<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 8, 2000
REGISTRATION NO. 333-49678
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HEWLETT-PACKARD COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3570 94-1081436
(State or other jurisdiction (Primary Standard (IRS Employer
of incorporation or Industrial Classification Identification No.)
organization) Code Number)
</TABLE>
3000 HANOVER STREET
PALO ALTO, CALIFORNIA 94304
(650) 857-1501
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
ANN O. BASKINS, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
HEWLETT-PACKARD COMPANY
3000 HANOVER STREET
PALO ALTO, CALIFORNIA 94304
(650) 857-1501
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C> <C>
Kenton J. King, Esq. Charles N. Charnas, Esq. Michael P. Gallagher, Esq.
Skadden, Arps, Slate, Meagher & Flom Assistant Secretary and Pepper Hamilton LLP
LLP
525 University Avenue, Suite 220 Senior Managing Counsel 1235 Westlakes Drive, Suite 400
Palo Alto, California 94301 Hewlett-Packard Company Berwyn, Pennsylvania 19312
(650) 470-4500 3000 Hanover Street (610) 640-7800
Palo Alto, California
94304
(650) 857-1501
</TABLE>
------------------------
Approximate Date of Commencement of Proposed Sale to Public: As soon as
practicable after this registration statement becomes effective and upon
consummation of the transactions described in the enclosed prospectus.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
[BLUESTONE LOGO]
300 STEVENS DRIVE
PHILADELPHIA, PENNSYLVANIA 19113
MERGER PROPOSED. YOUR VOTE IS VERY IMPORTANT.
December 13, 2000
DEAR STOCKHOLDER:
You are cordially invited to attend a special meeting of stockholders of
Bluestone Software, Inc. to be held on Wednesday, January 17, 2001 at
10:00 A.M., local time, at the Sheraton Rittenhouse Square, Philadelphia,
Pennsylvania.
At this important meeting, you will be asked to vote upon the merger of
Bluestone and Beta Acquisition Corporation, a wholly owned subsidiary of
Hewlett-Packard Company. If the merger is approved and ultimately closes, you
will receive 0.4866 (after giving effect to a two-for-one stock split, in the
form of a stock dividend, of Hewlett-Packard shares effective October 27, 2000)
of a share of Hewlett-Packard common stock for each share of Bluestone common
stock that you own. Hewlett-Packard shares are traded on the New York Stock
Exchange under the symbol "HWP." We expect that the merger will be tax-free to
you for United States federal income tax purposes, except for cash received in
place of fractional shares.
YOUR BOARD OF DIRECTORS HAS APPROVED THE MERGER AND THE MERGER AGREEMENT
WITH HEWLETT-PACKARD, AND RECOMMENDS THAT YOU VOTE "FOR" APPROVAL AND ADOPTION
OF THE MERGER AND THE MERGER AGREEMENT.
We believe that the merger represents an exciting strategic opportunity
which will allow you to continue your investment in Bluestone's future as part
of a larger and more diversified company.
YOUR VOTE IS IMPORTANT. We cannot complete the merger unless the holders of
a majority of our outstanding shares vote to approve and adopt the merger
agreement. Whether or not you are able to attend the meeting personally, please
complete, sign, date and return the enclosed proxy card promptly in the
accompanying envelope, which requires no postage if mailed in the United States.
You are, of course, welcome to attend the meeting and vote in person, even if
you have previously returned your proxy card.
If you fail to return your proxy card or vote in person at the meeting, it
will have the same effect as a vote against the merger.
This document provides you with detailed information about the merger. We
encourage you to read this entire document carefully. IN PARTICULAR, YOU SHOULD
CAREFULLY CONSIDER THE DISCUSSION IN THE SECTION ENTITLED "RISK FACTORS RELATED
TO THE PROPOSED MERGER," BEGINNING ON PAGE 14, DESCRIBING SOME OF THE RISKS THAT
YOU SHOULD CONSIDER IN EVALUATING THE MERGER.
I look forward to your support.
Sincerely,
/s/ P. Kevin Kilroy
P. Kevin Kilroy
Chairman and Chief Executive Officer
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE HEWLETT-PACKARD SHARES TO BE ISSUED
IN THE MERGER OR DETERMINED IF THIS DOCUMENT IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROXY STATEMENT/PROSPECTUS IS DATED , 2000.
AND WAS FIRST MAILED TO STOCKHOLDERS ON OR ABOUT DECEMBER 13, 2000.
<PAGE>
[BLUESTONE LOGO]
300 STEVENS DRIVE
PHILADELPHIA, PENNSYLVANIA 19113
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 17, 2001
------------------------
To the Stockholders of
Bluestone Software, Inc.:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Bluestone
Software, Inc. will be held at the Sheraton Rittenhouse Square, 18th and Locust
Streets, Philadelphia, Pennsylvania 19103, on Wednesday, January 17, 2001, at
10:00 A.M., local time, for the following purposes:
1. To consider and vote upon a proposal to approve the merger of Beta
Acquisition Corporation, a Delaware corporation and a direct wholly owned
subsidiary of Hewlett-Packard Company, into Bluestone and adopt the
Agreement and Plan of Merger, dated as of October 24, 2000, by and among
Hewlett-Packard, Beta Acquisition Corporation and Bluestone, pursuant to
which, among other things, each share of Bluestone common stock outstanding
immediately prior to the effective time of the merger will be converted into
0.4866 (after giving effect to a two-for-one stock split, in the form of a
stock dividend, of Hewlett-Packard shares effective October 27, 2000) of a
share of Hewlett-Packard common stock.
2. To act upon other matters relating to the conduct of the special meeting and
any adjournments or postponements thereto.
A copy of the merger agreement is attached as Appendix A to the accompanying
document. Approval and adoption of the merger and the merger agreement requires
the affirmative vote of a majority of the outstanding Bluestone shares. Holders
of Bluestone shares will not have dissenter's or appraisal rights, or have the
right to demand payment for their shares under Delaware law in connection with
the merger.
All stockholders are cordially invited to attend the special meeting.
Whether or not you plan to attend the special meeting, all holders of
Bluestone's common stock are urged to complete and sign the enclosed proxy, and
return it promptly to Bluestone. At any time prior to their being voted, proxies
are revocable by delivering written notice to Bluestone in accordance with the
instructions set forth in the proxy statement or by voting at the special
meeting in person.
Only stockholders of record as of the close of business on December 11, 2000
will be entitled to notice of and to vote at the meeting or any adjournments or
postponements thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE SIGN, DATE AND
RETURN PROMPTLY THE ENCLOSED PROXY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE,
WHICH DOES NOT REQUIRE ANY POSTAGE IF MAILED IN THE UNITED STATES. YOU MAY
REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS VOTED, BY DELIVERY TO BLUESTONE OF A
SUBSEQUENTLY EXECUTED PROXY OR A WRITTEN NOTICE OF REVOCATION OR BY VOTING IN
PERSON AT THE SPECIAL MEETING.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL AND ADOPTION
OF THE MERGER AND THE MERGER AGREEMENT, AS DESCRIBED IN DETAIL IN THE
ACCOMPANYING PROXY STATEMENT/PROSPECTUS.
By order of the Board of Directors,
/s/ Paul T. Porrini
Paul T. Porrini
Secretary
Philadelphia, Pennsylvania
December 13, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
WHERE YOU CAN FIND MORE INFORMATION......................... 1
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 3
SUMMARY..................................................... 4
The Companies............................................. 4
The Special Meeting....................................... 5
Record Date; Vote Required................................ 5
Reasons for the Merger.................................... 5
Recommendations of The Bluestone Board.................... 5
Opinion of Bluestone's Financial Advisor.................. 5
The Merger................................................ 5
The Terms of the Merger Agreement......................... 6
Regulatory Matters........................................ 7
Accounting Treatment...................................... 8
New York Stock Exchange Listing........................... 8
Ownership of Shares After the Merger...................... 8
Interests of Bluestone Officers and Directors in the
Merger.................................................. 8
Effects of the Merger on the Rights of Bluestone
Stockholders............................................ 8
SELECTED HEWLETT-PACKARD CONSOLIDATED FINANCIAL DATA........ 9
SELECTED BLUESTONE CONSOLIDATED FINANCIAL DATA.............. 10
COMPARATIVE PER SHARE DATA.................................. 12
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS........ 13
RISK FACTORS RELATED TO THE PROPOSED MERGER................. 14
THE SPECIAL MEETING......................................... 17
Time and Place; Purposes.................................. 17
Record Date............................................... 17
Quorum.................................................... 17
Vote Required............................................. 17
Proxies................................................... 18
THE MERGER.................................................. 19
Structure of the Merger................................... 19
Exchange of Bluestone Stock Certificates for
Hewlett-Packard Stock Certificates...................... 19
Background of the Merger.................................. 20
Bluestone's Reasons for Engaging in the Merger;
Recommendation of the Bluestone Board................... 23
Opinion of Bluestone's Financial Advisor.................. 26
Material United States Federal Income Tax Consequences.... 32
Anticipated Accounting Treatment.......................... 33
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Interests of Directors and Officers in the Merger......... 34
Director and Officer Indemnification and Insurance........ 34
Regulatory Matters........................................ 34
No Dissenter's or Appraisal Rights........................ 35
Listing on the New York Stock Exchange.................... 35
Delisting and Deregistration of Bluestone Common Stock.... 35
Federal Securities Laws Consequences...................... 35
THE MERGER AGREEMENT........................................ 37
The Merger................................................ 37
Conversion or Cancellation of Bluestone Shares and Options
in the Merger........................................... 37
Exchange of Certificates in the Merger.................... 38
Representations and Warranties............................ 38
Conduct of Business Pending the Merger.................... 39
No Solicitation........................................... 42
Insurance and Indemnification............................. 44
Additional Material Covenants............................. 44
Conditions................................................ 45
Termination............................................... 47
Effect of Termination..................................... 48
Termination Fee and Expenses.............................. 48
Amendment and Modification................................ 48
RELATED AGREEMENTS.......................................... 49
Stock Option Agreement.................................... 49
Voting Agreement.......................................... 50
MARKET PRICE AND DIVIDEND INFORMATION....................... 52
COMPARATIVE RIGHTS OF STOCKHOLDERS.......................... 53
SUBSEQUENT EVENTS........................................... 56
EXPERTS..................................................... 56
LEGAL MATTERS............................................... 56
SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS.................. 56
APPENDIX A AGREEMENT AND PLAN OF MERGER.................... A-1
APPENDIX B STOCK OPTION AGREEMENT.......................... B-1
APPENDIX C VOTING AGREEMENT................................ C-1
APPENDIX D OPINION OF BLUESTONE'S FINANCIAL ADVISOR,
DEUTSCHE BANK SECURITIES INC.................... D-1
</TABLE>
ii
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Hewlett-Packard and Bluestone file annual, quarterly and current reports,
proxy statements and other information with the Securities and Exchange
Commission. You may read and copy any reports, statements or other information
filed by either company at the SEC's public reference rooms at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 and at the following regional
offices of the SEC: Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and 7 World Trade Center, Suite 1300, New York, New
York 10048. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Hewlett-Packard and Bluestone's SEC filings are also
available to the public from commercial document retrieval services and at the
Internet web site maintained by the SEC at http://www.sec.gov.
Hewlett-Packard filed a registration statement on Form S-4 to register with
the SEC the Hewlett-Packard common stock to be issued to Bluestone stockholders
in the merger. This proxy statement/ prospectus is a part of that registration
statement and constitutes both a prospectus of Hewlett-Packard and a proxy
statement for Bluestone for its special meeting. As allowed by the SEC's rules,
this proxy statement/prospectus does not contain all of the information you can
find in the registration statement or the exhibits to the registration
statement. This proxy statement/prospectus summarizes some of the documents that
are exhibits to the registration statement, and you should refer to the exhibits
for a more complete description of the matters covered by those documents.
The SEC allows both Hewlett-Packard and Bluestone to "incorporate by
reference" information into this proxy statement/prospectus. This means that
both Hewlett-Packard and Bluestone may disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is considered to be part of this proxy
statement/prospectus, except for any information modified or superseded by
information in or incorporated by reference in this proxy statement/prospectus.
This proxy statement/prospectus incorporates by reference the documents set
forth below that Hewlett-Packard and Bluestone have previously filed with the
SEC. The documents contain important information about both Hewlett-Packard and
Bluestone and their respective financial conditions.
<TABLE>
<CAPTION>
HEWLETT-PACKARD'S FILINGS WITH THE SEC PERIOD
-------------------------------------- ------
<S> <C>
Annual Report on Form 10-K Fiscal year ended October 31, 1999
Quarterly Reports on Form 10-Q Quarters ended:
- January 31, 2000
- April 30, 2000
- July 31, 2000
Quarterly Report on Form 10-Q/A Quarter ended July 31, 2000
Current Reports on Form 8-K Filed on:
- April 11, 2000
- May 12, 2000
- June 5, 2000
- June 15, 2000
- August 18, 2000
- September 12, 2000
- September 18, 2000
- September 22, 2000
- October 25, 2000
- November 13, 2000
The description of shares of Hewlett-Packard
common stock set forth in Hewlett-Packard's
registration statement on Form S-3, filed on
February 18, 2000, including any amendment or
report filed with the SEC for the purpose of
updating such description
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
BLUESTONE'S FILINGS WITH THE SEC PERIOD
-------------------------------- ------
<S> <C>
Annual Report on Form 10-K Fiscal year ended December 31, 1999
Annual Report on Form 10-K/A Fiscal year ended December 31, 1999
Quarterly Reports on Form 10-Q Quarters ended:
- March 31, 2000
- June 30, 2000
- September 30, 2000
Current Report on Form 8-K Filed on:
- November 7, 2000
The description of Bluestone's capital stock
set forth in Bluestone's registration
statement on Form 8-A, filed on July 7, 1999,
including any amendment or report filed with
the SEC for the purpose of updating such
description
</TABLE>
Hewlett-Packard and Bluestone incorporate by reference into this proxy
statement/prospectus additional documents that may be filed with the SEC between
the date of this proxy statement/ prospectus and the date of the special meeting
of the Bluestone stockholders. These documents include periodic reports, such as
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K, as well as proxy statements.
Hewlett-Packard has supplied all information contained or incorporated by
reference in this proxy statement/prospectus relating to Hewlett-Packard, and
Bluestone has supplied all information contained or incorporated by reference in
this proxy statement/prospectus relating to Bluestone.
If you are a stockholder, we may already have sent you some of the documents
incorporated by reference, but you can obtain any of them through us, the SEC or
the SEC's Internet world wide web site as described above. Documents
incorporated by reference are available from us without charge, excluding all
exhibits unless we have specifically incorporated by reference an exhibit in
this proxy statement/prospectus. Stockholders may obtain documents incorporated
by reference in this proxy statement/prospectus by requesting them in writing or
by telephone from the appropriate company at the following addresses:
FOR HEWLETT-PACKARD DOCUMENTS:
Hewlett-Packard Company
3000 Hanover Street
Palo Alto, California 94304
Attention: Investor Relations Department
Telephone: (650) 857-4872
FOR BLUESTONE DOCUMENTS:
Bluestone Software, Inc.
300 Stevens Drive
Philadelphia, Pennsylvania 19113-4597
Attention: Investor Relations Department
Telephone: (610) 915-5000, Ext. 3123
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM EITHER COMPANY, PLEASE DO SO BY
JANUARY 3, 2001 TO RECEIVE THEM BEFORE THE SPECIAL MEETING OF THE BLUESTONE
STOCKHOLDERS.
You should rely on the information contained or incorporated by reference in
this proxy statement/ prospectus to vote on the merger agreement and the
transactions associated with it. Neither Hewlett-Packard nor Bluestone has
authorized anyone to provide you with information that is different from what is
contained in this proxy statement/prospectus. This proxy statement/prospectus is
dated , 2000. You should not assume that the information contained
in this proxy statement/ prospectus is accurate as of any date other than such
date, and neither the mailing of this proxy statement/prospectus to stockholders
nor the issuance of Hewlett-Packard common stock in the merger shall create any
implication to the contrary.
2
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT IS THE PROPOSED TRANSACTION?
A: A wholly owned subsidiary of Hewlett-Packard will merge into Bluestone. As a
result, Bluestone will become a wholly owned subsidiary of Hewlett-Packard.
Hewlett-Packard currently intends to effect an upstream merger of the
subsidiary into Hewlett-Packard shortly after the closing.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A. Each Bluestone share will be converted into 0.4866 of a Hewlett-Packard share
(after giving effect to a two-for-one stock split, in the form of a stock
dividend, of Hewlett-Packard shares effective October 27, 2000).
Hewlett-Packard will not issue fractional shares. Rather, you will receive
cash payments in place of any fractional Hewlett-Packard shares you would
have otherwise received. After giving effect to the merger, Bluestone
stockholders will hold less than one percent of the outstanding Hewlett-
Packard shares on a fully diluted basis.
Q: HOW DO I VOTE?
A: You may vote by mailing a signed proxy card in the enclosed return envelope
as soon as possible so that those shares may be represented at the special
meeting. You may also attend the special meeting and vote in person.
Q: CAN I CHANGE MY VOTE?
A: Yes. You may change your vote by delivering a written notice of revocation to
Bluestone's secretary, by delivering a later-dated, signed proxy card to
Bluestone's secretary before the special meeting, or by attending the
special meeting and voting in person.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions to your
broker on how to vote. You should follow the directions provided by your
broker regarding how to instruct your broker to vote your shares. Without
instructions to your broker, your shares will not be voted on the merger and
will have the same effect as a vote against the merger.
Q: IS THE MERGER TAXABLE TO ME?
A: Hewlett-Packard and Bluestone each expect the merger to be tax-free. We have
structured the merger so that, in general, Hewlett-Packard, Beta Acquisition
Corporation, Hewlett-Packard's wholly owned subsidiary formed for the
purpose of the merger, Bluestone and the Bluestone stockholders will not
recognize any gain or loss for United States federal income tax purposes in
the merger, except with respect to any cash that Bluestone stockholders will
receive in lieu of fractional Hewlett-Packard shares. We describe the
material United States federal income tax consequences of the transactions
in more detail on page 32. The tax consequences to you will depend on the
facts of your own situation. Please consult your tax advisor for a full
understanding of the tax consequences to you of the merger.
Q: AM I ENTITLED TO APPRAISAL RIGHTS?
A: No. You will not be entitled to appraisal rights in connection with the
merger.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We expect to complete the merger on or about January 18, 2001. Because the
merger is subject to government approvals and factors beyond our control,
however, we cannot predict the exact time of completion.
Q: SHOULD I SEND IN MY BLUESTONE STOCK CERTIFICATES NOW?
A: No. After we complete the merger, Hewlett-Packard will send instructions
explaining how to exchange your Bluestone share certificates for
Hewlett-Packard share certificates and, if applicable, cash in place of any
fractional shares.
Q: WHOM CAN I CALL WITH QUESTIONS?
A: If you have any questions about the merger, or if you would like copies of
any of the documents we refer to in this proxy statement/prospectus, you
should call Bluestone's Investor Relations Department at (610) 915-5000,
ext. 3123, or Bluestone's proxy solicitor, Georgeson Shareholder
Communications Inc., at (800) 223-2064, if they relate to Bluestone, or
Hewlett-Packard's Investor Relations Department at (650) 857-4872 if they
relate to Hewlett-Packard.
3
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROXY
STATEMENT/PROSPECTUS AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. TO BETTER UNDERSTAND THE MERGER, AND FOR A MORE COMPLETE
DESCRIPTION OF THE LEGAL TERMS OF THESE TRANSACTIONS, YOU SHOULD READ THIS
ENTIRE DOCUMENT CAREFULLY, AS WELL AS THOSE ADDITIONAL DOCUMENTS TO WHICH WE
REFER YOU. SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 1.
THE COMPANIES
HEWLETT-PACKARD COMPANY
3000 Hanover Street
Palo Alto, California 94304
Tel: (650) 857-1501
website: www.hp.com The information found on our website is not intended to be a
part of this proxy statement/prospectus.
Hewlett-Packard is a leading global provider of computing and imaging
solutions and services for business and home, and is focused on capitalizing on
the opportunities of the Internet and the emergence of next-generation
appliances, e-services and infrastructure. Hewlett-Packard's major businesses
include Imaging and Printing Systems, Computing Systems and Information
Technology Services, or IT Services: (1) Imaging and Printing Systems provides
laser and inkjet printers (both monochrome and color), mopiers, scanners,
all-in-one devices, personal color copiers and faxes, digital senders, wide- and
large-format printers, print servers, network-management software, networking
solutions, digital photography products, imaging and printing supplies, imaging
and software solutions and related professional and consulting services;
(2) Computing Systems provides a broad range of computing systems for the
enterprise, commercial and consumer markets. The products and solutions range
from mission-critical systems and software to personal computers for the
business and home. Major product lines include UNIX-Registered Trademark- and PC
servers, desktop and mobile personal computers, workstations, software solutions
and storage solutions; and (3) IT Services provides consulting, education,
design and installation services, ongoing support and maintenance, proactive
services like mission-critical support, outsourcing and utility-computing
capabilities. Financing capabilities include leasing, automatic technology-
refreshment services, solution financing and venture financing.
Hewlett-Packard is a corporation organized under the laws of the State of
Delaware. Hewlett-Packard shares are currently listed on the New York Stock
Exchange under the symbol "HWP."
BLUESTONE SOFTWARE, INC.
300 Stevens Drive
Philadelphia, Pennsylvania 19113
Tel: (610) 915-5000
website: www.bluestone.com The information found on our website is not intended
to be a part of this proxy statement/prospectus.
Bluestone is a leading provider of software for enterprise interaction
management, which enables businesses to extend information over the World Wide
Web in a controlled manner and to support high volumes of users and
interactions. Bluestone's flagship suite of products, Total-e-Business, is a
framework for Java Web application servers and is currently in Release 7.2. A
Web application server is a software product that allows broad access to stored
corporate information and applications to a variety of users, including
customers, suppliers and employees, via the Web. Bluestone believes that its
Java Web application server is the leading solution of its kind based on the
breadth of its functionality. It believes that it is the only product to
adequately address the four defining elements of enterprise interaction
management--development, deployment, integration and management--and therefore
provides the most complete overall solution to its customers. In January 1999,
Bluestone released Bluestone XML Suite, which represented a new generation of
specialized Web application servers focused on e-commerce via the Internet. In
December 1999, Bluestone released Bluestone Total-e-Business, an e-business
platform that provides the infrastructure, integration, content management,
personalization and e-commerce components
4
<PAGE>
that companies utilize to conduct their business on the Internet.
Bluestone is a corporation organized under the laws of the State of
Delaware. Bluestone shares are currently listed for quotation on the Nasdaq
National Market under the symbol "BLSW."
THE SPECIAL MEETING (SEE PAGE 17)
The special meeting will be held on Wednesday, January 17, 2001, at
10:00 A.M., local time, at the Sheraton Rittenhouse Square, Philadelphia,
Pennsylvania. At the special meeting, Bluestone stockholders will be asked to:
- approve and adopt the merger and the merger agreement; and
- act upon other matters relating to the conduct of the special meeting and
any adjournments or postponements thereto.
RECORD DATE; VOTE REQUIRED (SEE PAGE 17)
You can vote at the special meeting if you owned Bluestone shares at the
close of business on December 11, 2000. On that date, there were shares of
Bluestone common stock outstanding and entitled to vote. You can cast one vote
for each Bluestone share you owned on that date. Approval and adoption of the
merger and the merger agreement requires the favorable vote of the holders of a
majority of the outstanding Bluestone shares.
Stockholders representing approximately 32.2% of the voting power of
Bluestone shares, as of October 24, 2000, have entered into voting agreements
with Hewlett-Packard in which they agreed to vote in favor of approval and
adoption of the merger and the merger agreement. We have attached a copy of the
voting agreement as Appendix C to this proxy statement/prospectus.
REASONS FOR THE MERGER (SEE PAGE 23)
Hewlett-Packard and Bluestone believe that the merger will enhance
opportunities in Web development across many industries and enable customers to
benefit from greater resources and economies of scale. Bluestone provides
Hewlett-Packard with middleware and infrastructure software. Hewlett-Packard
provides a platform for Bluestone to compete against larger competitors in the
market and a global distribution channel.
RECOMMENDATION OF THE BLUESTONE BOARD (SEE PAGE 23)
The Bluestone board of directors has approved the merger and the merger
agreement and recommends that Bluestone stockholders vote "FOR" approval and
adoption of the merger and the merger agreement.
OPINION OF BLUESTONE'S FINANCIAL ADVISOR (SEE PAGE 26)
Deutsche Bank Securities Inc., Bluestone's financial advisor, has rendered a
written opinion, dated October 24, 2000, to the Bluestone board that, as of the
date of the opinion, the exchange ratio in the merger was fair, from a financial
point of view, to the holders of Bluestone shares. The full text of the written
opinion of Deutsche Bank is attached to this document as Appendix D. We
encourage you to read the opinion carefully in its entirety to understand the
procedures followed, assumptions made, matters considered and limitations on the
review undertaken by Deutsche Bank in providing its opinion. The opinion of
Deutsche Bank is directed to the Bluestone board and does not constitute a
recommendation to any stockholder with respect to any matter relating to the
merger.
THE MERGER (SEE PAGE 19)
We propose that a wholly owned subsidiary of Hewlett-Packard, formed solely
for the purpose of the merger, merge with and into Bluestone. As a result,
Bluestone will become a wholly owned subsidiary of Hewlett-Packard.
Hewlett-Packard currently intends to effect an upstream merger of the subsidiary
into Hewlett-Packard shortly after the closing.
We have attached the merger agreement, which is the legal document that
governs the merger, as Appendix A. We encourage you to read this document.
5
<PAGE>
WHAT YOU WILL RECEIVE IN THE MERGER (SEE PAGE 19)
Each of your Bluestone shares will be exchanged for 0.4866 (after giving
effect to a two-for-one stock split, in the form of a stock dividend, of
Hewlett-Packard shares effective October 27, 2000) of a Hewlett-Packard share.
Because the number of Hewlett-Packard shares that you will receive in the merger
is fixed, the value of the Hewlett-Packard shares you receive in the merger will
fluctuate up or down as the price of Hewlett-Packard common stock changes.
You will have to surrender your Bluestone stock certificates to receive
Hewlett-Packard common stock certificates. HOWEVER, PLEASE DO NOT SEND BLUESTONE
COMMON STOCK CERTIFICATES UNTIL YOU RECEIVE WRITTEN INSTRUCTIONS AFTER WE
COMPLETE THE MERGER.
TERMS OF THE MERGER AGREEMENT
CONDITIONS (SEE PAGE 45)
We will complete the merger only if certain conditions are satisfied or
waived, including the following:
- approval by the Bluestone stockholders;
- expiration of all waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and any applicable foreign antitrust
laws, and the filing of any and all government filings to permit
consummation of the merger (all such required filings of which the parties
are aware have been made and applicable waiting periods have expired);
- the absence of any statute, rule, regulation, injunction or order
prohibiting the merger;
- the absence of litigation challenging or seeking to enjoin the merger;
- the approval for listing on the New York Stock Exchange of the
Hewlett-Packard shares to be issued in the merger;
- the receipt of consents from several specified stockholders of Bluestone
waiving their respective rights to receive Bluestone shares in exchange
for the right to receive options to purchase Hewlett-Packard shares;
- the receipt of opinions from counsel to Bluestone and Hewlett-Packard that
the merger will qualify as a tax-free reorganization;
- the accuracy of representations and warranties of Bluestone and Hewlett-
Packard and the compliance with agreements and covenants of Bluestone and
Hewlett-Packard;
- at least 40 of 48 specified employees at Bluestone having accepted
employment offer letters, which condition has been satisfied and must
remain satisfied at the time of closing; and
- the absence of a material adverse change with respect to Bluestone.
NON-SOLICITATION COVENANT (SEE PAGE 42)
Bluestone has agreed not to initiate or, subject to some limited exceptions,
engage in discussions with any party other than Hewlett-Packard about a business
combination or other extraordinary transaction, such as a merger or a sale of
significant assets, while the merger is pending.
TERMINATION (SEE PAGE 47)
Either Hewlett-Packard or Bluestone may terminate the merger agreement if:
- Hewlett-Packard and Bluestone mutually agree to terminate the agreement;
- if the merger has not occurred by March 31, 2001, other than as a result
of the failure of the terminating party to perform its obligations;
- a final and non-appealable order is entered enjoining or prohibiting the
completion of the merger;
- the merger agreement fails to receive Bluestone stockholder approval at
the special meeting; or
6
<PAGE>
- the other party breaches, in any material respect, its representations or
any of its material agreements, which breach is incapable of being cured
or is not cured within 10 business days following written notice.
In addition, Hewlett-Packard may terminate the merger agreement if:
- the Bluestone board fails to recommend adoption and approval of the merger
and the merger agreement or modifies or withdraws such recommendation;
- the Bluestone board recommends a transaction other than the merger with
Hewlett-Packard;
- an alternative transaction proposal is announced or otherwise publicly
known and the Bluestone board fails to recommend against acceptance of
such transaction within 10 business days;
- a tender offer or exchange offer is commenced by a third party and the
Bluestone board recommends that stockholders tender in, or fails to
recommend against, such offer within 10 days; or
- any third party becomes beneficial owner of more than 15% of the
outstanding Bluestone shares.
TERMINATION FEE AND STOCK OPTION AGREEMENT (SEE PAGES 48 AND 49)
Bluestone will pay Hewlett-Packard a termination fee of $19 million if
Hewlett-Packard terminates the merger agreement pursuant to any of the reasons
for which it alone may do so, as set forth above, or if either Bluestone or
Hewlett-Packard terminates the merger agreement because of the failure to obtain
the Bluestone stockholders' approval at the special meeting.
Bluestone and Hewlett-Packard have entered into a stock option agreement,
under which Bluestone has granted to Hewlett-Packard an option to purchase
approximately 19.9% of its outstanding shares. The exercise price of the option
for Bluestone shares is $21.51 per share. The stock option agreement is attached
as Appendix B. The option is exercisable by Hewlett-Packard under those
circumstances where Hewlett-Packard would be entitled to terminate the merger
agreement and receive a termination fee.
The termination fee and stock option could discourage other companies from
trying or proposing to combine with Bluestone. The total termination fee and
profit realizable under the stock option agreement by Hewlett-Packard is limited
to $19 million under certain circumstances.
REGULATORY MATTERS (SEE PAGE 34)
Hewlett-Packard and Bluestone must comply with their filing obligations and
all applicable waiting periods must expire or be terminated. Hewlett-Packard and
Bluestone have agreed to cooperate with each other in connection with with such
filings.
Hewlett-Packard and Bluestone each filed required notifications with United
States regulatory authorities on October 31, 2000. Early termination of the
statutory waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, was granted on November 16, 2000. All required foreign
competition filings of which the parties are aware have been made, and all
applicable waiting periods have expired or been terminated.
TAX TREATMENT (SEE PAGE 32)
The parties have structured the merger so that in general, Hewlett-Packard,
Beta Acquisition Corporation, Bluestone and their respective stockholders will
not recognize gain or loss for United States federal income tax purposes in the
merger, except with respect to any cash that Bluestone stockholders will receive
in lieu of fractional Hewlett-Packard shares. It is a condition to the merger
that we receive legal opinions to this effect. After receipt of the Bluestone
stockholder approval, we may not waive the requirement that legal opinions be
provided unless further stockholder approval is obtained with appropriate
disclosure.
7
<PAGE>
Because tax matters are complicated, we encourage you to contact your tax
advisor to determine the particular tax consequences of the merger to you.
ACCOUNTING TREATMENT (SEE PAGE 33)
The merger will be accounted for under the purchase method of accounting in
accordance with accounting principles generally accepted in the United States.
Accordingly, the cost to acquire Bluestone will be allocated to the tangible
assets acquired and liabilities assumed based on their fair values, with any
excess being treated as goodwill, other intangible assets and deferred stock
compensation. To the extent that a portion of the purchase price is allocated to
in-process research and development, as is anticipated, a charge will be
recognized for the period in which the merger occurs.
NYSE LISTING (SEE PAGE 35)
Hewlett-Packard intends to list the Hewlett-Packard shares to be issued in
the merger on the New York Stock Exchange.
OWNERSHIP OF SHARES AFTER THE MERGER (SEE PAGE 37)
After giving effect to the merger, the former stockholders of Bluestone
common stock will, in the aggregate, hold less than one percent of the
outstanding Hewlett-Packard common stock, on a fully diluted basis, based upon
the figures for outstanding stock as of December 11, 2000.
INTERESTS OF BLUESTONE OFFICERS AND DIRECTORS IN THE MERGER (SEE PAGE 34)
When considering the merger agreement, Bluestone was aware that certain of
the officers and directors of Bluestone may have interests and arrangements that
may be different from your interests as stockholders, including new employment
arrangements with Hewlett-Packard, rights under stock-based employee benefits
plans and severance arrangements.
EFFECTS OF THE MERGER ON THE RIGHTS OF BLUESTONE STOCKHOLDERS (SEE PAGE 53)
The rights of Bluestone stockholders who receive Hewlett-Packard shares in
the merger will continue to be governed by Delaware law, but will also be
governed by Hewlett-Packard's certificate of incorporation and Hewlett-
Packard's by-laws. The rights of Bluestone stockholders under Hewlett-Packard's
certificate of incorporation and by-laws will differ in certain respects from
the rights under Bluestone's certificate of incorporation and by-laws.
If you have any questions about the merger, or if you would like copies of
any of the documents we refer to in this proxy statement/prospectus, you may
call Bluestone's proxy solicitor, Georgeson Shareholder Communications Inc. at
(800) 223-2064.
[GEORGESON SHAREHOLDER COMMUNICATIONS INC. LOGO]
8
<PAGE>
SELECTED HEWLETT-PACKARD CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data of Hewlett-Packard are
derived from Hewlett-Packard's consolidated financial statements. The selected
consolidated financial data are not necessarily indicative of results to be
expected for any future period and should be read in conjunction with
Hewlett-Packard's consolidated financial statements and Hewlett-Packard's
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," each incorporated by reference in this proxy statement/prospectus.
All stock splits, including the two-for-one stock split, in the form of a stock
dividend of Hewlett-Packard shares effective October 27, 2000, have been
retroactively reflected herein.
