AND IT DOES NOT
ADDRESS ANY OTHER ASPECT OF THE OFFER OR THE MERGER AND DOES NOT CONSTITUTE AN
OPINION OR A RECOMMENDATION AS TO WHETHER ANY HOLDER OF SHARES SHOULD ACCEPT THE
OFFER OR AS TO HOW SUCH HOLDER SHOULD VOTE WITH RESPECT TO THE MERGER, IF ANY
VOTE IS REQUIRED. THE SUMMARY OF THE MORGAN STANLEY OPINION SET FORTH HEREIN IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
In arriving at its opinion, Morgan Stanley, among other things: (i)
reviewed certain publicly available financial statements and other business and
financial information of the Company; (ii) reviewed certain internal financial
statements and other financial and operating data concerning the Company
prepared by the management of the Company; (iii) reviewed certain financial
forecasts prepared by the management of the Company; (iv) discussed the past and
current operations and financial condition and the prospects of the Company with
senior executives of the Company; (v) reviewed the reported prices and trading
activity for the Shares; (vi) compared the financial performance of the Company
and the prices and trading activity of the Shares with that of certain other
comparable publicly-traded companies and their securities; (vii) reviewed the
financial terms, to the extent publicly available, of certain comparable
acquisition transactions; (viii) considered the financial payments, through
short-term agreements and funding of certain expenses, provided by the Parent in
recent quarters in excess of amounts the Parent is obligated to provide under
existing contracts, and concluded, based on information provided to Morgan
Stanley by senior executives of the Company and representatives of the Parent,
that the assumption that such payments will continue or increase may not be
appropriate; (ix) participated in discussions and negotiations among
representatives of the Company and the Parent and their financial and legal
advisors; (x) reviewed the Merger Agreement and certain related documents; and
(xi) considered such other factors as Morgan Stanley deemed appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon without
independent verification the accuracy and completeness of the information
reviewed by Morgan Stanley for purposes of the Morgan Stanley Opinion. In
addition, Morgan Stanley assumed that the financial forecasts provided to it by
the management of the Company were reasonably prepared on bases reflecting the
best currently available estimates and judgments of the future financial
performance of the Company. Morgan Stanley did not make any independent
valuation or appraisal of the assets or liabilities of the Company, nor was it
furnished with any such appraisals. The Morgan Stanley Opinion is necessarily
based on financial, economic, market and other conditions as in effect on, and
the information made available to it as of, the date of the Morgan Stanley
Opinion.
The Morgan Stanley Opinion notes Morgan Stanley's understanding, based on
information provided to it by senior executives of the Company and
representatives of the Parent, that the Parent does not intend to sell its
ownership interest in the Company to a third party, nor, as an alternative, will
it support the spin-off or sale of one or more of the Company's principal lines
of business. Accordingly, in arriving at the Morgan Stanley Opinion, Morgan
Stanley did not solicit interest from any party with respect to the acquisition,
business combination or other extraordinary transaction involving the Company or
its assets, nor did Morgan Stanley receive any indication of interest in such an
acquisition from any party other than the Parent.
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The following is a brief summary of material analyses performed by Morgan
Stanley and reviewed with the Board of Directors of the Company on July 30, 1997
in connection with the preparation of the Morgan Stanley Opinion and with its
oral presentation to the Board of Directors of the Company on such date:
Common Stock Performance. Morgan Stanley's analysis of the performance of
the Company's common stock, par value $.05 per Share (the "Common Stock")
consisted of a historical analysis of closing prices and trading volumes from
January 1, 1994 through July 29, 1997 (the last full day of trading prior to the
date of the Morgan Stanley Opinion) and a comparison of such performance to the
indexed price performance of (i) the Standard & Poor's industrial average of 500
stocks (the "S&P 500"); and (ii) a composite of the following computer
companies: IBM, Hewlett-Packard Company, Digital Equipment Corporation, NCR
Corporation, Data General Corporation, Unisys Corp. and Sequent Computer
Systems, Inc. (collectively, the "Hardware Index"). Morgan Stanley observed that
over the periods from January 1, 1994 to July 29, 1997 and from January 1, 1996
to July 29, 1997, the Common Stock underperformed each of the S&P 500 and the
Hardware Index. In the twelve months ended July 29, 1997, the Common Stock
closed at a high of $14.00 per Share and a low of $8.125 per Share. Morgan
Stanley noted that the Offer Price represented a premium of 1.6% over the
closing price for the Common Stock on July 29, 1997, the last full day of
trading prior to the public announcement of the Offer, a premium of 34.3% over
the closing price for the Common Stock one month prior to the announcement of
the Offer, and a premium of 39.1% over the closing price of the Common Stock
three months prior to the announcement of the Offer.
Comparable Company Analysis. As part of its analysis, Morgan Stanley
compared certain financial information of the Company with that of IBM,
Hewlett-Packard Company, Digital Equipment Corporation, NCR Corporation, Data
General Corporation, Unisys Corp. and Sequent Computer Systems, Inc. (the
"Comparable Companies"), which are publicly traded computer hardware companies
that Morgan Stanley considered comparable in certain respects with the Company.
Morgan Stanley's analysis included, among other things, a review for each of the
Company and the Comparable Companies of (i) their respective aggregate values
(market value of equity plus net debt and preferred stock) expressed as a
multiple of their respective latest 12 months ("LTM") sales and (ii) the closing
price on July 29, 1997 of each companies' common stock expressed as a multiple
of their respective estimated earnings per share ("EPS") for the calendar years
1997 and 1998 (based on Institutional Brokers Estimate System estimates as of
July 29, 1997). Applying this analysis, Morgan Stanley derived a range of
implied prices per Share of $4.17 to $5.21 and $6.91 to $15.20, based on ranges
of multiples of 20.0 to 25.0 times the Company's internal 1997 EPS estimates and
13.0 to 17.0 times the Company's internal 1998 EPS estimates, respectively.
No company utilized as comparison in the Comparable Company Analysis is
identical to the Company. In evaluating the Comparable Companies, Morgan Stanley
made judgments and assumptions with regard to industry performance, general
business, economic, market and financial conditions and other matters, many of
which are beyond the control of the Company, such as the impact of competition
on the Company and the industry generally, industry growth and the absence of
any adverse material change in the financial condition and prospects of the
Company or the industry or in the financial markets in general.
Precedent Transaction Analysis. Using publicly available information,
Morgan Stanley reviewed and analyzed certain recent precedent transactions in
the computer hardware industry (the "Comparable Transactions") and certain
recent precedent transactions in which affiliates acquired the outstanding
equity interests in certain target companies in which they already owned an
equity stake (the "Acquisitions by Minority Affiliates Transactions"), each as
listed below, which, in Morgan Stanley's judgment, were deemed to be the most
comparable to the Offer and the Merger for purposes of calculating valuation
ranges for the Common Stock. The Comparable Transactions included Compaq
Computer Corporation's pending acquisition of Tandem Computers, Inc., Gateway
2000 Inc.'s acquisition of Advanced Logic Research, Inc., Samsung Electronics'
acquisition of all outstanding equity of AST Research, Inc., Silicon Graphics
Inc.'s acquisition of Cray Research, Inc., and Hewlett-Packard Company's
acquisition of Convex Computer Corporation. The Acquisitions by Minority
Affiliates Transactions included Safeway Inc.'s acquisition of the remaining
65.5% interest in Vons Companies Inc., Hyundai Electronics' acquisition of the
remaining 63.0% interest in Maxtor Corp., Intelligent Electronics Inc.'s
acquisition of the remaining 71.8% interest in Future
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Now Inc., AirTouch Communication Inc.'s acquisition of the remaining 60% of
Cellular Communications, and Cadbury Schweppes PLC's acquisition of the
remaining 77.3% interest in Dr. Pepper/7-Up Companies.
Morgan Stanley reviewed the prices paid in the Comparable Transactions,
including analysis of the aggregate value of such transactions expressed as
multiples of publicly available estimates of both 1997 LTM sales and operating
income and the equity value of such transactions expressed as multiples of
publicly available estimates of one-year forward net income of the respective
targets. Morgan Stanley also reviewed the prices paid in the Acquisitions by
Minority Affiliates Transactions and the share price paid in such transactions
expressed as a premium over the trading price of those shares both one month
prior and one day prior to announcement. The aggregate value for the Comparable
Transactions expressed (i) as a multiple of 1997 LTM sales ranged from a low of
0.33 times for Samsung Electronics' acquisition of AST Research to a high of
1.43 times for Compaq Computer's acquisition of Tandem Computers' and (ii) as a
multiple of 1997 LTM operating income ranged from a low of 9.9 times for Gateway
2000's acquisition of Advanced Logic Research to a high of 22.2 times for Compaq
Computers' acquisition of Tandem Computers. The equity value for the Comparable
Transactions expressed as a multiple of one-year forward net income ranged from
a low of 13.4 times for Gateway 2000's acquisition of Advanced Logic Research to
a high of 23.5 times for Silicon Graphics' acquisition of Cray Research. For the
Acquisitions by Minority Affiliates Transactions, the share price paid expressed
as a premium over the respective trading prices of the acquired company (i) one
month prior to the announcement ranged from 42.5% for Intelligent Electronics'
acquisition of Future Now to 7.3% for AirTouch Communication Inc.'s acquisition
of Cellular Communications and (ii) one day prior to the announcement ranged
from 42.9% for Hyundai Electronics' acquisition of Maxtor Corp. to 7.4% for Air
Touch Communications' acquisition of Cellular Communications. Applying this
analysis, Morgan Stanley derived ranges of implied prices per Share of (a) $8.27
to $17.23 based on a multiple range of 0.50 to 1.20 times 1997 LTM sales; (b)
$3.41 to $4.20 based on a range of 12.0 to 17.0 times 1997 LTM operating income;
(c) $4.81 to $8.51 based on a range of 13.0 to 23.0 times one-year forward net
income; (d) $11.55 to $12.99 based on a premium range of 20.0% to 35% for
trading price one month prior; and (e) $11.34 to $13.41 based on a premium range
of 10.0% to 30.0% for the unaffected trading price one day prior.
No transaction utilized in the precedent transaction analysis is identical
to the Offer and the Merger. In evaluating the precedent transactions, Morgan
Stanley made judgments and assumptions with regard to industry performance,
general business, economic, market and financial conditions and other matters,
many of which are beyond the control of the Company, such as the impact of
competition on the Company and the industry generally, industry growth and the
absence of any adverse material change in the financial condition and prospects
of the Company or the industry or in the financial markets in general.
Mathematical analysis (such as determining the average or median) is not in
itself a meaningful method of using comparable transaction data.
Discounted Equity Analysis. Morgan Stanley performed an analysis of the
present value per Share of the Company's future trading price based on a range
of multiples of EPS estimates for the Company for calendar years 1999 and 2000,
using an illustrative range of multiples of EPS from 12.0 to 16.0 times and an
illustrative discount rate range of 16.0% to 20.0% based on Morgan Stanley's
estimate of the theoretical return required by stockholders of the Company.
Morgan Stanley based its discounted equity analysis on a number of financial and
operating factors, including, but not limited to: (i) the Company's historical
financial performance for calendar years 1994, 1995, 1996 and the first quarter
of 1997; (ii) the second quarter of 1997 preliminary financial earnings results
provided to Morgan Stanley by the Company; (iii) a comparison of the Company's
January 1997 annual budget and the reduced financial outlook for the remainder
of the 1997 fiscal year; and (iv) the preliminary revised forecast provided in
the management's July 3, 1997 forecast for the remainder of the 1997 fiscal year
(including sales and margin targets).
Based on the information described above, Morgan Stanley developed and
analyzed a range of potential earnings estimates for calendar years 1999 and
2000, and calculated a range of potential present values per Share using an
illustrative discount rate range of 16.0%-20.0% and forward price-to-earnings
multiples of 12.0 to 16.0 times. Applying such estimates, Morgan Stanley
calculated approximate ranges of implied values per Share of $2.19 to $15.46 for
estimated 1999 EPS, and $3.44 to $14.24 for estimated 2000 EPS.
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Discounted Cash Flow Analysis. Morgan Stanley calculated ranges of implied
equity value for the Company based upon the value discounted to the present of
its projected five-year stream of unlevered cash flows plus a range of terminal
values based upon a range of multiples of its projected net income for calendar
year 2002, all based on various financial and operating scenarios prepared by
the Company's management together with Morgan Stanley, less the net debt of the
Company (net debt equals total debt less cash). The principal drivers in the
return to profitability were assumed to be a combination of meaningful revenue
growth and significant margin improvement. In conducting its analysis, Morgan
Stanley made certain assumptions with regard to the Company's operations and
working capital and applied discount rates reflecting a weighted average cost of
capital ranging from 14.0% to 17.0% and terminal multiples ranging from 12.0 to
16.0 times for net income for fiscal year 2002. Based on this analysis, Morgan
Stanley determined an implied equity value range for the Company of $9.57 to
$12.53 per share.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. In
arriving at its opinion, Morgan Stanley considered the results of all of its
analyses as a whole and did not attribute any particular weight to any
particular analysis or factor considered by it. Furthermore, selecting any
portions of Morgan Stanley's analyses, without considering all analyses, would
create an incomplete view of the process underlying the Morgan Stanley Opinion.
In addition, Morgan Stanley may have deemed various assumptions more or less
probable than other assumptions, so that the ranges of valuations resulting for
any particular analysis described above should not be taken to be Morgan
Stanley's view of the actual value of the Company.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of the Company. Where
appropriate, Morgan Stanley discounted comparable industry and/or company data
to reflect the Company's current and projected operating performance in relation
to that of the relevant industry or comparable company group. The analyses
performed by Morgan Stanley are not necessarily indicative of actual values,
which may be significantly more or less favorable than suggested by such
analyses. Such analyses were prepared solely as a part of Morgan Stanley's
analysis of whether the consideration to be received by the holders of Common
Stock (other than the Parent and its affiliates) pursuant to the Merger
Agreement is fair from a financial point of view to such holders, and were
conducted in connection with the delivery of the Morgan Stanley Opinion. The
analyses do not purport to be appraisals or to reflect the prices at which the
Company might actually be sold.
As described above (see "-- Recommendation of the Company Board of
Directors; Fairness of the Offer and the Merger"), the Morgan Stanley Opinion
and the information provided by Morgan Stanley to the Disinterested Board was
one of a number of factors taken into consideration by the Company Board of
Directors in making its determination to recommend approval of the Merger
Agreement, including the Offer and the Merger. Consequently, the Morgan Stanley
analyses described above should not be viewed as determinative of the opinion of
the Board of Directors or the view of management with respect to the value of
the Company.
The summary set forth above does not purport to be a complete description
of Morgan Stanley's analyses. A copy of written materials distributed by Morgan
Stanley to the Board of Directors on July 30, 1997 in connection with Morgan
Stanley's analyses has been filed as an exhibit to the Schedule 13E-3. Copies
thereof will be made available for inspection and copying at the principal
executive offices of the Company during regular business hours by any interested
stockholder of the Company, or his or her representative who has been so
designated in writing, and may also be obtained in the manner described in
Section 13 (except that copies will not be available at regional offices of the
SEC).
The Disinterested Board retained Morgan Stanley based upon its experience
and expertise. Morgan Stanley is an internationally recognized investment
banking and advisory firm. As part of its investment banking business, Morgan
Stanley is regularly engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for corporate and other purposes. Morgan Stanley is a
full-service securities firm engaged in securities trading and brokerage
activities, as well
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as providing investment banking and financial advisory services. In the ordinary
course of its trading and brokerage activities, Morgan Stanley or its affiliates
may at any time hold long or short positions, and may trade or otherwise effect
transactions, for its own account or the accounts of customers, in securities of
the Company or the Parent. In the past Morgan Stanley and its affiliates have
provided financial advisory and financing services to the Parent and its
affiliates and have received fees for the rendering of these services.
Pursuant to a letter agreement dated July 1, 1997, the Company has agreed
to pay Morgan Stanley a transaction fee, payable upon consummation of the
Merger, of approximately $4 million, which is based on the consideration to be
received by the holders of Shares other than the Parent and the Purchaser. In
the event the Merger is not consummated, the Company has agreed to pay Morgan
Stanley an advisory fee, estimated to be between $150,000 and $250,000, which
will reimburse Morgan Stanley for its time and efforts expended in connection
with the Proposed Transaction. In addition, the Company agreed to reimburse
Morgan Stanley for its expenses, including the fees and expenses of its counsel,
and to indemnify Morgan Stanley for liabilities and expenses arising out of the
engagement and the transactions in connection therewith, including liabilities
under federal securities laws.
REPORT OF FINANCIAL ADVISOR TO THE PARENT
The Parent retained Lehman Brothers on June 30, 1997 to provide certain
investment banking advice and services in connection with a possible acquisition
of the Shares not already owned by the Parent. On July 25, 1997, representatives
of Lehman Brothers made a presentation (the "Lehman Report") in Tokyo, Japan to
certain officers and employees of the Parent.
No limitations were imposed by the Parent upon Lehman Brothers with respect
to the investigations made or procedures followed by it in making its report
with respect to the possible acquisition of the Shares not owned by the Parent.
The Lehman Report was prepared exclusively for the use and benefit of the
Parent's Board of Directors and was presented to two of its members in
connection with their consideration of the contemplated acquisition of the
Company and was not intended to be, and does not constitute, a recommendation to
any public stockholder as to whether to accept the consideration to be offered
to such stockholder in the Offer. Lehman Brothers was not requested to evaluate,
and the Lehman Report does not in any manner address, the fairness of the
transaction to the Parent or the public stockholders of the Company, or the
Parent's underlying business decision to acquire the stock of the Company not
owned by the Parent and enter into the Merger Agreement.
In preparing the Lehman Report, Lehman Brothers reviewed and analyzed
certain publicly available financial information concerning the Company and
certain internal analyses and other information furnished to it by the Company.
Lehman Brothers also held discussions regarding the Company's business and
prospects with certain members of the senior management of the Company and
certain of its representatives, including the Company's financial advisor,
Morgan Stanley. In addition, Lehman Brothers: (i) reviewed the historical
reported prices and trading information for the Company's common stock; (ii)
compared certain financial information for the Company with similar information
for certain companies whose securities are publicly traded that Lehman Brothers
deemed relevant; (iii) compared certain stock market information and valuations
for the Company with similar information for certain companies whose securities
are publicly traded that Lehman Brothers deemed relevant; (iv) reviewed the
financial terms (to the extent publicly available) of certain recent business
combinations which it deemed comparable in whole or in part; and (v) performed
such other studies and analyses and considered such other factors as Lehman
Brothers deemed appropriate.
In preparing the Lehman Report, Lehman Brothers assumed and relied upon the
accuracy and completeness of the information provided by the Company and other
information used by Lehman Brothers without assuming any responsibility for
independent verification of such information and further relied upon the
assurances of management of the Company that they were not aware of any facts
that would make the information provided by the Company inaccurate or
misleading. With respect to the financial projections of the Company supplied to
Lehman Brothers by the management of the Company, upon advice of the Company,
Lehman Brothers assumed that such projections were reasonably prepared on a
basis reflecting the
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<PAGE> 21
best currently available estimates and judgments of the management of the
Company as to the future financial performance of the Company. However, for
purposes of its analysis, Lehman Brothers also considered certain more
conservative assumptions and estimates which resulted in significant adjustments
to the projections of the Company. See "Base Case and Sensitivity Case Financial
Projections" below. In its analyses, Lehman Brothers made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of the Company. Any
estimates contained in those analyses are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than as set forth therein. In preparing the Lehman
Report, Lehman Brothers did not conduct any physical inspection of the
properties and facilities of the Company, and did not make nor obtain any
evaluations or appraisals of the assets or liabilities of the Company. The
Lehman Report was necessarily based upon market, economic and other conditions
as they existed on, and could be evaluated as of, the date of the Lehman Report.
The following paragraphs summarize the material financial and comparative
analyses performed by Lehman Brothers in connection with the Lehman Report.
Base Case and Sensitivity Case Financial Projections. Lehman Brothers
reviewed the financial projections of the Company which were provided by the
Company for years 1997 to 1999 (the "Base Case") (see Section 8). The Company's
management indicated that it believed its financial projections were achievable,
but acknowledged that these projections were based on a number of assumptions
including: (i) an optimistic overall rate of growth in the product segment of
the business; (ii) modestly aggressive additional margin improvements in the
services segment of the business; (iii) research and development payments for
1998 and 1999 from the Parent that are significantly higher than currently
planned for 1997; and (iv) significant revenues and operating income from two of
its business units, the prospects of which the Company's management acknowledged
as uncertain. Lehman Brothers reviewed past financial projections for the years
1993 through 1996 and compared those projections to the actual results for those
years and noted that Company has consistently failed to achieve those financial
projections. The Company's management has acknowledged it has failed to meet its
recent financial projections and has also stated that its current projections
may be a challenge to achieve.
Lehman Brothers adjusted a number of the Company's management assumptions
for the years 1997 to 1999 and made assumptions which Lehman Brothers judged to
be more achievable and then produced financial projections using those
assumptions (the "Sensitivity Case"). The most significant differences between
the Sensitivity Case analysis and the Base Case analysis were that the
Sensitivity Case analysis assumed: (i) a lower growth rate with respect to the
Company's traditional System/390-compatible product and service businesses; (ii)
lower prospective margin improvements for the Company's DMR/Trecom business; and
(iii) lower growth and profitability of the software business. Lehman Brothers
noted in the Lehman Brothers Report that there were other important valuation
considerations that were not factored into the Sensitivity case including: (i)
the cash flow effect of any negative outcome from the Company's ongoing tax
audit by the United States Internal Revenue Service; (ii) the assumed level of
future support given by the Parent to the Company; and (iii) any required cash
injections into the Company's subsidiaries due to foreign statutory
requirements.
Preliminary Valuation Summary. Using the Base Case and Sensitivity Case
financial projections, Lehman Brothers performed a number of analyses to
determine a preliminary valuation for the Company. First, Lehman Brothers used
three separate valuation methodologies: (i) a comparable company analysis that
compared the historical and estimated 1997 and 1998 financial performance of
certain publicly traded companies that it considered relevant with the
historical and estimated 1997 and 1998 financial performance of the Company;
(ii) a discounted cash flow analysis, that estimated the potential net present
value of future cash flows generated by the Company based on discount rates
ranging from 13 to 15 percent and terminal values ranging from 12 to 14 times
year 2002 projected net income; and (iii) a price/earnings ratio to growth
analysis, that compared the price/earnings ratio of the Company to those of
other relevant companies, after adjusting such ratios for the expected growth
rate of each company. Using the results of these methodologies, Lehman Brothers
estimated a range of public equity market trading values of $10.50 to $13.00 per
Share for the Base Case and $9.00 to $11.50 per Share for the Sensitivity Case
(assuming 132.886 million shares
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outstanding, including all dilutive share equivalents, and estimated cash
proceeds of $78 million from the exercise of 10.214 million stock options).
In order to estimate an appropriate acquisition value for the Company,
Lehman Brothers performed several additional analyses, including (i) taking the
public equity market trading values above and applying an approximate 20%
control premium (based on comparable transactions), (ii) taking the Company's
closing public market Share price of July 22, 1997 (the latest trading date
before the Lehman Report was prepared), and applying premia ranging from 20% to
40%, and (iii) taking the Company's recent historical and estimated 1997 and
1998 financial performance and applying multiples derived from recent comparable
transactions. Based on the results from these stock analyses, Lehman Brothers
estimated that the acquisition value of the Company ranged from $12.00 to $15.00
per Share in the Base Case, and from $11.00 to $14.00 per Share in the
Sensitivity Case.
Additional Analyses. Lehman Brothers performed a purchase price ratio
analysis and calculated multiples under various acquisition prices based on
revenues, earnings before interest and taxes ("EBIT"), EBIT before depreciation
and amortization ("EBITDA"), net income and book value, and compared these
multiples with multiples from a number of recent transactions deemed relevant by
Lehman Brothers. Lehman Brothers also performed a contribution analysis which
indicated that, under the Base Case, any acquiror of the Company, applying U.S.
GAAP, could incur earnings accretion up to $15.00 per Share and earnings
dilution thereafter, before any synergies or contingencies. Under the
Sensitivity Case, the analysis indicated that earnings dilution could occur at
$12.00 per Share. Lehman Brothers also performed an internal rate of return
analysis on the Base Case, that assumed a terminal value at the year 2002 based
on a multiple of 13 times year 2002 projected net income, and which on a
cash-on-cash basis implied returns in the range of 13.9% to 22.9% for purchase
prices of $10.00 to $14.00 per Share. Under the Sensitivity Case the internal
rates of return ranged from 2.5% to 10.5% for purchase prices of $10.00 to
$14.00 per Share.
The Lehman Report also noted several factors that might imply a significant
difference between the price that the Parent may wish to pay for the stock of
the Company it does not already own and the possible values previously
indicated: (i) the Parent already owns 42.2% of the Company's stock,
significantly reducing the rationale for paying a large strategic premium; (ii)
the Company's recent discussions with equity research analysts may have led to
an unjustified increase in the stock price; (iii) the level of future financial
support from the Parent is uncertain; and (iv) equity analysts and the investing
public may overvalue certain of the Company's business prospects.
For informational purposes, the Lehman Report listed the premia paid in a
number of recent acquisitions. The Lehman Report noted that while the premia
paid varied significantly: (i) in transactions in which a significant minority
shareholder purchased 100% of the remaining shares of a company, the premium
paid was normally lower for larger companies; and (ii) in recent transactions in
the computer industry, the premium paid primarily varied with the health of the
target company.
The summary set forth above does not purport to be a complete description
of the Lehman Report. The full text of the Lehman Report, which sets forth,
among other things, assumptions made, matters considered and limitations on the
review undertaken, has been filed as an exhibit to the Schedule 13E-3. Copies
thereof will be made available for inspection and copying at the principal
executive offices of the Parent during its regular business hours by any
interested stockholder of the Company, or his or her representative who has been
so designated in writing, and may also be obtained in the manner described in
Section 13 (except that copies will not be available at regional offices of the
Commission).
Engagement of Lehman Brothers. Lehman Brothers is an investment banking
firm engaged in, among other things, the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive bids, secondary distributions of listed and unlisted
securities, private placements, and valuations for corporate, estate and other
purposes. The Parent selected Lehman Brothers to act as its financial advisor
because of its expertise, reputation and familiarity with the technology and
computer industries in general and because its investment banking professionals
have substantial experience in matters described above.
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Pursuant to a letter agreement dated June 30, 1997, between the Parent and
Lehman Brothers, the Parent agreed to pay Lehman Brothers in Japanese Yen
equivalents (plus Japanese consumption taxes) the following amounts: (i) a
non-refundable retainer of $150,000, upon the signing of the letter agreement;
(ii) $850,000 upon the launch of the Offer, payable within 10 days of the
launch; (iii) if within a certain period the Parent acquires a 51% or greater
interest in the Company's shares, but less than all of the remaining outstanding
Shares on the closing of the Offer, $1,375,000, payable within ten days
following the closing of the Offer; and (iv) if within a certain period the
Merger is consummated, $3,750,000, less the amounts previously paid pursuant to
clauses (i) through (iii), payable within 10 days of the closing of the Merger.
The Parent also agreed to reimburse Lehman Brothers for its reasonable expenses,
including reasonable professional and legal fees, in connection with the
services rendered under the letter agreement. The Company agreed to indemnify
Lehman Brothers and its affiliates, directors, officers, employees, agents and
controlling persons, for certain costs, expenses, losses, claims, damages and
liabilities arising out of or in connection with the services rendered under the
letter agreement.
Lehman Brothers has in the past provided investment banking services to the
Parent, for which it has received customary compensation.
In the ordinary course of its business, Lehman Brothers may actively trade
in the debt and equity securities of the Parent and the Company for its own
account and for the account of its customers and, accordingly, may at any time
hold a long or short position in such securities.
PURPOSE AND STRUCTURE OF THE OFFER AND THE MERGER; REASONS OF THE PARENT AND THE
PURCHASER FOR THE OFFER AND THE MERGER
Purpose and Structure of the Offer and the Merger. The purpose of the Offer
is for the Parent indirectly to acquire the entire equity interest in the
Company. The purpose of the Merger is for the Parent to acquire all of the
equity interest in the Company not acquired pursuant to the Offer. Upon
consummation of the Merger, the Company will become a wholly owned subsidiary of
the Parent. The acquisition of the entire 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 equity interest in the
Company held by stockholders of the Company (other than the Parent and the
Purchaser) from such stockholders to the Parent (indirectly) and to provide the
stockholders of the Company (other than the Parent and the Purchaser) with cash
for all of their Shares.
Following the Merger, the interest of the Parent in the Company's net book
value and net income will increase to 100%. The Parent, as the remaining
stockholder of the Company, will thereafter benefit from any increases in the
value of the Company and also bear the risk of any decreases in the value of the
Company.
Under the DGCL and the Company's certificate of incorporation, the approval
of the Board of Directors of the Company and, under certain circumstances, the
affirmative vote of the holders of a majority of the outstanding Shares are
required to approve and adopt the Merger Agreement and the Transactions,
including the Merger. If the Minimum Condition is satisfied and the Offer is
consummated, the Parent and the Purchaser will have sufficient voting power in
any vote by the stockholders of the Company to cause the approval and adoption
of the Merger Agreement and the Transactions without the affirmative vote of any
other stockholder. The Company has agreed that, if required under the DGCL, it
will convene a special meeting of its stockholders as promptly as practicable
following the acceptance for payment and purchase of Shares pursuant to the
Offer, for the purpose of considering and taking action on the approval of the
Merger and adoption of the Merger Agreement. Each of the Parent and the
Purchaser intend to vote all Shares owned by them in favor of the approval of
the Merger and adoption of the Merger Agreement.
Under the DGCL, if, following consummation of the Offer, the Purchaser is
the registered owner of at least 90% of the Shares then outstanding (including
any Shares with respect to which record or beneficial ownership may be
transferred to the Purchaser from the Parent), the Purchaser will be able to
cause the Merger to occur without a vote of the Company's stockholders. In such
event, the Parent, the Purchaser and the Company have agreed to take all
appropriate and necessary action to cause the Merger to become effective as soon
as reasonably practicable after consummation of the Offer without a meeting of
the Company's
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stockholders. If, following consummation of the Offer, the Purchaser owns less
than 90% of the Shares then outstanding, a vote of the Company's stockholders,
as described above, will be required under the DGCL to approve the Merger, and a
significantly longer period of time will be required to effect the Merger.
However, in the event that, following consummation of the Offer, the Purchaser
owns a number of Shares that, together with the Shares then held by the Parent,
constitutes less than 90% of the outstanding Shares, the Purchaser and the
Parent reserve the right to purchase additional Shares on the AMEX or the LSE,
in privately negotiated transactions or otherwise. The prices paid in such
purchases may be more or less than the price paid pursuant to the Offer.
The Merger does not require the approval of a majority of the unaffiliated
stockholders of the Company.
The Parent's and the Purchaser's Reasons for the Offer and the Merger. The
Parent's desire to acquire the remaining stock of the Company is driven by
several business considerations. The Company has suffered substantial cumulative
losses during recent years. The Parent believes that the Company's sales and
market share are adversely affected by such financial losses, in that potential
customers have a reduced level of confidence as to whether the Company will
remain viable, and whether the Company will be able to effectively support its
products and customers.
The Company's financial results have adversely affected the value of the
outstanding Shares, including the Shares owned by the Parent. However, because
the Parent currently holds only a minority interest in the Company, the Parent
has been unable to direct the management of the Company.
In acquiring the outstanding Shares that it does not presently own, the
Parent seeks to prevent any further diminution of the value of the Company's
shares held by the Company's stockholders (including the Shares held by the
Parent), and to take actions to improve the Company's financial performance.
Because of the size of the Company's business, the Parent believes that any
effort to substantially improve the Company's financial performance, whether by
reorganizing the Company, by expanding its marketing activities, or by other
actions, would require the combined financial resources of both companies.
In addition, the Parent and the Company are also exploring ways in which
the combined entity could more effectively compete with its competitors,
including, most importantly, IBM. The Parent believes that the Offer and the
Merger will improve the Company's ability to sell its products and services, by
providing potential customers the assurance that once it is acquired by the
Parent, a much larger entity, the Company will be more likely to sustain and
improve the products and services that it offers. The Parent and the Company
have not yet identified specific strategies to improve their combined
competitive position following consummation of the Offer and the Merger.
PLANS FOR THE COMPANY AFTER THE OFFER AND THE MERGER
Upon consummation of the Offer, the Parent intends to consummate the Merger
and to continue its review of the Company and its assets, businesses,
operations, properties, policies, corporate structure, dividend policy,
capitalization and management and consider if any changes would be desirable in
light of the circumstances then existing.
The Parent anticipates that, pursuant to the provisions of the Merger
Agreement, upon consummation of the Offer and the Merger it will designate the
directors of the Purchaser to be the directors of the Company and will designate
such further persons to be elected to the Board of Directors of the Company as
would be desirable in light of the circumstances then existing. See "-- The
Merger Agreement."
While the Offer is pending or thereafter, some form of new joint venture or
other business combination between the Parent and the Company may be explored by
their respective representatives. There is no assurance that any further
discussion will take place or, if such discussions do take place, that they will
lead to any agreement. The Parent may also determine to increase the Company's
equity or otherwise increase the Parent's level of financial support to the
Company.
Except for the foregoing, and as otherwise indicated in this Offer to
Purchase, none of the Parent or the Purchaser or any of their directors,
executive officers or controlling persons has any other present plans or
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proposals which relate to or would result in an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Company or any of its subsidiaries, a sale or transfer of a material amount of
assets of the Company or any of its subsidiaries or any other material changes
in the Company's corporate structure or business.
It is expected that, if Shares are not accepted for payment by the
Purchaser pursuant to the Offer and the Merger is not consummated, the Company's
current management, under the general direction of the current Board of
Directors of the Company (including any nominees of the Parent to the Board of
Directors), will continue to manage the Company as an ongoing business.
INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER
In considering the recommendation of the Board of Directors, stockholders
of the Company should be aware that certain officers and directors of the
Company have certain interests in the Offer and the Merger, including those
referred to below, that present actual or potential conflicts of interest in
connection with the Offer and the Merger. The Disinterested Board was aware of
these potential or actual conflicts of interest and considered them along with
other matters described under "-- Background of the Offer and the Merger; Past
Contacts, Transactions and Negotiations with the Company" and "-- Recommendation
of the Company Board of Directors; Fairness of the Offer and the Merger."
Interests of Certain Directors of the Company Affiliated with the Parent
and the Purchaser. Two members of the Company's Board of Directors, Mr. Webb and
Dr. Packard, entered into consulting agreements with the Parent in 1991 under
which they provide certain consulting services to the Parent in exchange for a
retainer fee of $40,000 (Mr. Webb) and $70,000 (Dr. Packard) per year. In
addition, Dr. Packard serves on the Board of Advisors to the Fujitsu Research
Institute. In light of such interests, Mr. Webb and Dr. Packard have not
participated in the consideration, voting or approval of the Offer or the Merger
on behalf of either of the Company or the Parent and the Purchaser.
Certain former directors of the Company were employees of the Parent when
they served as non-employee directors of the Company. All such directors
resigned from the Board of Directors of the Company prior to the negotiation of
the Offer and the Merger and did not participate in the Company's consideration,
voting or approval of the Offer or the Merger. See "-- Background of the Offer
and the Merger; Past Contacts, Transactions and Negotiations with the Company."
Such former directors included Mr. Keizo Fukagawa, who currently holds options
to purchase 15,000 Shares, all of which are currently vested, of which 10,000
are exercisable for an exercise price over $12.00 per Share, while 5,000 are
exercisable for $7.125 per Share; and Mr. Kazuto Kojima, who currently holds
options to purchase 5,000 Shares at an exercise price of $5.3125 per Share,
exercisable for a period of three months commencing on June 29, 1997, and
options to purchase 7,500 Shares at exercise prices above $12.00 per Share,
exercisable for a period of six months commencing on June 29, 1997.
Interests of Board Members with Respect to Compensation and Shares. During
fiscal 1996 and 1997, non-employee members of the Company's Board of Directors
received the following compensation: (i) $20,000 per year; (ii) $1,000 for each
meeting of the Board of Directors attended; (iii) $500 for each teleconference
and committee meeting attended; (iv) a nonqualified stock option to purchase
5,000 Shares pursuant to the Automatic Grant Program (the "Automatic Grant
Program") of the Company's 1994 Stock Incentive Plan (the "1994 Stock Plan"), at
the time of their election to the Board; and (v) a nonqualified stock option to
purchase 5,000 Shares pursuant to the Automatic Grant Program, on the date of
the Company's annual meeting, provided such individual had served as a
non-employee director of the Company for at least twelve months. In addition,
non-employee members of the Board of Directors are entitled to be reimbursed for
expenses related to these meetings.
The Automatic Grant Program provides that upon a "change in control" (as
defined in the 1994 Stock Plan), all outstanding options issued to non-employee
directors under the Automatic Grant Program will immediately vest. Thus, upon
consummation of the Offer, all options issued to non-employee directors under
the Automatic Grant Program will vest. Many of the Company's non-employee
directors also have options outstanding under the Company's Stock Option Plan
(1974) (the "1974 Option Plan"), which will vest at the
23
<PAGE> 26
Effective Time in accordance with the terms of that Plan. Pursuant to the Merger
Agreement, all such options will be canceled at the Effective Time and, in
consideration of such cancelation, each optionholder will receive for each Share
subject to such an option an amount in cash equal to the excess, if any, of the
Merger Consideration over the per Share exercise price of the option. The
current non-employee directors of the Company own options to purchase a total of
159,000 Shares at various exercise prices. Of these, options to purchase 100,000
Shares are exercisable at a price which is above the Offer Price and will,
therefore, not give rise to the right to receive such excess. See "-- The Merger
Agreement -- Effects on Securities; Stock Options and Stock Participation
Plans."
Interests of Executive Officers of the Company with Respect to Shares. The
Company's executive officers (including the only employee director) have options
outstanding to purchase Shares under the 1974 Option Plan and the Discretionary
Grant Program (the "Discretionary Grant Program") of the 1994 Stock Plan. Shares
subject to such vested options will receive an amount in cash equal to the
excess, if any, of the Merger Consideration over the per share exercise price of
the option to be paid at the Effective Time. Unvested options will receive the
excess, if any, of the Merger Consideration over the per Share exercise price of
the option at the time such options would have vested. See "-- The Merger
Agreement -- Effects on Securities; Stock Options and Stock Participation
Plans."
During the 1996 fiscal year and in the first two quarters of 1997, the
administrator of the 1994 Stock Plan granted options to purchase 929,000 Shares
to the Company's current executive officers, including the following: John C.
Lewis (150,000), William F. Ferone (57,000), Michael Poehner (50,000), Bruce J.
Ryan (108,000), David B. Wright (108,000). In addition, executive officers of
the Company (including John C. Lewis) received grants of Shares under the
Discretionary Grant Program which are subject to certain restrictions ("the
Restricted Stock"). These restrictions generally lapse and the stock vests over
a period of three to four years. Under the Discretionary Grant Program, the
Restricted Stock is purchased by the grantee at par value and may not be sold
until it vests. Grantees will receive the Merger Consideration at the time their
Restricted Stock would have vested. See "-- The Merger Agreement -- Effects on
Securities; Stock Options and Stock Participation Plans."
To the knowledge of the Company, as of July 29, 1997, the current directors
and officers of the Company, as a group, beneficially owned, directly or
indirectly, or exercise control or direction over 698,724 Shares, not
24
<PAGE> 27
including unexercised options, representing approximately 0.6% of the
outstanding Shares. The directors and executive officers of the Company will be
entitled to receive, as contemplated by the Merger Agreement, cash payments in
the manner set forth in the table below (see "-- The Merger Agreement -- Effects
on Securities; Stock Options and Stock Participation Plan"):
Shares and Option Amounts with Respect to the Company's Directors and Executive
Officers
<TABLE>
<CAPTION>
OPTIONS VALUE OF
CONVERTED TO CASH RESTRICTED
DOLLAR AT TIME OF OFFER AND STOCK AND
AMOUNT AT MERGER OPTIONS TO BE
OWNED OFFER ----------------------- PAID IN CASH TOTAL CASH
NAME SHARES* PRICE SHARES DOLLARS A LATER DATE CONSIDERATION
- ------------------------------- ------- ---------- ------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
John C. Lewis.................. 164,115 $1,969,380 233,625 $1,415,625.00 $1,481,362.50 $4,866,367.50
David L. Anderson.............. 20,943 251,316 213,750 748,328.12 224,765.63 1,224,409.75
Michael R. Carabetta........... 1,116 13,392 16,900 41,493.75 221,193.75 276,079.50
William F. Ferone.............. 12,387 148,644 133,000 939,343.74 215,921.63 1,303,909.37
William Flanagan............... 8,551 102,612 78,150 486,009.37 219,065.93 807,687.30
Charles E. Fonner.............. 7,625 91,500 46,650 325,603.12 119,203.13 536,306.25
Gregory R. Grodhaus............ 0 0 0 0 280,078.13 280,078.13
Orval J. Nutt.................. 1,144 13,728 116,500 693,656.25 93,937.50 801,321.75
Michael J. Poehner............. 6,253** 75,036 31,400 185,312.50 183,125.00 443,473.50
Anthony M. Pozos............... 53,094 637,128 184,450 1,069,890.62 212,765.63 1,919,784.25
William R. Riley............... 4,384 52,608 20,100 129,593.74 184,687.50 366,889.24
Bruce J. Ryan.................. 16,751 201,012 121,750 193,515.62 861,396.88 1,255,924.50
Ernest B. Thompson............. 229 2,748 55,300 391,681.25 57,168.75 451,598.00
David B. Wright................ 26,312 315,744 104,550 693,796.87 712,396.88 1,721,937.75
Michael R. Hallman............. 0 0 5,000 16,406.25 0 16,406.25
E.F. Heizer, Jr................ 8,000 96,000 11,000 47,968.75 0 143,968.75
Burton G. Malkiel, Ph.D........ 1,052*** 12,624 11,000 47,968.75 0 60,592.75
George R. Packard, Ph.D........ 1,000 12,000 10,000 40,781.25 0 52,781.25
Walter B. Reinhold............. 78,605 943,260 11,000 47,968.75 0 991,228.75
J. Sidney Webb................. 4,000 48,000 11,000 47,968.75 0 95,968.75
</TABLE>
This table does not include options with an exercise price greater than $12.00.
- ---------------
* Does not include Restricted Stock.
** Does not include 900 shares held by Mr. Poehner as custodian for his two
children. Mr. Poehner has sole voting and investment power over these
shares.
*** Does not include 1,000 shares held by the Jonathan P. Malkiel Trust of which
Dr. Malkiel is a trustee with shared voting, but sole investment power.
Severance Agreements. The Company has enacted the EOSP which applies to
each executive officer of the Company who is subject to the short-swing profit
restrictions of Section 16 of the Exchange Act. Under the EOSP, if an executive
officer's employment is terminated by the Company, or such individual resigns
for good reason (including a reduction in duties or compensation or a relocation
of place of employment), within 18 months following the Merger, then such
executive officer will immediately vest in all of his outstanding stock options
and Restricted Stock and his account balance under the Short-Term Executive
Incentive Performance Plan (the "Short-Term Plan") and will also receive for a
period of two years from the date of such termination or resignation: (i)
continuation of base salary, (ii) the average bonus payable to active officers
of the same salary level during the severance period, (iii) continued health
care coverage for such officer and his dependents, (iv) continued life insurance
coverage and (v) continued vesting in his account balance under the Long-Term
Executive Incentive Performance Plan (the "Long-Term Plan"). In November 1995,
the Compensation Committee of the Company committed to make available to Mr.
Lewis a retirement benefit pursuant to which he will be entitled to the
following benefits, in addition to his benefits under ESOP, upon his retirement
from the Company: (i) a retirement benefit valued at approximately $920,000
25
<PAGE> 28
(ii) continued health care coverage for him and his wife for life, (iii)
continuation on the Company's Board of Directors for at least one full term
following his retirement at a fee of $50,000 per year, annualization of his
compensation for purposes of any allocation made to his account under the
Long-Term Plan for the year of his retirement and (v) secretarial services and
office space.
The Short-Term Plan and Long-Term Plan are part of the Company's Executive
Incentive Plan which provides benefits, some of which are not payable until
termination of employment. Under these plans, certain executive officers and
other key employees receive incentive awards each year based upon the Company's
progress in achieving long-term business objectives. The combined total
aggregate annual award for the participants under these plans may not exceed 2%
of the Company's consolidated pre-tax earnings for the year.
In addition, the Company has approved a retirement package for Mr. Lewis
pursuant to which he will be entitled to the following benefits, in addition to
his benefits under the EOSP, upon his retirement from the Company: (i) a
retirement bonus of $800,000 plus interest from January 1, 1996 to October 1,
1996, (ii) continued health care coverage for him and his wife for life, (iii)
continuation on the Company's Board of Directors for at least one full term
following his retirement at a fee of $50,000 per year, (iv) interest on his
accrued and unpaid vacation balance from January 1, 1996 to October 1, 1996 and
(v) secretarial and office services for a total of approximately $920,000.
Indemnification Agreements. In May, 1987, the Company's stockholders
approved a provision in the Company's Bylaws authorizing the Company to enter
into indemnification agreements with its officers and directors. Since that
time, the Company has entered into indemnification agreements pursuant to which
the Company agreed to hold harmless and indemnify its directors to the fullest
extent permitted under the DGCL. Since November 1996, the Company also has
entered into indemnification agreements with its officers. Pursuant to these
indemnification agreements, the Company has agreed to hold harmless and
indemnify its officers against any and all expenses and loss actually and
reasonably incurred by such officer in connection with an actual or threatened
action, suit or proceeding to which the officer is or is threatened to become a
party by reason of the fact that such officer is or was an officer of the
Company or is or was serving at the request of the Company. No indemnification
for officers shall be paid by the Company: (i) except to the extent that the
aggregate loss to be indemnified exceeds the amount for which director and
officer insurance is available, (ii) if remuneration is in violation of law,
(iii) on account of any suit in which judgment is rendered against such officer
pursuant to Section 16(b) of the Exchange Act, (iv) on account of knowingly
fraudulent, deliberately dishonest or willful misconduct, or (v) if a court
determines that such indemnification is not lawful.
In addition, the Merger Agreement contains certain provisions with respect
to indemnification of directors and executive officers and maintenance of
directors and officers insurance subsequent to the Effective Time. See "-- The
Merger Agreement -- Indemnification and Insurance."
26
<PAGE> 29
BENEFICIAL OWNERSHIP OF SHARES
The following table sets forth certain information, as of July 29, 1997,
regarding the ownership of Shares by each person known by the Company to be the
beneficial owner of more than 5% of the outstanding Shares, as well as each
director of the Company, certain other officers of the Company and all executive
officers and directors of the Company as a group:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY APPROXIMATE
NAME OWNED(1) PERCENT OWNED(2)
- ------------------------------------------------------------- ------------------- ----------------
<S> <C> <C>
John C. Lewis................................................ 643,490 *
Michael R. Hallman........................................... 15,000 *
E. F. Heizer, Jr............................................. 37,000 *
Burton G. Malkiel, Ph.D...................................... 31,052** *
George R. Packard, Ph.D...................................... 29,000 *
Walter B. Reinhold........................................... 107,605 *
J. Sidney Webb............................................... 33,000 *
William F. Ferone............................................ 135,450 *
Michael J. Poehner........................................... 38,053*** *
Bruce J. Ryan................................................ 102,551 *
David B. Wright.............................................. 154,012 *
All directors and executive officers as a group (20
persons)................................................... 2,008,624 1.6%
Fujitsu Limited.............................................. 51,811,664 42.1%
The Prudential Insurance Company of America.................. 10,352,218 8.4%
1751 Broad Street
Newark, New Jersey 07102-3777
</TABLE>
- ---------------
* Less than 1%.
** Includes 1,000 Shares held by the Jonathan P. Malkiel Trust, of which Dr.
Malkiel is a trustee with shared voting, but sole investment, power.
*** Includes 900 Shares (450 each) held by Mr. Poehner as custodian for his two
children. Mr. Poehner has sole voting and investment power over these
shares.
(1) The Company has advised the Parent and the Purchaser that it believes that
all beneficial owners named in the table have sole voting and investment
power with respect to the Shares they beneficially own. The figures include
Shares that could be purchased by exercise of options within 60 days of July
30, 1997 (including options which have exercise prices above $12.00) as held
by: Mr. Lewis, 369,600 Shares; Mr. Hallman, 15,000 Shares; Mr. Heizer,
29,000 Shares; Dr. Malkiel, 29,000 Shares; Dr. Packard, 28,000 Shares; Mr.
Reinhold, 29,000 Shares; Mr. Webb, 29,000 Shares; Mr. Ferone, 113,800
Shares; Mr. Poehner, 23,400 Shares; Mr. Ryan, 36,250 Shares; Mr. Wright,
82,150 Shares; and all directors and executive officers as a group,
1,309,900 Shares.
(2) Percent of the 122,957,555 Shares outstanding as of July 29, 1997, counting
as outstanding for each named person all Shares issuable to such person on
exercise of Options that are included in the first column.
THE MERGER AGREEMENT
The following summary of certain provisions of the Merger Agreement is
presented only as a summary and is qualified in its entirety by reference to the
Merger Agreement, a copy of which is attached hereto as Exhibit III. For
purposes of the Merger Agreement, "Subsidiary" was defined as any corporation,
partnership, joint venture or other entity of which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are at the time
owned by the Company and/or one or more other direct or indirect Subsidiaries,
except that, for purposes of certain
27
<PAGE> 30
representations by the Company, Pebblesoft Learning, Inc. and Network
Intelligence, Inc. and their respective subsidiaries are not considered
"Subsidiaries."
The Offer. The Merger Agreement provides for the commencement of the Offer
by the Purchaser. The Purchaser's obligation to accept for payment or pay for
Shares is subject to the satisfaction of the conditions that are described in
Section 10 hereof, including satisfaction of the Minimum Condition. Pursuant to
the Merger Agreement, the Parent and the Purchaser expressly reserve the right
to waive the Minimum Condition and any of the other conditions to the Offer, to
the extent permitted by applicable law, and to make any change in the terms or
conditions of the Offer, including without limitation extending the expiration
date of the Offer, provided that the Parent and the Purchaser may not decrease
the price per Share or the number of Shares sought, change the form of
consideration payable or add additional conditions to the Offer. In addition,
the Parent and the Purchaser have agreed that if, at any such scheduled
expiration date, any of the conditions to the Offer have not been satisfied or
waived, then, upon the written request of the Company based on a reasonable,
good faith judgment that the conditions are capable of being satisfied within a
certain period, the Parent and the Purchaser shall extend the Expiration Date
for such period, not to exceed twenty business days, and in any event no later
than October 31, 1997 (the "Deadline Date").
The Merger. The Merger Agreement provides that, following the purchase of
Shares pursuant to the Offer and upon the terms and subject to the conditions
set forth in the Merger Agreement, the Purchaser will be merged with and into
the Company, and the separate corporate existence of the Purchaser will cease
with the Company continuing as the Surviving Corporation. The Merger Agreement
also provides that (i) the Merger shall close as soon as practicable after
satisfaction or waiver of all of the conditions to the Merger set forth in the
Merger Agreement, and (ii) on the Merger closing date, the Company, the Parent
and the Purchaser will file a Certificate of Merger with the Secretary of State
of Delaware in accordance with the DGCL. The Merger shall become effective when
the Certificate of Merger is duly filed with the Secretary of State of Delaware
or at such time as is agreed by the parties and specified in the Certificate of
Merger (the "Effective Time").
Effects on Securities; Stock Options and Stock Participation Plan. In the
Merger: (i) each share of common stock, par value $.05 per share, of the
Purchaser issued and outstanding will be canceled and retired, and no
consideration will be paid or delivered in exchange therefore; (ii) each Share
held in the treasury of the Company or by any Subsidiary will be canceled and
retired, and no consideration will be paid or delivered in exchange therefore;
(iii) each Share issued and outstanding and registered in the name of the Parent
or the Purchaser will not be converted, but will remain outstanding as a validly
issued, fully paid and nonassessable share of Common Stock of the Surviving
Corporation; and (iv) each Share issued and outstanding (other than Dissenting
Shares (as defined below) and those Shares referred to in clauses (ii) and
(iii)) will be converted into the right to receive, upon surrender of the
certificate evidencing such Share, an amount in cash, without interest, equal to
the Offer Price or any higher price paid for each Share in the Offer (the
"Merger Consideration"). Shares as to which appraisal rights have been validly
exercised pursuant to DGCL Section 262 ("Dissenting Shares") shall not be
converted into the right to receive the Merger Consideration, but the holders of
such Shares shall be entitled to payment of the appraised value of such Shares
in accordance with the provisions of Section 262 of the DGCL.
Options granted pursuant to the 1974 Option Plan will vest at the Effective
Time, in accordance with the terms of the 1974 Option Plan. Effective as of the
Effective Time, each outstanding stock option under the 1974 Option Plan, the
1994 Stock Plan and the Amdahl Corporation Stock Option Plan of DMR Group Inc.
(collectively, the "Company Option Plans") will terminate and be canceled, and
(i) each holder of a stock option which has vested as of the Effective Time will
be entitled to receive from the Company, at the Effective Time, for each Share
subject to the then-vested portion of the option, an amount in cash equal to the
excess, if any, of the Merger Consideration over the per share exercise price of
the option, and (ii) each holder of such a stock option which has not vested as
of the Effective Time shall be entitled to receive from the Company, on the
date(s) following the Effective Time on which the option would have vested under
the applicable Company Option Plan, for each Share subject to the then-vested
portion of the option, an amount in cash equal to the excess, if any, of the
Merger Consideration over the per share exercise price of the option, plus
interest from the Effective Time through the date such option would have vested
at 6% per annum, in each
28
<PAGE> 31
case subject to applicable withholding, if any. No optionholder will be entitled
to receive any payment in consideration of the termination and cancellation of
such option until the optionholder shall have delivered to the Company or the
Surviving Corporation a release in form satisfactory to the Parent. The Company
has agreed to take all such actions consistent with applicable law and the
existing provisions of the Stock Option Plans to provide that the right to
receive consideration as provided in the Merger Agreement will terminate, if not
previously claimed, with respect to each option at the date twelve months from
the Effective Time or, in the case of options not vested at the Effective Time,
twelve months from the date the option would have vested.
The Parent and the Company also have agreed that Restricted Stock issued
but not vested as of the Effective Time will be canceled as of the Effective
Time. In consideration of such cancelation, each holder of a Share of Restricted
Stock will be entitled to receive from the Company, on the date(s) following the
Effective Time on which the Share of Restricted Stock would have vested under
the Company's Restricted Plan, for each Share then vested, an amount in cash
equal to the Merger Consideration, plus interest from the Effective Time through
the date such Share of Restricted Stock would have vested at 6% per annum, in
each case subject to applicable withholding, if any. No holder of Restricted
Stock will be entitled to receive any payment in consideration of the
cancelation of such Restricted Stock until the holder shall have delivered to
the Company or the Surviving Corporation a release in form satisfactory to the
Parent. The Company has agreed to take all such actions consistent with
applicable law and the existing provisions of the Company's Restricted Stock
Plan to provide that the right to receive such consideration will terminate, if
not previously claimed, with respect to each Share of Restricted Stock at the
date twelve months from the date the Share would have vested.
