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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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AMDAHL CORPORATION
(NAME OF SUBJECT COMPANY)
AMDAHL CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)
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COMMON STOCK, PAR VALUE $.05 PER SHARE
(TITLE OF CLASS OF SECURITIES)
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023905 10 2
((CUSIP) NUMBER OF CLASS OF SECURITIES)
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JOHN C. LEWIS
CHAIRMAN OF THE BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
AMDAHL CORPORATION
1250 EAST ARQUES AVENUE
SUNNYVALE, CALIFORNIA 94088-3470
(408) 746-6000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZED TO RECEIVE
NOTICES AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
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Copies to:
JOHN W. LARSON, ESQ.
RONALD B. MOSKOVITZ, ESQ.
MICHAEL S. DORF, ESQ.
BROBECK, PHLEGER & HARRISON LLP
SPEAR STREET TOWER, ONE MARKET
SAN FRANCISCO, CALIFORNIA 94105-1000
(415) 442-0900
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INTRODUCTION
This Solicitation/Recommendation Statement on Schedule 14D-9 (this
"Schedule 14D-9" or this "Statement") relates to an offer by Fujitsu
International, Inc., a Delaware corporation and wholly-owned subsidiary of
Fujitsu Limited, a Japanese corporation, to purchase all of the Shares (as
defined below) of Amdahl Corporation, a Delaware corporation.
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Amdahl Corporation, a Delaware
corporation (the "Company"), and the address of the principal executive offices
of the Company is 1250 East Arques Avenue, Sunnyvale, California 94088-3470. The
title of the class of equity securities to which this statement relates is the
Company's common stock, par value $.05 per share ("Common Stock" or the
"Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to the tender offer (the "Offer") described in the
Tender Offer Statement on Schedule 14D-1 dated August 5, 1997 (as amended or
supplemented from time to time, the "Schedule 14D-1"), which has been filed by
Fujitsu International, Inc., a Delaware corporation (the "Purchaser"), which is
a wholly owned subsidiary of Fujitsu Limited, a Japanese corporation (the
"Parent"), and the Parent with the Securities and Exchange Commission (the
"Commission" or the "SEC"), and in a Rule 13e-3 Transaction Statement on
Schedule 13E-3 dated August 5, 1997 (as amended or supplemented from time to
time, the "Schedule 13E-3"), which has been filed by the Parent, the Purchaser
and the Company with the SEC, relating to an offer by the Purchaser to purchase
all the issued and outstanding Shares at a price of $12.00 per Share, net to the
seller in cash, without interest thereon (the "Offer Price"), upon the terms and
subject to the conditions set forth in the Purchaser's Offer to Purchase dated
August 5, 1997, and the related Letter of Transmittal (which, as amended or
supplemented from time to time, together constitute the "Offer Documents"). The
Offer Documents indicate that the principal executive offices of Parent and
Purchaser are located at Marunouchi Center Building, 6-1 Marunouchi, 1-Chome,
Chiyoda-ku, Tokyo 100, Japan.
The Offer is being made pursuant to the Agreement and Plan of Merger dated
as of July 30, 1997 (the "Merger Agreement"), among the Company, the Parent and
the Purchaser. A copy of the Merger Agreement has been filed as Exhibit 1 to
this Schedule 14D-9 and is incorporated herein by reference in its entirety.
Pursuant to the Merger Agreement, following the consummation of the Offer, upon
the satisfaction or waiver of certain conditions, the Purchaser will be merged
with and into the Company (the "Merger"). In the Merger, each Share outstanding
immediately prior to the effective time of the Merger (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 (the "DGCL")) will, by virtue of the Merger and without any action by
the holder thereof, be converted into the right to receive $12.00 per Share (or
any higher price paid per Share in the Offer), net to the seller in cash,
without interest thereon (the "Merger Consideration"), upon the surrender of the
certificate formerly representing such Share. The Merger Agreement is summarized
in Item 3 of this Schedule 14D-9.
ITEM 3. IDENTITY AND BACKGROUND.
a. The name and address of the Company, which is the person filing this
Schedule 14D-9, are set forth in Item 1 above. Unless the context otherwise
requires, references to the Company in this Schedule 14D-9 are to the "Company"
and its direct and indirect subsidiaries, viewed as a single entity.
b. Except as described herein and in Annex A hereto, to the knowledge of
the Company, as of the date hereof, there are no material contracts, agreements,
arrangements or understandings, or any actual or potential conflicts of interest
between the Company or its affiliates and (1) the Company and its executive
officers, directors or affiliates or (2) the Parent or the Purchaser and their
respective executive officers, directors and affiliates.
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(1) Certain Contracts, Agreements, Arrangements or Understandings and any
Actual or Potential Conflicts of Interest Between (A) the Company or its
Affiliates and (B) the Company and its Executive Officers, Directors or
Affiliates. In considering the recommendation of the Board of Directors set
forth in Item 4 below, the Company's stockholders (other than the Parent and its
affiliates) should be aware that certain members of the Board have interests in
the Merger and the Offer which are described in Annex A hereto and which may
present them with certain conflicts of interest. The Board of Directors was
aware of these potential conflicts and considered them along with the other
factors described in Item 4 below.
(2) Certain Contracts, Agreements, Arrangements or Understandings and any
Actual or Potential Conflicts of Interest Between (A) the Company or its
Affiliates and (B) the Purchaser and its Executive Officers, Directors or
Affiliates. For a description of certain agreements and understandings between
the Company, on the one hand, and the Parent or certain affiliates of the
Parent, on the other, see the information set forth in Item 4 below.
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 has been filed, as Exhibit 1 to this Schedule
14D-9 and is incorporated herein by reference in its entirety. 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 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 condition that the number of
shares being validly tendered and not withdrawn prior to the expiration of the
Offer 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 (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 (the "Expiration Date"), 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 U.S. 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 "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").
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Effects on Securities; Stock Options and Stock Participation Plan. In the
Merger: (i) each Share of Common Stock, $0.05 par value, of the Purchaser issued
and outstanding will be cancelled 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 cancelled 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 Company's Stock Option Plan (1974) (the
"1974 Option Plan") will vest at the Effective Time, in accordance with the
terms of that Plan. Pursuant to the Merger Agreement, effective as of the
Effective Time, each outstanding stock option under the 1974 Option Plan, the
Company's 1994 Stock Incentive 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 (i) 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 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 Company 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 cancellation, 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 Stock 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 cancellation 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
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(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 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 (as defined in Item 4
hereof) and brokers.
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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 stock options
under the Company's Option Plans); (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 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
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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 "Item
4 -- The Solicitation of Recommendation -- Background of the Transaction; Past
Contacts, Transactions and Negotiations with the Parent and the Purchaser."
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.
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
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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 period 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 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
7
<PAGE> 9
has commenced a tender offer or exchange offer for any Shares of capital stock
of the Company, (ii) the Disinterested Board (as defined in Item 4 hereof) 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 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.
Timing. The exact timing and details of the Merger will depend upon legal
requirements and a variety of other factors, including the number of Shares
acquired by the Purchaser pursuant to the Offer. Although the Purchaser and the
Parent have agreed to cause the Merger to be consummated on the terms set forth
above, there can be no assurance as to the timing of the Merger.
Appraisal Rights. Stockholders do not have dissenters' rights as a result
of the Offer. However, if the Merger is consummated, stockholders of the Company
at the time of the Merger who do not vote in favor of or consent in writing to
the Merger will have the right under the DGCL to dissent and demand appraisal of
their Shares in accordance with Section 262 of the DGCL. Under the DGCL,
dissenting stockholders who comply with the applicable statutory procedures will
be entitled to receive a judicial determination of the fair value of their
Shares (exclusive of any element of value arising from the accomplishment or
expectation of the Merger) and to receive payment of such fair value in cash,
together with a fair rate of interest, if any. Any such judicial determination
of the fair value of the Shares could be based upon considerations other than or
in addition to the price paid in the Offer (or the Merger) and the market value
of the Shares. Stockholders should recognize that the value so determined could
be higher or lower than the price per Share paid pursuant to the Offer or the
Merger. Moreover, the Parent or the Purchaser may argue in an appraisal
proceeding that, for purposes of such a proceeding, the fair value of the Shares
is less than the price paid in the Offer (or the Merger). THE FOREGOING SUMMARY
OF THE RIGHTS OF DISSENTING STOCKHOLDERS DOES NOT PURPORT TO BE A COMPLETE
STATEMENT OF PROCEDURES TO BE FOLLOWED BY STOCKHOLDERS DESIRING TO EXERCISE
THEIR DISSENTERS' RIGHTS.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
Recommendation of the Board of Directors.
The Company's Board of Directors, 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 (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 stockholders of the
Company (other than the Parent and its affiliates) and unanimously recommends
that all stockholders of the Company accept the Offer and tender all their
Shares pursuant to the Offer. This recommendation is based in part upon an
opinion (the "Morgan Stanley Opinion"), dated July 30, 1997, received by the
Company from Morgan Stanley & Co. Incorporated ("Morgan Stanley") that, as of
such date, the proposed consideration to be received by the Company's
stockholders in the Offer and the Merger is fair from a financial point of view
to the stockholders (other than
8
<PAGE> 10
the Parent and its affiliates). The full text of the Morgan Stanley Opinion
received by the Company from Morgan Stanley is filed as Exhibit 2 to this
Schedule 14D-9 and is also attached hereto as Annex B. The Morgan Stanley
Opinion states the assumptions made, procedures followed, matters considered and
review undertaken by Morgan Stanley, and stockholders are urged to read such
opinion in its entirety.
As set forth in the Offer Documents, the Purchaser will purchase all Shares
properly tendered prior to the close of the Offer if the Minimum Condition has
been satisfied by that time and if all other conditions to the Offer have been
satisfied (or waived). Stockholders considering not tendering their Shares in
order to wait for the Merger should note that if the Minimum Condition is not
satisfied or any of the other conditions to the Offer are not satisfied, the
Purchaser is not obligated to purchase any Shares, and can terminate the Offer
and the Merger Agreement and not proceed with the Merger. Under the DGCL, the
approval of the Company's Board of Directors and the affirmative vote of the
holders of a majority of the outstanding Shares are required to approve the
Merger. Accordingly, if the Minimum Condition is satisfied, the Purchaser will
have sufficient voting power to cause the approval of the Merger without the
affirmative vote of any other stockholder. The Company has been advised by the
Parent and the Purchaser that 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 Offer is scheduled to expire at 5:00 p.m., New York City time, on
Friday, September 5, 1997, unless the Offer is extended.
A copy of the press release issued jointly by the Company and the Parent on
July 30, 1997, announcing the Merger and the Offer, is filed as Exhibit 3 to
this Schedule 14D-9 and is incorporated herein by reference in its entirety. A
copy of a letter to all stockholders of the Company communicating the
recommendation of the Board of Directors is filed as Exhibit 4 hereto and is
incorporated herein by reference in its entirety.
Background of the Transaction; Past Contacts, Transactions and Negotiations
with the Parent and the Purchaser
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.
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).
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 develop-
9
<PAGE> 11
ment activities on behalf of the Parent. Transactions occurring in connection
with these relationships are described below.
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, 1995, 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
</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 signal price of such purchases 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, 1995, 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
</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 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
10
<PAGE> 12
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 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 fees 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 7 and 8 to this Schedule
14D-9), that 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, 1995, three nominees of the Parent,
Keizo Fukagawa, Takamitsu Tsuchimoto, and Kazuto Kojima were serving as
directors of the Company. On August 1, 1996,
11
<PAGE> 13
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 to Parent or are otherwise affiliated with the Parent or its
subsidiaries and received pursuant to consulting agreements the following annual
retainer fees from Parent 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.
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
12
<PAGE> 14
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 the conditions raised 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 continuing discussions regarding the profitability
of the Company's products business for the second quarter. The Parent and the
Company discussed a number of issues related to the Parent's reimbursement to
the 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
13
<PAGE> 15
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.