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
JULY 31, FOR THE YEARS ENDED OCTOBER 31,
---------------------- ----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
----------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue............... $35,519 $31,008 $42,370 $39,419 $35,465 $31,613 $25,381
Earnings from
operations.............. 2,934 2,779 3,688 3,399 3,405 2,926 2,818
Net earnings from
continuing operations... 2,639 2,344 3,104 2,678 2,515 2,085 1,973
Net earnings per share,
continuing operations
Basic................... 1.33 1.16 1.54 1.29 1.23 1.02 0.96
Diluted................. 1.28 1.12 1.49 1.26 1.19 0.99 0.94
Cash dividends per
share................... 0.32 0.32 0.32 0.30 0.26 0.22 0.18
At period end:
Assets--continuing
operations............ 32,457 30,648 31,764 28,624 26,681 22,934 19,950
Assets--total........... 32,457 34,070 35,297 31,708 29,852 25,977 22,802
Long-term debt.......... 3,390 1,824 1,764 2,063 3,158 2,579 663
</TABLE>
9
<PAGE>
SELECTED BLUESTONE CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data of Bluestone are derived
from Bluestone's consolidated financial statements. The pro forma net loss per
share amount presented below reflects the outstanding preferred stock during the
period presented on an as-converted basis. The selected consolidated financial
data are not necessarily indicative of results to be expected for any future
period and should be read in conjunction with Bluestone's consolidated financial
statements and Bluestone's "Management's Discussion and Analysis of Financial
Condition and Results of Operations," each incorporated by reference in this
proxy statement/prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Revenues:
Software license fees....................... $ 21,249 $ 7,874 $ 11,654 $ 3,391 $ 2,337 $ 1,475 $ --
Services.................................... 7,006 2,721 3,993 3,620 2,179 43 --
Third-party products and related services... -- -- -- 1,107 5,225 6,555 6,950
-------- -------- -------- -------- ------- ------- ------
Total revenues............................ 28,255 10,595 15,647 8,118 9,741 8,073 6,950
Cost of revenues:
Software license fees....................... 746 210 401 259 202 113 --
Services.................................... 8,220 3,412 4,792 4,433 2,516 305 --
Third-party products and related services... -- -- -- 643 2,798 4,261 3,975
-------- -------- -------- -------- ------- ------- ------
Total cost of revenues.................... 8,966 3,622 5,193 5,335 5,516 4,679 3,975
-------- -------- -------- -------- ------- ------- ------
Gross profit.................................. 19,289 6,973 10,454 2,783 4,225 3,394 2,975
Operating expenses:
Sales and marketing......................... 29,898 10,701 15,936 9,551 5,131 3,005 1,836
Product development......................... 7,169 3,087 4,537 2,474 1,295 702 458
General and administrative.................. 6,024 3,113 4,412 2,316 1,616 1,515 841
Write-off of acquired in-process research
and development........................... 2,200 -- -- -- -- -- --
Amortization of stock-based compensation.... 255 197 282 -- -- -- --
Amortization expense........................ 534 -- -- -- -- -- --
-------- -------- -------- -------- ------- ------- ------
Total operating expenses.................... 46,080 17,098 25,167 14,341 8,042 5,222 3,135
-------- -------- -------- -------- ------- ------- ------
Loss from operations.......................... (26,791) (10,125) (14,713) (11,558) (3,817) (1,828) (160)
Interest Income (expense), net................ 7,918 (1,035) (405) (47) (80) (50) (41)
-------- -------- -------- -------- ------- ------- ------
Loss from continuing operations............... (18,873) (11,160) (15,118) (11,605) (3,896) (1,878) (201)
Income (loss) from discontinued operations.... -- -- -- -- 99 (738) 497
-------- -------- -------- -------- ------- ------- ------
Net income (loss)............................. (18,873) (11,160) (15,118) (11,605) (3,798) (2,616) 296
Accretion of preferred stock redemption
value....................................... -- (1,636) (1,636) (846) (240) -- --
-------- -------- -------- -------- ------- ------- ------
Net income (loss) available to common
stockholders................................ $(18,873) $(12,796) $(16,754) $(12,451) $(4,038) $(2,616) $ 296
======== ======== ======== ======== ======= ======= ======
Basic and diluted net income (loss) per share:
Continuing operations....................... $ (0.94) $ (3.48) $ (2.18) $ (4.12) $ (1.39) $ (0.67) $(0.07)
Discontinued operations..................... -- -- -- -- 0.04 (0.26) 0.18
Accretion of preferred stock redemption
value..................................... -- (0.51) (0.24) (0.30) (0.09) -- --
-------- -------- -------- -------- ------- ------- ------
$ (0.94) $ (3.99) $ (2.42) $ (4.42) $ (1.44) $ (0.93) $ 0.11
======== ======== ======== ======== ======= ======= ======
Shares used in computing net income (loss) per
share....................................... 20,112 3,204 6,928 2,814 2,813 2,813 2,813
======== ======== ======== ======== ======= ======= ======
Pro forma basic and diluted net loss per share
from continuing operations.................. $ (1.13)
--------
Shares used in computing pro forma basic and
diluted net loss per share.................. 13,429
========
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
SEPTEMBER 30, ----------------------------------------------------
2000 1999 1998 1997 1996 1995
-------------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents........................... $149,084 $66,160 $ 2,535 $ 2,330 $ 1,086 $ 146
Working capital (deficit)........................... 185,170 63,545 (340) (48) (640) 1,205
Total assets........................................ 217,231 74,140 7,536 5,815 6,734 4,888
Long-term obligations, net of current portion....... -- 439 1,876 1,270 1,289 518
Mandatorily redeemable convertible preferred
stock............................................. -- -- 17,415 5,331 -- --
Total stockholders' equity (deficit)................ 203,786 65,964 (18,147) (5,703) (1,269) 1,375
</TABLE>
11
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical per share data of
Hewlett-Packard and Bluestone and certain equivalent Bluestone per share data.
The information set forth below should be read in conjunction with the selected
historical financial data included elsewhere in this proxy statement/
prospectus. The equivalent Bluestone per share data is calculated based on
Hewlett-Packard historical data, and an exchange ratio of 0.4866 of a share of
Hewlett-Packard common stock for each share of Bluestone common stock (after
giving effect to a two-for-one stock split, in the form of a stock dividend, of
Hewlett-Packard shares effective October 27, 2000.) Pro forma Hewlett-Packard
data giving effect to the merger under the purchase method of accounting have
not been presented because it is not materially different from historical
Hewlett-Packard information. All stock splits, including the two-for-one stock
split, in the form of a stock dividend of Hewlett-Packard shares effective
October 27, 2000, have been retroactively reflected herein.
<TABLE>
<CAPTION>
<S> <C>
Historical Hewlett-Packard--
Diluted net earnings per share from continuing operations:
For the twelve months ended October 31, 1999............ $ 1.49
For the nine months ended July 31, 2000................. 1.28
Cash dividends per share:
For the twelve months ended October 31, 1999............ 0.32
For the nine months ended July 31, 2000................. 0.32
Book value per share (1):
As of October 31, 1999.................................. 9.11
As of July 31, 2000..................................... 7.39
Historical Bluestone--
Diluted net loss per share from continuing operations:
For the twelve months ended December 31, 1999........... (2.18)
For the nine months ended September 30, 2000............ (0.94)
Cash dividends per share:
For the twelve months ended December 31, 1999........... --
For the nine months ended September 30, 2000............ --
Book value per share (1):
As of December 31, 1999................................. 3.62
As of September 30, 2000................................ 9.79
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Equivalent Bluestone--
Diluted net earnings per share from continuing operations:
For the twelve months ended October 31, 1999............ $0.73
For the nine months ended July 31, 2000................. 0.62
Cash dividends per share:
For the twelve months ended October 31, 1999............ 0.16
For the nine months ended July 31, 2000................. 0.16
Book value per share:
As of October 31, 1999.................................. 4.43
As of July 31, 2000..................................... 3.60
</TABLE>
------------------------
(1) Historical book value per share is computed by dividing total stockholders'
equity by the number of shares outstanding at the end of each period.
12
<PAGE>
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
THIS DOCUMENT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS,
UNCERTAINTIES AND ASSUMPTIONS THAT, IF THEY NEVER MATERIALIZE OR PROVE
INCORRECT, COULD CAUSE THE RESULTS OF HEWLETT-PACKARD AND BLUESTONE, AND THEIR
RESPECTIVE CONSOLIDATED SUBSIDIARIES, TO DIFFER MATERIALLY FROM THOSE EXPRESSED
OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS.
ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACT ARE FORWARD-LOOKING
STATEMENTS, INCLUDING: ANY PROJECTIONS OF EARNINGS, REVENUES OR OTHER FINANCIAL
ITEMS; ANY STATEMENTS OF THE PLANS, STRATEGIES AND OBJECTIVES OF MANAGEMENT FOR
FUTURE OPERATIONS; ANY STATEMENTS CONCERNING PROPOSED NEW PRODUCTS, SERVICES OR
DEVELOPMENTS; ANY STATEMENTS REGARDING FUTURE ECONOMIC CONDITIONS OR
PERFORMANCE; STATEMENTS OF BELIEF; AND ANY STATEMENTS OF ASSUMPTIONS UNDERLYING
ANY OF THE FOREGOING.
THE RISKS, UNCERTAINTIES AND ASSUMPTIONS REFERRED TO ABOVE INCLUDE:
- THOSE RISKS DESCRIBED IN THE SECTION "RISK FACTORS" BEGINNING ON PAGE 14;
AND
- OTHER RISKS, ASSUMPTIONS AND UNCERTAINTIES THAT ARE DESCRIBED FROM TIME TO
TIME IN HEWLETT-PACKARD'S AND BLUESTONE'S SEC FILINGS, INCLUDING, BUT NOT
LIMITED TO, HEWLETT-PACKARD'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED OCTOBER 31, 1999 AND OTHER SUBSEQUENTLY FILED REPORTS AND
BLUESTONE'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER
31, 1999 AND OTHER SUBSEQUENTLY FILED REPORTS.
MOREOVER, THE POTENTIAL ACQUISITION BY HEWLETT-PACKARD OF BLUESTONE PRESENTS
ADDITIONAL RISKS, UNCERTAINTIES AND ASSUMPTIONS, INCLUDING THE POSSIBILITY THAT
THE MERGER MAY NOT BE CONSUMMATED; THE CHALLENGE OF INTEGRATING THE BLUESTONE
BUSINESS; THE POSSIBILITY THAT THE COMBINED BUSINESSES MAY FAIL TO ACHIEVE
DESIRED SYNERGIES AND THAT, AFTER THE ACQUISITION, HEWLETT-PACKARD AS A WHOLE
MAY FAIL TO ACHIEVE REVENUE AND PROFIT EXPECTATIONS. NEITHER HEWLETT-PACKARD NOR
BLUESTONE INTENDS TO UPDATE THESE FORWARD-LOOKING STATEMENTS.
13
<PAGE>
RISK FACTORS RELATED TO THE PROPOSED MERGER
By voting in favor of the merger, you will be choosing to invest in
Hewlett-Packard common stock. You should consider carefully the following
important factors, in addition to those discussed in the documents that we have
filed with the SEC, and that we have incorporated by reference in this proxy
statement/prospectus, to determine whether to vote for the proposals relating to
the merger.
THE VALUE OF HEWLETT-PACKARD SHARES TO BE RECEIVED IN THE MERGER HAS FLUCTUATED
AND WILL CONTINUE TO FLUCTUATE.
In the merger, each Bluestone share will be converted into 0.4866 (after
giving effect to a two-for-one stock split, in the form of a stock dividend, of
Hewlett-Packard shares effective October 27, 2000) of a share of Hewlett-Packard
common stock. This exchange ratio is fixed and will not be adjusted in the event
of any increase or decrease in the price of the common stock of either
Hewlett-Packard or Bluestone. The price of Hewlett-Packard common stock at the
time of the merger may be higher or lower than its price as of the date that the
exchange ratio was fixed, today's date or at the date of the special meeting of
stockholders of Bluestone. The price of Hewlett-Packard common stock could
change due to changes in the business, operations or prospects of
Hewlett-Packard or Bluestone, market assessments of the merger, regulatory
considerations, general market and economic conditions or other factors. As a
result, there can be no assurance to Bluestone stockholders that the fractional
share of Hewlett-Packard common stock issuable in respect of a share of
Bluestone common stock will equal or exceed the market value of a share of
Bluestone common stock. Stockholders of Bluestone are urged to obtain current
market quotations for Bluestone common stock and Hewlett-Packard common stock.
FAILURE TO CONSUMMATE THE MERGER COULD NEGATIVELY IMPACT BLUESTONE AND/OR
HEWLETT-PACKARD'S STOCK PRICE, FUTURE BUSINESS AND OPERATIONS.
If the merger is not consummated for any reason, Bluestone and/or
Hewlett-Packard may be subject to a number of material risks, including:
- Bluestone may be required, under certain circumstances, to pay
Hewlett-Packard a termination fee of $19 million;
- the option granted to Hewlett-Packard by Bluestone may become exercisable
and, if exercised, will result in a substantial decrease in the percentage
of outstanding Bluestone common stock currently held by Bluestone
stockholders, may depress Bluestone's stock price and may make another
business combination involving Bluestone more difficult;
- in the event that Hewlett-Packard exercises its rights under the stock
option agreement to acquire 4,058,494 newly issued Bluestone shares at
$21.51 per share, the interests of the Bluestone stockholders will be
diluted and Bluestone may incur significant additional costs;
- the price of Bluestone and/or Hewlett-Packard common stock may decline to
the extent that the then current market price reflects a market assumption
that the merger will be consummated;
- costs related to the merger, such as legal, accounting and financial
printing fees, as well as a portion of the financial advisory fees, must
be paid even if the merger is not completed; and
- the diversion of management attention from the day-to-day business of each
company and the unavoidable disruption to each company's employees and
relationships with customers and suppliers, during the period before
consummation of the merger, may make it difficult to regain financial and
market position if the merger does not occur.
14
<PAGE>
HEWLETT-PACKARD AND BLUESTONE MAY ENCOUNTER DIFFICULTIES IN INTEGRATING THEIR
OPERATIONS OR ACHIEVING THE DESIRED BENEFITS OF THE ACQUISITION.
Although the Hewlett-Packard and Bluestone boards of directors have each
determined that the merger is in the best interests of the stockholders of
Hewlett-Packard and Bluestone, respectively, the integration of the two
companies will involve special risks and challenges, including:
- the retention of Bluestone customers;
- the retention and assimilation of Bluestone employees;
- the integration of the operations and systems of the two companies; and
- successful positioning and integration of Bluestone with Hewlett-Packard
partners.
The realization of potential operating synergies may prove difficult and may
cause management's attention to be diverted from other business concerns. In
addition, the combined businesses may fail to achieve the desired synergies of
the combination and other expected benefits of the transaction.
CERTAIN OFFICERS AND DIRECTORS OF BLUESTONE HAVE INTERESTS IN THE PROPOSED
MERGER THAT DIFFER FROM THE INTERESTS OF OTHER STOCKHOLDERS.
In considering the Bluestone board of directors' recommendation to approve
the merger, you should be aware that some officers and directors of Bluestone
may have potential conflicts of interest. The directors and certain officers of
Bluestone participate in certain arrangements and have continuing
indemnification against certain liabilities that provide them with interests in
the merger that are different from, or in addition to, stockholders of Bluestone
generally. These arrangements include:
- the acceleration of the vesting of one-half of the unvested Bluestone
options previously granted to the officers, as well as all other Bluestone
employees;
- the offers of employment of the officers, as well as other Bluestone
employees, that will become effective upon the consummation of the merger;
and
- certain severance agreement arrangements.
In addition, under the terms of the merger agreement, Hewlett-Packard will
indemnify the directors and officers of Bluestone to the same extent they are
now indemnified under Bluestone's current certificate of incorporation and
by-laws. Hewlett-Packard has also agreed to cause the surviving corporation to
provide directors' and officers' liability insurance for the directors and
officers of Bluestone for six years after the effective date of the merger. As a
result of these arrangements, the Bluestone directors and officers may be more
likely to vote to approve the merger agreement and the transactions associated
with it than if they did not hold these interests. Bluestone stockholders should
consider whether these interests may have influenced these directors and
officers to support or recommend the merger.
THE MERGER MAY CAUSE BLUESTONE CUSTOMERS TO DELAY OR ALTER PURCHASING DECISIONS
AND MAY CAUSE STRATEGIC PARTNERS TO ALTER OR SEVER THEIR RELATIONSHIP WITH
BLUESTONE.
Bluestone's customers may delay or alter purchasing decisions and
Bluestone's strategic partners may alter or sever their relationships with
Bluestone in response to the announcement of the merger. Any of these events
could have a material adverse effect on Bluestone's business, regardless of
whether the merger is ultimately completed. In particular, some of Bluestone's
strategic partners (for example, a Bluestone partner competitive with
Hewlett-Packard) may determine that the merger is detrimental to their
relationship with Bluestone and may accordingly alter or sever the relationship.
15
<PAGE>
THE MERGER MAY ADVERSELY AFFECT BLUESTONE'S ABILITY TO ATTRACT AND RETAIN KEY
BLUESTONE EMPLOYEES.
Current and prospective Bluestone employees may experience uncertainty about
their future roles with the surviving corporation. This uncertainty may
adversely affect Bluestone's ability to attract and retain key management,
sales, marketing and technical personnel. In addition, current and prospective
Bluestone employees may determine that they do not desire to work for
Hewlett-Packard for a variety of reasons.
THE MERGER AGREEMENT LIMITS BLUESTONE'S ABILITY, SUBJECT TO CERTAIN EXCEPTIONS,
TO ENTER INTO OTHER TRANSACTIONS AND, IN THE EVENT THAT THIS MERGER IS NOT
CONSUMMATED, SUCH OTHER TRANSACTIONS MAY NOT BE AVAILABLE TO BLUESTONE.
If the merger is terminated and Bluestone's board of directors determines to
seek another merger or business combination, there can be no assurance that it
will be able to find a partner on terms similar to those provided for in this
merger agreement. In addition, while the merger agreement is in effect, subject
to very narrowly defined exceptions, Bluestone is prohibited from soliciting,
initiating, encouraging or entering into certain extraordinary transactions,
such as a merger, sale of assets or other business combination, with any third
party.
THE PRICE OF HEWLETT-PACKARD SHARES ARE AFFECTED BY FACTORS DIFFERENT FROM THE
FACTORS AFFECTING THE PRICE OF BLUESTONE SHARES.
Upon completion of the proposed merger, holders of Bluestone shares will
become holders of Hewlett-Packard shares. Hewlett-Packard's business differs
significantly from that of Bluestone, and Hewlett-Packard's results of
operations, as well as the trading price of Hewlett-Packard's common stock, are
affected by factors that differ from those that affect Bluestone's results of
operations and the price of Bluestone's common stock.
IF BLUESTONE FAILS TO OBTAIN REQUIRED CONSENTS AND WAIVERS, THIRD PARTIES MAY
TERMINATE OR ALTER EXISTING CONTRACTS WITH BLUESTONE.
Bluestone has contracts with some of its customers and licensors that
require Bluestone to obtain the consent, waiver or approval of these other
parties to the assignment of certain contracts. Bluestone and Hewlett-Packard
may be adversely affected to the extent such consents, waivers or approvals are
not obtained. We cannot be sure that Bluestone will be able to obtain all of the
necessary consents, waivers and approvals.
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THE SPECIAL MEETING
This proxy statement/prospectus is furnished in connection with the
solicitation of proxies from Bluestone stockholders for use at the Bluestone
special meeting in connection with our proposed merger. This proxy
statement/prospectus is also furnished to Bluestone stockholders as a prospectus
issued in connection with the issuance of Hewlett-Packard shares in the merger.
This proxy statement/ prospectus and accompanying form of proxy are first being
mailed to Bluestone stockholders on or about December 13, 2000.
TIME AND PLACE; PURPOSES
The special meeting will be held on Wednesday, January 17, 2001, at
10:00 a.m., local time, at the Sheraton Rittenhouse Square, Philadelphia,
Pennsylvania. At that meeting, Bluestone stockholders will be asked to vote on
the proposal to approve and adopt the merger and the merger agreement.
RECORD DATE
Bluestone has established the close of business on December 11, 2000, as the
record date to determine Bluestone stockholders entitled to receive notice of
and to vote at the special meeting. At the close of business on the record date,
Bluestone shares were outstanding and entitled to vote at the special
meeting, and were held by approximately record holders. The Bluestone shares
constitute the only outstanding class of Bluestone voting securities. Each
Bluestone share is entitled to one vote.
QUORUM
The presence at the special meeting, either in person or by proxy, of a
majority of the Bluestone shares outstanding on the record date is necessary to
constitute a quorum to transact business at that meeting. If a quorum is not
present, it is expected that the special meeting will be adjourned or postponed
in order to solicit additional proxies.
Abstentions and "broker non-votes" will be counted for the purpose of
determining whether a quorum is present. Broker non-votes are shares held by
brokers or nominees on behalf of customers that are represented at the meeting
but with respect to which the broker or nominee has not been instructed how to
vote. Brokers holding Bluestone shares in street name for customers are
prohibited from voting those customers' shares regarding the merger and merger
agreement in the absence of specific instructions from those customers.
VOTE REQUIRED
Approval and adoption of the merger and the merger agreement requires the
affirmative vote of the holders of a majority of the Bluestone shares
outstanding on the record date. Failures to vote, abstentions and broker
non-votes will not be deemed to be cast either "FOR" or "AGAINST" the merger and
the merger agreement. However, because approval and adoption of the merger and
the merger agreement requires the affirmative vote of the holders of a majority
of the outstanding Bluestone shares, failures to vote, abstentions and broker
non-votes will have the same effect as a vote "AGAINST" the merger and the
merger agreement. Votes may be cast at the meeting in person or by proxy.
Bluestone's directors and executive officers beneficially owned, as of the
record date, 6,820,508 Bluestone shares, which represented approximately 32.8%
of the outstanding Bluestone shares. Stockholders representing approximately
32.2% of the voting power of Bluestone shares, as of October 24, 2000, have
entered into a voting agreement with Hewlett-Packard, in which they agree to
vote in favor of approval and adoption of the merger and the merger agreement.
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PROXIES
Bluestone shares represented by properly executed proxies, if such proxies
are received in time and are not revoked, will be voted in accordance with
instructions indicated on the proxies. Except for the broker non-votes, if no
instructions are indicated, those proxies will be voted "FOR" approval and
adoption of the merger and the merger agreement, and as determined by the
Bluestone board as to any other matter that may properly come before the special
meeting. In the event that a quorum is not present at the time the special
meeting is convened, or if for any other reason Bluestone believes that
additional time should be allowed for the solicitation of proxies, Bluestone may
postpone the meeting or may adjourn the meeting with or without a vote of
stockholders.
Any Bluestone stockholder who executes and returns a proxy may revoke it at
any time prior to the voting of the proxies by giving written notice to
Bluestone, by executing a later-dated proxy or by attending the special meeting
and voting in person.
All written notices of revocation and other communications with respect to
revocation of proxies should be addressed to Bluestone Software, Inc., 300
Stevens Drive, Philadelphia, Pennsylvania 19113-4597, Attention: Secretary. A
proxy appointment will not be revoked by death or incapacity of the Bluestone
stockholder executing the proxy unless, before the shares are voted, notice of
such death or incapacity is filed with Bluestone's secretary or other person
responsible for tabulating votes on Bluestone's behalf.
Your attendance at the special meeting will not by itself constitute
revocation of your proxy. If you wish to revoke your proxy at the special
meeting, you must also vote in person at the special meeting. If you instructed
your broker to vote your Bluestone shares, you must follow the broker's
directions in order to change your vote.
Bluestone will pay the cost of soliciting proxies. In addition to
solicitation by mail, Bluestone's officers and employees may solicit proxies by
telephone, fax, telegram or in person. Arrangements will also be made with
brokerage houses and other nominees and fiduciaries for forwarding solicitation
material to the beneficial owners of stock held of record by those persons, and
Bluestone will reimburse those custodians, nominees and fiduciaries for their
reasonable out-of-pocket expenses. Bluestone has also retained Georgeson
Shareholder Communications Inc. to assist in the solicitation of proxies for a
fee not to exceed $12,500, plus reimbursement for out-of-pocket expenses.
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THE MERGER
STRUCTURE OF THE MERGER
In accordance with the merger agreement and Delaware law, a wholly owned
subsidiary of Hewlett-Packard formed for the purpose of the merger, or Merger
Sub, will merge with and into Bluestone. Upon consummation of the merger,
Bluestone will become a wholly owned subsidiary of Hewlett-Packard. At any time
before or after consummation of the merger, Hewlett-Packard may decide to merge
Bluestone upstream into the parent company. Hewlett-Packard currently intends to
effect such an upstream merger shortly after the closing. In the merger, each
share of Bluestone common stock, par value $.001 per share, issued and
outstanding will be converted into the right to receive 0.4866 (after giving
effect to a two-for-one stock split, in the form of a stock dividend, of
Hewlett-Packard shares effective October 27, 2000), or the Exchange Ratio, of a
Hewlett-Packard share. No fractional Hewlett-Packard shares will be issued in
the merger, and the cash value equal to the value of any fractional share will
be paid instead. All Bluestone shares held in the treasury of Bluestone or by
Hewlett-Packard or Merger Sub will be cancelled, and market trading of Bluestone
common stock will cease.
The merger will become effective when a certificate of merger is filed with
the Secretary of State of Delaware or at such other time as may be specified in
the certificate of merger. The effective time of the merger will occur as soon
as practicable after the last of the conditions in the merger agreement has been
satisfied or waived. We expect the merger to occur on or about January 18, 2001.
However, we cannot predict the exact time of completion because the merger is
subject to government approvals and factors beyond our control.
EXCHANGE OF BLUESTONE STOCK CERTIFICATES FOR HEWLETT-PACKARD STOCK CERTIFICATES
When the merger is completed, we will mail to Bluestone stockholders a
letter of transmittal and instructions for use in surrendering Bluestone stock
certificates in exchange for Hewlett-Packard stock certificates. When you
deliver your Bluestone stock certificates to the exchange agent along with a
properly executed letter of transmittal and any other required documents, your
Bluestone stock certificates will be canceled and you will receive
Hewlett-Packard stock certificates representing the number of full shares of
Hewlett-Packard common stock to which you are entitled under the merger
agreement.
You will receive payment in cash, without interest, in place of any
fractional shares of Hewlett-Packard common stock which would have been
otherwise issuable to you as a result of the merger based on the closing price
of a Hewlett-Packard share on the New York Stock Exchange on the closing date of
the merger.
Please do not submit your Bluestone stock certificates for exchange unless
and until you receive the transmittal instructions and a form of letter of
transmittal from the exchange agent.
You are not entitled to receive any dividends or other distributions on
Bluestone common stock after the merger is completed.
If there is any dividend or other distribution on Hewlett-Packard common
stock with a record date after the merger and a payment date prior to the date
you surrender your Bluestone stock certificates in exchange for Hewlett-Packard
stock certificates, you will receive it with respect to the whole shares of
Hewlett-Packard common stock issued to you promptly after they are issued.
Hewlett-Packard will issue a Hewlett-Packard stock certificate or a check
only in place of a fractional share in a name other than that in which a
surrendered Bluestone stock certificate is registered if you present the
exchange agent with all documents required to show and effect the unrecorded
transfer of ownership and show that you paid any applicable stock transfer taxes
or that such transfer taxes were not applicable.
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BACKGROUND OF THE MERGER
Bluestone conducted its initial public offering of its common stock in
September 1999, raising net proceeds of $54.8 million. Bluestone conducted a
follow-on offering of its common stock in February 2000 in which it raised net
proceeds of $146.7 million. Throughout the development of the company, Bluestone
senior management has held regular corporate and business development
discussions with numerous leading and established technology companies,
independent software vendors, systems integrators and value added resellers.
Such discussions centered around various business opportunities including joint
product development, independent software vendor relationships, technology
license agreements, distribution agreements, strategic investments and sales and
marketing partnerships. In May 2000, Bluestone had extensive discussions with a
strategic partner about the possibility of a strategic business combination that
it believed would significantly increase distribution channels for Bluestone's
products. Such discussions terminated without agreement.
Since 1998, Hewlett-Packard has been a significant customer of Bluestone. As
such, the companies were familiar with each other's businesses and technologies.
Bluestone has recognized software license fees and services revenue from
Hewlett-Packard during the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------- SEPTEMBER 30,
1998 1999 2000
---------- ------------ -------------
<S> <C> <C> <C>
Software license fees............................. $454,145 $1,160,646 $1,302,900
Services.......................................... 424,425 55,250 98,225
-------- ---------- ----------
$878,570 $1,215,896 $1,401,125
======== ========== ==========
</TABLE>
During the fall of 1998, Hewlett-Packard and Bluestone entered into preliminary
discussions regarding a potential business combination. The discussions
terminated without agreement. Also in 1998, Bluestone licensed its SapphireWeb
product to Hewlett-Packard to embed into Hewlett-Packard's Changengine software
product. In June 2000, Bluestone licensed additional products to Hewlett-
Packard to embed into Hewlett-Packard's OpenView software product line. On
December 1, 2000 Bluestone and Hewlett-Packard entered into a license agreement
whereby Hewlett-Packard agreed to act as an independent software vendor for
Bluestone's products for an up-front fee of $1.0 million and future royalty
payments based upon sales above certain negotiated thresholds. This license
agreement is the result of the parties' licensing discussions described below
and was executed in order to allow the parties to continue collaborating prior
to and independent from the shareholder vote and closing of the transaction.
In August 2000, senior management of Bluestone met with executives from
Hewlett-Packard's Software and Solutions Organization to discuss the licensing
of Bluestone's Internet Operating Environment software to Hewlett-Packard.
Discussions regarding the possible licensing transaction continued through
September 2000.
Within the context of continuing discussions regarding a possible licensing
transaction, at meetings held between September 26 and September 28, 2000,
representatives of Bluestone and Hewlett-Packard met to discuss each company's
interest in a potential strategic business combination. Throughout this period,
Bluestone management briefed Bluestone board members individually regarding the
status of discussions with Hewlett-Packard about a potential transaction.
On September 29, 2000, the board of directors of Bluestone met to discuss a
potential business combination transaction and authorized management to continue
discussions with Hewlett-Packard. Shortly thereafter Bluestone and
Hewlett-Packard agreed to suspend discussions regarding additional licensing by
Hewlett-Packard of Bluestone products and focus instead on discussions relating
to a potential strategic business combination.
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In furtherance of a potential business combination, the parties held initial
due diligence meetings at Hewlett-Packard headquarters and participated in
various conference calls during the second week of October 2000. The parties
also preliminarily discussed issues related to corporate strategy, product
offerings, potential integration synergies and personnel.
On October 12, 2000, representatives of Hewlett-Packard and Bluestone met in
Philadelphia and conference calls were held on October 13, 2000 and October 14,
2000 among the business development teams, at which valuation and structure of a
potential combination were discussed.
On October 13, 2000, Bluestone engaged Deutsche Bank to act as Bluestone's
financial advisor in connection with a potential business combination
transaction.
On October 15, 2000, a meeting between the parties was held at
Hewlett-Packard headquarters in Palo Alto, California. Members of Bluestone's
management, business development group and its general counsel were present
along with representatives of Deutsche Bank, attending in person and by
teleconference, and representatives of Pepper Hamilton LLP, counsel to
Bluestone, participating by teleconference. Representatives of Hewlett-Packard
were present, as well as representatives of Skadden, Arps, Slate, Meagher & Flom
LLP, counsel to Hewlett-Packard. The representatives of Hewlett-Packard
presented proposed general terms of a cash tender offer and some discussion
ensued.
On the evening of October 15, 2000, a meeting of the Bluestone board of
directors was held at which representatives of Bluestone provided the board a
detailed update on the status of negotiations with Hewlett-Packard and described
the terms proposed by Hewlett-Packard. The Bluestone board of directors
authorized management to continue discussions regarding a potential business
combination with Hewlett-Packard.
On October 16, 2000, Hewlett-Packard provided Bluestone a revised proposal
that envisioned Hewlett-Packard's commencing a stock-for-stock exchange offer
for all of the outstanding shares of Bluestone. Also on October 16, 2000, an
agreement was executed by the parties which provided that Bluestone would
negotiate exclusively with Hewlett-Packard, neither party would divulge the
existence or substance of the negotiations and neither party would solicit
employees of the other party. The agreement to negotiate exclusively with
Hewlett-Packard expired on October 23, 2000.
On several occasions during the week of October 16, 2000, representatives of
Bluestone, Deutsche Bank and Hewlett-Packard met to discuss valuation
methodologies.
On October 17, 2000 and October 19, 2000, meetings attended by Bluestone's
management, business development group and general counsel, representatives from
Pepper Hamilton and Deutsche Bank and Hewlett-Packard's management, corporate
development group and Skadden, Arps were held at Hewlett-Packard headquarters.
The parties discussed the proposed terms and structure of a transaction and
valuation issues.
On October 18, 2000, P. Kevin Kilroy, Bluestone's chief executive officer,
met with representatives of Hewlett-Packard. Also on October 18, 2000 a
conference call between attorneys from Pepper Hamilton and Skadden, Arps was
held to discuss issues surrounding the structure of the proposed transaction.
Counsel for Bluestone emphasized Bluestone's desire that any transaction be
structured as a tax-free reorganization and to permit Bluestone stockholders to
continue to participate in the long-term growth prospects of the combined
entity. The parties believed one of two structures, that is, a stock exchange
offer or a one-step stock merger, would be acceptable, subject to further
clarification of tax issues.
On October 19, 2000, a meeting was held at Hewlett-Packard headquarters at
which the parties further discussed and negotiated issues relating to valuation
and structure. The parties focused discussions on a proposed transaction that
would value Bluestone at $475 million, structured as a one-step stock merger
that would value Hewlett-Packard's common stock using a 10-day average for
purposes of fixing an exchange ratio. On October 19, 2000, a meeting of the
board of directors of
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Bluestone was held at which management updated the Board on the status of
discussions. Bluestone's board of directors authorized management to proceed to
negotiate definitive agreements based on the terms that had been discussed
between the parties, subject to further review and approval.
On October 20, 2000, Skadden, Arps delivered a draft merger agreement to
Pepper Hamilton and Bluestone. On October 21, 2000, Skadden, Arps delivered
drafts of the other transaction documents, which included a voting agreement to
be entered into by the major stockholders of Bluestone and an option agreement
to be entered into by Bluestone in favor of Hewlett-Packard. Also on
October 20, 2000, Bluestone and Pepper Hamilton provided their initial comments
on the draft merger agreement and other transaction documents previously
delivered by Skadden, Arps.
On October 20, 2000, the negotiating teams of Hewlett-Packard and Bluestone
along with Bluestone's financial advisor and Skadden, Arps and Pepper Hamilton
participated in a series of negotiations on the terms of the merger agreement
and the other related agreements. These negotiations covered all aspects of the
transaction, including, among other things, the representations and warranties
made by the parties, the restrictions on the conduct of their business, the
conditions to completion of the proposed merger, the provisions regarding
termination, the details of the "no shop" clause, the amount, triggers and
payment of the termination fee and the consequences of termination, the details
and operation of the stock option agreement, and the delivery and terms of the
voting agreements.
From October 20, 2000 through the afternoon of October 22, 2000,
representatives of Bluestone and Hewlett-Packard, including their respective
auditors and advisors, continued to perform due diligence investigations and to
negotiate the terms of the proposed transaction documents. During this period,
affiliates of Bluestone who were asked to enter into a voting agreement
supporting the proposed transaction engaged their own legal counsel to review
and advise them regarding the delivery and terms of such agreement, and such
counsel participated in negotiations relating thereto.
Also on October 22, 2000 the board of directors of Bluestone held a meeting
to discuss the status of negotiations and authorized management to continue
negotiations with Hewlett-Packard.
On October 23, 2000, the Bluestone board of directors held its regularly
scheduled quarterly meeting and a special meeting at which Mr. Kilroy, together
with a representative of Pepper Hamilton, reviewed the status of negotiations
and discussions with Hewlett-Packard since the board's October 22, 2000 meeting.
Paul Porrini, Bluestone's general counsel, reviewed in detail the principal
terms of the proposed merger agreement and related agreements and summarized the
remaining open issues. In addition, a representative of Pepper Hamilton reviewed
with the Bluestone board of directors the main legal principles applicable to
the proposed merger (including the board's fiduciary duties and authority in
considering the merger). Representatives of Deutsche Bank gave a detailed oral
presentation regarding valuation, valuation methodology, comparable transactions
and the factors considered in enabling the rendering of a fairness opinion. The
Bluestone board of directors reviewed and discussed the terms of the proposed
transaction, including the exchange ratio and merger consideration, closing
conditions, termination rights, termination fee, the stock option agreement, the
voting agreement and Bluestone's ability to consider alternative proposals. The
Bluestone board authorized management to continue to negotiate to resolve open
issues and complete the transaction documents.
Also on October 23, 2000, the Hewlett-Packard board of directors held a
special meeting and approved the proposed transaction, including the price, form
of consideration and structure of transaction, subject to the approval by the
executive committee of the board of the final terms and conditions of the
proposed merger agreement and related voting and stock option agreements.
On the evening of October 23, 2000 through the afternoon of October 24,
2000, representatives of Bluestone and Hewlett-Packard, with consultation from
their respective legal counsel, continued to negotiate the terms of the proposed
transaction documents.
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On October 24, 2000, the Bluestone board of directors held a special meeting
to review revised drafts of the merger agreement and related agreements.
Representatives of Deutsche Bank, also reviewed the financial terms of the
proposed transaction in detail and delivered its oral fairness opinion, to the
Bluestone board of directors, subsequently confirmed in writing as of the same
date, that, based upon and subject to various considerations, as of October 24,
2000, the exchange ratio of 0.2433 (0.4866 after giving effect to a two-for-one
stock split, in the form of a stock dividend, of Hewlett-Packard shares
effective October 27, 2000) of a share of Hewlett-Packard common stock to be
received for each share of Bluestone common stock pursuant to the merger
agreement was fair from a financial point of view to the holders of Bluestone
common stock.