With respect to the Company's Employee Stock Purchase Plan (the "Company
Stock Purchase Plan"), the Company has agreed to take all actions necessary to
cause the last day of the "Purchase Period" (as used in the Company Stock
Purchase Plan) to be the earlier of (i) the end of the current Purchase Period
or (ii) the date on which the Effective Time occurs. On such date, each
participant in the Company Stock Purchase Plan will be deemed to have purchased
the number of whole Shares that could be purchased upon the application of the
funds then in such participant's withholding account in accordance with the
terms of the Company Stock Purchase Plan. As of the Effective Time, each
participant will be entitled to receive from the Company, for each Share such
participant is deemed to have purchased, the Merger Consideration, subject to
applicable withholding tax, if any. No participant will be entitled to receive
any payment on account of any Shares deemed to have been purchased pursuant to
the Merger Agreement until the participant shall have delivered to the Company
an acknowledgment that the participant has received all amounts due in
connection with the Company Stock Purchase Plan. The Company has agreed to take
all actions necessary to terminate the Company Stock Purchase Plan effective on
the Expiration Date so that no new Purchase Period that would otherwise commence
on or after that date will commence.
Employee Benefits. The Parent has agreed to cause the Surviving Corporation
to honor all employment, change in control, deferred compensation, pension,
retirement and severance agreements, pay and personnel policies in effect on the
date hereof between the Company or one of its Subsidiaries and any employee of
the Company or one of its Subsidiaries, or maintained for the benefit of any
employee of the Company or one of its Subsidiaries and all bonus plans and
arrangements for the fiscal year ending December 31, 1997 made by the Company or
any of its Subsidiaries prior to the date of the Merger Agreement. The Parent
also agreed to cause the Surviving Corporation to provide active employees of
the Company and its Subsidiaries with benefits that are no less favorable, taken
as a whole, than the benefits provided under the Company's benefit plans (other
than equity-based plans) as in effect immediately prior to the Effective Time.
Board Representation. The Merger Agreement provides that, effective upon
the acceptance for payment by the Purchaser of such number of Shares as shall
constitute satisfaction of the Minimum Condition, the Purchaser 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 equals the product of (i) the total
number of directors on such Board and (ii) the percentage that the number of
Shares owned by the Purchaser (including Shares accepted for payment) and the
Parent bears to the total number of Shares issued and outstanding, provided,
that there shall always be at least two directors in office as of the date of
the Merger Agreement who are not employees of the
29
<PAGE> 32
Company or any of its subsidiaries or affiliates or of the Parent or the
Purchaser (each, a "Continuing Director"). The Company also will use its best
efforts to cause the same percentage of directors designated by the Purchaser,
as determined above, to sit on all committees of such board, each board of each
Subsidiary and each committee of such Subsidiary boards.
The Merger Agreement provides that, from and after the Effective Time and
until their respective successors are duly elected or appointed and qualified,
(a) the directors of the Purchaser at the Effective Time will be the directors
of the Surviving Corporation and (b) the officers of the Company at the
Effective Time will be the officers of the Surviving Corporation.
Stockholders' Meeting and Proxy Statement. The Merger Agreement provides
that, if required by applicable law, the Company will call a Special Meeting of
its stockholders to be held as promptly as practicable following the acceptance
for payment and purchase of Shares, for the purpose of considering and voting on
the approval of the Merger and adoption of the Merger Agreement.
The Merger Agreement also provides that, if required by applicable law, the
Company will prepare and file with the SEC a proxy statement relating to the
Merger and the Merger Agreement.
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties thereto. These include
representations and warranties of the Company with respect to corporate
organization and qualification, subsidiaries, authority relative to the Merger
Agreement, non-contravention, capitalization, SEC filings, financial statements,
absence of certain changes or events, governmental approvals, compliance with
laws, litigation, intellectual property rights, taxes, employee benefit plans,
severance arrangements, environmental matters, limitations on business
activities, customer relationships, certain transactions, state takeover
statutes, the receipt of the Morgan Stanley Opinion and brokers.
The Parent and the Purchaser also have made certain representations and
warranties with respect to corporate organization and qualification, authority
relative to the Merger Agreement, non-contravention, governmental approvals,
brokers and financing.
None of the representations and warranties of any of the Company, the
Parent or the Purchaser survive the Effective Time.
Conduct of Business Pending the Merger. Pursuant to the Merger Agreement,
the Company agreed that, except as expressly contemplated in the Merger
Agreement, until the Effective Time, the business of the Company and the
Subsidiaries will be conducted only in the ordinary course.
The Company also agreed that, prior to the Effective Time, neither the
Company nor any Subsidiary will, among other things: (i) (a) amend or propose to
amend its Certificate of Incorporation or Bylaws or reincorporate in any
jurisdiction; (b) split, combine or reclassify any issued and outstanding shares
of its capital stock, or declare, set aside or pay any dividend or other
distribution with respect to such shares (except for any dividends paid in the
ordinary course to the Company or to any wholly owned Subsidiary); (c) redeem,
purchase, acquire or offer to acquire any shares of its capital stock; or (d)
issue, sell, pledge, accelerate, modify the terms of or dispose of, or agree to
issue, sell, pledge, accelerate, modify the terms of or dispose of, any
additional shares of, or securities convertible or exchangeable for, or any
options, warrants, calls, commitments or rights of any kind to acquire any
shares of, its capital stock of any class or other property or assets (other
than Shares pursuant to the purchase rights then outstanding under the Company
Stock Purchase Plan and upon the exercise of currently outstanding Options);
(ii) (a) transfer, lease, license, sell, mortgage, pledge, dispose of or
encumber any material assets (except in the ordinary course of business); (b)
acquire any corporation, partnership or other business organization or division
thereof or any other material assets; (c) enter into or modify any material
contract, lease, agreement or commitment, except in the ordinary course of
business; (d) terminate, modify, assign, waive, release or relinquish any
material rights or claims or amend any material rights or claims not in the
ordinary course of business; (e) pay, discharge or satisfy any material claims,
liabilities or obligations, other than the payment, discharge or satisfaction of
any such claims, liabilities or obligations, in the ordinary course of business,
reflected or reserved against in, or contemplated by, the consolidated financial
statements of the Company and the Subsidiaries included in the forms, reports,
schedules, statements and other documents filed by the Company with the SEC
since
30
<PAGE> 33
January 1, 1995 (the "Company SEC Filings"); or (f) settle or compromise any
material claim, action, suit or proceeding pending or threatened against the
Company or any Subsidiary, or certain claims against the Company's directors or
officers, before any court, governmental agency or arbitrator; or (iii) (a)
incur any long-term debt or, except in the ordinary course of business in
amounts consistent with past practice, short-term debt; (b) incur or modify any
material indebtedness or other liability; (c) assume, guarantee, endorse or
otherwise become liable or responsible for the obligations of any other person,
except in the ordinary course of business; or (d) make any loans, advances or
capital contributions to, or investments in, any other person (other than to
wholly owned Subsidiaries or customary loans or advances to employees in the
ordinary course of business).
The Company also agreed that, prior to the Effective Time, neither the
Company nor any Subsidiary may (i) grant any increase in the salary or other
compensation of its employees, or grant any bonus to any employee or enter into
any employment agreement or make any loan to or enter into any material
transaction of any other nature with any employee of the Company or any
Subsidiary, except pursuant to the terms of employment agreements or Company
policies in effect on the date of the Merger Agreement and previously disclosed
to the Parent and, in the case of employees who are not executive officers of
the Company, in the ordinary course of business and consistent with past
practice, or (ii) except as contemplated by the Merger Agreement or as may be
required by applicable law or regulation or, in the case of employees who are
not executive officers of the Company, in the ordinary course of business (a)
adopt, increase, accelerate the vesting of or payment of any amounts in respect
of, or otherwise amend, any collective bargaining, bonus, profit sharing,
incentive or other compensation, stock option, stock purchase or restricted
stock, insurance, pension, retirement, deferred compensation, employment or
other employee benefit plan, agreement, trust, fund, plan or arrangement for the
benefit or welfare of any directors, officers or employees; or (b) enter into
any employment or severance agreement with, or grant any severance or
termination pay to any officer or director of the Company or any Subsidiary or,
except in the ordinary course of business, any employee of the Company or any
Subsidiary.
Pursuant to the Merger Agreement, the Company further agreed that, prior to
the Effective Time, neither the Company nor any Subsidiary may (i) change any of
the accounting methods used by it, unless required by GAAP or other applicable
accounting principles, or (ii) make any Tax election (other than in the ordinary
course of preparing and filing its Tax returns) or settle or compromise any Tax
liability or investigation.
The Company has agreed to afford the Parent and the Purchaser access prior
to the Effective Time to the properties, books, contracts, commitments and
records of the Company and the Subsidiaries and, during such period, to furnish
the Parent and the Purchaser with all financial, operating and other information
as the Parent or the Purchaser may reasonably request.
Confidentiality Agreement; Standstill Agreement. The Parent, the Purchaser
and the Company have agreed in the Merger Agreement that the provisions of the
Confidentiality Agreement and the Standstill Agreement shall remain binding and
in full force and effect in accordance with their respective terms. "See --
Background of the Merger and the Offer; Past Contacts, Transactions and
Negotiations with the Company."
Reasonable Efforts; Approvals. Subject to the terms and conditions of the
Merger Agreement, each of the Parent, the Purchaser and the Company agreed to
use all reasonable efforts to take, or cause to be taken, all action and to do,
or cause to be done, all things necessary, proper or advisable to consummate and
make effective the Transactions. Pursuant to the Merger Agreement, each of the
Company, the Parent and the Purchaser has agreed to take all reasonable actions
necessary to comply promptly with all legal requirements that may be imposed on
it with respect to the Merger Agreement and the Transactions and to cooperate
with each other in connection with any such requirements imposed upon any of
them or any of their subsidiaries.
Each of the Company, the Parent and the Purchaser has agreed that it will,
and will cause its subsidiaries to, take all reasonable action to obtain (and
will cooperate with each other in obtaining) any consent, authorization, order
or approval of, or any exemption by, or to provide any required notice to, any
governmental authority or other public or private third party required to be
obtained or made by the Parent, the Purchaser or the Company or any of their
subsidiaries in connection with the Merger Agreement.
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Stockholder Litigation. The Company has agreed to give the Parent the
opportunity to participate in the defense and settlement of any stockholder
litigation against the Company or its directors relating to any of the
Transactions, and to not enter into any such settlement without the Parent's
consent, which consent may not be unreasonably withheld.
Inquiries and Negotiations. Pursuant to the Merger Agreement, the Company
has agreed that it will immediately notify the Parent if any proposal, offer,
inquiry or other contact is received by, any information is requested from, or
any discussions or negotiations are sought to be initiated or continued with,
the Company by or from any person, corporation, entity or "group" (as defined in
Section 13(d) of the Exchange Act) other than the Parent and its affiliates,
representatives and agents (each, a "Third Party") in connection with any
merger, consolidation, sale of any Subsidiary or division that is material to
the business of the Company and the Subsidiaries, sale of shares of capital
stock or other equity securities, tender or exchange offer, recapitalization,
debt restructuring or similar transaction involving the Company (such
transactions referred to as "Alternative Transactions"), and thereafter shall
keep the Parent informed, on a current basis, of the status and terms of any
such proposals or offers and the status of any such discussions or negotiations.
Without limiting the generality of the foregoing, the Company will provide the
Parent with not less than two Business Days' (defined as weekdays other than
public holidays in the U.S. or Japan) notice prior to the execution by the
Company of any definitive agreement with respect to any Alternative Transaction
or any public announcement relating to any Alternative Transaction.
Prior to furnishing any non-public information to, or entering into
negotiations or discussions with, any Third Party, the Company will obtain an
executed confidentiality agreement from such Third Party on terms substantially
the same as, or no less favorable to the Company in any material respect than,
those contained in the Confidentiality Agreement and the Standstill Agreement.
The Company will not release any Third Party from, or waive any provision of,
any such confidentiality agreement or any other confidentiality or standstill
agreement to which the Company is a party.
Indemnification and Insurance. The Merger Agreement provides that, subject
to certain limitations set forth therein, and subject to applicable law, for six
years after the Effective Time, the Surviving Corporation (or any successor)
will indemnify, defend and hold harmless the present and former officers,
directors, employees and agents of the Company and its subsidiaries against all
losses, claims, damages, liabilities, fees, costs and expenses (including, among
other things, amounts paid in settlement, provided that any such settlement is
effected with the written consent of the Parent or the Surviving Corporation),
based in whole or in part on the fact that such person is or was such a
director, officer, employee or agent and arising out of actions or omissions
occurring at or prior to the Effective Time to the full extent provided under
the terms of the Company's Certificate of Incorporation, Bylaws and
indemnification agreements, all as in effect at the date of the Merger
Agreement. The Merger Agreement also provides that, subject to certain
limitations, for not less than three years after the Effective Time, the
Surviving Corporation shall maintain the Company's existing officers' and
directors' liability insurance, provided that the Surviving Corporation may
substitute therefor policies of substantially similar coverage and amounts
containing terms no less favorable to such former directors or officers, and
provided that the Surviving Corporation will not be required to pay aggregate
premiums for such insurance in excess of 175% of the premiums paid by the
Company in 1996.
Conditions to the Merger. Pursuant to the Merger Agreement, the respective
obligations of each party to consummate the Merger are subject to the
satisfaction or waiver (to the extent permitted by law), on or prior to the
Effective Time of the following conditions: (i) the Merger Agreement shall have
been adopted and approved by the requisite vote of the stockholders, if such
vote is required by the DGCL, (ii) no applicable law shall prohibit consummation
of the Merger or make the Merger illegal; and (iii) the Offer shall not have
been terminated in accordance with its terms prior to the purchase of any
Shares. In addition, the obligation of the Parent and the Purchaser to effect
the Merger is subject, at their option, to the fulfillment at or prior to the
Effective Time of the following: (i) the expiration or earlier termination of
any applicable waiting periods under or in connection with the HSR Act, the
Exon-Florio Act and the antitrust and competition rules of the European
Commission and of all other government authorities; (ii) no preliminary or
permanent injunction or other order, decree or ruling issued by any court of
competent jurisdiction nor any statute, rule, regulation or order entered,
promulgated or enacted by any governmental, regulatory or administrative agency
or authority
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shall be in effect that would restrain the effective operation of the business
of the Company and the Subsidiaries from and after the Effective Time, and no
proceeding challenging the Merger Agreement or any of the Transactions or
seeking to prohibit, alter, prevent or materially delay the Merger shall be
pending before any governmental authority; and (iii) the Purchaser shall have
purchased Shares pursuant to the Offer.
Termination. The Merger Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time, whether before or after
stockholder approval thereof, (a) by mutual written consent of the Parent and
the Company; (b) by either the Parent or the Company, if (i) the Purchaser shall
not have purchased any Shares pursuant to the Offer by September 30, 1997,
unless such failure to purchase such Shares has been caused by the breach of the
Merger Agreement by the party seeking such termination, and provided, that if
the waiting period under the HSR Act shall not have expired or been terminated
as of such date or any governmental authority shall have caused to be issued as
of such date a temporary restraining order or a preliminary injunction
prohibiting the consummation of the Offer or the Merger and each of the parties,
in either case, are seeking the termination of such waiting period or contesting
such temporary restraining order or preliminary injunction, as the case may be,
such date shall be extended to the earlier of (A) the date of expiration or
termination of such waiting period or the lifting of such injunction or order or
(B) the Deadline Date; or (ii) prior to the purchase by the Purchaser of any
Shares pursuant to the Offer, any governmental authority shall have issued an
order, decree or ruling or taken any other action, in each case permanently
restraining, enjoining or otherwise prohibiting all or any material part of the
Transactions and such order, decree, ruling or other action shall have become
final and non-appealable; (c) by the Parent, if the Offer is terminated or
expires without the purchase of any Shares thereunder; (d) by the Parent, if (i)
the Company shall have entered into a letter of intent or agreement in principle
or similar agreement or into any definitive written agreement with respect to an
Alternative Transaction with a Third Party, or a Third Party has commenced a
tender offer or exchange offer for any shares of capital stock of the Company,
(ii) the Disinterested Board shall have withdrawn, or modified or amended in a
manner adverse to the Parent or the Purchaser, its approval or recommendation of
the Offer and the Merger or approved, recommended or endorsed any proposal for
an Alternative Transaction, (iii) Morgan Stanley shall have withdrawn the Morgan
Stanley Opinion, or (iv) required approval of the stockholders of the Company
shall not have been obtained by reason of a failure to obtain the required vote
upon a vote held at a duly held meeting of stockholders or at any adjournment
thereof; (e) by either the Parent or the Purchaser, on the one hand, or the
Company, on the other hand, if the other party shall have failed to comply in
any material respect with any of the material obligations contained in the
Merger Agreement; or (f) by the Company, if, prior to acceptance for payment of
Shares by the Purchaser under the Offer, the Company shall have done each of the
following: (i) entered into a definitive written agreement with respect to an
Alternative Transaction with a Third Party, (ii) determined, after receipt of
written advice from legal counsel to the Disinterested Board, that the failure
to take such action as described in the preceding clause (i) would cause the
Disinterested Board to violate its fiduciary duties to the Company's
stockholders under Applicable Law, and (iii) given notice to the Parent and the
Purchaser of its intent to terminate this Agreement and of the terms and
conditions of the Alternative Transaction, such notice to be given at least five
Business Days (defined as weekdays other than public holidays in the U.S. or
Japan) prior to the date of termination of the Merger Agreement.
Fees and Expenses. Each party to the Merger Agreement has agreed to pay its
own fees and expenses.
FINANCING THE OFFER AND THE MERGER
The Purchaser estimates that the total amount of funds required to purchase
all Shares validly tendered pursuant to the Offer, to consummate the Merger and
to pay all related costs and expenses will be approximately $918 million.
The Purchaser plans to obtain all funds needed for the Offer and the Merger
through a capital contribution that will be made by the Parent to the Purchaser
or, in connection with the Merger, through cash accounts of the Company. The
Parent will ensure that the Purchaser has sufficient funds to acquire all the
outstanding Shares pursuant to the Offer and the Merger. In order to make such
funds available to the Purchaser, the Parent plans to use funds that it has
available in its working capital, funds obtained from various existing credit
facilities with lenders in Japan which bear rates of interest customary for
borrowers of
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the size and credit rating of the Parent or funds generated by commercial paper
programs in Japan through commercial paper dealers at market rates at the time
of issuance. The Purchaser has not conditioned the Offer or the Merger on
obtaining financing.
The Parent anticipates that any indebtedness incurred through borrowings
under credit facilities will be repaid or refinanced from a variety of sources,
which may include, but may not be limited to, funds generated internally by the
Parent and its affiliates, bank financing, and the public or private sale of
debt or equity securities. Such decision will be made based on the Parent's
review from time to time of the advisability of particular actions, as well as
on prevailing interest rates and financial and other economic conditions and
such other factors as Parent may deem appropriate.
CERTAIN EFFECTS OF THE OFFER AND THE MERGER
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and the number of holders of Shares,
which could adversely affect the liquidity and market value of the remaining
publicly held Shares.
Exchange Listings. The Shares are listed and principally traded on the AMEX
and are also listed on the LSE. Depending upon the number of Shares purchased
pursuant to the Offer, following consummation of the Offer the Shares may no
longer meet the standards for continued inclusion on such exchanges. AMEX may
delist the Shares if, among other things, the number of publicly held Shares
(exclusive of holdings of officers, directors, controlling stockholders or other
family or concentrated holdings) falls below 200,000, the number of public
stockholders falls below 300 or the aggregate market value of publicly held
Shares falls below $1,000,000. If, as a result of the purchase of Shares
pursuant to the Offer or otherwise, the Shares no longer meet the AMEX
requirements for continued listing and are no longer listed, the market for
Shares could be adversely affected. It is anticipated that if the Shares are
delisted from the AMEX, a delisting from the LSE would follow promptly.
In the event that such exchanges were to delist the Shares, it is possible
that the Shares would continue to trade on another exchange or in the
over-the-counter market and that price quotations might still be available from
other sources. The extent of the public market for the Shares and availability
of such quotations would, however, depend upon the number of holders of Shares
remaining at such time, the interest in maintaining a market in the Shares on
the part of securities firms, the possible termination of registration under the
Exchange Act, as described below, and other factors.
Margin Regulations. Under the regulations of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"), the Shares are currently
"margin securities," which has the effect, among other things, of allowing
brokers to extend credit on the collateral of such Shares. Depending upon
factors similar to those described above regarding listing and market
quotations, it is possible, that the Shares would no longer constitute "margin
securities" and therefore could no longer be used as collateral for loans made
by brokers.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Such registration may be terminated upon application by the
Company to the SEC if the Shares are not listed on a national securities
exchange and there are fewer than 300 record holders 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 stockholders and to the SEC and would make certain provisions of the
Exchange Act, such as the short-swing profit recovery provisions of Section
16(b), the requirement of furnishing a proxy statement in connection with
stockholders' meetings pursuant to Section 14(a) and the requirements of Rule
13e-3 under the Exchange Act with respect to "going private" transactions, no
longer applicable to the Company. Furthermore, the ability of "affiliates" of
the Company and persons holding "restricted securities" of the Company to
dispose of such securities pursuant to Rule 144 under the Securities Act of
1933, as amended, may be impaired or eliminated. The Purchaser presently intends
to seek to cause the Company to apply for termination of registration of the
Shares promptly following the Offer if the criteria therefore are satisfied.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain federal income tax considerations
relevant to the Offer and Merger, but does not purport to be a complete analysis
of all potential tax effects. This discussion is based upon the Internal Revenue
Code of 1986, as amended (the "Code"), Treasury Regulations, Internal Revenue
Service ("IRS") rulings and pronouncements and judicial decisions all in effect
as of the date hereof, all of which are subject to change at any time, and any
such change may be applied retroactively in a manner that could adversely affect
stockholders. The summary is addressed only to stockholders that are U.S.
Persons (as defined below) and does not address all of the federal income tax
consequences that may be relevant to a holder in light of such holder's
particular circumstances or to holders subject to special rules, such as certain
financial institutions, insurance companies, dealers in securities, tax-exempt
organizations and persons holding the Shares as part of a "straddle," "hedge" or
"conversion transaction." Moreover, the effect of any applicable state, local or
foreign tax laws is not discussed. The discussion deals only with the Shares
held as "capital assets" within the meaning of section 1221 of the Code.
For purposes of this summary, a "U.S. Person" means a beneficial owner of
the Shares who or that (i) is a citizen or resident of the United States, (ii)
is a U.S. corporation or is an entity taxable as such for federal income tax
purposes; (iii) is an estate the income of which is subject to federal income
taxation regardless of its source, (iv) is a trust if (A) a U.S. court is able
to exercise primary supervision over administration of that trust and (B) one or
more U.S. fiduciaries have authority to control substantial decisions of that
trust, or (v) is otherwise subject to federal income tax on a net income basis
in respect of the Shares.
Tax Status of Transaction. The receipt of cash for Shares pursuant to the
Offer (or the Merger) will be a taxable transaction for federal income tax
purposes. The tax consequences of such receipt pursuant to the Offer (or the
Merger) may vary depending upon, among other things, the particular
circumstances of the stockholder. In general, a stockholder who receives cash
for Shares pursuant to the Offer (or the Merger) will recognize gain or loss for
federal income tax purposes equal to the difference between the amount of cash
received in exchange for the Shares sold and such stockholder's adjusted tax
basis in such Shares. Such gain or loss will be capital gain or loss, and will
be long term capital gain or loss if the holder has held the Shares for more
than one year at the time of sale. Gain or loss will be calculated separately
for each block of Shares (i.e., a group of Shares with the same tax basis and
holding period) tendered pursuant to the Offer. If a stockholder exercises such
stockholder's appraisal rights and receives an amount treated as interest for
federal income tax purposes, such amount will be taxed as ordinary income.
Stockholders should recognize that the present federal income tax treatment
of the disposition of the Shares pursuant to the Offer (or the Merger) may be
modified by legislative, judicial or administrative action at any time, and that
such action may affect commitments previously made. The rules dealing with
federal income taxation are constantly under review by persons involved in the
legislative process and by the IRS and Treasury Department, resulting in
revisions of regulations and revised interpretations of established concepts as
well as statutory changes. Revisions in federal income tax laws and
interpretations thereof could adversely or beneficially affect the tax
consequences of the Offer and the Merger to stockholders. However, enactment of
this proposed legislation is not certain. Stockholders are urged to consult
their tax advisors as to the impact to them of proposed legislative, regulative,
administrative or potential judicial changes to the federal income tax laws.
Backup Withholding. Payments in connection with the Offer or the Merger may
be subject to "backup withholding" at a rate of 31%. Backup withholding
generally applies if a stockholder (i) fails to furnish such holder's taxpayer
identification number ("TIN"), which is ordinarily the holder's social security
number, (ii) furnishes an incorrect TIN, (iii) is subject to backup withholding
due to previous failures to include reportable interest or dividend payments on
such holder's federal income tax return, or (iv) under certain circumstances,
fails to provide a certified statement, signed under penalties of perjury, that
the TIN provided is such holder's correct number and that such holder is not
subject to backup withholding. Backup withholding is not an additional tax, but
rather it is an advance tax payment that is subject to refund if and to the
extent that it results in an overpayment of tax. Certain taxpayers are generally
exempt from backup withholding, including corporations and certain foreign
individuals and entities. In order to avoid backup withholding (and
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IRS penalties) with respect to cash payments made pursuant to the Offer (unless
an applicable exemption exists and is proved in a manner satisfactory to the
Purchaser and the Depositary), a stockholder surrendering Shares in the Offer
must, on the Substitute IRS Form W-9 included as part of the Letter of
Transmittal, provide the Depositary with such stockholder's correct TIN and
certify under penalties of perjury that such TIN is correct and that such
stockholder is not subject to backup withholding. Noncorporate foreign
stockholders should complete and sign the main signature form and an IRS Form
W-8, Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 9 to the
Letter of Transmittal.
STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO THE
APPLICATION OF THE TAX CONSIDERATIONS DISCUSSED ABOVE TO THEIR PARTICULAR
SITUATIONS AS WELL AS THE APPLICATION OF ANY STATE, LOCAL, FOREIGN, GIFT, ESTATE
OR OTHER TAX LAWS.
DISSENTERS' RIGHTS
No appraisal rights are available in connection with the Offer. However, if
the Merger is consummated, stockholders of the Company who have not tendered
their Shares may have certain rights under the DGCL ("Section 262") to dissent
and demand appraisal of, and to receive payment in cash of the fair value of,
their Shares. Stockholders who perfect such rights by complying with the
procedures set forth in Section 262 will have the fair value of their Shares
(exclusive of any element of value arising from the accomplishment or
expectation of the Merger) determined by the Delaware Court of Chancery and will
be entitled to receive a cash payment equal to such fair value from the
Surviving Corporation. In addition, such dissenting stockholders would be
entitled to receive payment of a fair rate of interest from the date of
consummation of the Merger on the amount determined to be the fair value of
their Shares. In determining the fair value of the Shares, the court is required
to take into account all relevant factors. Accordingly, such determination could
be based upon considerations other than, or in addition to, the market value of
the Shares, including, among other things, asset values and earning capacity. In
Weinberger v. UOP, Inc., the Delaware Supreme Court stated that "proof of value
by any techniques or methods which are generally considered acceptable in the
financial community and otherwise admissible in court" should be considered in
an appraisal proceeding. The Weinberger court also noted that, under Section
262, fair value is to be determined "exclusive of any element of value arising
from the accomplishment or expectation of the merger." In Cede & Co. v.
Technicolor, Inc., however, the Delaware Supreme Court stated that, in the
context of a two-step cash merger, "to the extent that value has been added
following a change in majority control before cash-out, it is still value
attributable to the going concern," to be included in the appraisal process. As
a consequence of the foregoing, the fair value determined in any appraisal
proceeding could be the same as or more or less than the Merger Consideration.
In this regard, stockholders should be aware that opinions of investment banking
firms as to the fairness from a financial point of view (including the Morgan
Stanley Opinion described herein) are not necessarily opinions as to "fair
value" under Section 262.
The Parent does not intend to object, assuming the proper procedures are
followed, to the exercise of appraisal rights by any stockholder and the demand
for appraisal of, and payment in cash for the fair value of, the Shares.
THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS DOES NOT
PURPORT TO BE A COMPLETE SUMMARY OF THE PROCEDURES TO BE FOLLOWED BY
STOCKHOLDERS DESIRING TO EXERCISE ANY AVAILABLE APPRAISAL RIGHTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SECTION 262 INCLUDED
HEREWITH IN EXHIBIT IV. THE PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS ARE
CONDITIONED ON STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE DGCL.
Several decisions by Delaware courts have held that, in certain instances,
a controlling stockholder of a corporation involved in a merger has a fiduciary
duty to the other stockholders that requires the Merger to be "entirely fair" to
such other stockholders. In determining whether a merger is fair to such other
stockholders,
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the Delaware courts have considered, among other things, the type and amount of
consideration to be received by the stockholders and whether there was fair
dealing among the parties. The Delaware Supreme Court has stated in Weinberger
and in Rabkin v. Philip A. Hunt Chemical Corp. that although the remedy
ordinarily available to minority stockholders is the right to appraisal
described above, monetary damages, injunctive relief or such other relief as the
court may fashion may be available if a merger is found to be the product of
procedural unfairness, including fraud, misrepresentation or other misconduct.
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THE TENDER OFFER
SECTION 1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any extension or
amendment), the Purchaser will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date (as hereinafter defined) and not withdrawn
in accordance with Section 4. The term "Expiration Date" means 5:00 p.m., New
York City time, on Friday, September 5, 1997, unless and until the Purchaser, in
its discretion or pursuant 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 refer to the latest time and date at which the
Offer, as so extended by the Purchaser, shall expire.
The Offer is conditioned upon, among other things, (i) satisfaction of the
Minimum Condition, (ii) the expiration or termination of all applicable waiting
periods under the HSR Act and the Exon-Florio Act, and (iii) receipt of all
requisite approvals of the European Commission and the Bank of Japan. See Annex
II to the Merger Agreement, which sets forth in full the conditions to the
Offer, and Section 10.
Subject to the applicable rules and regulations of the SEC, the Purchaser
expressly reserves the right (but shall not be obligated), in its sole
discretion (but subject to the terms of the Merger Agreement), at any time and
from time to time, if any or all of the events set forth in Annex II to the
Merger Agreement shall have occurred or shall be determined by the Purchaser to
have occurred prior to the Expiration Date, to (i) decline to purchase any of
the Shares tendered in the Offer and terminate the Offer, and return all
tendered Shares to the tendering stockholders, (ii) waive or amend any or all
conditions to the Offer and, to the extent permitted by applicable law, purchase
all Shares validly tendered, (iii) extend the Offer and, subject to the right of
stockholders to withdraw Shares until the Expiration Date, retain the Shares
which have been tendered during the period or periods for which the Offer is
extended, or (iv) amend the Offer. In addition, the Parent and the Purchaser
have agreed in the Merger Agreement that if, at any scheduled Expiration Date,
any of the conditions to the Offer have not been satisfied or waived, then, upon
the written request of the Company based on its reasonable, good faith judgment
that such conditions are capable of being satisfied within a period of twenty
business days, the Parent and the Purchaser shall extend the Expiration Date for
such period, not to exceed twenty business days, and in any event not to exceed
the Deadline Date. The Merger Agreement also provides that, in addition to
extending the Offer, waiving any condition(s) and increasing the Offer Price,
the Parent and the Purchaser may make any other change or changes in the terms
or conditions of the Offer, provided, that they may not decrease the Offer Price
or the number of Shares sought, change the form of consideration payable or add
conditions to the Offer not stated in Annex II to the Merger Agreement.
The Purchaser shall, on the terms and subject to the prior satisfaction or
waiver of the conditions of the Offer, and subject to the right of the Parent
and the Purchaser to the extend the Offer, accept for payment Shares validly
tendered within five business days after such satisfaction or waiver of the
conditions of the Offer, and pay for accepted Shares as promptly thereafter as
reasonably practicable. In addition, as indicated above, at the Purchaser's sole
discretion, the Offer Price may be increased, and the Offer may be extended to
the extent required by law in connection with such increase, in each case
without the consent of the Company. See "SPECIAL FACTORS -- The Merger
Agreement."
The rights reserved by the Purchaser in this paragraph are in addition to
the Purchaser's rights to terminate the Offer pursuant Annex II to the Merger
Agreement. Subject to the applicable rules and regulations of the SEC and the
terms and conditions of the Merger Agreement, the Purchaser expressly reserves
the right, in its sole discretion, at any time and from time to time, regardless
of whether any of the events set forth in Section 10 shall have occurred or
shall have failed to occur, (i) 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 such extension to the Depositary
and (ii) to amend the Offer in any respect by giving oral or written notice of
such amendment to the Depositary. There can be no assurance, however,
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that the Purchaser will exercise its right to extend the Offer. Under no
circumstances will interest be paid on the purchase price for tendered Shares,
whether or not the Purchaser exercises its rights to extend the Offer.
Any extension, amendment or termination will be followed as promptly as
practicable by public announcement. In the case of an extension, Rule 14e-1(d)
under the Exchange Act requires that the announcement 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 14d-4(c) under the Exchange Act. Subject to applicable law
(including Rule 14d-4(c) and 14d-6(d) under the Exchange Act, which require that
any material change in the information published, sent or given to stockholders
in connection with the Offer be promptly disseminated to stockholders in a
manner reasonably designed to inform the stockholders of such change), and
without limiting the manner in which the Purchaser may choose to make any public
announcement, the Purchaser will not have any obligation to publish, advertise
or otherwise communicate any such public announcement other than by making a
release to the Dow Jones News Service. As used in this Offer to Purchase (except
where otherwise specifically indicated), "business day" has the meaning set
forth in Rule 14d-1 under the Exchange Act.
If the Purchaser extends the Offer, or if the Purchaser (whether before or
after its acceptance for payment of shares) is delayed in its purchase of or
payment for Shares or is unable to pay for Shares pursuant to the Offer for any
reason, then, without prejudice to the Purchaser's rights under the Offer, the
Depositary may retain tendered shares on behalf of the Purchaser, and such
Shares may not be withdrawn except to the extent tendering stockholders are
entitled to withdrawal rights as described in Section 4. However, the ability of
the Purchaser to delay the payment for Shares which the Purchaser has accepted
for payment is limited by Rule 14e-1(c) under the Exchange Act, which requires
that a bidder pay the consideration offered or return the securities deposited
by or on behalf of holders of securities promptly after the termination or
withdrawal of the bidder's offer.
If the Purchaser makes a material change in the terms of the Offer or
waives a material condition of the Offer (subject to the Merger Agreement), the
Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act. The minimum period during which the Offer must remain open
following material changes in the terms of the Offer or information concerning
the Offer, other than a change in price or a change in percentage of securities
sought, will depend upon the facts and circumstances, including the relative
materiality of the terms or information. With respect to a change in price or a
change in percentage of securities sought, Rule 14e-1 under the Exchange Act
requires a minimum ten business day period to allow for adequate dissemination
to stockholders and investor response.
The Company has provided the Purchaser with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase, the related Letter of Transmittal and
other relevant materials will be mailed to record holders of Shares whose names
appear on the Company's stockholder list and will be furnished, for subsequent
transmittal to beneficial owners of Shares, to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing.
SECTION 2. ACCEPTANCE FOR PAYMENT AND PAYMENT.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will accept for payment, and will pay for, all
Shares validly tendered prior to the Expiration Date and not withdrawn as
promptly after the Expiration Date as reasonably practical. All questions as to
the satisfaction of such terms and conditions will be determined by the
Purchaser in its sole discretion, which determination will be final and binding.
Subject to applicable rules of the SEC and the terms of the Merger Agreement,
the Purchaser expressly reserves the right, in its discretion, to delay
acceptance for payment of or payment for Shares in order to comply, in whole or
in part, with any applicable law, including, without limitation, the HSR Act and
the Exon-Florio Act. See Sections 10 and 11. Any such delays will be effected in
compliance with Rule 14e-1(c) under the Exchange
39
<PAGE> 42
Act (relating to a bidder's obligation to pay for or return tendered securities
promptly after the termination or withdrawal of such bidder's offer).
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 (i) the
certificates evidencing such Shares (the "Share Certificates") or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares, if such procedure is available, into the Depositary's account at the
Depository Trust Company or the Philadelphia Depository Trust Company (each a
"Book-Entry Transfer Facility" and, collectively, the "Book-Entry Transfer
Facilities") pursuant to the procedures set forth in Section 3, (ii) a Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees or, in the case of book-entry transfer, an
Agent's Message (as hereinafter defined) and (iii) any other documents required
by the Letter of Transmittal. The per Share consideration paid to any
stockholder pursuant to the Offer will be the highest per Share consideration
paid to any other stockholder pursuant to the Offer.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares, that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares validly tendered to the Purchaser and
not withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance for payment of such Shares pursuant to
the Offer. In all cases, upon the terms and subject to the conditions of the
Offer, payment for Shares accepted for payment pursuant to the Offer will be
made by deposit of the purchase price therefor with the Depositary, which will
act as agent for tendering stockholders for the purpose of receiving payments
from the Purchaser and transmitting payments to such tendering stockholders.
Under no circumstances will interest on the purchase price for the Shares be
paid, regardless of any extension of the Offer or any delay in making such
payment. Upon the deposit of funds with the Depositary for the purpose of making
payments to tendering stockholders, the Purchaser's obligation to make such
payments shall be satisfied and tendering stockholders must thereafter look
solely to the Depositary for payment of amounts owed to them by reason of the
acceptance for payment of Shares pursuant to the Offer. The Purchaser will pay
any stock transfer taxes with respect to the transfer and sale to it or its
order of Shares pursuant to the Offer, except as otherwise provided in
Instruction 6 of the Letter of Transmittal, as well as any charges and expenses
of the Depositary and the Information Agent.
If the Purchaser is delayed in its acceptance for payment of, or payment
for, tendered Shares, or is unable to accept for payment or pay for such Shares
pursuant to the Offer for any reason, then, without prejudice to the Purchaser's
rights under the Offer (but subject to the Purchaser's obligations under Rule
14e-1(c) under the Exchange Act to pay for or return the tendered Shares
promptly after the termination or withdrawal of the Offer), the Depositary may,
nevertheless, retain tendered Shares on behalf of the Purchaser, and such Shares
may not be withdrawn except to the extent tendering stockholders are entitled to
exercise, and duly exercise, withdrawal rights as described in Section 4.
If any tendered Shares are not purchased pursuant to the Offer because of
an invalid tender or for any reason, or if Share Certificates are submitted
evidencing more Shares than are tendered, Share Certificates evidencing
unpurchased Shares will be returned, without expense, to the tendering
stockholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure
set forth in Section 3, such Shares will be credited to an account maintained at
such Book-Entry Transfer Facility), as promptly as practicable following the
expiration, termination or withdrawal of the Offer.
The Purchaser reserves the right to transfer or assign, in whole at any
time, or in part from time to time, to the Parent or a direct or indirect wholly
owned subsidiary of the Parent, the right to purchase all or any portion of the
Shares tendered pursuant to the Offer, but any such transfer or assignment will
not relieve the
40
<PAGE> 43
Purchaser of its obligations under the Offer and will in no way prejudice the
rights of tendering stockholders to receive payment for Shares validly tendered
and accepted for payment pursuant to the Offer.
SECTION 3. PROCEDURE FOR TENDERING SHARES.
Valid Tender. For a stockholder validly to tender Shares pursuant to the
Offer, either (i) a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), together with any required signature guarantees, or, in
the case of a book-entry transfer, an Agent's Message, and any other required
documents, must be received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase prior to the Expiration Date, and
either the Share Certificates for tendered Shares must be received by the
Depositary at one of such addresses or such Shares must be tendered pursuant to
the procedure for book-entry transfer described below (and a Book-Entry
Confirmation must be received by the Depositary) in each case on or prior to the
Expiration Date, or (ii) the tendering stockholder must comply with the
guaranteed delivery procedures described below.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at each Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in any of the Book-Entry Transfer Facilities'
systems may make book-entry delivery of Shares by causing a Book-Entry Transfer
Facility to transfer such Shares into the Depositary's account at a Book-Entry
Transfer Facility in accordance with such Book-Entry Transfer Facility's
procedures for transfer. However, although delivery of Shares may be effected
through book-entry transfer at a Book-Entry Transfer Facility, the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or, in connection with a book-entry delivery
of Shares, 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 prior to the Expiration
Date or the tendering stockholder must comply with the guaranteed delivery
procedures described below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER
FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES
NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND
ANY OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL
BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN
THE CASE OF A BOOK-ENTRY TRANSFER, A BOOK-ENTRY CONFIRMATION). 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.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal if (a) the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section, includes any participant in
any of the Book-Entry Transfer Facilities systems whose name appears on a
security position listing as the owner of the Shares) of Shares tendered
therewith and such registered holder has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (b) such Shares are tendered for
the account of a bank, broker, dealer, credit union, savings association or
other entity which is a member in good standing of the Securities Transfer
Agents Medallion Program, the New York Stock Exchange Medallion Signature
Guarantee Program, the Stock Exchange Medallion Program, or a bank, broker,
dealer, credit union, savings association or other entity which is an "eligible
guarantor institution," as such term is defined in Rule 17Ad-15 under the
Exchange Act, (each, an "Eligible Institution"). In all other cases, all
signatures on the Letter of Transmittal must be guaranteed by an Eligible
Institution. If a Share Certificate is registered in the name of a person other
than the signer of the Letter of Transmittal, or if payment is to be made, or a
Share Certificate not accepted for payment, not validly tendered or not
purchased is to be returned, to a person other than the registered holder(s),
then the Share Certificate 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 Share Certificate, with the
41
<PAGE> 44
signature(s) on such Share Certificate or stock powers guaranteed as described
above. See Instructions 1 and 5 of the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates are not immediately
available or time will not permit all required documents to reach the Depositary
prior to the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all the
following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser herewith, is
received by the Depositary as provided below prior to the Expiration Date;
and
(iii) the Share Certificates for all tendered Shares, in proper form
for transfer (or a Book-Entry Confirmation with respect to all such
Shares), together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees
or, in the case of a book-entry transfer, an Agent's Message, and any other
required documents, are received by the Depositary within three trading
days after the date of execution of such Notice of Guaranteed Delivery. A
trading day is any day on which the New York Stock Exchange is open for
business.
Any Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, 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.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will, in all cases, be made only after timely
receipt by the Depositary of (i) the Share Certificates for (or a timely
Book-Entry Confirmation with respect to) such Shares, (ii) a Letter of
Transmittal (or facsimile thereof) for such Shares, properly completed and duly
executed, with any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message, and (iii) any other documents required
by the Letter of Transmittal. Accordingly, tendering stockholders may be paid at
different times depending upon when Share Certificates or Book-Entry
Confirmations with respect to Shares are actually received by the Depositary.
Under no circumstances will interest be paid on the purchase price of the Shares
to be paid by the Purchaser, regardless of any extension of the Offer or any
delay in making such payment.
The Purchaser's acceptance for payment of Shares validly rendered pursuant
to one of the procedures described above will constitute a binding agreement
between the tendering stockholder and the Purchaser upon the terms and subject
to the conditions of the Offer.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tendered Shares pursuant to any of the procedures described above will be
determined by the Purchaser, in its sole discretion, whose determination will be
final and binding on all parties. The Purchaser reserves the absolute right to
reject any or all tenders of any Shares determined by it not to be in proper
form or if the acceptance for payment of, or payment for, such Shares may, in
the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves
the absolute right, in its sole discretion, to waive any of the conditions of
the Offer or any defect or irregularity in any tender with respect to Shares of
any particular stockholder, whether or not similar defects or irregularities are
waived in the case of other stockholders. No tender of Shares will be deemed to
have been validly made until all defects and irregularities have been cured or
waived.
The Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding. None of the Parent, the Purchaser, the Dealer Manager, the
Depositary, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in tenders or will incur any
liability for failure to give any such notification.
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<PAGE> 45
Appointment as Proxy. By executing a Letter of Transmittal as set forth
above, a tendering stockholder irrevocably appoints designees of the Purchaser
as such stockholder's attorneys-in-fact and proxies, in the manner set forth in
the Letter of Transmittal, each with full power of substitution, to the full
extent of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser (and any and all other
Shares or other securities issued or issuable in respect of such Shares on or
after July 30, 1997). All such proxies shall be considered coupled with an
interest in the tendered Shares. This appointment will be effective when, and
only to the extent that, the Purchaser accepts such Shares for payment pursuant
to the Offer. Upon such acceptance for payment, all prior powers of attorney,
proxies or consents given by such stockholder with respect to such Shares and
other securities will, without further action, be revoked, and no subsequent
powers of attorney, proxies or consents may be given. The designees of the
Purchaser will thereby be empowered to exercise all voting and other rights with
respect to such Shares or securities in respect of any annual, special,
adjourned or postponed meeting of the Company's stockholders, actions by written
consent in lieu of any such annual meeting or otherwise, as they in their sole
discretion deem proper. The Purchaser reserves the right to require that, in
order for Shares to be deemed validly tendered, immediately upon the Purchaser's
acceptance for payment of such Shares the Purchaser must be able to exercise
full voting consent and other rights with respect to such Shares, including
voting at any meeting of stockholders.
Backup Withholding. IN ORDER TO AVOID "BACKUP WITHHOLDING" OF FEDERAL
INCOME TAX (AND IRS PENALTIES) ON PAYMENTS OF CASH PURSUANT TO THE OFFER (UNLESS
AN APPLICABLE EXEMPTION EXISTS AND IS PROVED IN A MANNER SATISFACTORY TO THE
PURCHASER AND THE DEPOSITARY), A STOCKHOLDER SURRENDERING SHARES IN THE OFFER
MUST PROVIDE THE DEPOSITARY WITH SUCH STOCKHOLDER'S CORRECT TIN ON A SUBSTITUTE
FORM W-9 AND CERTIFY UNDER PENALTIES OF PERJURY THAT SUCH TIN IS CORRECT AND
THAT SUCH STOCKHOLDER IS NOT SUBJECT TO BACKUP WITHHOLDING. IF A STOCKHOLDER
DOES NOT PROVIDE SUCH STOCKHOLDER'S CORRECT TIN OR FAILS TO PROVIDE THE
CERTIFICATIONS DESCRIBED ABOVE, THE IRS MAY IMPOSE A PENALTY ON SUCH STOCKHOLDER
AND PAYMENT OF CASH TO SUCH STOCKHOLDER PURSUANT TO THE OFFER MAY BE SUBJECT TO
BACKUP WITHHOLDING OF 31%. All stockholders surrendering Shares pursuant to the
Offer should complete and sign the main signature form and the Substitute Form
W-9 included as part of the Letter of Transmittal to provide the information and
certification necessary to avoid backup withholding (unless an applicable
exemption exists and is proved in a manner satisfactory to the Purchaser and the
Depositary). Certain taxpayers (including corporations and certain foreign
individuals and entities) are generally exempt from backup withholding.
Noncorporate foreign stockholders should complete and sign the main signature
form and a Form W-8, Certificate of Foreign Status, a copy of which may be
obtained from the Depositary, in order to avoid backup withholding. See "SPECIAL
FACTORS -- Certain Federal Income Tax Consequences" and Instruction 9 to the
Letter of Transmittal.
SECTION 4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to
the procedures set forth below at any time prior to 5:00 p.m., New York City
time, on Expiration Date and, unless theretofore accepted for payment by the
Purchaser pursuant to the Offer, may also be withdrawn at any time after October
3, 1997, or at such later time as may apply if the Offer is extended.
If the Purchaser extends the Offer, is delayed in its acceptance for
payment of or payment for Shares or is unable to accept Shares for payment
pursuant to the Offer for any reason, then, without prejudice to the Purchaser's
rights under the Offer (but subject to compliance with Rule 14e-1(c) under the
Exchange Act), the Depositary may, nevertheless, on behalf of the Purchaser,
retain tendered Shares, and such Shares may not be withdrawn except to the
extent that tendering stockholders are entitled to exercise, and duly exercise,
withdrawal rights as described in this Section 4. Any such delay will be
accompanied by an extension of the Offer to the extent required by law.
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<PAGE> 46
For a withdrawal of Shares 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 this Offer to
Purchase. Any such notice of withdrawal must specify the name of the person
having tendered the Shares to be withdrawn, the number of Shares to be
withdrawn, if Share Certificates have been tendered, and the name of the
registered holder of the Shares to be withdrawn as set forth on such Share
Certificates, if different from that of the person who tendered such Shares. If
Share Certificates evidencing Shares to be withdrawn have been delivered or
otherwise identified to the Depositary, then, prior to the physical release of
such Share Certificates, the serial numbers shown on such Share Certificates
must be submitted to the Depositary and, unless such Shares have been tendered
for the account of an Eligible Institution, the signature(s) on the notice of
withdrawal must be guaranteed by an Eligible Institution. If Shares have been
tendered pursuant to the procedures for book-entry transfer as set forth in
Section 3, any notice of withdrawal must also specify the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawn
Shares and otherwise comply with such Book-Entry Transfer Facility's procedures
for such withdrawal, in which case a notice of withdrawal will be effective if
delivered to the Depositary by any method of delivery described in the first
sentence of this paragraph.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser in its sole
discretion, whose determination will be final and binding. None of the Parent,
the Purchaser, the Depositary, the Dealer Manager, the Information Agent, the
Company or any other person will be under any duty to give notification of any
defects or irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification.
Withdrawals of tenders of Shares may not be rescinded, and any Shares
properly withdrawn will thereafter be deemed not validly tendered for purposes
of the Offer. However, withdrawn Shares may be re-tendered at any time prior to
the Expiration Date by again following one of the procedures described in
Section 3.
SECTION 5. PRICE RANGE OF SHARES; DIVIDENDS.
The Shares trade on the AMEX under the symbol AMH. The following table sets
forth, for the quarters indicated, the high and low last reported sales
quotations per Share on the AMEX, as reported in published financial sources:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
FISCAL 1995:
First Quarter.............................................. 12 1/8 10 1/4
Second Quarter............................................. 13 1/2 10 1/2
Third Quarter.............................................. 11 3/4 9
Fourth Quarter............................................. 10 5/8 8 3/16
FISCAL 1996:
First Quarter.............................................. 9 1/4 6 15/16
Second Quarter............................................. 13 3/8 8 13/16
Third Quarter.............................................. 10 7/8 8 3/4
Fourth Quarter............................................. 13 5/8 8 13/16
FISCAL 1997:
First Quarter.............................................. 12 3/4 9 3/8
Second Quarter............................................. 10 5/16 8 5/16
Third Quarter (through August 4, 1997)..................... 11 13/16 8 13/16
</TABLE>
On July 29, 1997, the last full trading day prior to the public
announcement of the execution of the Merger Agreement, the last reported sales
quotations of the Shares on the AMEX was $11 13/16 per Share. On August 4, 1997,
the last full trading day prior to the date of this Offer to Purchase, the last
reported sales quotations of the Shares on the AMEX was $11 13/16 per Share.
44
<PAGE> 47
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
The Company has not paid dividends on the Shares in any of fiscal years
1995, 1996 or 1997, and the Company has advised the Parent that it does not
intend to declare any dividend in the foreseeable future.
SECTION 6. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES.
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and the number of holders of Shares
and could adversely affect the liquidity and market value of the remaining
Shares held by the public and have other consequences with respect to the AMEX
reporting, Exchange Act registration and availability of margin credit. See
"SPECIAL FACTORS -- Certain Effects of the Offer and the Merger."
SECTION 7. CERTAIN INFORMATION CONCERNING THE COMPANY.
General
Except as otherwise noted below, the information concerning the Company
contained in this Offer to Purchase, including financial information, was
supplied by the Company. Neither the Parent nor the Purchaser assumes any
responsibility for the accuracy or completeness of such information or for any
failure by the Company to disclose events which may have occurred or may affect
the significance or accuracy of any such information but which are unknown to
the Parent or the Purchaser.
The following description of the Company's business has been taken from the
Company's most recently filed Annual Report on Form 10-K (the "10-K"), dated
December 27, 1996:
[The Company] was organized in 1970. Its principal offerings consist
of large-scale, high-performance, general-purpose computer systems, storage
subsystems and related hardware services for both the IBM System/390
compatible mainframe market and the open systems market; and a broad array
of professional and consulting services of the data processing industry.
The Company also offers a variety of software products.
[The Company's] initial product offerings consisted of IBM compatible
mainframe systems which it first delivered in 1975. Since that time, the
Company has continued to develop more advanced systems for this market. In
the latter part of 1996, the Company introduced its newest family of
compatible mainframes, the Millennium series, utilizing for the first time
CMOS based technology. Also, in 1993 the Company began delivery of
high-performance servers for the open systems market pursuant to a reseller
agreement with Sun Microsystems. In 1996 the Company introduced its EnVista
series, a family of high-performance servicers based in Intel
microprocessor technology and running the Microsoft Windows NT operating
system.
In November 1995 the Company acquired DMR Group Inc. based in
Montreal, Quebec, Canada, a major provider of professional and consulting
services in a number of important international markets. In April 1996 the
Company acquired Trecom Business Systems, Inc. based in Edison, New Jersey,
a major provider of professional and consulting services to a number of
significant industry groups within the United States. These entities have
been combined into a single organization known as the DMR Consulting Group
("DMR TRECOM" in the United States) through which the Company provides its
professional and consulting services offerings. Applications development
and maintenance services and "year 2000" conversion services are among the
major offerings of this business unit.
Since 1982 [the Company] has offered direct access storage subsystems
for use with IBM compatible mainframe systems. In 1996 the Company
introduced the Spectris series, its newest products in this line of IBM
System/390 compatible storage devices. In 1996 the Company also introduced
its LVS series of storage devices for the server market.
In addition, [the Company] offers hardware maintenance and related
operational services, and a number of software products. ObjectStar, a
comprehensive application development system; the A+
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<PAGE> 48
family of performance and productivity tools intended primarily for the
open systems environment; and UTS, a Unix based operating system for use on
IBM System/390 compatible mainframes, are the Company's principal software
offerings.
[The Parent] owns approximately 43% of the Company's outstanding
common stock and is of substantial importance to [the Company] in the areas
of technical assistance, product development and manufacturing. [The
Parent] has primary design and manufacturing responsibility for [the
Company's] Millennium, Spectris and follow-on products. Because of [the
Company's] increased dependence on [the Parent] as its supplier of future
compatible processors and [the Parent's] participation with [the Company]
in certain other ongoing research and development activities, the ability
to negotiate favorable pricing terms with respect to future product
requirements and to maintain a satisfactory working relationship are
important.