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.
14
<PAGE> 16
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. 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. See "-- Reasons for the Recommendation of the Board of Directors."
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 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 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.
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 a 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-
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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 party's 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-day
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 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 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 American and London Stock Exchanges 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 6:00 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
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<PAGE> 18
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 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 Company believes, and understand that the Parent and
the Purchaser believe that all of these suits are without merit and intends, and
understand that the Parent and the Purchaser intend to vigorously defend such
suits.
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Reasons for the Recommendation of the Board of Directors.
In reaching its conclusions described above, the 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 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 Schedule 14D-9 as Annex B 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."
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
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<PAGE> 20
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 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).
Opinion of Financial Advisor.
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 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 ANNEX B 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,
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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.
The following is a brief summary of material analyses performed by Morgan
Stanley and reviewed with the Disinterested Board on July 30, 1997 in connection
with the preparation of the Morgan Stanley Opinion and with its oral
presentation to the Disinterested Board on such date:
Common Stock Performance. Morgan Stanley's analysis of Common Stock
performance 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 $14.000 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
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to $15.20 based on ranges of multiples of 20.0x to 25.0x the Company's internal
1997 EPS estimates and 13.0x to 17.0x 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 Now Inc., AirTouch
Communications 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
0.33x for Samsung Electronics' acquisition of AST Research to a high of 1.43x
for Compaq Computer's acquisition of Tandem Computers' and (ii) as a multiple of
1997 LTM operating income ranged from a low of 9.9x for Gateway 2000's
acquisition of Advanced Logic Research to a high of 22.2x 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 13.4x for Gateway 2000's acquisition of Advanced Logic Research to a
high of 23.5x 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 Communications 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
AirTouch 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 0.50x to 1.20x 1997 LTM sales; (b) $3.41
to $4.20 based on a range of 12.0x to 17.0x 1997 LTM operating income; (c) $4.81
to $8.51 based on a range of 13.0x to 23.0x 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
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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 12.0x to 16.0x and an
illustrative discount rate range of 16.0% - 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 12.0x to 16.0x. 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.
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 12.0x to
16.0x 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.
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<PAGE> 24
As described above (see "-- Reasons for the Recommendations of the Board of
Directors), the Morgan Stanley Opinion and the presentation delivered by Morgan
Stanley to the Disinterested Board was one of a number of factors taken into
consideration by the Board of Directors in making its determination to recommend
approval of the Merger Agreement, 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.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company 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 as providing investment banking and financial advisory
services. In the ordinary course of its trading and brokerage activities, Morgan
Stanley or it 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.
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. In the past Morgan Stanley and its affiliates
have provided financial advisory and financing services for the Parent and its
affiliates and have received fees for the rendering of these services.
Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the stockholders of the Company on its
behalf with respect to the Offer and the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best knowledge of the Company, during the past sixty days, no
transactions in the Shares have been effected by the Company or, to the best of
the Company's knowledge, by any executive officer, director, affiliate, or
subsidiary of the Company, except for 2,666 Shares issued under the Company's
Employee Stock Purchase Option Plan.
(b) To the best knowledge of the Company, all of its executive officers and
all of the directors constituting the Disinterested Board currently intend to
tender pursuant to the Offer all Shares held of record or beneficially owned by
them.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Statement, no negotiation is being
undertaken or is underway by the Company in response to the Offer which relates
to or would result in (i) an extraordinary transaction, such as a merger or
reorganization, involving the Company or any subsidiary thereof; (ii) a
purchase, sale or transfer of a material amount of assets by the Company or any
subsidiary thereof; (iii) a tender offer for or other acquisition of securities
by or of the Company; or (iv) any material change in the present capitalization
or dividend policy of the Company.
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<PAGE> 25
(b) Except as set forth in this Statement, there is no transaction, board
resolution, agreement in principle or signed contract in response to the Offer
that relates to or would result in one or more of the events referred to in Item
7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
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, 1997 and August 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 of the Offer to Purchase.
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 of the Offer to Purchase 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.
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
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<PAGE> 26
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. 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 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
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<PAGE> 27
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 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 consumma-
26
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tion 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.
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
Board of Directors, 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 "Item 4: The Solicitation or
Recommendation -- Background of the Transaction, Past Contacts. Transactions and
Negotiations with the Parent and the Purchaser"). 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.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
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<TABLE>
<S> <C>
Exhibit 1 Merger Agreement dated as of July 30, 1997 among the Parent, the Purchaser
and the Company
Exhibit 2 Opinion of Morgan Stanley & Co. Incorporated, dated July 30, 1997 (Attached
to Schedule 14D-9 mailed to stockholders as Annex B)
Exhibit 3 Joint Press Release of the Company and the Parent, issued July 30, 1997
Exhibit 4 Letter dated July 30, 1997 from John C. Lewis to the stockholders of the
Company (Included with Schedule 14D-9 mailed to stockholders)
Exhibit 5 Article Eleventh of the Certificate of Incorporation of the Company
Exhibit 6 Article IX of the By-Laws of the Company
Exhibit 7 Amdahl/Fujitsu 1982 Agreement, dated March 4, 1982, between the Parent and
the Company
Exhibit 8 Letter Agreement, dated April 3, 1984, between the Parent and the Company
Exhibit 9 Joint Development Agreement between the Company and the Parent dated December
8, 1993 (Portions of this exhibit are deleted pursuant to a request for
confidential treatment) (incorporated by reference to Exhibit 10(aa) to the
Company's Form 10-K for the fiscal year ended December 31, 1993)
Exhibit 10 Loan Agreement between the Company and the Parent dated January 29, 1994
(incorporated by reference to Exhibit 10(c) to the Company's Form 10-Q for
the fiscal period ended April 1, 1994)
Exhibit 11 First Amendment to Loan Agreement between the Company and the Parent dated
January 27, 1994 (incorporated by reference to Exhibit 10 to the Company's
Form 10-Q for the fiscal period ended March 28, 1997)
Exhibit 12 Standstill Agreement, dated July 9, 1997, between the Parent and the Company
Exhibit 13 Confidentiality Agreement, dated June 30, 1997, between the Parent and the
Company
Exhibit 14 Joint Press Release of the Company and the Parent, issued August 5, 1997
</TABLE>
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<PAGE> 30
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
August 5, 1997 AMDAHL CORPORATION
By: /s/ JOHN C. LEWIS
------------------------------------
John C. Lewis
Chairman of the Board, President and
Chief Executive Officer
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<PAGE> 31
ANNEX A
AMDAHL CORPORATION
1250 EAST ARQUES AVENUE
SUNNYVALE, CALIFORNIA 94088-3470
(408) 746-6000
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
GENERAL
This Information Statement is being mailed on or about August 5, 1997, with
the Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") of Amdahl Corporation, a Delaware corporation(the "Company"), with
respect to the Offer to Purchase dated August 5, 1997 (as amended or
supplemented, the "Offer to Purchase") of Fujitsu International, Inc., a
Delaware corporation and a wholly owned subsidiary of Fujitsu Limited (the
"Purchaser"), a Japanese corporation (the "Parent"). The Purchaser is offering
to purchase all of the outstanding shares of Common Stock, par value $.05 per
share (the "Common Stock") of the Company at a price of $12.00 per share, net to
the seller in cash (the "Offer"). The Offer is being made pursuant to the
Agreement and Plan of Merger, dated as of July 30, 1997 (the "Merger
Agreement"), by and among the Parent, the Purchaser and the Company. You are
receiving this Information Statement in connection with the possible election of
persons designated by the Purchaser (the "Purchaser Designees") to at least a
majority of the seats on the Board of Directors (the "Board") of the Company
pursuant to the Merger Agreement. The Merger Agreement is more fully described
under Item 3 of the Schedule 14D-9, to which this Information Statement is
attached as Annex A. Capitalized terms used and not defined herein have the
meanings assigned to them in the Schedule 14D-9.
The information with respect to the Purchaser Designees has been supplied
to the Company by the Purchaser for inclusion or incorporation by reference
herein, and the Company assumes no responsibility for the accuracy or
completeness of such information.
This Information Statement is required by Section 14(f) of the Securities
and Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
thereunder. You are urged to read this Information Statement carefully. You are
not, however, required to take any action.
THE PURCHASER DESIGNEES
Pursuant to the Merger Agreement and subject to compliance with applicable
law, upon the Purchaser's acceptance for payment by the Purchaser of such number
of shares of Common Stock 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, that equals the product of
(i) the total number of directors on the Board and (ii) the percentage that the
number of shares of Common Stock owned by the Purchaser (including shares of
Common Stock accepted for payment) and the Parent bears to the total number of
shares of Common Stock 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 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 the Board,
each board of directors of each subsidiary of the Company and each committee of
such subsidiary boards.
The Purchaser has informed the Company that it will choose the Purchaser
Designees from the directors and executive officers listed in Schedule I to the
Purchaser's Offer to Purchase, a copy of which is being mailed to the Company's
stockholders together with the Schedule 14D-9. The Purchaser has informed the
Company that each of the directors and executive officers listed in Schedule I
to the Offer to Purchase has
A-1
<PAGE> 32
consented to act as a director, if so designated. The business address of each
such person is c/o Fujitsu Limited, Marunouchi Center Building, 6-1, Marunouchi
1-chome, Chiyoda-ku, Tokyo 100 Japan.
It is expected that the Purchaser Designees may assume office at any time
following the purchase by the Purchaser of the specified number of shares of
Common Stock pursuant to the Offer as shall constitute the Minimum Condition,
which purchase cannot be earlier than September 5, 1997.
CERTAIN INFORMATION CONCERNING THE COMPANY
The authorized capital stock of the Company consists of (a) 200,000,000
shares of Common Stock and (b) 5,000,000 shares of preferred stock, $1.00 par
value. The shares of Common Stock constitute the only class of voting securities
of the Company outstanding. As of the close of business on July 29, 1997, there
were 122,957,555 shares of Common Stock outstanding. None of the Company's
5,000,000 authorized shares of preferred stock are outstanding. The Board
currently consists of ten members, consisting of seven directors now in office
and three vacancies caused by the resignation on June 29, 1997 of three
directors who are employees of the Parent.
Each share of Common Stock entitles the record holder to one vote.
Stockholders may cumulate their votes for the election of directors. This means
that a stockholder can give one nominee a number of votes equal to the number of
directors to be elected multiplied by the number of votes to which the
stockholder is entitled. Or, the stockholder may distribute these votes among as
many nominees as he or she chooses.
THE CURRENT MEMBERS OF THE BOARD OF DIRECTORS OF THE COMPANY
To the extent the Board will consist of persons who are not Purchaser
Designees, the Board is expected to continue to consist of those persons who are
currently directors of the Company who do not resign. The current directors of
the Company, their ages as of July 29, 1997, and their positions and terms of
office with the Company are set forth below:
<TABLE>
<CAPTION>
DIRECTOR AGE AS OF
NAME POSITION SINCE JULY 29, 1997
- --------------------------------- ------------------------------- ------------ -------------
<S> <C> <C> <C>
John C. Lewis Chairman of the Board, 1977 61
President and Chief Executive
Officer
Michael R. Hallman(1) Director 1995 52
E.F. Heizer, Jr.(1) Director 1972 67
Burton G. Malkiel, Ph.D.(1) Director 1981 64
George R. Packard, Ph.D.(2)(3) Director 1987 65
Walter B. Reinhold(2)(3) Director 1981 72
J. Sidney Webb(2)(3) Director 1984 77
</TABLE>
- ---------------
(1) Member of the Audit Committee of the Company.
(2) Member of the Nominating Committee of the Company.
(3) Member of the Compensation and Stock Plan Administration Committees of the
Company.