The board of directors questioned the representatives of Deutsche Bank
regarding the fairness opinion and further discussed the principal terms of the
proposed merger. After further deliberation, the Bluestone board of directors
unanimously (with Mr. Kilroy abstaining due to his interests in the proposed
transaction):
- determined that the merger and the merger agreement are advisable, and
fair to and in the best interests of Bluestone and its stockholders;
- approved the merger, the merger agreement, the stock option agreement, the
voting agreement and the transactions contemplated thereby, together with
such changes as were discussed at the meeting;
- resolved to call a special meeting of Bluestone's stockholders to adopt
and approve the merger agreement and to approve the merger;
- resolved to recommend that stockholders of Bluestone vote in favor of
adoption and approval of the merger agreement and approval of the merger;
and
- authorized Mr. Kilroy or other proper officers of Bluestone to execute, on
behalf of Bluestone, the merger agreement and the stock option agreement
and such other documents that Mr. Kilroy and other proper officers deemed
necessary or advisable in their discretion, together with any changes,
deletions, additions and alterations Mr. Kilroy approved consistent with
the resolutions of the Bluestone board of directors.
Also on October 24, the Hewlett-Packard executive committee approved the
terms and conditions of the proposed merger agreement and related voting and
stock option agreements, and the Merger Sub board of directors approved the
merger and the merger agreement. During the afternoon of October 24, 2000,
certain affiliates of Bluestone entered into voting agreements with
Hewlett-Packard, pursuant to which they agreed to vote their Bluestone shares in
favor of adoption and approval of the merger and the merger agreement. In
addition, certain officers of Bluestone, including Mr. Kilroy, accepted
employment offer letters from Hewlett-Packard, effective upon the completion of
the merger, that include compensation terms. Hewlett-Packard and Bluestone then
entered into the merger agreement, the stock option agreement and the voting
agreement.
A joint press release was issued on October 24, 2000 announcing the signing
of the merger agreement. A joint conference call was held following the issuance
of the press release.
BLUESTONE'S REASONS FOR ENGAGING IN THE MERGER; RECOMMENDATION OF THE BLUESTONE
BOARD
The Bluestone board has unanimously (with Mr. Kilroy abstaining due to his
interests in the proposed transaction) approved the merger agreement and
recommends that Bluestone stockholders vote "FOR" the approval and adoption of
the merger agreement and approval of the merger. In reaching its decision to
approve the merger agreement, the Bluestone board consulted with (1) its legal
counsel regarding the legal terms of the transaction and the obligations of the
Bluestone board in its consideration of the proposed transaction, (2) its
financial advisors regarding the financial aspects of the proposed transaction
and the fairness from a financial point of view of the exchange ratio to
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Bluestone's stockholders, and (3) the management of Bluestone concerning the
strategic advantages of an alliance with Hewlett-Packard, Bluestone's prospects
in the absence of such an alliance and Bluestone's alternatives for enhancement
of stockholder value. At the same time, the Bluestone board also reviewed the
history of Hewlett-Packard and the prospects of Hewlett-Packard if the merger
were completed. The factors that were examined as part of this analysis include,
but were not limited to, the following:
- a review of Bluestone's business, operations, financial condition and
earnings on an historical and a prospective basis;
- the efficacy of Bluestone's strategic plan under current competitive
conditions and actions that would increase financial performance and
long-term stockholder value;
- the increasing competition in the application server markets from both
existing and potential competitors, some of which are larger and have far
greater assets and resources, in part as a result of the consolidation
taking place in the computer software industry;
- Bluestone's need to develop greater distribution power and marketing
infrastructure and the difficulties of doing so as a stand-alone entity;
- the potential for achieving long-term economies of scale, particularly in
sales and distribution, that would not have been readily achievable by
Bluestone independently;
- a review of potential benefits for stockholders of a larger organization
with greater resources, increased financial resources and a stronger
market position;
- the potential for increased revenues by selling into Hewlett-Packard's
installed customer base and through its larger sales force;
- Hewlett-Packard's publicly stated intent to become a leader in the
Internet infrastructure market;
- the ability to develop future products more quickly and to attract and
retain critical and scarce engineering talent as a result of having access
to both companies' financial, development and personnel resources;
- the Bluestone board's review of the business, operations, earnings and
financial condition of Hewlett-Packard on both an historical and a
prospective basis, the enhanced opportunities for operating efficiencies
and sales growth that could result from the merger, the enhanced
opportunities for growth that the merger would make possible and the
respective contributions that the parties would bring to a combined
corporation;
- the nature of the consideration for the merger being Hewlett-Packard stock
and that Hewlett-Packard is a widely-held company listed on the New York
Stock Exchange with no dominant or controlling stockholder;
- the differences in the stock price, volatility, public float and trading
volume trends for Bluestone and Hewlett-Packard's common stock and concern
about future fluctuations in the market price for Bluestone stock as a
result of market factors, fluctuating quarterly operating results,
potential future sales by large stockholders, as well as the prospects for
future growth;
- the belief of the Bluestone board and management that a business
combination with Hewlett-Packard would offer the potential for increased
immediate and long-term value and liquidity to current Bluestone
stockholders;
- the terms of the merger agreement and the transactions contemplated by the
merger agreement, including the exchange ratio, noting that it reflected
an approximately 30% premium, based on the average closing prices of the
common stock of the two companies during the 10-day trading period ending
October 23, 2000, and an approximately 34% premium, based on the average
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closing prices of the common stock of the two companies during the 30-day
trading period ending on such date, the "no-solicitation" provisions, the
assumption of Bluestone's outstanding options, the termination provisions,
the termination payments and option to acquire shares of Bluestone in
certain circumstances, the voting agreement from major stockholders, the
continuation of director and officer insurance and the indemnification of
directors;
- the expectation that the merger will be treated as a tax-free
reorganization to Bluestone and its stockholders;
- a comparison of the Hewlett-Packard offer with reported transactions,
nationally and in Bluestone's market, by companies with similar
characteristics;
- alternatives to the proposed transaction, including remaining independent
as well as consideration of other potential strategic merger partners;
- the opinion of Deutsche Bank, dated as of October 24, 2000, that, as of
that date, based upon and subject to the matters stated in that opinion,
the exchange ratio set forth in the merger agreement was fair to Bluestone
stockholders from a financial point of view;
- the timing of the proposed transaction relative to Bluestone's current and
proposed activities;
- the interests of management, particularly the condition that several
individuals, including Mr. Kilroy, accept new employment offers;
- the enhanced ability to attract and retain key managers and developers in
light of competition and market conditions as a result of a combination
with Hewlett-Packard; and
- the interests of employees in being part of, and opportunities for career
advancement as a result of, Hewlett-Packard's new e-commerce initiative.
The Bluestone board also considered several potentially negative factors
relating to the merger, including:
- the risk that the benefits sought from the merger would not be fully
achieved;
- the risk that the merger would not be completed and the effect of the
public announcement of the merger on Bluestone's sales and operating
results, particularly the effect of the announcement on key customer and
supplier relationships;
- the impact of the merger on key customer and partner relationships of
Bluestone;
- the difficulty of and risks associated with the integration of different
organizational structures;
- the risks of Bluestone suffering employee attrition or of failing to
attract key personnel due to uncertainties associated with a pending
merger; and
- conditions to the merger, including that at least 40 of 48 specified
employees of Bluestone accept new employment offer letters on or before
closing.
The Bluestone board concluded that these factors were outweighed by the
potential benefits to be gained by the merger agreement and the completion of
the proposed merger. The above discussion of material factors is not exhaustive,
but does set forth the principal factors considered by the Bluestone board. The
Bluestone board collectively reached the conclusion to approve the merger
agreement and the merger in light of the factors described above and other
factors that each member of the Bluestone board felt were appropriate. The
Bluestone board did not assign relative or specific weights to any of the
factors described above, and individual directors may have weighed the factors
differently.
FOR THE REASONS SET FORTH ABOVE, THE BLUESTONE BOARD HAS APPROVED THE MERGER
AND THE MERGER AGREEMENT AS FAIR TO AND IN THE BEST INTERESTS OF BLUESTONE AND
THE STOCKHOLDERS OF BLUESTONE, AND
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RECOMMENDS THAT BLUESTONE STOCKHOLDERS APPROVE AND ADOPT THE MERGER AND THE
MERGER AGREEMENT.
OPINION OF BLUESTONE'S FINANCIAL ADVISOR
THE FULL TEXT OF DEUTSCHE BANK'S WRITTEN OPINION, DATED OCTOBER 24, 2000,
WHICH SETS FORTH, AMONG OTHER THINGS, THE ASSUMPTIONS MADE, MATTERS CONSIDERED
AND LIMITS ON THE REVIEW UNDERTAKEN BY DEUTSCHE BANK IN CONNECTION WITH THE
OPINION, IS ATTACHED AS APPENDIX D TO THIS PROXY STATEMENT/PROSPECTUS AND IS
INCORPORATED HEREIN BY REFERENCE. BLUESTONE STOCKHOLDERS ARE URGED TO READ THE
OPINION OF DEUTSCHE BANK IN ITS ENTIRETY. THE SUMMARY OF THE OPINION OF DEUTSCHE
BANK SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE FULL TEXT OF THE OPINION OF DEUTSCHE BANK.
Deutsche Bank has acted as financial advisor to Bluestone in connection with
the merger. At the October 24, 2000 meeting of the Bluestone board of directors,
Deutsche Bank delivered its oral opinion, subsequently confirmed in writing as
of the same date to the Bluestone board of directors to the effect that, as of
the date of such opinion, based upon and subject to the assumptions made,
matters considered and limits of the review undertaken by Deutsche Bank, the
exchange ratio was fair, from a financial point of view, to holders of Bluestone
shares.
In connection with Deutsche Bank's role as financial advisor to Bluestone,
and in arriving at its opinion, Deutsche Bank has reviewed, among other things,
certain publicly available financial information and other information
concerning Bluestone and Hewlett-Packard and certain internal analyses and other
information furnished to it by Bluestone. Deutsche Bank also held discussions
with the members of the senior managements of Bluestone and Hewlett-Packard
regarding the businesses and prospects of their respective companies. Deutsche
Bank was granted limited access to management of Hewlett-Packard for the purpose
of discussing Hewlett-Packard's business and relied solely on publicly available
information with respect thereto. In addition, Deutsche Bank was not provided
information on the status of any potential acquisitions by Hewlett-Packard, and
accordingly did not consider the potential impact of such combinations, if any,
in its analysis. In addition, Deutsche Bank:
- reviewed the reported prices and trading activity for the common stock of
both Bluestone and Hewlett-Packard;
- compared certain financial and stock market information for Bluestone and
Hewlett-Packard with similar information for selected companies whose
securities are publicly traded;
- reviewed the financial terms of selected recent business combinations
which it deemed comparable in whole or in part;
- reviewed the terms of the merger agreement and certain related documents;
and
- performed such other studies and analyses and considered such other
factors as it deemed appropriate.
In preparing its opinion, Deutsche Bank did not assume responsibility for
the independent verification of, and did not independently verify, any
information, whether publicly available or furnished to it, concerning Bluestone
or Hewlett-Packard, including, without limitation, any financial information
considered in connection with the rendering of its opinion. Accordingly, for
purposes of its opinion, Deutsche Bank assumed and relied upon the accuracy and
completeness of all such information. Deutsche Bank did not conduct a physical
inspection of any of the properties or assets, and did not prepare or obtain any
independent evaluation or appraisal of any of the assets or liabilities of
Bluestone or Hewlett-Packard. In rendering its opinion, Deutsche Bank expressed
no view as to the reasonableness of publicly available earnings estimates
reported by research analysts who cover Bluestone and selected companies or the
assumptions on which they are based. The opinion of Deutsche Bank was
necessarily based upon economic, market and other conditions as in effect on,
and the information made available to Deutsche Bank as of, the date of the
opinion.
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<PAGE>
For purposes of rendering its opinion, Deutsche Bank assumed that, in all
respects material to its analysis,
- the representations and warranties of Bluestone, Hewlett-Packard and
Merger Sub contained in the merger agreement are true and correct;
- Bluestone, Hewlett-Packard and Merger Sub will each perform all of the
covenants and agreements to be performed by it under the merger agreement;
- all conditions to the obligation of each of Bluestone, Hewlett-Packard and
Merger Sub to consummate the merger will be satisfied without any waiver
thereof;
- all material governmental, regulatory or other approvals and consents
required in connection with the consummation of the transactions
contemplated by the merger agreement will be obtained;
- in connection with obtaining any necessary governmental, regulatory or
other approvals and consents, or any amendments, modifications or waivers
to any agreements, instruments or orders to which either Bluestone or
Hewlett-Packard is a party or subject or by which it is bound, no
limitations, restrictions or conditions will be imposed or amendments,
modifications or waivers made that would have a material adverse effect on
Bluestone or Hewlett-Packard; and
- the merger will be tax-free to each of Bluestone and Hewlett-Packard and
their respective stockholders and that the merger will be accounted for as
a purchase.
In connection with Deutsche Bank's role as financial advisor to Bluestone
and in arriving at its opinion, Deutsche Bank was not authorized to solicit, and
did not solicit, interest from any other person with respect to the acquisition
of all or any part of Bluestone or investigate any alternative transactions.
Deutsche Bank reviewed and analyzed recent and historical market prices and
trading volumes for Bluestone shares and Hewlett-Packard shares and compared
such market prices to certain stock market and industry indices. Set forth below
is a brief summary of certain financial analyses performed by Deutsche Bank in
connection with its opinion and reviewed with the Bluestone board of directors
at its meetings on October 23 and October 24, 2000. These summaries of financial
analyses include information presented in a tabular format. In order to
understand fully the financial analyses used by Deutsche Bank, the tables must
be read with the text of each summary, because the tables alone are not a
complete description of the financial analyses.
Deutsche Bank's review and analysis was completed prior to the two-for-one
split, in the form of a stock dividend, of Hewlett-Packard shares that was
effective on October 27, 2000.
HISTORICAL EXCHANGE RATIO ANALYSIS. Deutsche Bank reviewed the historical
ratio of the daily per share market closing prices of Bluestone shares divided
by the corresponding prices of Hewlett-Packard shares over the 10-day, 20-day,
30-day and 60-day periods prior to and as of October 23, 2000 (the last business
day prior to announcement of the merger). Deutsche Bank examined the premiums
represented by the exchange ratio of 0.2433 (0.4866 after giving effect to a
two-for-one stock split, in the form of a stock dividend, of Hewlett-Packard
shares effective October 27, 2000) over the averages
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<PAGE>
of these ratios over the various periods. The following table summarizes the
average exchange ratio over the indicated period and the premium represented by
such exchange ratio.
<TABLE>
<CAPTION>
AVERAGE EXCHANGE RATIO PREMIUM
AVERAGE EXCHANGE RATIO ADJUSTED FOR REPRESENTED BY
PERIOD DURING PERIOD STOCK SPLIT EXCHANGE RATIO
------ ---------------------- ---------------------- ----------------
<S> <C> <C> <C>
October 23, 2000............ .2230 .4460 9.1%
10 trading day average...... .1876 .3752 29.7%
20 trading day average...... .1809 .3618 34.5%
30 trading day average...... .1817 .3634 33.9%
60 trading day average...... .1791 .3582 35.8%
</TABLE>
ANALYSIS OF SELECTED PUBLICLY TRADED COMPANIES. Deutsche Bank compared
certain financial information and commonly used valuation measurements for
Bluestone to corresponding information and measurements for a group of six
publicly traded companies that Deutsche Bank deemed to be software companies
comparable to the business of Bluestone, which we refer to as the selected
companies. The following table lists the relevant selected companies:
<TABLE>
<CAPTION>
SELECTED SOFTWARE COMPANIES
---------------------------
<S> <C>
Allaire Corporation
Backweb Technologies Ltd.
Marimba, Inc.
NetObjects, Inc.
Persistence Software, Inc.
Silverstream Software, Inc.
</TABLE>
Deutsche Bank compared, among other things,
- equity market valuation;
- operating performance; and
- the enterprise value (determined as the equity market valuation adjusted
by adding the amount of any debt and subtracting the amount of any cash
and cash equivalents, as most recently reported) to revenue.
To calculate the trading multiples for Bluestone and the selected companies,
Deutsche Bank used publicly available information concerning historical and
projected financial performance, including published historical financial
information and earnings estimates reported by research analysts who cover the
selected companies. The following table summarizes the calculations by Deutsche
Bank of the multiples of enterprise value to revenue for Bluestone implied by
the merger and the mean, median, and ranges of multiples of enterprise value to
revenue for the selected companies for the indicated periods.
<TABLE>
<CAPTION>
SELECTED COMPANIES
BLUESTONE -----------------------------------
PERIOD BLUESTONE AT MERGER MEAN MEDIAN RANGE
------ --------- --------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Trailing 12 Months...................... 11.0x 12.7x 4.7x 4.0x 0.6x to 10.6x
Calendar Year 2000...................... 7.0x 8.0x 3.5x 3.3x 0.6x to 7.9x
Calendar Year 2001...................... 3.2x 3.7x 2.3x 2.0x 0.4x to 4.8x
</TABLE>
None of the companies utilized as a comparison was identical to Bluestone.
Accordingly, Deutsche Bank believes the analysis of publicly traded comparable
companies is not simply mathematical. Rather, it involves complex considerations
and qualitative judgments, reflected in Deutsche Bank's opinion,
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<PAGE>
concerning differences in financial and operating characteristics of the
comparable companies and other factors that could affect the public trading
value of the comparable companies.
ANALYSIS OF SELECTED PRECEDENT TRANSACTIONS. Deutsche Bank reviewed the
financial terms, to the extent publicly available, of 133 proposed, pending or
completed mergers and acquisition transactions since November 24, 1997 involving
companies in the software industry, which we refer to as the selected
transactions. Deutsche Bank calculated various financial multiples and premiums
over market value based on certain publicly available information for each of
the selected transactions and compared them to corresponding financial multiples
and premiums over market value for the merger, based on the exchange ratio. All
multiples for the selected transactions were based on public information
available at the time of announcement of such transaction, without taking into
account differing market and other conditions during the three-year period
during which the selected transactions occurred.
The following table summarizes the calculations by Deutsche Bank of the
range, mean and median of multiples of enterprise value to revenue for the
selected transactions and the corresponding multiples for Bluestone implied by
the merger.
<TABLE>
<CAPTION>
BLUESTONE AT MERGER MEAN MEDIAN RANGE
------------------- -------- -------- --------------
<S> <C> <C> <C> <C>
Trailing 12 Months Revenue.................... 12.7x 24.8x 13.4x 0.4x to 100.6x
Forward 12 Months Revenue..................... 5.6x 15.0x 10.4x 1.1x to 62.4x
</TABLE>
Deutsche Bank calculated the premium of the price at which the selected
transactions were announced or effected to each acquired company's per share
market price for the one day prior and the average for the thirty-day period
prior to the announcement of the transaction. Deutsche Bank further calculated
the premium represented by the per share market price implied by the exchange
ratio in the merger over the per share market price of Bluestone shares for the
one day prior and the average for the thirty-day period prior to the
announcement of the merger. Deutsche Bank also calculated the premium of the
price at which the selected transactions were announced or effected to each
acquired company's enterprise value for the one day prior and the average for
the thirty-day period prior to the announcement of the transaction, as well as
the premium represented by the price per share implied by the exchange ratio in
the merger over the enterprise value per share of Bluestone shares for the one
day prior and the average for the thirty-day period prior to the announcement of
the merger. The following table sets forth the premiums for the selected
transactions analyzed by Deutsche Bank:
<TABLE>
<CAPTION>
PRICE PREMIUM ENTERPRISE VALUE PRICE PREMIUM
------------------------------------ -------------------------------------
ONE DAY 30 DAY AVERAGE ONE DAY 30 DAY AVERAGE
----------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Range................ (10.7)% to 333.3% (6.7)% to 574.3% (16.3)% to 321.8% (12.0)% to 544.0%
Mean................. 46.3% 67.7% 52.8% 79.7%
Median............... 33.8% 47.7% 33.9% 53.6%
Bluestone at
Merger............. 9.1% 36.2% 15.2% 74.7%
</TABLE>
Because the reasons for, and circumstances surrounding, each of the selected
transactions analyzed were so diverse, and due to the inherent differences
between the operations and financial conditions of Bluestone and Hewlett-Packard
and the companies involved in the selected transactions, Deutsche Bank believes
that a comparable transaction analysis is not simply mathematical. Rather, it
involves complex considerations and qualitative judgments, reflected in Deutsche
Bank's opinion, concerning differences between the characteristics of these
transactions and the merger that could affect the value of the subject companies
and businesses and Bluestone and Hewlett-Packard.
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<PAGE>
CONTRIBUTION ANALYSIS. Deutsche Bank analyzed the relative contributions of
Bluestone and Hewlett-Packard to the pro forma revenue, operating income and net
income of the combined company, based on historical data for the last 12 months
and research analysts' reports for Hewlett-Packard's fiscal years ending
October 31, 2000 and October 31, 2001 (excluding the effect of any synergies
that may be realized as a result of the merger, and non-recurring expenses
relating to the merger). The following table summarizes the results of this
analysis:
<TABLE>
<CAPTION>
PERCENTAGE CONTRIBUTION TO
THE PRO FORMA COMBINED
COMPANY BY:
----------------------------
BLUESTONE HEWLETT-PACKARD
---------- ---------------
<S> <C> <C>
Last 12 Months:
Revenue................................................... 0.1% 99.9%
Operating Income.......................................... NM* NM
Net Income................................................ NM NM
Fiscal Year Ending October 31, 2000:
Revenue................................................... 0.1% 99.9%
Operating Income.......................................... NM NM
Net Income................................................ NM NM
Fiscal Year Ending October 31, 2001:
Revenue................................................... 0.1% 99.9%
Operating Income.......................................... NM NM
Net Income................................................ NM NM
</TABLE>
------------------------
* Not Meaningful.
Deutsche Bank compared the results of their analysis to the relative
ownership, based on the exchange ratio, by Bluestone's stockholders of
approximately 0.5% of the outstanding capital of the combined company on an
enterprise value basis.
PRO FORMA COMBINED EARNINGS ANALYSIS. Deutsche Bank analyzed certain pro
forma effects of the merger. Based on such analysis, Deutsche Bank computed the
resulting dilution/accretion to the combined company's earnings per share
estimate for the fiscal year ending October 31, 2001 without taking into account
any potential cost savings and other synergies identified by management that
Hewlett-Packard and Bluestone could achieve if the merger were consummated and
before non-recurring costs relating to the merger. Deutsche Bank concluded that
before taking into account any potential cost savings and other synergies and
before such non-recurring costs, the merger would be approximately 1.1% dilutive
to the combined company's earnings per share for the fiscal year ending
October 31, 2001.
The foregoing summary describes all analyses and factors that Deutsche Bank
deemed material in its presentation to the Bluestone board of directors, but is
not a comprehensive description of all analyses performed and factors considered
by Deutsche Bank in connection with preparing its opinion. The preparation of a
fairness opinion is a complex process involving the application of subjective
business judgment in determining the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances and, therefore, is not readily susceptible to summary description.
Deutsche Bank believes that its analyses must be considered as a whole and that
considering any portion of such analyses and of the factors considered without
considering all analyses and factors could create a misleading view of the
process underlying the opinion. In arriving at its fairness determination,
Deutsche Bank did not assign specific weights to any particular analyses.
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<PAGE>
In conducting its analyses and arriving at its opinions, Deutsche Bank
utilized a variety of generally accepted valuation methods. The analyses were
prepared solely for the purpose of enabling Deutsche Bank to provide its opinion
to the Bluestone board of directors as to the fairness to holders of Bluestone
shares of the exchange ratio and does not purport to be appraisals or
necessarily reflect the prices at which businesses or securities actually may be
sold, which are inherently subject to uncertainty. In connection with its
analyses, Deutsche Bank made, and was provided by Bluestone management with,
numerous assumptions with respect to industry performance, general business and
economic conditions and other matters, many of which are beyond Bluestone and
Hewlett-Packard's control. Analyses based on estimates or forecasts of future
results are not necessarily indicative of actual past or future values or
results, which may be significantly more or less favorable than suggested by
such analyses. Because these analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of Bluestone,
Hewlett-Packard or their respective advisors, neither Bluestone, Deutsche Bank
nor any other person assumes responsibility if future results or actual values
are materially different from these forecasts or assumptions.
The terms of the merger were determined through negotiations between
Bluestone and Hewlett-Packard and were approved by the Bluestone board of
directors. Although Deutsche Bank provided advice to Bluestone during the course
of these negotiations, the decision to enter into the merger was solely that of
the Bluestone board of directors. As described above, the opinion and
presentation of Deutsche Bank to the Bluestone board of directors were only part
of a number of factors taken into consideration by the Bluestone board of
directors in making its determination to approve the transaction. Deutsche
Bank's opinion was provided to the Bluestone board of directors to assist it in
connection with its consideration of the merger and does not constitute a
recommendation to any holder of Bluestone shares as to how to vote with respect
to the merger.
Bluestone selected Deutsche Bank as financial advisor in connection with the
merger based on Deutsche Bank's qualifications, expertise, reputation and
experience in mergers and acquisitions. Bluestone has retained Deutsche Bank
under a letter agreement dated October 13, 2000, or the Engagement Letter. As
compensation for Deutsche Bank's services in connection with the merger,
Bluestone will pay Deutsche Bank a cash fee of $1.5 million and an additional
cash fee equal to 1.0% of the value of the aggregate consideration to be paid in
connection with the merger, less $1.0 million, if the merger is consummated.
Regardless of whether the merger is consummated, Bluestone has agreed to
reimburse Deutsche Bank for reasonable fees and disbursements of Deutsche Bank's
counsel and all of Deutsche Bank's reasonable travel and other out-of-pocket
expenses incurred in connection with the merger or otherwise arising out of the
retention of Deutsche Bank under the Engagement Letter. Bluestone has also
agreed to indemnify Deutsche Bank and certain related persons to the full extent
lawful against certain liabilities, including certain liabilities under the
federal securities laws arising out of its engagement or the merger.
Deutsche Bank is an internationally recognized investment banking firm
experienced in providing advice in connection with mergers and acquisitions and
related transactions. Deutsche Bank is an affiliate of Deutsche Bank AG, or,
together with its affiliates, the DB Group. One or more members of the DB Group
have, from time to time, provided investment banking, commercial banking
(including extension of credit) or other financial services to Bluestone and
Hewlett-Packard or their affiliates for which it has received compensation.
Deutsche Bank acted as the placement agent for a private placement of preferred
stock for Bluestone in May 1999 for which it received $1.4 million in fees and
warrants to purchase 150,448 shares of Bluestone common stock, at an exercise
price of $15.00 per share, which warrants have not been exercised to date.
Deutsche Bank also was the lead underwriter for Bluestone's initial public
offering in September 1999 and its follow-on offering in February 2000 for which
it received aggregate underwriting fees of approximately $9.8 million. In the
ordinary course of business, members of the DB Group may actively trade in the
securities and other instruments and obligations of Bluestone and
Hewlett-Packard for their own accounts and for the accounts of their
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<PAGE>
customers, and accordingly, may at any time hold a long or short position in
such securities, instruments and obligations.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary discusses the anticipated material United States
federal income tax consequences of the merger to holders of Bluestone common
stock who exchange such stock for Hewlett-Packard common stock in the merger.
The summary is based upon the Internal Revenue Code of 1986, as amended, or the
Code, applicable Treasury regulations under the Code and administrative rulings
and judicial authority as of the date hereof, all of which are subject to
change, possibly with retroactive effect. This discussion assumes that holders
of Bluestone shares hold such shares as capital assets. This discussion does not
address all aspects of United States federal income taxation that may be
relevant to a stockholder in light of that stockholder's particular
circumstances, or to stockholders subject to special rules, such as rules
relating to:
- financial institutions;
- mutual funds;
- tax-exempt organizations;
- insurance companies;
- dealers in securities or foreign currencies;
- traders in securities who elect to apply a mark-to-market method of
accounting;
- foreign stockholders;
- stockholders who acquired Bluestone shares under Bluestone's equity-based
compensation plans or otherwise as compensation, or through a
tax-qualified retirement plan; and
- stockholders who hold Bluestone shares as part of a hedge, straddle,
constructive sale or conversion transaction.
This discussion does not address any consequences arising under the laws of
any state, locality or foreign jurisdiction or under federal laws other than the
United States federal income tax laws.
Holders of Bluestone common stock are strongly urged to consult their tax
advisor as to the specific tax consequences to them of the merger, including the
applicability and effect of federal, state, local and foreign income and other
tax laws in their particular circumstances.
The respective obligations of the parties to complete the merger are
conditioned on the receipt by Hewlett-Packard of an opinion of Skadden, Arps,
Slate, Meagher & Flom LLP, and the receipt by Bluestone of an opinion of Pepper
Hamilton LLP, on the closing date of the merger, that the merger (taking into
account the effect of the subsequent upstream merger of Bluestone with and into
Hewlett-Packard, if applicable) will qualify as a reorganization within the
meaning of Section 368(a) of the Code. The conditions relating to the tax
opinions are not waivable by Bluestone or Hewlett-Packard after receipt of the
Bluestone stockholder approval unless further stockholder approval is obtained
with appropriate disclosure. See "The Merger Agreement--Conditions." Such
opinions of counsel will be based upon, among other things, assumptions,
representations and covenants, including those contained in certificates of
officers of Hewlett-Packard, Bluestone and others, which counsel will assume to
be true, correct and complete. The opinions of counsel are not binding on the
Internal Revenue Service or the courts, and there can be no assurance that the
Internal Revenue Service will not challenge the conclusions set forth in the
opinions of counsel or that a court will not sustain such a challenge.
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<PAGE>
Assuming the merger qualifies as a reorganization:
- No gain or loss will be recognized for United States federal income tax
purposes by holders of Bluestone shares who exchange their Bluestone
shares solely for Hewlett-Packard shares pursuant to the merger, except to
the extent of cash, if any, received by Bluestone stockholders in lieu of
fractional share interests in such Hewlett-Packard shares.
- The aggregate adjusted tax basis of the Hewlett-Packard shares received in
the merger by a Bluestone stockholder (treating fractional share interests
in Hewlett-Packard shares as having been issued to such holder in the
merger and then sold for cash) will be the same as the aggregate adjusted
tax basis of the Bluestone shares surrendered in the merger.
- The holding period of the Hewlett-Packard shares that a Bluestone
stockholder receives in the merger will include the period during which
such holder held the Bluestone shares surrendered in the merger.
- Cash received by a Bluestone stockholder in lieu of a fractional share
interest in the Hewlett-Packard shares will result in the recognition of
gain or loss for United States federal income tax purposes, measured by
the difference between the amount of cash received and the portion of the
tax basis of the Bluestone share allocable to this fractional share
interest. This gain or loss will be capital gain or loss and will be
long-term capital gain or loss if the Bluestone stockholder's holding
period in the fractional Hewlett-Packard share interest is more than one
year at the effective time of the merger and such share was held as a
capital asset.
Certain non-corporate Bluestone stockholders may be subject to backup
withholding at a 31% rate on cash payments received in lieu of a fractional
share interest in the Hewlett-Packard shares. Backup withholding will not apply,
however, to a Bluestone stockholder who:
- furnishes a correct taxpayer identification number and certifies that such
holder is not subject to backup withholding on the substitute Form W-9 or
successor form included in the letter of transmittal to be delivered to
Bluestone stockholders;
- provides a certification of foreign status on Internal Revenue Service
Form W-8 or successor form; or
- is otherwise exempt from backup withholding.
ANTICIPATED ACCOUNTING TREATMENT
The merger will be accounted for as a purchase for financial accounting
purposes in accordance with accounting principles generally accepted in the
United States. For purposes of preparing Hewlett-Packard's consolidated
financial statements, Hewlett-Packard will establish a new accounting basis for
Bluestone's assets and liabilities based upon their fair values, the merger
consideration and the costs of the merger. Hewlett-Packard believes that any
excess of cost over the fair value of the net assets of Bluestone will be
recorded as goodwill, other intangible assets and deferred stock compensation. A
final determination of the intangible asset lives and required purchase
accounting adjustments, including the allocation of the purchase price to the
assets acquired and liabilities assumed based on their respective fair values,
has not yet been made. Hewlett-Packard will determine the fair value of
Bluestone's assets and liabilities and will make appropriate purchase accounting
adjustments, including adjustments to the amortization period of the intangible
assets, upon completion of that determination. To the extent that a portion of
the purchase price is allocated to in-process research and development, as is
anticipated, a charge will be recognized for the period in which the merger
occurs.
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<PAGE>
INTERESTS OF DIRECTORS AND OFFICERS IN THE MERGER
In considering the recommendation of the Bluestone board of directors with
respect to the adoption and approval of the merger agreement and approval of the
merger, Bluestone stockholders should be aware that certain members of the
management of Bluestone and the Bluestone board of directors may have interests
in the merger that are different from, or in addition to, the interests of
Bluestone stockholders generally. The Bluestone board of directors was aware of
these interests and considered the following matters, among others, in approving
the merger agreement and the merger.
As of the record date for the special meeting of Bluestone stockholders at
which the merger agreement and the merger will be presented and voted upon,
directors and executive officers of Bluestone (and their respective affiliates)
collectively beneficially owned directly or indirectly an aggregate of
approximately 6,820,508 shares of Bluestone common stock. Upon completion of the
merger, it is anticipated that the former directors and executive officers of
Bluestone (and their respective affiliates) collectively will beneficially own
an aggregate of 3,318,859 shares of Hewlett-Packard common stock, constituting
less than one percent of the then outstanding shares of Hewlett-Packard common
stock.
TREATMENT OF BLUESTONE OPTIONS
The Bluestone 1996 Incentive and Qualified Stock Option Plan provides that
50% of the unvested option shares will vest and become exercisable upon the
completion of the merger. Upon the completion of the merger, all options will be
substituted by Hewlett-Packard in accordance with the merger agreement. See the
section entitled "The Merger Agreement" beginning on page 37 of this document,
for a further description of the substitution of Bluestone options by
Hewlett-Packard and for a description of the outstanding Bluestone options that
will become options to purchase Hewlett-Packard common stock upon completion of
the merger.
EMPLOYMENT OFFER LETTERS
Officers of Bluestone, including Kevin Kilroy who is also a director, Joseph
Krivickas, Robert Bickel, Andre Pino, Thomas Stiling, Thomas Leonard, John
Capobianco, Al Smith and Craig Huke, along with several other Bluestone
employees, have accepted employment offers from Hewlett-Packard, effective upon
the completion of the merger.
DIRECTOR AND OFFICER INDEMNIFICATION AND INSURANCE
Hewlett-Packard has agreed to cause the surviving company to fulfill and
honor in all respects the indemnification agreements Bluestone and its
subsidiaries have previously entered into with their respective officers and
directors and to fulfill and honor any indemnification provisions of Bluestone's
and its subsidiaries' applicable charter documents.
Hewlett-Packard also has agreed to maintain insurance for Bluestone's
directors and officers that is no less favorable than Bluestone's current
directors' and officers' liability insurance for actions or omissions occurring
on or prior to the date of the completion of the merger for a period of not less
than six years after the completion of the merger, subject to limitations
regarding cost.
REGULATORY MATTERS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
or the HSR Act, and the rules that have been promulgated thereunder by the
United States Federal Trade Commission, or the FTC, certain transactions may not
be consummated unless certain information has been furnished to the FTC and the
Antitrust Division of the United States Department of Justice, or the Antitrust
Division, and all applicable waiting periods have expired or been terminated.
The merger is
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<PAGE>
subject to these requirements. Hewlett-Packard and Bluestone each filed a
Notification and Report Form with respect to the merger under the HSR Act on
October 31, 2000. Early termination of the HSR Act statutory waiting period was
granted on November 16, 2000.
Completion of the transactions may also require other regulatory approvals,
including approvals of foreign regulatory authorities. Under the laws of certain
foreign nations, the merger may not be completed unless certain filings are made
with these nations' antitrust regulatory authorities and these authorities
approve or clear the merger. Hewlett-Packard and Bluestone conduct operations in
a number of foreign countries, some of which have pre-merger and/or post-merger
notification systems. Should any other approval or action be required or deemed
advisable, Hewlett-Packard and Bluestone currently contemplate that such
approval or action would be sought. The failure to make any such filings or to
obtain any such approvals is not anticipated to have a material effect on the
merger or the combined company. Hewlett-Packard and Bluestone believe that they
will have obtained all material required regulatory approvals in connection with
the merger prior to the special meeting.