[The Company] carries out limited assembly functions in Sunnyvale,
California and Dublin, Ireland. Its principal hardware products are
manufactured by [the Parent] to [the Company] specifications. As of
February 21, 1997, [the Company] had approximately 9,900 full-time
employees.
Directors and Officers
The name, address, principal operation or employment, recent employment
history and citizenship of each director and executive officer of the Company is
set forth is Schedule II hereto.
Results for the Quarter Ended June 27, 1997
On July 30, 1997, the Company issued the following press release with
respect to its financial results for the quarter ended June 27, 1997:
Amdahl Corporation, which this morning revealed plans to merge with
and become a wholly owned subsidiary of Fujitsu Limited, today announced
financial results for the second quarter ended June 27, 1997.
Net income for the period amounted to $2,087,000 or 2 cents per share.
That compares to a net loss of $249,436,000 or $2.07 per share in the same
quarter a year ago, which included nonrecurring charges of $150,700,000 or
$1.25 per share to reduce the book value of older bipolar mainframe
computer assets and write off in-process engineering costs associated with
Amdahl's acquisition of TRECOM Business Systems. Second-quarter revenues
amounted to $438,476,000 this year and $382,854,000 in 1996.
Through the first six months of this year, Amdahl reported a net loss
of $8,918,000 or 7 cents per share on revenues of $831,381,000. In the same
period a year ago, the net loss including those nonrecurring charges
amounted to $287,959,000 or $2.40 per share, and revenues were
$699,882,000.
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<PAGE> 49
AMDAHL CORPORATION (AMEX:AMH)
<TABLE>
<CAPTION>
SECOND QUARTER ENDED
-------------------------------
JUNE 27, 1997 JUNE 28, 1996
------------- -------------
UNAUDITED
<S> <C> <C>
Revenues............................................... $ 438,476,000 $ 382,854,000
Income (Loss) Before Taxes............................. $ 4,087,000 $(228,436,000)
Net Income (Loss)...................................... $ 2,087,000 $(249,436,000)
Average Shares Outstanding............................. 124,774,000 120,221,000
Net Income (Loss) Per Share............................ $.02 $(2.07)
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------------------
JUNE 27, 1997 JUNE 28, 1996
------------- -------------
UNAUDITED
<S> <C> <C>
Revenues............................................... $ 831,381,000 $ 699,882,000
Income (Loss) Before Taxes............................. $ (3,918,000) $(276,590,000)
Net Income (Loss)...................................... $ (8,918,000) $(287,959,000)
Average Shares Outstanding............................. 122,353,000 119,894,000
Net Income (Loss) Per Share............................ $(.07) $(2.40)
</TABLE>
Selected Financial Information
Set forth below is certain selected consolidated financial information
relating to the Company and its subsidiaries which has been excerpted or derived
from the financial statements contained in the Company's Annual Report on Form
10-K for the fiscal year ended December 27, 1996 (the "1996 Form 10-K"), and the
Company's Quarterly Report on Form 10-Q for the quarter ended March 28, 1997
(the "1Q 1997 Form 10-Q"). More comprehensive financial information is included
in the 1996 Form 10-K and the 1Q 1997 Form 10-Q and other documents as filed by
the Company with the SEC. The financial information that follows is qualified in
its entirety by reference to such 1996 Form 10-K, 1Q 1997 Form 10-Q and such
other documents, including the financial statements and related notes contained
therein. The 1996 Form 10-K, the 1Q 1997 Form 10-Q and such other documents may
be examined and copies may be obtained from the offices of the SEC in the manner
set forth below.
AMDAHL CORPORATION
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(in thousands, except shares and per share data)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE FISCAL YEAR ENDED
-------------------------------- -----------------------------------------------
MARCH 28, 1997 MARCH 28, 1996 DEC. 27, 1996 DEC. 29, 1995 DEC. 30, 1994
-------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues............................ $ 392,905 $ 317,028 $ 1,631,549 $ 1,516,388 $ 1,638,613
Operating Income (Loss)............. $ (10,139) $ (54,334) $ (331,946) $ 9,124 $ 63,891
Income (Loss) Before Income Taxes... $ (8,005) $ (48,154) $ (313,682) $ 49,977 $ 80,254
Net Income (Loss)................... $ (11,005) $ (38,523) $ (326,682) $ 28,527 $ 74,804
Earnings (Loss) Per Common Share.... $ (.09) $ (.32) $ (2.71) $ .24 $ .63
Average Outstanding Shares and
Equivalents....................... 122,109,000 119,566,000 120,510,000 120,383,000 118,909,000
</TABLE>
<TABLE>
<CAPTION>
MARCH 28, 1997 DEC. 27, 1996 DEC. 29, 1995 DEC. 30, 1994
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA
Total Assets....................................... $1,449,583 $ 1,596,404 $ 1,708,198 $ 1,719,035
Total Stockholders' Equity......................... $ 603,405 $ 613,248 $ 933,824 $ 876,255
</TABLE>
Book value as of December 27, 1996 was $5.04 per Share, and as of March 28,
1997 was $4.94 per Share. The ratio of earnings to fixed charges for the quarter
ended March 28, 1997 and for the fiscal year ended
47
<PAGE> 50
December 27, 1996 is not relevant for the Company, given that the Company has
had negative earnings in such period. However, the ratio of earnings to fixed
charges for the year ended December 29, 1995 was 5.8.
The Company has advised the Purchaser that, during the past 60 days,
neither the Company nor any officer or director of the Company or pension plan,
profit sharing plan or similar plan of the Company has effected any transaction
in the Shares, except for 2,666 Shares issued under the Company Stock Purchase
Plan. In addition, the Company has advised the Purchaser that the Company has
never made purchases of its Shares.
The Company also has advised the Purchaser that the approximate number of
record holders of Shares as of December 27, 1996, was 15,000.
Certain Estimates Prepared by the Company
During the course of discussions between the Parent and the Company with
respect to the proposed transactions, the Company provided the Parent with
certain non-public information about the Company. This information included,
among other things, certain portions of the long range plan developed by Company
management as part of the Company's planning and budgeting process. The portions
of the long range plan provided to the Parent included the following information
regarding estimated earnings and earnings before interest and taxes ("EBIT"),
developed in connection with the Company's 1996 long range plan and the 1997
long range plan. It should be noted that, although the Company's management
believes that their current long range plan is achievable, they have
acknowledged that their financial projections were based on a number of
optimistic projections and may be a challenge to achieve. In addition, the
Company has failed in the past to meet its financial projections as noted in the
Lehman Report. See "SPECIAL FACTORS -- Report of Financial Advisor to the
Parent."
THE COMPANY DOES NOT, AS A MATTER OF COURSE, PUBLICLY DISCLOSE
FORWARD-LOOKING INFORMATION (SUCH AS THE FINANCIAL FORECASTS REFERRED TO ABOVE)
AS TO FUTURE REVENUES, EARNINGS OR OTHER FINANCIAL INFORMATION. PROJECTIONS OF
THIS TYPE ARE BASED ON ESTIMATES AND ASSUMPTIONS THAT ARE INHERENTLY SUBJECT TO
SIGNIFICANT ECONOMIC, INDUSTRY AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES,
ALL OF WHICH ARE DIFFICULT TO PREDICT AND MANY OF WHICH ARE BEYOND THE CONTROL
OF THE COMPANY. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE PROJECTED
RESULTS WOULD BE REALIZED OR THAT ACTUAL RESULTS WOULD NOT BE SIGNIFICANTLY
HIGHER OR LOWER THAN THOSE PROJECTED. IN ADDITION, THESE PROJECTIONS WERE
PREPARED BY THE COMPANY SOLELY FOR INTERNAL USE AND NOT FOR PUBLICATION OR WITH
A VIEW TO COMPLYING WITH THE PUBLISHED GUIDELINES OF THE SEC REGARDING
PROJECTIONS OR WITH THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS GUIDE
FOR PROSPECTIVE FINANCIAL STATEMENTS AND ARE INCLUDED IN THIS OFFER TO PURCHASE
ONLY BECAUSE THEY WERE FURNISHED TO THE PARENT. THE COMPANY FROM TIME TO TIME
(AND PRIOR TO DELIVERY OF THE PROJECTIONS INCLUDED BELOW) FURNISHED TO THE
PARENT OTHER PROJECTIONS THAT HAVE NOT BEEN INCLUDED HEREIN BECAUSE THEY WERE
NOT MATERIAL TO THE TRANSACTION AND WERE LESS OPTIMISTIC THAN THE PROJECTIONS
BELOW). THE FINANCIAL FORECASTS NECESSARILY MAKE NUMEROUS ASSUMPTIONS WITH
RESPECT TO INDUSTRY PERFORMANCE, GENERAL BUSINESS AND ECONOMIC CONDITIONS,
ACCESS TO MARKETS AND DISTRIBUTION CHANNELS, AVAILABILITY AND PRICING OF RAW
MATERIALS, FOREIGN CURRENCY RATES AND OTHER MATTERS, ALL OF WHICH ARE INHERENTLY
SUBJECT TO SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES AND MANY OF WHICH ARE
BEYOND THE COMPANY'S CONTROL. ONE CANNOT PREDICT WHETHER THE ASSUMPTIONS MADE IN
PREPARING THE FINANCIAL FORECASTS WILL BE ACCURATE, AND ACTUAL RESULTS MAY BE
MATERIALLY HIGHER OR LOWER THAN THOSE CONTAINED IN THE FORECASTS. THE INCLUSION
OF THIS FORWARD-LOOKING INFORMATION SHOULD NOT BE REGARDED AS FACT OR AN
INDICATION THAT PARENT, THE PURCHASER, THE COMPANY OR ANYONE WHO RECEIVED THIS
INFORMATION CONSIDERED IT A RELIABLE PREDICTOR OF FUTURE RESULTS, AND THIS
INFORMATION SHOULD NOT BE RELIED ON AS SUCH. NONE OF PARENT, THE PURCHASER OR
THE COMPANY ASSUMES ANY RESPONSIBILITY FOR THE VALIDITY, REASONABLENESS,
ACCURACY OR COMPLETENESS OF THE FORECASTS AND THE COMPANY HAS MADE NO
REPRESENTATION TO THE PARENT OR THE PURCHASER REGARDING THE FORECASTS.
48
<PAGE> 51
($ in millions)
<TABLE>
<CAPTION>
JUNE 1996 JULY 1997
LONG RANGE PLAN LONG RANGE PLAN
----------------------------- ----------------------------------------
1996E 1997E 1998E 1996A 1997E 1998E 1999E
------ ------- ------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
PRODUCT SEGMENT
Revenues............. $1,101 $ 1,430 $1,560 $ 992 $ 929 $ 914 $1,024
EBIT................. -- 133 146 -- 25 9 49
SERVICE SEGMENT
Revenues............. 556 775 1,075 581 752 952 1,179
EBIT................. -- 46 86 -- 14 77 108
SOFTWARE SEGMENT
Revenues............. 83 170 251 59 120 178 221
EBIT................. -- (8) 14 -- (19) 36 52
TOTAL
Revenues............. $1,740 $ 2,375 $2,886 $1,632 $ 1,801 $2,044 $2,424
EBIT(1).............. -- 171 246 -- 20 122 209
</TABLE>
- ---------------
(1) 1997E and 1998E total EBIT in the June 1996 Long Range Plan excludes $54 and
$55 of unallocated corporate expenses.
SPECIAL CAUTIONARY NOTICE
REGARDING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements to encourage companies to provide
prospective information about themselves without fear of litigation so long as
those statements are identified as forward-looking and are accompanied by
meaningful cautionary statements identifying important factors which could cause
actual results to differ materially from those projected in the statement. This
Offer to Purchase contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of management as well as
assumptions made by and information currently available to management. Such
forward-looking statements are principally contained in this section and
include, without limitation, the Company's expectation and estimates as to the
Company's business operations, including the introduction of new products,
future financial performance, including growth in net sales and earnings, cash
flows from operations and capital expenditures. In addition, in this and other
portions of this Offer to Purchase, the words "anticipates," "believes,"
"estimates," "expects," "plans," "intends" and similar expressions, as they
relate to the Company and its subsidiaries or the Company's management, are
intended to identify forward-looking statements. Such statements reflect the
current views of the Company with respect to future events and are subject to
certain risks, uncertainties and assumptions. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believe, estimated or expected. The Company does not intend to update these
forward-looking statements.
Available Information. The Company is subject to the information and
reporting requirements of the Exchange Act and, in accordance therewith, files
reports, proxy statements and other information with the SEC relating to its
business, financial condition and other matters. The Company is required to
disclose in such proxy statements and annual reports certain information, as of
particular dates, concerning the Company's directors and officers (including
their remuneration and stock options granted to them), the principal holders of
the Company's securities and any material interests of such persons in
transactions with the Company, and certain other matters. Such reports, proxy
statements and other information should be available for inspection at the
public reference facilities maintained by the SEC located at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and also should be available for
inspection and copying at
49
<PAGE> 52
prescribed rates at the following regional offices of the SEC: Seven World Trade
Center, 13th Floor, New York, New York 10048, Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 5670 Wilshire Boulevard, 11th
Floor, Los Angeles, California 90036. Copies of this material may also be
obtained by mail, upon payment of the SEC's customary fees, by writing to the
SEC's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The
SEC also maintains an Internet site on the World Wide Web at
<http://www.sec.gov> that contains reports, proxy statements and other
information. The information also may be inspected at the offices of the AMEX, 8
Trinity Place, New York, New York 10006.
SECTION 8. CERTAIN INFORMATION CONCERNING THE PARENT AND THE PURCHASER.
General
The Parent is a corporation organized under the laws of Japan and is
engaged in operations throughout the world. Its information technology business
includes the development and manufacture of global servers, high performance
computers (supercomputers), workstations, personal computers, peripherals and
software, including networking, multimedia and internet software. The Parent's
telecommunication business develops networking infrastructures, high-speed lines
employing optical transmission, base station switching equipment for cellular
phones, corporate information network systems, digital microwave products, and
cellular phones. The Parent's electronic devices business develops and
manufactures memory chips, including DRAMs and flash memory, custom logic
integrated circuits, including CMOS and GaAs products, and flat panel displays.
The Parent and its subsidiaries currently comprise the second largest computer
maker and solution provider in the world. The Parent's world headquarters is
located at: Marunouchi Center Building, 6-1, Marunouchi 1-chome, Chiyoda-ku,
Tokyo 100, Japan.
The Purchaser is a corporation organized under the laws of Delaware and is
presently a wholly owned subsidiary of the Parent. It is expected that, after
the Merger, the Parent will own all of the outstanding capital stock of the
Company as the surviving corporation of the Merger. The Purchaser was formed as
an acquisition vehicle in connection with the Offer, the Merger and the
Transactions and will be merged with and into the Company pursuant to the
Merger. The Purchaser's registered business office is located at: c/o Morrison &
Foerster LLP, 425 Market Street, San Francisco, California, 94105.
50
<PAGE> 53
Selected Financial Information
Set forth below is certain selected consolidated financial information
regarding the Parent. The financial information set forth below was prepared in
accordance with accounting principles generally accepted in Japan ("Japanese
GAAP"), which differ in certain respects from United States generally accepted
accounting principles ("U.S. GAAP").
FUJITSU LIMITED
SELECTED CONSOLIDATED BALANCE SHEET DATA
<TABLE>
<CAPTION>
MARCH 31,
--------------------------------------
1996 1997 1997
--------- --------- ----------
U.S.
DOLLARS
YEN (THOUSANDS)
(MILLIONS)
<S> <C> <C> <C>
Current Assets........................................... 2,423,897 2,659,599 21,448,379
Investments and long-term loans.......................... 623,479 651,243 5,251,960
Property, plant and equipment............................ 1,124,917 1,261,276 10,171,580
Other assets............................................. 152,197 155,569 1,254,589
TOTAL ASSETS................................... 4,324,490 4,727,687 38,126,508
--------- --------- ----------
Current Liabilities...................................... 1,955,926 2,244,273 18,098,976
Long-term liabilities.................................... 1,061,377 1,134,598 9,149,984
Minority interests in consolidated subsidiaries.......... 157,788 167,326 1,349,403
Shareholders' equity..................................... 1,149,399 1,181,490 9,528,145
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY..... 4,324,490 4,727,687 38,126,508
--------- --------- ----------
</TABLE>
The official accounting records of the Parent and its consolidated
subsidiaries are maintained in Japanese Yen in accordance with the laws and
regulations of Japan. For the convenience of the reader, the selected financial
information of the Parent has been translated into U.S. dollars at the rate of
124 Yen per U.S. Dollar, which was the prevailing rate at March 31, 1997.
Some of the material differences between Japanese and U.S. GAAP that relate
to the selected financial information of the Parent are summarized below:
(1) Accounting for Income Taxes. The selected financial information
reflects deferred tax calculated in accordance with the liability method to
recognize the effect of all temporary differences between the tax bases of
assets or liabilities and their reported amounts in financial statements. U.S.
GAAP (Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes") requires that deferred income taxes be recognized for temporary
differences between the tax basis of the asset or liability and the reported
amount in the financial statements, subject to a valuation allowance.
(2) Capitalized Interest Costs. Under Japanese GAAP interest costs are
generally not capitalized. U.S. GAAP (Statement of Financial Accounting
Standards No. 34, "Capitalization of Interest Cost") requires interest costs on
certain indebtedness incurred to finance construction incurred during the
construction period of certain assets to be capitalized as an asset.
(3) Accounting for Pensions. U.S. GAAP (Statements of Financial Accounting
Standards No. 87, "Employers' Accounting for Pensions") requires pension costs
to be recognized and computed as stipulated by this Statement. Japanese GAAP,
supplemented by Japan Institute of Certified Public Accountants guidelines,
prescribe that it is acceptable for a company to provide for financial
statements purposes either the tax allowable limit or 100 percent of the
voluntary retirement and severance liability, or the estimated liability
computed under an acceptable actuarial cost or similar voluntary method.
Accordingly, accounting practice may vary significantly as to the provision for
the estimated liability for employee retirement and severance benefits.
51
<PAGE> 54
(4) Valuation of Inventory. Japanese GAAP allows inventories to be stated
at cost, while U.S. GAAP requires all inventories to be valued at the lower of
cost or market value.
The name, citizenship, business address, principal occupation or employment
and five-year employment history of each of the executive officers of the
Purchaser and the Parent and each of the persons carrying out the functions in
the Parent similar to that of a director and/or executive officer in a United
States corporation are set forth in Schedule I hereto.
Except as set forth in this Offer to Purchase, (i) none of the Purchaser,
nor to the best of the Purchaser's or Parent's knowledge, any of the persons
listed in Schedule I hereto, or any associate or majority-owned subsidiary of
such persons, beneficially owns any equity security of the Company or has had or
has any transaction, contract, arrangement or understanding with any other
person with respect to the Shares, and (ii) none of the Purchaser nor to the
best knowledge of the Purchaser and the Parent, any of the other persons
referred to above, or any of the respective directors, executive officers or
subsidiaries of any of the foregoing, has effected any transaction in any Shares
during the past 60 days.
Except as set forth in this Offer to Purchase, none of the Purchaser or
Parent, or, to the best knowledge of the Purchaser and the Parent, any of the
persons listed in Schedule I hereto has had any transactions with the Company,
or any of its executive officers, directors or affiliates that would require
reporting under the rules of the SEC. Except as set forth in this Offer to
Purchase, there have been no contacts, negotiations or transactions between any
of the Purchaser or the Parent, or their respective subsidiaries, or, to the
best knowledge of the Purchaser and the Parent, any of the persons listed in
Schedule I hereto, on the one hand, and the Company or its executive officers,
directors or affiliates, on the other hand, concerning a merger, consolidation
or acquisition, tender offer or other acquisition of securities, election of
directors, or a sale or other transfer of a material amount of assets.
SECTION 9. DIVIDENDS AND DISTRIBUTIONS.
The Company agreed, pursuant to the Merger Agreement, that, prior to the
Effective Time, unless the Parent otherwise consents in writing, neither the
Company nor any Subsidiary will, among other things, (i) split, combine or
reclassify any issued and outstanding shares of its capital stock; (ii) declare,
set aside or pay any dividend or other distribution with respect to such shares
(except for any dividends paid in the ordinary course to the Company or to any
wholly owned Subsidiary); (iii) redeem, purchase, acquire or offer to acquire
(or permit any Subsidiary to redeem, purchase, acquire or offer to acquire) any
shares of its capital stock; or (iv) issue, sell, pledge, accelerate, modify the
terms of or dispose of, or agree to issue, sell, pledge, accelerate, modify the
terms of or dispose of, any additional shares of, or securities convertible or
exchangeable for, or any options, warrants, calls, commitments or rights of any
kind to acquire any shares of, its capital stock of any class or other property
or assets (other than Shares pursuant to the purchase rights then outstanding
under the Company Stock Purchase Plan and upon the exercise of currently
outstanding Options). See "SPECIAL FACTORS -- The Merger Agreement."
SECTION 10. CERTAIN CONDITIONS TO THE OFFER.
Notwithstanding any other provision of the Offer, and in addition to (and
not in limitation of) the Purchaser's rights to extend and amend the Offer at
any time in its sole discretion (subject to the provisions of the Merger
Agreement), the Purchaser shall not be required to accept for payment or pay for
any Shares, and may delay the acceptance for payment of or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act, the payment for, any tendered Shares, and may terminate or amend
the Offer as to any Shares not then paid for, if:
(1) at or prior to the expiration date of the Offer, the number of
Shares validly tendered and not withdrawn, together with any Shares then
owned by the Parent or the Purchaser, shall not satisfy the Minimum
Condition;
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<PAGE> 55
(2) at or prior to the expiration date of the Offer, (i) any
applicable waiting period under the HSR Act or the applicable laws and
regulations of the European Community shall not have expired or been
terminated, (ii) the review period under the Exon-Florio Act shall not have
expired, or the notice of determination not to investigate, or to take no
action, under the Exon-Florio Act, in form satisfactory to the Parent's
counsel, shall not have been given, (iii) the approval of the U.S.
Department of Defense pursuant to the National Industrial Security Program
shall not have been obtained, (iv) any applicable period under the
Competition Act (Canada) shall not have expired or been terminated (unless
a certificate satisfactory to the Parent shall have been issued under
Section 102 of that Act), or (v) any requisite approval of the European
Commission or the Bank of Japan shall not have been obtained; or
(3) at any time prior to acceptance for payment of or payment for
Shares, any of the following events or conditions shall occur or exist:
(a) there shall have been instituted or be pending any action or
proceeding by any governmental authority, whether or not having the
force of law, (i) challenging or seeking to make illegal, to delay or
otherwise directly or indirectly to restrain or prohibit the making of
the Offer, the acceptance for payment of or payment for some of or all
the Shares by the Purchaser, the Parent or any affiliate of the Parent
or the consummation by the Purchaser or the Parent of any other
Transaction, or seeking to obtain damages in connection with any
Transaction, (ii) seeking to restrain or prohibit the Parent's or the
Purchaser's full rights of ownership or operation (or that of the
Parent's subsidiaries or affiliates) of any portion of the business or
assets of the Company or any of its Subsidiaries, or of the Parent or
any of its subsidiaries, or any of their respective affiliates, or to
compel the Parent or any of its subsidiaries or affiliates to dispose of
or hold separate all or any portion of the business or assets of the
Company or any of its Subsidiaries or of the Parent or any of its
subsidiaries or any of their respective affiliates, (iii) seeking to
impose material limitations on the ability of the Parent or any of its
subsidiaries or affiliates effectively to exercise full rights of
ownership of the Shares, including, without limitation, the right to
vote any Shares acquired or owned by the Parent or any of its
subsidiaries or affiliates on all matters properly presented to the
Company's stockholders, (iv) seeking to require divestiture by the
Parent or any of its subsidiaries or affiliates of any Shares, or (v)
that otherwise, in the judgment of the Parent or the Purchaser, is
likely to materially adversely affect the Company or any of the
Subsidiaries or the Parent or any of its subsidiaries or affiliates; or
(b) there shall have been any action taken or any statute, rule,
regulation, judgment, administrative interpretation, injunction, order
or decree proposed, enacted, enforced, promulgated, issued or deemed
applicable to the Parent or the Purchaser or any other subsidiary or
affiliate of the Parent, the Company or any of its Subsidiaries or the
Offer, the acceptance for payment of or payment for any Shares, the
Merger or any other Transaction, by any governmental authority (other
than the application of the routine waiting period provisions of the HSR
Act and the Exon-Florio Act), that has, directly or indirectly,
resulted, or is reasonably likely to, directly or indirectly, result in
any of the consequences referred to in paragraph (a) above; or
(c) an event shall have occurred that has had or could reasonably
be expected to have a material adverse effect on the business, assets,
condition (financial or other) or operating results of the Company and
its Subsidiaries, taken as a whole, other than the effects of (A) the
announcement of the Transactions, (B) general economic conditions, or
(C) conditions that are generally applicable to the business segments in
which the Company conducts business (a "Material Adverse Effect"); or
(d) there shall have occurred (i) any general suspension of trading
in securities on any national securities exchange or in the
over-the-counter market, (ii) the declaration of any banking moratorium
or any suspension of payments in respect of banks or any limitation
(whether or not mandatory) which is material to the Transactions on the
extension of credit by lending institutions in the United States or
Japan, (iii) any limitation (whether or not mandatory) which is material
to the Transactions by any governmental authority on the extension of
credit by banks or other financial
53
<PAGE> 56
institutions, (iv) the commencement of a war or material armed
hostilities directly or indirectly involving the United States or Japan
or otherwise having a significant adverse effect on the functioning of
the financial markets in the United States or Japan, (v) any significant
change in the United States or Japanese currency exchange rates or
suspension of the markets therefor (whether or not mandatory) which is
material to the Transactions or the imposition of, or any significant
change in, any currency or exchange control laws in the United States or
Japan which is material to the Transaction, or (vi) any limitation by
any governmental authority that is likely to materially and adversely
affect the financing of the Offer or the Merger; or
(e) it shall have been publicly disclosed or the Parent or the
Purchaser shall have otherwise learned that any Third Party shall have
entered into a definitive agreement or an agreement in principle with
respect to an Alternative Transaction; or
(f) the Disinterested Board (i) shall have withdrawn, or modified
or changed in a manner adverse to the Parent or the Purchaser (including
by amendment of the Schedule 14D-9), its approval or recommendation of
the Offer, the Merger Agreement or the Merger, (ii) shall have
recommended an Alternative Transaction, or (iii) upon request of the
Parent or the Purchaser, shall have failed to reaffirm such approval or
recommendation or shall have resolved to do any of the foregoing; or
(g) the Company shall have breached or failed to perform in any
respect any of its covenants or agreements under the Merger Agreement,
or any of the representations and warranties of the Company set forth in
the Merger Agreement shall not be true in any respect when made or at
any time prior to consummation of the Offer as if made at and as of such
time (other than representations and warranties which by their terms
address matters only as of a certain date, which shall be true as of
such date), and in either case the effect thereof shall have had or
could reasonably be expected to have a Material Adverse Effect on the
Company; or
(h) the Merger Agreement shall have been terminated in accordance
with its terms or amended in accordance with its terms to provide for
such termination or amendment of the Offer.
The foregoing conditions are for the sole benefit of the Parent and the
Purchaser and may be asserted or waived by the Parent or the Purchaser,
regardless of the circumstances giving rise to any such condition, in whole or
in part at any time and from time to time in its sole discretion. The failure by
the Parent or the Purchaser at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right, and each such right shall be
deemed an ongoing right and may be asserted at any time and from time to time.
SECTION 11. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.
General. Except as otherwise disclosed herein, based on a review of
publicly available information filed by the Company with the SEC, neither the
Purchaser nor Parent is aware of (i) any license or regulatory permit that
appears to be material to the business of the Company and its subsidiaries,
taken as a whole, that might be adversely affected by the acquisition of Shares
by the Purchaser pursuant to the Offer or the Merger or (ii) any approval or
other action by or with any governmental authority required to be made or
obtained by the Parent or the Purchaser in connection with the acquisition or
ownership of the Shares pursuant to the Offer by the Purchaser, except (a)
filings pursuant to the Securities Act and the Exchange Act and the rules and
regulations promulgated by the SEC thereunder and state securities and blue sky
laws, (b) the notice of foreign investment required to be filed with the Bank of
Japan pursuant to the Japan Foreign Exchange Control Act and the notices to be
filed with the Tokyo, Osaka and Nagoya stock exchanges, and (c) such consents,
approvals, orders or authorizations which if not obtained, or registrations,
declarations or filings which if not made, would not materially adversely affect
the ability of the Parent or the Purchaser to consummate the Transactions.
Should any such approval or other action be required, the Purchaser
currently contemplates that such approval or action would be sought. While the
Purchaser does not currently intend to delay the acceptance for payment of
Shares tendered pursuant to the Offer pending the outcome of any such matter,
there can be no
54
<PAGE> 57
assurance that any such approval or action, if needed, would be obtained or
would be obtained without substantial conditions or that adverse consequences
might not result to the business of the Company, the Purchaser or the Parent or
that certain parts of the businesses of the Company, the Purchaser or the Parent
might not have to be disposed of in the event that such approvals were not
obtained or any other actions were not taken. The Purchaser's obligation under
the Offer to accept for payment and pay for Shares is subject to certain
conditions, including conditions related to the matters discussed in this
Section 11. See Section 10.
Antitrust. Under the HSR Act, and the rules that have been promulgated
thereunder by the Federal Trade Commission (the "FTC"), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the "Antitrust
Division") and the FTC and certain waiting period requirements have been
satisfied. The acquisition of Shares pursuant to the Offer is subject to such
requirements.
Under the provisions of the HSR Act applicable to the Offer, the purchase
of Shares under the Offer may not be consummated until the expiration of a
fifteen calendar day waiting period following the required filing. Each of the
Purchaser (on behalf of the Parent) and the Company filed a Notification and
Report Form with respect to the Offer on August 1 and 4, 1997, respectively.
Accordingly, the waiting period with respect to the Offer will expire at 11:59
p.m., New York City time, on August 16, 1997, unless the Parent receives a
request for additional information or documentary material, or the Antitrust
Division and the FTC terminate the waiting period prior thereto. If, within such
fifteen day period, either the Antitrust Division or the FTC requests additional
information or material from the Parent concerning the Offer, the waiting period
will be extended and would expire at 11:59 p.m., New York City time, on the
tenth calendar day after the date of substantial compliance by the Parent with
such request. Only one extension of the waiting period pursuant to a request for
additional information is authorized by the HSR Act. Thereafter, such waiting
period may be extended only by court order or with the consent of the Parent. In
practice, complying with a request for additional information or material can
take a significant amount of time. In addition, if the Antitrust Division or the
FTC raises substantive issues in connection with a proposed transaction, the
parties may engage in negotiations with the relevant governmental agency
concerning possible means of addressing those issues and may agree to delay
consummation of the transaction while such negotiations continue. Expiration or
termination of applicable waiting periods under the HSR Act is a condition to
the Purchaser's obligation to accept for payment and pay for Shares tendered
pursuant to the Offer. See Section 10.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's acquisition of Shares
pursuant to the Offer and the Merger. At any time before or after the
Purchaser's acquisition of Shares, the Antitrust Division or the FTC could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the acquisition of Shares pursuant
to the Offer or otherwise or seeking divestiture of Shares acquired by the
Purchaser or divestiture of substantial assets of the Parent or its
subsidiaries. Private parties and state attorneys general may also bring action
under the antitrust laws under certain circumstances.
Based upon an examination of publicly available information relating to the
businesses in which the Parent and the Company are engaged, the Parent and the
Purchaser believe that the acquisition of Shares by the Purchaser will not
violate the antitrust laws. Nevertheless, there can be no assurance that a
challenge to the Offer or other acquisition of Shares by the Purchaser on
antitrust grounds will not be made or, if such a challenge is made, of the
result. See Section 10 for certain conditions to the Offer, including conditions
with respect to litigation and certain governmental actions.
Exon-Florio Act. The Exon-Florio Act applies to all acquisitions proposed
or pending on or after August 23, 1988, by or with foreign persons which could
result in foreign control of persons engaged in interstate commerce in the
United States. The Exon-Florio Act empowers the President of the United States
to prohibit or suspend mergers, acquisitions or takeovers by or with foreign
persons if the President finds, after investigation, credible evidence that the
foreign person might take action that threatens to impair the national security
of the United States and that other provisions of existing law do not provide
adequate and appropriate authority to protect the national security.
55
<PAGE> 58
The President has designated The Committee on Foreign Investment in the
United States ("CFIUS") as the agency authorized under the Exon-Florio Act to
receive notices and other information, to determine whether investigations
should be undertaken and to make investigations. Any determination by CFIUS that
an investigation is called for must be made within thirty days after its
acceptance of written notification concerning a proposed transaction. In the
event that CFIUS determines to undertake an investigation, such investigation
must be completed within forty-five days after such determination. Upon
completion or termination of any such investigation, CFIUS must report to the
President and present its recommendation. The President then has fifteen days in
which to suspend or prohibit the proposed transaction or to seek other
appropriate relief. In order for the President to exercise his authority to
suspend or prohibit an acquisition, the President must make two findings: (i)
that there is credible evidence that leads the President to believe that the
foreign interest exercising control might take action that threatens to impair
national security and (ii) that provisions of law other than the Exon-Florio Act
and the International Emergency Economic Powers Act do not provide adequate and
appropriate authority for the President to protect the national security in
connection with the acquisition. Such findings are not subject to judicial
review. If the President makes such findings, he may take action for such time
as he considers appropriate to suspend or prohibit the relevant acquisition. The
President may direct the Attorney General to seek appropriate relief, including
divestment relief, in the District Courts of the United States in order to
implement and enforce the Exon-Florio Act. The Exon-Florio Act does not obligate
the parties to an acquisition to notify CFIUS of a proposed transaction.
However, if notice of a proposed acquisition is not submitted to CFIUS, then the
transaction remains indefinitely subject to review by the President under the
Exon-Florio Act, unless it is determined that CFIUS does not have jurisdiction
over the transaction.
The Purchaser (on behalf of the Parent) and the Company made a filing under
the Exon-Florio Act on August 1, 1997. Accordingly, CFIUS must determine by
August 31, 1997 whether an investigation is called for. There can be no
assurance that CFIUS will not determine to conduct an investigation of the
proposed transaction and, if an investigation is commenced, there can be no
assurance regarding the outcome of such investigation. If the results of such
investigation are adverse to the Purchaser, the Purchaser may not be obligated
to accept for payment or pay for any Shares tendered pursuant to the Offer.
National Industrial Security Program. The Company sells certain products
and services to the U.S. Department of Defense ("DoD") and the U.S. military
services and is subject to the provisions of the National Industrial Security
Program ("NISP") regarding the maintenance of certain security clearances for
its personnel. The NISP is administered by the Defense Investigative Service
("DIS") of the DoD. DIS previously determined that the Company is subject to
foreign ownership, control and influence ("FOCI") due to the Parent's existing
ownership interest in the Company. In order to maintain its personnel security
clearances under the NISP, the Company was required to put measures in place in
1981 intended to mitigate this FOCI as required and approved by the DIS. These
measures include establishing a separate wholly-owned subsidiary, Amdahl Federal
Service Corporation ("AFSC"), to provide product sales, consulting and
maintenance services to the DoD and military services. AFSC is subject to a
Voting Trust Agreement, pursuant to which control of AFSC is vested in certain
independent trustees and the Company may not exercise control over AFSC.
Although the Parent and the Purchaser are not aware of additional filings that
are required under the NISP, there can be no assurance that the DIS will approve
the continuation of such Voting Trust Agreement. In the event that DIS does not
approve of the effect on AFSC of the transactions contemplated by the Merger
Agreement, it may withdraw the security clearances currently held by AFSC
personnel and AFSC may not be permitted to provide product sales, consulting and
maintenance services to DoD and the military services.
Competition Act and Investment Canada Act. According to the Company's 1996
10-K, the Company conducts certain operations in Canada. Certain provisions of
Canada's Competition Act require pre-notification to the Director of
Investigation and Research appointed under the Competition Act (the "Canadian
Director") of the acquisition or establishment, direct or indirect, of control
over or a significant interest in the whole or part of the business of a
competitor, supplier, customer or other person where certain size of parties and
size of transaction thresholds are exceeded. Where a short form filing is made,
the parties must wait seven days before completing the transaction. In the case
of a long form filing, the waiting period is
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<PAGE> 59
twenty-one days. Where a short form notification is submitted, the Canadian
Director may, within the seven day waiting period, require a long form to be
provided, in which case a fresh long form waiting period will apply. These time
periods may be reduced by the Canadian Director. Exemptions from mandatory
prenotification include where the Canadian Director has issued an advance ruling
certificate ("ARC") and the merger is substantially completed within one year
after the issuance of the ARC. During the aforementioned waiting periods, the
Canadian Director may apply to the Competition Tribunal, a special purpose
Canadian Tribunal, for an interim order forbidding the completion or
implementation of the proposed merger if the proposed merger is reasonably
likely to prevent or lessen competition substantially and, in the absence of an
interim order, a party to the proposed merger or any other person is likely to
take an action that would substantially impair the ability of the Competition
Tribunal to remedy the effect of the proposed merger on competition.
At any time within three years of the completion of a transaction, the
Canadian Director may challenge it by applying to the Competition Tribunal
unless, as described below, an ARC has been obtained. Upon such application, if
the Competition Tribunal finds that a merger or proposed merger prevents or
lessens, or is likely to prevent or lessen, competition substantially, it may,
among other things, order the disposition of the Canadian assets acquired in
such transaction.
An ARC may be issued by the Canadian Director if he is satisfied that there
are insufficient grounds to challenge the merger. Where an ARC has been issued
by the Canadian Director, there is no requirement to meet the prenotification
requirements and no application may be brought by the Canadian Director to the
Competition Tribunal, either before or after completion of the transaction, so
long as the transaction is completed on the same facts, or substantially the
same facts, as described in the application for the ARC. The Parent filed an
application for an ARC on July 31, 1997, although there can be no assurance that
an ARC will be issued, and intends to file any additional required notice and
information with respect to its proposed acquisition and, to the extent
necessary, observe any applicable waiting periods.
The Investment Canada Act (the "ICA") requires that notice of the
acquisition of "control" (as defined in the ICA) by "non-Canadians" (as defined
in the ICA) of any "Canadian business" (as defined in the ICA) be furnished to
Investment Canada, a Canadian governmental entity. The acquisition of Shares by
the Purchaser pursuant to the Offer may constitute an indirect acquisition of a
"Canadian business" within the meaning of the ICA. The Purchaser intends to file
any notice required under the ICA.
European Union Regulation. According to Company's 1996 10-K, the Company
conducts substantial operations in the European Union (the "EU"). Regulation
4064/89 of the European Union (the "Merger Regulation") and Article 57 of the
European Economic Area Agreement require that concentrations with a "Community
dimension" be notified in prescribed form to the European Commission of the
European Communities (the "European Commission") for review and approval prior
to being put into effect. In such cases, the European Commission will, with
certain exceptions, have exclusive jurisdiction to review the concentration, as
opposed to the individual countries within the EU.
The Parent filed a notification with the European Commission in accordance
with the Merger Regulation on August 4, 1997. Transactions subject to the filing
requirements of the Merger Regulation are suspended automatically until three
weeks after receipt of the notification. The European Commission may extend the
suspension period for such period as it finds necessary to make a final decision
on the legality of the transaction. However, in the case of a public bid, the
bidder may acquire shares of the target company during the suspension period
(provided that the transaction has been duly notified to the European
Commission), but may not vote such shares until after the end of the suspension
period unless the European Commission grants permission to do so in order to
maintain the full value of the bidder's investment.
The European Commission must decide whether to initiate proceedings within
one month after the receipt of the notification, subject to certain extensions
for EU holidays if the information to be supplied with the notification is
incomplete or if an individual country has requested a referral of the
transaction (or part of it). If proceedings are initiated, the European
Commission must reach a decision in the proceedings within four months of the
commencement of the proceedings. During this period, the Purchaser may modify
the transactions contemplated to remove any serious doubts of the Commission as
to the compatibility of the
57
<PAGE> 60
transactions with the common market. If the European Commission fails to reach a
decision within either of these time periods the transaction will be deemed to
be compatible with the common market. If the European Commission declares the
Offer to be incompatible with the common market, it may prevent the consummation
of the transaction, order a divestiture if the transaction has already been
consummated, or impose conditions or other obligations.
Other Foreign Laws. The Company's 1996 10-K indicates that Company and
certain of its Subsidiaries conduct business in other foreign countries outside
Canada and the EU where regulatory filings or approvals may be required or
desirable in connection with the consummation of the Offer. Certain of such
filings or approvals, if required or desirable, may not be made or obtained
prior to the expiration of the Offer. After commencement of the Offer, the
Purchaser will seek further information regarding the applicability of any such
laws and currently intends to take such action as may be required or desirable.
If any government or governmental authority or agency takes any action prior to
the completion of the Offer that, in the sole judgment of the Purchaser, might
have certain adverse effects, the Purchaser will not be obligated to accept for
payment or pay for any Shares tendered. See Section 10.
State Takeover Statutes. The Company is incorporated under the laws of
Delaware. In general, Section 203 of the DGCL prevents an "Interested
Stockholder" (generally defined as a person who owns or has the right to acquire
15% or more of a corporation's voting stock, or an associate or affiliate
thereof) from engaging in a "Business Combination" (defined to include mergers
and certain other transactions) with a Delaware corporation for three years
following the date such person became an Interested Stockholder unless, among
other things, before such person became an Interested Stockholder, the board of
directors of the corporation approved the transaction in which the Interested
Stockholder became an Interested Stockholder or approved the Business
Combination. The Parent became an Interested Stockholder more than three years
prior to the anticipated date of expiration of the Offer and, additionally, the
Company Board, acting through the Disinterested Board, has approved the Merger
Agreement and the Purchaser's acquisition of Shares pursuant to the Offer and
the Merger and the other Transactions (see "SPECIAL FACTORS -- Background of the
Offer and the Merger; Past Contacts, Transactions and Negotiations with the
Company" and "SPECIAL FACTORS -- Recommendation of the Company's Board of
Directors; Fairness of the Offer and the Merger"). Accordingly, Section 203 is
inapplicable to the transactions, including the Purchaser's acquisition of
Shares pursuant to the Offer.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In Edgar v. MITE Corp., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Statute, which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult. However, in 1987, in
CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State of
Indiana may, as a matter of corporate law, and, in particular, with respect to
those aspects of corporate law concerning corporate governance, constitutionally
disqualify a potential acquirer from voting on the affairs of a target
corporation without the prior approval of the remaining stockholders. The state
law before the Supreme Court was by its terms applicable only to corporations
that had a substantial number of stockholders in the state and were incorporated
there.
The Company, directly or through subsidiaries, conducts business in a
number of states throughout the United States, some of which have enacted
takeover laws. The Purchaser does not know whether any of these laws will, by
their terms, apply to the Offer and has not complied with any such laws. Should
any person seek to apply any state takeover law, the Purchaser will take such
action as then appears desirable, which may include challenging the validity or
applicability of any such statute in appropriate court proceedings. In the event
it is asserted that one or more state takeover laws is applicable to the Offer
and the Merger, and an appropriate court does not determine that it is
inapplicable or invalid as applied to the Offer, the Purchaser might be required
to file certain information with, or receive approvals from, the relevant state
authorities. In addition, if enjoined, the Purchaser might be unable to accept
for payment any Shares tendered pursuant to the Offer, or be delayed in
continuing or consummating the Offer. In such case, the Purchaser may not be
obligated to accept for payment any Shares tendered. See Section 10.
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<PAGE> 61
Litigation. Shortly after the July 30, 1997 public announcement that the
Parent proposed to acquire those Shares of the Company that it did not already
own, several putative class actions were filed in the Delaware Court of Chancery
and in the California Superior Court for the County of Santa Clara challenging
the fairness of the proposed transaction to Company stockholders. Cases filed in
the Delaware Court of Chancery as of August 1, 1997 are: Lopez v. Amdahl Corp.,
et al. (Civ. Act. No. 15833NC), filed July 30, 1997; Kaltman v. Lewis, et al.
(Civ. Act. No. 15834NC), filed July 30, 1997; Uzzo v. Lewis, et al. (Civ. Act.
No. 15837), filed July 31, 1997; O'Shea v. Kojima, et al. (Civ. Act. No. 15838),
filed July 31, 1997; Gachot & Gachot, Inc. v. Amdahl Corp., et al. (Civ. Act.
No. 15839), filed July 31, 1997; Crandon Capital Partners v. Lewis, et al. (Civ.
Act. No. 15840), filed July 31, 1997; Bodakian v. Amdahl Corp., et al. (Civ.
Act. No. 15841), filed July 31, 1997; McCeady v. Amdahl Corp. (Civ. Act. No.
15845), filed July 31, 1997; Zicherman v. Lewis, et al. (Civ. Act. No. 15847NC),
filed August 1, 1997 and Halebian v. Lewis, et al. (Civ. Act. No. 15850NC),
filed August 1, 1997. Cases filed in the California Superior Court for the
County of Santa Clara as of August 1, 1997 are: Lacoff v. Amdahl Corp., et al.
(Case No. CV767860), filed July 30, 1997; and Silverman v. Amdahl Corp., et al.
(Case No. CV767896), filed August 1, 1997.
In substance, the complaints allege that because of the Parent's ownership
of approximately 42% of the Company, the relationship between the Parent and the
Company and the alleged control of the Parent over the Company's officers and
directors, the Parent dictated the terms of the transaction and that those terms
do not reflect the fair value of the Company. The complaints also allege that
the defendants -- the Parent, the Company and several individuals serving as
officers or directors of one or more of those companies -- possess material
non-public information regarding the fair value of the Company and breached
their fiduciary and other duties to the public stockholders of the Company by
failing to take adequate steps to determine the fair value of the Company or to
condition the Offer on acceptance by holders of a majority of the Shares held by
persons other than the Parent and its affiliates. The relief sought by the
plaintiffs includes an injunction against the acquisition of Shares by the
Parent; an injunction requiring that certain steps be taken to evaluate the
value of the Company; a declaration that defendants have breached their
fiduciary and other duties; an accounting for damages; compensatory and/or
rescissionary damages; costs of suit; and attorneys' and experts' fees in
unspecified amounts. The Parent and the Purchaser believe, and understand that
the Company believes, that all of these suits are without merit and intend, and
understand that the Company intends, to vigorously defend such suits.
SECTION 12. FEES AND EXPENSES.
The Parent and the Purchaser have retained Lehman Brothers to act as the
Dealer Manager and to provide certain financial advisory services. The Parent
has agreed, pursuant to an engagement letter dated as of June 30, 1997 (the
"Engagement Letter"), to pay Lehman Brothers certain fees for such services, and
to reimburse Lehman Brothers for certain expenses and to indemnify Lehman
Brothers against certain liabilities, as described above under "SPECIAL
FACTORS -- Report of Financial Advisor to the Parent."
The Purchaser has retained MacKenzie Partners, Inc. to act as the
Information Agent in connection with the Offer. The Information Agent may
contact holders of Shares by mail, telephone, facsimile, telegraph and personal
interviews and may request brokers, dealers and other nominee stockholders to
forward materials relating to the Offer to beneficial owners of Shares. The
Information Agent will be paid reasonable and customary compensation for its
services, will be reimbursed for certain reasonable out-of-pocket expenses and
will be indemnified against certain liabilities and expenses in connection
therewith, including certain liabilities under the federal securities laws.
The Purchaser has retained The Bank of New York as the Depositary in
connection with the Offer. The Depositary has not been retained to make
solicitations or recommendations in its role as Depositary. The Depositary will
be paid reasonable and customary compensation for its services, will be
reimbursed for certain reasonable out-of-pocket expenses and will be indemnified
against certain liabilities and expenses in connection therewith, including
certain liabilities under the federal securities laws.
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<PAGE> 62
It is estimated that the expenses incurred in connection with the Offer and
the Merger will be approximately as set forth below:
<TABLE>
<S> <C>
Financial Advisor Fees and Expenses............................ $3,925,000
Accounting..................................................... 550,000
Legal Fees..................................................... 1,300,000
Printing Costs................................................. 200,000
Filing Fees.................................................... 230,000
Advertising.................................................... 100,000
Miscellaneous (including Depositary and Information Agent fees
and expenses)................................................ 165,000
---------
Total.......................................................... $6,470,000
=========
</TABLE>
Except as set forth above, the Purchaser and Parent will not pay any fees
or commissions to any broker or dealer or any other person for soliciting
tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks,
trust companies and other nominees will, upon request only, be reimbursed by the
Purchaser for customary mailing and handling expenses incurred by them in
forwarding material to their customers.
SECTION 13. MISCELLANEOUS.
The Offer 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 or
acceptance thereof would not be in compliance with the securities, blue sky or
other laws of such jurisdiction. The Purchaser may, in its discretion, however,
take such action as it may deem necessary to make the Offer in any jurisdiction
and extend the Offer to holders of Shares in any such jurisdiction. 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 shall be deemed to be made on
behalf of the Purchaser by Lehman Brothers or one or more registered brokers or
dealers licensed under the laws of such jurisdiction.
The Parent and the Purchaser have filed with the SEC the Schedule 14D-1,
together with exhibits, pursuant to Section 14(d)(1) of the Exchange Act and
Rule 14d-3 promulgated thereunder, furnishing certain additional information
with respect to the Offer. The Parent, the Purchaser and the Company have filed
with the SEC the Schedule 13E-3, together with exhibits, pursuant to Rule 13e-3
under the Exchange Act, furnishing certain additional information with respect
to the Offer. In addition, the Company has filed with the SEC the Schedule 14D-9
pursuant to Rule 14d-9 under the Exchange Act, together with exhibits, setting
forth the Company's recommendation with respect to the transaction. Such
Schedule 14D-1, Schedule 13E-3 and Schedule 14D-9, including exhibits and any
amendments thereto, may be inspected at, and copies may be obtained from, the
same places and in the same manner as set forth in Section 7 (except that they
will not be available at the regional offices of the SEC).
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE PARENT OR THE PURCHASER OTHER THAN AS CONTAINED
IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE PURCHASER OR THE PARENT.
Fujitsu International, Inc.
August 5, 1997
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<PAGE> 63
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS
OF THE PARENT AND THE PURCHASER
Directors and Executive Officers of the Parent. The following table sets
forth the name, business or residence address, principal occupation or
employment at the present time and during the last five years, and the name of
any corporation or other organization in which such employment is conducted or
was conducted of each executive officer of the Parent and each person carrying
out functions in the Parent similar to that of a director in a United States
corporation. All of the persons listed below are citizens of Japan. Each
occupation set forth opposite a person's name, unless otherwise indicated,
refers to employment with the Parent. The business address of each of the
persons listed below is Fujitsu Limited, Marunouchi Center Building, 6-1,
Marunouchi 1-chome, Chiyoda-ku, Tokyo 100 Japan, unless otherwise set forth
below.
<TABLE>
<CAPTION>
PRESENT OCCUPATION OR MATERIAL POSITIONS HELD
NAME EMPLOYMENT DURING THE PAST FIVE YEARS
- --------------------------- -------------------------- ----------------------------------------
<S> <C> <C>
Tadashi Sekizawa President and Same as current employment.
Representative Director
Naoyuki Akikusa Executive Vice President 1996, Member of Steering Committee of
High Reliability Program, President,
Systems Business Group, President, ITS
Business Group, President, Large-Scale
Projects Promotion Headquarters, (Branch
& Store Systems Business Group); 1995,
(Western Region Sales); 1994-1995,
President, Kansai Regional Sales Group;
1992, (Systems Engineering), President,
Systems Business Group, President,
Large-Scale Projects Promotion
Headquarters, President, Sevilla EXPO 92
Group.
Michio Naruto Executive Vice President 1997, President, External Affairs Group;
1996, Disposal of Large-Scale Projects
Promotion Headquarters; 1995-1997,
(Strategic Products Export Control
Headquarters), (Legal & Industry
Relations), (ICL Business Group); 1994-
1997, President, China Project Promotion
Group; 1994-1996, Member of Large-Scale
Projects Promotion Headquarters,
(External Affairs Division, Computers),
(External Affairs Division,
Telecommunications); 1994, President,
Strategic Products Export Control
Headquarters; 1992-1994, President,
Legal & Industry Relations, President,
ICL Business Group; 1992, Executive Vice
President, Strategic Products Export
Control Headquarters.
</TABLE>
I-1
<PAGE> 64
<TABLE>
<CAPTION>
PRESENT OCCUPATION OR MATERIAL POSITIONS HELD
NAME EMPLOYMENT DURING THE PAST FIVE YEARS
- --------------------------- -------------------------- ----------------------------------------
<S> <C> <C>
Takeshi Maruyama Executive Vice President 1997, President, Network Business Group;
1996-1997, (Corporate Manufacturing
Systems Engineering Group), (Information
Processing); 1996, (Network Business
Group), Disposal of Long-Scale Projects
Promotion Group; 1994-1996, President,
Client-Server Business, Member of Long-
Scale Projects Promotion Group; 1995,
(Personal Systems Business), (Open
Systems Group); 1994, Senior Vice
President, Fujitsu, Ltd.; 1992,
Executive Vice President Systems
Business Promotion Group.
Masuo Tanaka Executive Vice President 1995, (Sales), President, Customer
Satisfaction Group, President, Sales
Group, Banking, Insurance & Securities;
1996, (Sales), President, Customer
Satisfaction Group, President, Sales
Group, Banking, Insurance & Securities;
1995, President, Administration &
Business Promotion Group, Electronic
Devices; 1994-1995 (Electronic Devices),
(Kawasaki Plant), (LCD Group); 1994,
Executive Vice President, Strategic
Products Export Control Headquarters,
President, Logic LSI Group; 1993,
General Manager, Business Development;
1992-1993, President, International
Computer Business, President, Strategic
Products Export Control Headquarters,
Executive Vice President, International
Telecommunications Business, Executive
Vice President, Computer Products
Business Group; 1992, Executive Vice
President, Sevilla EXPO 92 Group.
Keizo Fukagawa Executive Vice President 1992-1996, Chief Financial Officer;
and Chief Financial 1994, Senior Vice President, Fujitsu,
Officer Ltd.; 1992, Member of the Board.
Michio Fujisaki Executive Vice President 1997, President, Steering Committee of
High Reliability Program; 1996-1997,
(Communications Systems), President,
Communications Systems Group, (Space
Technology Development Group), (Kawasaki
Research & Manufacturing Facilities),
(Defense Systems Group), (Integrated
Information Network Systems Group);
1994-1997, President, Telecommunication
Network Systems Group; 1995, Steering
Committee of High Reliability Program;
1994, Senior Vice President, Fujitsu,
Ltd., Executive Vice President,
Communication Systems Group; 1992,
President, Telecommunication Network
Systems Group, Executive Vice President,
Communication Systems Group.