Mr. Lewis was elected Chairman of the Board in 1987 and was reelected
President and Chief Executive Officer on March 15, 1996. He was President of the
Company from 1977, when he joined the Company, until 1987. He was the Company's
Chief Executive Officer from 1983 until 1992. He is a director of Cypress
Semiconductor Corporation; Vitesse Semiconductor Corporation; Infinity Financial
Technology, Inc.; and Pinnacle Systems, Inc.
Mr. Hallman is the founder and President of The Hallman Group, a management
consulting firm which focuses on marketing, sales, business development and
strategic planning for the information systems industry. Mr. Hallman was
President and Chief Operating Officer of Microsoft Corporation from 1990 until
1992, and Vice President of the Boeing Company and President of Boeing Computer
Services from 1987 until 1990. From 1967 until 1987, he worked for IBM
Corporation in various sales and marketing executive positions. Mr. Hallman is
currently a director of In Focus Systems, Inc.; Intuit, Inc.; Timeline Inc.;
Keytronics
A-2
<PAGE> 33
Corporation; and Network Appliance, Inc., as well as a number of private
hardware and software technology startups. He provided consulting services to
the Company in 1994 and 1995, prior to becoming a Board member.
Mr. Heizer is engaged in the formation and development of businesses from
both a management and investment standpoint. He has been Chairman of the Heizer
Center for Entrepreneurship at Kellog Graduate School of Management at
Northwestern University since 1992. He has also been Vice President since 1995,
and a member of the Executive Committee since 1992, of the Yale Law School. He
was Chairman of the Board of Directors and Chief Executive Officer of Heizer
Corporation, a business development firm, from 1969 until 1985. Mr. Heizer is
currently a director of Chesapeake Energy Corporation and Material Sciences
Corporation. He is also a director of a number of private companies. He has been
Chairman of the Company's Audit Committee since 1974.
Dr. Malkiel has been Chemical Bank Chairman's Professor of Economics at
Princeton University since 1988. Dr. Malkiel was Dean of the Yale School of
Organization and Management from 1981 through 1987. Dr. Malkiel served on
President Ford's Council of Economic Advisors. He is currently a director of
Baker Fentress Inc.; the Jeffrey Co.; The Prudential Insurance Company of
America; Southern New England Telecommunications Co.; and the Vanguard Group of
Investment Companies.
Dr. Packard is a member of The Advisory Council to the Fujitsu Research
Institute in Tokyo. He is also Professor and Director of the Reischauer Center
for East Asian Studies of the School of Advanced International Studies at John
Hopkins University. He was Dean of the School from 1979 through 1993. Since 1994
he has concurrently served as Professor and Director of the Reischauer Center
and Visiting President of the International University of Japan. From 1976 to
1979 he was Deputy Director of the Woodrow Wilson International Center in
Washington, D.C. He is currently a director of the Mercantile-Safe Deposit and
Trust Funds; OFFITBANK; and GRC International Corp.
Mr. Reinhold has been Chairman of the Board since 1976, and was Chief
Executive Officer from 1976 to 1991, of Varco International, Inc. He currently
is a director of Revco D.S., Inc. and The Petroleum Equipment Suppliers
Association. Mr. Reinhold was Chairman of the Company's Benefit Plan
Administration Committee from 1983 through 1992 and has been Chairman of the
Compensation Committee since 1983. He was appointed Chairman of the Nominating
Committee in February 1996 and Chairman of the Stock Plan Administration
Committee in November 1996.
Mr. Webb has been Chairman of the Board since 1984 of The Titan
Corporation, and an independent consultant since his retirement in 1982 from
TRW-Fujitsu Co., a joint venture between the Parent and TRW, Inc. From 1980 to
1982, Mr. Webb was President of TRW-Fujitsu Co. In addition, he was a director
of TRW from 1966 until 1981. Mr. Webb is a director of EIP Microwave, Inc.;
Plantronics, Inc.; and Visigenics.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held six meetings during 1996.
The Board has an Acquisition Committee, an Audit Committee, a Compensation
Committee, a Nominating Committee and a Stock Plan Administration Committee.
The Audit Committee is responsible for approving the services performed by
the Company's independent public accountants and for reviewing and evaluating
the Company's accounting principles and reporting practices and its system of
internal accounting controls. This committee, currently consisting of Messrs.
Hallman, Heizer and Dr. Malkiel, held six meetings during 1996.
The Compensation Committee is responsible for reviewing and approving the
Company's compensation policies and administering the Company's employee benefit
programs, excluding the Company's stock plans. The committee held five meetings
during 1996, and currently consists of Messrs. Reinhold, Webb and Dr. Packard.
The Nominating Committee, established by the Board of Directors on February
8, 1996, is responsible for determining and recommending to the Board of
Directors candidates to stand for election to the Board of
A-3
<PAGE> 34
Directors. This committee has not yet held a meeting and currently consists of
Messrs. Reinhold, Webb and Dr. Packard.
The Stock Plan Administration Committee, established by the Board of
Directors on November 1, 1996, has exclusive authority to make all stock option
grants and other awards under the Company's stock plans and to otherwise
administer all the terms and provisions of the plans. The committee held one
meeting in 1996 and currently consists of Messrs. Reinhold, Webb and Dr.
Packard.
EXECUTIVE OFFICERS OF THE COMPANY
The current executive officers of the Company, their ages as of July 29,
1997, and their positions with the Company are set forth below:
<TABLE>
<CAPTION>
AGE AS OF
NAME JULY 29, 1997 POSITION
- --------------------- ------------- --------------------------------------------------------
<S> <C> <C>
John C. Lewis 61 Chairman of the Board, President and Chief Executive
Officer
David L. Anderson 49 Vice President and Chief Technical Officer
Michael R. Carabetta 48 Vice President and General Manager, A+ Software Group
William F. Ferone 53 Vice President and General Manager, Customer Services
William Flanagan 57 Vice President, Compatible Products Operations
Charles E. Fonner 54 Vice President and General Manager, The SmartCard Group
Gregory R. Grodhaus 49 Vice President, Marketing
Orval J. Nutt 56 Vice President, Market Planning
Michael J. Poehner 50 President, DMR Consulting Group, Inc.
Anthony M. Pozos 57 Senior Vice President, Human Resources and Corporate
Services
William R. Riley 54 Vice President, Field of Operations, North America
Bruce J. Ryan 54 Executive Vice President and Chief Financial Officer
Ernest B. Thompson 60 Vice President and Controller
David B. Wright 48 Executive Vice President, Amdahl Systems
</TABLE>
Information with respect to Mr. Lewis is included under "The Current
Members of the Board of Directors of the Company."
Mr. Anderson joined the Company in 1971 and was elected Vice President,
Processor Product Management in 1987. In 1989 Mr. Anderson became Vice President
of Advanced Systems and in 1992 became Vice President of Compatible Products
Development. In 1993 he was appointed Vice President and General Manager of
Compatible Systems, and in January 1996 became Chief Technical Officer and Vice
President of Enterprise Server Development. In January 1997 he was appointed
Vice President, Corporate Technology Group, while retaining his position as
Chief Technical Officer.
Mr. Carabetta joined the Company in 1994 as Vice President and General
Manager of Open Enterprise Systems. In January 1997 he became Vice President and
General Manager of the A+ Software Group. Prior to joining the Company, Mr.
Carabetta worked at Digital Equipment Corporation, where he served as Vice
President Finance and Administration, Business Systems from 1993 to 1994. He had
previously been Group Manager at Digital Equipment Corporation.
Mr. Ferone joined the Company in 1978 and was elected Vice President of
Customer Services in 1987. In 1988 he became Vice President of Unix Systems. Mr.
Ferone was elected to the position of Vice President, Marketing, Open Systems
Operations in 1990 and to the position of Vice President and General Manager of
Customer Services 1992. In January 1996 he was appointed Vice President of
Customer Services.
Mr. Flanagan joined the Company in 1973 and was elected Vice President of
Manufacturing in 1985. In 1993 he became Vice President of Operations,
Compatible Systems and in 1994 he was appointed Vice President, Business and
Marketing, Compatible Systems. In January 1996 Mr. Flanagan became Vice
President and General Manager of Compatible Systems. In January 1997 he was
appointed Vice President
A-4
<PAGE> 35
and General Manager, Compatible Business Group. In July 1997, Mr. Flanagan
became Vice President of Compatible Products Operations.
Mr. Fonner joined the Company in 1979 and was elected Vice President of
Systems Marketing in 1991. In 1992 Mr. Fonner became Vice President of Product
Management and Marketing. In January 1996 he became Vice President of Business
Development, and in November 1996 he was appointed Vice President and General
Manager, The SmartCard Group.
Mr. Grodhaus joined the Company in 1995 as Vice President and General
Manager of Enterprise Storage Systems. In January 1997 he was appointed Vice
President and General Manager, Server Business Group. Before joining the
Company, he was the President and Chief Executive Officer of IPL Systems, prior
to which he served in a variety of roles at Memorex Telex Corporation. In July
1997, Mr. Grodhaus became Vice President of Marketing.
Mr. Nutt joined the Company in 1976 and was elected Vice President of
Corporate Marketing in 1986 and Vice President and General Manager of U.S.
Operations in 1991. In 1993 Mr. Nutt became Vice President and General Manager
of Worldwide Field Operations. In January 1996 he became Chief Marketing Officer
and Vice President of Corporate Marketing. In July 1997, Mr. Nutt became Vice
President of Market Planning.
Mr. Poehner joined the Company in 1992 as Vice President and General
Manager, East Area, Office of Field Operations. In 1994 he became Vice President
and General Manager of the Business Solutions Group. In 1995 he was appointed
President and Chief Operating Officer of DMR Group Inc. Then in June 1996 Mr.
Poehner was appointed Chief Executive Officer, while retaining his position as
President. As of July 1997, Mr. Poehner serves as the President of DMR
Consulting Group, Inc.
Mr. Pozos has been Senior Vice President, Human Resources and Corporate
Services since 1986. Mr. Pozos joined the Company in 1976 as Corporate Vice
President, Industrial Relations, and in 1983 assumed responsibility for
Corporate Services.
Mr. Riley joined the Company in 1980. He held positions of increasing
responsibility within the Company until he was appointed Area General Manager,
North America, Office of Field Operations in January 1996. In November 1996 Mr.
Riley was appointed Vice President & General Manager, Worldwide Sales. In July
1997, Mr. Riley became Vice President, Field Operations, North America.
Mr. Ryan joined the Company in 1994 as Senior Vice President, Chief
Financial Officer and Corporate Secretary. In January 1996 he became Executive
Vice President and retained his positions of Chief Financial Officer and
Corporate Secretary. From 1993 through 1994 Mr. Ryan was Vice President of
Industry Marketing at Digital Equipment Corporation, where prior to which he
served as Vice President and Corporate Controller. As of July 1997, Mr. Ryan
serves as the Executive Vice President and Chief Financial Officer.
Mr. Thompson joined the Company in 1978 as Controller. He was elected Vice
President in 1980.
Mr. Wright joined the Company in 1987 as a regional Vice President of
Sales. After being named Vice President of Commercial U.S. Sales in 1989 and
Vice President and General Manager of European Operations in 1992, Mr. Wright
was appointed Vice President and General Manager of Worldwide Field Operations
in 1993. In January 1996 he became Executive Vice President of the Enterprise
Computing Group. In July 1997, Mr. Wright became Executive Vice President,
Amdahl Systems.