The German Federal Cartel Office has confirmed that the merger does not have
to be notified in Germany since it does not have an appreciable effect on the
German market. A pre-merger filing notification has been made in Italy. The
Italian law does not impose a statutory waiting period. The parties are not
aware of any additional jurisdictions where pre-merger notification of the
transaction is required.
At any time before or after the merger and notwithstanding termination of
the waiting period, the FTC, the Antitrust Division, or state and foreign
antitrust authorities could take such action under the antitrust laws as any of
them deems necessary or desirable in the public interest, including seeking to
enjoin the merger, seeking the divestiture by Hewlett-Packard of all or part of
the stock or assets of Bluestone or of assets or businesses of Hewlett-Packard,
or seeking to subject Hewlett-Packard or Bluestone to certain operating
conditions. Litigation seeking similar relief could be brought by private
parties. Hewlett-Packard does not believe that consummation of the merger will
result in the violation of any applicable antitrust laws. However, there can be
no assurance that a challenge to the merger on antitrust grounds will not be
made, or if such a challenge is made, what the result will be. The obligations
of Hewlett-Packard and Bluestone to complete the merger are subject to the
condition that there be no decree, order or injunction of a court of competent
jurisdiction that prohibits the completion of the merger.
NO DISSENTER'S OR APPRAISAL RIGHTS
Under Delaware law, stockholders of Bluestone will not be entitled to
exercise dissenter's rights or to demand payment for their shares in connection
with the merger.
LISTING ON THE NEW YORK STOCK EXCHANGE
It is a condition to the merger that the shares of Hewlett-Packard common
stock to be issued in the merger and the other shares to be reserved for
issuance in connection with the merger be approved for listing on the New York
Stock Exchange, subject to official notice of issuance.
DELISTING AND DEREGISTRATION OF BLUESTONE COMMON STOCK
If the merger is completed, the Bluestone common stock will be delisted from
quotation on the Nasdaq National Market and will be deregistered under the
Securities Exchange Act of 1934, as amended.
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FEDERAL SECURITIES LAWS CONSEQUENCES
The Hewlett-Packard shares to be issued to Bluestone stockholders in the
merger will have been registered under the Securities Act of 1933, as amended.
Upon issuance, these shares may be traded freely and without restriction by
those stockholders not deemed to be affiliates of Bluestone as that term is
defined under the Securities Act. An "affiliate" of Bluestone, as defined by the
rules promulgated under the Securities Act, is a person who directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with Bluestone. Any transfer of Hewlett-Packard shares
after the merger by an affiliate of Bluestone must be one permitted by the
resale provisions of Rule 145 promulgated under the Securities Act (or Rule 144
promulgated under the Securities Act, in the case of such persons who become
affiliates of Hewlett-Packard) or as otherwise permitted under the Securities
Act. These restrictions are expected to apply to the directors, executive
officers and holders of 10% or more of the Bluestone shares (as well as to
certain other related individuals or entities).
This proxy statement/prospectus does not cover resales of Hewlett-Packard
shares to be received by the stockholders of Bluestone in the merger, and no
person is authorized to make any use of this proxy statement/prospectus in
connection with any such resale.
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THE MERGER AGREEMENT
THE FOLLOWING IS A DESCRIPTION OF THE MATERIAL TERMS OF THE MERGER
AGREEMENT, BUT DOES NOT PURPORT TO DESCRIBE ALL THE TERMS OF THE MERGER
AGREEMENT. THE FULL TEXT OF THE MERGER AGREEMENT IS ATTACHED AS APPENDIX A TO
THIS PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE.
BLUESTONE STOCKHOLDERS ARE URGED TO READ THE MERGER AGREEMENT IN ITS ENTIRETY.
GENERAL
THE MERGER
Subject to the terms and conditions of the merger agreement, Merger Sub will
merge with and into Bluestone. Bluestone will continue as the surviving
corporation, the separate existence of Merger Sub will cease and Bluestone will
become a wholly owned subsidiary of Hewlett-Packard. At any time before or after
the consummation of the merger, Hewlett-Packard may decide to merge Bluestone
upstream into the parent company. Hewlett-Packard currently intends to effect
such an upstream merger shortly after the closing.
EFFECTIVE TIME
Hewlett-Packard, Merger Sub, and Bluestone will complete the merger by
filing a certificate of merger with the Secretary of State of the State of
Delaware as soon as practicable following the satisfaction or waiver of the
conditions to the merger. The date and time the certificate of merger is filed
or another later time specified in the certificate of merger is the effective
time of the merger.
CERTIFICATE OF INCORPORATION AND BY-LAWS
The merger agreement provides that at the effective time of the merger, the
certificate of incorporation and by-laws of Merger Sub will be the restated
certificate of incorporation and the by-laws of the surviving corporation.
DIRECTORS AND OFFICERS
The merger agreement provides that the directors and officers of Merger Sub
immediately prior to the effective time of the merger will be the initial
directors and officers of the surviving corporation.
CONVERSION OR CANCELLATION OF BLUESTONE SHARES AND OPTIONS IN THE MERGER
The merger agreement provides that, at the effective time of the merger and
without any further action on the part of Merger Sub, Bluestone or holders of
any of the securities listed below, each Bluestone share and each outstanding
option to purchase Bluestone shares will be treated as follows:
- Each Bluestone share issued and outstanding immediately prior to the
effective time, will be converted into the right to receive 0.4866 (after
giving effect to a two-for-one stock split, in the form of a stock
dividend, of Hewlett-Packard shares effective October 27, 2000) of a
Hewlett-Packard share.
- Each unexercised and unexpired stock option to purchase Bluestone shares
will be converted into an option to acquire the number of Hewlett-Packard
shares (rounded down to the nearest whole share) equal to 0.4866 of the
number of Bluestone shares subject to such option, at an exercise price
per Hewlett-Packard share equal to the exercise price per share of such
option immediately prior to the effective time divided by 0.4866 (rounded
up to the nearest whole cent).
- Shares of Bluestone common stock held in the treasury of Bluestone, or
owned by Hewlett-Packard or any direct or indirect subsidiary of Bluestone
or Hewlett-Packard, will be canceled and no Hewlett-Packard common stock
or other consideration will be delivered in exchange for this
cancellation.
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EXCHANGE OF CERTIFICATES IN THE MERGER
As soon as reasonably practicable after the effective time of the merger, an
exchange agent will mail to each stockholder of record of Bluestone a letter of
transmittal containing instructions for the surrender of certificates
representing Bluestone shares in exchange for certificates representing
Hewlett-Packard shares. WE REQUEST THAT YOU NOT SURRENDER YOUR CERTIFICATES FOR
EXCHANGE UNTIL YOU RECEIVE THE LETTER OF TRANSMITTAL AND INSTRUCTIONS. No
dividends or other distributions declared or made after the effective time with
respect to Hewlett-Packard shares will be paid to the holder of record of any
unsurrendered certificate. However, the holder of record will be paid, without
interest, upon surrender of such certificate, any dividends or distributions
with a record date after the effective time but a payment between the effective
time and the time of surrender. No transfers of Bluestone shares will be made
after the effective time.
No fractional Hewlett-Packard shares will be issued in the merger. Instead
of issuing fractional shares of Hewlett-Packard common stock to the holders of
Bluestone shares, the exchange agent will pay the aggregate of the fractional
shares at then prevailing prices of Hewlett-Packard shares on the New York Stock
Exchange and will distribute the net proceeds from such sale to the respective
holders of the fractional shares on a pro rata basis.
If, after six months from the effective date of the merger, a holder of
Bluestone shares has not surrendered the stock certificates representing such
shares to the exchange agent, then the holder of stock certificates representing
Bluestone shares may look only to Hewlett-Packard to receive its Hewlett-Packard
shares. None of Hewlett-Packard, Merger Sub, Bluestone or the exchange agent
will be liable to any holder of a certificate formerly representing Bluestone
shares for Hewlett-Packard shares, cash in lieu of fractional shares, or any
unpaid dividends or distributions properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
REPRESENTATIONS AND WARRANTIES
REPRESENTATIONS AND WARRANTIES BY BLUESTONE. The merger agreement contains
representations and warranties made by Bluestone that are customary for this
type of transaction, subject to qualifications, including representations and
warranties as to:
- organization, standing and similar corporate matters regarding Bluestone
and its subsidiaries;
- capitalization of Bluestone and its subsidiaries;
- the corporate power and authority to execute, deliver and perform the
merger agreement and the related agreements and to consummate the
transactions contemplated by these agreements;
- the absence of conflicts between organizational documents, by-laws and
agreements and the merger agreement and the related transactions;
- the absence of any required governmental consents, approvals or
authorizations other than those specified in the merger agreement;
- the timely filing of documents and the accuracy of information contained
in documents filed with the SEC;
- the absence of certain changes or events relating to Bluestone's business
since June 30, 2000;
- the absence of undisclosed liabilities;
- the accuracy of information supplied by Bluestone in connection with this
proxy statement/ prospectus and the registration statement of which it is
a part;
- benefit plans and other employment-related matters;
- compliance with applicable laws and possession of material permits;
- the absence of undisclosed pending or threatened material litigation;
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- the absence of default or violation of any organizational documents or
federal, state, local or foreign laws;
- timely filing of tax returns and other tax-related matters;
- the existence, validity and status of material contracts;
- the absence of owned real property by Bluestone or any of its
subsidiaries;
- compliance with environmental laws and regulations;
- the absence of undisclosed transactions with affiliates;
- Bluestone's receipt of a fairness opinion from Deutsche Bank;
- the absence of undisclosed brokers', finders', financial advisor's or
other similar fees or commissions;
- intellectual property matters;
- the absence of actions that would prevent the merger from constituting a
reorganization under the Internal Revenue Code;
- insurance matters;
- matters related to accounts receivable;
- matters related to suppliers and customers;
- labor matters; and
- full disclosure of material facts.
REPRESENTATIONS AND WARRANTIES BY HEWLETT-PACKARD AND MERGER SUB. The
merger agreement contains representations and warranties made by Hewlett-Packard
and Merger Sub that are customary for this type of transaction, subject to
qualifications, relating to the following matters:
- organization, standing and similar corporate matters;
- capitalization;
- the corporate power and authority to execute, deliver and perform the
merger agreement and the related agreements and to consummate the
transactions contemplated by these agreements;
- the absence of conflicts between organizational documents, by-laws and
agreements and the merger agreement and the related transactions;
- the absence of any required governmental consents, approvals or
authorizations other than those specified in the merger agreement;
- the accuracy of information supplied by Hewlett-Packard in connection with
this proxy statement/prospectus and the registration statement of which it
is a part;
- the timely filing of documents and the accuracy of information contained
in documents filed with the Securities and Exchange Commission; and
- the absence of material changes or events relating to Hewlett-Packard and
Merger Sub's respective business since July 31, 2000.
All representations and warranties of Bluestone, Hewlett-Packard and Merger
Sub will expire at the effective time of the merger.
CONDUCT OF BUSINESS PENDING THE MERGER
CONDUCT OF BUSINESS OF BLUESTONE PENDING THE MERGER. Bluestone has agreed
to conduct its business and the businesses of its subsidiaries, in the ordinary
and customary course consistent with past practice and to use commercially
reasonable efforts to preserve the business organization intact and maintain
their existing relationships with customers, suppliers, employees, creditors and
business partners.
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Bluestone has agreed that, with certain exceptions, neither it nor any of its
subsidiaries, will do any of the following without the prior written consent of
Hewlett-Packard:
AMENDMENT TO ORGANIZATIONAL DOCUMENTS
- amend its certificate of incorporation or by-laws or similar
organizational documents;
STOCK SPLITS, REDEMPTION AND DIVIDENDS
- split, combine or reclassify any of its capital stock;
- redeem, purchase or otherwise acquire directly or indirectly any of its
capital stock;
- declare, set aside or pay any dividend or other distribution;
SALE AND PURCHASE OF SECURITIES OR ASSETS
- issue, sell, transfer, pledge, dispose of or encumber any additional
shares of securities convertible into or exchangeable for, options,
warrants, calls, commitments or rights of any kind to acquire, any of its
capital stock, other than issuances pursuant to options outstanding on
October 24, 2000;
- transfer, lease, license, sell, mortgage, pledge, dispose of or encumber
any material assets other than in the ordinary and usual course of
business and consistent with past practice;
COMPENSATION
- grant any increase in compensation payable or to become payable to any of
its officers or directors or, except for planned increases previously
disclosed to Hewlett-Packard or increases in accordance with normal past
practice, to employees, agents or consultants;
- adopt or enter into any new plan, policy, agreement or arrangement for the
benefit of any of its current or former employees or directors;
- amend or otherwise increase, or accelerate the payment of the amounts
payable or to become payable under any existing employee benefit or
stock-based compensation plan;
- amend or modify in any manner, including but not limited to the
acceleration of vesting, an existing grant or award of restricted stock,
options or any similar award or grant of stock pursuant to any existing
stock-based compensation plan, except as otherwise provided under
Bluestone's stock option plans, programs or agreements;
- grant any rights to acquire or receive any Bluestone shares of its capital
stock, whether or not pursuant to existing employee benefit or option
plans;
- enter into any, or amend any existing, employment or severance agreement
with or, except in accordance with its existing written policies
previously delivered to Hewlett-Packard, grant any severance or
termination pay to any of its officers, directors or employees;
- make any loans to any of its officers, directors, employees, agents or
consultants or make any changes in its existing borrowing or lending
arrangements for or on behalf of any of such persons, whether contingent
on the merger or otherwise;
MATERIAL CONTRACTS
- modify, amend or terminate any of its material agreements or waive,
release or assign any material rights or claims, except in the ordinary
course of business and consistent with past practice;
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INSURANCE
- permit any material insurance policy naming it as a beneficiary or a loss
payable payee to be cancelled or terminated without notice to
Hewlett-Packard, except in the ordinary course of business and consistent
with past practice;
INDEBTEDNESS
- incur or assume any long-term debt or, except in the ordinary course of
business consistent with past practice, incur or assume any short-term
indebtedness in amounts not consistent with past practice;
- assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other person, except in the ordinary course of business and consistent
with past practice;
- make any loans, advances or capital contributions to, or investments in,
any other person (other than to wholly owned subsidiaries of Bluestone or
customary advances to employees in accordance with past practice); or
- enter into any material commitment or transaction (including, but not
limited to, any borrowing, capital expenditure or purchase, sale or lease
of assets) other than certain disclosed capital expenditures;
ACCOUNTING AND TAX
- change any of the accounting principles used by it unless required by
accounting principles generally accepted in the United States or
applicable law;
- voluntarily make or agree to make any changes in federal and state tax
accounting methods, waive or consent to the extension of any statute of
limitations with respect to taxes, or consent to any assessment of any
material taxes, or settle any judicial or administrative proceeding
affecting any material taxes;
CLAIMS
- pay, discharge or satisfy any 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 occuring:
- in the ordinary course of business and consistent with past practice,
or claims, liabilities or obligations reflected or reserved against in,
or contemplated by, the consolidated financial statements (or the notes
thereto) of Bluestone and its consolidated subsidiaries;
- incurred in the ordinary course of business and consistent with past
practice; or
- which are legally required to be paid, discharged or satisfied
(provided that if such claims, liabilities or obligations referred to
in this clause are legally required to be paid and are also not
otherwise payable in accordance with the first two clauses above,
Bluestone will notify Hewlett-Packard in writing if such claims,
liabilities or obligations exceed, individually or in the aggregate,
$250,000 in value, reasonably in advance of their payment);
REORGANIZATION
- adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of
Bluestone or any of its subsidiaries or any agreement relating to a
Takeover Proposal (as defined below) other than the merger;
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CONDITIONS
- take, or agree to commit to take, any action that would make any
representation or warranty of Bluestone inaccurate in any material respect
at, or as of any time prior to, the effective time; or
- enter into an agreement, contract, commitment or arrangement to do any of
the foregoing, or to authorize, recommend, propose or announce an
intention to do any of the foregoing;
CONDUCT OF BUSINESS OF HEWLETT-PACKARD PENDING THE MERGER. Hewlett-Packard
has agreed that, subject to certain exceptions, it will not do any of the
following without the prior written consent of Bluestone:
SECURITIES
- directly or indirectly, split, combine or reclassify the outstanding
Hewlett-Packard common stock (except for the two-for-one stock split, in
the form of a stock dividend, of Hewlett-Packard common stock effective
October 27, 2000 and any other action that would result in an adjustment
to the exchange ratio);
- declare, set aside or pay any dividend or other distribution payable in
cash (other than regular quarterly dividends), stock or property with
respect to its capital stock (except for the two-for-one stock split, in
the form of a stock dividend, of Hewlett-Packard common stock effective
October 27, 2000 and any other action that would result in an adjustment
to the exchange ratio);
ACCOUNTING
- change any of the accounting principles used by it unless required by
accounting principles generally accepted in the United States;
CONDITIONS
- take, or agree to commit to take, any action that would make any
representation or warranty of Hewlett-Packard inaccurate in any material
respect at, or as of any time prior to, the effective time; or
- enter into an agreement, contract, commitment or arrangement to do any of
the foregoing, or to authorize, recommend, propose or announce an
intention to do any of the foregoing.
NO SOLICITATION
Bluestone has agreed that neither it, nor any of its subsidiaries and/or
affiliates, will, and each will use its best efforts to ensure that its
respective representatives and agents do not, directly or indirectly:
- initiate, solicit or knowingly encourage, or take any other action to
facilitate the making of, any offer or proposal which constitutes or is
reasonably likely to lead to any Takeover Proposal of Bluestone or any
subsidiary or affiliate of Bluestone or any inquiry with respect thereto;
- enter into any agreement with respect to any Takeover Proposal; or
- in the event of an unsolicited written Takeover Proposal for Bluestone or
any subsidiary or affiliate of Bluestone, engage in negotiations or
discussions with, or provide any information or data to, any corporation,
partnership, person or other entity or group (other than Hewlett-Packard,
its affiliates or representatives) relating to any Takeover Proposal, or
otherwise cooperate in any way with, or assist or participate in,
facilitate or knowingly encourage any effort or attempt by any such person
to do or seek to do any of the foregoing.
However, prior to the approval and adoption of the merger and the merger
agreement by Bluestone stockholders, Bluestone may furnish confidential
information and engage in negotiations in response to an unsolicited written
Takeover Proposal relating to such Takeover Proposal to the extent
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that the Bluestone board determines in good faith and on the basis of advice
(1) from financial advisors that such alternative transaction involves
consideration to holders of Bluestone's shares that is superior to the
consideration offered pursuant to the merger agreement with Hewlett-Packard and
is otherwise superior to the merger and (2) from independent outside counsel
that the failure to take such action would constitute a violation of the board's
fiduciary duties under applicable law.
Bluestone has agreed to immediately notify Hewlett-Packard of any inquiries,
expressions of interest, proposals or offers received by Bluestone or any of its
representatives relating to any Takeover Proposal or the possibility of
consideration of making a Takeover Proposal and indicating in such notice the
name of the party indicating interest in a Takeover Proposal and the terms and
conditions of any proposals or offers. Bluestone will also keep Hewlett-Packard
informed of the status and terms of any interest in a Takeover Proposal.
"Takeover Proposal" means:
- any tender or exchange offer;
- any proposal for merger, consolidation or other business combination;
- any proposal or offer to acquire in any manner an interest in excess of
15% of Bluestone's outstanding securities or a substantial portion of
Bluestone's assets;
- any proposal or offer with respect to any recapitalization or
restructuring; or
- any proposal or offer with respect to a transaction similar to any of the
foregoing other than the transactions to be effected under the merger
agreement.
Bluestone has also agreed in the merger agreement that, except as described
below in connection with a Superior Proposal, its board of directors may not:
- withdraw, qualify or modify, or propose publicly to do any of the
foregoing, in a manner adverse to Hewlett-Packard or Merger Sub, its
approval or recommendation, or the issuance of Hewlett-Packard shares in
connection with the merger;
- approve or recommend, or propose publicly to approve or recommend, any
Takeover Proposal; or
- cause Bluestone to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement related to any
Takeover Proposal.
In the event that the Bluestone board determines in good faith, after it has
received a Superior Proposal, and after receipt of advice from outside counsel
that the failure to do so would violate the board's fiduciary duties under
applicable law, the Bluestone board may inform Bluestone's stockholders that it
no longer believes that the merger or the merger agreement is advisable and no
longer recommends approval but only after:
- the third business day following Hewlett-Packard's receipt of written
notice advising it that the Bluestone board has received a Superior
Proposal which specifies the material terms and conditions of the Superior
Proposal, including the person making such proposal and stating that it
intends to inform Bluestone's stockholders that it no longer believes that
the merger or the merger agreement is advisable and no longer recommends
approval; and
- providing Hewlett-Packard a reasonable opportunity to make such
adjustments in the terms and conditions of the merger agreement and/or the
stock option agreement that would enable Bluestone to proceed with its
recommendation to the stockholders without informing Bluestone's
stockholders that it no longer believes that the merger or the merger
agreement is advisable and no longer recommends approval.
"Superior Proposal" means any Takeover Proposal made by a person that the
Bluestone board determines in its good faith judgment, based on the advice of a
financial advisor of nationally recognized reputation, to be more favorable to
the Bluestone stockholders than the merger, taking into
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account all relevant factors, including whether, in the good faith judgment of
the Bluestone board, after obtaining advice of such financial advisor, the
person is reasonably able to finance the transaction, as well as any proposed
changes to the merger agreement and/or the stock option agreement that may be
proposed by Hewlett-Packard in response to such Takeover Proposal.
Notwithstanding any Superior Proposal or the intention of the Bluestone
board to inform Bluestone's stockholders that it no longer believes that the
merger or the merger agreement is advisable and no longer recommends approval,
Bluestone is obligated to submit the merger agreement to the Bluestone
stockholders.
INSURANCE AND INDEMNIFICATION
Under the merger agreement, Hewlett-Packard agrees to cause the surviving
corporation in the merger to indemnify, at all times after the effective time,
directors or officers of Bluestone and any of its subsidiaries, to the same
extent and in the same manner as provided in Bluestone's charter or by-laws as
in effect on October 24, 2000.
In addition, Hewlett-Packard also agrees to maintain for at least six years
after the effective time of the merger directors and officers' current liability
insurance policies on the same terms and conditions as Bluestone's insurance
policies in effect on October 24, 2000, which will cover events occurring at or
prior to the effective time of the merger. If the aggregate annual premiums for
such insurance at any time during the six-year period shall exceed 150% of the
per annum rate of premium currently paid by Bluestone and its subsidiaries for
such insurance on October 24, 2000, then Hewlett-Packard shall cause Bluestone
to provide the maximum coverage that shall then be available at an annual
premium equal to 150% of such rate.
ADDITIONAL MATERIAL COVENANTS
ACCESS TO INFORMATION. Subject to existing confidentiality obligations,
Hewlett-Packard and Bluestone have agreed to afford each other and each of their
respective representatives access during normal business hours to information
reasonably requested by the other party.
COOPERATION. Hewlett-Packard and Bluestone shall coordinate and cooperate:
- in determining whether any action by or in respect of, or filing with, any
governmental entity is required, or any actions, consents, approvals or
waivers are required to be obtained from parties to any material
contracts, in connection with the consummation of the transactions
contemplated by the merger agreement and the option agreement; and
- in seeking any such actions, consents, approvals or waivers or making any
such filings, furnishing information required in connection therewith and
timely seeking to obtain any such actions, consents, approvals or waivers.
REGISTRATION STATEMENT. Subject to the terms and conditions of the merger
agreement, each of the parties will use its commercially reasonable efforts to
have the registration statement declared effective under the Securities Act of
1933 as promptly as practicable after the registration statement is filed.
TAX TREATMENT. Hewlett-Packard, Merger Sub and Bluestone have agreed to use
commercially reasonable efforts to cause the merger to qualify as a
reorganization under Section 368(a) of the Internal Revenue Code and they will
not knowingly take any action, or knowingly fail to take any action, that would
be reasonably likely to jeopardize the qualification of the merger as a
reorganization.
In addition, Hewlett-Packard and Bluestone have agreed that if, not later
than three days prior to the effective time of the merger, Hewlett-Packard
provides written notice to Bluestone of its intention and Bluestone consents,
Bluestone may be merged with and into Hewlett-Packard immediately following the
effective time of the merger instead of remaining wholly owned by
Hewlett-Packard.
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EMPLOYEE BENEFITS. Hewlett-Packard and Merger Sub have agreed that,
effective as of the effective time, Hewlett-Packard shall provide, or cause
Merger Sub to provide, to those persons who, immediately prior to the effective
time, were employees of Bluestone and its subsidiaries and who continue in such
employment with benefits and compensation no less favorable than benefits and
compensation that are provided to substantially similarly situated employees of
Hewlett-Packard or Merger Sub as of the effective time.
Bluestone has agreed to terminate its 401(k) plan, effective not later than
the day immediately preceding the closing date of the merger, unless
Hewlett-Packard, in its sole and absolute discretion, elects to sponsor and
maintain such plan or to merge such plan into Hewlett-Packard's 401(k) plan, in
which event Hewlett-Packard has agreed to provide Bluestone with written notice
of such election at least three days prior to the closing date. Unless
Hewlett-Packard provides such notice to Bluestone, Hewlett-Packard shall receive
from Bluestone evidence that Bluestone's 401(k) plan has been terminated
pursuant to resolution of Bluestone's board of directors (the form and substance
of such resolutions shall be subject to review and approval by Hewlett-Packard),
not later than the day immediately preceding the closing date.
CONDITIONS
The merger agreement generally provides that the obligations of the parties
to complete the transactions contemplated in the merger agreement are subject to
customary conditions, including the following:
CONDITIONS TO THE OBLIGATIONS OF EACH PARTY
- HSR ACT. Expiration or termination of any waiting period applicable to the
consummation of the merger under the Hart-Scott-Rodino Act and any
comparable premerger notification laws, and no institution of any action
by a Hart-Scott-Rodino authority challenging or seeking to enjoin the
consummation of the merger. Early termination of the HSR Act waiting
period was granted on November 16, 2000, and all required foreign filings
of which the parties are aware have been made.
- STOCKHOLDERS' APPROVAL. Adoption and approval of the merger agreement by
the stockholders of Bluestone in accordance with the Delaware General
Corporation Law.
- NYSE LISTING. Authorization for listing on the NYSE of the shares of
Hewlett-Packard common stock to be issued pursuant to the merger, upon
official notice of issuance.
- GOVERNMENTAL ORDERS AND STATUTES. No issuance by any court, arbitrator or
governmental body, agency or official of any order, and no existence of
any statute, rule or regulation, restraining or prohibiting the
consummation of the merger or the effective operation of the business of
Bluestone and its subsidiaries after the effective time.
- GOVERNMENTAL CONSENTS. Receipt of all actions by or in respect of or
filings with any governmental body, agency official, or authority required
to permit the consummation of the merger (except for any consent,
approval, clearance or confirmation the failure to obtain which would not
have a material adverse effect on Hewlett-Packard, Merger Sub, Bluestone
or, after the effective time, the surviving corporation).
- EFFECTIVENESS OF FORM S-4. The registration statement having been declared
effective under the Securities Act of 1933, no issuance of any stop order
suspending effectiveness of the registration statement and no initiation
of any proceeding for that purpose initiated or threatened by the SEC.
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CONDITIONS TO THE OBLIGATIONS OF HEWLETT-PACKARD
- REPRESENTATIONS AND WARRANTIES OF BLUESTONE. The representations and
warranties of Bluestone contained in the merger agreement being true and
accurate both when made and (except for those representations and
warranties that address matters only as of a particular date which need
only be true and accurate as of such date) as of the effective time,
except where the failure of such representations and warranties to be so
true and correct is not likely to have a material adverse effect on
Bluestone and its subsidiaries, taken as a whole (except that the
representations and warranties regarding capitalization and corporate
authorization shall be true and correct in all respects).
- AGREEMENTS AND COVENANTS. Bluestone having performed in all material
respects all of its obligations under the merger agreement required to be
performed by it at or prior to the effective time.
- RECEIPT OF CONSENTS. Bluestone having obtained, and there shall be in full
force and effect, any required consents under the merger agreement,
including obtaining the consent from several specified stockholders
waiving their respective rights to receive shares of Bluestone common
stock in exchange for the right to receive options to purchase shares of
Hewlett-Packard common stock.
- EMPLOYMENT ARRANGEMENTS. The offer letters previously accepted by certain
employees of Bluestone being valid, in full force and effect and complied
with in all material respects by such employees.
- ACCEPTANCE OF OFFERS OF EMPLOYMENT. At least 40 of 48 specified employees
of Bluestone having accepted an employment offer letter, and each of such
offer letters shall be valid, in full force and effect and complied with
in all material respects by such employees.
- NO MATERIAL ADVERSE EFFECT. Since the date of the merger agreement, there
not having occurred any event, change or effect having, or which would be
reasonably likely to have, individually or in the aggregate, a material
adverse effect on Bluestone and its subsidiaries, taken as a whole, other
than any decrease in revenues, decrease in customer orders or any lawsuit,
in each case directly attributable to the public announcement of the
merger and the merger agreement.
- TAX OPINION. Hewlett-Packard having received an opinion of Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to Hewlett-Packard, dated as of the
effective time, to the effect that the merger (taking into account the
effect of the upstream merger, if applicable) will qualify as a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code.
- OFFICER'S CERTIFICATE. Bluestone having furnished Hewlett-Packard with a
certificate dated as of the closing date signed on behalf of it by the
President or any Vice President of Bluestone to the effect that certain of
the foregoing conditions have been satisfied.
CONDITIONS TO THE OBLIGATIONS OF BLUESTONE
- REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Hewlett-Packard and Merger Sub having been true and accurate both when
made and (except for those representations and warranties that address
matters only as of a particular date which need only be true and accurate
as of such date) as of the effective time, except where the failure of
such representations and warranties to be so true and correct (without
giving effect to any limitation as to "materiality" or "material adverse
effect" set forth therein), does not have, and is not likely to have,
individually or in the aggregate, a material adverse effect on
Hewlett-Packard and its subsidiaries, taken as a whole (except that the
representations and warranties regarding capitalization and corporate
authorization shall be true and correct in all respects).
46
<PAGE>
- AGREEMENTS AND COVENANTS. Each of Hewlett-Packard and Merger Sub having
performed in all material respects all of the respective obligations under
the merger agreement required to be performed by Hewlett-Packard or
Merger, as the case may be, at or prior to the effective time.
- TAX OPINION. Bluestone having received an opinion of Pepper Hamilton LLP,
counsel to Bluestone, dated as of the effective time, to the effect that
the merger (taking into account the effect of the upstream merger, if
applicable) will qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code.
- OFFICER'S CERTIFICATE. Hewlett-Packard having furnished Bluestone with a
certificate dated as of the closing date signed on behalf of it by the
President or any Vice President to the effect that certain of the
foregoing conditions have been satisfied.
TERMINATION
The merger agreement provides that at any time prior to the effective time
of the merger, the merger agreement may be terminated by the mutual consent of
the board of directors of Hewlett-Packard and the board of directors of
Bluestone.
The merger agreement may be terminated by either of the board of directors
of Bluestone or the board of directors of Hewlett-Packard:
- if the merger shall not have occurred on or prior to March 31, 2001
(except that the right to terminate the merger agreement will not be
available to any party whose willful and material breach of the merger
agreement has been the cause of, or resulted in, the failure of the merger
to occur on or prior to such date);
- if any governmental entity shall have issued an order, decree or ruling or
taken any other action, in each case permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by the merger
agreement and such order, decree, ruling or other action shall have become
final and non-appealable; or
- if the approval of the stockholders of Bluestone contemplated by the
merger agreement shall not have been obtained by reason of the failure to
obtain the required vote at a duly held meeting of stockholders or any
adjournment thereof.
The merger agreement may be terminated by the board of directors of
Bluestone if Hewlett-Packard or Merger Sub breaches or fails in any material
respect to perform or comply with any of its material covenants and agreements
contained in the merger agreement or breaches its representations and warranties
in any material respect, which breach or failure is incapable of being cured or
is not cured within 10 business days of written notice thereof.
The merger agreement may be terminated by the board of directors of
Hewlett-Packard:
- if Bluestone breaches or fails in any material respect to perform or
comply with any of its material covenants and agreements contained in the
merger agreement or breaches its representations and warranties in any
material respect, which breach or failure is incapable of being cured or
is not cured within 10 business days of written notice thereof;
- if the board of directors of Bluestone shall have failed to recommend
adoption and approval of the merger agreement and the merger by
Bluestone's stockholders or the board of directors of Bluestone shall have
withdrawn or modified such recommendation;
- the board of directors of Bluestone shall have recommended to the
stockholders of Bluestone a takeover proposal other than the merger;
- a takeover proposal other than the merger shall have been announced or
otherwise publicly known and the board of directors of Bluestone shall
have failed to recommend against acceptance of such takeover proposal by
its stockholders within 10 business days of its receipt or, if sooner, the
date its existence first becomes publicly known;
47
<PAGE>
- a tender offer or exchange offer for 15% or more of the outstanding shares
of Bluestone common stock is commenced (other than by Hewlett-Packard or
an affiliate of Hewlett-Packard) and the board of directors of Bluestone
recommends that the stockholders of Bluestone tender their shares in such
tender or exchange offer or, within 10 days after such tender or exchange
offer, fails to recommend against acceptance of such offer or takes no
position with respect to the acceptance thereof; or
- any third party (other than Hewlett-Packard or any of its subsidiaries or
affiliates) becomes a beneficial owner of more than 15% of the outstanding
shares of Bluestone.
In the event of the termination of the merger agreement, each party agrees
to give written notice thereof to the other party or parties specifying the
provision of the merger agreement pursuant to which such termination is made,
and the merger agreement shall thereafter become null and void, and there shall
be no liability on the part of Hewlett-Packard, Merger Sub or Bluestone except
for fraud or for material breach of the merger agreement, and for fees and
expenses as discussed below.
EFFECT OF TERMINATION
The merger agreement provides that, in the event of termination of the
merger by either Hewlett-Packard or Bluestone, the merger agreement will become
null and void, and there shall be no liability under the merger agreement on the
part of Hewlett-Packard, Merger Sub or Bluestone, except for fraud or material
breach of the merger agreement other than with respect to any termination fee
which may be payable and the agreement to share fees and expenses associated
with the filing of this document with the SEC and the printing and mailing of
this document to the stockholders.
TERMINATION FEE AND EXPENSES
Hewlett-Packard and Bluestone have each agreed that all costs and expenses
incurred in connection with the merger agreement, the option agreement and the
consummation of the transactions contemplated hereby and thereby shall be paid
by the party incurring such expenses, except that those costs and expenses
incurred in connection with filing, printing and mailing the registration
statement and the proxy statement/prospectus (including filing fees related
thereto) shall be shared equally by Hewlett-Packard and Bluestone.
If the board of directors of Hewlett-Packard terminates the merger agreement
pursuant to any of the reasons set forth above for which it alone may do so, or
if the board of directors of Hewlett-Packard or the board of directors of
Bluestone terminates the merger agreement because of a failure to obtain the
required vote of the Bluestone shareholders, Bluestone will be obligated to pay
to Hewlett-Packard a termination fee in an amount equal to $19 million. Payment
of the termination fee will not be deemed to be Hewlett-Packard's or Merger
Sub's exclusive remedy, and Hewlett-Packard will have the right to pursue any
remedies available to them at law or in equity. However, in the event of a
termination of the merger agreement because Bluestone has breached the merger
agreement or failed to comply with the material covenants and agreements as a
result of a breach, other than a willful breach, of any of Bluestone's
representations and warranties, the payments will be Hewlett-Packard or Merger
Sub's sole and exclusive remedy.
AMENDMENT AND MODIFICATION
Subject to applicable law, the merger agreement may be amended, modified and
supplemented in any and all respects, whether before or after any vote of the
stockholders of Bluestone, by written agreement of the parties or by action
taken by their respective boards of directors, at any time prior to the closing
date.