</TABLE>
I-2
<PAGE> 65
<TABLE>
<CAPTION>
PRESENT OCCUPATION OR MATERIAL POSITIONS HELD
NAME EMPLOYMENT DURING THE PAST FIVE YEARS
- --------------------------- -------------------------- ----------------------------------------
<S> <C> <C>
Takamitsu Tsuchimoto Executive Vice President 1997, President, CAD Group, President,
(Electronic Devices) Administration & Business Promotion
Group, Electronic Devices, (LCD Group);
1996, (Electronic Devices), President,
Administration & Business Promotion
Group, Electronic Devices, (LCD Group);
1994-1996, President, CAD Group; 1996,
Senior Vice President, Fujitsu, Ltd.;
1995, President, Steering Committee of
High Reliability Program; September
1994-1995, President, Logic LSI Group;
June 1994, Executive Vice President,
Logic LSI Group; 1992, Member of the
Board, President, Technology Group,
Member of Large-Scale Projects Promotion
Group.
Yuzuru Abe Senior Vice President 1996, General Manager, CALS Project
Promotion Division; 1994-1996,
President, Management Information
Systems Group, (Procurement); 1992,
President, Management Information
Systems Group.
Ryuzo Kawakami Senior Vice President 1996, President, Kansai Regional Sales
Group; 1995, Industries; 1994-1995,
President, Customer Satisfaction Group,
President, Sales Group; 1993, Executive
Vice President, Sales Group; 1992-1993,
Member of Large-Scale Projects Promotion
Headquarters, President, Marketing
Group.
Hiroaki Sakai Senior Vice President 1997, President, ICL Business Group;
1996-1997, President, Network Service
Business Group, Executive Vice
President, Software & Service Business
Promotion Group; 1996, Executive Vice
President, Systems Business Group,
Executive Vice President, Large-Scale
Projects Promotion Headquarters; 1994,
Executive Vice President, Systems
Integration Group, Executive Vice
President Large-Scale Projects Promotion
Headquarters; 1992, Executive Vice
President, Systems Engineering Group,
Executive Vice President, International
Computer Systems Group.
Toru Katsurada Senior Vice President 1996, Senior Vice President; 1995-1996,
President, Eastern-Japan Regional Sales
Group; 1992-1995, Member of the Board;
1994, (Personnel, Employee Relations,
Personnel Development, General Affairs,
Public Relations); 1993, (Public
Relations, General Affairs, Personnel,
Employee Relations), General Manager,
Corporate Planning Division; 1992,
(Personnel, Personnel Development,
General Affairs, Public Relations),
General Manager, Personnel Division.
</TABLE>
I-3
<PAGE> 66
<TABLE>
<CAPTION>
PRESENT OCCUPATION OR MATERIAL POSITIONS HELD
NAME EMPLOYMENT DURING THE PAST FIVE YEARS
- --------------------------- -------------------------- ----------------------------------------
<S> <C> <C>
Akira Takashima Senior Vice President 1997, President, External Affairs Group;
1996, Corporate Adviser, Nihon Research
Institute, and Corporate Adviser, The
Sumitomo Marine & Fire Insurance Co.,
Ltd.; 1995, Corporate Adviser, The
Mechanical Social Systems Foundation;
1994, Director General, Patent Office,
Ministry of International Trade and
Industry; 1993, Director, Environment
Protection and Industrial Location
Bureau, Ministry of International Trade
and Industry; 1992, Director, Industrial
Policy Bureau, Ministry of International
Trade and Industry.
Yoshiro Yoshioka Senior Vice President 1996-1997, President, Computer Systems
Group; 1994-1997, HAL Computer Systems,
Inc., President & CEO, Acting Chairman
(US resident); 1992-1996, Member of the
Board; 1992-1995, President, Open
Systems Group; 1995 Member of Steering
Committee of High Reliability Program;
1992, General Manager, Open Systems
Business Promotion Division.
Kazunari Shirai Senior Vice President 1996-1997, President, LSI Manufacturing
Group; 1993-1996, Member of the Board;
1994-1995, President, Memory Devices
Group, Executive Vice President, Logic
LSI Group; 1995, Member of Steering
Committee of High Reliability Program;
1994, President, Devices Group; Senior
Vice President, Logic LSI Group; 1993,
President, Administration & Business
Promotion Group, Electronic Devices;
1992, General Manager, Process Division,
Product Group, Electronic Devices; Basic
Process Development Division.
Tatsuhiko Otaki Senior Vice President 1996-1997, President, Information
Processing Administration Group;
1994-1996, Member of the Board;
1994-1995, Executive Vice President,
Information Processing Administration
Group; 1995, Member of Steering
Committee of High Reliability Program;
1992, Senior Vice President, Information
Processing Administration Group (in
charge of Management & Administration),
General Manager, Administration
Division, Personal Systems Business
Group.
</TABLE>
I-4
<PAGE> 67
<TABLE>
<CAPTION>
PRESENT OCCUPATION OR MATERIAL POSITIONS HELD
NAME EMPLOYMENT DURING THE PAST FIVE YEARS
- ------------------------- -------------------------- --------------------------------------------
<S> <C> <C>
Yoshihiko Nakazato Director 1995-1997, Member of the Board; 1991-1995,
Auditor of Fujitsu Limited; 1992-1995,
President and Representative Director of
Fuji Electric Co., Ltd.; 1987-1991,
Executive Vice President and Representative
Director of Fuji Electric Co. Ltd.
Kazuto Kojima Director 1994-1997, Member of the Board; 1996-1997,
President, Marketing Group, President,
International Computer Business Group; 1994,
President, Corporate Marketing and Strategy,
President, Digital Media Group; 1993,
General Manager, Corporate Marketing and
Strategy; 1992, General Manager, ICL
Business Group, Business Development
Division, General Manager, International
Computer Systems Group, Marketing Division,
General Manager, International Computer
Systems Group, Business Development
Division.
Hiroshi Oshima Director 1994-1997, Member of the Board, President,
Western-Japan Regional Sales Group;
1992-1993, General Manager, Kyushu Branch,
Western-Japan Regional Sales Group; 1992,
Fujitsu Isotec Limited.
Yuji Hirose Director 1994-1997, Member of the Board; 1996-1997,
President, Systems Engineering Group; 1996,
Disposal of Large-Scale Projects Promotion
Headquarters; 1994-1995, Group President,
Branch & Store Systems Business Group; 1995,
Member of Steering Committee of High
Reliability Program; 1992, General Manager,
Eastern Japan Regional Systems Engineering
Division, Systems Engineering Group.
Tatsuzumi Furukawa Director 1994-1997, Member of the Board; 1996-1997,
President, Application Software Business
Group, Executive Vice President, Software
Group; 1994- 1997, President, Multimedia
Business Development Group; 1993-1995,
President, Middleware Group; 1994-1995,
Executive Vice President, Systems Business
Group, Member of Large-Scale Projects
Promotion Headquarters; 1995, Member of
Steering Committee of High Reliability
Program; 1993, General Manager, Multimedia
Business Development Division; 1992-1993,
President, Program Products Group, General
Manager, Global Product Promotion Division,
General Manager, Software Support Division;
1992, President, Program Products Group,
General Manager, Global Product Promotion
Division.
Akio Moridera Director 1995-1997, Member of the Board, President,
Mobile Communication & Wireless Systems
Group, Executive Vice President, China
Project Promotion Group; 1996-1997, Member
of ITS Business Group; 1993-1995, Member of
Steering Committee of High Reliability
Program, Senior Vice President, China
Project Promotion Group, Senior Vice
President, Telecommunications Network
Systems Group (In Charge of Switching
Systems); 1993, Senior Vice President,
Integrated Communications Systems Group.
</TABLE>
I-5
<PAGE> 68
<TABLE>
<CAPTION>
PRESENT OCCUPATION OR MATERIAL POSITIONS HELD
NAME EMPLOYMENT DURING THE PAST FIVE YEARS
- ------------------------- -------------------------- --------------------------------------------
<S> <C> <C>
Tadayasu Sugita Director 1995-1997, Member of the Board, President,
Personal Systems Business Group; 1995,
General Manager, Global Marketing &
Strategic Planning Division, Member of
Steering Committee of High Reliability
Program; 1994, Senior Vice President,
Personal Systems Business Group (In Charge
of Development); 1992, Pocket Computers
Inc., (President & CEO)
Takashi Takaya Director 1995-1997, Member of the Board; 1996-1997,
(Finance & Accounting), President, Corporate
Marketing and Strategy; 1995, General
Manager, Finance Division, General Manager,
Accounting Division, General Manager,
Subsidiaries Administration Division; 1993,
President, Administration & Business
Promotion Group, Electronic Devices.
Ryusuke Hoshikawa Director 1996-1997, Member of the Board, Group
President, LSI Products Group; 1996, Member
of Steering Committee of High Reliability
Program; 1996, President, Logic LSI Group;
1994, Senior Vice President, Logic LSI Group
(In Charge of Product); 1992, General
Manager, System LSI & ASIC Design Division
Product Group, Electronic Devices.
Junji Maeyama Director 1996-1997, Member of the Board; 1997, Group
President, Software Group; 1996, Member of
Steering Committee of High Reliability
Program; 1996, President, Logic LSI Group,
Member of Large-Scale Projects Promotion
Group; 1995, Senior Vice President; 1994,
General Manager; 1992, General Manager.
Hiroya Madarame Director 1996-1997, Member of the Board, Executive
Vice President, Systems Engineering Group;
1993-1994, General Manager, System
Engineering Div. I, Systems Integration
Group; 1992, General Manager, Insurance &
Securities Systems Engineering Div., Systems
Engineering Group.
Masaru Takei Director 1996-1997, Member of the Board, President,
Sales Group Industries; 1996, President,
Sales Group, Distribution & Information
Systems; 1992-1994, General Manager, System
Engineering Div. II, Systems Integration
Group; 1992, General Manager, System
Engineering Div. II, Systems Integration
Group.
Tatsushi Miyazawa Director 1996-1997, Member of the Board, Executive
Vice President, Computer Systems Group;
1996, Member of Steering Committee of High
Reliability Program, Member of Large-Scale
Projects Promotion Program, Senior Vice
President, HPC Group, General Manager, DIPS
in 21, Information Processing Administration
Group; 1994-1996, Senior Vice President,
Global Server Systems Group; 1994, Assistant
Manager, HPC Group, General Manager DIPS in
21, Information Processing Administration
Group; 1992, General Manager, Mainframe Div.
Computer Systems Group, General Manager,
DIPS in 21, Information Processing
Administration Group.
</TABLE>
I-6
<PAGE> 69
<TABLE>
<CAPTION>
PRESENT OCCUPATION OR MATERIAL POSITIONS HELD
NAME EMPLOYMENT DURING THE PAST FIVE YEARS
- ------------------------- -------------------------- --------------------------------------------
<S> <C> <C>
Kazuo Murano Director 1997, Member of the Board; 1996-1997,
Executive Vice President, Telecommunication
Network Systems Group; 1996, General
Manager, Optical Access Systems Div.
Telecommunication Network Systems Group;
1995, General Manager, Access Network
Systems Div. Mobile Communication & Access
Systems Group; 1993-1995, Member of
Multimedia Business Development Group; 1993-
1994, General Manager, Technology Div.
Fujitsu Laboratories, Inc.; 1993, Member of
Multimedia Business Development Div.,
Middleware Group; 1993, General Manager,
Technology Div. Multimedia Systems
Laboratories, Fujitsu Laboratories Inc.,
Program Products Group, Vice General
Manager, Communication and Space Division,
Fujitsu Laboratories, Kawasaki, Fujitsu
Laboratories, Ltd.
Isao Suzuki Director 1997, Member of the Board; 1996-1997
President, Tokyo Regional Sales Group,
Executive Vice President, Marketing Group;
1996, Executive Vice President, Systems
Engineering Group; 1995, General Manager,
Tokyo Branch, Metropolitan Area Sales
Headquarters; 1992-1994, General Manager,
Sales Div. Distribution & Service, Sales
Group.
Noboru Ogi Director 1997, Member of the Board; 1994-1997,
President, Technology Group; 1995, Member of
Steering Committee of High Reliability
Program.
</TABLE>
Directors and Executive Officers of the Purchaser. The directors of the
Purchaser are Mr. Kazuto Kojima and Mr. Takashi Takaya. Mr. Kojima is the
President of the Purchaser and Mr. Takaya is the Chief Financial Officer of the
Purchaser. Both Mr. Kojima and Mr. Takaya are directors or executive officers of
the Parent, and additional information regarding them is provided above. The
Secretary of the Purchaser is Mr. Toshio Matsuoka. Mr. Matsuoka's business
address is Fujitsu Limited, 1-1, Kamikodana 4-chome, Nakahara-ku, Kawasaki
211-28, Japan. Mr. Matsuoka is a citizen of Japan. Mr. Matsuoka is a manager in
the Parent's legal department and has served in such capacity for at least five
years.
I-7
<PAGE> 70
SCHEDULE II
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS
OF THE COMPANY
The following table sets forth the names, present principal occupations or
employment and material occupations, positions, offices or employment, during
the last five years of each director and executive officer of the Company.
Unless otherwise indicated, all occupations, offices or positions of employment
listed opposite an individual's name are or were with the Company. Except as
otherwise indicated, each of the persons listed below is a citizen of the United
States of America. The business address of each individual is the principal
executive offices of the Company, which are located at Amdahl Corporation, 1250
East Arques Avenue, Sunnyvale, California 94086.
DIRECTORS OF THE COMPANY
<TABLE>
<CAPTION>
PRESENT OCCUPATION OR MATERIAL POSITIONS HELD DURING THE PAST
NAME EMPLOYMENT FIVE YEARS
- -------------------------- ----------------------- -----------------------------------------
<S> <C> <C>
John C. Lewis Chairman of the Board, March, 1996, President and Chief
President and Chief Executive Officer; 1987, appointed
Executive Officer, Chairman of the Board.
Amdahl Corporation
Michael R. Hallman President and Founder, Currently, director of In Focus Systems,
The Hallman Group Inc.; Intuit, Inc.; Timeline Inc.;
Keytronics Corporation; and Network
Appliance, Inc., as well as a number of
private hardware and software technology
startups; 1995, consultant to Amdahl.
E.F. Heizer, Jr. Private Investor and Currently, Chairman of Amdahl's Audit
Business Consultant Committee, Chairman of the Heizer Center
for Entrepreneurship at Kellog Graduate
School of Management at Northwestern
University, Vice President and a member
of the Executive Committee of the Yale
Law School, and a director of Chesapeake
Energy Corporation and Material Sciences
Corporation.
Burton G. Malkiel, Ph.D. Chemical Bank Currently, Chemical Bank Chairman's
Chairman's Professor of Professor of Economics at Princeton
Economics, Princeton University and a director of Baker
University Fentress Inc., the Jeffrey Co., The
Prudential Insurance Company of America,
Southern New England Telecommunications
Co.,and the Vanguard Group of Investment
Companies.
George R. Packard, Ph.D. Professor and Director, Currently, a director of the
Reischauer Center for Mercantile-Safe Deposit and Trust Funds,
East Asian Studies, OFFITBANK, and GRC International Corp,
School of Advanced member of The Advisory Council to the
International Studies, Fujitsu Research Institute in Tokyo,
Johns Hopkins Professor and Director of the Reischauer
University Center for East Asian Studies of the
School of Advanced International Studies
at John Hopkins University, professor and
Director of the Reischauer Center and
Visiting President of the International
University of Japan; 1993, Dean of the
School of Advanced International Studies
at John Hopkins University.
</TABLE>
II-1
<PAGE> 71
<TABLE>
<CAPTION>
PRESENT OCCUPATION OR MATERIAL POSITIONS HELD DURING THE PAST
NAME EMPLOYMENT FIVE YEARS
- -------------------------- ----------------------- -----------------------------------------
<S> <C> <C>
Walter B. Reinhold Chairman of the Board, Chairman of Amdahl's Compensation
Varco International, Committee a director of Revco D.S., Inc.
Inc. and The Petroleum Equipment Suppliers
Association; 1996, Chairman of the
Nominating Committee and Chairman of the
Stock Plan Administration Committee.
J. Sidney Webb Chairman of the Board, Currently, Chairman of the Board of The
The Titan Corporation Titan Corporation, independent
consultant, and a director of EIP
Microwave, Inc., Plantronics, Inc., and
Visigenics.
</TABLE>
EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
PRESENT OCCUPATION OR MATERIAL POSITIONS HELD DURING THE PAST
NAME EMPLOYMENT FIVE YEARS
- -------------------------- ----------------------- -----------------------------------------
<S> <C> <C>
John C. Lewis Chairman of the Board, March 1996, President and Chief Executive
President and Chief Officer; 1983-1992, Company Chief
Executive Officer Executive Officer.
David L. Anderson Vice President and January 1997, Vice President, Corporate
Chief Technical Officer Technology Group and Chief Technical
Officer; January 1996, Chief Technical
Officer and Vice President of Enterprise
Service Development; 1993, Vice President
and General Manager of Compatible
Systems; 1992, Vice President of
Compatible Products Development.
Michael R. Carabetta Vice President and January 1997, Vice President and General
General Manager, A+ Manager of A+ Software Group; 1994, Vice
Software Group President and General Manager of Open
Enterprise Systems; 1993-1994, Digital
Equipment Corporation, Vice President of
Finance and Administration, Business
Systems; Previously Digital Equipment
Corporation Group Manager.
William F. Ferone Vice President and January 1996, Vice President of Customer
General Manager, Services; 1992, Vice President and
Customer Services General Manager of Customer Services.
William Flanagan Vice President January 1997, Vice President and General
Compatible Products Manager, Compatible Business Group;
Operations January 1996, Vice President and General
Manager of Compatible Systems; 1994, Vice
President, Business and Marketing,
Compatible Systems; 1993, Vice President
of Operations, Compatible Systems.
Charles E. Fonner Vice President and January 1996, Vice President of Business
General Manager, The Development; November 1996, Vice
SmartCard Group President and General Manager, The
SmartCard Group; 1992, Vice President of
Product Management and Marketing.
Gregory R. Grodhaus Vice President, January 1997, Vice President and General
Marketing Manager, Server Business Group;
Previously, IPL Systems, President and
Chief Executive Officer; 1995, Joined
Company, Vice President and General
Manager of Enterprise Storage Systems;
Previously, Memorex Telex Corporation,
various roles.
</TABLE>
II-2
<PAGE> 72
<TABLE>
<CAPTION>
PRESENT OCCUPATION OR MATERIAL POSITIONS HELD DURING THE PAST
NAME EMPLOYMENT FIVE YEARS
- -------------------------- ----------------------- -----------------------------------------
<S> <C> <C>
Orval J. Nutt Vice President, Market January 1996, Chief Marketing Officer and
Planning Vice President of Corporate Marketing;
1993, Vice President and General Manager
of Worldwide Field Operations.
Michael J. Poehner President, DMR June 1996, Chief Executive Officer and
Consulting Group President; 1995, President and Chief
Operating Officer of DMR Group Inc.; Inc.
1994, Vice President and General Manager
of Business Solutions Group; 1992, Joined
Company, Vice President and General
Manager, East Area, Office of Field
Operations.
Anthony M. Pozos Senior Vice President, 1986 - Present, Senior Vice President,
Human Resources and Human Resources and Corporate Services.
Corporate Services
William R. Riley Vice President, Field January 1996, Area General Manager, North
Operations, North America, Office of Field Operations;
America November 1996, Vice President & General
Manager, Worldwide Sales.
Bruce J. Ryan Executive Vice January 1996, Executive Vice President,
President and Chief Chief Financial Officer, and Corporate
Financial Officer Secretary; 1994, Senior Vice President,
Chief Financial Officer and Corporate
Secretary; 1993-1994, Digital Equipment
Corporation, Vice President of Industry
Marketing; Previously, Digital Equipment
Corporation, Vice President and Corporate
Controller.
Ernest B. Thompson Vice President and 1980-Present, Vice President.
Controller
David B. Wright Executive Vice January 1996, Executive Vice President of
President Amdahl Enterprise Computing Group; 1993, Vice
Systems President and General Manager of
Worldwide Field Operations; 1992, Vice
President and General Manager of European
Operations.
</TABLE>
II-3
<PAGE> 73
EXHIBIT I
July 30, 1997
Board of Directors
Amdahl Corporation
1250 East Arques Avenue
Sunnyvale, California 94088
Members of the Board:
We understand that Amdahl Corporation (the "Company"), Fujitsu Limited
("Fujitsu") and Fujitsu International, Inc., a wholly owned subsidiary of
Fujitsu ("Newco"), propose to enter into an Agreement and Plan of Merger,
substantially in the form of the draft dated July 30, 1997 (the "Merger
Agreement"), which provides, among other things, for (i) the commencement by
Newco of a tender offer (the "Tender Offer") for all outstanding shares of
common stock, par value $0.05 per share (the "Company Common Stock"), of the
Company for $12.00 per share net to the seller in cash and (ii) the subsequent
merger (the "Merger") of Newco with and into the Company. Pursuant to the
Merger, the Company will become a wholly owned subsidiary of Fujitsu, and each
outstanding share of the Company Common Stock, other than shares held in
treasury or held by Fujitsu or any affiliate of Fujitsu or as to which
dissenters' rights have been perfected, will be converted into the right to
receive $12.00 per share in cash. The terms and conditions of the Tender Offer
and the Merger are more fully set forth in the Merger Agreement. We further
understand that approximately 42% of the outstanding shares of the Company
Common Stock is owned by Fujitsu and its affiliates.
You have asked for our opinion as to whether the consideration to be
received by the holders of shares of the Company Common Stock (other than
Fujitsu and its affiliates) pursuant to the Merger Agreement is fair from a
financial point of view to such holders.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
business and financial information of the Company;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning the Company prepared by the
management of the Company;
(iii) reviewed certain financial forecasts prepared by the management
of the Company;
(iv) discussed the past and current operations and financial condition
and the prospects of the Company with senior executives of the Company;
(v) reviewed the reported prices and trading activity for the Company
Common Stock;
(vi) compared the financial performance of the Company and the prices
and trading activity of the Company Common Stock with that of certain other
comparable publicly traded companies and their securities;
(vii) reviewed the financial terms, to the extent publicly available,
of certain comparable acquisition transactions;
(viii) considered the financial payments, through short-term
agreements and funding of certain expenses, provided by Fujitsu in recent
quarters in excess of amounts Fujitsu is obligated to provide under
existing contracts, and concluded, based on information provided to us by
senior executives of the Company and representatives of Fujitsu, that the
assumption that such payments will continue or increase may not be
appropriate;
(ix) participated in discussions and negotiations among
representatives of the Company and Fujitsu and their financial and legal
advisors:
I-1
<PAGE> 74
(x) reviewed the Merger Agreement and certain related documents; and
(xi) performed such other analyses and considered such other factors
as we have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial forecasts, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of the Company. We
have not made any independent valuation or appraisal of the assets or
liabilities of the Company, not have we been furnished with any such appraisals.
Our opinion is necessarily based on financial, economic, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof.
We understand, based on information provided to us by senior executives of
the Company and representatives of Fujitsu, that Fujitsu does not intend to sell
its ownership interest in the Company to a third party, nor, as an alternative,
is Fujitsu willing to support the "spin-off" or sale of one or more of the
Company's principal lines of business. Accordingly, in arriving at our opinion,
we did not solicit interest from any party with respect to the acquisition,
business combination or other extraordinary transaction involving the Company or
its assets, nor did we receive any indication of interest in such an acquisition
from any party other than Fujitsu.
We have acted as financial advisor to the Board of Directors of the Company
in connection with this transaction and will receive a fee for our services,
including a transaction fee, which is contingent upon the consummation of the
purchase of shares pursuant to the Tender Offer and Merger. In the past, Morgan
Stanley & Co. Incorporated and its affiliates have provided financial advisory
and financing services for the Company and Fujitsu and have received fees for
the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of the Company, except that this opinion may be included in its
entirety in any filing made by the Company in respect of the transaction with
the Securities and Exchange Commission. In addition, Morgan Stanley expresses no
opinion or recommendation as to whether the shareholders of the Company should
accept the Tender Offer.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the consideration to be received by the holders of shares of the
Company Common Stock (other than Fujitsu and its affiliates) pursuant to the
Merger Agreement is fair from a financial point of view to such holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
I-2
<PAGE> 75
EXHIBIT II
FINANCIAL RESULTS FOR THE FIRST QUARTER OF FISCAL YEAR 1997
ENDED MARCH 28, 1997
II-1
<PAGE> 76
AMDAHL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 27,
1996
MARCH 28, ----------
1997
----------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................... $ 197,861 $ 134,646
Restricted cash..................................................... 56,642 57,126
Short-term investments.............................................. 149,862 210,671
Receivables, net of allowances...................................... 373,290 498,851
Inventories --
Purchased materials.............................................. 25,280 30,766
Systems in process............................................... 25,548 26,407
Finished goods................................................... 57,618 71,582
Prepaid expenses and deferred tax assets............................ 84,969 86,360
---------- ----------
Total current assets........................................ 971,070 1,116,409
---------- ----------
Long-term receivables and other assets................................ 38,139 33,647
---------- ----------
Property and equipment:
Leased systems...................................................... 28,137 41,582
System spares....................................................... 356,284 368,209
Production and data processing equipment............................ 324,284 318,527
Office furniture, equipment, and improvements....................... 143,092 140,050
Land and buildings.................................................. 78,388 82,318
---------- ----------
930,185 950,686
Less -- Accumulated depreciation and amortization................... (688,426) (705,723)
---------- ----------
Property and equipment, net...................................... 241,759 244,963
---------- ----------
Excess of cost over net assets acquired, net of amortization.......... 198,615 201,385
---------- ----------
$1,449,583 $1,596,404
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and short-term debt................................... $ 34,328 $ 45,053
Short-term debt -- stockholder (Fujitsu Limited).................... 80,000 80,000
Accounts payable.................................................... 99,540 141,697
Accounts payable -- stockholder (Fujitsu Limited)................... 28,598 68,625
Accrued liabilities................................................. 501,665 541,743
---------- ----------
Total current liabilities................................... 744,131 877,118
---------- ----------
Long-term liabilities................................................. 41,903 43,663
---------- ----------
Deferred income taxes................................................. 60,144 62,375
---------- ----------
Stockholders' equity:
Common stock, $.05 par value --
Authorized -- 200,000,000 shares
Outstanding -- 122,312,000 shares in 1997 and 121,753,000 shares
in 1996......................................................... 6,116 6,088
Additional paid-in capital.......................................... 559,332 555,690
Retained earnings................................................... 33,308 44,313
Cumulative translation adjustments.................................. 8,295 9,300
Unrealized holding losses on securities............................. (3,646) (2,143)
---------- ----------
Total stockholders' equity....................................... 603,405 613,248
---------- ----------
$1,449,583 $1,596,404
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
II-2
<PAGE> 77
AMDAHL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER COMMON SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
---------------------------------
MARCH 28, 1997 MARCH 29, 1996
-------------- --------------
<S> <C> <C>
REVENUES
Equipment sales............................................... $112,867 $ 94,464
Service, software and other................................... 280,038 222,564
-------- --------
392,905 317,028
-------- --------
COST OF REVENUES
Equipment sales............................................... 71,537 85,584
Service, software and other................................... 219,606 158,862
-------- --------
291,143 244,446
-------- --------
Gross margin............................................... 101,762 72,582
-------- --------
OPERATING EXPENSES
Engineering and development................................... 24,674 30,563
Marketing, general and administrative......................... 87,227 96,353
-------- --------
111,901 126,916
-------- --------
Loss from operations....................................... (10,139) (54,334)
-------- --------
INTEREST
Income........................................................ 4,989 8,396
Expense....................................................... (2,855) (2,216)
-------- --------
2,134 6,180
-------- --------
Loss before provision for (benefit from) income taxes...... (8,005) (48,154)
PROVISION FOR (BENEFIT FROM) INCOME TAXES....................... 3,000 (9,631)
-------- --------
NET LOSS........................................................ $(11,005) $(38,523)
======== ========
PER COMMON SHARE AMOUNTS:
Net loss...................................................... $ (.09) $ (.32)
======== ========
Average outstanding shares.................................... 122,109 119,566
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
II-3
<PAGE> 78
AMDAHL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED
-----------------------
MARCH MARCH
28, 29,
1997 1996
-------- --------
<S> <C> <C>
Cash and cash equivalents at beginning of period................... $134,646 $192,980
-------- --------
Cash flows from operating activities:
Net loss......................................................... (11,005) (38,523)
Adjustments to reconcile net loss to net cash provided by
(used for) operating activities:
Depreciation and amortization................................. 24,070 25,948
Deferred income tax provision................................. (2,231) 1,153
Gain on dispositions of assets................................ (406) (432)
Changes in assets and liabilities:
Decrease in receivables....................................... 120,119 44,191
(Increase) decrease in inventories............................ 19,778 (3,108)
(Increase) decrease in prepaid expenses and deferred tax 746 (15,155)
benefit......................................................
Increase in long-term receivables and other assets............ (4,215) (3,301)
Decrease in accounts payable.................................. (79,541) (16,460)
Decrease in accrued liabilities............................... (36,758) (31,652)
Increase (decrease) in long-term liabilities.................. 805 (2,396)
-------- --------
Net cash provided by (used for) operating activities............. 31,362 (39,735)
-------- --------
Cash flows from investing activities:
Purchases of available-for-sale short-term investments........... (12,507) (84,623)
Proceeds from sales of available-for-sale investments............ 11,818 134,270
Proceeds from maturities of short-term investments............... 60,155 --
Capital expenditures:
Leased systems................................................ (594) (12,644)
System spares................................................. (5,229) (3,384)
Other property and equipment.................................. (21,973) (12,131)
Proceeds from property and equipment sales....................... 5,315 1,359
-------- --------
Net cash provided by investing activities........................ 36,985 22,847
-------- --------
Cash flows from financing activities:
Decrease in notes payable and short-term debt.................... (5,120) (3,986)
Repayments of long-term borrowings............................... (2,159) (746)
Sale of common stock and exercise of options..................... 3,670 2,050
-------- --------
net cash used for financing activities........................... (3,609) (2,682)
-------- --------
Effect of exchange rate changes on cash............................ (1,523) (892)
-------- --------
Net increase (decrease) in cash and cash equivalents............. 63,215 (20,462)
-------- --------
Cash and cash equivalents at end of period......................... $197,861 $172,518
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
II-4
<PAGE> 79
AMDAHL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The accompanying interim financial statements and related notes should be
read in conjunction with the financial statements and related notes included in
the Company's 1996 Annual Report to Stockholders.
RELATIONSHIP WITH FUJITSU LIMITED
During the first quarter of 1997 the Company recognized equipment sales to
Fujitsu Limited (Fujitsu) under distributorship and other arrangements which
contributed $5,154,000 to equipment sales compared to $7,486,000 in the first
quarter of 1996.
In 1995 the Company entered into a contract manufacturing agreement with
HaL Computer Systems, Inc. (HaL), a wholly-owned subsidiary of Fujitsu, whereby
Amdahl agreed to manufacture open system workstations for HaL. The Company also
performed circuit board assembly for Ross Technology, Inc., a majority-owned
subsidiary of Fujitsu. Both of these agreements were completed in 1996 and
contributed $4,427,000 and a negative $1,536,000 to equipment sales and gross
margin in the first quarter of 1996.
Fujitsu reimburses Amdahl for certain specific engineering development
activities performed by Amdahl from time to time related to products which are
being jointly developed by Amdahl and Fujitsu. In connection with these
development efforts, Amdahl recorded $8,903,000 as an offset to engineering and
development expenses in the first quarter of 1997, compared to $6,200,000 in the
first quarter of 1996.
In March 1997 Amdahl granted Fujitsu a license for certain storage system
software for use in conjunction with Fujitsu's proprietary operating system for
$4,700,000. This amount was recognized in first quarter 1997 as software
revenue. In addition, Fujitsu has agreed to compensate Amdahl as a result of
changes to development schedules requested by Fujitsu for storage products
currently being developed by Fujitsu for the Company under existing joint
development programs. Of this compensation, the Company recognized a credit of
$6,200,000 which reduced equipment sales cost of revenues in the first quarter
of 1997.
Amounts due from Fujitsu and their subsidiaries included in receivables
were $27,782,000 and $43,906,000 as of March 28,1997 and December 27, 1996,
respectively.
At March 28, 1997 and December 27, 1996, $80,000,000 was outstanding under
the loan agreement with Fujitsu. The terms of the loan were renegotiated in
January 1997, and the full amount is payable in January 1998. Interest expense
associated with the loan was $1,375,000 and $1,558,000 in the first quarters of
1997 and 1996, respectively.
SUPPLEMENTARY CASH FLOW DISCLOSURE
Income taxes of $3,403,000 (net of taxes refunded of $152,000) were paid by
the Company in the first three months of 1997, and income taxes of $4,555,000
were refunded to the Company in the first three months of 1996. Interest paid on
all borrowings was $2,813,000 and $2,231,000 for the first three months of 1997
and 1996, respectively.
NONCASH INVESTING ACTIVITIES
Net inventory capitalized into property, plan and equipment was $7,474,000
in the first three months of 1997, and transfers of Amdahl-manufactured systems
from net property, plant and equipment to inventories were $6,942,000 in the
first three months of 1996.
SUBSEQUENT EVENTS
On April 22, 1997 the Company paid $65 million in cash for the remaining
purchase price of Trecom Business Systems, Inc. (Trecom), which was acquired in
the second quarter of 1996.
II-5
<PAGE> 80
AMDAHL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
On April 16, 1997 Amdahl's professional services company, DMR Trecom, Inc.,
acquired William J. Kelley & Co., Inc., a Boston-based information technology
firm, for $5,100,000. The acquisition will be accounted for in the second
quarter of 1997 using the purchase method of accounting.
A lawsuit was filed against the Company in June 1995 by an equipment
supplier for breach of contract. The Company filed a counterclaim against the
supplier in July 1995 for amounts it believed were owed to it by the supplier.
On May 5, 1997 a judgement was awarded in favor of the supplier for
approximately $4 million.
NEW ACCOUNTING STANDARDS
In February 1997 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 128, Earnings per Share,
which will be adopted by the Company in the fourth quarter of 1997. SFAS No. 128
requires companies to compute net income per share under two different methods,
basic and diluted, and to disclose the methodology used for the calculation. If
SFAS No. 128 had been applied by the Company during the first quarter of 1997
and 1996, basic net income per share and diluted net income per share would not
have changed.
In February 1997 FASB issued SFAS No. 129, Disclosure of Information about
Capital Structure, which will be adopted by the Company in the fourth quarter of
1997. SFAS No. 129 requires companies to disclose certain information about
their capital structure. The Company does not anticipate that SFAS No. 129 will
have a material impact on its financial position, results of operations or cash
flows.
II-6
<PAGE> 81
FINANCIAL RESULTS FOR THE FISCAL YEAR 1996
ENDED DECEMBER 27, 1996
II-7
<PAGE> 82
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO AMDAHL CORPORATION:
We have audited the accompanying consolidated balance sheets of Amdahl
Corporation (a Delaware corporation) and subsidiaries as of December 27, 1996
and December 29, 1995, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 27, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Amdahl Corporation and
subsidiaries as of December 27, 1996 and December 29, 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended December 27, 1996 in conformity with generally accepted accounting
principles.
San Jose, California ARTHUR ANDERSEN LLP
January 28, 1997
II-8
<PAGE> 83
AMDAHL CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 27, 1996 AND
DECEMBER 29, 1995
-------------------------
1996 1995
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash and cash equivalents......................................... $ 134,646 $ 192,980
Restricted cash................................................... 57,126 --
Short-term investments............................................ 210,671 444,006
Receivables, net of allowances of $10,185 in 1996 and $5,964 in
1995........................................................... 498,851 319,777
Inventories....................................................... 128,755 274,813
Prepaid expenses and deferred tax assets.......................... 86,360 69,115
---------- ----------
Total current assets...................................... 1,116,409 1,300,691
---------- ----------
Long-term receivables and other assets.............................. 33,647 28,083
---------- ----------
Property and equipment:
Leased systems.................................................... 41,582 37,937
System spares..................................................... 368,209 379,797
Production and data processing equipment.......................... 318,527 327,051
Office furniture, equipment and improvements...................... 140,050 173,691
Land and buildings................................................ 82,318 111,715
---------- ----------
950,686 1,030,191
Less -- accumulated depreciation and amortization................. 705,723 757,523
---------- ----------
Property and equipment, net.................................... 244,963 272,668
---------- ----------
Excess of cost over net assets acquired, net of accumulated
amortization of $8,368 in 1996 and $692 in 1995................... 201,385 106,756
---------- ----------
$1,596,404 $1,708,198
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and short-term debt................................. $ 45,053 $ 22,026
Short-term debt -- stockholder (Fujitsu Limited).................. 80,000 --
Accounts payable.................................................. 141,697 111,871
Accounts payable -- stockholder (Fujitsu Limited)................. 68,625 29,152
Accrued liabilities............................................... 541,743 431,600
---------- ----------
Total current liabilities................................. 877,118 594,649
---------- ----------
Long-term debt -- stockholder (Fujitsu Limited)..................... -- 80,000
Long-term debt and liabilities...................................... 43,663 51,152
---------- ----------
Deferred income taxes............................................... 62,375 48,573
---------- ----------
Stockholders' equity:
Common stock, $.05 par value Authorized -- 200,000,000 shares
Outstanding -- 121,753,000 shares in 1996 and 119,259,000
shares in 1995................................................. 6,088 5,963
Additional paid-in capital........................................ 555,690 542,269
Retained earnings................................................. 44,313 370,995
Cumulative translation adjustments................................ 9,300 10,932
Unrealized holding gains (losses) on available-for-sale
securities..................................................... (2,143) 3,665
---------- ----------
Total stockholders' equity.......................................... 613,248 933,824
---------- ----------
$1,596,404 $1,708,198
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
II-9
<PAGE> 84
AMDAHL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE YEARS ENDED DECEMBER 27, 1996
----------------------------------------------
1996 1995 1994
------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER COMMON SHARE
AMOUNTS)
<S> <C> <C> <C>
REVENUES
Equipment sales.................................. $ 538,934 $ 803,567 $ 1,050,236
Service, software and other...................... 1,092,615 712,821 588,377
---------- ---------- ----------
1,631,549 1,516,388 1,638,613
---------- ---------- ----------
COST OF REVENUES
Equipment sales.................................. 559,229 540,541 716,144
Service, software and other...................... 815,257 419,046 327,420
---------- ---------- ----------
1,374,486 959,587 1,043,564
---------- ---------- ----------
Gross margin................................... 257,063 556,801 595,049
---------- ---------- ----------
OPERATING EXPENSES
Engineering and development...................... 125,825 149,610 203,241
Marketing, general and administrative............ 402,484 370,771 327,917
Purchased in-process engineering and
development.................................... 20,700 27,296 --
Restructuring costs.............................. 40,000 -- --
---------- ---------- ----------
589,009 547,677 531,158
---------- ---------- ----------
Income (loss) from operations.................. (331,946) 9,124 63,891
---------- ---------- ----------
INTEREST
Income........................................... 28,996 51,334 26,305
Expense.......................................... (10,732) (10,481) (9,942)
---------- ---------- ----------
18,264 40,853 16,363
---------- ---------- ----------
Income (loss) before provision for income
taxes....................................... (313,682) 49,977 80,254
PROVISION FOR INCOME TAXES....................... 13,000 21,450 5,450
---------- ---------- ----------
NET INCOME (LOSS)................................ $ (326,682) $ 28,527 $ 74,804
========== ========== ==========
EARNINGS (LOSS) PER COMMON SHARE................. $ (2.71) $ .24 $ .63
Average outstanding shares and equivalents....... 120,510,000 120,383,000 118,909,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
II-10
<PAGE> 85
AMDAHL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE YEARS ENDED DECEMBER
27, 1996
-------------------------------------
1996 1995 1994
--------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT NOTE
DATA)
<S> <C> <C> <C>
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR........... $ 192,980 $ 358,006 $ 149,484
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)........................................ (326,682) 28,527 74,804
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation and amortization.......................... 104,980 108,552 132,864
Write-down of inventories and leased systems to
market.............................................. 130,000 26,000 --
Purchased in-process engineering and development....... 20,700 27,296 --
Restructuring charges.................................. 40,000 -- --
Deferred income tax provision.......................... 13,816 (3,201) (7,083)
Gain on sales of assets................................ (559) (343) (8,524)
Change in assets and liabilities net of effects of
business acquisitions:
(Increase) decrease in receivables..................... (141,335) 33,771 (2,384)
Decrease in inventories................................ 22,211 4,391 271,872
Increase in prepaid expenses and deferred tax assets... (11,059) (12,157) (1,781)
(Increase) decrease in long-term receivables and other
assets.............................................. (9,065) 10,981 9,992
Increase (decrease) in accounts payable................ 66,776 (13,407) 68,964
Decrease in accrued liabilities........................ (11,834) (113,955) (49,774)
Increase (decrease) in long-term liabilities........... 283 (11,853) (2,287)
--------- --------- ---------
Net cash provided by (used for) operating activities..... (101,768) 84,602 486,663
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available-for-sale short-term investments... (178,664) (376,503) (47,016)
Purchases of held-to-maturity short-term investments..... -- (287,067) (519,684)
Proceeds from sales of available-for-sale short-term
investments............................................ 60,440 107,411 40,677
Proceeds from maturities of short-term investments....... 287,917 458,116 286,075
Payments for business acquisitions, net of cash
acquired............................................... (68,204) (136,692) --
Capital expenditures:
Leased systems......................................... (38,222) (27,156) (18,200)
System spares.......................................... (20,464) (16,559) (8,584)
Other property and equipment........................... (44,627) (38,159) (40,841)
Proceeds from property and equipment sales............. 31,716 30,158 62,352
--------- --------- ---------
Net cash provided by (used for) investing activities..... 29,892 (286,451) (245,221)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in notes payable and short-term borrowings...... 3,669 11,070 2,521
Long-term borrowings..................................... -- -- 80,000
Repayments of borrowings under revolving credit
agreement.............................................. (1,665) -- (130,000)
Sale of common stock and exercise of options............. 13,546 22,544 12,064
--------- --------- ---------
Net cash provided by (used for) financing activities..... 15,550 33,614 (35,415)
--------- --------- ---------
Effect of exchange rate changes on cash.................. (2,008) 3,209 2,495
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents..... (58,334) (165,026) 208,522
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR................. $ 134,646 $ 192,980 $ 358,006
========= ========= =========
</TABLE>
- ---------------
Non-cash investing and financing activities: transfers of Amdahl-manufactured
systems from net property and equipment to inventories were $16,290,000 in 1996,
$17,423,000 in 1995, and $46,225,000 in 1994.
The accompanying notes are an integral part of these financial statements.
II-11
<PAGE> 86
AMDAHL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE THREE YEARS ENDED DECEMBER 27, 1996
----------------------------------------------------------------------
UNREALIZED
ADDITIONAL CUMULATIVE HOLDING
COMMON PAID-IN RETAINED TRANSLATION GAINS
STOCK CAPITAL EARNINGS ADJUSTMENTS (LOSSES) TOTAL
------ ---------- --------- ----------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993..... $5,729 $ 507,895 $ 267,664 $ 8,918 $ -- $ 790,206
Sale of 2,057,964 shares, net of
repurchases, of common stock
under employee stock benefit
plans.......................... 103 9,513 -- -- -- 9,616
Income tax benefit arising from
employee stock option plans.... -- 2,448 -- -- -- 2,448
Net income....................... -- -- 74,804 -- -- 74,804
Translation adjustments.......... -- -- -- (57) -- (57)
Unrealized holding losses on
available -for-sale
securities..................... -- -- -- -- (762) (762)
------ -------- -------- ------ ------- --------
BALANCE AT DECEMBER 30, 1994..... 5,832 519,856 342,468 8,861 (762) 876,255
Sale of 2,622,920 shares, net of
repurchases, of common stock
under employee stock benefit
plans.......................... 131 17,513 -- -- -- 17,644
Income tax benefit arising from
employee stock option plans.... -- 4,900 -- -- -- 4,900
Net income....................... -- -- 28,527 -- -- 28,527
Translation adjustments.......... -- -- -- 2,071 -- 2,071
Unrealized holding gains on
available -for-sale
securities..................... -- -- -- -- 4,427 4,427
------ -------- -------- ------ ------- --------
BALANCE AT DECEMBER 29, 1995..... 5,963 542,269 370,995 10,932 3,665 933,824
Sale of 2,494,398 shares, net of
repurchases, of common stock
under employee stock benefit
plans.......................... 125 13,421 -- -- -- 13,546
Net loss......................... -- -- (326,682) -- -- (326,682)
Translation adjustments.......... -- -- -- (1,632) -- (1,632)
Unrealized holding losses on
available -for-sale
securities..................... -- -- -- -- (5,808) (5,808)
------ -------- -------- ------ ------- --------
BALANCE AT DECEMBER 27, 1996..... $6,088 $ 555,690 $ 44,313 $ 9,300 $ (2,143) $ 613,248
====== ======== ======== ====== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
II-12
<PAGE> 87
AMDAHL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF ACCOUNTING PRACTICES
Amdahl Corporation and subsidiaries (the Company or Amdahl) is a
multinational company that provides large-scale, high-performance,
general-purpose computer systems, storage, software and communications products,
and client-server hardware systems for the open systems marketplace. The Company
also provides equipment maintenance, consulting and professional services. See
Note 9 for information on revenues by classes of products and services and by
geographic area. The Company's markets are worldwide and include the
communications, banking, finance and insurance, services and government
industries.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported components of results of operations during the
reporting period. These estimates include, but are not limited to, inventory
reserves, amortization of intangible assets, restructuring reserves and income
tax assets and liabilities. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned and majority-owned subsidiaries. Intercompany accounts and
transactions have been eliminated.
Fiscal Year
The Company's fiscal year ends on the last Friday in December.
Translation of Foreign Currencies
The financial position and results of operations of the Company's non-U.S.
subsidiaries are measured using local currency as the functional currency.
Accordingly, all assets and liabilities are translated into U.S. dollars at
current exchange rates as of the respective balance sheet date. Revenue and
expense items are translated at the average exchange rates prevailing during the
period. Cumulative translation gains and losses are reported as a separate
component of stockholders' equity.
Gains from foreign exchange transactions were $348,000, $247,000 and
$81,000 in 1996, 1995 and 1994, respectively, and were included in marketing,
general and administrative expenses.
Revenues
Revenues from equipment sales and sales-type leases are generally
recognized when the equipment has been shipped, installed and financing
arrangements have been completed. Revenues from operating leases are recognized
over the term of the respective contracts.
Service for Amdahl products is provided under service and parts warranty or
separate maintenance agreements. The large-scale computer systems normally carry
a one-year service and parts warranty, and the storage and other products
usually have shorter warranty periods. Where material, a portion of equipment
sales revenue is deferred and recognized over the warranty period as service is
provided. Following the warranty period, Amdahl provides maintenance service
under separate contracts which typically can be terminated by the customer on
ninety days notice. Revenues from maintenance contracts are recognized over the
term of the respective contracts as service is provided.
Revenues from consulting and professional services are generally recognized
as the service is performed or on the percentage-of-completion method of
accounting, depending on the nature of the project.
II-13
<PAGE> 88
AMDAHL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company accounts for software revenues in accordance with the American
Institute of Certified Public Accountants' Statement of Position 91-1, Software
Revenue Recognition. Revenues earned under software license agreements with end
users are generally recognized when the software has been shipped, payment is
due within one year, collectibility is probable, and there are no significant
obligations remaining.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market. Systems in process and finished goods include material, labor and
manufacturing overhead. Year-end inventories consisted of the following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Purchased materials.................................... $ 30,766 $ 18,879
Systems in process..................................... 26,407 168,322
Finished goods......................................... 71,582 87,612
-------- --------
$128,755 $274,813
======== ========
</TABLE>
Inventories contained components and assemblies in excess of the Company's
current estimated requirements and were fully reserved at December 27, 1996 and
December 29, 1995. Also as a result of severe price declines, the Company
charged cost of equipment sales for $105 million in 1996 and $26 million in 1995
to reduce 5995M inventories to estimated market value. Due to competitive
pressures, it is reasonably possible that these estimates could change in the
near term.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
are computed using the straight-line method over estimated useful lives (or, for
leasehold improvements and assets recorded under capital lease obligations, over
the remaining lease terms or estimated useful lives, whichever is shorter) as
follows:
<TABLE>
<CAPTION>
YEARS
------
<S> <C>
System spares...................................................... 5
Production and data processing equipment........................... 3-15
Office furniture, equipment and improvements....................... 3-20
Buildings.......................................................... 20-40
</TABLE>
Intangible Assets
Excess of cost over net assets acquired (goodwill) is amortized by the
straight-line method over twenty-five years. The realizability of goodwill is
evaluated periodically as events or circumstances indicate a possible inability
to recover its carrying amount. Such evaluation is based on various analyses,
including cash flow and profitability projections that incorporate, as
applicable, the impact on existing lines of business. The analyses involve a
significant level of management judgment in order to evaluate the ability of an
acquired business to perform within projections.
Certain software development costs have been capitalized and amortized over
the life of the product. At December 27, 1996 and December 29, 1995 software
development costs that had been capitalized were immaterial.
II-14
<PAGE> 89
AMDAHL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Long-Lived Assets
Effective December 1995 the Company adopted the provisions of Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of. This statement
requires that long-lived assets and certain identifiable intangibles to be held
and used or disposed of by an entity be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. During 1996 the Company determined that no impairment loss
needed to be recognized for applicable assets of continuing operations.
Earnings (Loss) Per Common Share
Earnings (loss) per common share have been computed based on the weighted
average number of common and common equivalent shares outstanding. Common
equivalent shares result from the assumed exercise of stock options which would
have a dilutive effect in years where there are earnings. Primary and fully
diluted earnings per common share amounts are substantially the same.
NOTE 2. RELATIONSHIP WITH FUJITSU LIMITED
At December 27, 1996 Fujitsu Limited (Fujitsu) owned approximately 43% of
the Company's outstanding stock. The Company has entered into various
transactions with Fujitsu, as follows:
A. Amdahl purchases under contracts with Fujitsu certain finished products,
certain subassemblies and substantially all of its large-scale integrated
semiconductor components and high-density printed circuit boards. The Company's
primary products are manufactured by Fujitsu to Amdahl specifications. The cost
of computer equipment, subassemblies and spare parts purchased from Fujitsu and
the amount included in cost of revenues for equipment sales were as follows:
<TABLE>
<CAPTION>
COST OF
PURCHASES REVENUES
-------- --------
(IN THOUSANDS)
<S> <C> <C>
1996................................................... $160,092 $326,380
1995................................................... $282,913 $275,707
1994................................................... $218,925 $374,224
</TABLE>
Amdahl was committed to purchase manufacturing material and other equipment
from Fujitsu totaling approximately $34,000,000 at December 27, 1996. Prices for
these manufacturing materials and other equipment are subject to adjustment if
the U.S. dollar-Japanese yen exchange rate fluctuates outside of specified
ranges. The Company has entered into hedging arrangements designed to protect
against currency exchange risks associated with anticipated product purchases
from Fujitsu in 1997.
B. Under joint development efforts, Fujitsu supplies Amdahl with services
and material related to the Company's development of current and future
products, which resulted in charges to engineering and development expense of
$7,371,000 in 1996, $2,399,000 in 1995, and $6,443,000 in 1994.
In 1996 Fujitsu entered into an agreement to reimburse Amdahl for certain
specific engineering development activities performed by Amdahl from time to
time related to products which are being jointly developed by Amdahl and
Fujitsu. In connection with these development efforts, Amdahl recorded
$24,000,000 as an offset to engineering and development expense in 1996. No such
reimbursements occurred in 1995 and 1994.
Amdahl and Fujitsu have an agreement pursuant to which Amdahl and Fujitsu
participate in the joint development of the Company's next generation of
IBM-compatible systems. Under the agreement, Fujitsu has primary responsibility
for the design and manufacture of these systems.
II-15
<PAGE> 90
AMDAHL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
C. Fujitsu markets Amdahl's computer equipment in Brazil, Japan, Malaysia
and Spain under distributorship arrangements. Sales in 1996, 1995 and 1994 by
the Company of computer systems and complementary storage products to Fujitsu
contributed $23,325,000, $37,290,000 and $38,682,000 to equipment sales and
$4,793,000, $17,190,000 and $14,405,000 to gross margin, respectively.
In 1995 the Company entered into a contract-manufacturing agreement with
HaL Computer Systems, Inc. (HaL), a wholly-owned subsidiary of Fujitsu, whereby
Amdahl agreed to manufacture high-end open system workstations for HaL. The
Company also performed circuit board assembly for Ross Technology, Inc., a
majority-owned subsidiary of Fujitsu. In 1996 and 1995 these agreements
contributed $5,629,000 and $9,375,000 to equipment sales and ($2,210,000) and
$1,035,000 to gross margin, respectively. Both of these agreements were
completed by the end of 1996.
In the fourth quarter of 1995 Fujitsu agreed to pay Amdahl $14,800,000 for
the right and license to use certain software diagnostic tools developed by
Amdahl and $1,000,000 for the right to market certain storage products in Japan.
These amounts were recognized in the fourth quarter of 1995 as software revenue
and equipment sales revenue, respectively. In 1996 Fujitsu paid the company
$2,000,000 for the right to market Millennium processors in Japan. This amount
was recognized in the third quarter of 1996 as equipment sales revenue.
At December 27, 1996 and December 29, 1995 receivables included $43,906,000
and $35,795,000, respectively, from Fujitsu.
D. In January 1994 the Company entered into an agreement with Fujitsu under
which Fujitsu agreed to provide loans to the Company in an aggregate amount not
to exceed $100,000,000. Such loans bear interest at a rate based upon the London
Interbank Offered Rate (6.78% as of December 27, 1996). As of December 27, 1996
and December 29, 1995, $80,000,000 in principal was outstanding under this
agreement (see Note 7). Subsequent to December 27, 1996 Amdahl renegotiated the
terms of this loan and it is now payable in January 1998 and cannot exceed
$80,000,000. Interest expense associated with the loan was $5,680,000 in 1996,
$5,745,000 in 1995 and $4,238,000 in 1994, of which $919,000 and $958,000 was
payable and was included in accrued liabilities at December 27, 1996 and
December 29, 1995, respectively.
NOTE 3. ACQUISITIONS
Trecom Business Systems, Inc.
On April 22, 1996 the Company acquired all of the outstanding shares of
Trecom Business Systems, Inc. (Trecom), a provider of information technology
services. Under the merger agreement between the Company and Trecom,
approximately $66 million of the purchase price was paid in April 1996 and
approximately $65 million is payable without interest in April 1997. The Company
has pledged cash with a custodian as security for approximately $57 million of
the April 1997 payment. This amount was classified as restricted cash on the
Company's balance sheet at December 27, 1996. Additionally, up to $2 million was
payable in the event that Trecom achieves certain financial goals during the one
year period ending March 31, 1997 (the contingent payment). The present value of
the aggregate purchase price at the acquisition date, including acquisition
costs and payment to the shareholders, and excluding the contingent payment, was
approximately $130 million. In April 1996, the Company also paid down $15
million of Trecom's debt. The Company funded the April 1996 payments and intends
to fund the April 1997 payment with existing cash.