A-5
<PAGE> 36
BENEFICIAL OWNERSHIP OF SHARES
The beneficial ownership for each person or entity known by the Company to
beneficially own 5% or more of the outstanding shares of Common Stock as of July
29, 1997 is shown below:
<TABLE>
<CAPTION>
NUMBER APPROXIMATE
NAME AND ADDRESS OF SHARES % OWNED
----------------------------------------------------- ---------- -----------
<S> <C> <C>
The Prudential Insurance Company of America(1)....... 10,352,218 8.4%
751 Broad Street
Newark, New Jersey 07102-3777
Fujitsu Limited(2)................................... 51,811,664 42.1%
6-1 Marunouchi 1-chome
Chiyoda-ku
Tokyo, 100 Japan
</TABLE>
- ---------------
(1) According to a Schedule 13G filed with the Security and Exchange Commission
on February 10, 1997, as of December 31, 1996, The Prudential Insurance
Company of America ("Prudential") held 2,000 shares for the benefit of its
general account. In addition, Prudential may have had direct or indirect
voting and/or investment discretion over 10,350,218 shares, which were held
for the benefit of its clients in separate accounts, externally managed
accounts, registered investment companies, subsidiaries and/or other
affiliates. Prudential reported the combined holdings of these entities for
the purpose of administrative convenience. Prudential acquired these shares
in the ordinary course of business, and not with the purpose or effect of
changing or influencing control of the Company.
(2) Parent has sole dispositive and voting power over these shares. In addition
to its share ownership, Parent has extensive business relationships with the
Company. On August 5, 1997, Parent commenced a tender offer for all of the
outstanding shares of Common Stock.
The following table lists the beneficial ownership of Common Stock as of
July 29, 1997 by each director, the chief executive officer, the four other most
highly compensated executive officers, and all directors and executive officers
as a group.
<TABLE>
<CAPTION>
NUMBER APPROXIMATE %
NAME OF SHARES(1) 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%
</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) These shares are subject to the sole voting and investment power of the
indicated person(s). The figures include shares that could be purchased by
exercise of options within 60 days of July 29, 1997 (including
A-6
<PAGE> 37
stock 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 stock options that are included in the first column.
INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THIS 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 Item 4 of the Schedule 14D-9 to which this
Information Statement is attached.
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 Advisory Council 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 Item 4 of the Schedule 14D-9
to which this Information Statement is attached. Such former directors included
Mr. Keizo Fukagawa, who currently holds options to purchase 15,000 shares, all
of which are currently exercisable, of which 10,000 are vested for an exercise
price over $12.00 per share, and 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. Each grant made
under the Automatic Grant Program has an exercise price equal to the fair market
value on the grant date and a maximum term of fifteen years. Each option is
immediately exercisable for all of the option shares. Any shares purchased under
the option will be repurchased by the Company at the original exercise price if
the director ceases Board service before the shares vest or before completing
four years of Board service. If the director terminates Board service for any
reason (other than removal for cause) after four years, the option shares
immediately vest and the option, remains exercisable until the expiration of the
option term. Otherwise, the option shares will vest in two equal
A-7
<PAGE> 38
annual installments, with the first installment vesting one year after the
automatic grant date. In addition, non-employee members of the Board of
Directors are entitled to be reimbursed for expenses related to these meetings.
Directors may defer all or part of their compensation under the Director Fee
Deferral Plan. The deferred compensation will be paid to the director at a
selected time with interest, at a specified formula rate, either in a lump sum
or on an annual installment basis. The 1994 Stock Incentive Plan also contains a
special stock acquisition program for the non-employee directors. They may elect
to apply all or a portion of their annual retainer fee to purchase unvested
shares.
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 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 Item 3 of the Schedule
14D-9 to which this Information Statement is attached.
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 such time such options would have vested. See
Item 3 of the Schedule 14D-9 to which this Information Statement is attached.
During the 1996 fiscal year and in the first two quarters of 1997, the
administrator of the 1994 Stock Plans 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 Mr. Lewis) received grants of Restricted Stock under the
Discretionary Grant Program. 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.
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 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 Item 3 of the Schedule 14D-9 to which this
Information Statement is attached):
A-8
<PAGE> 39
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 $4,826,365.50
David L. Anderson.............. 20,943 251,316 213,750 748,328.12 224,765.63 1,244,409.75
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. Grophaus............ 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 47,968.25 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 that are not exercisable for under $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. Malikiel Trust of
which Dr. Malkiel is a trustee with shared voting, but sole investment
power.
SEVERANCE AGREEMENTS.
The Company has enacted the Executive Officer Severance Plan (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 the ESOP,
upon his retirement from the Company: (i) a retirement benefit valued at
approximately $920,000, (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
A-9
<PAGE> 40
year, (iv) 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.
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 Item 3 of
the Schedule 14D-9 to which this Information Statement is attached.
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<PAGE> 41
EXECUTIVE COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND OFFICERS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides summary information covering compensation paid
or accrued to both of the individuals who served as the Company's Chief
Executive Officers in 1996 and each of the four other most highly compensated
executive officers of the Company in 1996 (hereafter referred to as the "named
executive officers") for services rendered during the last three fiscal years
ended December 30, 1994, December 29, 1995 and December 27, 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION AWARDS
ANNUAL COMPENSATION ----------------------------------------------
-------------------------------------------- SECURITIES
NAME AND OTHER RESTRICTED UNDERLYING
PRINCIPAL ANNUAL STOCK OPTIONS/ ALL OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARDS($)(1) SARS(#) COMPENSATION($)(2)
- -------------------------- ---- -------- -------- --------------- ------------ ---------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
John C. Lewis............. 1996 $660,036 $ 0 $952,365 100,000 $ 2,250
Chairman of the Board 1995 $660,036 $120,000 $ 0 -0- $ 171,325
and Chief Executive 1994 $660,036 $250,000 $ 0 -0- $ 210,635
Officer
William F. Ferone......... 1996 $280,020 $ 62,700 $ 98,183 27,000 $ 2,250
Vice President 1995 $250,016 $142,000 $ 0 -0- $ 77,590
1994 $238,056 $132,000 $ 0 -0- $ 74,849
Michael J. Poehner........ 1996 $248,688 $ 93,500 $ 0 $ 79,500 20,000 $ 2,250
President and Chief 1995 $200,044 $100,000 $ 0 $ 0 -0- $ 2,250
Executive Officer, DMR 1994 $165,175 $103,544 $ 27,733 $ 0 10,000 $ 2,250
Consulting Group, Inc.
Bruce J. Ryan(3).......... 1996 $365,040 $ 0 $ 143,321(4) $217,830 33,000 $ 2,250
Executive Vice 1995 $325,000 $ 74,800 $ 114,459 $ 0 10,000 $ 87,076
President, Chief 1994 $151,250 $130,000 $ 41,422 $ 55,750 40,000 $ 50,221
Financial Officer &
Corporate Secretary
David B. Wright........... 1996 $365,040 $ 0 $ 0 $217,830 33,000 $ 2,250
Executive Vice 1995 $325,000 $ 74,800 $ 44,760 $ 0 15,000 $ 84,826
President 1994 $301,823 $280,000 $ 238,472 $ 0 -0- $ 100,969
E. Joseph Zemke........... 1996 $172,313 $ 0 $ 38,100(5) $440,430 40,000 $4,776,800
former Chief 1995 $700,024 $202,000 $ 0 $ 0 -0- $ 212,168
Executive Officer 1994 $644,361 $900,000 $ 0 $695,000 -0- $ 265,107
</TABLE>
- ---------------
(1) Restricted shares, subject to the Company's repurchase rights, were held by
the following named executive officers with an aggregate value (closing
price less consideration paid) as of December 27, 1996: Mr. Lewis, 79,700
shares, $1,012,190; Mr. Ferone, 12,350 shares, $156,845; Mr. Poehner, 10,000
shares, $127,000; Mr. Ryan, 33,400 shares, $424,180; and Mr. Wright, 28,400
shares, $360,680. Mr. Wright was awarded 5,000 shares in 1992 and Mr. Ryan
was awarded 10,000 shares in 1994, on which the Company's repurchase rights
will lapse in 20% increments over five years from the award date. In 1996
the following named executive officers were awarded restricted shares, on
which the Company's repurchase rights will lapse in 25% increments over four
years from the award date: Mr. Lewis, 79,700 shares; Mr. Ferone, 12,350
shares; Mr. Poehner, 10,000 shares; Mr. Ryan, 27,400 shares; and Mr. Wright,
27,400 shares. In 1996 Mr. Zemke was awarded 55,400 restricted shares, on
which the Company's repurchase rights lapsed on November 1, 1996 pursuant to
Mr. Zemke's separation agreement with the Company. Repurchase rights become
exercisable by the Company upon an officer's termination of employment and
allow the Company to repurchase, at the original purchase price paid by the
officer, any restricted shares on which the repurchase rights have not yet
lapsed. Shares subject to the Company's repurchase rights have the same
dividend rights as all other Company stock.
(2) Amounts reported as All Other Compensation for 1996 include Company matching
contributions to the Employee Savings Plan in the amount of $2,250 for each
of the named executive officers. In 1996 no awards were allocated to the
Short-Term Plan and the Long-Term Plan accounts maintained for each officer.
For further information concerning the vesting and payout of accounts under
both the Short-Term
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<PAGE> 42
Plan and the Long-Term Plan, see "Employment Contracts and Termination of
Employment Agreements." Amounts reported for Mr. Zemke are in accordance
with his separation agreement with the Company and include the following:
1996 Company matching contributions to the Employee Savings Plan: $2,250;
accrued vacation: $17,618; executive health insurance costs paid in 1996:
$8,644; estimated executive health insurance costs through age 65: $69,382;
consulting fees paid in 1996: $39,236; aggregate consulting fees to be paid
in 1997 and 1998: $80,780; separation pay for 1996: $916,154; separation pay
for 1997 and 1998: $1,465,846; and Short-Term Plan and Long-Term Plan
account balances paid in 1996: $2,176,890. For further information on Mr.
Zemke's separation agreement with the Company see "Compensation Committee
and Stock Plan Administration Committee Report on Executive Compensation."
(3) Mr. Ryan joined the Company as an executive officer on July 1, 1994.
(4) Other Annual Compensation reported for Mr. Ryan includes: (i) the principal
amount of $50,000, which was forgiven in accordance with the terms of the
note for his mortgage loan with the Company described in the section
"Transactions with Executive Officers of the Company" (ii) the amount of
$81,726 which was paid to Mr. Ryan to reimburse him for the loss on the sale
of his home in Massachusetts; and (iii) other fringe benefits in the
aggregate amount of $11,595.
(5) Other Annual Compensation reported for Mr. Zemke includes: (i) dental
insurance coverage: $29,868; and (ii) other fringe benefits in the aggregate
amount of $8,232.
STOCK OPTION GRANTS TO EXECUTIVE OFFICERS
The following table contains information on stock option grants in 1996 to
the named executive officers:
OPTION GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM
OPTIONS EMPLOYEES IN BASE EXPIRATION -----------------------
NAME GRANTED(2) FISCAL YEAR PRICE ($/SH)(3) DATE 5% ($)(4) 10% ($)(4)
- -------------------------------- ---------- ------------ --------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
John C. Lewis................... 100,000 2.83% $ 12.1875 05/01/11 $1,314,944 $3,872,271
William F. Ferone............... 27,000 .76% $ 7.9375 02/06/11 $ 231,228 $ 680,924
Michael J. Poehner.............. 20,000 .57% $ 7.9375 02/06/11 $ 171,280 $ 504,388
Bruce J. Ryan................... 33,000 .93% $ 7.9375 02/06/11 $ 282,612 $ 832,240
David B. Wright................. 33,000 .93% $ 7.9375 02/06/11 $ 282,612 $ 832,240
E. Joseph Zemke................. 40,000 1.13% $ 7.9375 03/13/98 $ 32,544 $ 66,675
</TABLE>
- ---------------
(1) No stock appreciation rights have been granted to date.
(2) The options are exercisable in four equal annual installments over the
optionee's period of service with the Company, measured from the grant date.
Upon an acquisition of the Company by a merger or asset sale, each option
becomes immediately and fully exercisable. See "Interests of Certain Persons
in the Offer and the Merger." Each option has a maximum term of 15 years,
subject to earlier termination in the event of the optionee's cessation of
service with the Company. The Stock Plan Administration Committee has the
discretion to accelerate any option in whole or in part in connection with
the optionee's cessation of service. The committee may also grant stock
appreciation rights with respect to one or more outstanding options. These
rights will allow the holders to elect to exercise the option or to
surrender it in exchange for cash or stock equal to the fair market value of
the shares subject to the surrendered option less the option exercise price
payable for those shares. To date no stock appreciation rights have been
granted.