48
<PAGE>
RELATED AGREEMENTS
THE FOLLOWING IS A DESCRIPTION OF THE MATERIAL TERMS OF THE STOCK OPTION
AGREEMENT AND THE VOTING AGREEMENT, BUT DOES NOT PURPORT TO DESCRIBE ALL THE
TERMS OF THE STOCK OPTION AGREEMENT OR THE VOTING AGREEMENT. THE FULL TEXT OF
THE STOCK OPTION AGREEMENT IS ATTACHED AS APPENDIX B AND THE FULL TEXT OF THE
VOTING AGREEMENT IS ATTACHED AS APPENDIX C TO THIS PROXY STATEMENT/PROSPECTUS
AND BOTH ARE INCORPORATED BY REFERENCE. BLUESTONE STOCKHOLDERS ARE URGED TO READ
EACH OF THE STOCK OPTION AGREEMENT AND THE VOTING AGREEMENT IN ITS ENTIRETY.
STOCK OPTION AGREEMENT
GENERAL
Bluestone and Hewlett-Packard have entered into a stock option agreement
giving Hewlett-Packard the right to acquire shares of Bluestone. The stock
option agreement may prevent a third party from completing a
pooling-of-interests transaction with Bluestone and would make alternative
transactions, including a merger with another company, more expensive for a
potential purchaser than would otherwise be the case. Accordingly, the stock
option agreement may discourage third parties from proposing alternative
transactions that may be more advantageous than the merger for Bluestone
stockholders.
The stock option agreement gives Hewlett-Packard an option to purchase
shares of Bluestone common stock at an exercise price of $21.51 per share. The
maximum number of shares that Hewlett-Packard may purchase under the option is
4,058,494 shares of Bluestone common stock, which represents approximately 19.9%
of the shares of Bluestone common stock outstanding on October 24, 2000.
WHEN THE OPTION MAY BE EXERCISED
The option will become exercisable upon the occurrence of any event under
the merger agreement that would entitle Hewlett-Packard to terminate the merger
agreement and receive the termination fee from Bluestone. These circumstances
are described under "The Merger Agreement--Termination Fee and Expenses."
EVENTS TERMINATING THE RIGHT TO EXERCISE
The right to exercise the option terminates upon effectiveness of the
merger. The right to exercise the option also terminates:
- six months after the option becomes exercisable; and
- on the date on which the merger agreement is terminated, provided that the
merger agreement is not terminated in a circumstance in which
Hewlett-Packard is entitled to receive a termination fee from Bluestone;
provided, however, that if the option cannot be exercised as of any such date by
reason of any applicable judgment, decree, law, regulation or order, or by
reason of the waiting period under the Hart-Scott-Rodino Act, then the right to
exercise the option will terminate 30 days after such impediment has been
removed or such waiting period has expired.
PUT AND CALL
At any time after the option becomes exercisable and before the option
expires, Hewlett-Packard may require that Bluestone repurchase all or any
portion of the option, to the extent not previously exercised, and all or any
portion of the shares of Bluestone common stock issued pursuant to the option as
Hewlett-Packard may designate. At any time after the option becomes exercisable
and before the option expires, Bluestone may require Hewlett-Packard to sell all
or any portion of the option, to the extent not previously exercised, and all or
any of the shares of Bluestone common stock issued pursuant to the option, as
Bluestone may designate.
49
<PAGE>
If either Hewlett-Packard or Bluestone exercises such right, the option
would be sold and purchased at a price equal to the difference between the
higher of (1) the price per Bluestone share offered as of the date notice is
given that the shares are to be repurchased pursuant to any tender or exchange
offer or other Takeover Proposal defined under "The Merger Agreement--No
Solicitation" which was made prior to the notice date and not terminated or
withdrawn as of the notice date, or (2) the average of the closing prices of
Bluestone shares on the Nasdaq National Market for the 10 trading days
immediately preceding the notice date and the option exercise price, multiplied
by the number of shares purchasable pursuant to the option.
LIMITATION ON TOTAL PROFIT
The "total profit" that Hewlett-Packard can realize from the stock option
agreement and the termination fee may not exceed $19 million. The "total profit"
realized by Hewlett-Packard is defined as the sum of the following amounts
(before taxes):
- the net cash amounts received for the repurchase by Bluestone of shares
issued pursuant to the option;
- the net cash amounts received for the repurchase of the option by
Bluestone; and
- any termination fee received under the merger agreement.
REGISTRATION RIGHTS
Hewlett-Packard may demand on two occasions that Bluestone file a
registration statement, including a shelf registration statement, to register
the shares of Bluestone common stock that it may acquire upon the exercise of
the option. The registration rights terminate two years after the first exercise
of the option. The stock option agreement also grants Hewlett-Packard the right
to have shares of Bluestone common stock that it may acquire upon exercise of
the option included in registration statements filed by Bluestone for a period
of two years after the first exercise of the option.
ADJUSTMENTS
The type and number of securities purchasable under the option agreement
will be adjusted appropriately to reflect any change in Bluestone common stock
that occurs involving reclassifications, recapitalizations, conversions,
split-ups, combinations, subdivisions, exchanges of shares or similar events.
TRANSFER
Neither Bluestone nor Hewlett-Packard may transfer the exercise of rights
under the option agreement or the option to any person without the prior written
consent of the other party.
VOTING AGREEMENT
Certain stockholders of Bluestone have agreed with Hewlett-Packard, and have
granted Hewlett-Packard irrevocable proxies to vote all of the voting securities
of Bluestone which are beneficially owned by them:
- in favor of approval and adoption of the merger and the merger agreement;
and
- against any other Takeover Proposal.
These stockholders have also agreed that they will not sell or transfer the
securities of Bluestone or any interest in the securities of Bluestone, which
are beneficially owned by them except to a person who executes the voting
agreement and has agreed in writing to be bound by its terms.
As of October 24, 2000, these stockholders beneficially owned 6,703,345
Bluestone shares, representing approximately 32.2% of the voting power of the
outstanding Bluestone shares.
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<PAGE>
The voting agreement also restricts the stockholders and their
representatives from directly or indirectly:
- initiating, taking, soliciting or encouraging any inquiries or the making
of any Takeover Proposal;
- entering into any agreement with respect to any Takeover Proposal; or
- participating in any discussions or negotiations regarding, or furnishing
to any person any information with respect to, or taking any other action
to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Takeover
Proposal,
except to the extent that any such action is permitted by the merger agreement.
The voting agreement will terminate on the earliest of the effective time of
the merger and the termination of the merger agreement in accordance with its
terms.
51
<PAGE>
MARKET PRICE AND DIVIDEND INFORMATION
The following table sets forth the high and low closing prices for
Hewlett-Packard shares and the dividends declared as reported on the New York
Stock Exchange for the periods indicated based on published financial sources.
Hewlett-Packard share prices reflect the retroactive effects of all stock splits
including the two-for-one stock split, in the form of a stock dividend,
effective October 27, 2000. Hewlett-Packard's common stock is currently traded
on the New York Stock Exchange under the symbol "HWP."
<TABLE>
<CAPTION>
CASH DIVIDEND
HIGH LOW PER SHARE
-------- -------- -------------
<S> <C> <C> <C>
1999 Fiscal Year Ended October 31, 1999
First Quarter............................................. $39.19 $28.91 $0.16
Second Quarter............................................ 40.97 32.94 0.00
Third Quarter............................................. 58.13 38.66 0.16
Fourth Quarter............................................ 57.00 33.50 0.00
2000 Fiscal Year Ended October 31, 2000
First Quarter............................................. 58.72 36.13 0.16
Second Quarter............................................ 77.00 52.91 0.00
Third Quarter............................................. 71.06 52.94 0.16
Fourth Quarter............................................ 63.00 41.84 0.00
2001 Fiscal Year Ended October 31, 2001
First Quarter (through December 11, 2000).................
</TABLE>
The following table sets forth the high and low closing prices for Bluestone
shares as reported on the Nasdaq National Market for the periods indicated
following Bluestone's initial public offering of its common stock on
September 23, 1999 based on published financial sources. Bluestone has never
declared or paid a cash dividend. Bluestone's common stock is currently listed
for quotation on the Nasdaq National Market under the symbol "BLSW."
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
1999 Calendar Year
Third Quarter............................................. $ 23.13 $18.44
Fourth Quarter............................................ 135.13 23.75
2000 Calendar Year
First Quarter............................................. 113.75 33.75
Second Quarter............................................ 35.25 14.06
Third Quarter............................................. 35.25 16.56
Fourth Quarter (through December 11, 2000)................
</TABLE>
On October 23, 2000, the last trading day prior to the public announcement
of the merger agreement, the closing sale price of a Hewlett-Packard share was
$49.19, and the closing sale price of a Bluestone share was $21.94. On
December 11, 2000, the most recent practicable date prior to the printing of
this proxy statement/prospectus, the closing price of a Hewlett-Packard share
was $ , and the closing price of a Bluestone share was $ .
Because the exchange ratio in the merger is fixed and because the market
price of Hewlett-Packard common stock is subject to fluctuation, the market
value of the Hewlett-Packard shares that the Bluestone stockholders will receive
in the merger may increase or decrease before and after the special meeting. We
urge Bluestone stockholders to obtain current market quotations for Hewlett-
Packard common stock and Bluestone common stock prior to making any decision
with respect to the merger.
52
<PAGE>
COMPARATIVE RIGHTS OF STOCKHOLDERS
Upon completion of the merger, the stockholders of Bluestone will become
stockholders of Hewlett-Packard, and the Hewlett-Packard certificate of
incorporation and the Hewlett-Packard by-laws will govern the rights of former
Bluestone stockholders. Both Hewlett-Packard and Bluestone are incorporated
under Delaware law and are subject to the Delaware General Corporation Law.
The following is a summary of material differences between the rights of
holders of Hewlett-Packard common stock and the rights of holders of Bluestone
common stock. These differences arise from differences between the
Hewlett-Packard certificate of incorporation and the Hewlett-Packard by-laws, on
the one hand, and the Bluestone certificate of incorporation and the Bluestone
by-laws, on the other hand. This discussion is not, and does not purport to be,
complete or to identify all differences that may, under given situations, be
material to stockholders. The following summaries are qualified in their
entirety by reference to the Hewlett-Packard certificate of incorporation and
the Hewlett-Packard by-laws, which are filed as exhibits to Hewlett-Packard's
Annual Report on Form 10-Q for the fiscal quarter ended April 30, 1998, and to
the Bluestone certificate of incorporation and the Bluestone by-laws, which are
filed as exhibits to Bluestone's Registration Statement on Form S-1 filed with
the SEC on February 1, 2000. To obtain these documents, see "Where You Can Find
More Information."
<TABLE>
<CAPTION>
BLUESTONE STOCKHOLDER RIGHTS HEWLETT-PACKARD STOCKHOLDER RIGHTS
----------------------------- ----------------------------------
<S> <C> <C>
Authorized Capital Stock The authorized capital stock The authorized capital stock of
of Bluestone consists of Hewlett-Packard consists of 4.8
54.9 million shares of common billion shares of common stock and
stock. 300 million shares of preferred
stock.
Number of Directors The Bluestone certificate of The Hewlett-Packard by-laws
incorporation provides that provide that the Hewlett- Packard
the Bluestone board shall fix board shall fix the number of
the number of directors by a directors by a majority vote of
majority vote of the entire the entire board, but shall not be
board. The Bluestone board less than eight and not more than
currently consists of six 17. The Hewlett-Packard board
members. currently consists of ten members.
Classification of Board of The Bluestone board is Hewlett-Packard does not have a
Directors divided into three classes, classified board.
with each class serving a
staggered three-year term.
Quorum for Meeting of The Bluestone by-laws provide The Hewlett-Packard by-laws
Directors that a majority of the entire provide that a majority of the
Bluestone board shall entire Hewlett-Packard board shall
constitute a quorum. constitute a quorum.
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
BLUESTONE STOCKHOLDER RIGHTS HEWLETT-PACKARD STOCKHOLDER RIGHTS
----------------------------- ----------------------------------
<S> <C> <C>
Election of Directors The Bluestone by-laws provide The Hewlett-Packard certificate of
that directors are elected by incorporation provides that
a plurality vote of the directors may be elected by
holders of Bluestone shares cumulative voting. Each holder of
which are entitled to vote in stock of any class or series shall
the election of directors. be entitled to cumulative voting
rights as to the directors to be
elected by each class or series.
Removal of Directors Delaware law provides that a Delaware law provides that a
director, or the entire board director, or the entire board of
of directors, of a directors, of a corporation may be
corporation may be removed removed with cause only by an
with cause only by an affirmative vote of a majority of
affirmative vote of a the shares of corporation entitled
majority of the shares of to vote at an election of
corporation entitled to vote directors. These provisions of
at an election of directors. Delaware law govern the removal of
These provisions of Delaware directors from the Hewlett-Packard
law govern the removal of board.
directors from the Bluestone
board.
Stockholder Action The Bluestone certificate of The Hewlett-Packard certificate of
incorporation provides that incorporation provides that
Bluestone stockholders may Hewlett-Packard stockholders may
take action at an annual take action at an annual meeting
meeting or a special meeting or special meeting of
of stockholders, or may be stockholders, but may not take
taken without a meeting, action by written consent.
without prior notice and
without a vote, if a written
consent is signed by the
holders of outstanding stock
having not less than the
minimum number of votes
necessary to take such
action.
Amendment of Certificate of The Bluestone Certificate of The Hewlett-Packard certificate of
Incorporation Incorporation provides that incorporation provides that
Bluestone reserves the right Hewlett-Packard reserves the right
to adopt, repeal, rescind or to amend, alter, change, or repeal
amend any provision of the any provision of the certificate
certificate of incorporation. of incorporation.
Amendment of By-Laws The Bluestone certificate of The Hewlett-Packard by-laws may be
incorporation provides that made, altered, amended or repealed
the Bluestone board may by the affirmative vote of the
adopt, repeal, alter or amend Hewlett-Packard board or the
the by-laws by a majority affirmative vote of the holders of
vote of the total number of the majority of then outstanding
authorized directors. shares of capital stock.
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
BLUESTONE STOCKHOLDER RIGHTS HEWLETT-PACKARD STOCKHOLDER RIGHTS
----------------------------- ----------------------------------
<S> <C> <C>
Voting Stock The outstanding voting The outstanding voting securities
securities of Bluestone are of Hewlett-Packard are the common
the common stock. stock.
Appraisal Rights The Bluestone certificate of The Hewlett-Packard certificate of
incorporation and by-laws do incorporation and by-laws do not
not provide for appraisal provide for appraisal rights.
rights.
Special Meeting of The Bluestone by-laws provide The Hewlett-Packard by-laws
Stockholders that special meetings of the provide that the board of
stockholders may be called by directors, the chairman of the
the chief executive officer board, the vice chairman of the
or president and shall be board, the chairman of the
called by the president or executive committee or the
secretary of Bluestone on the president may call a special
request in writing or by an meeting of the stockholders for
affirmative vote of a any purpose.
majority of the directors or
at the request in writing of
the stockholders of record
owning at least 75% in amount
of the capital stock
outstanding and entitled to
vote.
Filling Vacancies on the The Bluestone by-laws provide The Hewlett-Packard by-laws
Board of Directors that any vacancies on provide that any vacancies on
Bluestone's board may be Hewlett-Packard's board may be
filled by a majority of the filled by a majority of the
directors then in office. directors then in office.
Limitations on Business The Bluestone by-laws provide The Hewlett-Packard by-laws
Transacted at a Special that business transacted at a provide that business transacted
Meeting of Stockholders special meeting of at a special meeting of Hewlett-
Bluestone's stockholders is Packard's stockholders is limited
limited to the purposes to the purposes specified in the
specified in the notice of notice of the meeting.
the meeting.
Indemnification The Bluestone certificate of The Hewlett-Packard certificate of
incorporation provides that incorporation provides that
directors shall be directors shall be indemnified by
indemnified by Bluestone to Hewlett-Packard to the full extent
the full extent permitted by permitted by the Delaware General
the Delaware General Corporation Law.
Corporation Law.
</TABLE>
55
<PAGE>
SUBSEQUENT EVENTS
On November 13, 2000, Hewlett-Packard issued a press release containing
unaudited financial information for the fiscal quarter and fiscal year ended
October 31, 2000 and forward-looking statements relating to fiscal year 2001,
and announcing that it had terminated discussions with PricewaterhouseCoopers
regarding the potential acquisition of its consulting business. A copy of the
press release and related materials were filed by Hewlett-Packard with the SEC
in a Current Report on Form 8-K dated November 13, 2000, which report is
incorporated by reference herein. You are urged to review the Form 8-K.
All of the information in the Current Report on Form 8-K referred to above,
including exhibits thereto, is presented as of the date of such report, and
Hewlett-Packard does not assume any obligation to update this information in the
future.
EXPERTS
The financial statements of Hewlett-Packard incorporated in this proxy
statement/prospectus by reference to Hewlett-Packard's Annual Report on Form
10-K for the fiscal year ended October 31, 1999, have been so incorporated in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The financial statements of Bluestone Software, Inc. as of December 31, 1998
and 1999 and for the years ended December 31, 1997, 1998 and 1999, included in
Bluestone Software, Inc.'s annual report on Form 10-K, filed on February 15,
2000, have been audited by Arthur Andersen LLP, independent public accountants,
as indicated in their reports with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said reports.
LEGAL MATTERS
The validity of the Hewlett-Packard shares to be issued in connection with
the merger is being passed upon for Hewlett-Packard by Skadden, Arps, Slate,
Meagher & Flom LLP, Palo Alto, California.
It is a condition to the completion of the merger that Bluestone receive an
opinion of Pepper Hamilton LLP and that Hewlett-Packard receive an opinion of
Skadden, Arps, Slate, Meagher & Flom LLP, in each case to the effect that the
merger (taking into account the effect of the subsequent upstream merger of
Bluestone with and into Hewlett-Packard, if applicable) will qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code.
SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS
If the merger is not completed before the 2001 annual meeting of Bluestone
stockholders, any stockholder proposal intended to be presented at the Bluestone
2001 annual meeting of stockholders must have been received by Bluestone at its
office in Philadelphia, Pennsylvania on or before November 24, 2000 in order to
be considered for inclusion in Bluestone's proxy statement and form of proxy
relating to such annual meeting. If a Bluestone stockholder wishes to present a
proposal before the 2001 annual meeting, but does not wish to have the proposal
considered for inclusion in Bluestone's proxy statement and proxy card, such
stockholder must also give written notice to Bluestone at 300 Stevens Drive,
Philadelphia, Pennsylvania 19113-4597, Attention: Secretary. Bluestone's by-laws
require that such notice be received no less than 90 days nor more than
120 days prior to the first anniversary of the preceding year's annual meeting.
With respect to Bluestone's 2001 annual meeting of stockholders, if Bluestone is
not provided notice between December 22, 2000 and January 22, 2001 of a
stockholder proposal which the stockholder has not previously sought to include
in our proxy statement, the proxies will be allowed to use their discretionary
authority to vote on any such proposals.
56
<PAGE>
APPENDIX A
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
HEWLETT-PACKARD COMPANY,
BETA ACQUISITION CORPORATION
AND
BLUESTONE SOFTWARE, INC.
DATED AS OF
OCTOBER 24, 2000
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TABLE OF CONTENTS
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ARTICLE I
MERGER.................................................... A-1
Section 1.1 THE MERGER.................................... A-1
Section 1.2 EFFECTIVE TIME................................ A-2
Section 1.3 CLOSING....................................... A-2
Section 1.4 DIRECTORS AND OFFICERS OF THE SURVIVING
CORPORATION............................................. A-2
ARTICLE II
STOCKHOLDER APPROVAL...................................... A-2
Section 2.1 STOCKHOLDERS' MEETING......................... A-2
Section 2.2 PROXY STATEMENT/PROSPECTUS; REGISTRATION
STATEMENT............................................... A-2
Section 2.3 NO FALSE OR MISLEADING STATEMENTS............. A-3
ARTICLE III
CONVERSION OF SHARES...................................... A-3
Section 3.1 CONVERSION OF SHARES.......................... A-3
Section 3.2 SURRENDER OF CERTIFICATES..................... A-4
Section 3.3 NO FRACTIONAL SHARES.......................... A-4
Section 3.4 NO DIVIDENDS.................................. A-5
Section 3.5 RETURN TO PARENT.............................. A-5
Section 3.6 STOCK OPTIONS; EMPLOYEE STOCK PURCHASE PLAN... A-5
Section 3.7 EMPLOYEE STOCK PURCHASE PLAN.................. A-6
Section 3.8 STOCK TRANSFER BOOKS.......................... A-6
Section 3.9 CERTAIN ADJUSTMENTS........................... A-6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............. A-7
Section 4.1 ORGANIZATION.................................. A-7
Section 4.2 CAPITALIZATION................................ A-7
Section 4.3 CORPORATE AUTHORIZATION; VALIDITY OF
AGREEMENT; COMPANY ACTION............................... A-8
Section 4.4 CONSENTS AND APPROVALS; NO VIOLATIONS......... A-8
Section 4.5 SEC REPORTS AND FINANCIAL STATEMENTS.......... A-9
Section 4.6 ABSENCE OF CERTAIN CHANGES.................... A-9
Section 4.7 NO UNDISCLOSED LIABILITIES.................... A-9
Section 4.8 INFORMATION IN PROXY STATEMENT/PROSPECTUS..... A-10
Section 4.9 EMPLOYEE BENEFIT PLANS; ERISA................. A-10
Section 4.10 LITIGATION; COMPLIANCE WITH LAW.............. A-12
Section 4.11 NO DEFAULT................................... A-12
Section 4.12 TAXES........................................ A-12
Section 4.13 CONTRACTS.................................... A-14
Section 4.14 ASSETS; REAL PROPERTY........................ A-14
Section 4.15 ENVIRONMENTAL MATTERS........................ A-14
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Section 4.16 TRANSACTIONS WITH AFFILIATES................. A-15
Section 4.17 OPINION OF FINANCIAL ADVISOR; BROKERS........ A-15
Section 4.18 INTELLECTUAL PROPERTY........................ A-15
Section 4.19 REORGANIZATION............................... A-17
Section 4.20 INSURANCE.................................... A-17
Section 4.21 ACCOUNTS RECEIVABLE.......................... A-18
Section 4.22 SUPPLIERS AND CUSTOMERS...................... A-18
Section 4.23 LABOR MATTERS................................ A-18
Section 4.24 FULL DISCLOSURE.............................. A-19
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.......... A-20
Section 5.1 ORGANIZATION.................................. A-20
Section 5.2 CAPITALIZATION................................ A-20
Section 5.3 AUTHORIZATION; VALIDITY OF AGREEMENT;
NECESSARY ACTION........................................ A-20
Section 5.4 CONSENTS AND APPROVALS; NO VIOLATIONS......... A-20
Section 5.5 INFORMATION IN PROXY STATEMENT/PROSPECTUS..... A-21
Section 5.6 SEC REPORTS AND FINANCIAL STATEMENTS.......... A-21
Section 5.7 ABSENCE OF CERTAIN CHANGES.................... A-21
ARTICLE VI
COVENANTS................................................. A-22
Section 6.1 INTERIM OPERATIONS OF THE COMPANY............. A-22
Section 6.2 INTERIM OPERATIONS OF PARENT.................. A-23
Section 6.3 ACCESS TO INFORMATION......................... A-24
Section 6.4 HSR ACT FILINGS............................... A-24
Section 6.5 OTHER CONSENTS AND APPROVALS.................. A-25
Section 6.6 NO SOLICITATION............................... A-25
Section 6.7 ADDITIONAL AGREEMENTS......................... A-27
Section 6.8 PUBLICITY..................................... A-27
Section 6.9 NOTIFICATION OF CERTAIN MATTERS............... A-27
Section 6.10 DIRECTORS' AND OFFICERS' INSURANCE AND
INDEMNIFICATION......................................... A-27
Section 6.11 COOPERATION.................................. A-28
Section 6.12 CONSENTS OF ACCOUNTANTS...................... A-28
Section 6.13 SUBSEQUENT FINANCIAL STATEMENTS.............. A-28
Section 6.14 TAX TREATMENT................................ A-28
ARTICLE VII
CONDITIONS................................................ A-29
Section 7.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY... A-29
Section 7.2 CONDITIONS TO THE OBLIGATIONS OF PARENT AND
SUB..................................................... A-29
Section 7.3 CONDITIONS TO THE OBLIGATIONS OF THE
COMPANY................................................. A-30
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ARTICLE VIII
TERMINATION............................................... A-31
Section 8.1 TERMINATION................................... A-31
Section 8.2 EFFECT OF TERMINATION......................... A-32
ARTICLE IX
MISCELLANEOUS............................................. A-32
Section 9.1 FEES AND EXPENSES............................. A-32
Section 9.2 AMENDMENT AND MODIFICATION.................... A-32
Section 9.3 NONSURVIVAL OF REPRESENTATIONS AND
WARRANTIES.............................................. A-32
Section 9.4 NOTICES....................................... A-32
Section 9.5 INTERPRETATION................................ A-33
Section 9.6 COUNTERPARTS.................................. A-34
Section 9.7 ENTIRE AGREEMENT; NO THIRD PARTY
BENEFICIARIES; RIGHTS OF OWNERSHIP...................... A-34
Section 9.8 SEVERABILITY.................................. A-34
Section 9.9 GOVERNING LAW................................. A-34
Section 9.10 ASSIGNMENT................................... A-34
EXHIBITS
Exhibit A Form of Option Agreement
Exhibit B Form of Voting Agreement
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of October 24,
2000, by and among Hewlett-Packard Company, a Delaware corporation ("PARENT"),
Beta Acquisition Corporation, a Delaware corporation and a direct wholly owned
subsidiary of Parent ("SUB"), and Bluestone Software, Inc., a Delaware
corporation (the "COMPANY").
WITNESSETH:
WHEREAS, the Boards of Directors of Parent and Sub have approved, and deem
it advisable and in the best interests of their respective stockholders to
consummate, a strategic business combination between the Company and Parent upon
the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company, having carefully considered
the long-term prospects and interests of the Company and its stockholders and
having determined that such strategic business combination is advisable, has
approved the transactions contemplated by this Agreement and the Option
Agreement (as defined below) in accordance with the provisions of the Delaware
General Corporation Law (the "DGCL") and has resolved to recommend to the
stockholders of the Company the approval and adoption of this Agreement and the
Merger (as defined below) and the consummation of the transactions contemplated
hereby and thereby upon the terms and subject to the conditions set forth
herein;
WHEREAS, as a condition and inducement to Parent and Sub entering into this
Agreement and incurring the obligations set forth herein, concurrently with the
execution and delivery of this Agreement, (i) Parent and the Company are
entering into an Option Agreement, in the form of EXHIBIT A hereto (the "OPTION
AGREEMENT"), pursuant to which, among other things, the Company has granted Sub
an option to purchase certain newly-issued Shares (as defined in Section 3.1
hereof), subject to certain conditions; (ii) Parent and certain employees of the
Company identified in Section 7.2(d) of the Disclosure Schedule (as defined in
Section 3.6(a) hereof) are entering into offer letters, the effectiveness of
which offer letters is conditioned upon the consummation of the transactions
contemplated hereby (the "OFFER LETTERS"); and (iii) Parent and certain
stockholders of the Company are entering into Voting Agreements, each in the
form of EXHIBIT B hereto (the "VOTING AGREEMENTS"), pursuant to which, among
other things, such stockholders are agreeing to vote in favor of approval and
adoption of this Agreement and the transactions contemplated hereby and against
approval of any competing transaction;
WHEREAS, the Board of Directors of the Company has approved the transactions
contemplated by this Agreement and the Option Agreement in accordance with the
provisions of Section 251 of the DGCL; and
WHEREAS, for United States federal income tax purposes, it is intended that
the Merger shall qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder (the "CODE"), and this Agreement is
intended to be and is adopted as a plan of reorganization within the meaning of
Section 368 of the Code.
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NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Option Agreement, the parties hereto agree as follows:
ARTICLE I
MERGER
Section 1.1 THE MERGER. Subject to the terms and conditions of this
Agreement and the provisions of the DGCL, at the Effective Time (as defined in
Section 1.2 hereof), the Company and Sub shall consummate a merger (the
"MERGER") pursuant to which: (a) Sub shall be merged with and into the Company
and the separate corporate existence of Sub shall thereupon cease; (b) the
Company shall be the successor or surviving corporation in the Merger and shall
continue to be governed by the laws of the State of Delaware; and (c) the
separate corporate existence of the Company, with all its rights, privileges,
immunities, powers and franchises, shall continue unaffected by the Merger.
Pursuant to the Merger, (x) the certificate of incorporation of Sub, as in
effect immediately prior to the Effective Time, shall be the certificate of
incorporation (the "CERTIFICATE OF INCORPORATION") of the Surviving Corporation
(as defined below) until thereafter amended as provided by law and the
Certificate of Incorporation and (y) the bylaws of Sub, as in effect immediately
prior to the Effective Time, shall be the bylaws (the "BYLAWS") of the Surviving
Corporation until thereafter amended as provided by law, the Certificate of
Incorporation and the Bylaws. The corporation surviving the Merger is sometimes
hereinafter referred to as the "SURVIVING CORPORATION". The Merger shall have
the effects set forth in Section 259 and in the other relevant provisions of the
DGCL.
Section 1.2 EFFECTIVE TIME. Parent, Sub and the Company will cause a
certificate of merger (the "CERTIFICATE OF MERGER") to be executed and filed on
the date of the Closing (as defined in Section 1.3 hereof) (or on such other
date as Parent and the Company may agree) with the Secretary of State of the
State of Delaware (the "SECRETARY OF STATE") as provided by the DGCL. The Merger
shall become effective on the date on which the Certificate of Merger has been
duly filed with the Secretary of State at such time specified therein or such
other later date as the Company and Sub shall agree and specify in the
Certificate of Merger, and such time is hereinafter referred to as the
"EFFECTIVE TIME".
Section 1.3 CLOSING. The closing of the Merger (the "CLOSING") will take
place at 8:00 a.m., Palo Alto, California time, on a date to be specified by
Sub, which may be on but shall be no later than the first business day after
satisfaction or waiver of all of the conditions set forth in Article VII hereof
(the "CLOSING DATE"), at the offices of Skadden, Arps, Slate, Meagher & Flom
LLP, 525 University Avenue, Palo Alto, California, unless another date or place
is agreed to in writing by the parties hereto.
Section 1.4 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The
directors and officers of Sub at the Effective Time shall, from and after the
Effective Time, be the directors and officers, respectively, of the Surviving
Corporation until their successors shall have been duly elected or appointed or
qualified or until their earlier death, resignation or removal in accordance
with the Certificate of Incorporation and Bylaws.
ARTICLE II
STOCKHOLDER APPROVAL
Section 2.1 STOCKHOLDERS' MEETING. In order to consummate the Merger, the
Company, acting through its Board of Directors, shall, in accordance with
applicable law, duly call, give notice of, convene and hold a special meeting of
its stockholders (the "SPECIAL MEETING"), as soon as practicable after the
Registration Statement (as defined in Section 2.2 hereof) is declared effective,
for the purpose of considering and taking action upon this Agreement and the
transactions contemplated hereby. Subject to Section 6.6 hereof, the Company
shall include in the Proxy Statement/Prospectus (as defined
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in Section 2.2 hereof) the recommendation of the Board of Directors of the
Company that stockholders of the Company vote in favor of the approval of the
Merger and the adoption of this Agreement.
Section 2.2 PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT. In
connection with the solicitation of approval of this Agreement and the Merger by
the Company's stockholders, the Company shall prepare and file with the
Securities and Exchange Commission (the "SEC") a preliminary proxy statement
relating to the Merger and this Agreement and use its best efforts to obtain and
furnish the information required to be included by the SEC in the Proxy
Statement/Prospectus (as hereinafter defined) and, after consultation with
Parent, to respond promptly to any comments made by the SEC with respect to the
preliminary proxy statement and cause a definitive proxy statement to be mailed
to its stockholders. Such definitive proxy statement shall also constitute a
prospectus of Parent with respect to the common stock, par value $.01 per share,
of Parent ("PARENT COMMON STOCK") to be issued in the Merger (such proxy
statement and prospectus are hereinafter referred to as the "PROXY
STATEMENT/PROSPECTUS") and shall be filed by Parent with the SEC as part of a
registration statement on Form S-4 (the "REGISTRATION STATEMENT") filed by
Parent with the SEC for the purpose of registering such shares of Parent Common
Stock under the Securities Act of 1933, as amended (the "SECURITIES ACT"). The
Company and Parent shall cooperate to file promptly the Registration Statement
and shall use their commercially reasonable efforts to have the Registration
Statement declared effective by the SEC. The Company shall use its commercially
reasonable efforts to obtain the necessary approvals of the Merger and this
Agreement by its stockholders.
Section 2.3 NO FALSE OR MISLEADING STATEMENTS. The information provided
and to be provided by each of Parent, Sub and the Company specifically for use
in the Registration Statement shall not, with respect to the information
supplied by such party, in the case of the Registration Statement, on the date
the Registration Statement becomes effective and, in the case of the Proxy
Statement/Prospectus, on the date upon which the Proxy Statement/Prospectus is
mailed to the stockholders of the Company or on the date upon which approval of
the Merger by the stockholders of the Company is obtained, 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. Each of Parent,
Sub and the Company agrees to correct promptly any such information provided by
it that shall have become false or misleading in any material respect and to
take all steps necessary to file with the SEC and have declared effective or
cleared by the SEC any amendment or supplement to the Registration Statement or
the Proxy Statement/Prospectus so as to correct the same and to cause the Proxy
Statement/Prospectus as so corrected to be disseminated to the Company's
stockholders to the extent required by applicable law. The Registration
Statement and the Proxy Statement/Prospectus shall comply as to form in all
material respects with the provisions of the Securities Act, the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and other applicable law.
ARTICLE III
CONVERSION OF SHARES
Section 3.1 CONVERSION OF SHARES. (a) Each share of common stock, $.001
par value per share, of the Company (the "COMPANY COMMON STOCK" or the "SHARES")
issued and outstanding immediately prior to the Effective Time (other than
Shares to be cancelled pursuant to Section 3.1(c) hereof) shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted into the right to receive .2433 (the "EXCHANGE RATIO"), of a fully
paid and nonassessable share of Parent Common Stock (the "MERGER
CONSIDERATION").
(b) Each share of Common Stock, par value $.001 per share, of Sub (the
"SUB COMMON STOCK"), issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger
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and without any action on the part of Parent or Sub, be converted into one fully
paid and nonassessable share of common stock, $.001 par value per share, of the
Surviving Corporation.
(c) At the Effective Time, all shares of Company Common Stock that are
owned by the Company as treasury stock and any shares of Company Common Stock
owned by Parent, Sub or any other wholly owned Subsidiary (as defined in
Section 4.1 hereof) of Parent shall be cancelled and retired and shall cease to
exist and no Parent Common Stock or other consideration shall be delivered in
exchange therefor.
(d) On and after the Effective Time, holders of certificates which
immediately prior to the Effective Time represented outstanding Shares (the
"CERTIFICATES") shall cease to have any rights as stockholders of the Company,
except the right to receive the Merger Consideration for each Share represented
by such Certificates and held by such holders.
Section 3.2 SURRENDER OF CERTIFICATES. At or promptly after the Effective
Time, Parent shall make available to a bank or trust company reasonably
acceptable to the Company (the "EXCHANGE AGENT"), in trust for the benefit of
the holders of Shares for exchange in accordance with this Article III,
certificates representing the aggregate number of shares of Parent Common Stock
issuable pursuant to Section 3.1 hereof. Promptly after the Effective Time, the
Exchange Agent shall mail to each holder of record of a Certificate, a letter of
transmittal and instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing Parent Common Stock and
cash in lieu of fractional shares pursuant to Section 3.3 hereof, if applicable.
Upon surrender of a Certificate to the Exchange Agent, together with such letter
of transmittal, duly executed, the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration for each Share formerly
represented by such Certificate, and the Certificate so surrendered shall
forthwith be cancelled. Until surrendered as contemplated by this Article III,
from and after the Effective Time each Certificate shall be deemed to represent
only the right to receive the Merger Consideration for each Share formerly
represented by such Certificate, and shall not evidence any interest in, or any
right to exercise the rights of a stockholder of Parent. If a certificate
representing Parent Common Stock is to be issued or a cash payment in lieu of
fractional share interests pursuant to Section 3.3 hereof is to be made to a
person other than the one in whose name the Certificate surrendered in exchange
therefor is registered, it shall be a condition to such issuance or payment that
such Certificate be properly endorsed (or accompanied by an appropriate
instrument of transfer) and accompanied by evidence that any applicable stock
transfer taxes have been paid or provided for as specified in such letter of
transmittal.