The acquisition was accounted for using the purchase method of accounting.
Accordingly, the results of Trecom's operations have been combined with those of
the Company since the date of acquisition. In addition, a portion of the
purchase price was allocated to the net assets acquired based on their estimated
fair values. The fair value of tangible assets acquired and liabilities assumed
was $49 million and $34 million, respectively. In addition, $20,700,000 of the
purchase price was allocated to in-process engineering and development projects
that had not reached technological feasibility and had no probable alternative
future uses, which the
II-16
<PAGE> 91
AMDAHL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Company expensed at the date of acquisition. The balance of the purchase price,
$94 million, was recorded as excess of cost over net assets acquired (goodwill)
and is being amortized over twenty-five years on a straight-line basis.
During the third quarter of 1996 Trecom achieved certain financial goals
resulting in an additional payment of $1,200,000 to Trecom shareholders. These
payments have been allocated to costs in excess of net assets acquired. Due to
the uncertainty of meeting the remaining performance targets, the remaining
$800,000 was not recorded as a liability in these financial statements.
The following table reflects unaudited pro forma combined results of
operations of the Company and Trecom on the basis that the acquisition had taken
place at the beginning of the fiscal year for each of the periods presented:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT
PER COMMON SHARE AMOUNTS)
<S> <C> <C>
Revenues........................................ $ 1,668,896 $ 1,655,723
Net income (loss)............................... $ (333,378) $ 26,967
Net income (loss) per common share.............. $ (2.77) $ .22
Shares used in computation...................... 120,510,000 120,383,000
</TABLE>
DMR Group Inc.
On November 15, 1995 the Company acquired all of the outstanding shares of
DMR Group Inc. (DMR), a multinational information technology consulting company,
for $140 million. The acquisition was funded with existing cash.
The acquisition was accounted for using the purchase method of accounting.
Accordingly, results of DMR's operations have been combined with those of the
Company since the date of acquisition. In addition, a portion of the purchase
price was allocated to the net assets acquired based on their estimated fair
values. The fair value of tangible assets acquired and liabilities assumed was
$60 million and $55 million, respectively. In addition, $27,296,000 of the
purchase price was allocated to in-process engineering and development projects
that had not reached technological feasibility and had no probable alternative
future uses, which the Company expensed at the date of acquisition. The balance
of the purchase price, $108 million, was recorded as excess of cost over net
assets acquired (goodwill) and is being amortized over twenty-five years on a
straight-line basis.
During 1996 the DMR opening balance sheet reserves were increased by
$5,395,000 and additional acquisition costs of $2,145,000 were incurred. As a
result, the goodwill was increased by $7,540,000.
The following table reflects unaudited pro forma combined results of
operations of the Company and DMR on the basis that the acquisition had taken
place and the related charge, noted above, was recorded at the beginning of the
fiscal year for each of the periods presented:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT
PER COMMON SHARE AMOUNTS)
<S> <C> <C>
Revenues........................................ $ 1,693,912 $ 1,857,880
Net income...................................... $ 20,783 $ 38,777
Net income per common share..................... $ .17 $ .33
Shares used in computation...................... 120,383,000 118,909,000
</TABLE>
In management's opinion, the unaudited pro forma combined results of
operations are not indicative of the actual results that would have occurred had
the acquisitions been consummated at the beginning of the
II-17
<PAGE> 92
AMDAHL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
years presented or of future operations of the combined companies under the
ownership and management of the Company.
NOTE 4. EQUIPMENT LEASING AND THIRD PARTY TRANSACTIONS
The Company is the lessor of equipment under operating leases for periods
generally less than four years. Certain operating leases contain provisions for
early termination with a penalty or with conversion to another system. The cost
of leased systems is depreciated to a zero value on a straight-line basis over
two to four years. Accumulated depreciation on leased systems was $21,629,000 at
December 27, 1996 and $12,462,000 at December 29, 1995. In 1996 the Company
charged leased systems cost of sales for $24,700,000 to reduce the cost of
certain 5995M leased systems to market value. The Company also leases equipment
to customers under sales-type leases as defined in Statement of Financial
Accounting Standards No. 13, Accounting for Leases. The current portion of the
net investment in sales-type leases is included in receivables and the long-term
portion is included in long-term receivables and other assets. The components of
the net investment in sales-type leases were as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Minimum rentals receivable............................... $16,577 $ 8,020
Estimated residual values of leased equipment
(unguaranteed)......................................... 839 2,500
Less unearned interest income............................ (3,975) (1,116)
------- ------
Net investment in sales-type leases...................... $13,441 $ 9,404
======= ======
</TABLE>
Minimum rentals receivable under existing leases as of December 27, 1996
were as follows:
<TABLE>
<CAPTION>
SALES-TYPE OPERATING
---------- ---------
<S> <C> <C>
1997.................................................... $ 6,585 $14,217
1998.................................................... 5,488 9,519
1999.................................................... 2,382 1,062
2000.................................................... 1,769 --
2001.................................................... 353 --
Thereafter.............................................. -- --
------- -------
$ 16,577 $24,798
======= =======
</TABLE>
In addition, during the periods presented, the Company sold certain
equipment subject to operating leases and financed certain sales-type equipment
leases and installment contracts with financing institutions (Third Parties).
The Company sometimes agrees to perform certain services and obligations with
respect to the equipment and related leases, such as general lease
administration, invoicing and collection of rentals, payment of insurance and
personal property taxes, maintenance services and non-priority remarketing of
equipment that comes off lease. For these services and obligations, the Company
generally receives its normal maintenance charges and a remarketing and
administration fee. Many of the agreements with Third Parties provide the
Company with residual rights in revenues, if any, derived from the equipment
after the Third Parties have received a designated return. Equipment sales
revenues arising from these transactions with Third Parties were approximately
$42,000,000, $48,000,000 and $71,000,000 in 1996, 1995 and 1994, respectively.
NOTE 5. FINANCIAL INSTRUMENTS
The Company invests in a variety of financial instruments but does not hold
or issue financial instruments for trading purposes.
II-18
<PAGE> 93
AMDAHL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Off-Balance Sheet Financial Instruments
The Company hedges certain portions of its exposure to foreign currency
fluctuations through a variety of strategies and financial instruments,
including the use of forward foreign exchange contracts and currency swap
agreements. These contracts and swaps generally have maturities that do not
exceed three months and two years, respectively. At December 27, 1996 and
December 29, 1995 the Company had approximately $187,000,000 and $57,000,000,
respectively, in notional principal of forward foreign exchange contracts
outstanding. The Company had $20,000,000 of currency swap agreements outstanding
at December 27, 1996 and December 29, 1995. The gains and losses associated with
currency rate changes on forward foreign exchange contracts and currency swap
agreements are recorded currently in income as they offset corresponding gains
and losses on the foreign currency-denominated assets and liabilities being
hedged. Therefore, the carrying value of forward foreign exchange contracts and
currency swap agreements approximates their fair value, which was immaterial at
December 27, 1996 and December 29, 1995.
The Company enters into foreign currency options to protect against
currency exchange risks associated with its probable anticipated, but not firmly
committed, non-U.S. intercompany sales and with both inventory purchase
commitments and probable anticipated inventory purchases from Fujitsu. Realized
and unrealized gains and losses on such contracts and the associated cash flows
that qualify as hedges are reported as components of the related transactions.
These option contracts generally have maturities that do not exceed one year. At
December 27, 1996 and December 29, 1995 the Company had approximately
$129,000,000 and $80,000,000 in notional principal of purchased option contracts
outstanding, respectively. The net income effect deferred on foreign currency
option contracts represents the amount by which the carrying value of the option
contracts exceeded their fair value and was immaterial as of December 27, 1996
and December 29, 1995.
The Company enters into interest rate swap agreements to extend the
effective duration of a portion of the Company's investments in
available-for-sale debt securities and accrues the differential to be paid or
received under the agreements as interest rates change over the life of the
contracts. These agreements generally have maturities that do not exceed three
years. Notional principal outstanding under these agreements was zero as of
December 27, 1996 and approximately $12,000,000 as of December 29, 1995. The
fair value of interest rate swaps is the estimated amount that the Company would
receive or pay to terminate the swap agreements at the reporting date, taking
into account current interest rates. The fair value of interest rate swaps at
December 27, 1996 and December 29, 1995 was immaterial.
Balance Sheet Financial Instruments
Substantially all cash equivalents consist of investments in major bank
time deposits, certificates of deposit and commercial paper with initial
maturities of three months or less. Substantially all short-term investments
consist of major bank time deposits, certificates of deposit, commercial paper
and U.S. government securities which the Company intends to hold between three
and twelve months.
In November 1995 the Financial Accounting Standards Board issued a Special
Report, A Guide to Implementation of Statement 115 on Accounting for Certain
Investments in Debt and Equity Securities (Special Report). Concurrent with the
issue of the Special Report the Company reassessed the appropriateness of the
classifications of its securities investments and reclassified all of its
held-to-maturity securities to the available-for-sale category. Amortized cost
of the securities transferred was $161,033,000 and the related unrealized gain
was $225,000.
At December 27, 1996 the Company's available-for-sale securities had
contractual maturities of overnight to fifteen years and the average maturity
was one year. The fair value of available-for-sale securities was determined
based on quoted market prices at the reporting date for those instruments. At
December 27,
II-19
<PAGE> 94
AMDAHL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1996 and December 29, 1995 the amortized cost basis, aggregate fair value and
gross unrealized holding gains and losses by major security type were as
follows:
<TABLE>
<CAPTION>
1996
------------------------------------------
UNREALIZED
AMORTIZED AGGREGATE GAINS
COST FAIR VALUE (LOSSES)
--------- ---------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Available-for-Sale Securities
Equity securities........................ $ 2,152 $ 985 $(1,167)
Debt securities issued by U.S. Treasury
and other U.S. government agencies..... 195,134 194,402 (732)
Debt securities issued by foreign
governments............................ 71,718 71,888 170
Corporate debt securities................ 50,899 50,562 (337)
Mortgage-backed securities............... 15,706 15,629 (77)
------- ------- ------
Total investments in debt and
equity securities............ $ 335,609 $ 333,466 $(2,143)
======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
1995
------------------------------------------
AMORTIZED AGGREGATE UNREALIZED
COST FAIR VALUE GAINS
--------- ---------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Available-for-Sale Securities
Equity securities........................ $ 2,582 $ 2,894 $ 312
Debt securities issued by U.S. Treasury
and other U.S. government agencies..... 222,036 223,553 1,517
Debt securities issued by foreign
governments............................ 1,821 2,020 199
Corporate debt securities................ 283,877 285,285 1,408
Mortgage-backed securities............... 17,096 17,325 229
------- ------- ------
Total investments in debt and
equity securities............ $ 527,412 $ 531,077 $ 3,665
======= ======= ======
</TABLE>
In 1996, 1995 and 1994 proceeds from sales of available-for-sale securities
were $60,440,000, $107,411,000 and $40,677,000, respectively. Gross realized
gains of $3,264,000 and $832,000 in 1996 and 1995, respectively, and gross
realized losses of $2,171,000 in 1994 were recognized on those sales and were
included in marketing, general and administrative expenses. The Company used
specific identification as the cost basis in computing realized gains and
losses.
At December 27, 1996 and December 29, 1995 the carrying value of notes
payable, short-term debt and long-term debt approximated fair value because of
the variable interest rate nature of these instruments.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of temporary cash investments
and trade receivables. The Company has cash investment policies that limit the
amount of credit exposure to any one financial institution and restrict
placement of these investments to financial institutions evaluated as highly
creditworthy. Concentrations of credit risk with respect to trade receivables
are limited due to the large number of customers comprising the Company's
customer base and their dispersion across many different industries and
geographies.
II-20
<PAGE> 95
AMDAHL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Payroll and vacation................................... $138,472 $125,482
Restructuring costs (Note 8)........................... 43,311 55,110
Income taxes........................................... 54,986 38,085
Deferred income........................................ 106,778 95,968
Acquisition price payable (Note 3)..................... 64,174 --
Other.................................................. 134,022 116,955
-------- --------
$541,743 $431,600
======== ========
</TABLE>
NOTE 7. LONG-TERM DEBT AND LIABILITIES AND BANK CREDIT AGREEMENTS
Long-term debt and liabilities consisted of the following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt -- stockholder (Fujitsu) (Note 2)....... $ 80,000 $ 80,000
Bank loans at DMR...................................... 749 7,444
Capitalized lease obligations (Note 13)................ 17,988 19,856
Long-term liabilities.................................. 27,252 26,970
-------- --------
125,989 134,270
Less current maturities................................ 82,326 3,118
-------- --------
Long-term debt and liabilities......................... $ 43,663 $131,152
======== ========
</TABLE>
Bank loans at DMR primarily consist of installment loans and have maturity
dates ranging from 1997 to 1999. Bank loans at DMR on December 29, 1995
primarily consisted of the outstanding balance on a $14,700,000 revolving term
line of credit having an original maturity of five years and bearing interest at
a rate based upon the Canadian Bankers' Acceptance Rate. In 1996 the revolving
term line of credit was refinanced to short-term borrowings and was included in
the short-term debt balance.
The Company has credit agreements with a number of banks providing for
short-term borrowings in U.S. dollars and various foreign currencies at varying
interest rates. At December 27, 1996 and December 29, 1995, $42,727,000 and
$18,908,000, respectively, were outstanding under these agreements.
Interest paid on all borrowings was $10,731,000, $10,460,000 and $9,098,000
in 1996, 1995 and 1994, respectively.
Long-term liabilities included deferred equipment maintenance revenues and
long-term amounts accrued under the Executive Incentive Performance Plan.
NOTE 8. RESTRUCTURING OF OPERATIONS
In the fourth quarter of 1996, the Company recorded a restructuring charge
based on an evaluation of the competitive conditions in the markets for
large-scale computing systems, consulting services and software. The Company
looked at future costs in line with anticipated levels of business in 1997 and
beyond, and determined that a restructuring charge of $40 million was required
to cover the costs of reducing certain sectors of its workforce and facilities
to levels more appropriate to current business requirements.
II-21
<PAGE> 96
AMDAHL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At December 27, 1996, $43.3 million of restructuring charges remained in
accrued liabilities. The balance was comprised of $34.4 million for the
reduction of approximately 300 employees to be completed in 1997, $7.5 million
for closing excess facilities and $1.4 million for other non-cash write-downs of
recorded assets, of which $41.9 million represents estimated future cash
outflows. A summary of the restructuring activity is presented below:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Balance at December 31, 1993*................................ $180,743
1994 activity:
Non-cash write-downs of property, equipment and
inventories............................................. (11,113)
Reduction in workforce and other cash outflows............. (53,460)
---------
Balance at December 30, 1994................................. 116,170
1995 activity:
Restructuring reserve associated with the acquisition of
DMR..................................................... 2,272
Non-cash write-downs of property, equipment and
inventories............................................. (17,004)
Reduction in workforce and other cash outflows............. (22,170)
---------
Balance at December 29, 1995................................. 79,268
1996 provision............................................... 40,000
1996 activity:
Non-cash write-downs of property, equipment and
inventories............................................. (43,191)
Reduction in workforce and other cash outflows............. (32,766)
---------
Balance at December 27, 1996................................. $ 43,311
=========
</TABLE>
- ---------------
* Balance of restructuring accrual recorded in 1993.
NOTE 9. MAJOR CUSTOMER, GEOGRAPHIC AREA AND PRODUCT LINE DATA
No single customer accounted for 10% or more of total revenues in 1996,
1995 or 1994. The Company's operations by geographical area for the three years
ended December 27, 1996 were as follows:
<TABLE>
<CAPTION>
ASIA ADJUSTMENTS
UNITED PACIFIC &
STATES CANADA EUROPE & OTHER ELIMINATIONS CONSOLIDATED
---------- -------- ---------- -------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
1996 CONSOLIDATED
Revenues:
Customers................. $ 797,766 $166,680 $ 488,474 $178,629 $ -- $1,631,549
Intercompany.............. 280,686 5,971 22,978 -- (309,635) --
---------- -------- ---------- -------- ----------- ----------
Total revenues.... $1,078,452 $172,651 $ 511,452 $178,629 $ (309,635) $1,631,549
========== ======== ========== ======== =========== ==========
Income (loss) from
operations................ $ (319,121) $ 2,733 $ 18,853 $ (2,172) $ (32,239) $ (331,946)
Interest income, net........ 18,264
----------
Loss before income taxes.... $ (313,682)
==========
Identifiable assets......... $ 969,039 $402,670 $1,123,018 $ 73,989 $(1,344,809) $1,223,907
Corporate assets............ 372,497
----------
Total assets...... $1,596,404
==========
</TABLE>
II-22
<PAGE> 97
AMDAHL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
ASIA ADJUSTMENTS
UNITED PACIFIC &
STATES CANADA EUROPE & OTHER ELIMINATIONS CONSOLIDATED
---------- -------- ---------- -------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
1995 CONSOLIDATED
Revenues:
Customers................. $ 872,153 $ 52,731 $ 455,216 $136,288 $ -- $1,516,388
Intercompany.............. 236,477 1,016 10,998 -- (248,491) --
---------- -------- ---------- -------- ----------- ----------
Total revenues.... $1,108,630 $ 53,747 $ 466,214 $136,288 $ (248,491) $1,516,388
========= ======== ========= ======== ========== =========
Income(loss) from
operations................ $ (24,390) $(23,563) $ 40,309 $ 1,641 $ 15,127 $ 9,124
Interest income, net........ 40,853
----------
Income before income
taxes..................... $ 49,977
=========
Identifiable assets......... $ 666,019 $202,484 $ 945,553 $ 56,118 $ (738,903) $1,131,271
Corporate assets............ 576,927
----------
Total assets...... $1,708,198
=========
</TABLE>
<TABLE>
<CAPTION>
ASIA ADJUSTMENTS
UNITED PACIFIC &
STATES CANADA EUROPE & OTHER ELIMINATIONS CONSOLIDATED
---------- -------- ---------- -------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
1994 CONSOLIDATED
Revenues:
Customers................. $ 955,090 $ 62,433 $ 506,526 $114,564 $ -- $1,638,613
Intercompany.............. 241,468 (88) 7,428 -- (248,808) --
---------- -------- ---------- -------- ----------- ----------
Total revenues.... $1,196,558 $ 62,345 $ 513,954 $114,564 $ (248,808) $1,638,613
========= ======== ========= ======== ========== =========
Income from operations...... $ 49,908 $ 4,444 $ 3,256 $ 3,672 $ 2,611 $ 63,891
Interest income, net........ 16,363
----------
Income before income
taxes..................... $ 80,254
=========
Identifiable assets......... $ 663,205 $ 23,051 $ 681,193 $ 32,128 $ (354,320) $1,045,257
Corporate assets............ 673,778
----------
Total assets...... $1,719,035
=========
</TABLE>
The Company's operations are structured to achieve consolidated objectives.
As a result, significant interdependencies and overlaps exist among the
Company's operating units. Accordingly, the revenue, operating income (loss) and
identifiable assets shown for each geographic area may not be indicative of the
amounts that would have been reported if the operating units were independent of
one another.
Intercompany sales and transfers of manufacturing materials and finished
systems between areas are accounted for based on established intercompany sales
prices.
Operating income (loss) is revenue less related costs and direct and
allocated operating expenses, excluding interest and, for all areas except the
United States, the unallocated portion of corporate expenses. United States
operating income (loss) is net of corporate engineering and development and
administrative expenses. The United States' 1996 operating loss includes the
write-off of purchased in-process engineering and development recorded upon the
acquisition of Trecom (see Note 3) and the corporate restructuring charge (see
Note 8). The United States' 1996 identifiable assets included the excess of cost
over new assets acquired related to the acquisition of Trecom. Canada's 1995
loss from operations includes the write-off of
II-23
<PAGE> 98
AMDAHL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
purchased in-process engineering and development. Canada's 1995 and 1996
identifiable assets include the excess of cost over net assets acquired related
to the acquisition of DMR (see Note 3).
Corporate assets include assets maintained for general purposes,
principally cash equivalents and short-term investments.
The Company operates in the large-scale computer system and related storage
and communications products segment of the data processing industry. The Company
also continues to make the transition to being a more service and solutions
oriented business. Revenues for similar classes of products or services within
this one business segment for the most recent three years are presented below:
<TABLE>
<CAPTION>
1996 1995* 1994*
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Processor equipment sales**....................... $ 363 $ 643 $ 820
Storage product equipment sales................... 79 83 203
Server equipment sales............................ 97 77 27
------ ------ ------
Total equipment sales................... 539 803 1,050
------ ------ ------
Maintenance services revenues..................... 435 475 449
Consulting and professional services revenues..... 559 141 64
Lease revenues.................................... 23 18 30
Software and implementation services
revenues***..................................... 76 79 46
------ ------ ------
Total service, software and other
revenues.............................. 1,093 713 589
------ ------ ------
$1,632 $1,516 $1,639
====== ====== ======
</TABLE>
- ---------------
* Reclassified to conform to 1996 presentation.
** Includes Systems/390-compatible mainframe processors and certain related
hardware products.
*** Includes all software revenue and services performed to implement the
software environment at customer sites (excludes application services). 1995
included $15 million of nonrecurring software sales to Fujitsu (see Note 2).
NOTE 10. CAPITAL STOCK
There are 200,000,000 authorized shares of common stock, par value of $.05
per share, of which 121,753,000 shares were issued and outstanding as of
December 27, 1996. As of December 27, 1996 the Company had reserved shares of
its common stock for the following purposes:
<TABLE>
<CAPTION>
DESCRIPTION SHARES RESERVED
-------------------------------------------------------- ---------------
<S> <C>
Stock Option Plans --
Stock options outstanding............................. 8,279,873
Stock options and restricted stock available for
grant.............................................. 2,031,114
Employee Stock Purchase Plan.......................... 6,069,960
----------
16,380,947
==========
</TABLE>
On November 1, 1996 the Board of Directors authorized, subject to
stockholder approval at the annual meeting on May 1, 1997, an increase to the
shares available for grant under the 1994 Stock Incentive Plan by 2% of the
shares of common stock outstanding on May 1, 1997. The Board of Directors also
authorized, subject to stockholder approval, ongoing annual increases to the
shares available for grant on the first trading day of each calendar year
beginning with 1998. The annual increases will be 3% of the shares of common
stock outstanding on December 31 of the immediately preceding calendar year,
provided that each annual increase
II-24
<PAGE> 99
AMDAHL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
will be limited so that the shares available for future option grants and share
issuances will not exceed 6,000,000 shares at the time of each annual increase.
On May 2, 1996 the stockholders approved an increase of 5,000,000 shares in
the number of shares issuable under the Employee Stock Purchase Plan.
On February 8, 1996 the Board of Directors authorized the Company to buy
back up to $100 million of the Company's common stock. No shares were
repurchased under this authorization in 1996.
There are 5,000,000 authorized shares of Preferred Stock, par value of $1
per share. This stock, if issued, will carry liquidation preferences and other
rights, as determined by the Board of Directors. As of December 27, 1996 no
Preferred Stock had been issued.
NOTE 11. EMPLOYEE STOCK OPTIONS AND BENEFIT PLANS
Under the Company's stock option plans, options generally become
exercisable in cumulative annual installments beginning one year after the date
of grant, are fully exercisable after four or five years and expire after ten or
fifteen years. Options are granted to non-employee directors under the Automatic
Option Grant Program. The Company accounts for these plans under APB Opinion No.
25, under which no compensation cost has been recognized. Had compensation cost
for these plans been determined consistent with Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS No.
123), the Company's net income (loss) and earnings (loss) per share would have
been adjusted to the following pro forma amounts:
<TABLE>
<CAPTION>
1996 1995
--------- -------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Net income (loss):
As Reported................................. $(326,682) $28,527
Pro Forma................................... $(331,997) $28,165
Earnings (loss) per share:
As Reported................................. $ (2.71) $ .24
Pro Forma................................... $ (2.75) $ .23
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1996 and 1995, respectively: risk-free interest
rates of 5.6 and 6.7 percent; expected dividend yields of 0 and 0 percent;
expected lives of 4.4 and 4.5 years; and expected volatility of 37.6 and 37.6
percent.
Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to fiscal 1995, the resulting pro forma compensation cost
may not be representative of that to be expected in future years.
Under the Employee Stock Purchase Plan, the Company's employees, subject to
certain restrictions, may purchase shares of common stock at a price per share
that is the lesser of 85% of the fair market value as of the first day or the
last day of each three-month purchase period. The Company sold 755,000 shares,
619,000 shares, and 1,031,000 shares in 1996, 1995 and 1994, respectively. The
weighted average fair value of shares sold in 1996 was $10.08.
II-25
<PAGE> 100
AMDAHL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Activity in the Company's option plans excluding restricted stock is
summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------- -------------------- --------------------
WTD. AVG. WTD. AVG. WTD. AVG.
-------------------- -------------------- --------------------
SHARES EX PRICE* SHARES EX PRICE* SHARES EX PRICE*
------- ---------- ------- ---------- ------- ----------
(SHARES IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at Beginning of
year................................. 6,875 $ 6.13 8,996 $ 5.77 10,736 $ 5.57
Granted.............................. 3,576 8.05 377 11.07 391 7.24
Exercised............................ (1,464) 5.34 (2,032) 5.49 (935) 4.94
Expired or canceled.................. (707) 7.43 (466 6.01 (1,196) 5.13
Options outstanding at end of year..... 8,280 $ 6.98 6,875 $ 6.13 8,996 $ 5.77
Exercisable at end of year............. 3,716 3,114 3,262
Weighted average fair value of
options granted................... $ 3.51 $ 4.58
</TABLE>
- ---------------
* Weighted Average Exercise Price
The following summarizes the stock options outstanding at December 27,
1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
ACTUAL ------------------------------------------------------- OPTIONS EXERCISABLE
RANGE OF WEIGHTED- ---------------------------------
EXERCISE AVERAGE WEIGHTED-
PRICES NUMBER REMAINING NUMBER AVERAGE
($5 OUTSTANDING CONTRACTUAL WEIGHTED-AVERAGE EXERCISABLE EXERCISE
INCREMENTS) 12/27/96 LIFE EXERCISE PRICE 12/27/96 PRICE
- ------------- ----------------- ----------- ----------------- ----------------- -----------
<S> <C> <C> <C> <C> <C>
$ 2.57-4.81 3,760,003 6.1 $ 4.65 2,481,377 $ 4.72
$ 5.31-9.91 3,460,186 12.4 $ 7.80 724,825 $ 7.13
$10.06-14.72 970,684 10.1 $ 12.14 425,829 $ 12.82
$15.00-18.88 89,000 3.6 $ 17.18 84,200 $ 17.21
--------- ---- ------ --------- ------
$ 2.57-18.88 8,279,873 9.2 $ 6.98 3,716,231 $ 6.40
========= ==== ====== ========= ======
</TABLE>
As of December 27, 1996 the Company had 356,701 shares of restricted common
stock outstanding with certain officers and key employees under the 1994 Stock
Incentive Plan. These shares carry certain restrictions on transferability,
which will lapse over periods as determined by the Board of Directors at the
time of award. The difference between the fair market value at the date of grant
and the purchase price of the shares (generally, $.05 per share) is recorded as
compensation expense ratably over the period from the date of grant to the date
the restrictions lapse.
The Company has a Capital Accumulation Plan available to all its North
American employees to which it contributes based on its profits. The Company
also has a savings plan for domestic employees whereby it matches 25% of
employee contributions up to specified limits. In addition, under the Executive
Incentive Performance Plan, amounts up to 2% of income before taxes are accrued
for selected key employees instead of their participation in the Capital
Accumulation Plan. Approximately half of the award vests over the following four
years and the remainder vests over a service period of up to twenty years. The
total cost of these plans charged to operations was $1,322,000 in 1996,
$10,303,000 in 1995 and $9,025,000 in 1994.
II-26
<PAGE> 101
AMDAHL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12. INCOME TAXES
Income (loss) before taxes and the provision for (benefit from) income
taxes were comprised of the following:
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Income (loss) before provision for income
taxes:
Domestic................................ $(268,098) $ 18,104 $ 65,941
Foreign................................. (45,584) 31,873 14,313
--------- ------- -------
$(313,682) $ 49,977 $ 80,254
========= ======= =======
Provision for (benefit from) income taxes:
Federal --
Current................................. $ (6,244) $ 25,804 $ 20,531
Deferred, net........................... 6,244 (12,918) (4,895)
-- 12,886 15,636
State --
Current................................. 5,390 4,328 (7,284)
Deferred, net........................... (1,890) (2,328) 8,484
--------- ------- -------
3,500 2,000 1,200
Foreign --
Current................................. 11,659 6,291 (744)
Deferred, net........................... (2,159) 273 (10,642)
9,500 6,564 (11,386)
--------- ------- -------
Net tax provision.................... $ 13,000 $ 21,450 $ 5,450
========= ======= =======
</TABLE>
The effective income tax provision differed from the statutory federal
provision due to the following (prior year amounts have been reclassified to
conform to current-year presentation):
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Statutory federal tax provision
(benefit)............................... $(109,789) $ 17,492 $ 28,089
State tax provisions, net of federal tax
benefit................................. 2,275 1,300 780
Foreign losses in excess of available
benefits................................ 27,163 13,132 4,199
Unutilized (utilized) deductible temporary
differences............................. 82,427 (20,055) (40,484)
Foreign subsidiaries' earnings taxed at
rates in excess of the statutory federal
rate.................................... 169 235 8,750
Write-off of purchased in-process
engineering and development............. 7,245 9,554 --
Goodwill amortization..................... 2,693 -- --
Other..................................... 817 (208) 4,116
--------- ------- ------
Net tax provision......................... $ 13,000 $ 21,450 $ 5,450
========= ======= ======
Net effective tax rate.................... (4%) 43% 7%
========= ======= ======
</TABLE>
Net income tax refunds of $6,104,000 and $12,340,000 were received by the
Company in 1996 and 1994, respectively, and net income taxes of $26,050,000 were
paid by the Company in 1995.
II-27
<PAGE> 102
AMDAHL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The components of the net deferred tax liability at December 27, 1996 and
December 29, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Taxes on foreign income...................... $ (35,174) $(18,520)
Depreciation................................. (44,975) (26,173)
Revenue timing............................... (3,149) (12,450)
--------- --------
Total deferred tax liability......... (83,298) (57,143)
--------- --------
Deferred tax assets:
Reserves..................................... 137,916 84,594
Net operating loss and credit
carryforwards............................. 142,762 40,423
Other........................................ 7,493 20,860
--------- --------
288,171 145,877
Valuation allowance.......................... (207,700) (89,367)
--------- --------
Total deferred tax assets............ 80,471 56,510
--------- --------
Net deferred tax liability..................... $ (2,827) $ (633)
========= ========
</TABLE>
No tax benefit was recorded for losses other than recoverable taxes or
future taxable income from the reversal of deferred items.
The valuation allowance at December 27, 1996 and December 29, 1995 provided
reserves against worldwide operating losses, deferred tax assets, and tax credit
carryforwards which may expire before the Company can utilize them. The Company
believes sufficient uncertainty exists regarding the realizability of these
items and accordingly has continued to provide a valuation allowance for them.
Cumulative undistributed earnings of foreign subsidiaries for which no
United States income or foreign withholding taxes have been recorded, because
such earnings are expected to be reinvested indefinitely, amounted to
$105,200,000 at December 27, 1996. The Company provides in full for United
States income taxes on the earnings of foreign subsidiaries not considered
indefinitely invested outside the United States.
At December 27, 1996 the Company had U.S. federal net operating loss
carryforwards of $136,900,000 which expire in the year 2011. State net operating
loss carryforwards approximate $347,200,000 which expire in the years 1997
through 2011. Foreign net operating loss carryforwards of $71,900,000 expire at
various dates from 1997 through 2006 and $70,700,000 can be carried forward
indefinitely.
In 1994 the Internal Revenue Service (IRS) issued a notice of deficiency to
the Company for disputed items related to the 1983 through 1986 tax years, the
most significant of which related to the treatment of system spares. In the
fourth quarter of 1996 the Company was notified that the IRS was no longer
contesting the Company's treatment of system spares. The remaining disputed
items are immaterial.
The IRS field audit of the Company's 1987 through 1990 tax years is in
process. In the opinion of management, the final resolution of the matters
raised by the IRS field audit will not result in any material adverse impact to
the Company's results of operations or financial position. It is reasonably
possible that the Company's estimate of the final impact of these matters will
change in the near term upon the completion of the IRS field audit.
NOTE 13. LEASE COMMITMENTS
The Company leases a substantial portion of its principal facilities under
capital lease agreements extending through the year 2008. Capitalized facilities
leases totaling $18,571,000 and $32,995,000 with
II-28
<PAGE> 103
AMDAHL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
accumulated amortization of $17,408,000 and $24,176,000 were included in the
land and buildings classification on the balance sheets at December 27, 1996 and
December 29, 1995, respectively. The lease agreements provide for renewal
options extending the lease terms beyond the initial terms in five-year
increments. The Company also leases certain equipment and sales and service
facilities under operating leases. The minimum lease commitments as of December
27, 1996 were as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
(IN THOUSANDS)
<S> <C> <C>
1997.................................................... $ 3,717 $ 38,547
1998.................................................... 3,390 30,742
1999.................................................... 2,624 23,539
2000.................................................... 2,626 16,864
2001.................................................... 2,626 12,935
After 2001.............................................. 15,760 19,539
-------- --------
Total minimum lease commitments............... 30,743 $ 142,166
========
Less imputed interest (9.25% to 13.74%)................. (12,755)
--------
Present value of minimum lease commitments (Note 7)..... $17,988
========
</TABLE>
Minimum obligations have not been reduced by minimum rentals of $6,020,000
and $20,691,000 receivable in the future under noncancelable subleases of
capital leases and operating leases, respectively, as of December 27, 1996.
Rental expense charged to income was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Minimum rent.................................. $46,108 $37,701 $38,768
Less sublease rent............................ (463) (6,276) (4,073)
------- ------- -------
Total............................... $45,645 $31,425 $34,695
======= ======= =======
</TABLE>
NOTE 14. SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH YEAR
-------- --------- -------- -------- ----------
(IN THOUSANDS, EXCEPT PER COMMON SHARE AMOUNTS AND NOTE
DATA)
<S> <C> <C> <C> <C> <C>
FISCAL QUARTER AND YEAR 1996
Revenues................................. $317,028 $ 382,854 $439,819 $491,848 $1,631,549
Gross margin............................. $ 72,582 $ (76,894) $123,449 $137,926 $ 257,063
(Loss) before taxes...................... $(48,153) $(228,436) $ (4,201) $(32,892) $ (313,682)
Net (loss)............................... $(38,523) $(249,436) $ (4,833) $(33,890) $ (326,682)
Net (loss) per common share.............. $ (.32) $ (2.07) $ (.04) $ (.28) $ (2.71)
FISCAL QUARTER AND YEAR 1995
Revenues................................. $371,526 $ 378,666 $350,016 $416,180 $1,516,388
Gross margin............................. $145,315 $ 148,271 $142,469 $120,746 $ 556,801
Income (loss) before taxes............... $ 26,394 $ 33,642 $ 25,707 $(35,766) $ 49,977
Net income (loss)........................ $ 20,594 $ 26,242 $ 20,057 $(38,366) $ 28,527
Net income (loss) per common share....... $ .17 $ .22 $ .17 $ (.32) $ .24
</TABLE>
- ---------------
Notes: Second-quarter 1996 results of operations included charges of $20,700,000
or $.17 per share to write off in-process engineering and development at Trecom
Business Systems, Inc., and $130,000,000 or $1.08 per
II-29
<PAGE> 104
AMDAHL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
share to reduce 5995M assets to estimated market value. Fourth-quarter 1996
results of operations included a restructuring charge of $40,000,000 or $.33 per
share. Fourth-quarter 1995 results of operations included charges of $27,296,000
or $.23 per share to write off in-process engineering and development at DMR
Group Inc. and $26,000,000 or $.22 per share to reduce inventories to estimated
market value.
II-30
<PAGE> 105
EXHIBIT III
AGREEMENT AND PLAN OF MERGER
AMONG
FUJITSU LIMITED,
FUJITSU INTERNATIONAL, INC.
AND
AMDAHL CORPORATION
DATED AS OF JULY 30, 1997
<PAGE> 106
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I. THE OFFER
Section 1.1. The Offer................................................................ 1
Section 1.2. Company Action........................................................... 2
Section 1.3. SEC Actions.............................................................. 2
Section 1.4. Directors................................................................ 3
ARTICLE II. THE MERGER
Section 2.1. The Merger............................................................... 4
Section 2.2. Effect of the Merger..................................................... 4
Section 2.3. Consummation of the Merger............................................... 4
Section 2.4. Certificate of Incorporation; Bylaws; Directors and Officers............. 4
Section 2.5. Effect on Securities..................................................... 5
Section 2.6. Company Stock Plans...................................................... 5
Section 2.7. Payment for Shares....................................................... 6
Section 2.8. Dissenting Shares........................................................ 7
Section 2.9. Stockholders' Meeting.................................................... 7
Section 2.10. Subsequent Actions....................................................... 8
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1. Organization and Qualification........................................... 9
Section 3.2. Subsidiaries............................................................. 9
Section 3.3. Authority Relative to Agreement.......................................... 9
Section 3.4. Non-Contravention........................................................ 10
Section 3.5. Capitalization........................................................... 10
Section 3.6. SEC Filings.............................................................. 11
Section 3.7. Financial Statements..................................................... 11
Section 3.8. Absence of Certain Changes or Events..................................... 12
Section 3.9. Governmental Approvals................................................... 12
Section 3.10. Compliance with Laws..................................................... 12
Section 3.11. Litigation............................................................... 13
Section 3.12. Intellectual Property Rights............................................. 13
Section 3.13. Taxes.................................................................... 14
Section 3.14. Employee Benefit Plans................................................... 15
Section 3.15. Severance Arrangements................................................... 17
Section 3.16. Environmental Matters.................................................... 17
Section 3.17. Limitations on Business Activities....................................... 17
Section 3.18. Customer Relationships................................................... 18
Section 3.19. Certain Transactions..................................................... 18
Section 3.20. State Takeover Statute................................................... 18
Section 3.21. Fairness Opinion......................................................... 18
Section 3.22. Brokers.................................................................. 18
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO
Section 4.1. Organization and Qualification........................................... 18
Section 4.2. Authority Relative to Agreement.......................................... 18
Section 4.3. Non-Contravention........................................................ 19
Section 4.4. Governmental Approvals................................................... 19
</TABLE>
i
<PAGE> 107
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 4.5. Brokers.................................................................. 19
Section 4.6. Financing................................................................ 19
ARTICLE V. CERTAIN AGREEMENTS
Section 5.1. Conduct of the Company's Business........................................ 20
Section 5.2. Access to Information.................................................... 21
Section 5.3. Consents and Approvals; Further Assurances............................... 22
Section 5.4. Inquiries and Negotiations............................................... 22
Section 5.5. Notification of Certain Matters.......................................... 23
Section 5.6. Indemnification.......................................................... 23
Section 5.7. FIRPTA Certificate....................................................... 24
Section 5.8. Employee Benefits........................................................ 25
ARTICLE VI. CONDITIONS TO THE MERGER
Section 6.1. Conditions to Each Party's Obligation to Effect the Merger............... 25
Section 6.2. Conditions to Parent's and Newco's Obligation to Effect the Merger....... 25
ARTICLE VII. TERMINATION AND ABANDONMENT
Section 7.1. Termination and Abandonment.............................................. 26
Section 7.2. Effect of Termination.................................................... 27
ARTICLE VIII. MISCELLANEOUS
Section 8.1. Nonsurvival of Representations and Warranties............................ 27
Section 8.2. Expenses, Etc............................................................ 27
Section 8.3. Publicity................................................................ 27
Section 8.4. Execution in Counterparts................................................ 27
Section 8.5. Notices.................................................................. 27
Section 8.6. Waivers.................................................................. 28
Section 8.7. Entire Agreement......................................................... 28
Section 8.8. Applicable Law........................................................... 29
Section 8.9. Specific Performance..................................................... 29
Section 8.10. Binding Effect, Benefits................................................. 29
Section 8.11. Assignability............................................................ 29
Section 8.12. Amendments............................................................... 29
Section 8.13. Headings................................................................. 29
Section 8.14. Mutual Drafting.......................................................... 29
ANNEX I Defined Terms
ANNEX II Conditions to the Offer
ANNEX III Significant Subsidiaries
</TABLE>
ii
<PAGE> 108
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement"), dated as of July 30,
1997, is entered into by and among Fujitsu Limited, a Japanese corporation
("Parent"), Fujitsu International, Inc., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Newco"), and Amdahl Corporation, a Delaware
corporation (the "Company" and, collectively with Parent and Newco, the
"Parties"). The Company and Newco are hereinafter sometimes referred to as the
"Constituent Corporations." Certain capitalized terms used herein are defined in
Annex I hereto.
WHEREAS Parent, Newco and the Company have each approved, upon the terms
and subject to the conditions hereinafter provided, the acquisition of the
Company by Newco pursuant to a tender offer (the "Offer") by Newco for all the
issued and outstanding shares of Common Stock, $.05 par value ("Company Common
Stock"), of the Company, followed by a merger (the "Merger") of Newco with and
into the Company, with the Company as the surviving corporation, and all other
transactions contemplated by this Agreement (such acquisition, tender offer,
merger and other transactions, collectively the "Transactions");
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants, agreements and conditions contained herein, and in order to set forth
the terms and conditions of the Merger and the mode of carrying the same into
effect, the Parties hereby agree as follows:
ARTICLE I.
THE OFFER
SECTION 1.1. The Offer.
(a) Offer. Parent shall cause Newco, as promptly as reasonably practicable
after the date hereof, but in no event later than five (5) U.S. Business Days
following the public announcement of the terms of this Agreement, to commence
(within the meaning of Rule 14d-2 under the Exchange Act) the Offer to purchase
any and all of the issued and outstanding shares (the "Shares") of Company
Common Stock (other than those Shares currently owned by Newco or Parent) at a
price of $12.00 per Share, net to the seller in cash (or at such higher price as
Newco elects to offer) (the "Offer Price"), but subject to any withholding
required by law, provided, that Newco shall not be required to commence the
Offer if an event shall have occurred that, had the Offer already been
commenced, would give rise to a right to terminate the Offer under any of the
conditions set forth in Annex II hereto. The Offer shall have a scheduled
expiration date not less than twenty (20) U.S. Business Days following the
commencement thereof. The obligation of Parent and Newco to accept and pay for
Shares tendered shall be subject to the condition that there shall be validly
tendered prior to the expiration date of the Offer and not withdrawn a number of
Shares which, when added to the Shares owned by Parent, represent at least 51%
of the Shares issued and outstanding on a fully diluted basis (the "Minimum
Condition") and to the other conditions set forth in Annex II. Parent and Newco
expressly reserve the right to waive the Minimum Condition or any of the other
conditions to the Offer, to increase the price per Share payable in the Offer
and to make any other change or changes in the terms or conditions of the Offer,
including without limitation extending the expiration date, provided, that no
change may be made that changes the form of consideration to be paid or
decreases the price per Share or the number of Shares sought in the Offer or
which imposes conditions to the Offer in addition to those set forth in Annex
II. If at any scheduled expiration date of the Offer any of the conditions of
the Offer have not been satisfied or waived by Parent, but in the reasonable,
good faith judgment of the Company are capable of being satisfied within a
period not to exceed twenty (20) U.S. Business Days, then, at the written
request of the Company, Parent and Newco shall extend the Offer for such period,
to a maximum of twenty (20) U.S. Business Days, but not in any event beyond the
date specified in Section 7.1(b)(i)(B) hereof.
(b) Acceptance and Payment. Newco shall, on the terms and subject to the
prior satisfaction or waiver of the conditions of the Offer, accept for payment
Shares validly tendered within five (5) Business Days after such satisfaction or
waiver of all conditions of the Offer, and pay for accepted Shares as promptly
thereafter as reasonably practicable.
1
<PAGE> 109
SECTION 1.2. Company Action.
(a) Board of Directors. The Company hereby approves and consents to the
Offer and represents that its Board of Directors, at a meeting duly called and
held and acting on the unanimous recommendation of the members of the Board of
Directors of the Company who are independent of Parent and Newco and who
constitute a majority of the directors in office (the "Company Board"), has (i)
determined that this Agreement and the Transactions, including the Offer and the
Merger, are fair to and in the best interest of the Company's stockholders, (ii)
approved this Agreement and the Transactions, including the Offer and the
Merger, which approval satisfies in full the requirements of the General
Corporation Law of the State of Delaware (the "DGCL") including, without
limitation, Section 203 thereof, and (iii) resolved to recommend acceptance of
the Offer and approval and adoption of this Agreement and the Merger and other
Transactions by its stockholders. The Company represents that it has been
advised that all of the directors on the Company Board and all of the executive
officers intend to tender their Shares pursuant to the Offer.
(b) Stockholder Lists; Other Assistance. The Company will promptly, and in
any event within three (3) U.S. Business Days after the execution of this
Agreement, furnish, or cause its transfer agent to furnish, Newco with a list of
its stockholders, mailing labels and any available listing or computer file
containing the names and addresses of all record holders of Shares and lists of
securities positions of Shares held in stock depositories, in each case which,
to the Company's best knowledge, are true and correct as of a recent date, and
will provide, or cause its transfer agent to provide, to Newco such additional
information (including, without limitation, updated lists of stockholders,
mailing labels and lists of securities positions) and such other assistance as
Parent or Newco or any of their respective agents may reasonably request in
connection with the Offer and Merger.
SECTION 1.3. SEC Actions.
(a) Schedules 14D-1 and 13E-3. As soon as reasonably practicable on the
date of commencement of the Offer, Parent and Newco shall file with the
Securities and Exchange Commission ("SEC") (i) a Tender Offer Statement on
Schedule 14D-1 with respect to the Offer (including all supplements and
amendments thereto, the "Schedule 14D-1") and (ii) a Transaction Statement on
Schedule 13E-3 (including all supplements and amendments thereto, the "Schedule
13E-3," which, together with the Schedule 14D-1 and all other documents required
to be filed by Parent and Newco with the SEC in connection with the
Transactions, are collectively referred to as the "Offer Documents"). The
Company shall execute, and join in the filing of, the Schedule 13E-3.
(b) Schedule 14D-9. Concurrently with the filing of the Schedule 14D-1, the
Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 (including all supplements and amendments thereto, the "Schedule
14D-9"), which shall reflect the recommendations of the Company Board referred
to in Section 1.2(a).
(c) Action by Parties.
(i) Parent and Newco will take all steps necessary to ensure that the
Offer Documents, and the Company will take all steps necessary to ensure
that the Schedule 14D-9 and all other documents required to be filed by the
Company with the SEC in connection with the Transactions (collectively, the
"Company Disclosure Documents"), comply or complies in all material
respects with the provisions of applicable federal securities laws and, on
the date filed with the SEC and on the date first published, sent or given
to the Company's stockholders, shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, provided,
that Parent and Newco make no representation with respect to information
furnished by the Company for inclusion in the Offer Documents and that the
Company makes no representation with respect to information furnished by
Parent or Newco for inclusion in the Company Disclosure Documents.
(ii) The Company represents and warrants to Parent and Newco that the
information with respect to the Company or any Subsidiary that (i) the
Company or any Subsidiary furnishes to Parent in writing
2
<PAGE> 110
specifically for inclusion in the Offer Documents, (ii) is incorporated in
the Offer Documents by reference to any of the Company SEC Filings or (iii)
is set forth in the Company Disclosure Documents (other than any
information set forth in the Company Disclosure Documents that is furnished
by Parent or Newco for inclusion therein), will not, at the time of the
filing of the Offer Documents, at the time of any distribution thereof and
at the time of the consummation of the Offer, contain any untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. Parent and Newco jointly and severally represent to
the Company that the information with respect to Parent and Newco that (i)
Parent or Newco furnishes to the Company in writing specifically for
inclusion in the Company Disclosure Documents, (ii) is incorporated in the
Company Disclosure Documents by reference to any of the Offer Documents
(other than any information set forth in any of the Offer Documents that is
furnished by the Company or any Subsidiary for inclusion therein), or (iii)
is set forth in the Schedule 14D-1 (other than any information set forth in
the Schedule 14D-1 that is furnished by the Company or any Subsidiary for
inclusion therein), will not, at the time of the filing of the Offer
Documents, at the time of any distribution thereof and at the time of the
consummation of the Offer, contain any untrue statement of a material fact
or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Each of Parent and Newco, on the one hand, and the Company, on
the other hand, will promptly correct any information provided by it for
use in the Offer Documents and the Company Disclosure Documents, as the
case may be, if and to the extent that it shall have become false and
misleading in any material respect.
(iii) Each of Parent and Newco will take all steps necessary to cause
the Offer Documents, and the Company will take all steps necessary to cause
the Company Disclosure Documents, in each case including all amendments
thereto, to be filed with the SEC and to be disseminated to holders of the
Shares as and to the extent required by applicable federal securities laws.
(iv) Each of the Company, on the one hand, and Parent and Newco on the
other hand, will give the other, and their respective counsel, the
opportunity to review and provide comments with respect to the Company
Disclosure Documents and the Offer Documents, as the case may be, before
they are filed with the SEC, in each case including all amendments thereto.
In addition, each Party will provide the other Parties and their counsel
with any comments, whether written or oral, which it may receive from time
to time from the SEC or its staff with respect to the Company Disclosure
Documents or the Offer Documents promptly after the receipt of such
comments.
SECTION 1.4. Directors.
(a) Entitlement. Effective upon the acceptance for payment by Newco of such
number of Shares as shall constitute satisfaction of the Minimum Condition,
Newco shall be entitled, at its option, to designate the number of directors,
rounded up to the next whole number, on the Board of Directors of the Company
for the period following such acceptance (the "Post-Acceptance Board") that
equals the product of (i) the total number of directors on the Post-Acceptance
Board (giving effect to the election of any additional directors and/or the
resignation of any existing directors pursuant to this Section) and (ii) the
percentage that the number of Shares owned by Newco (including Shares accepted
for payment) and Parent bears to the total number of Shares issued and
outstanding, and the Company shall take all action necessary to cause Newco's
designees to be elected or appointed to the Post-Acceptance Board, including,
without limitation, increasing the number of directors and seeking and accepting
resignations of incumbent directors. The Company will use its best efforts to
cause individuals designated by Newco as provided in the previous sentence to
constitute the same percentage as such individuals represent on the
Post-Acceptance Board of (A) each committee of such Board (other than any
committee of such Board established to take action under this Agreement), (B)
each board of directors of each Subsidiary and (C) each committee of each such
board. Notwithstanding the foregoing, at all times prior to the Effective Time
the Post-Acceptance Board shall include at least two (2) directors in office as
of the date hereof who are not employees of the Company or any of its
subsidiaries or affiliates of Parent or Newco (any such director remaining in
office being a "Continuing Director"). The provisions of this Section 1.4(a) are
in addition to and shall not limit any rights which Parent or Newco or any
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of their affiliates may have as a holder or beneficial owner of Shares as a
matter of law with respect to the election of directors or otherwise.
(b) Company Actions. The Company shall promptly take all actions required
in order to fulfill its obligations under this Section, including without
limitation all actions required pursuant to Section 14(f) of the Exchange Act
and Rule 14f-1 promulgated thereunder, which shall include without limitation
including in the Schedule 14D-9 such information with respect to the Company and
its officers and directors and Newco's designees as is necessary to enable
Newco's designees to be elected to the Post-Acceptance Board. Parent or Newco
will supply to the Company any information with respect to itself and such
nominees, officers, directors and affiliates required by such Section 14(f) and
Rule 14f-1, and Parent and Newco jointly and severally represent to the Company
that such information will not, at the time of the filing with the SEC of any
document required to be filed pursuant to this Section 1.4(b), contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order that the statements made therein, in
light of the circumstances under which they were made, are not misleading.
ARTICLE II.
THE MERGER
SECTION 2.1. The Merger.
As promptly as reasonably practicable after consummation of the Offer,
subject to the terms and conditions of this Agreement, at the Effective Time, in
accordance with this Agreement and the DGCL, Newco shall, pursuant to the
Merger, be merged with and into the Company, the separate existence of Newco
(except as it may be continued by operation of law) shall cease, and the Company
shall continue as the surviving corporation (the "Surviving Corporation").
SECTION 2.2. Effect of the Merger.
Upon the effectiveness of the Merger, the Surviving Corporation shall
succeed to and assume all the rights and obligations of the Company and Newco in
accordance with the DGCL, and the Merger shall otherwise have the effects set
forth in Section 259 of the DGCL.
SECTION 2.3. Consummation of the Merger.
The closing of the Merger (the "Closing") will take place as soon as
practicable after the satisfaction or waiver of the conditions to the
obligations of the parties to effect the Merger set forth herein, provided that
this Agreement has not been terminated previously, at the offices of Morrison &
Foerster, LLP, San Francisco, California, or such other location as the Parties
may agree. On the date of the Closing, the Parties will cause the Merger to be
consummated by filing with the Secretary of State of the State of Delaware a
properly executed certificate of merger in accordance with the DGCL, which shall
be effective upon filing or on such later date as may be specified therein (the
time of such effectiveness being the "Effective Time").
SECTION 2.4. Certificate of Incorporation; Bylaws; Directors and Officers.
The Certificate of Incorporation of the Company in effect at the Effective
Time shall be the Certificate of Incorporation of the Surviving Corporation,
until thereafter amended in accordance with the provisions thereof and as
provided by the DGCL. The Bylaws of the Company in effect at the Effective Time
shall be the Bylaws of the Surviving Corporation, until thereafter amended in
accordance with the provisions thereof and the Certificate of Incorporation of
the Surviving Corporation and as provided by the DGCL. From and after the
Effective Time and until their respective successors are duly elected or
appointed and qualified, (a) the directors of Newco at the Effective Time shall
be the directors of the Surviving Corporation and (b) the officers of the
Company at the Effective Time shall be the officers of the Surviving
Corporation.
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SECTION 2.5. Effect on Securities.
By virtue of the Merger and without any action on the part of either
Constituent Corporation or any holder of the capital stock thereof, at the
Effective Time:
(a) Each share of Common Stock, $0.05 par value, of Newco issued and
outstanding immediately prior to the Effective Time shall be canceled and
retired, and no consideration shall be paid or delivered in exchange
therefor;
(b) Each Share that is held in the treasury of the Company or by any
Subsidiary immediately prior to the Effective Time shall be canceled and
retired, and no consideration shall be paid or delivered in exchange
therefor;
(c) Each Share issued and outstanding immediately prior to the
Effective Time and registered in the name of Parent or Newco shall not be
converted but shall remain outstanding as one validly issued, fully paid
and nonassessable share of Common Stock of the Surviving Corporation; and
(d) Each Share issued and outstanding immediately prior to the
Effective Time (other than Shares referred to in Section 2.5(b) or 2.5(c)
above and Dissenting Shares (which are to be treated in accordance with
Section 2.8)) shall be converted into the right to receive, upon surrender
of the certificate formerly representing such Share, in the manner provided
below, an amount in cash, without interest, equal to the Offer Price or any
higher price paid for each Share in the Offer (the "Merger Consideration").