(3) The exercise price may be paid in cash, in shares of the Company's stock
valued at fair market value on the exercise date or through a cashless
exercise involving a same-day sale of the purchased shares. The Company may
also finance an option exercise by loaning the optionee sufficient funds to
pay the exercise price for the purchased shares and the federal and state
income tax liability incurred in connection with
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<PAGE> 43
the exercise. The optionee may apply a portion of the shares purchased under
the option (or deliver existing shares of stock) in satisfaction of the tax
liability.
(4) These columns reflect the potential realizable value of each grant assuming
the market value of the Company's stock appreciates at 5% and 10% annually
from the date of grant over the term of the option. There is no assurance
that the actual stock price appreciation over the 15-year option term will
be at the assumed 5% or 10% levels or at any other level. Unless the market
price of the stock does in fact appreciate over the option term, no value
will be realized from the option grants.
OPTION EXERCISES AND HOLDINGS OF EXECUTIVE OFFICERS
The following table provides information on the exercise of options by the
named executive officers during 1996 and unexercised options held by them at the
end of the fiscal year:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES ACQUIRED OPTIONS AT FY-END AT FY-END ($)(3)
NAME ON EXERCISE (#) VALUE REALIZED ($)(2) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ----------------------- --------------- --------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
John C. Lewis.......... 48,000 $ 207,000 327,000/156,000 $1,179,138/$405,050
William F. Ferone...... N/A N/A 91,400/ 61,850 $ 711,050/$396,763
Michael J. Poehner..... N/A N/A 18,400/ 33,000 $ 117,100/$167,750
Bruce J. Ryan.......... N/A N/A 18,000/ 65,000 $ 116,125/$334,625
David B. Wright........ N/A N/A 70,900/ 67,400 $ 534,063/$347,075
E. Joseph Zemke........ 52,800 $ 94,950 364,000/ -0- $ 1,656,125/$0
</TABLE>
- ---------------
(1) No stock appreciation rights have been granted to date.
(2) Fair market value at time of exercise less exercise price.
(3) Fair market value at fiscal year end ($12.5625) less exercise price.
TRANSACTIONS WITH EXECUTIVE OFFICERS OF COMPANY
The Company makes loans to executive officers through the Officer Loan
Program for the acquisition of stock under the Company's stock plans or for the
payment of tax obligations in connection with the acquisition of stock. These
loans may not be outstanding for more than 120 months and bear interest at the
applicable federal rate. Loans are secured by stock valued at 150% of the
principal balance.
In 1995 the Company extended a mortgage loan to Mr. Carabetta, secured by a
second deed of trust on his primary residence, in the amount of $150,000. The
loan bears interest at 6.83%, compounded annually, and the principal balance
plus the accrued interest is due and payable on June 7, 2001, except to the
extent previously forgiven or paid. Under the terms of the note (i) $25,000 of
principal and the then accrued interest is forgiven on June 7 of each year,
beginning in 1996, if Mr. Carabetta is not in default and the note has not been
accelerated; (ii) the note may be accelerated if Mr. Carabetta's employment is
terminated for any reason other than by agreement with the Company, if he fails
to make a payment under the note, if he breaches the terms of the second deed of
trust or if the property securing the loan is sold; (iii) the note will be
accelerated in the event of Mr. Carabetta's bankruptcy; and (iv) the note will
be forgiven in the event Mr. Carabetta's employment is terminated by agreement
between Mr. Carabetta and the Company.
In 1993 the Company extended to Mr. John C. Cavalier a loan for $400,000,
for the purpose of assisting him with his relocation to Dallas, Texas, the
headquarters of Antares Alliance Group ("Antares"), of which Mr. Cavalier was
President and Chief Executive Officer. The note had an interest rate of 5.32%,
compounded annually, and the principal balance plus accrued interest was payable
on January 31, 2002, except to the extent previously forgiven or paid. Under the
terms of the note (i) Mr. Cavalier was required to maintain a life insurance
policy on his life naming the Company as a beneficiary and in an amount equal to
the unpaid principal amount of the note; (ii) $25,000 plus one-half of the then
accrued interest was forgiven on
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<PAGE> 44
January 31 of each year, beginning in 1995, if Mr. Cavalier was not in default
and the note had not been accelerated; (iii) $25,000 plus one-half of the then
accrued interest was payable on January 31 of each year, beginning in 1995, with
up to one-half of Mr. Cavalier's bonus to be applied toward such payment; (iv)
the note could have been accelerated if Mr. Cavalier was terminated for cause or
for other reasons not involving a change in control of Antares or a change in
the policies of the Company or Antares; and (v) the note would have been
accelerated in the event of Mr. Cavalier's bankruptcy. On November 1, 1996 Mr.
Cavalier terminated his employment with the Company at which time $156,190.21 of
this loan was forgiven. The remaining $199,685.66 was forgiven on January 1,
1997.
In 1995 the Company extended to Mr. Grodhaus a mortgage loan, secured by a
second deed of trust on his primary residence, in the amount of $300,000. The
loan bears interest at 6.31%, compounded annually, and the principal balance
plus accrued interest is due and payable on October 9, 2003, except to the
extent previously forgiven or paid. Under the terms of the note (i) one-half of
the principal, plus the accrued interest thereon, will be paid in seven annual
installments by Mr. Grodhaus on October 9 of each year beginning in 1997; (ii)
one-half of the principal, plus the accrued interest thereon, will be forgiven
in five annual installments on October 9 of each year beginning in 1997, if Mr.
Grodhaus is not in default and the note has not been accelerated; (iii) the note
may be accelerated if Mr. Grodhaus's employment is terminated for any reason, if
he fails to make a payment under the note, if he breaches the terms of the
second deed of trust or if the property securing the loan is sold; and (iv) the
note will be accelerated in the event of Mr. Grodhaus's bankruptcy.
In 1994 the Company extended to Mr. Ryan a mortgage loan, secured by a
second deed of trust on his primary residence, in the amount of $300,000. The
loan bears interest at 7.05%, compounded annually, and the principal balance
plus accrued interest is due and payable on September 26, 2000, except to the
extent previously forgiven or paid. Under the terms of the note (i) accrued
interest is payable each quarter, commencing January 15, 1995; (ii) $50,000 of
principal is forgiven on September 26 of each year, beginning in 1995, if Mr.
Ryan is not in default and the note has not been accelerated; (iii) the note may
be accelerated if Mr. Ryan's employment is terminated for any reason, if he
fails to make a payment under the note, if he breaches the terms of the second
deed of trust or if the property securing the loan is sold; and (iv) the note
will be accelerated in the event of Mr. Ryan's bankruptcy.
The Company has extended loans of more than $60,000 to the following
individuals who were executive officers during the last fiscal year. Except for
the loans to Messrs. Carabetta, Cavalier, Grodhaus and Ryan described above, the
loans on the table below were extended under the Officer Loan Program:
<TABLE>
<CAPTION>
MAXIMUM AMOUNT
OUTSTANDING
SINCE
DECEMBER 30, AMOUNT OUTSTANDING
NAME 1995 ON MARCH 3, 1997
------------------------------------ -------------- ------------------
<S> <C> <C>
Michael R. Carabetta................ $ 160,415.75 $ 131,403.13
John C. Cavalier.................... $ 380,283.84 $ 0
William F. Ferone................... $ 60,013.45 $ 60,013.45
Charles E. Fonner................... $ 67,276.33 $ 67,276.33
Gregory R. Grodhaus................. $ 327,359.21 $ 327,359.21
John C. Lewis....................... $ 151,529.14 $ 151,529.14
Anthony M. Pozos.................... $ 216,365.39 $ 216,365.39
Bruce J. Ryan....................... $ 270,187.22 $ 218,733.17
David B. Wright..................... $ 86,047.53 $ 86,047.53
E. Joseph Zemke..................... $ 453,300.64 $ 0
</TABLE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AGREEMENTS
The Company currently has no employment contracts with any of its named
executive officers. However, the Company has implemented the Short-Term Plan
(approved by the stockholders in May 1995) and the Long-Term Plan, which provide
benefits some of which are not payable until termination of employment. Under
these plans executive officers and other key employees may receive incentive
awards each year based
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<PAGE> 45
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.
Allocations to the Short-Term Plan are based upon each participant's
compensation (salary and bonus) for the year, with vesting and payout to occur
generally over four years beginning one year after the award date.
The Long-Term Plan is a long-term income accumulation program designed to
create a source of retirement income for each participant in the plan. The
Compensation Committee determines the dollar amount of the retirement income
target applicable to each participant and periodically adjusts that target as
circumstances change. The annual award to the Long-Term Plan is allocated to
each participant's long-term account in proportion to his or her share of the
aggregate retirement income targets in effect for all participants at that time.
Vesting in this account (including the individual retirement income target) will
begin upon the latest to occur of (i) the participant's completion of ten years
of service with the Company, (ii) the attainment of age 55 or (iii) the
attainment of combined age and years of service totalling 70. At that time, the
participant will initially vest in the portion of the long-term account equal to
his or her years of service multiplied by 5% and will vest in an additional 5%
upon completion of each additional year of service thereafter. The committee
modified Mr. Ryan's account at the time he was hired so that it vests at the
rate of 7.5% per year. No payments will be made from the participant's account
until termination of service, and the payment at that time may be made either in
a lump sum or in annual installments in accordance with the participant's prior
election. Special vesting provisions will apply in the event the participant's
service with the Company terminates by reason of death or disability. In
addition, the participant may receive the entire balance credited to his or her
long-term account upon termination of service in the event that such balance is
less than the portion of the retirement income target in which the participant
is vested at that time.
No trust fund or other segregated account has been established as an actual
funding vehicle for the payment of the participant's long-term account, and the
account is simply a record entry upon the Company's books. Accordingly, each
participant is a general creditor of the Company with respect to his or her
unpaid account balance.
When Mr. Ryan left his former employer to join the Company, he forfeited
the right to substantial future retirement benefits from that employer. To
compensate Mr. Ryan for the loss of those benefits, the Company committed to pay
him $45,000 per year, for 20 years, commencing at age 65.
COMPENSATION COMMITTEE AND STOCK PLAN ADMINISTRATION
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
The Compensation Committee of the Board of Directors, which met 5 times in
1996, is responsible for the administration of the non-stock based compensation
programs for the Company's executive officers. Until the appointment of the
Stock Plan Administration Committee, the Compensation Committee also
administered the Company's stock plans. The Stock Plan Administration Committee,
which was appointed on November 1, 1996 and met once in 1996, assumed
responsibility for the administration of the Company's stock plans. The
compensation programs have been designed to ensure that compensation paid to
executive officers is linked to both Company and individual performance.
Accordingly, a substantial portion of the compensation paid to each executive
officer is comprised of various components based upon individual achievement and
Company performance, such as pre-tax profit, attainment of predetermined goals
and the improvement in the market price of the Company's stock.
The committees determined that the Compensation Principles adopted in 1994,
as stated below, were still appropriate.
A-15
<PAGE> 46
COMPENSATION PRINCIPLES
The design and implementation of all executive compensation programs are
based on a series of guiding principles derived from Company values, business
strategy and management requirements. These principles may be summarized as
follows:
- Attract and retain key executives essential to the long-term success of
the Company.
- Reward executives for long-term corporate success by facilitating their
ability to acquire an ownership interest in the Company.
- Provide direct linkage between the compensation payable to executives and
the Company's attainment of annual and long-term financial goals and
targets.
- Emphasize reward for performance at the individual, team and corporate
level.
Consistent with these principles, executive compensation consists of two
components -- fixed compensation and variable compensation. Base salary, the
fixed component, is set at a level which is competitive in the marketplace.