Section 3.3 NO FRACTIONAL SHARES.
(a) No certificate or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of Certificates,
and such fractional share interests will not entitle the owner thereof to vote
or to any rights of a stockholder of Parent.
(b) As promptly as practicable following the Effective Time, the
Exchange Agent shall determine the excess of (x) the number of full shares of
Parent Common Stock delivered to the Exchange Agent by Parent pursuant to
Section 3.2 hereof over (y) the aggregate number of full shares of Parent Common
Stock to be distributed to holders of Shares pursuant to Section 3.1 hereof
(such excess being herein called the "EXCESS SHARES"). As soon after the
Effective Time as practicable, the Exchange Agent, as agent for the holders of
Shares, shall sell the Excess Shares at then prevailing prices on the New York
Stock Exchange, Inc. (the "NYSE"), all in the manner provided in paragraph (c)
of this Section 3.3.
(c) The sale of the Excess Shares by the Exchange Agent shall be
executed on the NYSE through one or more member firms of the NYSE and shall be
executed in round lots to the extent practicable. Until the net proceeds of such
sale or sales have been distributed to the holders of Shares,
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the Exchange Agent will hold such proceeds in trust for the holders of Shares
(the "SHARES TRUST"). All commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation of the Exchange
Agent, incurred in connection with such sale of the Excess Shares shall be paid
out of proceeds from the sale of such Excess Shares. The Exchange Agent shall
determine the portion of the Shares Trust to which each holder of Shares shall
be entitled, if any, by multiplying the amount of the aggregate net proceeds
comprising the Shares Trust by a fraction the numerator of which is the amount
of the fractional share interest to which such holder of Shares is entitled and
the denominator of which is the aggregate amount of fractional share interests
to which all holders of Shares are entitled.
(d) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of Shares in lieu of any fractional share
interests, the Exchange Agent shall make available such amount to such holders
of Shares.
Section 3.4 NO DIVIDENDS. No dividends or other distributions declared or
made after the Effective Time with respect to shares of Parent Common Stock with
a record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the Parent Common Stock represented
thereby until the holder of such Certificate shall surrender such Certificate.
Dividends or other distributions with a record date after the Effective Time
payable in respect of shares of Parent Common Stock held by the Exchange Agent
shall be held in trust for the benefit of such holders of unsurrendered
Certificates. Following surrender of any previously unsurrendered Certificate,
there shall be paid to the holder of the certificates representing whole shares
of Parent Common Stock issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of any dividends or other distributions with
a record date after the Effective Time theretofore paid with respect to such
whole shares of Parent Common Stock and (ii) at the date of payment of any
dividends or other distributions with a record date after the Effective Time but
prior to surrender and a payment date subsequent to surrender, the amount of
such dividends or other distributions payable with respect to such whole shares
of Parent Common Stock.
Section 3.5 RETURN TO PARENT. Any shares of Parent Common Stock made
available to the Exchange Agent and any portion of the Shares Trust not
exchanged for Certificates within six months after the Effective Time and any
dividends and distributions held by the Exchange Agent for payment or delivery
to the holders of unsurrendered Certificates representing Shares and unclaimed
at the end of such six-month period shall be redelivered or repaid by the
Exchange Agent to Parent, after which time any holder of a Certificate who has
not theretofore delivered or surrendered such Certificate to the Exchange Agent,
subject to applicable law, shall look as a general creditor only to Parent for
payment of the Merger Consideration, cash in lieu of fractional share interests
to be paid pursuant to Section 3.3 hereof, and any such dividends or
distributions. Notwithstanding the foregoing, none of Parent, the Exchange
Agent, the Surviving Corporation or any other party shall be liable to a holder
of Shares for any Merger Consideration, cash in lieu of fractional share
interests to be paid pursuant to Section 3.3 hereof or dividends or
distributions delivered to a public official pursuant to applicable escheat
laws.
Section 3.6 STOCK OPTIONS; EMPLOYEE STOCK PURCHASE PLAN.
(a) Unless Parent, Sub and the Company agree otherwise, Parent, Sub and
the Company shall take all actions necessary to provide that effective as of the
Effective Time, each outstanding option to purchase shares of Company Common
Stock (each, a "COMPANY STOCK OPTION," and collectively, the "COMPANY STOCK
OPTIONS") granted under the Company's 1996 Incentive and Non-Qualified Stock
Option Plan, or any other stock option plan, program or agreement to which the
Company or any of its subsidiaries is a party (collectively, the "COMPANY OPTION
PLANS") that is outstanding immediately prior to the Effective Time, whether or
not then exercisable, shall be cancelled as of the Effective Time. As of the
Effective Time, each such Company Stock Option shall cease to
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represent a right to acquire shares of Company Common Stock and shall be
converted automatically into an option to purchase shares of Parent Common Stock
under the HP 2000 Stock Plan (collectively, the "NEW PARENT STOCK OPTIONS") in
an amount, at an exercise price and subject to such terms and conditions
determined as provided below. Each Company Stock Option assumed by Parent shall
be subject to, and exercisable upon, the same terms and conditions as under the
applicable Company Option Plan and the applicable option agreement issued
thereunder, except that (A) each assumed Company Stock Option shall be
exercisable for, and represent the right to acquire, that number of shares of
Parent Common Stock (rounded down to the nearest whole share) equal to (i) the
number of shares of Company Common Stock subject to such Company Stock Option
immediately prior to the Effective Time multiplied by (ii) the Exchange Ratio;
and (B) the exercise price per share of Parent Common Stock subject to each
assumed Company Stock Option shall be an amount equal to (i) the exercise price
per share of Company Common Stock subject to such Company Stock Option in effect
immediately prior to the Effective Time divided by (ii) the Exchange Ratio
(rounded up to the nearest whole cent). A listing of all outstanding Company
Options as of October 24, 2000 is set forth in Section 3.6 of the disclosure
schedule delivered by the Company to Parent (the "DISCLOSURE SCHEDULE") showing
the per share exercise price and the date upon which each Company Option
expires.
(b) If and to the extent necessary or required by the terms of the
Company Option Plans or pursuant to the terms of any Company Stock Option
granted thereunder, each of Parent, Sub and the Company shall use its
commercially reasonable efforts to obtain the consent of each holder of
outstanding Company Stock Options to the foregoing treatment of such Company
Stock Options.
(c) The Company, Parent and Sub agree that each of the Company Option
Plans and agreements shall be amended, to the extent necessary, to reflect the
transactions contemplated by this Agreement.
(d) Parent, Sub and the Company shall take all such steps as may be
required to cause the transactions contemplated by this Section 3.6 and any
other dispositions of equity securities of the Company (including derivative
securities) or acquisitions of Parent equity securities (including derivative
securities) in connection with this Agreement by each individual who (i) is a
director or officer of Company or (ii) at the Effective Time, will become a
director or officer of Parent, to be exempt under Rule 16b-3 promulgated under
the Exchange Act, such steps to be taken in accordance with the No-Action Letter
dated January 12, 1999, issued by the SEC to Skadden, Arps, Slate, Meagher &
Flom LLP.
(e) Parent shall file with the SEC as soon as practicable following the
Effective Time a registration statement on Form S-8 under the Securities Act
covering, to the extent applicable, the shares of Parent Common Stock to be
issued upon the exercise of Company Stock Options assumed by Parent.
Section 3.7 EMPLOYEE STOCK PURCHASE PLAN. As of the earlier of
December 31, 2000 and the Effective Time (the "TERMINATION DATE"), the Company's
2000 Employee Stock Purchase Plan shall be terminated. If the Termination Date
does not coincide with the last day of the offering period then underway, then,
pursuant to Section 15 of such plan, payroll deductions (to the extent not yet
applied to the purchase of shares under such plan) shall be distributed to the
participants. Prior to the Termination Date, the Company shall take all actions
(including, if appropriate, amending the terms of such plan) that are necessary
to give effect to the transactions contemplated by this Section 3.7. In respect
of the foregoing, the Company shall cause written notice to be given to
participants in accordance with the terms of the plan and no further offering
period shall be created thereunder.
Section 3.8 STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of Shares shall
thereafter be made. If, after the Effective Time, any Certificate is presented
to the Surviving Corporation, such Certificate shall be cancelled and exchanged
for the Merger Consideration.
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Section 3.9 CERTAIN ADJUSTMENTS. If between the date hereof and the
Effective Time, the outstanding shares of Parent Common Stock shall be changed
into a different number of shares by reason of any reclassification,
recapitalization, stock split, split-up, combination or exchange of shares, or
any dividend payable in stock or other securities shall be declared thereon with
a record date within such period, the Exchange Ratio shall be adjusted
accordingly to provide to the holders of Company Common Stock the same economic
effect as contemplated by this Agreement prior to such reclassification,
recapitalization, stock split, split-up, combination, exchange or dividend. By
way of example, upon the two-for-one stock split of Parent Common Stock
effective October 27, 2000, the Exchange Ratio will automatically be adjusted
from .2433 to .4866.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 4.1 ORGANIZATION. Each of the Company and its Subsidiaries (as
defined below) is a corporation, partnership or other entity duly organized,
validly existing, duly qualified or licensed to do business and in good standing
under the laws of the jurisdiction of its incorporation or organization and in
each jurisdiction in which the nature of the business conducted by it makes such
qualification or licensing necessary, and has all requisite corporate or other
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing or to
have such power, authority, and governmental approvals would not have a material
adverse effect on the Company and its Subsidiaries, taken as a whole. As used in
this Agreement, the word "SUBSIDIARY" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which (i) such party or any other Subsidiary of such party is a general partner
(excluding such partnerships where such party or any Subsidiary of such party
does not have a majority of the voting interest in such partnership) or (ii) at
least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries. As used in this Agreement, any reference to any event, change or
effect having a "MATERIAL ADVERSE EFFECT" on or with respect to any entity (or
group of entities taken as a whole) means such event, change, occurrence or
circumstance, individually or in the aggregate with such other events, changes,
occurrences or circumstances, which is materially adverse to the business,
operations, prospects, properties, financial condition or results of operations
of such entity (or, if used with respect thereto, of such group of entities
taken as a whole); provided, that none of the following shall be deemed,
individually or in the aggregate, in and of itself or by themselves, to
constitute a material adverse effect on the Company: (i) any decrease in
revenues of the Company, (ii) any decrease in or cancellation of customer orders
or (iii) any suit, claim, action or proceeding, in each case directly
attributable to the public announcement of the transactions contemplated by this
Agreement. Section 4.1 of the Disclosure Schedule sets forth a complete list of
the names, jurisdiction of incorporation or other formation and capitalization
of each of the Company's Subsidiaries.
Section 4.2 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 54,900,000
shares of Company Common Stock. As of the date hereof: (i) 20,812,792 shares of
Company Common Stock were issued and outstanding, of which no shares were held
by the Company's 2000 Employee Stock Purchase Plan; (ii) 6,906,250 shares of
Company Common Stock were reserved for issuance pursuant to the Company Option
Plan and all other employee benefit plans of the Company; and (iii) 201,132
shares of Company Common Stock were reserved for issuance upon the exercise of
warrants. All of the issued and outstanding shares of Company Common Stock are
validly issued, fully paid and nonassessable.
(b) Except as disclosed in this Section 4.2 or as set forth in Sections
3.6 or 4.2(b) of the Disclosure Schedule other than pursuant to the Option
Agreement: (i) there is no outstanding right, subscription, warrant, call,
option or other agreement or arrangement of any kind (collectively, "RIGHTS") to
purchase or otherwise to receive from the Company or any of its Subsidiaries any
of the outstanding authorized but unissued or treasury shares of the capital
stock or any other security of the Company or any of its Subsidiaries;
(ii) there is no outstanding security of any kind convertible into or
exchangeable for such capital stock; and (iii) there is no voting trust or other
agreement or understanding to which the Company or any of its Subsidiaries is a
party or is bound with respect to the voting of the capital stock of the Company
or any of its Subsidiaries.
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(c) Since April 19, 2000, the Company has not in any manner modified
the terms and conditions applicable to any of the Company Options, whether set
forth in the Company Option Plan, in a stock option grant, award or other
agreement, or otherwise.
Section 4.3 CORPORATE AUTHORIZATION; VALIDITY OF AGREEMENT; COMPANY
ACTION. (a) The Company has full corporate power and authority to execute and
deliver this Agreement and the Option Agreement and, subject to obtaining any
necessary approval of its stockholders as contemplated by Section 2.1 hereof
with respect to the Merger, to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance by the Company of this
Agreement and the Option Agreement, and the consummation by it of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by its Board of Directors and, except for obtaining any approval of
its stockholders as contemplated by Section 2.1 hereof with respect to the
Merger, no other corporate action on the part of the Company is necessary to
authorize the execution and delivery by the Company of this Agreement and the
Option Agreement and the consummation by it of the transactions contemplated
hereby and thereby. Each of this Agreement and the Option Agreement have been
duly executed and delivered by the Company and, assuming this Agreement
constitutes a valid and binding obligation of the other parties hereto,
constitutes a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except that (i) such enforcement may
be subject to applicable bankruptcy, insolvency or other similar laws, now or
hereafter in effect, affecting creditors' rights generally and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
(b) The Board of Directors of the Company has duly and validly approved
and taken all corporate action required to be taken by the Board of Directors
for the consummation of the transactions contemplated by this Agreement and the
Option Agreement, including, but not limited to, all actions necessary to render
the provisions of Section 203 of the DGCL inapplicable to such transactions. The
affirmative vote of the holders of a majority of the Shares is the only vote of
the holders of any class or series of Company capital stock necessary to approve
the Merger. To the best of the Company's knowledge, no other state takeover
statute or similar statute or regulation applies or purports to apply to the
Merger, this Agreement, the Option Agreement or any of the transactions
contemplated by this Agreement or the Option Agreement.
Section 4.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Except as disclosed in
Section 4.4 of the Disclosure Schedule and for filings, permits, authorizations,
consents and approvals as may be required under, and other applicable
requirements of, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"), and any comparable premerger notification laws, rules
or regulations of any applicable foreign jurisdiction, and the Exchange Act, the
approval of this Agreement and the Merger by the Company's stockholders and the
filing of the Certificate of Merger as required by the DGCL, neither the
execution, delivery or performance of this Agreement or the Option Agreement by
the Company nor the consummation by the Company of the transactions contemplated
hereby or thereby nor compliance by the Company with any of the provisions
hereof or thereof will: (i) conflict with or result in any breach of any
provision of the certificate of incorporation or bylaws or similar
organizational documents of the Company or of any of its Subsidiaries;
(ii) require any filing with, or permit, authorization, consent or approval of,
any court, arbitral tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency (a "GOVERNMENTAL ENTITY");
(iii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, guarantee,
other evidence of indebtedness, lease, license, contract, agreement or other
instrument or obligation to which the Company or any of its Subsidiaries is a
party or by which any of them or any of their properties or assets may be bound
(a "COMPANY AGREEMENT"); or
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(iv) violates any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company, any of its Subsidiaries or any of their properties or
assets; except in the case of clause (ii), (iii) or (iv) where the failure to
obtain such permits, authorizations, consents or approvals or to make such
filings, or where such violations, breaches or defaults would not, individually
or in the aggregate, have a material adverse effect on the Company and its
Subsidiaries, taken as a whole, and will not materially impair the ability of
the Company to consummate the transactions contemplated hereby or by the Option
Agreement.
Section 4.5 SEC REPORTS AND FINANCIAL STATEMENTS. The Company has filed
with the SEC, and has heretofore made available to Parent true and complete
copies of, all forms, reports, schedules, statements and other documents
required to be filed by it and its Subsidiaries since September 23, 1999 under
the Exchange Act and the Securities Act (as such documents have been amended
since the time of their filing, collectively, the "COMPANY SEC DOCUMENTS"). As
of their respective dates or, if amended, as of the date of the last such
amendment, the Company SEC Documents, including, without limitation, any
financial statements or schedules included therein (a) did not 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 light
of the circumstances under which they were made, not misleading and
(b) complied in all material respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be, and the applicable
rules and regulations of the SEC thereunder. Each of the consolidated financial
statements included in the Company SEC Documents has been prepared from, and is
in accordance with, the books and records of the Company and its consolidated
Subsidiaries, complies in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, has been prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
presents in all material respects the consolidated financial position and the
consolidated results of operations and cash flows of the Company and its
consolidated Subsidiaries as at the dates thereof or for the periods presented
therein.
Section 4.6 ABSENCE OF CERTAIN CHANGES. Except to the extent disclosed in
the Company SEC Documents filed prior to the date of this Agreement or in
Section 4.6 of the Disclosure Schedule, since June 30, 2000, the Company and its
Subsidiaries have conducted their respective businesses and operations
consistent with past practice only in the ordinary and usual course. From
June 30, 2000 through the date of this Agreement, there has not occurred:
(i) any event, change, or effect (including the incurrence of any liabilities of
any nature, whether or not accrued, contingent or otherwise) having or, which
would be reasonably likely to have, individually or in the aggregate, a material
adverse effect on the Company and its Subsidiaries, taken as a whole; (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the equity interests of the
Company or of any of its Subsidiaries; or (iii) any change by the Company or any
of its Subsidiaries in accounting principles or methods, except insofar as may
be required by a change in GAAP. Except as set forth in Sections 3.6 or 4.6 of
the Disclosure Schedule, since June 30, 2000 neither the Company nor any of its
Subsidiaries has taken any of the actions prohibited by Section 6.1 hereof.
Section 4.7 NO UNDISCLOSED LIABILITIES. Except (a) to the extent disclosed
in the Company SEC Documents filed prior to the date of this Agreement or in
Section 4.7 of the Disclosure Schedule and (b) for liabilities and obligations
incurred in the ordinary course of business and consistent with past practice,
since June 30, 2000, neither the Company nor any of its Subsidiaries has
incurred any liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, that have, or would be reasonably likely to have, a
material adverse effect on the Company and its Subsidiaries taken as a whole or
would be required to be reflected or reserved against on a consolidated balance
sheet of the Company and its Subsidiaries (including the notes thereto) prepared
in accordance with GAAP as
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applied in preparing the consolidated balance sheet of the Company and its
Subsidiaries as of June 30, 2000. Section 4.7 of the Disclosure Schedule sets
forth the amount of principal and unpaid interest outstanding under each
instrument evidencing indebtedness of the Company and its Subsidiaries which
will accelerate or become due or result in a right of redemption or repurchase
on the part of the holder of such indebtedness (with or without due notice or
lapse of time) as a result of this Agreement, the Option Agreement, the Merger
or the other transactions contemplated hereby or thereby.
Section 4.8 INFORMATION IN PROXY STATEMENT/PROSPECTUS. The Proxy
Statement/Prospectus (or any amendment thereof or supplement thereto) will not,
at the date mailed to Company stockholders and at the time of the Special
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading, except that no representation is made by the Company with respect to
statements made therein based on information supplied by Parent or Sub in
writing for inclusion in the Proxy Statement/Prospectus. None of the information
supplied by the Company for inclusion or incorporation by reference in the
Registration Statement will, at the date it becomes effective and at the time of
the Special Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Proxy Statement/Prospectus will comply in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder.
Section 4.9 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Section 4.9 of the Disclosure Schedule contains a true and complete
list of each employment, bonus, deferred compensation, incentive compensation,
stock purchase, stock option, stock appreciation right or other equity-based
incentive, severance or termination pay, hospitalization or other medical, life,
disability or other insurance, supplemental unemployment benefits,
profit-sharing, savings, pension, or retirement plan, program, agreement or
arrangement, and each other employee benefit plan, program, agreement or
arrangement, sponsored, maintained or contributed to or required to be
contributed to by the Company or by any trade or business, whether or not
incorporated (an "ERISA AFFILIATE"), that together with the Company would be
deemed a "single employer" within the meaning of Section 4001(b)(1) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), for the
benefit of any current or former employee or director of the Company or any
ERISA Affiliate (the "PLANS").
(b) With respect to each Plan, the Company has heretofore delivered to
Parent true and complete copies of each of the following documents, as
applicable: (i) a copy of the Plan (including all amendments thereto) or a
written description of any Plan that is not otherwise in writing; (ii) if
required under ERISA, a copy of the annual report and actuarial valuation with
respect to such Plan for each of the last three plan years; (iii) a copy of the
most recent Summary Plan Description required under ERISA with respect thereto,
together with all Summaries of Material Modification issued with respect to such
Summary Plan Description, and a copy of all other material employee
communications relating to the Plan; (iv) if the Plan is funded through a trust
or any other funding vehicle, a copy of the trust or other funding agreement
(including all amendments thereto) and the latest financial statements thereof;
(v) all contracts relating to the Plans with respect to which the Company or any
ERISA Affiliate may have any liability, including, without limitation, insurance
contracts, investment management agreements, subscription and participation
agreements and record keeping agreements; and (vi) the most recent determination
letter received from the Internal Revenue Service with respect to each Plan
intended to qualify under Section 401(a) of the Code or trust intended to
qualify under Section 501(c)(9) of the Code.
(c) Neither the Company nor any ERISA Affiliate currently or within the
six year period immediately preceding the date hereof, has maintained,
sponsored, contributed to or otherwise been
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obligated or required to make contributions to any plan subject to Title IV of
ERISA, including without limitation any "multiemployer plan" as defined in
Sections 3(37) and 4001(a)(3) of ERISA or plan described in Section 4063(a) of
ERISA. Neither the Company nor any ERISA Affiliate has at any time incurred any
liability under Title IV of ERISA in respect of a plan termination or a
withdrawal from a multiemployer plan.
(d) Neither the Company nor any ERISA Affiliate, nor any Plan, nor any
trust created thereunder, nor any trustee or administrator thereof has engaged
in a transaction in connection with which the Company or any ERISA Affiliate,
any Plan, any such trust, or any trustee or administrator thereof, or any party
dealing with any Plan or any such trust could be subject to either a material
civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material
tax imposed pursuant to Section 4975 or 4976 of the Code. Full payment has been
made, or will be made in accordance with Section 404(a)(6) of the Code, of all
amounts which the Company or any ERISA Affiliate is required to pay under the
terms of each of the Plans, and all such amounts properly accrued through the
Closing Date with respect to the current plan year thereof will be paid by the
Company on or prior to the Closing Date or have been properly accrued for in the
financial statements of the Company.
(e) Each Plan has been operated and administered in accordance with its
terms and in all material respects in accordance with applicable law, including
but not limited to ERISA and the Code. Each Plan intended to be "qualified"
within the meaning of Section 401(a) of the Code is so qualified and the trusts
maintained thereunder are exempt from taxation under Section 501(a) of the Code
and no circumstances exist which may reasonably affect such qualified status.
The Company has timely applied for and received a currently effective
determination letter from the Internal Revenue Service with respect to each such
Plan.
(f) No amounts payable under the Plans or any other agreement or
arrangement with respect to which the Company may have any liability could give
rise to the payment of any amount that would fail to be deductible for federal
income tax purposes by virtue of Section 162(m) or 280G of the Code.
(g) No Plan provides benefits, including without limitation death or
medical benefits (whether or not insured), with respect to current or former
employees, directors or consultants of the Company or any ERISA Affiliate beyond
their retirement or other termination of service (other than coverage mandated
by applicable law).
(h) With respect to each Plan that is funded wholly or partially
through an insurance policy, there will be no liability of the Company or any
ERISA Affiliate, as of the Closing Date, under any such insurance policy or
ancillary agreement with respect to such insurance policy in the nature of a
retroactive rate adjustment, loss sharing arrangement or other actual or
contingent liability arising wholly or partially out of events occurring prior
to the Closing Date.
(i) Except as set forth in Sections 3.6 or 4.9 of the Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not (i) entitle any current or former employee, officer, director, agent or
consultant of the Company or any ERISA Affiliate to severance pay, unemployment
compensation or any other payment, except as expressly provided in this
Agreement or (ii) accelerate the time of payment or vesting, or increase the
amount of or otherwise enhance any compensation or other benefit (whether under
any Plan or otherwise) to any such employee, officer, director, agent or
consultant.
(j) There are no pending, threatened or, to the knowledge of the
Company, anticipated claims by or on behalf of any Plan, by any employee or
beneficiary under any Plan, or otherwise involving the operation or
administration of any such Plan (other than routine claims for benefits).
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Section 4.10 LITIGATION; COMPLIANCE WITH LAW.
(a) Except to the extent disclosed in the Company SEC Documents filed
prior to the date of this Agreement or in Section 4.10 of the Disclosure
Schedule, there is no suit, claim, action, proceeding or investigation pending
or, to the best knowledge of the Company, threatened against or affecting, the
Company or any of its Subsidiaries which, individually or in the aggregate, is
reasonably likely, individually or in the aggregate, to have a material adverse
effect on the Company and its Subsidiaries, taken as a whole, or materially
impair the ability of the Company to consummate the Merger or the other
transactions contemplated hereby or by the Option Agreement.
(b) The Company and its Subsidiaries have complied in a timely manner
and in all material respects, with all laws, statutes, regulations, rules,
ordinances, and judgments, decrees, orders, writs and injunctions, of any court
or governmental entity relating to any of the property owned, leased or used by
them, or applicable to their business, including, but not limited to, (A) the
Foreign Corrupt Practices Act of 1977 and any other laws regarding use of funds
for political activity or commercial bribery and (B) except as set forth in
Section 4.23 of the Disclosure Schedule, laws relating to equal employment
opportunity, discrimination, occupational safety and health, environmental,
interstate commerce and antitrust.
Section 4.11 NO DEFAULT. The business of the Company and each of its
Subsidiaries has not been and is not being conducted in default or violation of
any term, condition or provision of: (i) their respective bylaws or similar
organizational documents; (ii) any Company Agreement; or (iii) any federal,
state, local or foreign law, statute, regulation, rule, ordinance, judgment,
decree, order, writ, injunction, concession, grant, franchise, permit or license
or other governmental authorization or approval applicable to the Company or any
of its Subsidiaries; excluding from the foregoing clauses (ii) and (iii),
defaults or violations that would not, individually or in the aggregate, have a
material adverse effect on the Company and its Subsidiaries, taken as a whole,
or materially impair the ability of the Company to consummate the Merger or the
other transactions contemplated hereby or by the Option Agreement. As of the
date of this Agreement, no investigation or review by any Governmental Entity or
other entity with respect to the Company or any of its Subsidiaries is pending
or, to the best knowledge of the Company, threatened, nor has any Governmental
Entity or other entity indicated in writing an intention to conduct the same,
other than, in each case, those the outcome of which, as far as reasonably can
be foreseen, in the future will not, individually or in the aggregate, have a
material adverse effect on the Company and its Subsidiaries, taken as a whole.
Section 4.12 TAXES.
(a) Except as set forth in Section 4.12 of the Disclosure Schedule:
(i) each of the Company and its Subsidiaries, including any
predecessors thereof, has (A) duly and timely filed (or there have been filed on
its behalf) with the appropriate governmental authorities all material Tax
Returns required to be filed by it on or prior to the date hereof, and such Tax
Returns are true, correct and complete in all material respects, and (B) duly
paid in full or made provision in accordance with GAAP (or there has been paid
or provision has been made on its behalf) for the payment of all material Taxes
for all periods ending through the date hereof;
(ii) the Company and its Subsidiaries, including any predecessors
thereof, have complied in all material respects with all applicable laws, rules
and regulations relating to the payment and withholding of Taxes;
(iii) there are no material liens for Taxes upon any property or
assets of the Company or any Subsidiary thereof, except for liens for Taxes not
yet due and payable;
(iv) the unpaid Taxes of the Company and its Subsidiaries (A) did
not, as of the most recent financial statements of the Company and its
Subsidiaries, exceed to any material extent the
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reserve for Tax liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth
on the face of such financial statements (rather than in any notes thereto), and
(B) do not exceed that reserve as adjusted for the passage of time since the
date of such financial statements in accordance with the past custom and
practice of the Company and its Subsidiaries in filing their Tax Returns;
(v) there are no pending examinations, audits, actions,
proceedings, investigations, legal proceedings, disputes or claims with respect
to Taxes of the Company or any of its Subsidiaries, including any predecessors
thereof ("AUDITS"), and neither the Company nor any of its Subsidiaries has
received any written notice of any such Audits;
(vi) no issue has been raised in any Audit which, by application of
similar principles, could be expected to result in the proposal or assertion of
a material Tax deficiency for any other year not so examined;
(vii) the federal income Tax Returns of the Company and each of its
Subsidiaries, including any predecessors thereof, have been examined by the
applicable taxing authorities (or the applicable statutes of limitation for the
assessment of federal income Taxes for such periods have expired) for all
periods through and including December 31, 1996, and no material deficiencies
were asserted as a result of such examinations which have not been resolved and
fully paid;
(viii) neither the Company nor any of its Subsidiaries has received
notice of any claim made by a governmental authority in a jurisdiction where the
Company or any of its Subsidiaries, as applicable, does not file a Tax Return,
that the Company or such Subsidiary is or may be subject to taxation by that
jurisdiction;
(ix) there are no outstanding requests, agreements, consents or
waivers to extend the statutory period of limitations applicable to the
assessment of any Taxes or deficiencies against the Company or any of its
Subsidiaries, and no power of attorney granted by either the Company or any of
its Subsidiaries with respect to any Taxes is currently in force;
(x) neither the Company nor any of its Subsidiaries is a party to
any agreement providing for the allocation or sharing of Taxes imposed on or
with respect to any individual or other Person, and neither the Company nor any
of its Subsidiaries (A) has been a member of an affiliated group (or similar
state, local or foreign filing group) filing a consolidated federal income Tax
Return (other than the group the common parent of which is the Company) or
(B) has any liability for the Taxes of any person (other than the Company or any
of its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract, or otherwise;
(xi) the Company and each of its Subsidiaries has delivered or made
available to Parent complete and accurate copies of: all federal income Tax
Returns of the Company or any of its Subsidiaries for taxable years ending
December 31, 1997 through December 31, 1999;
(xii) neither the Company nor any of its Subsidiaries has filed a
consent under Section 341(f) of the Code concerning collapsible corporations;
and
(xiii) neither the Company nor any of its Subsidiaries has
constituted either a "distributing corporation" or a "controlled corporation"
(within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (A) in the
two years prior to the date hereof or (B) in a distribution which could
otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in connection with the
Merger.
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(b) As used herein:
(i) "TAXES" means any and all federal, state, local, foreign or
other taxes of any kind (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto) imposed by
any governmental authority, including, without limitation, taxes or other
charges on or with respect to income, franchises, windfall or other profits,
gross receipts, property, sales, use, capital stock, payroll, employment,
unemployment, social security, workers' compensation, or net worth, and taxes or
other charges in the nature of excise, withholding, ad valorem or value added;
and
(ii) "TAX RETURN" means any return, report or similar statement
(including the attached schedules) required to be filed with respect to Taxes,
including, without limitation, any information return, claim for refund, amended
return, or declaration of estimated Taxes.
Section 4.13 CONTRACTS. Each Company Agreement is valid, binding and
enforceable and in full force and effect, except where failure to be valid,
binding and enforceable and in full force and effect would not have a material
adverse effect on the Company and its Subsidiaries, and there are no defaults
thereunder, except those defaults that would not have a material adverse effect
on the Company and its Subsidiaries, taken as a whole. Section 4.13 of the
Disclosure Schedule sets forth a complete list of (i) all material Company
Agreements entered into by the Company or any of its Subsidiaries since
December 31, 1999 and all amendments to any Company Agreements included as an
exhibit to the Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 2000 and June 30, 2000 and (ii) all non-competition agreements
imposing restrictions on the ability of the Company or any of its Subsidiaries
to conduct business in any jurisdiction or territory.
Section 4.14 ASSETS; REAL PROPERTY. Neither the Company nor any Subsidiary
of the Company owns any real property.
(a) Section 4.14(b) of the Disclosure Schedule sets forth all leases,
subleases and other agreements (the "REAL PROPERTY LEASES") under which the
Company or any of its Subsidiaries uses or occupies or has the right to use or
occupy, now or in the future, any real property. The Company has heretofore
delivered to Parent true, correct and complete copies of all material Real
Property Leases (including all modifications, amendments and supplements
hereto). Each Real Property Lease is valid, binding and in full force and
effect, all rent and other sums and charges payable by the Company and its
Subsidiaries as tenants thereunder are current, no termination event or
condition or uncured default of a material nature on the part of the Company or
any such Subsidiary or, to the Company's knowledge, the landlord, exists under
any Real Property Lease. Each of the Company and its Subsidiaries has a good and
valid leasehold interest in each parcel of real property leased by it free and
clear of all mortgages, pledges, liens, encumbrances and security interests,
except: (i) those reflected or reserved against in the balance sheets of the
Company in the Company SEC Documents filed prior to the date of this Agreement;
(ii) taxes and general and special assessments not in default and payable
without penalty and interest; and (iii) other liens, mortgages, pledges,
encumbrances and security interests which do not materially interfere with the
Company's use and enjoyment of such real property or materially detract from or
diminish the value thereof.
Section 4.15 ENVIRONMENTAL MATTERS.
(a) The Company and each of its Subsidiaries (i) is and has been in
compliance in all material respects with all applicable laws, rules,
regulations, common law, ordinances, decrees, orders or other legal or
regulatory requirements relating to pollution or the protection of human health
or the environment (including without limitation the treatment, storage and
disposal of wastes and the remediation of releases and threatened releases of
materials of environmental concern) ("ENVIRONMENTAL LAWS"), and there are no
outstanding allegations by any person or entity that the Company or any of its
Subsidiaries is not or has not been in compliance with any Environmental Laws
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and (ii) the Company and each of its Subsidiaries currently hold all permits,
licenses, registrations and other governmental authorizations (including without
limitation exemptions, waivers, and the like) and financial assurance required
under any Environmental Laws for the Company and each of its Subsidiaries to
operate their business.
(b) To the Company's knowledge, except as set forth in Section 4.15(b)
of the Disclosure Schedule, (i) there are no asbestos or asbestos-containing
materials in or on any real property, buildings, structures or components
thereof currently, leased or operated by the Company or any of its Subsidiaries,
and (ii) there are and have been no underground or aboveground storage tanks
(whether or not required to be registered under any applicable law), dumps,
landfills, lagoons, surface impoundments, sumps, injection wells or other
disposal or storage sites or locations in or on any property currently leased or
operated by the Company or any of its Subsidiaries.
(c) Neither the Company nor any of its Subsidiaries have received
(x) any written communication from any person stating or alleging that any of
them may be a potentially responsible party under any Environmental Law
(including without limitation the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, and any state analog
thereto) with respect to any actual or alleged environmental contamination, or
(y) any written request for information under any Environmental Law from any
governmental agency or authority or any other person or entity with respect to
any actual or alleged environmental contamination or violation. None of the
Company, its Subsidiaries, any governmental agency or authority, or any other
person or entity is conducting or has conducted (or is proposing or threatening
to conduct) any environmental remediation or investigation which could result in
a material liability of the Company or any of its Subsidiaries under any
Environmental Law or otherwise require disclosure under the Securities Act or
Exchange Act.
Section 4.16 TRANSACTIONS WITH AFFILIATES. Except to the extent disclosed
in the Company SEC Documents filed prior to the date of this Agreement or as
disclosed in Section 4.16 of the Disclosure Schedule, since January 1, 1997,
there have been no transactions, agreements, arrangements or understandings
between the Company and its affiliates that would be required to be disclosed
under Item 404 of Regulation S-K under the Securities Act.
Section 4.17 OPINION OF FINANCIAL ADVISOR; BROKERS. The Company has
received an opinion from Deutsche Bank Securities, Inc. ("DBAB"), financial
advisor to the Company, to the effect that the consideration to be received by
the stockholders of the Company pursuant to the Merger is fair to such
stockholders from a financial point of view, a copy of which opinion has been
provided to Parent. Except for fees payable to DBAB, pursuant to an engagement
letter, dated October 13, 2000, a true and complete copy of which has been
provided to Parent, no broker, investment banker, financial advisor or other
person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company.