As of the Effective Time, each such remaining Share shall no longer be
issued and outstanding and shall automatically be canceled and retired and
shall cease to exist, and each holder of a certificate representing any
such Share shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration, without interest.
SECTION 2.6. Company Stock Plans.
(a) Company Option Plans. The Options granted pursuant to the Company's
1974 Stock Incentive Plan shall vest automatically at the Effective Time. The
Company Option Plans and all stock options issued and outstanding thereunder
shall terminate and be canceled effective as of the Effective Time. In
consideration of such termination and cancellation, (i) each holder of a stock
option under the Company Option Plans which, in whole or in part, has vested as
of the Effective Time shall be entitled to receive from the Company, at the
Effective Time, for each share of Company Common Stock subject to the
then-vested portion of the option, an amount in cash equal to the excess, if
any, of the Merger Consideration over the per share exercise price of the
option, and (ii) each holder of a stock option under the Company Option Plans
which, in whole or in part, has not vested as of the Effective Time shall be
entitled to receive from the Company, on the date(s) following the Effective
Time on which the option would have vested under the relevant Company Option
Plan, for each Share subject to the then-vested portion of the option, an amount
in cash equal to the excess, if any, of the Merger Consideration over the per
share exercise price of the option, plus interest on such cash amount calculated
from the Effective Time to the date the option would have vested at an annual
rate of six percent (6%) based on the actual number of days elapsed, in each
case subject to applicable withholding tax, if any, provided the holder
continues to be an employee of the Surviving Corporation or one of its
affiliates as of such date. Notwithstanding the foregoing, no optionholder shall
be entitled to receive any payment in consideration of the termination and
cancellation of such option until the optionholder shall have delivered to the
Company or the Surviving Corporation a release in form satisfactory to Parent.
The Board of Directors of the Company shall take all actions necessary to cause
all outstanding options to purchase Shares to be terminated and canceled as
provided in this Section 2.6(a). The Board of Directors of the Company further
shall take all such actions consistent with Applicable Law and the existing
provisions of the Stock Option Plans to provide that the right to receive
consideration as provided in this Section 2.6(a) shall terminate, if not
previously claimed, with respect to each option at the date twelve months from
the Effective Time or, in the case of any option not vested at the Effective
Time, twelve months from the date such option would have vested. The Surviving
Corporation shall use reasonable efforts to notify each holder of a stock option
under the Company Option Plans which has not vested as of the Effective Time of
such holder's right to claim receipt of consideration as provided in this
Section 2.6(a) promptly following the date(s) each such option would have
vested.
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(b) Company Stock Purchase Plan. The Company shall take all actions
necessary to cause the last day of the "Purchase Period" (as defined in the
Company Stock Purchase Plan) to be the earlier of (i) the end of the current
Purchase Period or (ii) the date on which the Effective Time occurs. On such
date, each participant in the Company Stock Purchase Plan shall be deemed to
have purchased the number of whole Shares that could be purchased upon the
application of the funds then in such participant's withholding account in
accordance with the terms of the Company Stock Purchase Plan. As of the
Effective Time, each participant shall be entitled to receive from the Company,
for each Share such participant is deemed to have purchased, the Merger
Consideration, subject to applicable withholding tax, if any. Notwithstanding
the foregoing, no participant shall be entitled to receive any payment on
account of any Shares deemed to have been purchased pursuant to this Section
2.6(b) until the participant shall have delivered to the Company an
acknowledgment that the participant has received all amounts due in connection
with the Company Stock Purchase Plan. The Company shall take all actions
necessary to terminate the Company Stock Purchase Plan effective on the date as
aforesaid so that no new Purchase Period that would otherwise commence on or
after that date shall commence.
SECTION 2.7. Payment for Shares.
(a) Paying Agent. Prior to the Effective Time, Parent shall designate a
bank or trust company to act as paying agent (the "Paying Agent") for the
purpose of exchanging certificates representing issued and outstanding Shares
(each, a "Certificate") for the Merger Consideration. Parent or Newco shall,
from time to time, make available or cause to be made available to the Paying
Agent funds in amounts and at times necessary for the payment of the Merger
Consideration in the manner provided herein. All interest on such funds shall be
paid to Parent or Newco.
(b) Letter of Transmittal. Promptly after the Effective Time, the
Surviving Corporation shall instruct the Paying Agent to mail to each holder of
record of one or more Shares, (i) a letter of transmittal, which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificate to the Paying Agent,
and which shall have such other provisions as Parent shall specify, and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for Merger Consideration.
(c) Entitlement of Shares. Upon surrender of a Certificate for
cancellation to the Paying Agent, together with such letter of transmittal, duly
executed and completed in accordance with the instructions thereto, and such
other documents as may reasonably be required by the Paying Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor the Merger
Consideration payable in respect of Shares previously represented by such
Certificate, after giving effect to any withholding tax required by Applicable
Law, and the Certificate so surrendered shall forthwith be canceled. Until
surrendered as contemplated by this Section 2.7, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration. No interest will be paid or accrued on the
Merger Consideration.
(d) Payments to Other Persons. If Merger Consideration is to be paid to
any person other than the person in whose name the Certificates for Shares
surrendered for conversion are registered, it shall be a condition of the
payment that such Certificates be properly endorsed and the signatures thereon
properly guaranteed and otherwise in proper form for transfer and that the
person requesting such payment shall have paid to the Paying Agent any transfer
or other taxes required by reason of the delivery of Merger Consideration to a
person other than the registered holder of such Certificate, or shall have
established to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable.
(e) Termination. Any portion of the exchange funds held by the Paying
Agent for delivery pursuant to this Section 2.7 and unclaimed at the end of six
months after the Effective Time shall be paid or delivered to the Surviving
Corporation, upon demand, and any holders of Certificates who have not
theretofore complied with this Section 2.7 shall, subject to Applicable Law,
thereafter look only to the Surviving Corporation for payment of the Merger
Consideration in respect of Shares. Notwithstanding the foregoing, none of
Parent, the Surviving Corporation or the Paying Agent shall be liable to any
holder of Shares for any amount paid to a
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public official pursuant to any applicable abandoned property, escheat or
similar law. Any amounts unclaimed by holders of Shares two years after the
Effective Time (or such earlier date immediately prior to such time as such
amounts would otherwise escheat to or become the property of any governmental
entity) shall, to the extent permitted by applicable law, become the property of
the Surviving Corporation free and clear of any claims or interest of any person
previously entitled thereto.
(f) Stock Transfer Books; No Further Ownership Rights. At and after the
Effective Time, the stock transfer books of the Company shall be closed, and
there shall be no further registrations of transfers of Shares thereafter on the
records of the Company. From and after the Effective Time, the holders of
Certificates evidencing ownership of the Shares issued and outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such Shares, except as otherwise provided for herein or by applicable
law. If, after the Effective Time, Certificates are presented to the Surviving
Corporation, Parent or the Paying Agent for any reason, they shall be canceled
and exchanged for Merger Consideration as provided in this Section 2.7.
SECTION 2.8. Dissenting Shares.
Notwithstanding anything in this Agreement to the contrary, Shares that are
issued and outstanding immediately prior to the Effective Time and that are held
by stockholders who have not voted such Shares in favor of the approval and
adoption of this Agreement and who shall have delivered a written demand for
appraisal of such Shares in the manner provided in Section 262 of the DGCL
("Dissenting Shares") shall not be converted into the right to receive the
Merger Consideration, but instead shall be converted into the right of the
holders of such Shares to payment of the appraised value of such Shares in
accordance with the provisions of Section 262 of the DGCL; provided, however,
that if any holder of Dissenting Shares (i) shall subsequently deliver a written
withdrawal of his demand for appraisal of such Shares (with the written approval
of the Surviving Corporation, if such withdrawal is not tendered within 60 days
after the Effective Time), (ii) fails to perfect or loses his appraisal rights
as provided in Section 262 of the DGCL, or (iii) fails to demand payment within
the time period provided in Section 262 of the DGCL, such holder shall forfeit
the right to appraisal of such Shares and such Shares shall thereupon be deemed
to have been converted into, as of the Effective Time, the right to receive the
Merger Consideration, without any interest thereon. The Company shall give
Parent and Newco (i) prompt notice of any demands received by the Company for
appraisal of Shares and (ii) the opportunity to direct all negotiations and
proceedings with respect to such demands. The Company shall not, except with the
written consent of Parent, make any payment with respect to, or settle or offer
to settle, any such demands.
SECTION 2.9. Stockholders' Meeting.
(a) Special Meeting and Proxy Statement. If required by Applicable Law in
order to consummate the Merger, the Company, acting through the Post-Acceptance
Board, shall, in accordance with Applicable Law:
(i) duly call, give notice of, convene and hold a special meeting of
its stockholders (the "Special Meeting"), as promptly as practicable
following the acceptance for payment and purchase of Shares by Newco
pursuant to the Offer, for the purpose of considering and taking action
upon the approval of the Merger and the adoption of this Agreement;
(ii) prepare and file with the SEC a preliminary proxy or information
statement relating to the Merger and this Agreement, and use its best
efforts (x) to obtain and furnish the information required to be included
by the SEC in the Proxy Statement (as hereinafter defined) and, after
consultation with Parent, to respond promptly to any comments made by the
SEC with respect to the preliminary proxy or information statement; (y) to
cause a definitive proxy or information statement, including any amendment
or supplement thereto (the "Proxy Statement"), to be mailed to its
stockholders, provided, that the Company (i) will promptly notify Parent of
its receipt of any comments from the SEC or its staff and of any request by
the SEC or its staff for amendments or supplements of the Proxy Statement
or for additional information; (ii) will promptly provide Parent with
copies of all correspondence between the Company or any of its
representatives, on the one hand, and the SEC or its staff, on the other
hand, with respect to the Proxy Statement or the Merger and (iii) will not
amend or supplement the Proxy
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Statement without first consulting with Parent and its counsel; and (z) to
obtain the necessary approvals of the Merger and this Agreement by its
stockholders to the extent required by the DGCL;
(iii) prepare and revise the Proxy Statement so that, at the date
mailed to Company stockholders and at the time of the Special Meeting, the
Proxy Statement will (x) not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order that the statements made therein, in light of the
circumstances under which they are made, are not misleading (except that
the Company shall not be responsible under this clause (iii) with respect
to statements made therein based on information supplied by Parent or Newco
expressly for inclusion in the Proxy Statement), and (y) comply in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder;
(iv) subject to the fiduciary obligations of the Company Board under
applicable law as advised in writing by counsel to the Company Board,
include in the Proxy Statement the recommendation of such Board that
stockholders of the Company vote in favor of the approval of the Merger and
the adoption of this Agreement; and
(v) without limiting the generality of the foregoing, the Company
agrees that its obligations pursuant to Section 2.9(a)(i) shall not be
affected by (i) the commencement, public proposal, public disclosure or
communication to the Company of any Alternative Transaction or (ii) any
withdrawal or modification by the Company Board of its approval or
recommendation of the Offer, this Agreement or the Merger.
(b) Parent Information. Parent shall furnish to the Company such
information concerning itself and Newco, for inclusion in the Proxy Statement,
as may be requested by the Company and required to be included in the Proxy
Statement. Parent and Newco jointly and severally represent to the Company that
such information provided in writing expressly for inclusion in the Proxy
Statement will not, at the date the Proxy Statement is mailed to Company
stockholders and (including any corrections or modifications made by Parent or
Newco to such information) at the time of the Special Meeting, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order that the statements made therein, in
light of the circumstances under which they were made, are not misleading.
(c) Merger Without Meeting of Stockholders. Notwithstanding the foregoing,
in the event that Parent or Newco shall acquire at least 90% of the issued and
outstanding Shares, the Parties agree, at the request of Parent, to take all
appropriate and necessary action to cause the Merger to become effective as soon
as practicable after the expiration or termination of the Offer, without a
meeting of stockholders of the Company, in accordance with Section 253 of the
DGCL.
SECTION 2.10. Subsequent 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 either of
the Constituent Corporations acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or otherwise to
carry out this Agreement, the officers and directors of the Surviving
Corporation are hereby authorized to execute and deliver, in the name and on
behalf of each of the Constituent Corporations or otherwise, all such deeds,
bills of sale, assignments and assurances and to take and do, in the name and on
behalf of each of the Constituent Corporations or otherwise, all such other
actions and things as may be necessary or desirable to vest, perfect 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.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Newco that, except as set
forth in the written Disclosure Schedule previously delivered by the Company to
Parent:
SECTION 3.1. Organization and Qualification.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to own or lease and operate its properties and assets and to
carry on its business as it is now being conducted. The Company is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction in which the character of its properties owned or leased or
the nature of its activities makes such qualification necessary, except where
the failure to be so qualified could not reasonably be expected to have a
Material Adverse Effect on the Company.
SECTION 3.2. Subsidiaries.
(a) Subsidiaries. Except for shares of the Subsidiaries identified on
Exhibit 21.1 to the Company's Annual Report on form 10-K for the fiscal year
ended December 27, 1996 (the "Company Annual Report"), or the Subsidiaries or
interests described in Schedule 3.2 attached hereto, the Company does not own of
record or beneficially, directly or indirectly, (i) any shares of issued and
outstanding capital stock or securities convertible into capital stock of any
other corporation or (ii) any participating interest in any partnership, joint
venture or other non-corporate business enterprise. Each Subsidiary and its
jurisdiction of formation is identified in the Company Annual Report or on
Schedule 3.2 attached hereto. The Company's proportionate share of the total
assets (after intercompany eliminations) of those Subsidiaries that are not
Significant Subsidiaries, taken as a whole, is less than 14% of the consolidated
total assets of the Company as of December 27, 1996, and the Company's equity in
the revenue of those Subsidiaries that are not Significant Subsidiaries, taken
as a whole, is less than 20% of the consolidated revenue of the Company for the
1996 fiscal year. No one Subsidiary that is not a Significant Subsidiary
accounted for more than 3% of the consolidated revenue for the Company for the
1996 fiscal year.
(b) Organization and Authority. Except as set forth on Schedule 3.2
hereto, each Subsidiary is a corporation duly organized and validly existing
under the laws of its jurisdiction of incorporation, and each Significant
Subsidiary and, to the Company's best knowledge, each other Subsidiary is in
good standing under the jurisdiction of its incorporation. Each Significant
Subsidiary and, to the Company's best knowledge, each other Subsidiary has all
requisite corporate power and authority to own or lease and operate its
properties and to carry on its business as it is now being conducted, and is
duly qualified as a foreign corporation to do business, and is in good standing,
in each jurisdiction in which the character of its properties owned or leased or
the nature of its activities makes such qualification necessary, except where
the failure to be so qualified could not reasonably be expected to have a
Material Adverse Effect on the Company.
(c) Shares. Except as set forth on Schedule 3.2 hereto, all the issued and
outstanding shares of capital stock of each Significant Subsidiary and, to the
Company's best knowledge, each other Subsidiary are validly issued, fully paid
and nonassessable and are owned by the Company or by a wholly-owned Subsidiary,
free and clear of any Encumbrances or adverse claims, and there are no proxies
issued and outstanding or restrictions on voting with respect to any such
shares.
SECTION 3.3. Authority Relative to Agreement.
The Company has all requisite corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. The execution,
delivery and performance of this Agreement by the Company and the consummation
by it of the Transactions have been duly authorized by the Company Board, and no
other corporate proceedings on the part of the Company (including without
limitation any action by its stockholders) are necessary to authorize this
Agreement and the Transactions, except for approval of the Merger by the
stockholders of the Company to the extent required by the DGCL. This Agreement
has been
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duly executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as such enforceability may be subject to or limited by
bankruptcy, insolvency, reorganization, or other similar laws, now or hereafter
in effect, affecting the enforcement of creditors' rights generally, and except
that the availability of equitable remedies, including specific performance, may
be subject to the discretion of the court before which any proceeding therefor
may be brought.
SECTION 3.4. Non-Contravention.
Except as set forth on Schedule 3.4 hereto, the execution and delivery of
this Agreement by the Company do not and the consummation by the Company of the
Transactions will not (i) conflict with any provision of the Certificate of
Incorporation or Bylaws of the Company; (ii) result (with the giving of notice
or the lapse of time or both) in any violation of or default or loss of a
benefit under, or permit the acceleration of any obligation under, any mortgage,
indenture, lease, agreement or other instrument to which the Company or any
Significant Subsidiary or, to the Company's best knowledge, any other Subsidiary
is a party or by which any of the properties of the Company or any Significant
Subsidiary or, to the Company's best knowledge, any other Subsidiary may be
bound (each, a "Company Agreement"), any permit, concession, grant, franchise or
license or any Applicable Law; or (iii) result in the creation or imposition of
any Encumbrance of any nature whatsoever upon any asset of the Company or any
Significant Subsidiary or, to the Company's best knowledge, any other
Subsidiary; other than (in the cases of clauses (ii) and (iii) only) such as (a)
could not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on the Company or (b) are described in Schedule 3.4
attached hereto.
SECTION 3.5. Capitalization.
(a) Issued and Outstanding Shares. The authorized capital stock of the
Company consists of (i) 200,000,000 shares of Company Common Stock, and (ii)
5,000,000 shares of preferred stock, $1.00 par value ("Preferred Stock"). As of
the close of trading on the date immediately prior to the date hereof, (x) the
number of shares of Company Common Stock issued and outstanding was 122,957,555,
plus such number of shares of Company Common Stock (to a maximum of 95,000
shares) that may have been issued since July 24, 1997, pursuant to the Company
Stock Purchase Plan in the ordinary course of administration of that Plan, (y)
no shares of Company Common Stock are held in the treasury of the Company and
(z) no shares of Preferred Stock are issued and outstanding. All of the issued
and outstanding shares of the Company's capital stock are, and all Shares which
may be issued pursuant to the exercise of outstanding Options will be, when
issued in accordance with the respective terms thereof, duly authorized, validly
issued, fully paid and non-assessable. There are no bonds, debentures, notes or
other indebtedness having general voting rights (or convertible into securities
having such rights) of the Company or any of its Significant Subsidiaries issued
and outstanding.
(b) Options. Except for (i) options ("Options") to purchase, as of the
close of trading on the date immediately prior to the date hereof, an aggregate
of 10,324,954 shares of Company Common Stock granted pursuant to the Company's
Stock Option Plan (1974), the Company's 1994 Stock Incentive Plan and the Amdahl
Corporation Stock Option Plan of DMR Group Inc. (collectively, the "Company
Option Plans"), at a weighted average exercise price of $6.55 per share, and
(ii) 5,505,927 Shares authorized and reserved for issuance under the Company's
Employee Stock Purchase Plan (the "Company Stock Purchase Plan" and,
collectively with the Company Option Plans and the Company's Restricted Stock
Plan, the "Company Stock Plans"), and except as set forth on Schedule 3.5
hereto, there is no existing subscription, warrant, option, convertible
security, stock appreciation, call, pre-emptive, subscription or other right,
agreement or arrangement (contingent or otherwise) requiring the Company or any
Significant Subsidiary or, to the Company's best knowledge, any other Subsidiary
to issue, transfer, purchase or acquire, or any securities convertible into or
exchangeable for, any shares of any class of capital stock or other equity
interest of the Company or any Significant Subsidiary or, to the Company's best
knowledge, any other Subsidiary, and there is no commitment of the Company or
any Significant Subsidiary or, to the Company's best knowledge, any other
Subsidiary to issue any shares, warrants, options or other such rights or to
distribute to holders of any class of
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its capital stock any evidences of indebtedness or assets. Since July 24, 1997,
no Shares have been issued pursuant to the Company Stock Purchase Plan other
than in the ordinary course of administration of that Plan.
(c) Other Arrangements. Except as set forth on Schedule 3.5 hereto, there
are no outstanding obligations of the Company or any Subsidiary to vote, or to
repurchase, redeem or otherwise acquire, any shares of capital stock of the
Company or any Subsidiary or other affiliate of the Company, to make or pay any
dividend in respect thereof or, except in the ordinary course of business or for
amounts which are not material, to provide funds or to make any investment (in
the form of a loan, capital contribution or otherwise) in any subsidiary or any
other entity (other than a Subsidiary). There are no outstanding obligations of
the Company
or of any Significant Subsidiary to file a registration statement under the
Securities Act or which otherwise relate to the registration of any securities
of the Company or any Significant Subsidiary under the Securities Act.
SECTION 3.6. SEC Filings.
The Company acknowledges that Parent and Newco have relied on publicly
available versions of the Company's reports, statements and registration
statements filed by the Company with the SEC, and represents that the Company
has filed with the SEC all forms, reports, schedules, statements and other
documents required to be filed by it since January 1, 1995 (collectively, the
"Company SEC Filings"). As of their respective dates, the Company SEC Filings
(including, without limitation, any financial statements or schedules included
therein) (i) were prepared in compliance with the requirements of the Securities
Act or the Exchange Act, as the case may be, and the rules and regulations of
the SEC promulgated thereunder and (ii) did not at the time of filing (or if
amended, supplemented or superseded by a filing prior to the date hereof, on the
date of that filing) contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. None of the Subsidiaries is required to file any
forms, reports or other documents with the SEC under the Exchange Act.
SECTION 3.7. Financial Statements.
(a) Financial Statements. The consolidated financial statements of the
Company included in the Company SEC Filings have been prepared in accordance
with generally accepted accounting principles ("GAAP") consistently applied and
consistent with prior periods, subject, in the case of unaudited interim
consolidated financial statements, to year-end adjustments (which consist of
normal recurring accruals) and the absence of certain footnote disclosures. The
consolidated balance sheets of the Company included in the Company SEC Filings
fairly present in all material respects the financial position of the Company
and the Subsidiaries, taken as a whole, as of their respective dates, and the
related consolidated statements of operations, stockholders' equity and cash
flows included in the Company SEC Filings fairly present in all material
respects the results of operations of the Company and the Subsidiaries, taken as
a whole, for the respective periods then ended, subject, in the case of
unaudited interim financial statements, to (i) normal recurring year-end
adjustments, (ii) all such other non-material adjustments as management of the
Company believes are necessary for a fair presentation of the Company's
financial condition at the dates indicated and the results of operations for the
periods indicated, and (iii) the absence of certain footnote disclosures.
(b) No Undisclosed Liabilities. Except (i) as disclosed in the Company SEC
Filings, including any exhibits to the Company SEC Filings, and (ii) for
liabilities and obligations (x) incurred subsequent to December 27, 1996 in the
ordinary course of business and consistent with past practice, (y) pursuant to
the terms of this Agreement or (z) as set forth in Schedule 3.7 attached hereto,
neither the Company nor any Significant Subsidiary nor, to the Company's best
knowledge, any other Subsidiary has any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, that have, or could
reasonably be expected to have, a Material Adverse Effect on the Company.
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SECTION 3.8. Absence of Certain Changes or Events.
Except as set forth in the Company SEC Filings or on Schedule 3.8 hereto or
as permitted under Section 5.1 hereof, since December 27, 1996, neither the
Company nor any Significant Subsidiary nor, to the Company's best knowledge, any
other Subsidiary has (i) issued any stock, bonds or other corporate securities,
except Options and restricted stock issued under the Company Stock Plans and
Shares issued pursuant thereto included within the outstanding Options and
Shares described in Section 3.5 hereof, (ii) borrowed any amount or incurred any
liabilities that individually or collectively are material to the Company,
except in the ordinary course of business, (iii) except in the ordinary course
of business, discharged or satisfied any lien or incurred or paid any obligation
or liability that individually or collectively are material to the Company,
other than current liabilities shown on the consolidated balance sheet of the
Company and the Subsidiaries as of December 27, 1996 and current liabilities
incurred since the date of such balance sheet, (iv) declared or made any payment
or distribution to stockholders (in cash, stock or property) or purchased or
redeemed any shares of its capital stock (other than restricted stock issued
under the Company Stock Plans) or other securities except, in the case of
Subsidiaries, in the ordinary course of business, (v) mortgaged, pledged or
subjected to lien any of its assets, tangible or intangible, that individually
or collectively are material to the Company, other than liens for current real
property taxes not yet due and payable, except in the ordinary course of
business, (vi) sold, assigned or transferred any of its tangible assets, or
canceled any debts or claims, that individually or collectively are material to
the Company or the Subsidiary, except in the ordinary course of business or as
otherwise contemplated hereby, (vii) sold, assigned or transferred any patents,
trademarks, trade names, copyrights, trade secrets or other intangible assets
that individually or collectively are material to the Company, (viii) made any
changes in executive officer compensation or severance terms, (ix) changed any
of its accounting methods or practices, except as required by a change in GAAP,
(x) agreed, in writing or otherwise, to take any of the actions listed in
clauses (i) through (ix) above, (xi) suffered any Material Adverse Effect with
respect to the Company or waived any rights of material value to the Company,
whether or not in the ordinary course of business, or (xii) entered into any
material transaction or otherwise conducted its business in any material
respect, except in the ordinary course of business or as otherwise contemplated
hereby.
SECTION 3.9. Governmental Approvals.
Except as set forth on Schedule 3.9 hereto, no filing, declaration or
registration with, or permit, authorization, consent or approval of, any
federal, state, local or foreign government, court, arbitral tribunal or
arbitrator of any kind or other administrative, governmental or other regulatory
agency, commission, authority, board, bureau or instrumentality of any kind
(each, a "Governmental Authority") is required to be made or obtained by the
Company or any Significant Subsidiary or, to the Company's best knowledge, any
other Subsidiary in connection with the execution and delivery of this Agreement
by the Company or the consummation by the Company of the Transactions, except
for (i) compliance by the Company with the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act"), (ii) compliance with the National
Industrial Security Program, issued pursuant to Executive Order 12829 (January,
1995) ("National Industrial Security Program"), (iii) the filing of a
certificate of merger with the Secretary of State of the State of Delaware in
accordance with the DGCL, (iv) the filing of notices required to be filed with
the American and London stock exchanges, (v) such as are listed on Schedule 3.9
hereto, and (vi) such consents, approvals, orders or authorizations which if not
obtained, or registrations, declarations or filings which if not made, would not
materially adversely affect the ability of the Company to consummate the
Transactions or the ability of the Surviving Corporation or any Significant
Subsidiary or, to the Company's best knowledge, any other Subsidiary to conduct
its business after the Effective Time substantially as currently conducted by
the Company or such Significant Subsidiary and, to the Company's best knowledge,
each other Subsidiary and could not otherwise reasonably be expected to have a
Material Adverse Effect on the Company.
SECTION 3.10. Compliance with Laws.
Except as set forth on Schedule 3.10 hereto, the business of the Company
and each Subsidiary is not being conducted in default or violation of, and the
Company and each of its Subsidiaries are not in default
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under or in violation of, any term, condition or provision of (i) their
respective Certificate of Incorporation or Bylaws, (ii) any of the Company
Agreements, or (iii) any order of any Governmental Authority to which the
Company or any Significant Subsidiary or, to the Company's best knowledge, any
other Subsidiary is subject, or any Applicable Law (including, but not limited
to, Applicable Law relating to export controls, labor and employment matters and
foreign corrupt practices) to which the Company or any Significant Subsidiary
or, to the Company's best knowledge, any other Subsidiary is subject, except, in
the case of clauses (ii) and (iii) only, for such defaults or violations that,
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect on the Company. To the best knowledge of the Company, neither the Company
nor any Subsidiary has failed to obtain any licenses, permits, franchises or
other governmental authorizations necessary to the ownership of its properties
or to the conduct of its business, which failure could reasonably be expected to
have a Material Adverse Effect on the Company, and, after giving effect to the
Transactions, to the best knowledge of the Company, all such licenses, permits,
franchises and other governmental authorizations will continue to be valid and
in full force and effect except as set forth on Schedule 3.10 hereto. To the
best knowledge of the Company, except as set forth on Schedule 3.10 hereto, no
investigation or review by any Governmental Authority or other entity with
respect to the Company or any of its Subsidiaries is pending or threatened, nor
has any Governmental Authority or other entity indicated an intention to conduct
the same, other than those investigations or reviews of which the outcome could
not reasonably be expected to have a Material Adverse Effect on the Company.
SECTION 3.11. Litigation.
Except as set forth on Schedule 3.11 hereto, to the best knowledge of the
Company, there is no action, suit, arbitration, investigation, proceeding or
claim pending or threatened against or affecting the Company or any Subsidiary,
or their respective properties or rights, before any Governmental Authority,
either alone or together with other similar actions, the outcome of which could
reasonably be expected to (i) have a Material Adverse Effect on the Company,
(ii) prevent the Company from performing its obligations under this Agreement,
or (iii) prevent the consummation of the Merger, nor is there any judgment,
decree, injunction, rule or order of any Governmental Authority issued and
outstanding against the Company or any Subsidiary having, or which could
reasonably be expected to have, any such effect.
SECTION 3.12. Intellectual Property Rights.
(a) Intellectual Property Rights. To the best knowledge of the Company and
except as set forth on Schedule 3.12 hereto, each of the Company and the
Subsidiaries owns, or is licensed or otherwise has the right to use, all
patents, patent rights, trademarks, trademark rights, trade names, trade name
rights, servicemarks, copyrights, industrial models, mask works, trade secrets,
know-how, algorithms and processes, and applications for patents, trademarks,
copyrights and servicemarks (collectively, "Intellectual Property Rights") which
is currently used and is necessary for the conduct of its business as presently
conducted or as proposed to be conducted, and each of the Company and the
Subsidiaries has valid licenses to all copies of all Intellectual Property
Rights that are not owned by it and are used by it in connection with the
conduct of its business ("Third Party IP"), and the use by the Company or such
Subsidiary of such Third Party IP, including without limitation all
modifications and enhancements thereto (whether or not created by the Company or
a Subsidiary), complies with such license (except for such absence of license or
noncompliance as could not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect on the Company).
(b) Absence of Infringement. To the best knowledge of the Company, and
except as set forth on Schedule 3.12 hereto, the use by the Company and the
Subsidiaries of all Intellectual Property Rights used in the conduct of its
business as presently conducted or as proposed to be conducted does not infringe
the rights of any person in any manner which has, or could reasonably be
expected to have, a Material Adverse Effect on the Company; no claims are
pending or, to the best knowledge of the Company, threatened by any person
against the Company or any of its Subsidiaries as to the use of any Intellectual
Property Rights; and no third person is infringing on the Intellectual Property
Rights of the Company or any of its Subsidiaries in a manner which could
reasonably be expected to have a Material Adverse Effect on the Company.
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(c) Proprietary Software. To the best knowledge of the Company, and except
as set forth on Schedule 3.12 hereto, the Company owns or has valid licenses
from third parties with respect to all software sold or licensed by the Company
and the Subsidiaries to customers (collectively, the "Proprietary Software"),
except such software which, if not so owned or licensed, could not reasonably be
expected to have a Material Adverse Effect on the Company.
(d) Trade Secrets. Except as set forth on Schedule 3.12 hereto, without
limiting the generality of the foregoing, no third party has notified the
Company or any Significant Subsidiary or, to the Company's best knowledge, any
other Subsidiary in writing, or to the best knowledge of the Company, claimed
that any person employed by or acting as a consultant to the Company or any
Significant Subsidiary or, to the Company's best knowledge, any other Subsidiary
has, in respect of his or her activities to date, violated any of the terms or
conditions of his or her employment or consulting contract with any third party,
or disclosed or utilized any trade secrets or proprietary information or
documentation of any third party, or interfered in the employment relationship
between any third party and any of its employees, which violation, disclosure,
utilization or interference could reasonably be expected to have a Material
Adverse Effect on the Company. To the best knowledge of the Company, no person
employed by or acting as a consultant to the Company or any Subsidiary has
employed any trade secrets or any information or documentation proprietary of
any former employer, or violated any confidential relationship which such person
may have had with any third party, in connection with the development or sale of
any products of the Company or any Subsidiary, which employment or violation
could reasonably be expected to have a Material Adverse Effect on the Company.
SECTION 3.13. Taxes.
(a) Except as set forth on Schedule 3.13 hereto, each of the Company, the
Subsidiaries and any affiliated, combined or unitary group of which any such
corporation is or was a member has (i) timely filed all federal, state, local
and foreign returns, declarations, reports, estimates, information returns and
statements ("Returns") required to be filed by it in respect of any Taxes (as
hereinafter defined), which Returns are accurate and complete, (ii) timely paid
or withheld all Taxes that are shown to be due and payable with respect to the
Returns referred to in clause (i) (other than Taxes that are being contested in
good faith by appropriate proceedings and are adequately reserved for in the
Company's most recent consolidated financial statements described in Section 3.7
hereof), (iii) established reserves (excluding reserves for deferred Taxes) that
are adequate for the payment of all Taxes not yet due and payable with respect
to the Returns filed regarding the Company and the Subsidiaries through the date
hereof, and (iv) to the Company's best knowledge, has complied with all
Applicable Law relating to the payment and withholding of Taxes and has timely
withheld from employee wages and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over, except such
inaccuracies or incompleteness in Returns, such failures to pay or withhold,
such failures to establish reserves and such non-compliance as could not
reasonably be expected to have a Material Adverse Effect.
(b) Except as set forth on Schedule 3.13 hereto, (i) there is no material
deficiency, material claim, or audit, action, suit, proceeding or investigation
now pending or, to the Company's best knowledge, threatened against or with
respect to the Company or any Subsidiary that could reasonably be expected to
have a Material Adverse Effect in respect of any Taxes; and (ii) there are no
requests for rulings or determinations in respect of any Taxes pending between
the Company or any Subsidiary and any taxing authority.
(c) Except as set forth on Schedule 3.13 hereto, neither the Company nor
any Subsidiary has executed or entered into (or prior to the Effective Time will
execute or enter into) with the Internal Revenue Service or any taxing authority
(i) any agreement or other document extending or having the effect of extending
the period for assessments or collection of any Taxes for which the Company or
any Significant Subsidiary would be liable or (ii) a closing agreement pursuant
to Section 7121 of the Code, or any predecessor provision thereof or any similar
provision of foreign, state or local Tax law that relates to the assets or
operations of the Company or any Subsidiary, except any extensions or closing
agreements that are not material to the Company and its Subsidiaries, taken as a
whole.
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(d) Except as set forth on Schedule 3.13 hereto, neither the Company nor
any Subsidiary is (and has never been) a party to any tax sharing agreement.
Except for the Executive Officer Severance Plan and the effective acceleration
of Options as a result of the consummation of the Transactions, neither the
Company nor any Subsidiary has entered into any compensatory agreements with
respect to the performance of services as to which payment thereunder would
result in a nondeductible expense to the Company or any Subsidiary pursuant to
Section 280G of the Code or would result in an excise tax to the recipient of
any such payment pursuant to Section 4999 of the Code. The Company has provided
to Parent a description of the Company's basis in its assets, the Company's and
each Subsidiary's current and accumulated earnings and profits, the Company's
and each Subsidiary's net operating loss carryforwards, other material tax
carryovers, excess loss accounts, material tax elections, and deferred
intercompany transactions. Neither the Company nor any Subsidiary has any net
operating losses or other tax attributes presently limited under Code Sections
382, 383, or 384, or the federal consolidated return regulations. The Company
has made available to Parent true and complete copies of (i) all income tax
audit reports, statements of deficiencies, closing or other agreements received
by or on behalf of the Company or any Subsidiary relating to Taxes, and (ii) all
federal, state, local and foreign Tax returns of the Company or any Subsidiary
for all periods ending on and after the last Friday in December of 1991. Neither
the Company nor any Subsidiary does business in or is subject to Tax in any
state, local, territorial or foreign taxing jurisdiction other than those for
which all Returns have been made available to Parent.
(e) For purposes of this Agreement, "Tax" (and with correlative meaning,
"Taxes") shall mean all federal, state, local, foreign or other taxing authority
net income, franchise, sales, use, ad valorem, property, payroll, withholding,
excise, severance, transfer, employment, alternative or add-on minimum, stamp,
occupation, premium, environmental or windfall profits taxes, and other taxes,
charges, fees, levies, imposts, customs, duties, licenses or other assessments,
together with any interest and any penalties, additions to tax or additional
amounts imposed by any taxing authority.
SECTION 3.14. Employee Benefit Plans.
(a) Plans. Schedule 3.14 attached hereto lists (i) all material "employee
benefit plans" within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), (ii) all material employment
agreements currently in effect, including, but not limited to, any individual
benefit arrangement, policy or practice with respect to any current or former
employee or director of the Company or Member of the Controlled Group, and (iii)
to the extent material to the Company in amount, all other employee benefit,
bonus or other incentive compensation, stock option, stock purchase, stock
appreciation, severance pay, lay-off or reduction in force, change in control,
sick pay, vacation pay, salary continuation, retainer, leave of absence,
educational assistance, service award, employee discount, fringe benefit plans,
arrangements, policies or practices, whether legally binding or not, to which
the Company or any Member of the Controlled Group maintains, contributes to or
has any obligation to or liability for (collectively, the "Plans"). Except as
set forth on Schedule 3.14, none of the Plans is either a plan described in
Section 3(35) of ERISA or a plan subject to the minimum funding standards set
forth in Section 302 of ERISA and Section 412 of the Code (a "Defined Benefit
Plan"), and neither the Company nor any Member of the Controlled Group has ever
sponsored, maintained or contributed to, or ever been obligated to contribute
to, a Defined Benefit Plan. None of the Plans is a plan described in Section
3(37) of ERISA (a "Multiemployer Plan"), and neither the Company nor any Member
of the Controlled Group has ever contributed to, or ever been obligated to
contribute to, a Multiemployer Plan. Except as set forth on Schedule 3.14, the
Company does not maintain or contribute to any welfare benefit plan which
provides health benefits to an employee after the employee's termination of
employment or retirement except as required under Section 4980B of the Code and
Sections 601 through 608 of ERISA. For purposes of this Agreement, "Member of
the Controlled Group" shall mean each corporation and each trade or business,
whether or not incorporated, which would be treated as a single employer with
the Company under Section 4001 of ERISA or Section 414(b), (c), (m) or (o) of
the Code.
(b) Compliance. Except as set forth on Schedule 3.14 hereto, to the best
knowledge of the Company, each Plan which is an "employee benefit plan," as
defined in Section 3(3) of ERISA, complies by its terms
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and in operation in all material respects with the requirements provided by any
and all statutes, orders or governmental rules or regulations currently in
effect and applicable to the Plan, including but not limited to ERISA and the
Code. To the best knowledge of the Company, all reports, forms and other
documents required to be filed with any government entity with respect to any
Plan (including without limitation, summary plan descriptions, Forms 5500 and
summary annual reports) have been timely filed and are accurate, except where
the failure to make such timely filing or such inaccuracy, alone or collectively
with others, could not reasonably be expected to have a Material Adverse Effect
on the Company. All of the Plans, to the extent applicable, are in material
compliance with the continuation of group health coverage provisions contained
in Section 4980B of the Code and Sections 601 through 608 of ERISA.
(c) Qualification. Except as set forth on Schedule 3.14 hereto, each Plan
intended to qualify under Section 401(a) of the Code has been determined by the
Internal Revenue Service to so qualify after January 1, 1989, and each trust
maintained pursuant thereto has been determined by the Internal Revenue Service
to be exempt from taxation under Section 501 of the Code. To the best knowledge
of the Company, and except as set forth on Schedule 3.14 hereto, nothing has
occurred since the date of the Internal Revenue Service's favorable
determination letter that could adversely affect the qualification of the Plan
and its related trust. The Company and each Member of the Controlled Group have
timely and properly applied for a written determination by the Internal Revenue
Service on the qualification of each such Plan and its related trust under
Section 401(a) of the Code, as amended by the Tax Reform Act of 1986 and
subsequent legislation enacted through the date hereof, and Section 501 of the
Code.
(d) Contributions. All Plan contributions for all periods ending prior to
the Effective Time (including periods from the first day of the current plan
year to the Effective Time) have been made prior to the Effective Time by the
Company in accordance with the recommended contribution in any applicable
actuarial report.
(e) Insurance Premiums. All insurance premiums which are due and payable
have been paid in full, subject only to normal retrospective adjustments in the
ordinary course, with regard to the Plans for plan years ending on or before the
Effective Time.
(f) Absence of Certain Events. With respect to each Plan, to the best
knowledge of the Company, and except as set forth on Schedule 3.14:
(i) no prohibited transactions (as defined in Section 406 or 407 of
ERISA or Section 4975 of the Code) have occurred for which a statutory
exemption is not available;
(ii) no action or claims (other than routine claims for benefits made
in the ordinary course of Plan administration for which Plan administrative
review procedures have not been exhausted) are pending, threatened or
imminent against or with respect to the Plan, any employer who is
participating (or who has participated) in any Plan or any fiduciary (as
defined in Section 3(21) of ERISA), of the Plan;
(iii) neither the Company nor any fiduciary has any knowledge of any
facts which could give rise to any such action or claim; and
(iv) it provides that it may be amended or terminated at any time and,
except for benefits accrued or vested under Company Plans and benefits
protected under Section 411(d) of the Code, all benefits payable to current
employees, terminated employees or any beneficiary may be amended or
terminated by the Company at any time without liability.
(g) Other Liabilities. To the best knowledge of the Company, neither the
Company nor any Member of the Controlled Group has any liability or is
threatened with any liability (whether joint or several) (i) for any excise tax
imposed by Sections 4971, 4975, 4976, 4977 or 4979 of the Code, or (ii) to a
fine under Section 502 of ERISA.
(h) Documents. True, correct and complete copies of all documents creating
or evidencing any Plan have been made available to the Parent, and true, correct
and complete copies of all reports, forms and other documents required to be
filed with any governmental entity (including, without limitation, summary plan
descriptions, Forms 5500 and summary annual reports for all plans subject to
ERISA) have been made available to the Parent or its representatives. To the
best knowledge of the Company, there are no material
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negotiations, demands or proposals which are pending or have been made which
concern matters now covered, or that would be covered, by the type of agreements
listed in Schedule 3.15.
(i) Books and Records. All expenses and liabilities relating to all of the
Plans have been, and as of the end of the fiscal quarter immediately preceding
the Effective Time will be, fully and properly accrued on the Company's books
and records and disclosed in accordance with GAAP and in Plan financial
statements.
SECTION 3.15. Severance Arrangements.
Except as set forth on Schedule 3.15 hereto, neither the Company nor any
Significant Subsidiary nor, to the Company's best knowledge, any other
Subsidiary is party to any agreement with any employee (i) the benefits of which
(including, without limitation, severance benefits) are contingent, or the terms
of which are materially altered, upon the occurrence of a transaction involving
the Company or any Significant Subsidiary or, to the Company's best knowledge,
any other Subsidiary of the nature of any of the Transactions or (ii) providing
severance benefits in excess of those generally available under the Company's
severance policies as in effect on the date hereof (which are described on
Schedule 3.15), or which are conditioned upon a change of control, after the
termination of employment of such employees regardless of the reason for such
termination of employment. Except as set forth on Schedule 3.15, neither the
Company nor any Significant Subsidiary nor, to the Company's best knowledge, any
other Subsidiary is a party to any employment agreement or compensation
guarantee that provides for compensation or guarantees of amounts in excess of
or potentially in excess of $200,000 to any one individual.
SECTION 3.16. Environmental Matters.
To the best knowledge of the Company and except as set forth on Schedule
3.11 hereto, each of the Company and its Subsidiaries conducts its business and
operations in compliance with, and is otherwise in compliance with, all
Applicable Law relating to the environment, except where such noncompliance
could not reasonably be expected to have a Material Adverse Effect on the
Company. To the best knowledge of the Company, neither the Company nor any
Subsidiary has received notice of any action, suit, investigation, proceeding or
claim from any Governmental Authority or other third party, (i) based on or
related to the manufacture, processing, import, export, distribution, use,
treatment, storage, disposal, transport or handling, or the emission, discharge,
release or threatened release into the environment, of any pollutant,
contaminant or hazardous or toxic material or waste (collectively, an
"Environmental Event") by the Company or any Subsidiary or by any other party
with respect to the business of, or any property owned or leased by, the Company
or any Subsidiary or (ii) alleging that the Company or any of its Subsidiaries
is not in compliance with any Applicable Law relating to the Environment, which,
if adversely determined, could reasonably be expected to have a Material Adverse
Effect on the Company. To the best knowledge of the Company, there has never
been any Environmental Event with respect to any of the premises occupied by or
used by the Company or any Subsidiary prior to the date such premises were so
occupied or used, except such as could not reasonably be expected to have a
Material Adverse Effect on the Company. Without limiting the generality of the
foregoing, to the best knowledge of the Company except as set forth on Schedule
3.11 hereto, neither the Company nor any Subsidiary has disposed of or placed on
or in any property or facility owned or leased by the Company or any Subsidiary
or used in the business of the Company or any Subsidiary any waste materials,
hazardous materials or hazardous substances in violation of law, except such as
could not reasonably be expected to have a Material Adverse Effect on the
Company.
SECTION 3.17. Limitations on Business Activities.
Except as set forth on Schedule 3.17 hereto, the Company and each
Significant Subsidiary and, to the Company's best knowledge, each other
Subsidiary is not, and after the Effective Time neither the Surviving
Corporation nor Parent (by reason of any agreement to which the Surviving
Corporation is a party) will be, subject to any noncompetition or similar
restriction on their respective businesses or activities or those of their
affiliates, except such as could not reasonably be expected to have a Material
Adverse Effect on the Company.
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SECTION 3.18. Customer Relationships.
As of the date of this Agreement, neither the Company nor any Significant
Subsidiary or, to the Company's best knowledge, any other Subsidiary has, since
December 27, 1996, been notified that it will, and to the best knowledge of the
Company no representative of any customer has notified the Company or any
Subsidiary that in the event of a change of ownership of the Company such as
contemplated by this Agreement the Company or any Subsidiary would, suffer
diminution in its relationship with any customer, which loss or diminution could
reasonably be expected to result in a Material Adverse Effect on the Company.
SECTION 3.19. Certain Transactions.
Except as disclosed in the Company SEC Filings or on Schedule 3.19 hereto,
there are no existing or proposed material transactions or arrangements between
the Company or any Subsidiary and any person or entity controlling or under
common control with the Company (other than Parent and its affiliates).
SECTION 3.20. State Takeover Statute.
The provisions of Section 203 of the DGCL are not applicable to the Merger.
SECTION 3.21. Fairness Opinion.
The Company has received the opinion (the "Fairness Opinion") of Morgan
Stanley & Co. Incorporated ("Morgan Stanley"), financial advisor to the Company,
dated the date of this Agreement, to the effect that the consideration to be
received by the holders of Company Common Stock pursuant to the Offer and the
Merger is fair, from a financial point of view, and has delivered a copy of such
opinion to Parent.
SECTION 3.22. Brokers.
No person is entitled to any brokerage or finder's fee or commission in
connection with the Transactions as a result of any action taken by or on behalf
of the Company, other than Morgan Stanley pursuant to an engagement letter, a
copy of which has been furnished to Parent.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO
Parent and Newco, jointly and severally, represent and warrant to the
Company as follows:
SECTION 4.1. Organization and Qualification.
(a) Organization. Parent is a corporation duly organized, validly existing
and in good standing under the laws of Japan. Newco is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own or lease and
operate its properties and assets and to carry on its business as it is now
being conducted. Each of Parent and Newco is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction in
which the character of its properties owned or leased or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified would not have a material adverse effect on Parent's or Newco's
ability to perform their respective obligations hereunder.
(b) Newco Activities. Since the date of its incorporation, Newco has not
engaged in any activity other than in connection with or as contemplated by this
Agreement, the Offer and the Merger or in connection with arranging financing
required to consummate the Transactions.
SECTION 4.2. Authority Relative to Agreement.
Each of Parent and Newco has all requisite corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder. The
execution, delivery and performance of this
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Agreement by Parent and Newco and the consummation by Parent and Newco of the
Transactions have been duly authorized by Parent and Newco, and no other
corporate proceedings on the part of Parent or Newco (including, without
limitation, any action by their respective stockholders) are necessary to
authorize this Agreement and the Transactions. This Agreement has been duly
executed and delivered by each of Parent and Newco and constitutes the legal,
valid and binding obligation of Parent and Newco, enforceable against Parent and
Newco in accordance with its terms, except as such enforceability may be subject
to or limited by bankruptcy, insolvency, reorganization, or other similar laws,
now or hereafter in effect, affecting the enforcement of creditors' rights
generally, and except that the availability of equitable remedies, including
specific performance, may be subject to the discretion of the court before which
any proceeding therefor may be brought.
SECTION 4.3. Non-Contravention.
The execution and delivery of this Agreement by Parent and the consummation
by Parent and Newco of the Transactions will not (i) conflict with any provision
of their respective Certificates of Incorporation or Bylaws or (ii) result (with
the giving of notice or the lapse of time or both) in any violation of or
default or loss of a benefit under, or permit the acceleration of any obligation
under, any mortgage, indenture, lease, agreement or other instrument, permit,
concession, grant, franchise or license or any Applicable Law applicable to
Parent or Newco or any of their respective properties, other than any such
violation, default, loss or acceleration that would not materially adversely
affect the ability of Parent or Newco, as the case may be, to perform their
respective obligations hereunder.
SECTION 4.4. Governmental Approvals.
No filing, declaration or registration with, or permit, authorization,
consent or approval, of, any Governmental Authority is required to be made or
obtained by Parent or Newco in connection with the execution and delivery of
this Agreement by Parent or Newco or the consummation by Parent or Newco of the
Transactions, except for (i) compliance by Parent and Newco with the HSR Act,
(ii) compliance by Parent and Newco with the Exon-Florio amendments to the
Omnibus Trade and Competition Act of 1988 and the 1992 Byrd-Exon amendments to
the Defense Production Act (collectively, as the same may be supplemented or
amended, the "Exon-Florio Act"), (iii) compliance by Parent and Newco with the
National Industrial Security Program, (iv) filings pursuant to the Securities
Act and the Exchange Act and the rules and regulations promulgated by the SEC
thereunder and state securities and blue sky laws, (v) the filing of a
certificate of merger with the Secretary of State of the State of Delaware in
accordance with the DGCL, (vi) compliance with European Community Regulation
4064/89 and applicable antitrust and competition laws and regulations of Canada,
(vii) the approval by the Bank of Japan pursuant to the Japan Foreign Exchange
Control Act, and the notices to be filed with the Tokyo, Osaka, Nagoya, Basil,
Frankfurt, Zurich, London and Geneva stock exchanges, and (viii) such consents,
approvals, orders or authorizations which if not obtained, or registrations,
declarations or filings which if not made, would not materially adversely affect
the ability of Parent or Newco to consummate the Transactions.
SECTION 4.5. Brokers.
No person is entitled to any brokerage or finder's fee or commission in
connection with the Transactions as a result of any action taken by or on behalf
of Parent or Newco, other than Lehman Brothers Inc.
SECTION 4.6. Financing.
Parent has available to it cash, credit lines or other sources of financing
to provide the funds necessary for completion of the Transactions.
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ARTICLE V.
CERTAIN AGREEMENTS
SECTION 5.1. Conduct of the Company's Business.
The Company covenants and agrees that, prior to the Effective Time, unless
Parent shall otherwise consent in writing or as otherwise expressly contemplated
by this Agreement:
(a) the business of the Company and the Subsidiaries shall be
conducted only in, and the Company and the Subsidiaries shall not take any
action except in, the ordinary course of business;
(b) neither the Company nor any Subsidiary shall, directly or
indirectly, do any of the following: (i) amend or propose to amend its
Certificate of Incorporation or Bylaws or reincorporate in any
jurisdiction; (ii) split, combine or reclassify any issued and outstanding
shares of its capital stock, or declare, set aside or pay any dividend or
other distribution (payable in cash, stock, property or otherwise) with
respect to such shares (except for any dividends paid in the ordinary
course to the Company or to any wholly-owned Subsidiary); (iii) redeem,
purchase, acquire or offer to acquire (or permit any Subsidiary to redeem,
purchase, acquire or offer to acquire) any shares of its capital stock; or
(iv) issue, sell, pledge, accelerate, modify the terms of or dispose of, or
agree to issue, sell, pledge, accelerate, modify the terms of or dispose
of, any additional shares of, or securities convertible or exchangeable
for, or any options, warrants, calls, commitments or rights of any kind to
acquire any shares of, its capital stock of any class or other property or
assets, whether pursuant to the Company Option Plans or otherwise,
provided, that the Company may issue shares of Company Common Stock
pursuant to the purchase rights then outstanding under the Company Stock
Purchase Plan and upon the exercise of currently outstanding Options
referred to in Section 3.5 hereof and may take the actions contemplated in
Section 2.6 hereof;
(c) neither the Company nor any Significant Subsidiary shall (i)
transfer, lease, license, sell, mortgage, pledge, dispose of or encumber
any material assets except in the ordinary course of business; (ii) acquire
(by merger, consolidation or acquisition of stock or assets) any
corporation, partnership or other business organization or division thereof
or any other material assets; (iii) enter into or modify any material
contract, lease, agreement or commitment, except in the ordinary course of
business; (iv) terminate, modify, assign, waive, release or relinquish any
material rights or claims or amend any material rights or claims not in the
ordinary course of business; (v) pay, discharge or satisfy any material
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction of any such claims, liabilities or obligations, in the
ordinary course of business, reflected or reserved against in, or
contemplated by, the consolidated financial statements of the Company and
its Subsidiaries included in the Company SEC Filings; or (vi) settle or
compromise any material claim, action, suit or proceeding pending or
threatened against the Company or any Subsidiary, or, if the Company may be
liable or obligated to provide indemnification, against the Company's
directors or officers, before any court, governmental agency or arbitrator;
(d) neither the Company nor any Subsidiary shall (i) incur any
long-term debt or, except in the ordinary course of business in amounts
consistent with past practice, short-term debt; (ii) incur or modify any
material indebtedness or other liability; (iii) assume, guarantee, endorse
or otherwise become liable or responsible (directly or indirectly,
contingent or otherwise) for the obligations of any other person, except in
the ordinary course of business; or (iv) make any loans, advances or
capital contributions to, or investments in, any other person (other than
to wholly-owned Subsidiaries or customary loans or advances to employees in
the ordinary course of business);
(e) neither the Company nor any Subsidiary shall grant any increase in
the salary or other compensation of its employees, or grant any bonus to
any employee or enter into any employment agreement or make any loan to or
enter into any material transaction of any other nature with any employee
of the Company or any Subsidiary, except (i) pursuant to the terms of
employment agreements or Company policies in effect on the date hereof and
previously disclosed to Parent and (ii) in the case of
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employees who are not executive officers of the Company, in the ordinary
course of business and consistent with past practice;
(f) neither the Company nor any Subsidiary shall, except as
contemplated by this Agreement or as may be required by applicable law or
regulation or, in the case of employees who are not executive officers of
the Company, in the ordinary course of business (i) adopt, increase,
accelerate the vesting of or payment of any amounts in respect of, or
otherwise amend, in any respect, any collective bargaining, bonus, profit
sharing, incentive or other compensation, stock option, stock purchase or
restricted stock, insurance, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund, plan or
arrangement for the benefit or welfare of any directors, officers or
employees (including, without limitation, any such plan or arrangement
relating to severance or termination pay); or (ii) enter into any
employment or severance agreement with or grant any severance or
termination pay to any officer or director of the Company or any
Subsidiary;
(g) neither the Company nor any Subsidiary shall take any action that
would make any representation or warranty of the Company hereunder
inaccurate in any respect at, or as of any time prior to, the Effective
Time, or omit to take any action necessary to prevent any such
representation or warranty from being inaccurate in any respect at any such
time;
(h) neither the Company nor any Subsidiary shall change any of the
accounting methods used by it, unless required by GAAP or other applicable
accounting principles;
(i) neither the Company nor any Subsidiary shall make any Tax election
(other than in the ordinary course of preparing and filing its Tax returns)
or settle or compromise any Tax liability or investigation;
(j) neither the Company nor any Subsidiary shall enter into any
agreement, contract, commitment or arrangement to do, or to authorize,
recommend, propose or announce an intention to do, any of the actions
described in the above paragraphs, other than paragraph (a); and
(k) each of the Company and each Subsidiary shall use its reasonable
best efforts, to the extent not prohibited by the foregoing provisions of
this Section 5.1, to maintain its relationships with its suppliers,
customers and employees, and, if and as requested by Parent or Newco, (i)
to the extent permitted by Applicable Law, the Company shall use its
reasonable best efforts to make reasonable arrangements for representatives
of Parent or Newco to meet with customers and suppliers of the Company or
any Subsidiary, and (ii) the Company shall schedule, and the management of
the Company shall participate in, meetings of representatives of Parent or
Newco with employees of the Company or any Subsidiary.