Variable compensation consists of annual bonus and long-term incentives.
BASE SALARY
Company performance plays a limited role in the determination of base
salary. The base salary for each executive officer is based on several factors,
including, importance of the function performed, the scope of responsibility and
the salary levels in effect for comparable positions with the Company's
principal competitors. The weight given to each of these factors may vary from
individual to individual. In general, base salary is determined to be
competitive with the base salary levels paid by a peer group of companies within
the Company's industry which the Compensation Committee has identified for
comparative compensation purposes. The base salary levels in effect for the
Company's executive officers for the 1996 fiscal year ranged from the 50th
percentile to the 75th percentile of the surveyed salaries for the peer group
companies. Ten of the peer group companies are included in the Standard & Poor's
Computer (Hardware) Index (the "S & P Index") which has been chosen as the
Company's industry index for purposes of the Company stock price performance
graph which follows this report. In selecting the peer group companies to survey
for comparative compensation purposes, the Compensation Committee focused
primarily on whether those companies were actually competitive with the Company
in seeking executive talent, whether those companies had a management style and
corporate culture similar to the Company's and whether similar positions existed
within their corporate structure. For this reason, the number of companies
surveyed for compensation data was less than the number of companies included in
the S & P Index.
ANNUAL BONUS
Annual bonuses for the 1996 fiscal year were calculated by the use of a
structured formula that used the following components:
- Company Financial Performance
Each year the Board approves the pre-tax profit goals for the Company, and
operating income and revenue goals for each line of business. The Company's
performance against these goals is assessed by the Compensation Committee at the
close of the year. The financial performance component of the annual bonus is
based on the percent of the pre-tax profit goal achieved (or, for some
executives, percent of the operating income or revenue goal achieved for a line
of business). The award scale is nonlinear and provides the maximum award for
above target performance while reducing the award for below target performance.
The financial performance component is not paid if less than 75% of the goal is
achieved, and the maximum bonus will be paid only if 125% or higher of the goal
is achieved.
The financial performance component of the CEO's bonus measures both
Company pre-tax profit goal achievement and line of business revenue goal
achievement. Pre-tax profit bonus may be equal to 2.6% of salary if 76% of the
goal is achieved, 65% of salary at 100% goal achievement, and 97.5% of salary at
125% or higher goal achievement. Line of business revenue goal bonus may equal
.8% of salary at 76% goal
A-16
<PAGE> 47
achievement, 20% of salary at 100% goal achievement, and 30% of salary at 125%
or higher goal achievement. For other executive officers, the financial
performance component of bonus (Company pre-tax profit goals for some
executives, line of business revenue goals for others) may be equal to 10% of
salary at 75% goal achievement, 30% of salary at 100% goal achievement, and 60%
of salary at 125% goal achievement.
- Individual Performance
Each executive officer's individual performance is measured against goals
established for that individual in various areas, including leadership,
planning, management and innovation. The weight assigned to each of these
factors varies from individual to individual. The individual performance
component of the CEO's annual bonus may be equal to 35% of salary at 100% goal
achievement and may go up to a maximum of 52.5% of salary at higher than 100%
goal achievement. This component for Executive Vice Presidents may be equal to
12% of salary at 100% goal achievement and may go up to a maximum of 24% of
salary at higher than 100% goal achievement. For other executive officers this
component may be equal to 10% of salary at 100% goal achievement, up to a
maximum of 20% of salary at higher than 100% goal achievement.
- Corporate Teamwork
This component applies to executives other than the CEO. An assessment is
made of the individual's contribution to the corporate team and contribution to
future positioning of the Company. This component for Executive Vice Presidents
may be equal to 12% of salary at 100% goal achievement and may go up to a
maximum of 24% of salary at higher than 100% goal achievement. For other
executive officers this component may range from 10% of salary at 100% goal
achievement up to a maximum of 20% of salary at higher than 100% goal
achievement.
LONG-TERM INCENTIVES
Long-term incentives are provided primarily through annual option grants,
as well as by supplemental option grants, restricted stock awards, and
participation in an income accumulation program funded out of the Company's
pre-tax profits. These incentives are intended to motivate the executive officer
to improve long-term Company performance. All options currently outstanding were
granted with an exercise price equal to the market price on the grant date and
will be of no value unless the market price of the Company's common stock
appreciates, thereby aligning a part of the executive officer's compensation
with the return realized by stockholders.
- Stock Options
Stock option grants are designed to create meaningful stock ownership for
key employees of the Company. The Stock Plan Administration Committee has
general guidelines for granting options to executive officers, which target a
fixed number of invested option shares based on an individual's current position
with the Company, comparability with grants made to other Company executives and
an individual's potential for growth within the Company, i.e., future
responsibilities and possible promotions over the option term. These general
guidelines determine a multiple of the individual's salary level which may be
represented by the value of invested options. To maintain the targeted invested
position, regular grants of options will normally be made. The guidelines and
the granting of options within these guidelines are not normally based on
Company performance. The committee does not always strictly adhere to these
guidelines and will occasionally vary the size of the option grant as
circumstances warrant.
Each grant allows the executive officer to acquire shares of the Company's
common stock at a fixed price per share (traditionally the fair market value on
the grant date) over a specified period of time (up to fifteen years). The
option generally vests in equal installments over a period of four years,
contingent upon the executive officer's continued employment with the Company.
Accordingly, the option will provide a return to the executive officer only if
he or she remains employed by the Company through the vesting period and the
market price of the underlying securities appreciates over the option term.
- Restricted Stock
Awards of restricted stock are not made by reference to formulas or
guidelines but are provided solely at the Stock Plan Administration Committee's
discretion. Restricted Stock is awarded under limited circum-
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<PAGE> 48
stances, such as, to recognize a significant contribution to the Company's
performance, to provide an incentive to achieve performance objectives or in
connection with a significant promotion. The vesting schedules for restricted
stock awards are tailored to meet the particular purposes of the awards, unlike
the more uniform vesting schedules utilized for stock option grants.
EXECUTIVE INCENTIVE PERFORMANCE PLAN
The Short-Term Plan and the Long-Term Plan, administered by the
Compensation Committee, are designed to retain key executives and to provide
retirement income for them through their participation in an income accumulation
program determined in reference to the Company's pre-tax profits each year. The
Short-Term Plan allows each executive officer to share in a portion of such
pre-tax profits on the basis of his or her compensation for the year and
provides for vesting and payout of the award in four equal annual installments
beginning one year after the award. The Long-Term Plan serves as the vehicle to
meet the specific retirement income target which the committee has established
for each participant, and vesting in this benefit will occur as the age and
years of service requirements of the plan are met.
Actual allocations to the two plans will occur only if the Company's
operations are profitable. No awards were made under these plans to any named
executive officer for the 1996 fiscal year. See "Employment Contracts and
Termination of Employment Agreements" for additional information about the
plans.
CEO COMPENSATION
In connection with his resignation as the Company's President and Chief
Executive Officer and member of the Board of Directors on March 14, 1996, the
Compensation Committee deemed it appropriate and in the best interests of the
Company to enter into a formal severance agreement with Mr. Zemke that was
consistent with his prior understanding. Accordingly, Mr. Zemke is to receive
continuation payments totalling $2,382,000 at bi-weekly intervals over the
two-year period beginning March 15, 1996 and is to receive an additional $5,000
per month of consulting fees over that two-year period. The Compensation
Committee authorized the accelerated release of 139,400 shares of restricted
stock held by Mr. Zemke at the time of his resignation, together with the
immediate vesting of 138,000 invested stock option shares, also held by Mr.
Zemke at the time of his resignation. All outstanding vested stock option
shares, totalling 392,800 shares, held by Mr. Zemke at the time of his
resignation will be exercisable through March 13, 1998. Mr. Zemke was fully
vested in his account balance under the Long-Term Plan at the time of his
resignation, and the Compensation Committee decided to immediately vest Mr.
Zemke in all his outstanding accounts under the Short-Term Plan, and the entire
balance under both of these plans ($2,176,890) was paid to Mr. Zemke in a lump
sum on November 1, 1996. In addition, Mr. Zemke is to be provided with continued
health coverage under the Company's executive officer medical/dental plan until
his attainment of age 65 or (if earlier) his participation under another
employer's health plan which provides substantially the same coverage. In return
for these benefits, Mr. Zemke has agreed not to engage in any competitive
activity with the Company for the two-year period coincidental with his salary
and bonus continuation period and to render up to 10 hours of consulting
services per month during that period. The severance agreement also contains
mutual releases pursuant to which the Company and Mr. Zemke have released each
other from any and all claims relating to Mr. Zemke's employment with the
Company or the termination of that employment relationship. In summary, the
Compensation Committee believes that the severance package resulted in a fair
and amicable separation between the Company and Mr. Zemke and assured an orderly
transition to Mr. Lewis' resumption of the office of President and Chief
Executive Officer.
In setting the compensation payable to Mr. Lewis in 1996, the Compensation
Committee's goal was to provide a package which was competitive with other
companies in the industry and which at the same time tied a significant
percentage of his compensation to positive Company performance and stock price
appreciation. In general, the factors utilized in determining Mr. Lewis's
compensation were similar to those applied to the other executive officers in
the manner described in the preceding paragraphs, although achievement of
Company financial performance goals had a greater impact on his total
compensation.
A-18
<PAGE> 49
In establishing Mr. Lewis's base salary, it was the committee's intent to
provide him with a level of stability and certainty each year, and not to have
this particular component of compensation affected to a significant degree by
Company performance. His base salary for the 1996 fiscal year approximates the
50th percentile of reported base salaries for chief executive officers from the
peer group.
Based on Company results, Mr. Lewis was not paid an annual bonus for 1996.
The long-term incentive component of Mr. Lewis's compensation consisted of
a restricted stock award of 79,400 shares and a stock option grant of 100,000
shares, both of which will vest in 25% increments over four years from the date
of grant. The award and the grant were made in connection with Mr. Lewis's
resumption of the Chief Executive Officer position.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to publicly held companies for compensation exceeding $1 million paid
to certain executive officers of such companies. The limitation applies only to
compensation which is not considered to be performance-based. Stock options
granted under the 1994 Stock Incentive Plan, which are not discounted, and
compensation paid under the Short-Term Plan will qualify as performance-based
compensation not subject to the $1 million limitation. For the present, the
Compensation Committee has decided not to take any other action to limit or
restructure the other elements of the compensation package payable to the
Company's executive officers. The Compensation Committee will reconsider this
decision in the future should the non-performance-based compensation of any
executive officer significantly exceed $1 million.
Members of the Compensation Committee
and the Stock Plan Administration
Committee:
Walter B. Reinhold, Chairman
George R. Packard
J. Sidney Webb
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Kazuto Kojima, a former director of the Company who resigned from the
Board on July 29, 1997, was a member of the Compensation Committee in 1996. Mr.
Kojima was an employee of the Parent when he served as a director of the Company
and as a member of the Compensation Committee. Mr. Webb and Dr. Packard have
entered into consulting agreements with Parent. See "Interests of Certain
Persons in the Offer and the Merger" and Item 4 of the Schedule 14 D-9 to which
this Information Statement is attached for a discussion of certain relationships
between Messrs. Kojima and Webb, Dr. Packard and the Parent.
CERTAIN TRANSACTIONS
See Item 4 of the Schedule 14 D-9 to which this Information Statement is
attached for information regarding the Parent.