Section 4.18 INTELLECTUAL PROPERTY.
(a) The Company or its Subsidiaries own or have a valid right to use
all: trademarks, service marks, trade names, Internet domain names, designs,
slogans, and general intangibles of like nature, together with all goodwill
related to the foregoing (collectively, "TRADEMARKS"); patents; inventions
(whether patented or not); copyrights (including any registrations, renewals and
applications for any of the foregoing); Software (as defined below in
Section 4.18(x)); technology, trade secrets and other confidential information,
know-how, proprietary processes, formulae, algorithms, models, and methodologies
(collectively, "TRADE SECRETS," and together with the foregoing, the
"INTELLECTUAL PROPERTY") used in or necessary for the conduct of the business of
the Company and each of its Subsidiaries' as currently conducted or contemplated
to be conducted (collectively "COMPANY INTELLECTUAL PROPERTY").
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(b) Section 4.18(ii)(a) of the Disclosure Schedule sets forth, a
complete and accurate list of all Company Intellectual Property, consisting of
all U.S. and foreign (a) patents and patent applications, (b) Trademark
registrations (including Internet domain registrations) and applications and
material unregistered Trademarks, and (c) copyright registrations and
applications, and material unregistered copyrights, including those in Software,
indicating for each, the applicable jurisdiction, registration number (or
application number), and date issued (or date filed); and a list of all material
Trade Secrets. Section 4.18(ii)(b) of the Disclosure Schedule sets forth a
complete and accurate list of all Company Intellectual Property not owned by the
Company and license agreements granting any right to use or practice any rights
under any Company Intellectual Property, whether the Company or any Subsidiary
is the licensee or licensor thereunder, and any written settlements relating to
any Company Intellectual Property to which the Company or any Subsidiary is a
party or otherwise bound (collectively, the "LICENSE AGREEMENTS"), indicating
for each the title, the parties, date executed, and the Company Intellectual
Property covered thereby.
(c) The Company Intellectual Property is free and clear of all Liens,
and the Company or a Subsidiary or a third party (as the case may be), as set
forth in Section 4.18(iii) of the Disclosure Schedule is listed in the records
of the appropriate United States, state, or foreign agency as the sole owner of
record for each application and registration listed in Section 4.18(iii) of the
Disclosure Schedule.
(d) Except as set forth on Section 4.18(iv) of the Disclosure Schedule,
the Company Intellectual Property is valid and subsisting, in full force and
effect, and has not been cancelled, expired, or abandoned. There is no pending
or, to the Company's knowledge, threatened opposition, interference or
cancellation proceeding before any court or registration authority in any
jurisdiction against the registrations listed in Section 4.18(iv) of the
Disclosure Schedule, or against any Company Intellectual Property not owned by
the Company or its Subsidiaries.
(e) To the knowledge of the Company, the conduct of the business of the
Company's and each of its Subsidiaries' as currently conducted or planned to be
conducted does not infringe upon any Intellectual Property rights owned or
controlled by any third party (either directly or indirectly such as through
contributory infringement or inducement to infringe). Except as set forth in
Section 4.18(v) of the Disclosure Schedule, there are no claims or suits pending
or, to the Company's knowledge, threatened, and neither the Company nor any
Subsidiary has received any notice of a third party claim or suit (a) alleging
that its activities or the conduct of its businesses infringes upon, violates,
or constitutes the unauthorized use of the Intellectual Property rights of any
third party or (b) challenging the ownership, use, validity or enforceability of
any Company Intellectual Property.
(f) Except as set forth in Section 4.18(vi) of the Disclosure Schedule,
there are no settlements, forebearances to sue, consents, judgments, or orders
or similar obligations which (a) restrict the Company's or its Subsidiaries'
rights to use any Company Intellectual Property, (b) restrict the Company's or
its Subsidiaries' business in order to accommodate a third party's Intellectual
Property rights, or (c) permit third parties to use any Company Intellectual
Property owned or controlled by the Company or any Subsidiary. The Company or
its Subsidiaries have not licensed or sublicensed their rights in any material
Company Intellectual Property other than pursuant to the License Agreements, and
no royalties, honoraria or other fees are payable by the Company or its
Subsidiaries for the use of or right to use any Company Intellectual Property,
except pursuant to the License Agreements. The License Agreements are valid and
binding obligations of all parties thereto, enforceable in accordance with their
terms (except that (i) such enforcement may be subject to applicable bankruptcy,
insolvency or other similar laws, now or hereafter in effect, affecting
creditors' rights generally and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought) and there exists no event or condition which will result in a
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violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default by any party under any such License Agreement.
(g) The Company and each of its Subsidiaries takes commercially
reasonable measures to protect the confidentiality of Trade Secrets, including
requiring its employees and independent contractors having access thereto to
execute written non-disclosure agreements. No Trade Secret has been disclosed or
authorized to be disclosed to any third party other than pursuant to a
non-disclosure agreement that adequately protects the Company and the applicable
Subsidiary's proprietary interests in and to such Trade Secrets. To the
knowledge of the Company, no party to any non-disclosure agreement relating to
its Trade Secrets is in breach or default thereof.
(h) To the knowledge of the Company, no third party is
misappropriating, infringing, diluting, or violating any Intellectual Property
owned by the Company or any Subsidiary and, except as set forth on
Section 4.18(viii) of the Disclosure Schedule, no such claims have been brought
against any third party by the Company or any Subsidiary.
(i) Except as set forth in Section 4.18(ix) of the Disclosure Schedule,
the consummation of the transactions contemplated hereby will not result in the
loss or material impairment of the Company or any Subsidiary's right to own or
use any of the Company Intellectual Property, nor will require the consent of
any governmental authority or third party in respect of any such Intellectual
Property.
(j) Section 4.18(x) of the Disclosure Schedule lists all Software
(other than off-the-shelf software applications programs having an acquisition
price of less than $25,000), which are owned, licensed, leased, or otherwise
used by the Company or any Subsidiary, and identifies which Software is owned,
licensed, leased, or otherwise used, as the case may be. Section 4.18(x) of the
Disclosure Schedule lists all Software sold, licensed, leased or otherwise
distributed by the Company or any Subsidiary to any third party, and identifies
which Software is sold, licensed, leased, or otherwise distributed as the case
may be. With respect to the Software set forth in Section 4.18(x) of the
Disclosure Schedule which the Company or any Subsidiary purports to own, such
Software was either developed (a) by employees of the Company or any Subsidiary
within the scope of their employment or (b) by independent contractors who have
assigned their rights to the Company or any Subsidiary pursuant to written
agreements. For purposes of this Section 4.18, "SOFTWARE" means any and all
(v) computer programs, including any and all software implementations of
algorithms, models and methodologies, whether in source code or object code,
(w) databases and compilations, including any and all data and collections of
data, whether machine readable or otherwise, (x) descriptions, flow-charts and
other work product used to design, plan, organize and develop any of the
foregoing, (y) the technology supporting any Internet site(s) operated by or on
behalf of the Company or any Subsidiary, and (z) all documentation, including
user manuals and training materials, relating to any of the foregoing.
Section 4.19 REORGANIZATION. None of the Company, any of its Subsidiaries
or, to the knowledge of the Company, any of their respective directors, officers
or stockholders, has taken any action which would prevent the Merger from
constituting a reorganization qualifying under the provisions of Section 368(a)
of the Code.
Section 4.20 INSURANCE. The Company and each of its Subsidiaries has
policies of insurance and bonds of the type and in amounts customarily carried
by persons conducting businesses or owning assets similar to those of the
Company and its Subsidiaries. There is no material claim pending under any of
such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid and the Company and its
Subsidiaries are otherwise in compliance in all material respects with the terms
of such policies and bonds. The Company has no knowledge of any threatened
termination of, or material premium increase with respect to, any of such
policies.
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Section 4.21 ACCOUNTS RECEIVABLE. Subject to any reserves set forth in the
balance sheet of the Company included in the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 2000, as filed with the SEC prior to
the date of this Agreement (the "COMPANY BALANCE SHEET"), the accounts
receivable shown in the Company Balance Sheet arose in the ordinary course of
business; were not, as of the date of the Company Balance Sheet, subject to any
material discount, contingency, claim of offset or recoupment or counterclaim;
and represented, as of the date of the Company Balance Sheet, bona fide claims
against debtors for sales, leases, licenses and other charges. All accounts
receivable of the Company and its Subsidiaries arising after the date of the
Company Balance Sheet through the date of this Agreement arose in the ordinary
course of business and, as of the date of this Agreement, are not subject to any
material discount, contingency, claim of offset or recoupment or counterclaim,
except for normal reserves consistent with past practice. The amount carried for
doubtful accounts and allowances disclosed in the Company Balance Sheet is
believed by the Company as of the date of this Agreement to be sufficient to
provide for any losses which may be sustained or realization of the accounts
receivable shown in the Company Balance Sheet.
Section 4.22 SUPPLIERS AND CUSTOMERS. Since December 31, 1999, no material
licensor, vendor, supplier, licensee or customer of the Company or any of its
Subsidiaries, has cancelled or otherwise modified its relationship with the
Company or its Subsidiaries in a manner adverse to the Company and its
Subsidiaries, taken as a whole, and, to the Company's knowledge, (i) no such
person has any intention to do so, and (ii) the consummation of the transactions
contemplated hereby will not adversely affect any of such relationships.
Section 4.23 LABOR MATTERS.
(a) Except as set forth in Section 4.23 of the Disclosure Schedule:
(i) there is no labor strike, dispute, slowdown, stoppage or lockout actually
pending, or to the knowledge of the Company, threatened against or affecting the
Company or any Subsidiary thereto and during the last three (3) years there has
not been any such action; (ii) to the knowledge of the Company, no union claims
to represent the employees of the Company or any Subsidiary thereto;
(iii) neither the Company nor any Subsidiary thereto is a party to or bound by
any collective bargaining or similar agreement with any labor organization, or
work rules or practices agreed to with any labor organization or employee
association applicable to employees of the Company or any Subsidiary thereto;
(iv) none of the employees of the Company or any Subsidiary thereto are
represented by any labor organization and the Company has no knowledge of any
current union organizing activities among the employees of the Company or any
Subsidiary thereto, nor does any question concerning representation exist
concerning such employees; (v) there are no written personnel policies, rules or
procedures applicable to employees of the Company other than those set forth in
Section 4.23 of the Disclosure Schedule, true, correct and complete copies of
which have heretofore been delivered to Parent; (vi) the Company and any
Subsidiary thereto are, and have at all times been, in material compliance with
all applicable laws respecting employment and employment practices, terms and
conditions of employment, wages, hours of work, immigration, equal employment
opportunity, and occupational safety and health, and are not engaged in any
unfair labor practices as defined in the National Labor Relations Act or other
applicable law, ordinance or regulation; (vii) the Company has not received
written notice of any pending or threatened unfair labor practice charge or
complaint against the Company or any Subsidiary thereto before the National
Labor Relations Board or any similar state agency; (viii) there is no grievance
or arbitration proceeding arising out of any collective bargaining agreement or
other grievance procedure relating to the Company or any Subsidiary thereto;
(ix) the Company has not received written notice of any charges with respect to
or relating to the Company or any Subsidiary thereto are pending before the
Equal Employment Opportunity Commission or any other agency responsible for the
prevention of unlawful employment practices; (x) the Company has not received
written or other notice of the intent of any federal, state, or local agency
responsible for the enforcement of labor or employment laws to conduct an
investigation with respect to or relating to the
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Company or any Subsidiary thereto and no such investigation is in progress; and
(xi) there are no complaints, controversies, lawsuits or other proceedings
pending or, to the knowledge of the Company, threatened to be brought by any
applicant for employment of current or former employees, or classes of the
foregoing, alleging breach of any express or implied contract for employment,
any law or regulation governing employment or the termination thereof or other
discriminatory, wrongful or tortious conduct in connection with the employment
relationship. Except as set forth in Section 4.23 of the Disclosure Schedule,
there are no employment contracts, severance agreements, confidentiality
agreements (other than standard employee non-disclosure agreements as
contemplated by Section 4.23(vii) hereof) or other agreements (other than any
agreements set forth in Section 4.9 of the Disclosure Schedule) with any
employees of the Company or any Subsidiary thereto. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement and the Option Agreement will not result in a breach or other
violation of any collective bargaining agreement or any other employment
contract or agreement to which the Company or any Subsidiary thereto is a party.
(b) Since the enactment of Worker Adjustment and Retraining
Notification Act of 1988 (the "WARN ACT"), neither the Company nor any
Subsidiary thereto has effectuated (i) a "PLANT CLOSING" (as defined in the WARN
Act) affecting any site of employment or one or more facilities or operating
units within any site of employment or facility of the Company or any Subsidiary
thereto, or (ii) a "MASS LAYOFF" (as defined in the WARN Act) affecting any site
of employment or facility of the Company or any Subsidiary thereto; nor has the
Company or any Subsidiary thereto been affected by any transaction or engaged in
layoffs or employment terminations sufficient in number to trigger application
of any similar state or local law. Except as set forth in Section 4.23 of the
Disclosure Schedule, none of the employees of the Company or any Subsidiary
thereto has suffered an "EMPLOYMENT LOSS" (as defined in the WARN Act) during
the ninety day period prior to the execution of this Agreement.
(c) Each of the individuals identified in Section 7.2(e) of the
Disclosure Schedule, has executed an Employee Confidentiality Agreement, in
substantially the form attached to Section 4.23(c) of the Disclosure Schedule.
As of the date of this Agreement, the individuals identified in Section 7.2(e)
of the Disclosure Schedule constitute all of the individuals who are engaged in
the development of software for or on behalf of the Company.
Section 4.24 FULL DISCLOSURE. The Company has not knowingly failed to
disclose to Parent any facts material to the Company's business, operations,
prospects, properties, financial condition or results of operations. No
representation or warranty by the Company in this Agreement and no statement by
the Company in any document referred to herein (including the Schedules and
Exhibits hereto), contains any untrue statements of a material fact or omits to
state any material fact necessary, in order to make the statement made herein or
therein, in light of the circumstances under which they were made, not
misleading.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
Section 5.1 ORGANIZATION. Each of Parent and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has all requisite corporate or other
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing or to
have such power, authority, and governmental approvals would not have a material
adverse effect on Parent and its Subsidiaries. Parent and each of its
Subsidiaries is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not, in the aggregate, have a material adverse effect on
Parent and its Subsidiaries, taken as a whole.
Section 5.2 CAPITALIZATION.
As of September 30, 2000, the authorized capital stock of Parent consists of
4,800,000,000 shares of Parent Common Stock and 300,000,000 shares of preferred
stock, $.01 par value per share (the "PARENT PREFERRED STOCK"). Before giving
effect to a two-for-one stock split in the form of a stock dividend effective
October 27, 2000 for stockholders of record of Parent as of September 27, 2000,
as of the close of business on September 30, 2000, (i) 979,221,142 shares of
Parent Common Stock were issued and outstanding and (ii) no shares of Parent
Preferred Stock were issued and outstanding. All of the issued and outstanding
shares of Parent Common Stock are duly authorized, validly issued, fully paid
and nonassessable.
Section 5.3 AUTHORIZATION; VALIDITY OF AGREEMENT; NECESSARY ACTION. Each
of Parent and Sub has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement and the consummation of
the Merger and of the other transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and Sub and
no other corporate proceedings on the part of Parent and Sub are necessary to
authorize this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly executed and delivered by Parent and Sub and, assuming
this Agreement constitutes a valid and binding obligation of the other parties
hereto, constitutes a valid and binding obligation of each of Parent and Sub, as
the case may be, enforceable against them in accordance with its terms, except
that (i) such enforcement may be subject to applicable bankruptcy, insolvency or
other similar laws, now or hereafter in effect, affecting creditors' rights
generally and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
When issued in accordance with the terms of this Agreement, the shares of Parent
Common Stock to be issued pursuant to the Merger will be duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights.
Section 5.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the HSR Act and any comparable premerger
notification laws, rules or regulations of any applicable foreign jurisdiction,
the Exchange Act, the Securities Act, the DGCL, state blue sky laws and any
applicable state takeover laws, neither the execution, delivery or performance
of this Agreement by Parent and Sub nor the consummation by Parent and Sub of
the transactions contemplated hereby nor compliance by Parent and Sub with any
of the provisions hereof will (i) conflict with or result in any breach of any
provision of the certificate of incorporation or bylaws of Parent or the
certificate of incorporation and
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bylaws of Sub, (ii) require any filing with, or permit, authorization, consent
or approval of, any Governmental Entity, (iii) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any material note, bond,
mortgage, indenture, license, lease, contract, agreement or other instrument or
obligation to which Parent or any of its Subsidiaries is a party or by which any
of them or any of their properties or assets may be bound or (iv) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to
Parent, any of its Subsidiaries or any of their properties or assets, except in
the case of clauses (ii), (iii) and (iv) where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings, or where
such violations, breaches or defaults would not, individually or in the
aggregate, materially impair the ability of Parent or Sub to consummate the
transactions contemplated hereby.
Section 5.5 INFORMATION IN PROXY STATEMENT/PROSPECTUS. The Registration
Statement (or any amendment thereof or supplement thereto) will not, at the date
it becomes effective and at the time of the Special Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading, except that no
representation is made by Parent or Sub with respect to statements made therein
based on information supplied by the Company in writing for inclusion in the
Registration Statement. None of the information supplied by Parent or Sub for
inclusion or incorporation by reference in the Proxy Statement/Prospectus, at
the date mailed to Company stockholders and at the time of the Special Meeting,
will contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Registration Statement will comply in all material respects with
the provisions of the Securities Act and the rules and regulations thereunder.
Section 5.6 SEC REPORTS AND FINANCIAL STATEMENTS. Parent has filed with
the SEC, and has heretofore made available to the Company, true and complete
copies of, all forms, reports, schedules, statements and other documents
required to be filed by it and its Subsidiaries since November 1, 1999 under the
Exchange Act or the Securities Act (as such documents have been amended since
the time of their filing, collectively, the "PARENT SEC DOCUMENTS"). As of their
respective dates or, if amended, as of the date of the last such amendment, the
Parent SEC Documents, including, without limitation, any financial statements or
schedules included therein (a) did not 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 light of the circumstances
under which they were made, not misleading and (b) complied in all material
respects with the applicable requirements of the Exchange Act and the Securities
Act, as the case may be, and the applicable rules and regulations of the SEC
thereunder. Each of the consolidated financial statements included in the Parent
SEC Documents has been prepared from, and is in accordance with, the books and
records of Parent and its consolidated Subsidiaries, complies in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, has been prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly presents the consolidated
financial position and the consolidated results of operations and cash flows of
the Parent and its consolidated Subsidiaries as at the dates thereof or for the
periods presented therein.
Section 5.7 ABSENCE OF CERTAIN CHANGES. Except to the extent disclosed in
the Parent SEC Documents filed prior to the date of this Agreement, since
July 31, 2000 through the date of this Agreement, Parent and its Subsidiaries
have conducted their respective businesses and operations in all material
respects consistent with past practice only in the ordinary and usual course.
From July 31, 2000 through the date of this Agreement, there has not occurred:
(i) any events, changes, or effects (including the incurrence of any liabilities
of any nature, whether or not accrued, contingent or
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otherwise) having or, which would be reasonably likely to have, individually or
in the aggregate, a material adverse effect on Parent and its Subsidiaries;
(ii) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to the equity
interests of Parent or of any of its Subsidiaries other than (A) regular
quarterly cash dividends or dividends paid by wholly owned Subsidiaries and
(B) the two-for-one stock split, in the form of a stock dividend, of Parent
Common Stock effective October 27, 2000; or (iii) any change by Parent or any of
its Subsidiaries in accounting principles or methods, except insofar as may be
required by a change in GAAP or applicable law.
ARTICLE VI
COVENANTS
Section 6.1 INTERIM OPERATIONS OF THE COMPANY. The Company covenants and
agrees that, except (i) as expressly provided in this Agreement or disclosed in
Section 6.1 of the Disclosure Schedule, or (ii) with the prior written consent
of Parent, after the date hereof and prior to the Effective Time:
(a) the business of the Company and its Subsidiaries shall be conducted
only in the ordinary and customary course consistent with past practice, and
each of the Company and its Subsidiaries shall use commercially reasonable
efforts to preserve its business organization intact and maintain its existing
relations with customers, suppliers, employees, creditors and business partners;
(b) the Company will not, directly or indirectly, split, combine or
reclassify the outstanding Company Common Stock, or any outstanding capital
stock of any of the Subsidiaries of the Company;
(c) neither the Company nor any of its Subsidiaries shall: (i) amend
its certificate of incorporation or bylaws or similar organizational documents;
(ii) declare, set aside or pay any dividend or other distribution payable in
cash, stock or property with respect to its capital stock; (iii) issue, sell,
transfer, pledge, dispose of or encumber any additional shares of, or securities
convertible into or exchangeable for, or options, warrants, calls, commitments
or rights of any kind to acquire, any shares of capital stock of any class of
the Company or its Subsidiaries, other than issuances pursuant to the exercise
of Options outstanding on the date hereof; (iv) transfer, lease, license, sell,
mortgage, pledge, dispose of, or encumber any material assets other than in the
ordinary and usual course of business and consistent with past practice; or
(v) redeem, purchase or otherwise acquire directly or indirectly any of its
capital stock;
(d) neither the Company nor any of its Subsidiaries shall: (i) grant
any increase in the compensation payable or to become payable by the Company or
any of its Subsidiaries to any of its officers or directors, or, except for
planned increases that have been previously disclosed to Parent or increases in
accordance with normal past practice, employees, agents or consultants;
(ii) adopt or enter into any new plan, policy, agreement or arrangement that
would constitute a Plan, or amend or otherwise increase, or accelerate the
payment or vesting of the amounts payable or to become payable under any
existing Plan; (iii) grant any Rights, whether or not pursuant to the Company
Option Plans; (iv) enter into any, or amend any existing, employment or
severance agreement with or, except in accordance with the existing written
policies of the Company previously delivered to Parent, grant any severance or
termination pay to any officer, director or employee of the Company or any of
its Subsidiaries; or (v) make any loans to any of its officers, directors,
employees, agents or consultants or make any changes in its existing borrowing
or lending arrangements for or on behalf of any of such persons, whether
contingent on the Merger or otherwise;
(e) neither the Company nor any of its Subsidiaries shall modify, amend
or terminate any of the material Company Agreements or waive, release or assign
any material rights or claims, except in the ordinary course of business and
consistent with past practice;
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(f) neither the Company nor any of its Subsidiaries shall permit any
material insurance policy naming it as a beneficiary or a loss payable payee to
be cancelled or terminated without notice to Parent, except in the ordinary
course of business and consistent with past practice;
(g) neither the Company nor any of its Subsidiaries shall: (i) incur or
assume any long-term debt or, except in the ordinary course of business
consistent with past practice, incur or assume any short-term indebtedness in
amounts not consistent with past practice; (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person, except in the ordinary
course of business and consistent with past practice; (iii) make any loans,
advances or capital contributions to, or investments in, any other person (other
than to wholly owned Subsidiaries of the Company or customary advances to
employees in accordance with past practice); or (iv) enter into any material
commitment or transaction (including, but not limited to, any borrowing, capital
expenditure or purchase, sale or lease of assets) other than capital
expenditures described in Section 6.1(g) of the Disclosure Schedule;
(h) neither the Company nor any of its Subsidiaries shall change any of
the accounting principles used by it unless required by GAAP or applicable law;
(i) neither the Company nor any of its Subsidiaries shall pay,
discharge or satisfy any 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 (x) in
the ordinary course of business and consistent with past practice, or claims,
liabilities or obligations reflected or reserved against in, or contemplated by,
the consolidated financial statements (or the notes thereto) of the Company and
its consolidated Subsidiaries, (y) incurred in the ordinary course of business
and consistent with past practice or (z) which are legally required to be paid,
discharged or satisfied (provided that if such claims, liabilities or
obligations referred to in this clause (z) are legally required to be paid and
are also not otherwise payable in accordance with clauses (x) or (y) above, the
Company will notify Parent in writing if such claims, liabilities or obligations
exceed, individually or in the aggregate, $250,000 in value, reasonably in
advance of their payment);
(j) neither the Company nor any of its Subsidiaries will adopt a plan
of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or any of
its Subsidiaries or any agreement relating to a Takeover Proposal (as defined in
Section 6.6(b) hereof) (other than the Merger);
(k) neither the Company nor any of its Subsidiaries will take, or agree
to commit to take, any action that would make any representation or warranty of
the Company contained herein inaccurate in any material respect at, or as of any
time prior to, the Effective Time;
(l) neither the Company nor any of its Subsidiaries shall voluntarily
make or agree to make any changes in federal and state Tax accounting methods,
waive or consent to the extension of any statute of limitations with respect to
Taxes, or consent to any assessment of any material Taxes, or settle any
judicial or administrative proceeding affecting any material Taxes; and
(m) neither the Company nor any of its Subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing, or to
authorize, recommend, propose or announce an intention to do any of the
foregoing.
Section 6.2 INTERIM OPERATIONS OF PARENT. Each of Parent and Sub covenants
and agrees that, except (i) as expressly provided in this Agreement, or
(ii) with the prior written consent of the Company, after the date hereof and
prior to the Effective Time:
(a) Parent will not, directly or indirectly, split, combine or
reclassify the outstanding Parent Common Stock (except for the two-for-one stock
split, in the form of a stock dividend, of Parent
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Common Stock effective October 27, 2000 and any other action that would result
in an adjustment to the Exchange Ratio pursuant to Section 3.9 hereof);
(b) Parent shall not declare, set aside or pay any dividend or other
distribution payable in cash (other than regular quarterly dividends), stock or
property with respect to its capital stock (except for the two-for-one stock
split, in the form of a stock dividend, of Parent Common Stock effective
October 27, 2000 and any other action that would result in an adjustment to the
Exchange Ratio pursuant to Section 3.9 hereof);
(c) neither Parent nor any of its Subsidiaries shall change any of the
accounting principles used by it unless required by GAAP;
(d) neither Parent nor any of its Subsidiaries will take, or agree to
commit to take, any action that would make any representation or warranty of
Parent and Sub contained herein inaccurate in any respect at, or as of any time
prior to, the Effective Time; and
(e) neither Parent nor any of its Subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing, or to
authorize, recommend, propose or announce an intention to do any of the
foregoing.
Section 6.3 ACCESS TO INFORMATION. The Company shall (and shall cause each
of its Subsidiaries to) afford to the officers, employees, accountants, counsel
and other representatives of Parent, access, during normal business hours,
during the period prior to the Effective Time, to all of its and its
Subsidiaries' properties, books, contracts, commitments and records and, during
such period, the Company shall (and shall cause each of its Subsidiaries to)
furnish promptly to Parent (a) a copy of each report, schedule, registration
statement and other document filed or received by it during such period pursuant
to the requirements of federal securities laws and (b) all other information
concerning its business, properties and personnel as Parent may reasonably
request. Unless otherwise required by law or by any listing agreement with a
national securities exchange, until the Effective Time, Parent will hold any
such information which is nonpublic in confidence in accordance with the
provisions of the confidentiality agreement between the Company and Parent,
dated October 16, 2000 (the "CONFIDENTIALITY AGREEMENT"). Parent and Sub shall
provide to the Company and its representatives access and information reasonably
requested by the Company.
Section 6.4 HSR ACT FILINGS.
(a) Each of Parent and the Company shall: (i) make or cause to be made
the filings required of such party or any of its Subsidiaries or affiliates
under the HSR Act with respect to the transactions contemplated by this
Agreement and the Option Agreement as promptly as practicable and in any event
within ten business days after the date of this Agreement; (ii) comply at the
earliest practicable date with any request under the HSR Act for additional
information, documents, or other materials received by such party or any of its
Subsidiaries from the Federal Trade Commission or the Department of Justice
(either, an "HSR AUTHORITY") or any other Governmental Entity in respect of such
filings or such transactions; and (iii) cooperate with the other party in
connection with any such filing, response to a request for additional
information, documents or other materials, or other submissions to such
Governmental Entity under HSR Act, the Sherman Act, as amended, the Clayton Act,
as amended, the Federal Trade Commission Act, as amended, and any other federal,
state or foreign statutes, rules, regulations, orders, decrees, administrative
or judicial doctrines or other laws that are designed to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint of
trade (collectively, "ANTITRUST LAWS") with respect to any such filing or any
such transaction. Each party shall use its commercially reasonable efforts to
furnish to each other all information required for any application or another
filing to be made pursuant to any applicable law in connection with the Merger
and the other transactions contemplated by this Agreement. Each party shall
promptly inform the other party of any communication with, and any proposed
understanding,
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undertaking, or agreement with, any Governmental Entity regarding any such
filings or any such transaction.
(b) Notwithstanding this Section 6.4 or any other provision of this
Agreement, neither Parent nor Sub shall be required, whether before or after the
Effective Time, to hold separate (including by trust or otherwise) or divest any
of its business or assets or any of the businesses or assets of the Company, or
enter into any consent decree or other agreement that would restrict Parent or
the Company in the conduct of its respective businesses as heretofore conducted.
Section 6.5 OTHER CONSENTS AND APPROVALS. Each of the Company, Parent and
Sub 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 contemplated hereby (which actions shall include, without
limitation, furnishing all information in connection with approvals of or
filings with any Governmental Entity) and will promptly cooperate with and
furnish information to each other in connection with any such requirements
imposed upon any of them or any of their Subsidiaries in connection with this
Agreement, the Option Agreement and the transactions contemplated hereby and
thereby. Each of the Company, Parent and Sub will, and will cause its respective
Subsidiaries to, take all reasonable actions necessary to obtain any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity or other public or private third party required to be obtained or made by
Parent, Sub, the Company or any of their Subsidiaries in connection with the
Merger or the taking of any action contemplated thereby or by this Agreement or
the Option Agreement.
Section 6.6 NO SOLICITATION.
(a) The Company (and its Subsidiaries and affiliates) will not, and the
Company (and its Subsidiaries and affiliates) will use their best efforts to
ensure that their respective officers, directors, employees, investment bankers,
attorneys, accountants and other agents do not, directly or indirectly:
(i) initiate, solicit or knowingly encourage, or take any action to facilitate
the making of, any offer or proposal which constitutes or is reasonably likely
to lead to any Takeover Proposal (as defined below) of the Company or any
Subsidiary or affiliate of the Company or an inquiry with respect thereto;
(ii) enter into any agreement with respect to any Takeover Proposal; or
(iii) in the event of an unsolicited written Takeover Proposal for the Company
or any Subsidiary or affiliate of the Company, engage in negotiations or
discussions with, or provide any information or data to, any corporation,
partnership, person or other entity or group (other than Parent, any of its
affiliates or representatives) ("PERSON") relating to any Takeover Proposal, or
otherwise cooperate in any way with, or assist or participate in, facilitate or
knowingly encourage any effort or attempt by any Person to do or seek any of the
foregoing; PROVIDED, HOWEVER, that the Company may furnish confidential
information in response to an unsolicited written Takeover Proposal and engage
in negotiations with a Person relating to such written Takeover Proposal if, but
only if, the Company's Board of Directors shall have concluded in good faith and
on the basis of advice (x) from financial advisors, that such Takeover Proposal
involves consideration to the holders of Company Common Stock that is superior
to the consideration offered pursuant to the Merger and is otherwise superior to
the Merger and (y) from independent outside counsel that the failure to take
such action would constitute a violation of the Board's fiduciary duties under
applicable law; and PROVIDED, FURTHER, that the Company shall notify Parent
immediately of any inquiries, expressions of interest, proposals or offers
received by, the Company or any of the Company's representatives relating to any
Takeover Proposal or the possibility or consideration of making a Takeover
Proposal ("TAKEOVER PROPOSAL INTEREST") indicating, in connection with such
notice, the name of the Person indicating such Takeover Proposal Interest and
the terms and conditions of any proposals or offers. The Company agrees that it
will immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Takeover Proposal Interest. The Company agrees that it will take the
necessary steps promptly to inform the individuals or entities referred to in
the first sentence hereof of the obligations undertaken
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in this Section 6.6. The Company agrees that it shall keep Parent informed, on a
current basis, of the status and terms of any Takeover Proposal Interest.
(b) As used in this Agreement, "TAKEOVER PROPOSAL" when used in
connection with any Person shall mean any tender or exchange offer involving
such Person, any proposal for a merger, consolidation or other business
combination involving such Person or any Subsidiary of such Person, any proposal
or offer to acquire in any manner an interest in excess of 15% of the
outstanding equity securities of, or a substantial portion of the business or
assets of, such Person or any Subsidiary of such Person, any proposal or offer
with respect to any recapitalization or restructuring with respect to such
Person or any Subsidiary of such Person or any proposal or offer with respect to
any other transaction similar to any of the foregoing with respect to such
Person or any Subsidiary of such Person, other than pursuant to the transactions
to be effected pursuant to this Agreement.
(c) Neither the Board of Directors of the Company nor any committee
thereof shall (i) except as expressly permitted by this Section 6.6(c),
withdraw, qualify or modify, or propose publicly to withdraw, qualify or modify,
in a manner adverse to Parent or Sub, the approval or recommendation by such
Board of Directors or such committee of the Merger or this Agreement, or the
issuance of Parent Common Stock in connection with the Merger, (ii) approve or
recommend, or propose publicly to approve or recommend, any Takeover Proposal,
or (iii) cause the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement related to any
Takeover Proposal. Notwithstanding the foregoing, in the event that prior to the
adoption of this Agreement by the holders of Company Common Stock the Board of
Directors of the Company determines in good faith, after it has received a
Superior Proposal (as defined below) and after receipt of advice from
independent outside counsel that the failure to do so would constitute a
violation of the Board's fiduciary duties under applicable law, the Board of
Directors of the Company may (subject to this and the following sentences)
inform the Company's stockholders that it no longer believes that the Merger or
this Agreement is advisable and no longer recommends approval (a "SUBSEQUENT
DETERMINATION"), but only at a time that is after the third business day
following Parent's receipt of written notice advising Parent that the Board of
Directors of the Company has received a Superior Proposal specifying the
material terms and conditions of such Superior Proposal, identifying the person
making such Superior Proposal and stating that it intends to make a Subsequent
Determination. After providing such notice, the Company shall provide a
reasonable opportunity to Parent to make such adjustments in the terms and
conditions of this Agreement and/or of the Option Agreement as would enable the
Company to proceed with its recommendation to stockholders without making a
Subsequent Determination; PROVIDED, HOWEVER, that any such adjustments shall be
at the discretion of the parties at such time. For purposes of this Agreement, a
"Superior Proposal" means any Takeover Proposal (on its most recently amended or
modified terms, if amended or modified) made by a Person which the Board of
Directors of the Company determines in its good faith judgment (based on the
advice of DBAB, or another financial advisor of nationally recognized
reputation) to be more favorable to the Company's stockholders than the Merger
taking into account all relevant factors (including whether, in the good faith
judgment of the Board of Directors of the Company, after obtaining advice from
DBAB, or another financial advisor of nationally recognized reputation, the
Person is reasonably able to finance the transaction, and any proposed changes
to this Agreement and/or the Option Agreement that may be proposed by Parent in
response to such Takeover Proposal). Notwithstanding any other provision of this
Agreement, the Company shall submit this Agreement to its stockholders whether
or not the Board of Directors of the Company makes a Subsequent Determination.
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(d) Nothing contained in this Section 6.6 shall prohibit the Company
(i) from taking and disclosing to its stockholders a position contemplated by
Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act or (ii) from
making any disclosure to its stockholders if, in the good faith judgment of the
Board of Directors of the Company, after receipt of advice from independent
outside counsel, failure so to disclose would constitute a violation of the
Board's fiduciary duties under applicable law.
Section 6.7 ADDITIONAL AGREEMENTS. Subject to the terms and conditions
herein provided, each of the parties hereto 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, whether under applicable laws and
regulations or otherwise, or to remove any injunctions or other impediments or
delays, legal or otherwise, to consummate and make effective the Merger and the
other transactions contemplated by this Agreement and the Option Agreement. In
case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement or the Option Agreement,
the proper officers and directors of the Company and Parent shall use all
reasonable efforts to take, or cause to be taken, all such necessary actions.