Section 5.2 Access to Information.
(a) Access and Disclosure. Subject to the requirements of any binding
confidentiality agreements with customers and subject to any applicable
limitations imposed by law, the Company shall, and shall cause the Subsidiaries
and its and their respective officers, directors, employees, representatives and
agents to, afford, from the date hereof to the Effective Time, the officers,
employees, counsel, representatives and agents of Parent reasonable access
during regular business hours to its officers, employees, agents, properties,
books, records and workpapers, and shall promptly furnish Parent all financial,
operating and other information and data as Parent, through its officers,
employees or agents, may reasonably request, provided, that in the event such
access or the furnishing of such information is prohibited or limited due to
binding customer agreements or applicable law, the Company will so inform Parent
and will upon request use its reasonable best efforts to obtain any necessary
consent to allow such access or to provide such information. During such period,
the Company shall (and shall cause each Subsidiary to) furnish promptly to
Parent (i) a copy of each report, schedule, registration statement or other
document filed or received by it during such period pursuant to the requirements
of federal securities laws, and (ii) all other information concerning its
business, properties and personnel as Parent may request.
(b) Confidentiality Agreement; Standstill Agreement. Parent, Newco and the
Company agree that the provisions of the confidentiality agreement between
Parent and the Company dated June 30, 1997 (the "Confidentiality Agreement") and
the standstill agreement between Parent and the Company dated July 9,
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1997 (the "Standstill Agreement") shall remain binding and in full force and
effect in accordance with their respective terms and that the terms thereof are
incorporated herein by reference.
(c) Effect. No investigation pursuant to this Section 5.2 shall affect, add
to or subtract from any representations or warranties of the parties hereto or
the conditions to the obligations of the parties hereto to consummate the Offer
or effect the Merger.
Section 5.3. Consents and Approvals; Further Assurances.
(a) Consents and Approvals. Each of the Company, Parent and Newco will take
all reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on it with respect to this Agreement and the Transactions
(which actions shall include, without limitation, furnishing all information,
making all filings and taking all other acts (i) required under the Exchange
Act, the Securities Act and all other federal or state securities laws, (ii)
required under the HSR Act, the Exon-Florio Act or any antitrust or competition
laws in the European Community, or (iii) required or requested by any bank,
stock exchange, or by any other Governmental Authority) and will cooperate
promptly with and furnish information to each other in connection with any such
requirements imposed on any of them or their respective subsidiaries in
connection with this Agreement and the Transactions. Each of the Company, Parent
and Newco will, and will cause its subsidiaries to, take all reasonable action
to obtain (and will cooperate with each other in obtaining) any consent,
authorization, order or approval of, or any exemption by, or to provide any
required notice to, any Governmental Authority or other public or private third
party required to be obtained or made by Parent, Newco or the Company or any of
their subsidiaries in connection with the Merger or the taking of any action
contemplated in connection with the Merger or otherwise by this Agreement.
(b) Antitrust and Competition Filings. Without limiting the generality of
sub-section (a) above, the Company and Parent shall take all reasonable actions
necessary to file as soon as practicable notifications under the HSR Act and any
antitrust or competition laws in the European Community and to respond as
promptly as practicable to any inquiries received from the Federal Trade
Commission, the Antitrust Division of the Department of Justice or any other
Governmental Authority for additional information or documentation and to
respond as promptly as practicable to all inquiries and requests received from
any Governmental Authority in connection with antitrust and competition matters.
(c) Further Assurances. Subject to the terms and conditions herein
provided, each of the Parties agrees to use all reasonable efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the Transactions, including, without limitation, using all
reasonable efforts to obtain all necessary waivers, consents and approvals.
(d) Stockholder Litigation. The Company shall give Parent the opportunity
to participate in the defense and settlement of any stockholder litigation
against the Company or its directors relating to any of the transactions
contemplated by this Agreement and shall not enter into any such settlement
without Parent's consent, which consent shall not be unreasonably withheld.
(e) Limits. Nothing in this Agreement shall require Parent or Newco to
agree to make, or to permit the Company or any of the Subsidiaries to make, any
divestiture of a significant asset in order to obtain any waiver, consent or
approval.
Section 5.4. Inquiries and Negotiations.
(a) Notice. The Company shall immediately notify Parent if any proposal,
offer, inquiry or other contact is received by, any information is requested
from, or any discussions or negotiations are sought to be initiated or continued
with, the Company by or from any person, corporation, entity or "group" (as
defined in Section 13(d) of the Exchange Act) other than Parent and its
affiliates, representatives and agents (each, a "Third Party") in connection
with any merger, consolidation, sale of any Subsidiary or division that is
material to the business of the Company and the Subsidiaries, sale of shares of
capital stock or other equity securities, tender or exchange offer,
recapitalization, debt restructuring or similar transaction involving the
Company
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(such transactions being hereinafter referred to as "Alternative Transactions"),
and shall, in any such notice to Parent, indicate the identity of the Third
Party and the terms and conditions of any proposals or offers or the nature of
any inquiries or contacts, and thereafter shall keep Parent informed, on a
current basis, of the status and terms of any such proposals or offers and the
status of any such discussions or negotiations. Without limiting the generality
of the foregoing, the Company shall provide Parent with not less than two (2)
Business Days' notice prior to the execution by the Company of any definitive
agreement with respect to any Alternative Transaction or any public announcement
relating to any Alternative Transaction.
(b) Third Parties. Prior to furnishing any non-public information to, or
entering into negotiations or discussions with, any Third Party, the Company
will obtain an executed confidentiality agreement from such Third Party on terms
substantially the same as, or no less favorable to the Company in any material
respect than, those contained in the Confidentiality Agreement and the
Standstill Agreement. The Company shall not release any Third Party from, or
waive any provision of, any such confidentiality agreement or any other
confidentiality or standstill agreement to which the Company is a party.
SECTION 5.5. Notification of Certain Matters.
The Company shall give prompt notice to Parent and Newco, and Parent and
Newco shall give prompt notice to the Company, of (i) the occurrence, or failure
to occur, of any event that such Party believes would be likely to cause any of
its representations or warranties contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Effective Time and (ii) any material failure of the Company, Parent or Newco, as
the case may be, or any officer, director, employee or agent thereof, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any such
notice shall not limit or otherwise affect the remedies available hereunder to
the Party receiving such notice.
SECTION 5.6. Indemnification.
(a) Rights to Indemnification. For six years after the Effective Time, the
Surviving Corporation (or any successor to the Surviving Corporation) shall
indemnify, defend and hold harmless the present and former officers, directors,
employees and agents of the Company and its subsidiaries (each an "Indemnified
Party") against all losses, claims, damages, liabilities, fees, costs and
expenses (including reasonable fees and disbursements of counsel in advance of
disposition of judgments, fines, losses, claims, liabilities and amounts paid in
settlement (provided that any such settlement is effected with the written
consent of Parent or the Surviving Corporation, which consent will not be
unreasonably withheld or delayed)) based in whole or in part on the fact that
such person is or was such a director, officer, employee or agent and arising
out of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, matters arising out of or pertaining to the
Transactions) to the full extent provided under the terms of the Company's
Certificate of Incorporation, Bylaws and indemnification agreements, all as in
effect at the date hereof, including provisions relating to advancement of
expenses incurred in the defense of any action or suit, and subject to
applicable law; provided, that, in the event any claim or claims are asserted or
made within such six year period, all rights to indemnification or advancement
of expenses in respect of such claim or claims shall continue until disposition
of any and all such claims; provided, further, that any determination required
to be made with respect to whether an Indemnified Party's conduct complies with
the standards set forth under Delaware law, the Company's Certificate of
Incorporation or Bylaws or such agreements, as the case may be, shall be made by
independent counsel mutually acceptable to Parent and the Indemnified Party; and
provided, further, that nothing herein shall impair any existing rights or
obligations of any present or former directors or officers of the Company. In
the event of any threatened or actual claim, suit, proceeding or investigation
as to which an Indemnified Party is entitled to indemnification or advancement
of expenses hereunder (whether asserted before, at or after the Effective Time),
the Indemnified Party may retain counsel reasonably satisfactory to it after
consultation with Parent, but in no event shall the Surviving Corporation be
required to reimburse the costs of such counsel hereunder unless (i) the
Surviving Corporation shall have declined to assume the defense of such claim
with counsel reasonably satisfactory to the Indemnified Party within ten U.S.
Business Days of a written request for indemnification given in accordance with
Section 8.5 or (ii) the Indemnified
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Party shall have reasonably concluded, upon the advice of counsel, that there
may be defenses available to it which conflict with those available to the
Surviving Corporation; provided, that the Surviving Corporation shall not, in
connection with any one such action or proceeding or separate but substantially
similar actions or proceedings arising out of the same general allegations, be
liable for the fees and expenses of more than one separate firm of attorneys at
any time for all Indemnified Parties, except to the extent that local counsel,
in addition to such parties' regular counsel, is necessary in order to
effectively defend against such action or proceeding.
(b) D&O Insurance. The Surviving Corporation shall maintain the Company's
existing officers' and directors' liability insurance ("D&O Insurance") for a
period of not less than three years after the Effective Time, except to the
extent such insurance is not generally available in the market; provided, that
the Surviving Corporation may substitute therefor policies of substantially
similar coverage and amounts containing terms no less favorable to such former
directors or officers; provided, further, if the existing D&O Insurance expires,
is terminated or canceled during such period, Parent or the Surviving
Corporation will use all reasonable efforts to obtain substantially similar D&O
Insurance; provided, further, however, that in no event shall the Surviving
Corporation be required to pay aggregate premiums for insurance under this
Section 5.6 in excess of 175% of the aggregate premiums to be paid by the
Company for the twelve-month period ending December 9, 1997 (which the Company
represents and warrants is $628,195) on an annualized basis for such purpose (in
which event the Surviving Corporation shall cause to be maintained D&O Insurance
which, in Parent's good faith judgment, provides the maximum coverage available
at an annual premium equal to 175% of the Company's 1996 annualized premiums).
(c) Charter Documents. The Surviving Corporation (or any successor
corporation) shall not, for a period of six years from the Effective Time, amend
the provisions of its Certificate of Incorporation or Bylaws providing for
exculpation of director and officer liability and indemnification of the
Indemnified Parties in any manner that would adversely affect the rights
thereunder of Indemnified Parties who at any time prior to the Effective Time
were entitled thereunder to exculpation or indemnification in respect of actions
or omissions occurring at or prior to the Effective Time, except as required by
Applicable Law.
(d) Beneficiaries; Equitable Relief. The rights under this Section 5.6 are
intended to benefit the Company and each Indemnified Party hereunder, shall be
binding on all successors and assigns of Parent and the Surviving Corporation
and shall be enforceable by each Indemnified Party. The Parties acknowledge and
agree that the remedy at law for any breach of the obligations of Parent and the
Surviving Corporation under this Section 5.6 is and will be insufficient and
inadequate and that the Indemnified Parties, in addition to any remedies at law,
shall be entitled to equitable relief (including specific performance). The
Surviving Corporation shall pay all reasonable expenses, including reasonable
attorneys' fees, incurred by any Indemnified Party in enforcing the indemnity
and other obligations set forth in this Section 5.6.
(e) Parent. Parent will not cause the liquidation or dissolution of the
Surviving Corporation or cause the Surviving Corporation to transfer all or
substantially all of its assets to a non-affiliated third party, without first
providing a guarantee by the Parent of all of the Surviving Corporation's
payment and other obligations as set forth in this Section 5.6 or insurance
covering the entire obligation of the Surviving Corporation under this Section
5.6. Parent will cause the Surviving Corporation to honor all of its
indemnification obligations under this Section 5.6 and will not assert or permit
Surviving Corporation to assert any defense thereto except those specified in
Section 102(b)(7) of the DGCL.
(f) Survival. This Section 5.6 shall survive the consummation of the Merger
at the Effective Time, is intended to benefit the Company, Parent, the Surviving
Corporation and the Indemnified Parties, and shall be binding on the successors
and assigns of the Surviving Corporation.
SECTION 5.7. FIRPTA Certificate.
Prior to the date of expiration of the Offer, the Company shall deliver to
Newco a certification that the Shares do not constitute U.S. real property
interests within the meaning of Section 897 of the Code, in form satisfactory to
Newco.
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SECTION 5.8. Employee Benefits.
(a) Parent shall cause the Surviving Corporation and its Subsidiaries to
(x) honor all employment, change in control, deferred compensation, pension,
retirement and severance agreements, pay and personnel policies in effect on the
date hereof between the Company or one of its Subsidiaries and any employee of
the Company or one of its Subsidiaries, or maintained for the benefit of any
employee of the Company or one of its Subsidiaries, all of which have been made
available to Parent, and (y) honor all bonus plans and arrangements for the
fiscal year ending December 31, 1997 made by the Company or any of its
Subsidiaries prior to the date hereof.
(b) Parent shall cause the Surviving Corporation to provide active
employees of the Company and its Subsidiaries with benefits (including, without
limitation, welfare benefits) that are no less favorable, taken as a whole, than
the benefits provided under the Company's benefit plans (other than equity-based
plans) as in effect immediately prior to the Effective Time. To the extent that
service is relevant for eligibility, vesting or benefit calculations or
allowances (including, without limitation, entitlements to vacation and sick
days) under any plan or arrangement maintained in order to provide the benefits
described in the preceding sentence, such plan or arrangement shall credit
employees for service on or prior to the Effective Time with the Company or any
of its Subsidiaries.
ARTICLE VI.
CONDITIONS TO THE MERGER
SECTION 6.1. Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger shall be
subject, at its option, to the fulfillment at or prior to the Effective Time of
the following conditions:
(a) Stockholder Approval. If required by the DGCL, this Agreement and
the Merger shall have been approved and adopted by the requisite vote of
the stockholders of the Company in accordance with applicable provisions of
the Company's Certificate of Incorporation and the DGCL;
(b) No Illegality. No Applicable Law shall prohibit consummation of
the Merger or make the Merger illegal; and
(c) No Termination of Offer. The Offer shall not have been terminated
in accordance with its terms prior to the purchase of any Shares.
SECTION 6.2.Conditions to Parent's and NEWCO's Obligation to Effect the Merger.
The obligation of Parent and Newco to effect the Merger in addition shall
be subject, at their option, to the fulfillment at or prior to the Effective
Time of the following conditions:
(a) Governmental Approvals. The expiration or earlier termination of
any waiting period under or in connection with the HSR Act, the Exon-Florio
Act, the antitrust and competition rules of the European Commission and of
all other Governmental Authorities shall have occurred;
(b) No Governmental Actions. No preliminary or permanent injunction or
other order, decree or ruling issued by any court of competent jurisdiction
nor any statute, rule, regulation or order entered, promulgated or enacted
by any governmental, regulatory or administrative agency or authority shall
be in effect that would restrain the effective operation of the business of
the Company and the Subsidiaries from and after the Effective Time, and no
proceeding challenging this Agreement or the Transactions or seeking to
prohibit, alter, prevent or materially delay the Merger shall be pending
before any Governmental Authority; and
(c) Consummation of Offer. Newco shall have purchased Shares pursuant
to the Offer (provided that this condition shall be deemed fulfilled if
Newco shall have failed to purchase Shares in violation of the Offer).
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ARTICLE VII.
TERMINATION AND ABANDONMENT
SECTION 7.1. Termination and Abandonment.
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time, whether before or after approval by the
stockholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company, if (i) Newco shall not have
purchased any Shares pursuant to the Offer by September 30, 1997, unless
such failure to purchase such Shares has been caused by the breach of this
Agreement by the Party seeking such termination, and provided, that if the
waiting period under the HSR Act shall not have expired or been terminated
as of such date or any Governmental Authority shall have caused to be
issued as of such date a temporary restraining order or a preliminary
injunction prohibiting the consummation of the Offer or the Merger and each
of the Parties, in either case, are seeking the termination of such waiting
period or contesting such temporary restraining order or preliminary
injunction, as the case may be, such date shall be extended to the earlier
of (A) the date of expiration or termination of such waiting period or the
lifting of such injunction or order or (B) October 31, 1997; or (ii) prior
to the purchase by Newco of any Shares pursuant to the Offer, any
Governmental Authority shall have issued an order, decree or ruling or
taken any other action, in each case permanently restraining, enjoining or
otherwise prohibiting all or any material part of the Transactions and such
order, decree, ruling or other action shall have become final and
non-appealable;
(c) by Parent, if (i) the Offer is terminated or expires without the
purchase of any Shares thereunder, unless such termination or expiration
has been caused by the failure of Parent or Newco to perform in any
material respect its obligations under this Agreement, or (ii) due to an
occurrence that, if occurring after the commencement of the Offer, could
reasonably be expected to result in a failure to satisfy any of the
conditions set forth in Annex II hereto, Parent and Newco shall have failed
to commence the Offer on or prior to the fifth U.S. Business Day following
the date of the initial public announcement of the Offer;
(d) by Parent, if (i) the Company shall have entered into a letter of
intent or agreement in principle or similar agreement, whether or not
legally binding, or into any definitive written agreement with respect to
an Alternative Transaction with a Third Party, or a Third Party has
commenced a tender offer or exchange offer for any shares of capital stock
of the Company, (ii) the Company Board shall have withdrawn, or modified or
amended in a manner adverse to Parent or Newco, its approval or
recommendation of the Offer and the Merger or approved, recommended or
endorsed any proposal for an Alternative Transaction, (iii) Morgan Stanley
shall have withdrawn the Fairness Opinion, or (iv) required approval of the
stockholders of the Company shall not have been obtained by reason of a
failure to obtain the required vote upon a vote held at a duly held meeting
of stockholders or at any adjournment thereof;
(e) by either Parent or Newco, on the one hand, or the Company, on the
other hand, if the other Party shall have failed to comply in any material
respect with any of the material obligations contained in this Agreement to
be complied with or performed by such Party at or prior to such date of
termination; or
(f) by the Company, if, prior to acceptance for payment of Shares by
Newco under the Offer, the Company shall have done each of the following:
(i) entered into a definitive written agreement with respect to an
Alternative Transaction with a Third Party; (ii) determined, after receipt
of written advice from legal counsel to the Company Board, that the failure
to take such action as described in the preceding clause (i) would cause
the Company Board to violate its fiduciary duties to the Company's
stockholders under Applicable Law; and (iii) given notice to Parent and
Newco of its intent to terminate this Agreement and of the terms and
conditions of the Alternative Transaction, such notice to be given at least
five Business Days prior to the date of termination of this Agreement.
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Any Party desiring to terminate this Agreement pursuant to this Section 7.1
shall give notice to the other party in accordance with Section 8.5.
SECTION 7.2. Effect of Termination.
Except as provided in Section 5.2(b) and Section 8.2 hereof, in the event
of the termination of this Agreement and the abandonment of the Merger pursuant
to Section 7.1, this Agreement shall thereafter become void and have no effect,
and no Party shall have any liability to any other Party or its stockholders or
directors or officers in respect thereof, except that nothing herein shall
relieve any Party from liability for any willful breach hereof.
ARTICLE VIII.
MISCELLANEOUS
SECTION 8.1. Nonsurvival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant hereto shall survive the Effective Time, provided
that this Section 8.1 shall not limit any covenant or agreement of the Parties
that by its terms contemplates performance after the Effective Time.
SECTION 8.2. Expenses, Etc.
Except as contemplated by this Agreement, all costs and expenses incurred
in connection with this Agreement and the consummation of the Transactions shall
be paid by the Party incurring such expenses.
SECTION 8.3. Publicity.
The Company and Parent agree that they will not issue any press release or
make any other public announcement concerning this Agreement or the Transactions
without the prior consent of the other Party, except that the Company or Parent
may make such public disclosure that it believes in good faith to be required by
law (in which event such Party shall consult with the other prior to making such
disclosure).
SECTION 8.4. Execution in Counterparts.
For the convenience of the Parties, 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.
SECTION 8.5. Notices.
All notices that are required or may be given pursuant to the terms of this
Agreement shall be in writing and shall be sufficient in all respects if given
in writing and delivered by hand or overnight courier service (providing proof
of delivery), transmitted by telecopy or mailed by registered or certified mail,
postage prepaid, as follows:
If to Newco or Parent to
Fujitsu Limited
Marunouchi Center Building
6-1 Marunouchi 1-Chome
Chiyoda-ku Tokyo 100
Japan
Attention: Takashi Takaya,
Director and General Manager,
Corporate Planning and
Business Development
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with a copy to:
Morrison & Foerster LLP
425 Market Street
San Francisco, CA 94105
Attention: Robert S. Townsend, Esq.
If to the Company, to:
Amdahl Corporation
1250 East Arques Avenue
M/S 109
P.O. Box 3470
Sunnyvale, CA 94088
Attention: John Lewis,
President and Chief Executive
Officer
with a copy to:
Brobeck, Phleger & Harrison LLP
Spear Street Tower
One Market
San Francisco, CA 94105
Attention: John W. Larson, Esq.
or such other address or addresses as any Party shall have designated by notice
in writing to the other parties hereto.
SECTION 8.6. Waivers.
The Company, on the one hand, and Parent and Newco, on the other hand, may,
by written notice to the other, at any time prior to the Effective Time (i)
extend the time for the performance of any of the obligations or other actions
of the other under this Agreement; (ii) waive any inaccuracies in the
representations or warranties of the other contained in this Agreement or in any
document delivered pursuant to this Agreement; (iii) waive compliance by the
other with any of the conditions contained in this Agreement; or (iv) waive
performance of any of the obligations of the other under this Agreement. Except
as provided in the preceding sentence, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf of
any Party, shall be deemed to constitute a waiver by the Party taking such
action of compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any Party of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
SECTION 8.7. Entire Agreement.
This Agreement, its Schedules, the documents executed at the Effective Time
in connection herewith, the Standstill Agreement and the Confidentiality
Agreement constitute the entire agreement among the Parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
oral and written, among the Parties with respect to the subject matter hereof.
No representation, warranty, promise, inducement or statement of intention has
been made by any Party that is not embodied in this Agreement or such other
documents, and none of the Parties shall be bound by, or be liable for, any
alleged representation, warranty, promise, inducement or statement of intention
not embodied herein or therein.
SECTION 8.8. Applicable Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to principles of conflict of laws.
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SECTION 8.9. Specific Performance.
The Parties agree that irreparable damage would occur in the event any
provision of this Agreement were not performed in accordance with the terms
hereof and that the Parties shall be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or in equity.
SECTION 8.10. Binding Effect, Benefits.
This Agreement shall inure to the benefit of and be binding upon the
Parties and their respective permitted successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the Parties
or their respective permitted successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement; provided,
however, that the provisions of Section 5.6 hereof shall accrue to the benefit
of, and shall be enforceable by, each of the current and former directors and
officers of the Company.
SECTION 8.11. Assignability.
Neither this Agreement nor any of the Parties' rights hereunder shall be
assignable by any Party without the prior written consent of the other Parties.
SECTION 8.12. Amendments.
This Agreement may be varied, amended or supplemented at any time before or
after the approval and adoption of this Agreement by the stockholders of the
Company, by action of the respective boards of directors of the Company and
Newco and by the proper officers of Parent, without action by the stockholders
thereof; provided that, after approval and adoption of this Agreement by the
Company's stockholders, no such variance, amendment or supplement shall, without
consent of such stockholders, reduce the amount or alter the form of the
consideration that the holders of the capital stock of the Company shall be
entitled to receive following the Effective Time pursuant to Section 2.5 hereof.
Without limiting the generality of the foregoing, this Agreement may only be
amended, varied or supplemented by an instrument in writing, signed by the
Parties.
SECTION 8.13. Headings.
The descriptive headings contained in this Agreement are included for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.14. Mutual Drafting.
Each Party has participated in the drafting of this Agreement, which each
Party acknowledges is the result of extensive negotiations between the Parties.
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IN WITNESS WHEREOF, the Parties have caused their duly authorized
representatives to execute and deliver this Agreement as of the date first above
written.
FUJITSU LIMITED
By /s/ KAZUTO KOJIMA
------------------------------------
Name: Kazuto Kojima
Title: Group President, Marketing
Group and
International Comupter Business
Group
FUJITSU INTERNATIONAL, INC.
By /s/ KAZUTO KOJIMA
------------------------------------
Name: Kazuto Kojima
Title: President
AMDAHL CORPORATION
By /s/ JOHN C. LEWIS
------------------------------------
Name: John C. Lewis
Title: President and Chief Executive
Officer
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ANNEX I
DEFINED TERMS
"Agreement" shall mean the Agreement and Plan of Merger to which this Annex
I is attached. References in this Annex I to a "Section" shall mean a reference
to the specified Section of the Agreement.
"Alternative Transactions" shall have the meaning ascribed to it in Section
5.4(a).
"Applicable Law" shall mean any foreign or domestic, federal, state or
local, statute, law, ordinance, rule, administrative interpretation, regulation,
order, writ, injunction, directive, permit, judgment, decree or other
requirement of any Governmental Authority.
"Business Day" shall mean a weekday other than a public holiday in the U.S.
or Japan, as the case may be. The term "U.S. Business Day" shall mean a business
day for purposes of the Exchange Act.
"Certificate" shall have the meaning ascribed to it in Section 2.7(a).
"Closing" shall have the meaning ascribed to it in Section 2.3.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company Agreement" shall have the meaning ascribed to it in Section 3.4.
"Company Annual Report" shall have the meaning ascribed to it in Section
3.2(a).
"Company Board" shall have the meaning ascribed to it in Section 1.2(a).
"Company Common Stock" shall have the meaning ascribed to it in the
Recitals to the Agreement.
"Company Disclosure Documents" shall have the meaning ascribed to it in
Section 1.3(c).
"Company Stock Purchase Plan" shall have the meaning ascribed to it in
Section 3.5(b).
"Company Option Plans" shall have the meaning ascribed to it in Section
3.5(b).
"Company SEC Filings" shall have the meaning ascribed to it in Section 3.6.
"Company Stock Plans" shall have the meaning ascribed to it in Section
3.5(b).
"Confidentiality Agreement" shall have the meaning ascribed to it in
Section 5.2(b).
"Constituent Corporations" shall have the meaning ascribed to it in the
Recitals to the Agreement.
"Continuing Director" shall have the meaning ascribed to it in Section
1.4(a).
"DGCL" shall have the meaning ascribed to it in Section 1.2(a).
"Defined Benefit Plan" shall have the meaning ascribed to it in Section
3.14(a).
"Dissenting Shares" shall have the meaning ascribed to it in Section 2.8.
"Effective Time" shall have the meaning ascribed to it in Section 2.3.
"Encumbrance" shall mean any pledge, security interest, lien, claim,
encumbrance, mortgage, charge, hypothecation, option, right of first refusal or
offer, preemptive right, voting agreement, voting trust, proxy, power of
attorney, escrow, option, forfeiture, penalty, action at law or in equity,
security agreement, stockholder agreement or other agreement, arrangement,
contract, commitment, understanding or obligation, or any other restriction,
qualification or limitation on the use, transfer, right to vote, right to
dissent and seek appraisal, receipt of income or other exercise of any attribute
of ownership.
"Environmental Event" shall have the meaning ascribed to it in Section
3.16.
"ERISA" shall have the meaning ascribed to it in Section 3.14(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
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"Exon-Florio Act" shall have the meaning ascribed to it in Section 4.4.
"Fairness Opinion" shall have the meaning ascribed to it in Section 3.21.
"GAAP" shall have the meaning ascribed to it in Section 3.7(a).
"Governmental Authority" shall have the meaning ascribed to it in Section
3.9.
"HSR Act" shall have the meaning ascribed to it in Section 3.9.
"Indemnified Parties" shall have the meaning ascribed to it in Section
5.6(a).
"Intellectual Property Rights" shall have the meaning ascribed to it in
Section 3.12(a).
"Knowledge" or "best knowledge" of the Company shall mean the actual
knowledge of (i) any of the executive officers of the Company (within the
meaning of Section 16 of the Exchange Act), (ii) any of the following additional
officers of the Company: (a) Vice President, General Counsel and Corporate
Secretary, (b) Vice President of Taxation, (c) Vice President of European Field
Operations, (d) Vice President of Product Operations, and (e) Vice President and
Treasurer of the Company, and (iii) any senior counsel of the Company involved
in the preparation of this Agreement.
"Material" means material to the value of the Company and its Subsidiaries,
taken as a whole.
"Material Adverse Effect" shall mean a material adverse effect on the
business, assets, condition (financial or other) or operating results that is
material and adverse to the value of the Company and its subsidiaries, taken as
a whole, other than the effects of (A) the announcement of the Transactions, (B)
general economic conditions, (C) conditions that are generally applicable to the
business segments in which such Party conducts business or (D) actions taken or
decisions made by Parent (other than as provided by contract or required by
Applicable Law).
"Member of the Controlled Group" shall have the meaning ascribed to it in
Section 3.14(a).
"Merger" shall have the meaning ascribed to it in the Recitals to the
Agreement.
"Merger Consideration" shall have the meaning ascribed to it in Section
2.5(d).
"Minimum Condition" shall have the meaning ascribed to it in Section
1.1(a).
"Morgan Stanley" shall have the meaning ascribed to it in Section 3.21.
"Multiemployer Plan" shall have the meaning ascribed to it in Section
3.14(a).
"National Industrial Security Program" shall have the meaning ascribed to
it in Section 3.9.
"Offer" shall have the meaning ascribed to it in the Recitals to the
Agreement.
"Offer Documents" shall have the meaning ascribed to it in Section 1.3(a).
"Offer Price" shall have the meaning ascribed to it in Section 1.1(a).
"Options" shall have the meaning ascribed to it in Section 3.5(b).
"Paying Agent" shall have the meaning ascribed to it in Section 2.7(a).
"Plans" shall have the meaning ascribed to it in Section 3.14(a).
"Post-Acceptance Board" shall have the meaning ascribed to it in Section
1.4(a).
"Preferred Stock" shall have the meaning ascribed to it in Section 3.5(a).
"Proprietary Software" shall have the meaning ascribed to it in Section
3.12(c).
"Proxy Statement" shall have the meaning ascribed to it in Section 2.9(a).
"Returns" shall have the meaning ascribed to it in Section 3.13(a).
"SEC" shall have the meaning ascribed to it in Section 1.3(a).
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"Securities Act" shall mean the Securities Act of 1933, as amended.
"Schedule 14D-1" shall have the meaning ascribed to it in Section 1.3(a).
"Schedule 14D-9" shall have the meaning ascribed to it in Section 1.3(b).
"Schedule 13E-3" shall have the meaning ascribed to it in Section 1.3(a).
"Shares" shall have the meaning ascribed to it in Section 1.1(a).
"Significant Subsidiary" shall mean each of the Subsidiaries listed on
Annex III to the Agreement.
"Special Meeting" shall have the meaning ascribed to it in Section 2.9(a).
"Standstill Agreement" shall have the meaning ascribed to it in Section
5.2(b).
"Subsidiary" shall mean any corporation, partnership, joint venture or
other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are at the time owned by the Company and/or one or
more other direct or indirect Subsidiaries; provided, however, that for purposes
of Article III (other than Section 3.2(a) and (b)), the following shall not be
considered "Subsidiaries": Pebblesoft Learning, Inc. and Network Intelligence,
Inc. and any of their respective subsidiaries.
"Surviving Corporation" shall have the meaning ascribed to it in Section
2.1.
"Tax" and "Taxes" shall have the meanings ascribed in Section 3.13(e).
"Third Party" shall have the meaning ascribed to it in Section 5.4(a).
"Third Party IP" shall have the meaning ascribed to it in Section 3.12(a).
"Transactions" shall have the meaning ascribed to it in the Recitals to the
Agreement.
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ANNEX II
CONDITIONS TO THE OFFER
Capitalized terms used in this Annex II shall have the meanings assigned to
them in the Agreement to which it is attached (the "Merger Agreement").
Notwithstanding any other provision of the Offer, and in addition to (and
not in limitation of) Newco's rights to extend and amend the Offer at any time
in its sole discretion (subject to the provisions of the Merger Agreement),
Newco shall not be required to accept for payment or pay for any Shares, and may
delay the acceptance for payment of or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act, the
payment for, any tendered Shares, and may terminate or amend the Offer as to any
Shares not then paid for, if:
(1) at or prior to the expiration date of the Offer, the number of
Shares validly tendered and not withdrawn, together with any Shares then
owned by Parent or Newco, shall not satisfy the Minimum Condition;
(2) at or prior to the expiration date of the Offer, (i) any
applicable waiting period under the HSR Act or the applicable laws and
regulations of the European Community shall not have expired or been
terminated, (ii) the review period under the Exon-Florio Act shall not have
expired, or the notice of determination not to investigate, or to take no
action, under the Exon-Florio Act, in form satisfactory to Parent's
counsel, shall not have been given, (iii) the approval of the U.S.
Department of Defense pursuant to the National Industrial Security Program
shall not have been obtained, (iv) any applicable period under the
Competition Act (Canada) shall not have expired or been terminated (unless
a certificate satisfactory to Parent shall have been issued under Section
102 of that Act), or (v) any requisite approval the European Commission or
the Bank of Japan shall not have been obtained; or
(3) at any time prior to acceptance for payment of or payment for
Shares, any of the following events or conditions shall occur or exist:
(a) there shall have been instituted or be pending any action or
proceeding by any Governmental Authority, whether or not having the
force of law, (i) challenging or seeking to make illegal, to delay or
otherwise directly or indirectly to restrain or prohibit the making of
the Offer, the acceptance for payment of or payment for some of or all
the Shares by Newco, Parent or any affiliate of Parent or the
consummation by Newco or Parent of any other Transaction, or seeking to
obtain damages in connection with any Transaction, (ii) seeking to
restrain or prohibit Parent's or Newco's full rights of ownership or
operation (or that of Parent's subsidiaries or affiliates) of any
portion of the business or assets of the Company or any of its
Subsidiaries, or of Parent or any of its subsidiaries, or any of their
respective affiliates, or to compel Parent or any of its subsidiaries or
affiliates to dispose of or hold separate all or any portion of the
business or assets of the Company or any of its Subsidiaries or of
Parent or any of its subsidiaries or any of their respective affiliates,
(iii) seeking to impose material limitations on the ability of Parent or
any of its subsidiaries or affiliates effectively to exercise full
rights of ownership of the Shares, including, without limitation, the
right to vote any Shares acquired or owned by Parent or any of its
subsidiaries or affiliates on all matters properly presented to the
Company's stockholders, (iv) seeking to require divestiture by Parent or
any of its subsidiaries or affiliates of any Shares, or (v) that
otherwise, in the judgment of Parent or Newco, is likely to materially
adversely affect the Company or any of the Subsidiaries or Parent or any
of its subsidiaries or affiliates; or
(b) there shall have been any action taken or any statute, rule,
regulation, judgment, administrative interpretation, injunction, order
or decree proposed, enacted, enforced, promulgated, issued or deemed
applicable to Parent or Newco or any other subsidiary or affiliate of
Parent, the Company or any of its Subsidiaries or the Offer, the
acceptance for payment of or payment for any Shares, the Merger or any
other Transaction, by any Governmental Authority (other than the
application of the routine waiting period provisions of the HSR Act and
the Exon-Florio Act), that
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has, directly or indirectly, resulted, or is reasonably likely to,
directly or indirectly, result in any of the consequences referred to in
paragraph (a) above; or
(c) an event shall have occurred that has had or could reasonably
be expected to have a Material Adverse Effect on the Company; or
(d) there shall have occurred (i) any general suspension of trading
in securities on any national securities exchange or in the
over-the-counter market, (ii) the declaration of any banking moratorium
or any suspension of payments in respect of banks or any limitation
(whether or not mandatory) which is material to the Transactions on the
extension of credit by lending institutions in the United States or
Japan, (iii) any limitation (whether or not mandatory) which is material
to the Transactions by any Governmental Authority on the extension of
credit by banks or other financial institutions, (iv) the commencement
of a war or material armed hostilities directly or indirectly involving
the United States or Japan or otherwise having a significant adverse
effect on the functioning of the financial markets in the United States
or Japan, (v) any significant change in the United States or Japanese
currency exchange rates or suspension of the markets therefor (whether
or not mandatory) or the imposition of, or any significant change in,
any currency or exchange control laws in the United States or Japan
which is material to the Transactions, or (vi) any limitation by any
Governmental Authority that is likely to materially and adversely affect
the financing of the Offer or the Merger; or
(e) it shall have been publicly disclosed or Parent or Newco shall
have otherwise learned that any Third Party shall have entered into a
definitive agreement or an agreement in principle with respect to an
Alternative Transaction; or
(f) the Company Board (i) shall have withdrawn, or modified or
changed in a manner adverse to Parent or Newco (including by amendment
of the Schedule 14D-9) its approval or recommendation of the Offer, the
Merger Agreement or the Merger, (ii) shall have recommended an
Alternative Transaction, or (iii) upon request of the Parent or Newco,
shall have failed to reaffirm such approval or recommendation or shall
have resolved to do any of the foregoing; or
(g) the Company shall have breached or failed to perform in any
respect any of its covenants or agreements under the Merger Agreement,
or any of the representations and warranties of the Company set forth in
the Merger Agreement shall not be true in any respect when made or at
any time prior to consummation of the Offer as if made at and as of such
time (other than representations and warranties which by their terms
address matters only as of a certain date, which shall be true as of
such date), and in either case the effect thereof shall have had or
could reasonably be expected to have a Material Adverse Effect on the
Company; or
(h) the Merger Agreement shall have been terminated in accordance
with its terms or amended in accordance with its terms to provide for
such termination or amendment of the Offer.
The foregoing conditions are for the sole benefit of Parent and Newco and
may be asserted or waived by Parent or Newco, regardless of the circumstances
giving rise to any such condition, in whole or in part at any time and from time
to time in its sole discretion. The failure by Parent or Newco at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right, and each such right shall be deemed an ongoing right and may be asserted
at any time and from time to time.
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ANNEX III
SIGNIFICANT SUBSIDIARIES
Amdahl Ireland Limited
Amdahl International Corporation
Amdahl Overseas Capital Corporation N.V.
Amdahl Canada Limited
DMR Consulting Group Inc.
Amdahl Federal Service Corporation
Antares Alliance Group
DMR Trecom, Inc.
Amdahl Deutschland GmbH
Amdahl Italia S.p.A.
Amdahl (U.K.) Limited
AG Solutions Limited
Amdahl Canada Finance NRO Inc.
Amdahl Australia Pty. Ltd.
DMR Australia Pty. Ltd.
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EXHIBIT IV
DELAWARE GENERAL CORPORATION LAW
SECTION 262. APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
IV-1
<PAGE> 145
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date
IV-2
<PAGE> 146
is fixed and the notice is given prior to the effective date, the record
date shall be the close of business on the day next preceding the day on
which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or
IV-3
<PAGE> 147
compound, as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith, and the
case of holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Court's decree may
be enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
IV-4
<PAGE> 148
The Depositary for the Offer is:
THE BANK OF NEW YORK
BY MAIL:
The Bank of New York
Tender & Exchange Department
P.O. Box 11248
Church Street Station
New York, New York 10286-1248
Facsimile for Eligible Institutions:
(212) 815-6213
To Confirm by Telephone:
(800) 507-9357
Questions or requests for assistance may be directed to the Information
Agent at its address and telephone numbers listed below or to the Dealer Manager
at its address and telephone numbers listed below. Additional copies of this
Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may be obtained from the Information Agent. A stockholder may also
contact brokers, dealers, commercial banks or trust companies for assistance
concerning the Offer.
The Information Agent for the Offer is:
LOGO
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (call collect)
OR
CALL TOLL FREE (800) 322-2885
The Dealer Manager for the Offer is:
LEHMAN BROTHERS
3 World Financial Center
New York, NY 10285
(212) 526-2415 or (212) 526-5266
BY HAND OR OVERNIGHT COURIER:
The Bank of New York
Tender & Exchange Department
101 Barclay Street
Receive and Deliver Window
New York, New York 10286
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
AMDAHL CORPORATION
PURSUANT TO THE OFFER TO PURCHASE DATED AUGUST 5, 1997
OF
FUJITSU INTERNATIONAL, INC.
A WHOLLY OWNED SUBSIDIARY OF
FUJITSU LIMITED
THIS OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 5, 1997, UNLESS THE OFFER
IS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
THE BANK OF NEW YORK
By Mail: By Hand or Overnight Courier:
The Bank of New York The Bank of New York
Tender & Exchange Department Tender & Exchange Department
P.O. Box 11248 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
By Facsimile for Eligible Institutions:
(212) 815-6213
Confirmation by Telephone:
(800) 507-9357
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER OTHER THAN
AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS
LETTER OF TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9
PROVIDED BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF SHARES TENDERED
- ---------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDERS(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S)
APPEAR(S) ON SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
- ---------------------------------------------------------------------------------------------------------
TOTAL NUMBER OF
SHARES EVIDENCED
BY
SHARE CERTIFICATE SHARE NUMBER OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
TOTAL SHARES
</TABLE>
- --------------------------------------------------------------------------------
* Need not be completed by stockholders delivering Shares by book-entry
transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced
by each Share Certificate (as defined below) delivered to the Depositary
are being tendered hereby. See Instruction 4.
- --------------------------------------------------------------------------------
<PAGE> 2
This Letter of Transmittal is to be completed by stockholders of Amdahl
Corporation, a Delaware corporation (the "Company"), if certificates ("Share
Certificates") evidencing Shares (as defined below) are to be forwarded herewith
or, unless an Agent's Message (as defined in the Offer to Purchase (as defined
below)) is utilized, if delivery of Shares is to be made by book-entry transfer
to the Depositary's account at The Depository Trust Company ("DTC") or the
Philadelphia Depository Trust Company ("PDTC") (hereinafter collectively
referred to as the "Book-Entry Transfer Facilities") pursuant to the book-entry
transfer procedures set forth in the Offer to Purchase. DELIVERY OF DOCUMENTS TO
A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Stockholders whose Share Certificates are not immediately available or who
cannot deliver their Share Certificates and all other documents required hereby
to the Depositary by the Expiration Date (as defined in the Offer to Purchase),
or who cannot comply with the book-entry transfer procedures on a timely basis,
may nevertheless tender their Shares pursuant to the guaranteed delivery
procedure set forth in the Offer to Purchase. See Instruction 2.
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution:
Check Box of Applicable Book-Entry Transfer Facility:
(check one) [ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
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:
2
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Fujitsu International, Inc., a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of Fujitsu Limited,
a corporation organized and existing under the laws of Japan (the "Parent"), the
above-described shares of common stock, $.05 par value per share (the "Shares"),
of Amdahl Corporation, a Delaware corporation (the "Company"), pursuant to the
Purchaser's offer to purchase all of the outstanding Shares at a purchase price
of $12.00 per Share, net to the seller in cash, without interest, upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated August
5, 1997 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and
in this Letter of Transmittal (which, together with the Offer to Purchase and
any amendments or supplements thereto or hereto, constitute the "Offer").
Subject to and effective upon acceptance for payment of and payment for the
Shares tendered herewith, the undersigned hereby sells, assigns and transfers to
or upon the order of the Purchaser all right, title and interest in and to all
the Shares that are being tendered hereby and all dividends, distributions
(including, without limitation, distributions of additional Shares) and rights
declared, paid or distributed in respect of such Shares on or after July 30,
1997 (collectively, "Distributions"), and irrevocably appoints the Depositary
the true and lawful agent and attorney-in-fact of the undersigned with respect
to such Shares and all Distributions, with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), to (i) deliver Share Certificates evidencing such Shares and all
Distributions, or transfer ownership of such Shares and all Distributions on the
account books maintained by any of the Book-Entry Transfer Facilities, together,
in any such case, with all accompanying evidences of transfer and authenticity,
to or upon the order of the Purchaser, (ii) present such Shares and all
Distributions for transfer on the books of the Company and (iii) receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Shares and all Distributions, all in accordance with the terms of and subject to
the conditions to the Offer.
The undersigned hereby irrevocably appoints each designee of the Purchaser
as the attorney and proxy of the undersigned, each with full power of
substitution, to exercise all voting and other rights of the undersigned in such
manner as each such attorney and proxy or his or her substitute shall, in his or
her sole judgment, deem proper and otherwise act (by written consent or
otherwise) with respect to all of the Shares tendered hereby which have been
accepted for payment by the Purchaser prior to the time of any vote or other
action (and all Shares and other securities issued in Distributions in respect
of such Shares), at any meeting of stockholders of the Company (whether annual
or special and whether or not an adjourned meeting) or consent in lieu of
meeting or otherwise. This power of attorney and proxy are irrevocable, are
coupled with an interest in the Shares tendered hereby, and are granted in
consideration of, and effective upon, the acceptance for payment of such Shares
by the Purchaser in accordance with the terms of the Offer. Such acceptance for
payment shall revoke all other proxies, written consents or powers of attorney
granted by the undersigned at any time with respect to such Shares (and all
Shares and other securities issued in Distributions in respect of such Shares),
and no subsequent proxy or power of attorney will be given or written consent
executed by the undersigned (and if given or executed, will not be deemed
effective) with respect thereto. The undersigned understands that the Purchaser
reserves the right to require that, in order for Shares to be deemed validly
tendered, immediately upon the Purchaser's acceptance of such Shares for payment
the Purchaser must be able to exercise full voting, consent and other rights
with respect to such Shares and all Distributions, including, without
limitation, voting at any meeting of the Company's stockholders then scheduled.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and all Distributions, and that when such Shares are accepted
for payment by the Purchaser, the Purchaser will acquire good, marketable and
unencumbered title thereto and to all Distributions, free and clear of all
liens, restrictions, charges and encumbrances, and that none of such Shares and
Distributions will be subject to any adverse claims. The undersigned will, upon
request, 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 hereby and all Distributions. In addition,
the undersigned shall remit and transfer promptly to the Depositary for the
account of the Purchaser all Distributions in respect of the Shares tendered
hereby, accompanied by appropriate documentation of transfer, and, pending such
remittance and transfer or appropriate assurance thereof, the Purchaser shall be
entitled to all rights and privileges as owner of each such Distribution and may
withhold the entire purchase price of the Shares tendered hereby, or deduct from
such purchase price, the amount or value of such Distributions as determined by
the Purchaser in its sole discretion.
3
<PAGE> 4
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding upon
the heirs, personal representatives, successors and assigns of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in the Offer to Purchase and in the instructions hereto
will constitute the undersigned's acceptance of the terms and conditions of the
Offer. The Purchaser's acceptance of such Shares for payment will constitute a
binding agreement between the undersigned and the Purchaser upon the terms and
subject to the conditions of the Offer.
Unless otherwise indicated in the box entitled "Special Payment
Instructions," please issue the check for the purchase price of any Shares
purchased, and return any Share Certificates evidencing any Shares not tendered
or not purchased, in the name(s) of the registered holder(s) appearing above
under "Description of Shares Tendered." Similarly, unless otherwise indicated in
the box entitled "Special Delivery Instructions," please mail the check for the
purchase price of any Shares purchased and return any certificates for Shares
not tendered or not purchased (and accompanying documents, as appropriate) to
the address(es) of the registered holder(s) appearing above under "Description
of Shares Tendered." In the event that the boxes entitled "Special Payment
Instructions" and "Special Delivery Instructions" are both completed, please
issue the check for the purchase price of any Shares purchased and return any
Share Certificates evidencing any Shares not tendered or not purchased in the
name(s) of, and mail said check and any certificates to, the person(s) so
indicated. Unless otherwise indicated herein in the box entitled "Special
Payment Instructions," please credit any Shares tendered hereby and delivered by
book-entry transfer, but which are not purchased, by crediting the account at
the Book-Entry Transfer Facility designated above. The undersigned recognizes
that the Purchaser has no obligation, pursuant to the "Special Payment
Instructions," to transfer any Shares from the name of the registered holder(s)
thereof if the Purchaser does not accept for payment any of the Shares so
tendered.
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares
purchased, or the Share Certificates evidencing Shares not tendered or not
purchased, are to be issued in the name of someone other than the undersigned,
or if Shares tendered hereby and delivered by book-entry transfer which are not
purchased are to be returned by credit to an account at one of the Book-Entry
Transfer Facilities other than the account designated above.
Issue [ ] Check [ ] Share Certificate(s) to:
Name:
(PLEASE PRINT)
Address:
(INCLUDE ZIP CODE)
Taxpayer Identification or Social Security Number
(see Substitute Form W-9 on reverse side)
[ ] Credit Shares delivered by book-entry transfer and not purchased to the
account set forth below:
Check appropriate box:
[ ] DTC [ ] PDTC
Account Number:
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares
purchased, or the Share Certificates evidencing Shares not tendered or not
purchased, are to be mailed to someone other than the undersigned, or to the
undersigned at an address other than that shown above under "Description of
Shares Tendered."
Mail [ ] Check [ ] Share Certificate(s) to:
Name:
(PLEASE PRINT)
Address:
(INCLUDE ZIP CODE)
Taxpayer Identification or Social Security Number
(see Substitute Form W-9 on reverse side)
4
<PAGE> 5
IMPORTANT
STOCKHOLDERS: SIGN HERE
(PLEASE ALSO COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
___________________________________________
___________________________________________
Signature(s) of Stockholder(s)
Dated: , 1997
------------------------------
(Must be signed by registered holder(s) exactly as name(s) appear(s) on Share
Certificates or on a security position listing or by a 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 other person acting in a fiduciary
or representative capacity, please provide the following information. See
Instruction 5.)
Name(s):
(PLEASE PRINT)
Capacity (full title):
Address:
(INCLUDE ZIP CODE)
Area Code and Telephone No.:
Taxpayer Identification or
Social Security No.:
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
GUARANTY OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
Name:
(PLEASE PRINT)
Title:
Name of Firm:
Address:
(INCLUDE ZIP CODE)
Area Code and Telephone No.:
Date:
5
<PAGE> 6
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a bank, broker,
dealer, credit union, savings association or other entity that is a member in
good standing of the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program or by any other bank, broker, dealer, credit union, savings
association or other entity which is an "eligible guarantor institution," as
such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934,
as amended (each of the foregoing constituting an "Eligible Institution"),
unless (i) this Letter of Transmittal is signed by the registered holder(s)
(which term, for purposes of this document, shall include any participant in a
Book-Entry Transfer Facility whose name appears on a security position listing
as the owner of Shares) of the Shares tendered hereby and such holder(s) has
(have) not completed either the box entitled "Special Payment Instructions" or
the box entitled "Special Delivery Instructions" herein or (ii) such Shares are
tendered for the account of an Eligible Institution. If a Share Certificate is
registered in the name of a person or persons other than the person signing this
Letter of Transmittal, or if payment is to be made or delivered to, or
certificates evidencing Shares not tendered or purchased are to be issued or
returned to, a person other than the registered holder(s), then the tendered
certificates must be endorsed or accompanied by duly executed stock powers, in
either case signed exactly as the name(s) of the registered holder(s) appear on
the certificates, with the signatures on the certificates or stock powers
guaranteed by an Eligible Institution as described above. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. This Letter
of Transmittal is to be used either if Share Certificates are to be forwarded
herewith or, unless an Agent's Message (as defined in the Offer to Purchase) is
utilized, if the delivery of Shares is to be made by book-entry transfer
pursuant to the procedures set forth in the Offer to Purchase. Certificates for
all physically delivered Shares, or a confirmation of a book-entry transfer, if
such procedure is available, into the Depositary's account at one of the
Book-Entry Transfer Facilities of all Shares delivered by book-entry transfer,
as well as a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile thereof), with any required signature guarantees, or
an Agent's Message in the case of a book-entry delivery, and any other documents
required by this Letter of Transmittal, must be received by the Depositary at
one of its addresses set forth on the front page of this Letter of Transmittal
by the Expiration Date. If Share Certificates are forwarded to the Depositary in
multiple deliveries, a properly completed and duly executed Letter of
Transmittal must accompany each such delivery. Stockholders whose Share
Certificates are not immediately available, who cannot deliver their Share
Certificates and all other required documents to the Depositary by the
Expiration Date or who cannot complete the procedure for delivery by book-entry
transfer on a timely basis may tender their Shares pursuant to the guaranteed
delivery procedure set forth in the Offer to Purchase. Pursuant to such
procedure: (i) such 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, must be received by
the Depositary prior to the Expiration Date; and (iii) the Share Certificates
for all physically delivered Shares, in proper form for transfer by delivery, or
a confirmation of a book-entry transfer into the Depositary's account at one of
the Book-Entry Transfer Facilities of all Shares delivered by book-entry
transfer, in each case together with a properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile thereof), with any
required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message), 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 such Notice of Guaranteed
Delivery, all as provided in the Offer to Purchase.
The method of delivery of this Letter of Transmittal, Share Certificates
and all other required documents, including delivery through any Book-Entry
Transfer Facility, is at the option and risk of the tendering stockholder, 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.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. By execution of this Letter of Transmittal
(or a facsimile hereof), all tendering stockholders waive any right to receive
any notice of the acceptance of their Shares for payment.