A-19
<PAGE> 50
COMPANY STOCK PRICE PERFORMANCE
The following graph shows a five-year comparison of cumulative total
stockholder returns for the Company, the Standard & Poor's 500 Stock Index and
the Standard & Poor's Computer (Hardware) Index from December 31, 1991 through
December 31, 1996:
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG AMDAHL CORP., S&P 500 INDEX AND S&P COMPUTER (HARDWARE) INDEX
<TABLE>
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S&P COMPUTER
MEASUREMENT PERIOD AMDAHL S&P 500 (HARDWARE)
(FISCAL YEAR COVERED) CORPORATION INDEX INDEX
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 46 108 73
1993 39 118 76
1994 71 120 98
1995 55 165 131
1996 78 203 175
</TABLE>
- ---------------
* $100 invested on December 31, 1991 in stock or index, including reinvestment
of dividends.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, or the Securities Exchange
Act of 1934 that might incorporate future filings made by the Company under
those statutes, including this proxy statement, the preceding Compensation
Committee and Stock Plan Administration Committee Report on Executive
Compensation and Company Stock Price Performance graph shall not be incorporated
by reference into any such filings; nor shall such report or graph be
incorporated by reference into any future filings made by the Company under
those statutes.
A-20
<PAGE> 51
COMPLIANCE WITH SECTION 16(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
The directors and executive officers of the Company, and holders of more
than 10% of the Company's outstanding stock, are required under Section 16(a) of
the Exchange Act to file forms which report their ownership of and transactions
in the Company's securities with the SEC. They are also required to furnish
copies of all reports they file to the Company.
Based upon copies of the reports received by the Company, and written
representations that no other reports were required to be filed, the Company
believes that all reporting requirements for the fiscal year ended December 27,
1996 were met in a timely manner by its directors, executive officers and
holders of more than 10% of the Company's stock, with the exception that Mr.
Poehner's initial statement of ownership on Form 3 did not include a restricted
stock award for 10,000 shares made to him the day prior to his appointment as an
executive officer. He subsequently reported the award on a timely filed Form 5.
A-21
<PAGE> 52
ANNEX B
MORGAN STANLEY
MORGAN STANLEY & CO.
INCORPORATED
555 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA
94104
(415) 576-2000
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
B-1
<PAGE> 53
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:
(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, nor 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
B-2
<PAGE> 1
EXHIBIT III
AGREEMENT AND PLAN OF MERGER
AMONG
FUJITSU LIMITED,
FUJITSU INTERNATIONAL, INC.
AND
AMDAHL CORPORATION
DATED AS OF JULY 30, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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<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> 3
<TABLE>
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<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> 4
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> 5
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> 6
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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<PAGE> 31
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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<PAGE> 33
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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<PAGE> 34
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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<PAGE> 36
"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.
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(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> 42
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> 43
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> 1
EXHIBIT 3
JOINT PRESS RELEASE, DATED JULY 30, 1997
Contact: FOR FUJITSU
Korendo Shiotsuki
General Manager, NY Office
or
Sitrick And Company
Michael Sitrick
Donna Walters
(415) 268-7352
FOR AMDAHL
William Stewart
Vice President, Public Relations
(408) 746-6076
FUJITSU AGREES TO PURCHASE ALL OUTSTANDING SHARES OF AMDAHL
TOKYO, JAPAN & SUNNYVALE, CA, U.S.A. -- JULY 30, 1997 -- Fujitsu, Ltd.
(TSE: 6702) and Amdahl Corp. [AMEX: AMH] today announced that, pursuant to a
definitive merger agreement, Fujitsu will purchase for $12.00 per share in cash
all outstanding shares of Amdahl stock not currently owned by Fujitsu for an
aggregate of approximately $850 million. The merger agreement was unanimously
approved by the Amdahl directors who are unaffiliated with Fujitsu.
The agreement provides that Fujitsu will commence a tender offer by
Tuesday, August 5, 1997. The tender offer is scheduled to expire at 5:00 p.m.
EDT, Friday, September 5, 1997, unless 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.
According to Fujitsu, the Amdahl name and management team will be
retained. Although
<PAGE> 2
Amdahl would be a wholly owned subsidiary of Fujitsu, no external changes in
relationships and dealings with customers are anticipated and there will be
essentially no reduction in employment levels as a result of the acquisition.
The purchase of the outstanding shares will consummate the historic
ties between Fujitsu and Amdahl that began 25 years ago when Fujitsu made its
initial investment in Amdahl. Since that initial investment in 1972, Fujitsu
has continued to strengthen its ties with Amdahl and the two companies have
benefitted from the sharing of technological advances.
In 1995 and 1996, Amdahl acquired two new subsidiaries -- DMR and Trecom
- -- and has focused its business operations to become a global-solutions company,
providing information processing systems, software and services. In 1996, these
services and support businesses contributed about half of Amdahl's annual
revenue, and this year these businesses are expected to contribute about 60% of
Amdahl's revenue. This transition to a global-solutions company will be further
accelerated by Amdahl's access to Fujitsu's technology and capital resources,
as well as its global presence.
During more than two decades of cooperation, Fujitsu and Amdahl have
jointly developed "mission-critical" servers, storage and peripheral
technologies for the U.S. and worldwide markets.
Tadashi Sekizawa, president and representative director of Fujitsu
said, "We are pleased to further our long-standing, mutually beneficial
relationship with Amdahl. This acquisition represents a strong affirmation by
Fujitsu of its commitment to the enterprise server and storage business and to
Amdahl's extensive customer base. This combination will enhance Fujitsu's
presence in the U.S. and Europe, particularly in the high-growth areas of
information technology
<PAGE> 3
products and services for the telecommunications, financial services and
transportation industries, among others. With the resources available to it as
a part of the Fujitsu group, Amdahl will be able to further enhance the
development and marketing of its hardware and software and services for the
global market.
"We also see this transaction as an opportunity for Fujitsu to
significantly extend its solutions-oriented business in the United States and
Europe," Mr. Sekizawa continued, "in addition to its current presence in this
market arena in Asia, the Pacific Rim and Europe. The addition of Amdahl to
other companies within the Fujitsu group, such as ICL, Fujitsu's European
affiliate, significantly expands Fujitsu's role in the worldwide market for the
full range of information technology solutions."
Early on in the relationship, Fujitsu helped create Amdahl's mainframe
computer business. Amdahl is now a leading provider of large enterprise servers
in the United States.
Mr. Sekizawa said, "Additionally, we believe that the global market for
Amdahl's 'mission critical' servers and storage will continue to be an
important part of the computer industry. With the combined resources this
transaction will produce, Fujitsu and Amdahl will enhance their role as a vital
and successful force in the market for enterprise systems."
John C. Lewis, chairman and chief executive officer of Amdahl, said,
"In recent years, Amdahl's strategy has been to blend hardware, software, and
services to provide customers with complete information technology solutions to
business requirements. Becoming part of Fujitsu's family of companies is the
best way to ensure that Amdahl has the products, the service capabilities and
the financial resources needed to successfully pursue that strategy and more
fully meet customer needs."
<PAGE> 4
Mr. Lewis noted that the computing industry is undergoing significant
changes, with shorter product cycles requiring healthy investments in research
and development. At the same time, declining product prices are making it
necessary for companies to generate greater volumes of business to fund that
R&D and pursue new business opportunities.
"In short," he said, "both our capital requirements and the need to
expand our marketing reach are growing and this merger will give us the
financial staying power, the access to superior technologies and the greater
global presence we need to effectively compete in today's changing marketplace."
The Amdahl Board of Directors was represented by Morgan Stanley.
Fujitsu is being advised by Lehman Brothers who will also act as Dealer Manager
for the tender offer.
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 Corp., based in Sunnyvale, Calif., was founded in 1970. Amdahl
had revenues last year of $1.63 billion, two-thirds of which came from
information processing and software and the remainder from the sale of computer
hardware, including large-scale mainframe computers, mid-range servers and data
storage devices. Amdahl has 9,800 employees, worldwide.
Statements made in this news release that state the Company's or
management's intentions, hopes, beliefs, expectations or predictions for the
future are forward-looking statements that involve risk
<PAGE> 5
and uncertainties. It is important to note that the Company's actual results
could differ materially from those projected in such forward-looking
statements. In addition to the factors set forth above, other important
factors that could cause actual results to differ materially include, but are
not limited to, projected financial results and industry-wide market factors.
###
<PAGE> 1
EXHIBIT 5
RESTATED CERTIFICATE
OF
INCORPORATION
OF
AMDAHL CORPORATION
ELEVENTH. A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of his
fiduciary duty as a director, except for liability (i) for any breach of the
Director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the Director derived
any improper personal benefit. If the Delaware General Corporation Law is
hereafter amended to authorize, with the approval of a Corporation's
stockholders, further reductions in the liability of the Corporation's
directors for breach of fiduciary duty, then a director of the Corporation
shall not be liable for any such breach to the fullest extent permitted by the
Delaware General Corporation Law as so amended. Any repeal or modification of
the foregoing provisions of this Article ELEVENTH by the stockholders of the
Corporation shall not adversely affect any right or protection of a director of
the Corporation existing at the time of such repeal or modification.
<PAGE> 1
EXHIBIT 6
AMDAHL CORPORATION
RESTATED BYLAWS
Article IX
-------------
INDEMNIFICATION
-------------
SECTION 1. Each person who is or was a director or officer of the
Corporation and is or was made a party or is threatened to be made a party to or
is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that he or she, or a person of whom he or she is the legal representative,
is or was a director, officer, employee or agent of the Corporation or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another Corporation or a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended, against all expense, liability and loss (including
attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by such
person in connection with the investigation, defense or appeal thereof and such
indemnification shall continue as to a person who has ceased to be a director
or officer and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that except as provided in Section 3 hereof,
the Corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person only if
such proceeding (or part thereof) was authorized by the board of Directors of
the Corporation.
SECTION 2. Each person who may have a right to indemnification under
this Article shall also have the right to be paid by the Corporation the
expenses incurred in defending any proceeding in advance of its final
disposition; provided, however, that if the Delaware General Corporation Law
requires, the payment of such expenses incurred by a directory or officer in
his or her capacity as a director or officer (and not in any other capacity in
which service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding, shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Article or
otherwise. The Corporation may, by action of the Board of Directors, provide
indemnification to employees and agents of the Corporation with the same scope
and effect as the foregoing indemnification of directors and officers.
SECTION 3. If a claim under this Article is not paid in full by the
Corporation within thirty days after a written claim has been received by the
Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than
an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the
<PAGE> 2
Delaware General Corporation Law for the Corporation to indemnify the claimant
for the amount claimed, but the burden of proving such defense shall be on the
Corporation.
SECTION 4. The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition
conferred in this Article shall not be exclusive of any other right which any
person may have or hereafter acquire under any other right which any person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, by-law, agreement, vote of stockholders or disinterested
directors or otherwise.
SECTION 5. The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another Corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
SECTION 6. The Corporation shall have the express authority to enter
such agreements as the Board of Directors deems appropriate for the
indemnification of present or future directors or officers of the Corporation
in connection with their service to, or status with, the Corporation or any
other Corporation, entity or enterprise with whom such person is serving at the
express written request of the Corporation.
<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
---------------------------
<PAGE> 1
EXHIBIT 12
LETTER AGREEMENT, DATED JULY 9, 1997
July 9, 1997
Fujitsu Limited
Marunouchi Center Bldg.
6-1, Marunouchi 1-Chome
Chiyoda-ku, Tokyo 100
JAPAN
Dear Sirs:
In connection with your consideration of a possible transaction involving
Amdahl Corporation, a Delaware corporation (the "Company"), you agree that for a
period (the "Restricted Period") commencing with the date of this letter
agreement and ending on the earlier of (i) the first anniversary of the date of
this letter agreement or (ii) the occurrence of a "Significant Event" (as
defined below), neither you nor any of your Representatives (for purposes of
this letter agreement, "Representative" shall mean, as to any person, its
directors, officers, employees, agents and advisors (including, without
limitation, financial advisors, attorneys and accountants) and "person" shall be
broadly interpreted to include, without limitation, any corporation, company,
partnership, other entity or individual) shall, without the prior written
consent of the Company or its board of directors:
(a) acquire, offer to acquire, or agree to acquire, directly or
indirectly, by purchase or otherwise, any voting securities or
direct or indirect rights to acquire any voting securities of the
Company or any subsidiary thereof, or of any successor to or person
in control of the Company, or any assets of the Company or any
subsidiary or division thereof or of any such successor or
controlling person, except as your Representatives may do so for
their own account or for the account of persons other than you or
your affiliates;
(b) make, or in any way participate, directly or indirectly, in any
"solicitation" of "proxies" to vote (as such terms are used in the
rules of the Securities and Exchange Commission (the "SEC")), or
seek to advise or influence any person or entity with respect to the
voting of any voting securities, except as your Representatives may
do so in their capacities as members of the Company Board of
Directors or in their capacities as agents or advisors of persons
other than you or your affiliates;
<PAGE> 2
(c) make any public announcement with respect to, or submit a
proposal for, or offer of (with or without conditions) any
extraordinary transaction involving the Company or any of its
securities or assets;
(d) form, join or in any way participate in a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), in connection with any of the foregoing; or
(e) request the Company or any of its Representatives, directly or
indirectly, to amend or waive any provision of this paragraph.
During the Restricted Period, the Company agrees to promptly advise you of
any inquiry or proposal made to it with respect to any Significant Event. For
purposes of this letter agreement, (i) "Significant Event" shall mean any of (A)
the public announcement by a bona fide offer of a proposal to acquire or the
acquisition by any person or "13D Group" (as defined below) of beneficial
ownership of "Voting Securities" (as defined below) of the Company representing
15% or more of the then outstanding Voting Securities of the Company; (B) the
announcement or commencement by any person or 13D Group of a tender or exchange
offer to acquire Voting Securities of the Company which, if successful, would
result in such person or 13D Group owning, when combined with any other Voting
Securities of the Company owned by such person or 13D Group, 15% or more of the
then outstanding Voting Securities of the Company; or (C) the entry into by the
Company, or determination by the Company to seek to, or commence negotiations
to, enter into any merger, sale or other business combination transaction
pursuant to which the outstanding shares of common stock of the Company would be
converted into cash or securities of another person or 13D Group or 50% or more
of the then outstanding shares of common stock of the Company would be owned by
persons other than the then current holders of shares of common stock of the
Company, or which would result in all or a substantial portion of the Company's
assets being sold to any person or 13D Group; (ii) "Voting Securities" shall
mean shares of any class of capital stock of the Company which are then entitled
to vote generally in the election of directors; provided, that for purposes of
this definition any securities which at such time are convertible or
exchangeable into or exercisable for shares of common stock of the Company shall
be deemed to have been so converted, exchanged or exercised; and (iii) "13D
Group" shall mean any group of persons formed for the purpose of acquiring,
holding, voting or disposing of Voting Securities which would be required under
Section 13(d) of the Exchange Act and the rules and regulations thereunder to
file a statement on Schedule 13D with the SEC as a "person" within the meaning
of Section 13(d)(3) of the Exchange Act if such group beneficially owned Voting
Securities representing more than 5% of the total combined voting power of all
such Voting Securities then outstanding.
Please confirm your agreement with the foregoing by signing and returning
one copy of this letter to the undersigned, whereupon this letter agreement
shall become a binding agreement between you and the Company.
<PAGE> 3
Very truly yours,
AMDAHL CORPORATION
By: /s/ John C. Lewis
----------------------------------
Name: John C. Lewis
Title: Chairman, President & CEO
Accepted and agreed as of the
date first written above:
FUJITSU LIMITED
By: /s/ Takashi Takaya
-------------------------------------
Name: Takashi Takaya
Title: Member of the Board
<PAGE> 1
EXHIBIT 13
CONFIDENTIALITY AGREEMENT, DATED JUNE 30, 1997
CONFIDENTIALITY AGREEMENT
June 30, 1997
FUJITSU LIMITED
6-1, Marunouchi 1-chome
Chiyoda-ku, Tokyo 100
Japan
Dear Sirs:
In connection with your consideration of a possible transaction involving
Amdahl Corporation (the "Company"), the Company will make available to you
certain information concerning the business, financial condition, operations,
assets and liabilities of the Company. As a condition to such information being
furnished to you and your Representatives (as defined below), you agree to treat
in accordance with the provisions of this letter agreement any information
concerning the Company that is furnished to you or to your Representatives on or
after the date of this letter in connection with such possible transaction by or
on behalf of the Company, regardless of the manner in which it is furnished
(herein collectively referred to as the "Evaluation Material"). For purposes of
this letter agreement, (i) "Representative" shall mean, as to any person, its
directors, officers, employees, agents and advisors (including, without
limitation, financial advisors, attorneys and accountants); and (ii) "person"
shall be broadly interpreted to include, without limitation, any corporation,
company, partnership, other entity or individual.
The term "Evaluation Material" shall include all notes, analyses or other
documents prepared by you or your Representatives which contain any Evaluation
Material furnished to you or your Representatives pursuant hereto. The term
"Evaluation Material" does not include information which (i) is or becomes
generally available to the public other than as a result of a disclosure by you
or your Representatives, (ii) was within your possession on a non-confidential
basis prior to its being furnished to you by or on behalf of the Company
pursuant hereto, provided that the source of such information was not known by
you to be bound by a confidentiality agreement with or other
contractual, legal or fiduciary obligation of confidentiality to the Company
with respect to such information or (iii) was or becomes available to you on a
non-confidential basis from a source other than the Company or any of its
Representatives, provided that such source was not known by you to be bound by a
confidentiality agreement with or other
<PAGE> 2
contractual, legal or fiduciary obligation of confidentiality to the Company or
any other party with respect to such information.
Except as required by law, you hereby agree (x) that you and your
Representatives shall use the Evaluation Material solely for the purpose of
evaluating a possible transaction between the Company and you, and (y) that the
Evaluation Material will be kept confidential and that you and your
Representatives will not disclose or reveal any of the Evaluation Material in
any manner whatsoever, provided, however, that (i) you may make any disclosure
of such information to which the Company gives its prior written consent and
(ii) any of such information may be disclosed to your Representatives who need
to know such information for the purpose of evaluating a possible transaction
with the Company. You further agree to take such steps to protect and maintain
the security and confidentiality of the Evaluation Material as you would in the
case of your own confidential business information. You shall direct your
Representatives to observe the terms of this letter agreement and shall be
responsible for any breach of the terms of this letter agreement by your
Representatives.
The parties expressly confirm and agree that no public disclosure with
respect to any discussions or negotiations taking place as referred to herein is
now required by reasons of securities laws or similar requirements related to
general disclosure and in the event either party determines that such disclosure
is required in the future, no such disclosures shall be made unless and until
such party consults with the other party regarding the necessity and form of any
such disclosure. You hereby agree that you shall not disclose to any person any
information about a possible transaction between the Company and you, or the
terms or conditions or any other facts relating thereto, including, without
limitation, the fact that discussions are taking place with respect thereto or
the status thereof, or the fact that Evaluation Material has been made available
to you or your Representatives, except for the disclosure of such information as
may be required in filings under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or by corresponding statutes existing under the laws of
Japan, if and to the extent you are required to make such disclosure pursuant to
the Exchange Act, such corresponding statute, or the rules and regulations
promulgated under either of them, provided, however, that prior to any such
disclosure, you shall first give the Company a reasonable opportunity to review
the proposed disclosure and comment thereon.
To the extent that any Evaluation Material may include material subject to
the attorney-client privilege, work product doctrine or any other applicable
privilege concerning pending or threatened legal proceedings or governmental
investigations, the parties understand and agree that they have a commonality of
interest with respect to such matters and it is their desire, intention and
mutual understanding that the sharing of such material is not intended to, and
shall not, waive or diminish in any way the confidentiality of such material or
its continued protection under the attorney-client privilege, work product
doctrine or other applicable privilege. All Evaluation Material provided by a
party that is entitled to protection under the attorney-client privilege, work
product doctrine or other applicable privilege shall remain entitled to such
protection under these privileges, this letter agreement, and under the joint
defense doctrine. Nothing in this
<PAGE> 3
letter agreement obligates any party to reveal material subject to the
attorney-client privilege, work product doctrine or any other applicable
privilege.
If you or any of your Representatives are requested or required by oral
questions (that the court orders to be answered), interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar
process, to disclose any part of the Evaluation Material, you or your
Representatives, as the case may be, will (i) promptly notify the Company of
each such request or requirement and the documents requested thereby, so that
the Company may seek an appropriate protective order or other remedy and/or
waive compliance by you or your Representatives, as the case may be, with the
provisions of this Agreement, and (ii) consult with the Company on the
advisability of tasking legally available steps to resists or narrow such
request or requirement. If, in the absence of such a protective order or receipt
of such a waiver, you or your Representative is nonetheless in the written
opinion of your outside counsel compelled to disclose, by mandatorily applicable
law, any part of the Evaluation Material, you may disclose such Evaluation
Material without liability under this Agreement, except that in that event, if
the circumstances so permit, you shall give the Company written notice of the
Evaluation Material to be so disclosed as far in advance of its disclosure as is
lawful and practicable, and you shall use your best efforts to obtain an order
or other reliable assurances that confidential treatment will be accorded to the
portion of the Evaluation Material so required to be disclosed.
If either party hereto shall determine that it does not wish to proceed
with the Proposed Transaction, such party shall promptly advise the other party
of that decision. In that case, or in the event that the Company, in its sole
discretion, so requests or the Proposed Transaction is not consummated by you,
you shall, upon the Company's written request, promptly deliver to the Company
all Evaluation Material, and, at your election, return or destroy (provided that
any such destruction shall be certified by one of your duly authorized officers)
all copies, reproductions, summaries, analyses or extracts thereof or based
thereon in your possession or in the possession of any of your Representatives.
You shall not be entitled to rely on the completeness of any Evaluation
Material, but shall be entitled to rely solely on such representations and
warranties as may be made in any final acquisition agreement relating to a
transaction between you and the Company, subject to the terms and conditions of
such agreement.
You hereby acknowledge that you are aware and will advise your
Representatives that the United States securities laws prohibit any person who
has received from an issuer material, nonpublic information concerning the
matters which are the subject of this letter agreement from purchasing or
selling securities of such issuer or from communicating such information to any
other person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell such securities. Your obligation to keep
confidential any Evaluation Material shall terminate five (5) years after the
date hereof.
<PAGE> 4
You agree that unless and until a definitive agreement regarding a
transaction between the Company and you has been executed and delivered, neither
the Company nor you will be under any legal obligation of any kind whatsoever
with respect to such a transaction by virtue of this letter agreement except for
the matters specifically agreed to herein. The parties further acknowledge and
agree that they each reserve the right, in their sole discretion, to reject any
and all proposals that might be made by the other party or any of its
Representatives with regard to a transaction between the parties, and to
terminate discussions and negotiations with the other party at any time.
It is understood and agreed that this letter agreement is not intended to
modify any obligations that you or any of your officers, directors, employees,
agents or controlling persons may have under applicable law as a director or
stockholder of the Company.
It is understood and agreed that no failure or delay in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any right, power or privilege hereunder.
It is further understood and agreed that money damages would not be a
sufficient remedy for any material breach of this letter agreement by you or of
any of your Representatives, and that the Company shall be entitled to equitable
relief, including injunction and specific performance, as a remedy for any such
breach.
This letter agreement shall be governed by and construed in accordance
with the laws of the State of California applicable to agreements made and to be
performed within such state.
<PAGE> 5
Please confirm your agreement with the foregoing by signing and returning
one copy of this letter to the undersigned, whereupon this letter agreement
shall become a binding agreement between you and the Company.
Very truly yours,
AMDAHL CORPORATION
/s/ John C. Lewis
By: John C. Lewis
Title: Chairman, President & CEO
Accepted and agreed as of the
date first written above:
FUJITSU LIMITED:
By: /s/ Takashi Takaya
Title: Member of the Board
<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.