6
<PAGE> 7
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the Share Certificate numbers, the number of
Shares represented by such Share Certificates and the number of Shares tendered
should be listed on a separate schedule and attached thereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY
BOOK-ENTRY TRANSFER). If fewer than all the Shares represented by any Share
Certificate delivered to the Depositary herewith are to be tendered, fill in the
number of Shares which are to be tendered in the box entitled "Number of Shares
Tendered." In such case, a new Share Certificate for the remainder of the Shares
represented by the Share Certificate delivered to the Depositary will be sent to
the person(s) signing this Letter of Transmittal, unless otherwise provided in
the box entitled "Special Delivery Instructions," as promptly as practicable
following the expiration or termination of the Offer. All Shares evidenced 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 hereby, the signature(s) must correspond with the name(s) as written on
the face of the certificates without alteration, enlargement or any other change
whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate stock
powers are required, unless payment of the purchase price is to be made to, or
Shares not tendered or not purchased are to be issued in the name of or returned
in the name of, any person other than the registered holder(s), in which case
the Share Certificate(s) evidencing the Shares tendered hereby 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 such Share Certificate(s).
Signatures on any such Share Certificate(s) or stock powers must be guaranteed
by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on the certificates for such Shares. Signature(s)
on any such Share Certificate(s) or stock powers must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Purchaser of the authority of such person so to act must be
submitted.
6. STOCK TRANSFER TAXES. The Purchaser will pay any stock transfer taxes
with respect to the sale and transfer of any Shares to it or its order pursuant
to the Offer. If, however, payment of the purchase price is to be made to, or
Share Certificate(s) evidencing Shares not tendered or not purchased are to be
returned in the name of, any person other than the registered holder(s), then
the amount of any stock transfer taxes (whether imposed on the registered
holder(s), such other person or otherwise) payable on account of the transfer to
such person will be deducted from the purchase price, unless evidence
satisfactory to the Purchaser of the payment of such taxes, or exemption
therefrom, is submitted. Except as provided in this Instruction 6, it will not
be necessary for transfer tax stamps to be affixed to the Certificates listed in
this Letter of Transmittal.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the
purchase price of any Shares purchased is to be issued, or any Share
Certificate(s) evidencing Shares not tendered or not purchased are to be issued
or returned, in the name of a person other than the person(s) signing this
Letter of Transmittal or if such check or any such Share Certificate(s) are to
be sent to someone other than the person(s) signing this Letter of Transmittal
or to the person(s) signing this Letter of Transmittal at an address other than
that shown above under "Description of Shares Tendered," the appropriate boxes
on this Letter of Transmittal must be completed. Stockholders tendering Shares
by book-entry transfer may request that Shares not purchased be credited to such
account at any of the Book-Entry Transfer Facilities as such stockholder may
designate in the box entitled "Special Payment Instructions." If no such
instructions are given, any such Shares not purchased will be returned by
crediting the same account at the Book-Entry Transfer Facilities designated
above as the account from which such Shares were delivered.
7
<PAGE> 8
8. SUBSTITUTE FORM W-9. Each tendering holder of Shares is required to
provide the Depositary with such holder's correct taxpayer identification number
("TIN") on Substitute Form W-9, which is provided below, unless an exemption
applies. In the case of such a holder who has completed the box entitled
"Special Payment Instructions," however, the correct TIN on Substitute Form W-9
should be provided for the recipient of the payment pursuant to such
Instructions. Failure to provide the information on the Substitute Form W-9 may
subject the tendering holder of Shares to penalties imposed by the Internal
Revenue Service ("IRS") and to 31% federal income tax backup withholding on the
payment of the purchase price for the Shares.
9. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions
and requests for assistance may be directed to the Information Agent at its
address or telephone numbers set forth below or to the Dealer Manager at its
address or telephone number set forth below. Additional copies of the Offer to
Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be obtained from the Information Agent or from brokers, dealers, commercial
banks or trust companies.
IMPORTANT TAX INFORMATION
Under the federal income tax law, a holder of Shares whose tendered Shares
are accepted for payment is required by law to provide the Depositary (as payer)
with such holder's correct TIN on Substitute Form W-9 below. The holder of
Shares must also state that (i) such holder has not been notified by the IRS
that such holder is subject to backup withholding as a result of a failure to
report all interest or dividends or (ii) the Internal Revenue Service has
notified such holder that such holder is no longer subject to backup
withholding. If the Depositary is not provided with the correct TIN, the holder
of Shares may be subject to penalties imposed by the IRS and payments made to
such holder may be subject to backup withholding.
Certain holders of Shares (including, among others, all 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, such individual must submit a Form W-8, signed under penalties
of perjury, attesting to such individual's exempt status. A Form W-8 can be
obtained from the Depositary. See the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional
instructions. A stockholder should consult his or her tax advisor as to such
stockholder's qualification for an exemption from backup withholding and the
procedure for obtaining such exemption.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the holder of Shares. Backup withholding is not an
additional tax. Rather, the tax withheld pursuant to backup withholding rules
will be available as a credit against such holder's tax liabilities. If
withholding results in an overpayment of taxes, a refund may be obtained from
the IRS.
WHAT NUMBER TO GIVE THE DEPOSITARY
If the holder of Shares is an individual, the correct TIN ordinarily is his
or her social security number. In other cases, the correct TIN may be the
employer identification number of the record holder of the Shares tendered
hereby. 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. If the tendering holder of Shares has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, the holder should write "Applied For" in the space provided for the TIN
in Part I, and sign and date the Substitute Form W-9 and the Certificate of
Awaiting Taxpayer Identification Number. If "Applied For" is written in Part I
and the Depositary is not provided with a TIN within 60 days, the Depositary may
withhold 31% of all payments of the purchase price to such holder until a TIN is
provided to the Depositary.
8
<PAGE> 9
- --------------------------------------------------------------------------------
PAYER'S NAME: THE BANK OF NEW YORK
- --------------------------------------------------------------------------------
SUBSTITUTE
FORM W-9
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
PAYER'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER (TIN)
PART I -- Taxpayer Identification Number - For all accounts, enter taxpayer
identification number in the box at right. (For most individuals, this is your
social security number. If you do not have a number, see OBTAINING A NUMBER in
the enclosed Guidelines.) Certify by signing and dating below.
NOTE: If the account is in more than one name, see chart in the enclosed
Guidelines to determine which number to give the payer.
--------------------------------
Social Security Number
OR --------------------------------
Employer Identification Number
(If awaiting TIN write "Applied For")
- --------------------------------------------------------------------------------
PART II -- For Payees Exempt from Backup Withholding, see the enclosed
Guidelines and complete as instructed therein.
- --------------------------------------------------------------------------------
CERTIFICATIONS -- 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 either because 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 or dividends, or
(b) the 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 the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding, you
received another notification from the IRS that you were no longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the
enclosed Guidelines.)
- -------------------------------------------------------------------------------
SIGNATURE DATE 199
------------------------------------------- ------------------ --
- -------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THE SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER TO PURCHASE. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
ARE AWAITING (OR WILL SOON APPLY FOR) A TAXPAYER IDENTIFICATION NUMBER.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (i) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (ii)
I intend to mail or deliver an application in the near future. I understand
that, notwithstanding the information I provided in Part III of the Substitute
Form W-9 (and the fact that I have completed this Certificate of Awaiting
Taxpayer Identification Number), if I do not provide a correct TIN to the
Depositary within sixty (60) days, 31% of all reportable payments made to me
pursuant to the Offer may be withheld until I provide a number.
- --------------------------------- ---------------------------------
Signature Date
9
<PAGE> 10
[THIS PAGE INTENTIONALLY LEFT BLANK]
10
<PAGE> 11
[THIS PAGE INTENTIONALLY LEFT BLANK]
11
<PAGE> 12
IMPORTANT: THIS LETTER OF TRANSMITTAL OR FACSIMILE HEREOF, PROPERLY
COMPLETED AND DULY EXECUTED, OR AN AGENT'S MESSAGE IN THE CASE OF A BOOK-ENTRY
DELIVERY (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES AND SHARE CERTIFICATES
OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A
PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER
TO PURCHASE).
The Information Agent for the Offer is:
LOGO
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (call collect)
or
CALL TOLL FREE (800) 322-2885
The Dealer Manager for the Offer is:
LEHMAN BROTHERS
3 World Financial Center
New York, NY 10285
(212) 526-2415 or (212) 526-5266
August 5, 1997
<PAGE> 1
LEHMAN BROTHERS
3 World Financial Center
New York, NY 10285
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
AMDAHL CORPORATION
AT
$12.00 NET PER SHARE
BY
FUJITSU INTERNATIONAL, INC.
A WHOLLY OWNED SUBSIDIARY OF
FUJITSU LIMITED
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 5, 1997,
UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
August 5, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Fujitsu International, Inc., a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of Fujitsu Limited,
a corporation organized and existing under the laws of Japan (the "Parent"), to
act as Dealer Manager in connection with the Purchaser's offer to purchase all
outstanding shares of common stock, par value $.05 per share (the "Shares"), of
Amdahl Corporation, a Delaware corporation (the "Company"), at a purchase price
of $12.00 per Share, net to the seller in cash, without interest, upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated August
5, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which,
as amended or supplemented from time to time, together constitute the "Offer")
enclosed herewith. The Offer is being made in connection with the Agreement and
Plan of Merger, dated as of July 30, 1997, among the Parent, the Purchaser and
the Company (the "Merger Agreement"). Please furnish copies of the enclosed
materials to those of your clients for whose accounts you hold Shares in your
name or in the name of your nominee.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE OF THE OFFER THAT NUMBER
OF SHARES WHICH, WHEN ADDED TO THOSE SHARES HELD BY THE PARENT AS OF THE
EXPIRATION OF THE OFFER, REPRESENTS AT LEAST 51% OF THE OUTSTANDING SHARES, (ii)
THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIODS UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE
EXON-FLORIO ACT, AND (iii) RECEIPT OF ANY REQUISITE APPROVALS OF THE EUROPEAN
COMMISSION AND THE BANK OF JAPAN. THE OFFER ALSO IS SUBJECT TO THE OTHER TERMS
AND CONDITIONS DESCRIBED IN THE OFFER TO PURCHASE.
Enclosed herewith for your information and for forwarding to 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, are copies of the following
documents:
1. Offer to Purchase dated August 5, 1997;
2. Letter of Transmittal to tender Shares for your use and for the
information of your clients. Facsimile copies of the Letter of Transmittal (with
manual signatures) may be used to tender Shares;
3. Notice of Guaranteed Delivery for Shares to be used to accept the Offer
if certificates for Shares are not immediately available or time will not permit
all required documents to reach the Depositary by the
<PAGE> 2
Expiration Date (as those terms are defined in the Offer to Purchase) or if the
procedure for book-entry transfer cannot be completed on a timely basis;
4. A letter to stockholders from John C. Lewis, Chairman of the Board,
President and Chief Executive Officer of the Company, together with the
Solicitation/Recommendation Statement on Schedule 14D-9 filed by the Company
with the Securities and Exchange Commission;
5. A letter which may be sent to your clients for whose accounts you hold
Shares registered in your name or the name of your nominee, with space provided
for obtaining such clients' instructions with regard to the Offer;
6. Guidelines of the Internal Revenue Service for Certification of Taxpayer
Identification Number on Substitute Form W-9; and
7. A return envelope addressed to the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
FRIDAY, SEPTEMBER 5, 1997, UNLESS THE OFFER IS EXTENDED.
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 (i) the
certificates evidencing the tendered Shares or a timely confirmation of a
book-entry transfer of such Shares into Depositary's account at one of the
Book-Entry Transfer Facilities (as defined in the Offer to Purchase); (ii) a
Letter of Transmittal (or a manually signed facsimile thereof), properly
completed and duly executed, with any required signature guarantees or, in the
case of a book-entry transfer, an Agent's Message (as defined in the Offer to
Purchase); and (iii) any other documents required under the Letter of
Transmittal.
If a holder wishes to tender Shares pursuant to the Offer, but cannot
deliver such holder's certificates or other required documents or complete the
procedures for book-entry transfer prior to the expiration of the Offer, a
tender of Shares may be effected by following the guaranteed delivery procedures
specified in the Offer to Purchase.
Neither the Purchaser nor the Parent, nor any officer, director,
stockholder, agent or other representative of the Purchaser or the Parent, will
pay any fees or commissions to any broker, dealer or other person (other than
the Dealer Manager, the Depositary and the Information Agent, as described in
the Offer to Purchase) for soliciting tenders of Shares pursuant to the Offer.
The Purchaser will, however, upon request, reimburse you for customary mailing
and handling expenses incurred by you in forwarding any of the enclosed
materials to your clients. The Purchaser will pay or cause to be paid any
transfer taxes payable on the transfer to it of Shares, except as otherwise
provided in the Letter of Transmittal. Backup tax withholding at a rate of 31%
may be required, however, unless the required tax identification information is
provided. See "Important Tax Information" contained in the Letter of
Transmittal.
Any inquiries you may have with respect to the Offer should be addressed
to, and additional copies of the enclosed material may be obtained by
contacting, MacKenzie Partners, Inc., the Information Agent, at its address and
telephone numbers set forth on the back cover page of the Letter of Transmittal.
Inquiries with respect to the Offer may also be addressed to Lehman Brothers
Inc. at the address and telephone numbers set forth on the back cover page of
the Offer to Purchase.
Very truly yours,
Lehman Brothers Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON TO ACT ON BEHALF OF OR AS THE AGENT OF THE PARENT, THE
PURCHASER, THE COMPANY, THE DEPOSITARY, THE INFORMATION AGENT, THE DEALER
MANAGER OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO
MAKE ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION
WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED
THEREIN.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
AMDAHL CORPORATION
AT
$12.00 NET PER SHARE
BY
FUJITSU INTERNATIONAL, INC.
A WHOLLY OWNED SUBSIDIARY OF
FUJITSU LIMITED
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 5, 1997,
UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
To Our Clients:
Enclosed for your consideration are an Offer to Purchase, dated August 5,
1997 (the "Offer to Purchase"), and a related Letter of Transmittal (which, as
amended or supplemented from time to time, together constitute the "Offer")
relating to an offer by Fujitsu International, Inc., a Delaware corporation (the
"Purchaser") and a wholly owned subsidiary of Fujitsu Limited, a corporation
organized and existing under the laws of Japan (the "Parent"), to purchase all
outstanding shares of common stock, par value $.05 per share (the "Shares"), of
Amdahl Corporation, a Delaware corporation (the "Company"), at a purchase price
of $12.00 per Share, net to the seller in cash, without interest, upon the terms
and subject to the conditions set forth in the Offer. Also enclosed is the
letter to stockholders of the Company from John C. Lewis, Chairman of the Board,
President and Chief Executive Officer of the Company, together with a
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission by the Company.
We are (or our nominee is) the holder of record of Shares held by us for
your account. A TENDER OF SUCH 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 tender any or all of such
Shares held by us for your account, pursuant to the terms and conditions set
forth in the Offer.
Your attention is invited to the following:
1. The tender price is $12.00 per Share, net to the seller in cash,
without interest.
2. The Offer is being made for all outstanding Shares.
3. The Board of Directors of the Company, acting through the members of
the Board of Directors of the Company who are independent of the Parent and the
Purchaser and who constitute a majority of the directors in office, has
unanimously approved the Offer, the Merger (as defined in the Offer to Purchase)
and the Merger Agreement (as defined in the Offer to Purchase) and unanimously
determined that the Offer, the Merger and the Merger Agreement are fair to and
in the best interests of the Company and the Company's stockholders (other than
the Parent and its affiliates), and unanimously recommends that the Company's
stockholders accept the Offer and tender their Shares to the Purchaser.
4. The Offer and withdrawal rights will expire at 5:00 p.m., New York City
time, on Friday, September 5, 1997, unless the Offer is extended.
5. The Offer is conditioned upon, among other things, (i) there being
validly tendered and not withdrawn prior to the expiration of the Offer that
number of Shares which, when added to those Shares held by the Parent as of the
expiration of the Offer, represents at least 51% of the outstanding Shares, (ii)
the expiration or termination of any applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
Exon-Florio Act, and (iii) receipt of any requisite approvals of the European
Commission and the Bank of Japan. The Offer also is subject to the other terms
and conditions described in the Offer to Purchase.
<PAGE> 2
6. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase of Shares by the
Purchaser pursuant to the Offer.
If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing and returning to us the
instruction form contained in this letter. An envelope to return your
instruction to us is enclosed. If you authorize the tender of your Shares, all
such Shares will be tendered unless otherwise indicated in such instruction
form. PLEASE FORWARD YOUR INSTRUCTIONS TO US AS SOON AS POSSIBLE TO ALLOW US
AMPLE TIME TO TENDER YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE
OFFER.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by The Bank of New York (the
"Depositary") of (i) the certificates evidencing the tendered Shares (the "Share
Certificates"), or a timely Book-Entry Confirmation (as defined in the Offer to
Purchase) with respect to such Shares, (ii) a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer effected pursuant
to the procedure set forth in the Offer to Purchase, an Agent's Message (as
defined in the Offer to Purchase), and (iii) any other documents required under
the Letter of Transmittal.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and any supplements or amendments thereto. The Offer is being made
to all holders of Shares (other than Purchaser and the Parent), provided that
the Offer 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 thereof would not be in compliance with the securities, blue sky
or other laws of such jurisdiction. The Purchaser may, in its discretion,
however, take such action as it may deem necessary to make the Offer in any
jurisdiction and extend the Offer to holders of Shares in such jurisdiction. 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 shall be deemed to be made
on behalf of the Purchaser by Lehman Brothers Inc. or one or more registered
brokers or dealers licensed under the laws of such jurisdiction.
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING
SHARES OF COMMON STOCK OF AMDAHL CORPORATION BY FUJITSU INTERNATIONAL, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase dated August 5, 1997 (the "Offer to Purchase"), and the
related Letter of Transmittal (which, as amended or supplemented from time to
time, together constitute the "Offer") in connection with the offer by Fujitsu
International, Inc., a Delaware corporation (the "Purchaser") and a wholly owned
subsidiary of Fujitsu Limited, a corporation organized and existing under the
laws of Japan, to purchase all outstanding shares of common stock, par value
$.05 per share (the "Shares"), of Amdahl Corporation, a Delaware corporation.
This will instruct you to tender to the Purchaser 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.
- --------------------------------------------------------------------------------
Number of Shares to be Tendered:
------------------------------------- Shares*
Account Number:
-------------------------------------
Dated:
-------------------------------------, 1997
- --------------------------------------------------------------------------------
SIGN HERE
Signature(s):
------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please type or print name(s):
------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please type or print address:
------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Area Code and Telephone Number:
- --------------------------------------------------------------------------------
Taxpayer Identification or Social Security Number:
---------------------------------------------------------------
- --------------------------------------------------------------------------------
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
- --------------------------------------------------------------------------------
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
AMDAHL CORPORATION
TO
FUJITSU INTERNATIONAL, INC.
A WHOLLY OWNED SUBSIDIARY OF
FUJITSU LIMITED
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 5, 1997,
UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
This Notice of Guaranteed Delivery, or one substantially in the form
hereof, must be used to accept the Offer (as defined below) if (i) certificates
("Share Certificates") evidencing shares of common stock, par value $.05 per
share (the "Shares"), of Amdahl Corporation, a Delaware corporation (the
"Company"), are not immediately available, (ii) Share Certificates and all other
required documents cannot be delivered to The Bank of New York, as Depositary
(the "Depositary"), prior to the Expiration Date (as defined in the Offer to
Purchase (defined below)) or (iii) the procedure for delivery by book-entry
transfer cannot be completed on a timely basis. This Notice of Guaranteed
Delivery may be delivered by hand or mail or transmitted by facsimile to the
Depositary. See the Offer to Purchase, dated August 5, 1997 (the "Offer to
Purchase").
THE DEPOSITARY FOR THE OFFER IS:
THE BANK OF NEW YORK
By Mail:
The Bank of New York
Tender & Exchange Department
P.O. Box 11248
Church Street Station
New York, New York 10286-1248
By Facsimile for Eligible Institutions:
(212) 815-6213
Confirmation by Telephone:
(800) 507-9357
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
(as defined in the Offer to Purchase) under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
By Hand or Overnight Courier:
The Bank of New York
Tender & Exchange Department
101 Barclay Street
Receive and Deliver Window
New York, New York 10286
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to Fujitsu International, Inc., a Delaware
corporation and a wholly owned subsidiary of Fujitsu Limited, a corporation
organized and existing under the laws of Japan, upon the terms and subject to
the conditions set forth in the Offer to Purchase, dated August 5, 1997 (the
"Offer to Purchase"), and the related Letter of Transmittal (which together, as
amended or supplemented from time to time, constitute the "Offer"), receipt of
which are hereby acknowledged, the number of Shares specified below pursuant to
the guaranteed delivery procedures described in the Offer to Purchase.
Number of Shares:
-----------------------------
Certificate Nos. (If Available):
===================================================
Check ONE box if Shares will be
delivered by book-entry transfer:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account Number:
- -------------------------------
- ---------------------------------------------------
- ---------------------------------------------------
Signature(s) of Record Holder(s)
Dated:
- ------------------ , 1997
Name(s) of Holder(s):
===================================================
Please Type or Print
- ---------------------------------------------------
Address
- ---------------------------------------------------
Zip Code
- ---------------------------------------------------
Area Code and Telephone No.
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a bank, broker, dealer, credit union, savings association
or other entity which is a member in good standing of the Securities Transfer
Agents Medallion Program, the New York Stock Exchange Medallion Signature
Guarantee Program or the Stock Exchange Medallion Program, or a bank, broker,
dealer, credit union, savings association or other entity which is an "eligible
guarantor institution," as such term is defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, hereby guarantees the delivery to
the Depositary of the Shares tendered hereby, together with a properly completed
and duly executed Letter of Transmittal (or manually signed facsimile(s)
thereof) and any other required documents, or an Agent's Message (as defined in
the Offer to Purchase) in the case of a book-entry delivery of Shares, all
within three New York Stock Exchange trading days after the date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and Share
Certificates to the Depositary within the time period shown herein. Failure to
do so could result in a financial loss for such Eligible Institution.
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
NAME OF FIRM AUTHORIZED SIGNATURE
- -------------------------------------------- Name:
--------------------------------------------
ADDRESS PLEASE TYPE OR PRINT
- -------------------------------------------- --------------------------------------------
ZIP CODE TITLE
- -------------------------------------------- Dated:
----------------------------------------, 1997
AREA CODE AND TELEPHONE NO.
</TABLE>
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES
SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. -- Social Security numbers have nine digits separated by two hyphens:
e.g., 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: e.g., 00-0000000. The table below will help determine the
number to give the payer.
<TABLE>
<C> <S> <C>
- ----------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF --
==========================================================
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF --
- ----------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first
individual on the
account(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint
funds, either person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor, or
guardian or committee incompetent person(3)
for a designated ward,
minor, or incompetent
person
7. A. A revocable savings The grantor-trustee(1)
trust account (in
which grantor is also
trustee)
B. Any "trust" account The actual owner(1)
that is not a legal
or valid trust under
State law
8. Sole proprietorship The owner(4)
account
9. A valid trust, estate, The legal entity (Do not
or pension trust furnish the identifying
number of the personal
representative or
trustee unless the legal
entity itself is not
designated in the
account title)(5)
10. Corporate account The corporation
11. Religious, charitable, The organization
or educational
organization account
12. Partnership account held The partnership
in the name of the
business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or nominee
nominee
15. 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
</TABLE>
=============================================================
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner. If the owner does not have an employer
identification number, furnish the owner's social security number.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL BE
CONSIDERED TO BE THAT OF THE FIRST NAME LISTED.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you do not have a taxpayer indentification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
resident individuals), Form SS-4, Application for Employer Identification Number
(for businesses and all other entities), or Form W-7 for International Taxpayer
Identification Number (for alien individuals required to file U.S. tax returns),
at an office of the Social Security Administration or the Internal Revenue
Service.
To complete Substitute Form W-9, if you do not have a taxpayer indentification
number, write "Applied For" in the space for the taxpayer indentification number
in Part 1, sign and date the Form, and give it to the requester. Generally, you
will then have 60 days to obtain a taxpayer identification number and furnish it
to the requester. If the requester does not receive your taxpayer
indentification number within 60 days, backup withholding, if applicable, will
begin and will continue until you furnish your taxpayer indentification number
to the requester.
PAYEES EXEMPT FROM BACKUP WITHHOLDING PENALTIES
Payees specifically exempted from backup withholding on ALL payments include the
following:*
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan (IRA), or a custodial account under section 403(b)(7).
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
political subdivision or instrumentality thereof.
- A foreign government or a political subdivision, agency or instrumentality
thereof.
- An international organization or any agency or instrumentality thereof.
- A registered dealer in securities or commodities registered in the United
States or a possession of the United States.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or non-exempt trust descibed in
section 4947(a)(1).
- An entity registered at all times during the tax year under the Investment
Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under
section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
that have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
Payments of interest generally not subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. NOTE: You may be
subject to backup withholding if (i) this interest is $600 or more, (ii) the
interest is paid in the course of the payer's trade or business and (iii)
you have not provided your correct taxpayer indentification number to the
payer.
- Payments of tax-exempt interest (including exempt interest dividends under
section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE A SUBSITUTE FORM W-9 TO AVOID POSSIBLE
ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND
DATE THE FORM AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends and patronage dividends that are
not subject to information reporting are also not subject to backup withholding.
For details, see the regulations under sections 6041, 6041A(a), 6045 and 6050A
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes and to help verify the accuracy of your tax return.
Payers must be given the numbers whether or not recipients are required to file
tax returns. Payers must generally withhold 31% of taxable interest, dividends,
and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, 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 STATEMENTS WITH RESPECT TO WITHHOLDING.--If you make
a false statement with no reasonable basis which results in no imposition of
backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--If you falsify certifications
or affirmations, you are subject to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
- ---------------
*Unless otherwise noted herein, all references below to section numbers or to
regulations are references to the Internal Revenue Code and the regulations
promulgated thereunder.
<PAGE> 1
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares (as defined below). The Offer (as defined below) is made solely
by the Offer to Purchase dated August 5, 1997 and the related Letter of
Transmittal. The Offer is being made to all holders of Shares, except that the
Offer 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 thereof would not be in compliance with the securities, blue sky or
other laws of such jurisdiction. The Purchaser (as defined below) may, in its
discretion, however, take such action as it may deem necessary to make the Offer
in any jurisdiction and extend the Offer to holders of Shares in such
jurisdiction. 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 shall be
deemed to be made on behalf of the Purchaser by Lehman Brothers Inc. or 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
AMDAHL CORPORATION
AT
$12.00 NET PER SHARE
BY
FUJITSU INTERNATIONAL, INC.
A WHOLLY OWNED SUBSIDIARY OF
FUJITSU LIMITED
Fujitsu International, Inc., a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of Fujitsu Limited, a corporation organized under the
laws of Japan (the "Parent"), is offering to purchase all outstanding shares of
common stock, par value $.05 per share (the "Shares"), of Amdahl Corporation, a
Delaware corporation (the "Company"), at a price of $12.00 per Share, net to the
seller in cash, without interest, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated August 5, 1997 (the "Offer to
Purchase") and in the related Letter of Transmittal (which together, as amended
or supplemented from time to time, constitute the "Offer"). The purpose of the
Offer is to enable the Parent to acquire all of the equity interest in the
Company that it does not currently own. The Parent currently owns 51,811,664
Shares, representing, as of July 29, 1997, approximately 42.1% of the
outstanding Shares. Following the Offer, the Purchaser intends to effect the
Merger (as defined below).
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON FRIDAY, SEPTEMBER 5, 1997, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, (i) there being validly
tendered and not withdrawn prior to the expiration of the Offer that number of
Shares which, when added to those Shares held by the Parent as of the expiration
of the Offer, represents at least 51% of the outstanding Shares, (ii) the
expiration or termination of any applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
Exon-Florio Act, and (iii) the receipt of any requisite approvals of the
European Commission and the Bank of Japan. The Offer also is subject to the
other terms and conditions described in the Offer to Purchase.
<PAGE> 2
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of July 30, 1997 (the "Merger Agreement") among the Parent, the Purchaser and
the Company. The Merger Agreement provides, among other things, for the making
of the Offer by the Purchaser, and further provides that, following the purchase
of Shares pursuant to the Offer and as soon as practicable after the
satisfaction or waiver of certain other conditions set forth in the Merger
Agreement, and in accordance with relevant provisions of the Delaware General
Corporation Law (the "Delaware Law"), the Purchaser will be merged with and into
the Company (the "Merger"). Following consummation of the Merger, the Company
will continue as the surviving corporation (the "Surviving Corporation") and
will be a wholly owned subsidiary of the Parent. At the effective time of the
Merger (the "Effective Time"), each issued and outstanding Share (except for
Shares owned by the Company as treasury stock or by any subsidiary of the
Company, Shares registered in the name of the Parent or the Purchaser and Shares
held by stockholders who shall have properly demanded and perfected appraisal
rights under Section 262 of the Delaware Law) will automatically be canceled and
converted into the right to receive $12.00 (or any higher price that may be paid
per Share in the Offer), net to the holder in cash, without interest.
THE BOARD OF DIRECTORS OF THE COMPANY, ACTING THROUGH THE MEMBERS OF THE
BOARD WHO ARE INDEPENDENT OF THE PARENT AND THE PURCHASER AND WHO CONSTITUTE A
MAJORITY OF THE DIRECTORS IN OFFICE, HAS UNANIMOUSLY APPROVED THE OFFER, THE
MERGER AND THE MERGER AGREEMENT AND UNANIMOUSLY DETERMINED THAT THE OFFER, THE
MERGER AND THE MERGER AGREEMENT ARE FAIR TO AND IN THE BEST INTERESTS OF THE
COMPANY AND THE COMPANY'S STOCKHOLDERS (OTHER THAN THE PARENT AND ITS
AFFILIATES), AND UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT
THE OFFER AND TENDER THEIR SHARES TO THE PURCHASER.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares validly tendered and not properly
withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary (as defined in the Offer to Purchase) of the Purchaser's acceptance
for payment of such Shares pursuant to the Offer. In all cases, upon the terms
and subject to the conditions of the Offer, payment for Shares accepted for
payment pursuant to the Offer will be made by deposit of the purchase price
therefor with the Depositary, which will act as agent for tendering stockholders
for the purpose of receiving payments from the Purchaser and transmitting such
payments to tendering stockholders whose Shares have been accepted for payment.
UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR THE SHARES BE
PAID, REGARDLESS OF ANY EXTENSION OF THE OFFER OR DELAY IN MAKING SUCH PAYMENT.
Upon deposit of funds with the Depositary for the purpose of making payments to
tendering stockholders, the Purchaser's obligation to make such payments shall
be satisfied and tendering stockholders must thereafter look solely to the
Depositary for payment of amounts owed to them by reason of acceptance for
payment of Shares pursuant to the Offer. 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 (i) the certificates evidencing such Shares
(the "Share Certificates") or timely confirmation (a "Book-Entry Confirmation")
of a book-entry transfer of such Shares into the Depositary's account at one of
the Book-Entry Transfer Facilities (as defined in the Offer to Purchase)
pursuant to the procedures set forth in of the Offer to Purchase, (ii) a Letter
of Transmittal (or a facsimile thereof), properly completed and duly executed,
with any required signature guarantees, or, in the case of a book-entry
transfer, an Agent's Message (as defined in the Offer to Purchase) and (iii) any
other documents required under the Letter of Transmittal.
Subject to the applicable rules and regulations of the Securities and
Exchange Commission and the terms and conditions of the Merger Agreement, the
Purchaser expressly reserves the right, in its sole discretion, at any time and
from time to time, regardless of whether any of the conditions to the Offer set
forth in the Offer to Purchase have or have not been satisfied, (i) 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 such extension to the Depositary and (ii) to amend the Offer in any respect
by giving oral or written notice of such amendment to the Depositary. There can
be no assurance, however, that the Purchaser will exercise its right to extend
the Offer. In the case of an extension, a public announcement will be made no
later than
<PAGE> 3
9:00 a.m., New York City time, on the next business day after the previously
scheduled expiration date of the Offer. During any such extension, all Shares
previously tendered and not properly withdrawn will remain subject to the Offer
and to the rights of a tendering stockholder to withdraw such stockholder's
Shares.
Tenders of Shares made pursuant to the Offer are irrevocable, except that
such Shares may be withdrawn pursuant to the procedures set forth in the Offer
to Purchase at any time prior to 5:00 p.m., New York City time, on Friday,
September 5, 1997 (or the latest time and date at which the Offer, if extended
by the Purchaser, shall expire) and, unless theretofore accepted for payment by
the Purchaser pursuant to the Offer, may also be withdrawn at any time after
October 3, 1997 or such later time as may apply if the Offer is extended. For
the withdrawal of Shares 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 page of the Offer to Purchase.
Any such notice of withdrawal must specify the name of the person having
tendered the Shares to be withdrawn, the number of Shares to be withdrawn, if
Share Certificates have been tendered, and the name of the registered holder of
such Shares to be withdrawn as set forth on such Share Certificates, if
different from that of the person who tendered such Shares. If Share
Certificates evidencing Shares to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such Share
Certificates, the serial numbers shown on such Share Certificates must be
submitted to the Depositary and, unless such Shares have been tendered by an
Eligible Institution (as defined in the Offer to Purchase), the signature(s) on
the notice of withdrawal must be guaranteed by an Eligible Institution. If
Shares have been tendered pursuant to the procedures for book-entry transfer (as
set forth in the Offer to Purchase), any notice of withdrawal must specify the
name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Shares and must otherwise comply with such
Book-Entry Transfer Facility's procedures for such withdrawal. Withdrawals of
tenders of Shares may not be rescinded, and any Shares properly withdrawn will
thereafter be deemed not validly tendered for purposes of the Offer. Withdrawn
Shares may be retendered by again following one of the procedures described in
the Offer to Purchase at any time on or prior to the expiration date of the
Offer. All questions as to the form and validity (including the time of receipt)
of any notice of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has caused its stockholder list and security position listings
to be provided to the Purchaser for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase, the related Letter of Transmittal and
other relevant materials will be mailed to record holders of Shares whose names
appear on the Company's stockholder list and will be furnished, for subsequent
transmittal to beneficial owners of Shares, to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
Questions and requests for assistance may be directed to the Information
Agent or to the Dealer Manager as set forth below. Copies of the Offer to
Purchase, the Letter of Transmittal or other related materials may be obtained
from the Information Agent or from brokers, dealers, or commercial banks and
trusts. Neither the Purchaser nor the Parent, nor any officer, director,
stockholder, agent or other representative of the Purchaser or the Parent, will
pay any fees or commissions to any broker, dealer or other person (other than
the Depositary, the Information Agent and the Dealer Manager, as described in
the Offer to Purchase) for soliciting tenders of Shares pursuant to the Offer.
<PAGE> 4
The Information Agent for the Offer is:
LOGO
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (call collect)
or
CALL TOLL FREE (800) 322-2885
The Dealer Manager for the Offer is:
LEHMAN BROTHERS
3 World Financial Center
New York, NY 10285
(212) 526-2415 or (212) 526-5266
August 5, 1997
<PAGE> 1
August 5, 1997
Contact: For Fujitsu Limited
Korendo Shiotsuki
General Manager, NY Office
or
Sitrick And Company
Michael Sitrick
Donna Walters
(415) 268-7352
Investor Relations For Amdahl Corporation
William Stewart
Vice President
Director of Financial and Public Relations
(408) 746-6076
FUJITSU COMMENCES TENDER TO PURCHASE ALL OUTSTANDING SHARES OF AMDAHL
TOKYO, JAPAN & SUNNYVALE, CA, U.S.A. -- AUGUST 5, 1997 - Fujitsu Limited
(TSE: 6702) and Amdahl Corporation (AMEX: AMH) announced that, in accordance
with the previously announced definitive merger agreement, Fujitsu today
commenced a tender offer for all of the outstanding shares of Amdahl stock not
currently owned by Fujitsu at a purchase price of $12.00 per share in cash. As
previously announced, the merger agreement was unanimously approved by the
Amdahl directors who are unaffiliated with Fujitsu.
The tender offer and withdrawal rights will expire at 5:00 p.m. New York
City time, Friday, September 5, 1997, unless the offer is extended. Pursuant to
the merger agreement, if the tender offer is consummated, Fujitsu will be
obligated to acquire any remaining Amdahl shares in a cash merger at the same
price as the tender offer. Fujitsu currently owns approximately 42 percent of
Amdahl's shares. The tender offer is subject to several conditions, including
the tender of a minimum number of shares that, when added to Fujitsu's existing
42 percent stake, will represent 51 percent of the outstanding Amdahl shares,
and other customary conditions as described in an Offer to Purchase being mailed
to all shareholders of Amdahl.
<PAGE> 2
The Bank of New York will act as depository for the tender, Mackenzie
Partners, Inc. as information agent and Lehman Brothers Inc. as dealer manager.
Fujitsu, which was founded in 1935, had sales of more than $36 billion
in 1996. It is the world's second-largest computer maker and solutions
provider, as well as a leader in the manufacture of telecommunications
equipment, semiconductors and other electronic devices. From its headquarters
in Tokyo, Fujitsu operates more than 440 consolidated subsidiaries. Its U.S.
operations include four manufacturing plants, in California, Oregon and Texas.
The company employs 165,000 people worldwide.
Amdahl Corporation, based in Sunnyvale, California, was founded in 1970.
Amdahl had revenues last year of $1.63 billion, with about half coming from
information processing services and software and the remainder from the sale and
maintenance of computer hardware, including large-scale mainframe computers,
mid-range servers and data storage devices. Amdahl has 9,800 employees
worldwide.
<PAGE> 1
3/4/82
AMDAHL/FUJITSU 1982 AGREEMENT
This Agreement is made and entered into as of March 4, 1982, by and between
FUJITSU LIMITED, a corporation of Japan, having a registered place of business
at 1015 Kamikodanaka, Nakahara-ku, Kawasaki, Japan (hereinafter referred to as
"FJ"), and AMDAHL CORPORATION, a corporation formed under the laws of the State
of Delaware, having a principal place of business at 1250 East Arques Avenue,
Sunnyvale, California 94086, United States of America (hereinafter referred to
as "AC").
W I T N E S S E T H:
WHEREAS, FJ and AC (hereinafter sometimes referred to collectively as "the
parties" and individually as a "party") have made and entered into the
AMDAHL/FUJITSU Licensing Agreement, effective as of April 8, 1977 (hereinafter,
together with all amendments and supplements thereto, referred to as the "1977
Agreement"); and
WHEREAS, FJ and AC have made and entered into the AMDAHL/FUJITSU 1978
Agreement, effective as of September 7, 1978 (hereinafter, together with all
amendments and supplements thereto, including, without limitation, the
AMDAHL/FUJITSU 1979 Supplement dated October 1, 1979, referred to as the "1978
Agreement"); and
WHEREAS, the 1977 Agreement and the 1978 Agreement each provide for
cross-licensing by the parties under certain present and future patents, in
some instances on an exclusive, and in other instances on a non-exclusive,
basis; and
WHEREAS, the parties wish to enter into this Agreement which, among other
things, would provide for possible modification of certain licenses granted
under the 1977 Agreement and the 1978 Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
contained herein, FJ and AC agree as follows:
1. In the event that any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence
shall be voluntary or come about or be effected by operation of law or
otherwise):
(a) Except as specified in subparagraphs (ii) and (vi) below, AC
hereafter issues shares of stock or securities convertible
into, or rights to acquire, stock having voting power in the
election of directors without first having offered to FJ the
right to purchase the type of stock, securities, or rights,
proposed to be issued, for cash, in an amount that will permit
FJ to maintain "FJ's Percentage Ownership" for the same price
as the stock, securities, or rights are to be offered to
others.
(i) As used herein, the phrase "AC Equity Securities"
shall mean all shares of AC stock and stock issuable
upon conversion or exercise
<PAGE> 2
of securities convertible into, and rights to acquire,
AC stock having voting power in the election of
directors, other than: (x) AC Series B Common Stock
and any other stock having not more than one-quarter
of a vote per share issued to employees of AC or its
affiliates; and (y) employee or director stock options
and rights to purchase AC stock pursuant to employee
benefit plans and AC stock issuable under such options
or rights approved by or subject to the approval of AC
stockholders. As used herein, the phrase "FJ's
Percentage Ownership" shall mean the percentage
determined by dividing the total number of AC Equity
Securities then held by FJ by the total number of AC
Equity Securities then outstanding; provided, that for
purposes of this computation, FJ's Percentage
Ownership shall not exceed 31.3%, unless such
ownership is increased above 31.3% upon the purchase
of AC Equity Securities directly from AC, except a
purchase made pursuant to subparagraph (iv) of this
paragraph (a).
(ii) The issuance of: (x) shares of AC Series B Common
Stock and of any other stock having not more than
one-quarter of one vote per share to employees of AC
or its affiliates pursuant to the authorization of
AC's Board of Directors and (y) employee stock
options and rights to purchase AC stock pursuant to
employee benefit plans approved by or subject to the
approval of AC's stockholders shall be exempt from
the requirements of this paragraph (a), but the
issuance of shares of AC stock having more than
one-quarter of one vote in the election of directors
("AC Voting Stock") upon conversion of such
securities or exercise of such rights is the subject
to the provisions hereof.
(iii) FJ's rights to purchase stock, securities and rights
pursuant to this paragraph (a) shall be applicable
whether the consideration to be received by AC upon
issuance thereof is cash or property (including
securities). If such consideration shall be other
than cash, the price to be paid by FJ for such stock,
securities and rights that it is offered shall be
equal to the per share fair market value in cash of
the AC stock, securities or rights being issued.
(iv) Notwithstanding the provisions of subparagraph (ii)
above, FJ's rights to purchase AC Voting Stock upon
the issuance of such stock pursuant to the conversion
of securities or exercise of rights as described
therein shall be subject to the limitations specified
in this subparagraph (iv), as follows:
(aa) Such rights of FJ to purchase AC Voting Stock
shall accumulate until FJ shall have the
right to purchase not less
<PAGE> 3
than 125,000 shares (subject to adjustments
for stock splits, stock dividends and similar
capital adjustments);
(bb) When FJ may purchase pursuant to subparagraph
(aa) above, FJ may effect a purchase of all
or any of the AC Voting Stock that it is
entitled to purchase (provided that all
purchases must be in amounts of at least
125,000 shares) during the week (a "Purchase
Period") following the period that ends on
the tenth trading day after the third day
following the public release of AC's
quarterly financial results at a price equal
to the average of the closing prices of such
AC Voting Stock for such ten trading day
period, provided that such AC Voting Stock is
publicly traded, or if such securities are
not publicly traded, at the fair market value
thereof determined in good faith by the Board
of Directors of AC.
(cc) In the event that FJ's rights to purchase
described in this subparagraph (iv) shall
accumulate to the point (that FJ has the
unexercised right to purchase the FJ
Percentage Ownership of four percent or more
of the outstanding AC Voting Stock) and FJ
shall fail to exercise its purchase rights
during the next succeeding Purchase Period to
reduce its accumulated rights to less than
the FJ Percentage Ownership of four percent,
then for the purpose of computing FJ's
Percentage Ownership in the future, the
number of shares of AC Voting Stock that FJ
holds will be reduced by the number of shares
of AC Voting Stock that FJ could have
acquired if it had exercised all of its
purchase rights during such Purchase Period.
(v) AC shall give FJ written notice of its right to
purchase stock, securities or rights pursuant to this
paragraph (a), and such offer may only be accepted by
FJ (except as provided in subparagraph (iv) hereof)
within 30 days after receipt of such notice. All
purchase and sales shall be completed promptly after
such acceptances. The right to purchase stock,
securities or rights shall not be assignable by FJ
except to wholly-owned subsidiaries of FJ.
(vi) Notwithstanding anything to the contrary in this
paragraph (a) FJ shall have no rights to purchase AC
stock, securities, or rights in connection with: (x)
AC stock, securities or rights being issued pursuant
to any stock split, stock dividend or
recapitalization of AC (it being the parties'
understanding that such actions will not
<PAGE> 4
affect relative ownership interest of AC Voting
Stock), or (y) AC Common Stock issued pursuant to the
exercise of all warrants to purchase AC stock
presently outstanding, or issued pursuant to
securities convertible into, or rights to acquire AC
Common Stock offered to FJ pursuant to this paragraph
(a).
(vii) If AC inadvertently fails to offer to FJ the right to
purchase stock, securities or rights in the manner
required by this paragraph (a), FJ may not elect to
modify licenses pursuant to this Agreement if AC
corrects such a failure and makes an offer to FJ to
purchase the correct amount of stock, securities or
rights promptly after AC discovers such failure.
(b) All or substantially all of AC's business of selling large
scale mainframe computers having a performance in excess of
two times the IBM 158 Model III ("Large Scale Computers"), in
the United States and Canada, or all or substantially all of
AC's business throughout the world of developing or
manufacturing Large Scale Computers is transferred to a third
party in a single transaction or a series of related
transactions; or
(c) A party effects a transaction (or a series of related
transactions) whereby outstanding shares (or securities
convertible into such shares) having more than 50 percent of
the voting power in the election of directors of such party,
or of any entity into which such party is merged, or of which
such party becomes a subsidiary, are held, directly or
indirectly, by shareholders upon the closing of such
transaction (other than the other party hereto) who were not
holders of 50 percent or more of such voting stock of such
party prior to such consummation; provided that, if AC is the
party effecting such transaction, this paragraph (c) will not
be applicable if FJ votes any of its shares of AC Voting Stock
in favor of such transaction; or
(d) AC terminates all or substantially all of its business of
manufacturing Large Scale Computers; or
(e) A party makes an assignment for the benefit of creditors, or
becomes unable to pay its debts generally as they become due;
or
(f) Any order, judgment or decree is entered adjudicating a party
bankrupt or insolvent; or
(g) A party commences any proceedings relating to itself under any
bankruptcy or insolvency laws of any jurisdiction, including
any reorganization proceedings under such laws; or
<PAGE> 5
(h) In connection with and as a part of a corporate combination of
AC, the Chief Executive Officer of the combined companies
shall be other than the Chief Executive Officer of AC
immediately prior to such combination, provided that this
paragraph (h) will not be applicable if FJ votes any of its
shares of AC Voting Stock in favor of such transaction; or
(j) FJ shall become unable to elect individuals to serve as
directors of AC in a number proportionate to its ownership of
their outstanding AC Voting Stock pursuant to cumulative
voting (disregarding fractions) as a result of AC amending its
Certificates of Incorporation or by-laws; or
(k) AC enters into a transaction to acquire a computer from a
third party for resale as a product substantially in the form
acquired and not as part of a larger system and as a
substitute for any model of ALTA Series (as defined in the
1978 Agreement) that is then subject to the purchase
commitments specified in Section 10 of the 1978 Agreement; or
after such purchase commitment has terminated, AC enters into
a transaction to acquire such a computer from a third party
for resale as a product substantially in the form acquired and
not as part of a larger system and as a model in a series of
computers that is developed to succeed ALTA Series, or to
succeed any series of computers developed to succeed ALTA
Series and its successors, or as a substitute for any such
model; provided that FJ may not elect to modify licenses
pursuant to this Agreement if AC has first offered to purchase
any such computer from FJ, affording FJ a reasonable period of
time to consider such offer, and, after good faith
negotiations, AC and FJ have not entered into an agreement
pursuant to which FJ will sell and AC will purchase a
substantially equivalent product on terms and conditions that
are substantially comparable to those offered by any such
third party, unless AC shall enter into such an agreement with
a Japanese company which at the date of this Agreement is
manufacturing and selling large scale IBM compatible
computers, in which latter event FJ will have the right to
elect to modify licenses in the manner provided in this
Agreement.
Then FJ, or in the case of subparagraphs (c), (e), (f), and (g), the
party which has not taken the action described, or is not the subject
of the events specified, in such subparagraphs, may, at its option,
elect to cause the following modifications to be made to licenses
granted under the 1977 Agreement and the 1978 Agreement:
(aa) Each exclusive right and license granted by a
party to the other under Article II of the
1977 Agreement shall become a non-exclusive
right and license, and the exclusions
affecting the existing non-exclusive licenses
shall be deleted, and each party shall
automatically grant to the other party,
without necessity of any further action, a
<PAGE> 6
worldwide non-exclusive, non-transferable,
paid-up, royalty-free right and license to
make, have made, import, use, lease, sell and
otherwise dispose of Licensed Products and any
other product made under Licensed Patents and
to utilize in connection therewith any of the
Technical Information and Know-How (as such
capitalized terms are defined in the 1977
Agreement); and
(bb) The exclusive right and license granted by FJ
to AC pursuant to Section 5.2 of the 1978
Agreement and the exclusive right and license
granted by AC to FJ pursuant to Section 5.3
of the 1978 Agreement shall become
non-exclusive rights and licenses,
provided, however, that a party hereto shall not be entitled to make
such election if prior to its notice of election it shall have
substantially breached (not through events beyond its control) the
1978 Agreement or the Manufacturing Agreements entered into pursuant
to Section 10 of the 1978 Agreement, and such substantial breach has
not been cured so that the non-breaching party will be in the same
economic position as though the breach had not occurred; and provided
further that in the event that after a modification of licenses shall
have occurred pursuant to this Agreement, a party hereto shall be
found by a judicial authority to have substantially breached (not
through events beyond its control) the 1978 Agreement or the
Manufacturing Agreement entered into pursuant to Section 10 of the
1978 Agreement, the following shall result:
(x) if the party found to have breached is FJ:
(aa) The conversion of exclusive rights and
licenses under the 1977 Agreement and the
1978 Agreement to non-exclusive licenses
shall not be affected and such rights and
licenses shall continue as non-exclusive
licenses; and
(bb) The modification of the non-exclusive
licenses granted to FJ under the 1977
Agreement previously effected by FJ shall be
terminated, and FJ shall have no additional
rights under the 1977 Agreement non-exclusive
licenses than it enjoyed prior to the initial
modification of licenses; and
(y) if the party found to have breached is AC:
(aa) The conversion of exclusive rights and
licenses under the 1977 Agreement and the
1978 Agreement to non-exclusive licenses
shall not be affected and such rights and
licenses shall continue as non-exclusive
licenses; and
<PAGE> 7
(bb) The modifications of the non-exclusive
licenses granted to AC under the 1977
Agreement previously effected shall be
terminated, and AC shall have no additional
rights under the 1977 Agreement non-exclusive
licenses than it enjoyed prior to the initial
modification of licenses;
provided, however, that a claim of a right of termination of modification of
licenses pursuant to subparagraphs (x)(bb) and (y)(bb) above shall not be the
grounds for issuance of an injunction as a remedy for patent infringement prior
to such termination, and that in the event of such termination the parties
shall cooperate to provide maintenance and other support to customer
installations of products that, as a result of such termination are no longer
subject to valid licenses; and provided further, however, that should FJ make
such election, AC will have an option to modify its obligations under the 1978
Agreement to purchase specified quantities of computer subsystems and
semiconductor devices, but AC may not reduce by more than one-half its
obligation to purchase subsystems and semiconductor devices under Section 10 of
the 1978 Agreement, and in any event FJ will remain obligated to sell products
to AC pursuant to the terms of the 1978 Agreement and the Manufacturing
Agreement entered into pursuant to Section 10 of the 1978 Agreement.
2. Notice of election to exercise the option specified in Section 1
hereof shall be given, if at all, within six months after a party
entitled to exercise such option has become aware of the occurrence of
such event, and shall be given in writing by registered air mail to
the President of the respective party at the address set forth at the
start of this Agreement. Such notice shall be deemed to have been
received on the fifth day after the date of the postmark.
3. The terms and conditions of this Agreement shall control where they
may be inconsistent with terms and conditions of the 1977 Agreement or
the 1978 Agreement, each of which shall be hereby amended to the
extent necessary to carry out the provisions hereof. All matters of
interpretation shall be construed so as to give full effect to the
provisions and intentions of this Agreement.
IN WITNESS WHEREOF, both parties hereto have caused this Agreement to
be executed by duly authorized representatives as of the date first
set forth above.
AMDAHL CORPORATION FUJITSU LIMITED
By /s/ John C. Lewis By /s/ Shiro Yoshikawa
----------------------- --------------------------
<PAGE> 1
April 3, 1984
Amdahl Corporation
1250 East Arques
Sunnyvale, CA 94086
U.S.A.
Attention: Mr. John C. Lewis
President
Gentlemen:
This letter will confirm the agreements and representations of Fujitsu
Limited ("Fujitsu") and Amdahl Corporation ("Amdahl") with respect to the
acquisition by Fujitsu of 6,007,532 shares (the "Shares") of Amdahl Common
Stock, $.05 par value ("Common Stock") and warrants to purchase 2,490,000
shares of Common Stock expiring December 31, 1984 ("Warrants") from Heizer
Corporation ("Heizer"). For purposes of this Agreement, the term "Amdahl Equity
Securities" at a particular time shall mean all shares of Amdahl Common Stock,
$.05 par value, Amdahl Preferred Stock and any other class or series of equity
securities then authorized in the Amdahl Certificate of Incorporation, and all
such securities issuable upon conversion or exercise of any then outstanding
options, warrants or convertible securities of Amdahl.
1. Neither Fujitsu nor any majority-owned subsidiary of Fujitsu
(collectively called "Fujitsu Group") will, without the prior approval of
Amdahl, directly or indirectly, acquire any Amdahl Equity Securities, whether
in the open market, directly from Amdahl, directly from other Amdahl security
holders, or otherwise, if such acquisition would result in the Fujitsu Group's
Percentage Ownership of Common Stock Outstanding On A Fully Diluted Basis
exceeding 49.5% of all Common Stock Outstanding On A Fully Diluted Basis.
"Common Stock Outstanding On A Fully Diluted Basis" shall mean all shares of
Common Stock having voting power in the election of directors outstanding at
any time plus all shares of Common Stock issuable upon conversion of exercise
of securities convertible into, and rights to acquire, Common Stock having
voting power in the election of directors outstanding at any time.
2. Section 1(a)(i) of the Amdahl/Fujitsu 1982 Agreement, dated as of
March 4, 1982, is hereby amended so as to delete the number "31.3%" wherever it
appears and to substitute therefor the number "49.5%.
3. The provisions of this Agreement will become effective on the date
of the closing of the purchase of the Shares and Warrants by Fujitsu from Heizer
and shall remain in full force and effect until the tenth anniversary of such
date, or earlier
<PAGE> 2
termination as provided below, after which such provisions, except for
provisions of Section 2 above, which shall survive, shall become null and void
and will cease to have any further force or effect, provided, however, that
this Agreement (except for Section 2) may be terminated by Fujitsu or by Amdahl
by delivering a written notice of termination to the other party at any time
during the period from April 1, 1990 to June 30, 1990.
4. Each party hereto acknowledges that the breach of any of its
agreements contained herein would result in irreparable damage to the other
which could not be adequately compensated in monetary damages.
5. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
If the foregoing correctly sets forth the understanding between us,
please execute this letter in the space provided below, whereupon it will
become a binding agreement between us pursuant to its terms.
Very truly yours,
FUJITSU LIMITED
By: /s/ Takuma Yamamoto
--------------------------
Takuma Yamamoto
President
Acknowledged and agreed to:
AMDAHL CORPORATION
By: /s/ John C. Lewis
---------------------------