Section 6.8 PUBLICITY. So long as this Agreement is in effect, neither the
Company, Parent nor any of their respective affiliates shall issue or cause the
publication of any press release or other announcement with respect to the
Merger, this Agreement, the Option Agreement, the Employee Agreements, the
Voting Agreements or the other transactions contemplated hereby or thereby
without the prior consultation of the other party, except as may be required by
law or by any listing agreement with a national securities exchange.
Section 6.9 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Parent and Parent shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event the occurrence or non-occurrence of
which would cause any representation or warranty contained in this Agreement to
be untrue or inaccurate in any material respect at or prior to the Effective
Time and (ii) any material failure of the Company or Parent, as the case may be,
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder or under any Ancillary Agreement; PROVIDED,
HOWEVER, that the delivery of any notice pursuant to this Section 6.9 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
Section 6.10 DIRECTORS' AND OFFICERS' INSURANCE AND
INDEMNIFICATION. Parent agrees that at all times after the Effective Time, it
shall cause the Company (or the Surviving Corporation if after the Effective
Time) and its Subsidiaries to, at all times after the Effective Time, indemnify,
each person who is now, or has been at any time prior to the date hereof, a
director or officer of the Company or of any of the Company's Subsidiaries,
successors and assigns (individually an "INDEMNIFIED PARTY" and collectively the
"INDEMNIFIED PARTIES"), to the same extent and in the same manner as is now
provided in the respective charters or by-laws of the Company and such
Subsidiaries or otherwise in effect on the date hereof, with respect to any
claim, liability, loss, damage, cost or expense (whenever asserted or claimed)
("INDEMNIFIED LIABILITY") based in whole or in part on, or arising in whole or
in part out of, any matter existing or occurring at or prior to the Effective
Time. Parent shall, and shall cause the Company (or the Surviving Corporation if
after the Effective Time) to, maintain in effect for not less than six years
after the Effective Time the current policies of directors' and officers'
liability insurance maintained by the Company and its Subsidiaries on the date
hereof (provided that Parent may substitute therefor policies having at least
the same coverage and containing terms and conditions which are no less
advantageous to the persons currently covered by such policies as insured) with
respect to matters existing or occurring at or prior to the Effective Time;
PROVIDED, HOWEVER, that if the aggregate annual premiums for such insurance at
any time during such period shall exceed 150% of the per annum rate of premium
currently paid by the Company and its Subsidiaries for such insurance on the
date of this Agreement, which amount is set forth in Section 6.10 of the
Disclosure Schedule, then Parent shall cause the Company (or the Surviving
Corporation if after the Effective Time) to, and the
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Company (or the Surviving Corporation if after the Effective Time) shall,
provide the maximum coverage that shall then be available at an annual premium
equal to 150% of such rate.
Section 6.11 COOPERATION. Parent and the Company shall together, or
pursuant to an allocation of responsibility to be agreed upon between them,
coordinate and cooperate (i) in determining whether any action by or in respect
of, or filing with, any Governmental Entity is required, or any actions,
consents approvals or waivers are required to be obtained from parties to any
material contracts, in connection with the consummation of the transactions
contemplated by this Agreement and the Option Agreement and (ii) in seeking any
such actions, consents, approvals or waivers or making any such filings,
furnishing information required in connection therewith and timely seeking to
obtain any such actions, consents approvals or waivers. Subject to the terms and
conditions of this Agreement, Parent and the Company will each use its
commercially reasonable efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after the
Registration Statement is filed, and Parent and the Company shall, subject to
applicable law, confer on a regular and frequent basis with one or more
representatives of one another to report operational matters of significance to
the Merger and the general status of ongoing operations insofar as relevant to
the Merger, provided that the parties will not confer on any matter to the
extent inconsistent with law.
Section 6.12 CONSENTS OF ACCOUNTANTS. Parent and the Company will each use
commercially reasonable efforts to cause to be delivered to each other consents
from their respective independent auditors, dated the date on which the
Registration Statement shall become effective, in form reasonably satisfactory
to the recipient and customary in scope and substance for consents delivered by
independent public accountants in connection with registration statements on
Form S-4 under the Securities Act.
Section 6.13 SUBSEQUENT FINANCIAL STATEMENTS. The Company shall consult
with Parent prior to making publicly available its financial results for any
period after the date of this Agreement and prior to filing any Company SEC
Documents after the date of this Agreement, it being understood that Parent
shall have no liability by reason of such consultation.
Section 6.14 TAX TREATMENT. Each of Parent, Sub, the Company and their
respective Subsidiaries intend that the Merger will qualify as a reorganization
with the meaning of Section 368(a) of the Code, and each shall use commercially
reasonable efforts to cause the Merger to so qualify. The parties agree and
acknowledge that if (i) Parent has, not later than three days prior to the
Effective Time, provided written notice to the Company of its intention to merge
the Surviving Corporation with and into Parent with Parent surviving the merger
(the "Upstream Merger"), and (ii) the Company consents to the Upstream Merger,
which consent shall not be unreasonably withheld, then the Upstream Merger shall
occur immediately following the Effective Time. Neither Parent nor the Company
shall knowingly take any action, or knowingly fail to take any action, that
would be reasonably likely to jeopardize the qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
Section 6.15 EMPLOYEE BENEFITS. Parent and Sub agree that, effective as of
the Effective Time, Parent shall provide, or shall cause Sub to provide, to
those persons who, immediately prior to the Effective Time, were employees of
the Company and its subsidiaries and who continue in such employment
("Continuing Employees"), with benefits and compensation no less favorable, in
the aggregate, to the Continuing Employees than benefits and compensation that
are provided to substantially similarly situated employees of the Parent or Sub
as of the Effective Time.
Section 6.16 401(k) PLAN. The Company shall terminate any and all 401(k)
plans of the Company, effective not later than the day immediately preceding the
Closing Date, unless Parent, in its sole and absolute discretion, elects to
sponsor and maintain such plan or to merge such plan into Parent's 401(k) plan,
in which event Parent shall provide the Company with written notice of such
election at least three (3) days prior to the Closing Date. Unless Parent
provides such notice to the Company, Parent shall receive from the Company
evidence that the Company's 401(k) plan(s) have
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been terminated pursuant to resolution of Company's Board of Directors (the form
and substance of such resolutions shall be subject to review and approval by
Parent), not later than the day immediately preceding the Closing Date.
ARTICLE VII
CONDITIONS
Section 7.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations
of the Company, on the one hand, and Parent and Sub, on the other hand, to
consummate the Merger are subject to the satisfaction (or, if permissible,
waiver by the party for whose benefit such conditions exist) of the following
conditions:
(a) any waiting period applicable to the consummation of the Merger
under the HSR Act and any comparable premerger notification laws, rules or
regulations of any applicable foreign jurisdiction shall have expired or been
terminated, and no action shall have been instituted by an HSR Authority
challenging or seeking to enjoin the consummation of this transaction, which
action shall have not been withdrawn or terminated;
(b) this Agreement shall have been adopted and approved by the
stockholders of the Company in accordance with the DGCL;
(c) the shares of Parent Common Stock to be issued pursuant to the
Merger shall have been authorized for listing on the NYSE, upon official notice
of issuance;
(d) no court, arbitrator or governmental body, agency or official shall
have issued any order, and there shall not be any statute, rule or regulation,
restraining or prohibiting the consummation of the Merger or the effective
operation of the business of the Company and its respective Subsidiaries after
the Effective Time;
(e) all actions by or in respect of or filings with any governmental
body, agency official, or authority required to permit the consummation of the
Merger shall have been obtained but excluding any consent, approval, clearance
or confirmation the failure to obtain which would not have a material adverse
effect on Parent, Sub, the Company or, after the Effective Time, the Surviving
Corporation; and
(f) the Registration Statement shall have become effective under the
Securities Act and no stop order suspending effectiveness of the Registration
Statement shall have been issued and no proceeding for that purpose shall have
been initiated or threatened by the SEC.
Section 7.2 CONDITIONS TO THE OBLIGATIONS OF PARENT AND SUB. The
obligations of Parent and Sub to consummate the Merger are subject to the
satisfaction (or waiver by Parent) of the following further conditions:
(a) the representations and warranties of the Company shall have been
true and accurate both when made and (except for those representations and
warranties that address matters only as of a particular date which need only be
true and accurate as of such date) as of the Effective Time as if made at and as
of such time, except where the failure of such representations and warranties to
be so true and correct (without giving effect to any limitation as to
"materiality" or "material adverse effect" set forth therein), does not have,
and is not likely to have, individually or in the aggregate, a material adverse
effect on the Company and its Subsidiaries, taken as a whole, PROVIDED, that the
representations and warranties set forth in Sections 4.2 and 4.3 shall be true
and correct in all respects;
(b) the Company shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Effective Time;
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(c) the Company shall have obtained, and there shall be in full force
and effect, the consents described in Section 7.2(c) of the Disclosure Schedule;
(d) the Offer Letters shall be valid, in full force and effect and
complied with in all material respects by the employee signatory thereto;
(e) at least forty (40) of the individuals identified in
Section 7.2(e) of the Disclosure Schedule shall have countersigned an offer
letter, in substantially the form attached as Schedule 7.2(e) of the Disclosure
Schedule, and each of such offer letters shall be valid, in full force and
effect and complied with in all material respects by the employee signatory
thereto;
(f) since the date of this Agreement, there shall not have occurred any
event, change or effect having, or which would be reasonably likely to have,
individually or in the aggregate, a material adverse effect on the Company and
its Subsidiaries, taken as a whole;
(g) Parent shall have received an opinion of Skadden, Arps, Slate,
Meagher & Flom LLP, counsel to Parent, dated as of the Effective Time, to the
effect that the Merger (taking into account the effect of the Upstream Merger,
if applicable) will qualify as a reorganization within the meaning of
Section 368(a) of the Code. The issuance of such opinion shall be conditioned
upon the receipt by such counsel of customary representation letters from each
of Parent, Sub and the Company, in each case, in form and substance reasonably
satisfactory to each counsel. Each such representation letter shall be dated on
or before the date of such opinion and shall not have been withdrawn or modified
in any material respect. The opinion condition referred to in this
Section 7.2(g) shall not be waivable after receipt of the stockholder approval
referred to in Section 7.1(b), unless further stockholder approval is obtained
with appropriate disclosure; and
(h) the Company shall have furnished Parent with a certificate dated
the Closing Date signed on behalf of it by the President or any Vice President
of the Company to the effect that the conditions set forth in Sections 7.2(a)
through (f) have been satisfied.
Section 7.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations
of the Company to consummate the Merger are subject to the satisfaction (or
waiver by the Company) of the following further conditions:
(a) the representations and warranties of Parent and Sub shall have
been true and accurate both when made and (except for those representations and
warranties that address matters only as of a particular date which need only be
true and accurate as of such date) as of the Effective Time as if made at and as
of such time, except where the failure of such representations and warranties to
be so true and correct (without giving effect to any limitation as to
"materiality" or "material adverse effect" set forth therein), does not have,
and is not likely to have, individually or in the aggregate, a material adverse
effect on Parent and its Subsidiaries, taken as a whole, PROVIDED, that the
representations and warranties set forth in Sections 5.2 and 5.3 shall be true
and correct in all respects;
(b) Each of Parent and Sub shall have performed in all material
respects all of the respective obligations hereunder required to be performed by
Parent or Sub, as the case may be, at or prior to the Effective Time;
(c) The Company shall have received an opinion of Pepper Hamilton LLP,
counsel to the Company, dated as of the Effective Time, to the effect that the
Merger (taking into account the effect of the Upstream Merger, if applicable)
will qualify as a reorganization within the meaning of Section 368(a) of the
Code. The issuance of such opinion shall be conditioned upon the receipt by such
counsel of customary representation letters from each of Parent, Sub and the
Company, in each case, in form and substance reasonably satisfactory to such
counsel. Each such representation letter shall be dated on or before the date of
such opinion and shall not have been withdrawn or modified in any material
respect. The opinion condition referred to in this Section 7.3(c) shall not be
waivable after
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receipt of the stockholder approval referred to in Section 7.1(b), unless
further stockholder approval is obtained with appropriate disclosure; and
(d) Parent shall have furnished the Company with a certificate dated
the Closing Date signed on behalf of it by the President or any Vice President
to the effect that the conditions set forth in Sections 7.3(a) and (b) have been
satisfied.
ARTICLE VIII
TERMINATION
Section 8.1 TERMINATION. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the Merger contemplated
herein may be abandoned at any time prior to the Effective Time, whether before
or after approval thereof by the Company's stockholders (and regardless of any
time that may have elapsed since the event giving rise to the right to terminate
hereunder):
(a) By the mutual consent of the Board of Directors of Parent and the
Board of Directors of the Company.
(b) By either of the Board of Directors of the Company or the Board of
Directors of Parent:
(i) if the Merger shall not have occurred on or prior to March 31,
2001; PROVIDED, HOWEVER, that the right to terminate this Agreement under this
Section 8.1(b)(i) shall not be available to any party whose willful and material
breach of this Agreement has been the cause of, or resulted in, the failure of
the Merger to occur on or prior to such date;
(ii) if any Governmental Entity shall have issued an order, decree
or ruling or taken any other action, in each case permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement and such order, decree, ruling or other action shall have become final
and non-appealable; or
(iii) if the approval of the stockholders of the Company
contemplated by this Agreement shall not have been obtained by reason of the
failure to obtain the required vote at a duly held meeting of stockholders or
any adjournment thereof.
(c) By the Board of Directors of the Company if Parent or Sub breaches
or fails in any material respect to perform or comply with any of its material
covenants and agreements contained herein or breaches its representations and
warranties in any material respect, which breach or failure is incapable of
being cured or is not cured within ten (10) business days of written notice
thereof; or
(d) By the Board of Directors of Parent:
(i) if the Company breaches or fails in any material respect to
perform or comply with any of its material covenants and agreements contained
herein or breaches its representations and warranties in any material respect,
which breach or failure is incapable of being cured or is not cured within ten
(10) business days of written notice thereof; or
(ii) if (a) the Board of Directors of the Company shall have failed
to recommend adoption and approval of this Agreement and the Merger by the
Company's stockholders or the Board of Directors of the Company shall have
withdrawn or modified such recommendation; (b) the Board of Directors of the
Company shall have recommended to the stockholders of the Company a Takeover
Proposal other than Merger; (c) a Takeover Proposal other than the Merger shall
have been announced or otherwise publicly known and the Board of Directors of
the Company shall have failed to recommend against acceptance of such Takeover
Proposal by its stockholders within ten (10) business days of its receipt or, if
sooner, the date its existence first becomes publicly known; or (d) a tender
offer or exchange offer for 15% or more of the outstanding shares of the Company
Common Stock is
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commenced (other than by Parent or an affiliate of Parent) and the Board of
Directors of the Company recommends that the stockholders of the Company tender
their shares in such tender or exchange offer or, within ten (10) days after
such tender or exchange offer, fails to recommend against acceptance of such
offer or takes no position with respect to the acceptance thereof; or (e) any
Person (other than Parent or any of its Subsidiaries or affiliates) becomes a
beneficial owner of more than 15% of the outstanding Shares.
Section 8.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 8.1, written notice thereof shall forthwith be
given to the other party or parties specifying the provision hereof pursuant to
which such termination is made, and this Agreement shall forthwith become null
and void, and there shall be no liability on the part of the Parent, Sub or the
Company except (A) for fraud or for material breach of this Agreement and
(B) as set forth in Section 9.1 hereof.
ARTICLE IX
MISCELLANEOUS
Section 9.1 FEES AND EXPENSES.
(a) Except as contemplated by this Agreement, including Sections 9.1(b)
and 9.1(c) hereof, all costs and expenses incurred in connection with this
Agreement, the Option Agreement and the consummation of the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expenses, except that those costs and expenses incurred in connection with
filing, printing and mailing the Registration Statement and the Proxy
Statement/Prospectus (including filing fees related thereto) shall be shared
equally by Parent and the Company.
(b) If (x) the Board of Directors of Parent shall terminate this
Agreement pursuant to Section 8.1(d) hereof, or (y) the Board of Directors of
Parent or the Board of Directors of the Company shall terminate this Agreement
pursuant to Section 8.1(b)(iii) hereof, then in any such case as described in
clause (x) or (y) (each such case of termination being referred to as a "TRIGGER
EVENT"), the Company shall pay to Parent (not later than simultaneously with any
such Trigger Event) an amount equal to $19 million (the "TERMINATION FEE").
(c) Notwithstanding anything to the contrary in this Section 9.1, the
payments provided for in this Section 9.1 shall not be deemed to be Parent's or
Sub's exclusive remedy, and Parent and Sub shall have the right to pursue any
remedies available to them at law or in equity; provided, however, that in the
event of a termination of this Agreement pursuant to Section 8.1(d)(i) hereof as
a result of a breach (other than a willful breach) of any of the Company's
representations and warranties, the payments provided for in this Section 9.1
shall be Parent's or Sub's sole and exclusive remedy.
Section 9.2 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified and supplemented in any and all respects,
whether before or after any vote of the stockholders of the Company contemplated
hereby, by written agreement of the parties hereto, by action taken by their
respective Boards of Directors, at any time prior to the Closing Date with
respect to any of the terms contained herein.
Section 9.3 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any schedule,
certificate, instrument or other document delivered pursuant to this Agreement
shall survive the Effective Time.
Section 9.4 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or sent by an overnight
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courier service, such as FedEx, to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to:
Hewlett-Packard Company
3000 Hanover Street
Mail Stop 20-BQ
Palo Alto, CA 94304
Attention: General Counsel
Telephone: (650) 857-1501
Facsimile: (650) 857-4392
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
525 University Avenue -- Suite 220
Palo Alto, CA 91301
Attention: Kenton J. King, Esq.
Telephone: (650) 470-4500
Facsimile: (650) 470-4570
and
(b) if to the Company, to:
Bluestone Software, Inc.
300 Stevens Drive
Philadelphia, PA 19113-1597
Attention: Paul T. Porrini, Esq.
Telephone: (610) 915-5005
Facsimile: (610) 915-5010
with a copy to:
Pepper Hamilton LLP
1235 Westlakes Drive
Berwyn, Pennsylvania 19312
Attention: Michael P. Gallagher, Esq.
Telephone: (610) 640-7807
Facsimile: (610) 640-7835
Section 9.5 INTERPRETATION. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words "INCLUDE", "INCLUDES" or "INCLUDING" are
used in this Agreement they shall be deemed to be followed by the words "without
limitation". The phrase "MADE AVAILABLE" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. The phrases "THE DATE OF THIS
AGREEMENT", "THE DATE HEREOF", and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to October 24, 2000. As used in
this Agreement, the term "AFFILIATE(S)" shall have the meaning set forth in
Rule 12b-2 of the Exchange Act.
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<PAGE>
Section 9.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 9.7 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; RIGHTS OF
OWNERSHIP. This Agreement and the Confidentiality Agreement (including the
documents and the instruments referred to herein and therein): (a) constitute
the entire agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
and (b) except as provided in Section 6.11 hereof, are not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder.
Section 9.8 SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void, unenforceable or against its regulatory policy,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
Section 9.9 GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware without giving effect to
the principles of conflicts of law thereof.
Section 9.10 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned Subsidiary of Parent. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
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<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
<TABLE>
<S> <C> <C>
HEWLETT-PACKARD COMPANY
By: /s/ DUANE ZITZNER
--------------------------------------
Name: Duane Zitzner
--------------------------------------
Title: President, Computing Systems
--------------------------------------
BETA ACQUISITION CORPORATION
By: /s/ CHARLES N. CHARNAS
--------------------------------------
Name: Charles N. Charnas
--------------------------------------
Title: Assistant Secretary
--------------------------------------
BLUESTONE SOFTWARE, INC.
By: /s/ P. KEVIN KILROY
--------------------------------------
Name: P. Kevin Kilroy
--------------------------------------
Title: Chairman and Chief Executive Officer
--------------------------------------
</TABLE>
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<PAGE>
ANNEX B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (this "AGREEMENT"), dated October 24, 2000 between
Bluestone Software, Inc., a Delaware corporation ("Issuer"), and Hewlett-Packard
Company, a Delaware corporation ("Grantee").
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger, dated as of October 24, 2000 (the "Merger Agreement"), which provides,
among other things, for the merger of Sub with and into Issuer with Issuer
continuing as the surviving corporation upon the terms and subject to the
conditions set forth in the Merger Agreement (capitalized terms used herein
without definition shall have the respective meanings specified in the Merger
Agreement); and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement and
in consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. GRANT OF OPTION. Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof,
4,058,494 shares of fully paid and nonassessable common stock of the Issuer, par
value $.001 per share ("Common Stock"), equal to and in no event exceeding
nineteen and nine-tenths percent (19.9%) of the shares of Common Stock
outstanding as of the date hereof, at a purchase price of $21.51 per share of
Common Stock as adjusted in accordance with the provisions of Section 6 of this
Agreement (such price, as adjusted if applicable, the "Option Price").
2. EXERCISE OF OPTION.
(a) Grantee may exercise the Option, in whole or part, and from time to
time, if, but only if, a Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Option Termination Event (as hereinafter
defined), provided that Grantee shall have sent the written notice of such
exercise (as provided in subsection (e) of this Section 2) on or prior to the
last date of the six (6) month period following such Triggering Event (the
"Option Expiration Date").
(b) The term "Option Termination Event" shall mean the first day after
the earliest to occur of the following dates: (i) the date on which the
Effective Time of the Merger occurs; or (ii) the date of the termination of the
Merger Agreement, provided that a Triggering Event has not occurred prior to or
in connection with such termination of the Merger Agreement; PROVIDED, HOWEVER,
that if the Option cannot be exercised as of any such date by reason of any
applicable judgment, decree, law, regulation or order (each, an "Impediment"),
or by reason of the waiting period under the HSR Act, then the Option
Termination Event shall be delayed until the date which is thirty (30) days
after such Impediment has been removed or such waiting period has expired.
(c) TRIGGERING EVENT. The term "Triggering Event" shall mean any event
under the Merger Agreement that, upon termination of the Merger Agreement, would
entitle Grantee to receive payment of the Termination Fee from Issuer pursuant
to Section 9.1(b) of the Merger Agreement, whether or not the Merger Agreement
has been terminated.
(d) NOTICE OF TRIGGERING EVENT. Issuer shall notify Grantee promptly in
writing of the occurrence of any Triggering Event, and in any event within
twenty-four (24) hours, it being
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understood that the giving of such notice by Issuer shall not be a condition to
the right of Grantee to exercise the Option or for a Triggering Event to have
occurred.
(e) NOTICE OF EXERCISE; CLOSING. In the event Grantee is entitled to
and wishes to exercise the Option, it shall send to Issuer a written notice (the
date of which being herein referred to as the "Notice Date") specifying (i) the
total number of shares it will purchase pursuant to such exercise and (ii) a
place and date which shall be a business day not earlier than three
(3) business days nor later than sixty (60) business days from the Notice Date
for the closing of such purchase (the "Closing Date"); PROVIDED, that if the
closing of the purchase and sale pursuant to the Option (the "Closing") cannot
be consummated, in the reasonable opinion of Grantee, by reason of any
applicable judgment, decree, order, law or regulation, the period of time that
otherwise would run pursuant to this sentence shall run instead from the date on
which such restriction on consummation has expired or been terminated; and
provided further, without limiting the foregoing, that if, in the reasonable
opinion of Grantee, prior notification to or approval of any regulatory agency
is required in connection with such purchase, Grantee shall promptly file the
required notice or application for approval and shall expeditiously process the
same and the period of time that otherwise would run pursuant to this sentence
shall run instead from the date on which any required notification periods have
expired or been terminated or such approvals have been obtained and any
requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Closing Date relating thereto.
(f) PURCHASE PRICE. At the Closing referred to in subsection (e) of
this Section 2, Grantee shall pay to Issuer the aggregate purchase price for the
shares of Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank account designated by
Issuer, provided that failure or refusal of Issuer to designate such a bank
account shall not preclude Grantee from exercising the Option.
(g) ISSUANCE OF COMMON STOCK. At such Closing, simultaneously with the
delivery of immediately available funds as provided in subsection (f) of this
Section 2, Issuer shall deliver to Grantee a certificate or certificates
representing the number of shares of Common Stock purchased by the Grantee and,
if the Option should be exercised in part only, a new Option evidencing the
rights of Grantee thereof to purchase the balance of the shares purchasable
hereunder, and the Grantee shall deliver to Issuer this Agreement and a letter
agreeing that Grantee will not offer to sell or otherwise dispose of such shares
in violation of applicable law or the provisions of this Agreement.
(h) LEGEND. Certificates for Common Stock delivered at a Closing
hereunder may be endorsed with a restrictive legend that shall read
substantially as follows:
"THE TRANSFER AND VOTING OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO CERTAIN PROVISIONS OF AN AGREEMENT BETWEEN THE REGISTERED HOLDER
HEREOF AND ISSUER AND TO RESALE RESTRICTIONS ARISING UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. A COPY OF SUCH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICE OF ISSUER AND WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT
CHARGE UPON RECEIPT BY ISSUER OF A WRITTEN REQUEST THEREFOR."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "Securities Act"),
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if Grantee shall have delivered to Issuer a copy of a
letter from the staff of the SEC, or an opinion of counsel, in form and
substance reasonably satisfactory to Issuer, to the effect that such legend is
not required for purposes of the Securities Act; (ii) the reference to the
provisions of this Agreement in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference; and
(iii) the legend shall be removed in its entirety if the conditions in the
preceding clauses
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<PAGE>
(i) and (ii) and both satisfied. In addition, such certificates shall bear any
other legend as may be required by law.
(i) RECORD HOLDER; EXPENSES. Upon the Closing, Grantee shall be deemed
to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of Issuer shall then be
closed or that certificates representing such shares of Common Stock shall not
then be actually delivered to Grantee or the Issuer shall have failed or refused
to designate the bank account described in subsection (f) of this Section 2.
Issuer shall pay all expenses, and any and all United States federal, state and
local taxes and other charges that may be payable in connection with the
preparation, issuance and delivery of stock certificates under this Section 2 in
the name of Grantee or its assignee, transferee or designee.
3. CONDITIONS TO DELIVERY OF OPTION SHARES. The obligation of Issuer to
deliver Option Shares upon any exercise of the Option is subject to the
satisfaction of the following conditions:
(a) All waiting periods, if any, under the HSR Act applicable to the
issuance of Option Shares hereunder shall have expired or been terminated; and
(b) There shall be no preliminary or permanent injunction or other order
issued by any court of competent jurisdiction preventing or prohibiting such
exercise of the Option or the delivery of the Option Shares in respect of such
exercise.
4. RESERVATION OF SHARES. Issuer agrees: (i) that it shall at all times
maintain, free from preemptive rights, sufficient authorized but unissued or
treasury shares of Common Stock (and other securities issuable pursuant to
Section 6) so that the Option may be exercised without additional authorization
of Common Stock (or such other securities) after giving effect to all other
options, warrants, convertible securities and other rights to purchase Common
Stock (or such other securities); (ii) that it will not, by charter amendment or
through reorganization, consolidation, merger, dissolution or sale of assets, or
by any other voluntary act avoid or seek to avoid the observance or performance
of any of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all action as may from time to time
be required (including without limitation complying with all premerger
notification, reporting and waiting periods in the HSR Act and the rules and
regulations thereunder) in order to permit Grantee to exercise the Option and
the Issuer duly and effectively to issue shares of Common Stock pursuant hereto;
and (iv) promptly to take all action provided herein to protect the rights of
Grantee against dilution.
5. LOST OPTIONS. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date.
6. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. The number of shares of
Common Stock purchasable upon the exercise of the Option shall be subject to
adjustment from time to time as provided in this Section 6.
(a) In the event of any change in Common Stock by reason of stock
dividends, other dividends on the Common Stock payable in securities or other
property (other than regular cash dividends), stock splits, merger,
recapitalization, combinations, subdivisions, conversions, exchanges of shares
or other similar transactions, then the type and number of shares of Common
Stock purchasable upon exercise hereof shall be appropriately adjusted, and
proper provision will be made in the agreements governing such transaction so
that Grantee shall receive upon exercise of the Option and payment of the
aggregate Option Price hereunder the number and class of shares or other
securities or property that Grantee would have received in respect of Common
Stock if the Option had been exercised in full immediately prior to such event,
or the record date therefor, as applicable.
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(b) Whenever the number of shares of outstanding Common Stock changes
after the date hereof as a result of the events described in clause (b) hereof
(but not the events described in clause (a) hereof), the Option Price shall be
adjusted by multiplying the Option Price by a fraction the numerator of which
shall be equal to the aggregate number of shares of Common Stock purchasable
prior to the adjustment and the denominator of which shall be equal to the
aggregate number of shares of Common Stock purchasable immediately after the
adjustment.
(c) No adjustment made in accordance with this Section 6 shall
constitute or be deemed a waiver of any breach of any of Issuer's
representations, warranties, covenants, agreements or obligations contained in
the Merger Agreement.
7. REGISTRATION RIGHTS.
(a) As used in this Agreement, "Registrable Securities" means each of
the Option Shares issued to Grantee hereunder and any other securities issued in
exchange for, or issued as dividends or otherwise on or in respect of, any of
such Option Shares.
(b) At any time or from time to time within two (2) years of the first
Closing, Grantee may make a written request to Issuer for registration under and
in accordance with the provisions of the Securities Act with respect to all or
any part of the Registrable Securities (a "Demand Registration"). A Demand
Registration may be, at the option of Grantee, a shelf registration or a
registration involving an underwritten offering. As soon as reasonably
practicable after Grantee's request for a Demand Registration, Issuer shall file
one or more registration statements on any appropriate form with respect to all
of the Registrable Securities requested to be so registered; provided that
Issuer will not be required to file any such registration statement during any
period of time (not to exceed sixty (60) days after such request in the case of
clause (i) below or ninety (90) days in the case of clauses (ii) or
(iii) below) when (i) Issuer is in possession of material non-public information
which it reasonably believes would be detrimental to be disclosed at such time,
(ii) Issuer is required under the Securities Act to include audited financial
statements for any period in such registration statement that are not yet
available for inclusion therein, or (iii) Issuer determines, in its reasonable
judgment, that such registration would interfere with any financing, acquisition
or other material transaction involving Issuer or any of its affiliates. Issuer
shall use its best efforts to have the Demand Registration declared effective as
soon as reasonably practicable after such filing and to keep the Demand
Registration continuously effective for a period of at least sixty (60) days
following the date on which the Demand Registration is declared effective, in
the case of an underwritten offering, or at least one hundred twenty (120) days
following the date on which the Demand Registration is declared effective, in
the case of a shelf registration; provided that, if for any reason the
effectiveness of any Demand Registration is suspended, the required period of
effectiveness shall be extended by the aggregate number of days of each such
suspension; and provided, further, that the effectiveness of any Demand
Registration may be terminated if and when all of the Registrable Securities
covered thereby shall have been sold. Grantee shall be entitled to two
(2) Demand Registrations; provided, that only requests relating to a
registration statement that has become effective under the Securities Act shall
be counted for purposes of determining the number of Demand Registrations made.
If any Demand Registration involves an underwritten offering, (i) Issuer shall
have the right to select the managing underwriter, which shall be reasonably
acceptable to Grantee and (ii) Issuer shall enter into an underwriting agreement
in customary form.
(c) If at any time within two (2) years of the first Closing, Issuer
proposes to file a registration statement under the Securities Act with respect
to any shares of any class of its equity securities to be sold for the account
of Issuer (other than a registration statement on Form S-4 or Form S-8 or any
successor form), and the registration form to be used may be used for the
registration of Registrable Securities, then Issuer shall in each case give
written notice of such proposed filing to Grantee at least twenty (20) days
before the anticipated filing date, and Grantee shall have the right to
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include in such registration such number of Registrable Securities as Grantee
may request (such request to be made by written notice to Issuer within fifteen
(15) days following Grantee's receipt from Issuer of such notice of proposed
filing) (an "Incidental Registration"). Issuer shall use its commercially
reasonable efforts to cause the managing underwriter of any proposed
underwritten offering to permit Grantee to include in such offering all
Registrable Securities requested by Grantee to be included in the registration
for such offering on the same terms and conditions as any similar securities of
Issuer included therein. Notwithstanding the foregoing, if the managing
underwriter of such offering advises Grantee that, in the reasonable opinion of
such underwriter, the amount of Registrable Securities which Grantee requests to
be included in such offering would materially and adversely affect the success
of such offering, then the amount of Registrable Securities to be offered shall
be reduced to the extent necessary to reduce the total amount of securities to
be included in such offering to the amount recommended by such underwriter;
provided that if the amount of Registrable Securities shall be so reduced,
Issuer shall include in such offering (i) first all shares proposed to be
included therein by the Issuer and any holder's exercising demand registration
rights and (ii) second the shares requested to be included therein by Grantee
pro rata with the shares intended to be included therein by any other
stockholder of the Issuer. Participation by Grantee in any Incidental
registration shall not affect the obligation of the Company to effect Demand
Registrations under this Section 4.1. The issuer may withdraw any registration
under the Securities Act that gives rise to an Incidental Registration without
consent of Grantee.
(d) In the event that Registrable Securities are included in a
"piggyback" registration statement pursuant to Section 7(c) hereof, Grantee
agrees not to effect any public sale or distribution of the issue being
registered or a similar security of Issuer, or any securities convertible into
or exchangeable or exercisable for such securities, including a sale pursuant to
Rule 144 under the Securities Act, during the ten (10) business days prior to,
and during the ninety (90)-day period beginning on, the effective date of such
registration statement (except as part of such registration), if and to the
extent timely notified in writing by Issuer, in the case of a non-underwritten
public offering, or by the managing underwriter, in the case of an underwritten
public offering. In the event that Grantee requests a Demand Registration or if
Registrable Securities are included in a "piggyback" registration pursuant to
Section 7(c) hereof, Issuer agrees not to effect any public sale or distribution
of the issue being registered or a similar security of Issuer, or any securities
convertible into or exchangeable or exercisable for such securities, during the
period from such request until ninety (90) days after the effective date of such
registration statement (except as part of such registration or pursuant to a
registration of securities on Form S-4 or Form S-8 or any successor form).
(e) Notwithstanding anything to the contrary contained herein, in the
event that Grantee requests a Demand Registration or a "piggyback" registration
of Registrable Securities pursuant to Section 7(b) or 7(c) hereof, respectively,
Issuer shall have the right to purchase all, but not less than all, of the
Registrable Securities requested to be so registered, upon the terms and subject
to the conditions set forth in this Section 7(e). If Issuer wishes to exercise
such purchase right, then within two (2) business days following receipt of a
request for a Demand Registration or a "piggyback" registration, Issuer shall
send a written notice (a "Repurchase Notice") to Grantee specifying that Issuer
wishes to exercise such purchase right, a date for the closing of such purchase,
which shall not be more than ten (10) business days after delivery of such
Repurchase Notice, and a place for the closing of such purchase (a "Repurchase
Closing"). Upon delivery of a Repurchase Notice subject to applicable Delaware
law, a binding agreement shall be deemed to exist between Grantee and Issuer
providing for the purchase by Issuer of the Registrable Securities requested to
be registered by Grantee, upon the terms and subject to the conditions set forth
in this Section 7(e). The purchase price per share or other unit of Registrable
Securities (the "Repurchase Price") shall equal the average per share or per
unit closing price as quoted on the Nasdaq (or if not then quoted thereon, on
such other exchange or quotation system on which the Registrable Securities are
quoted) for the period of five (5) trading days ending on the trading day
immediately prior to the day on which Grantee requests a
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<PAGE>
Demand Registration or a "piggyback" registration of the Registrable Securities
which Issuer subsequently elects to purchase. Grantee's obligation to deliver
any Registrable Securities at a Repurchase Closing shall be subject to the
condition that, at such Repurchase Closing, Issuer shall have delivered to
Grantee a certificate signed on behalf of Issuer by Issuer's chief executive
officer and chief financial officer, which certificate shall be satisfactory in
form and substance to Grantee, to the effect that the purchase by Issuer of such
Registrable Securities (i) is permitted under applicable Delaware corporate law
and under the fraudulent conveyance provisions of the federal bankruptcy code
and (ii) does not violate any material agreement to which Issuer or any of its
subsidiaries is a party or by which any of their properties or assets is bound.
At any Repurchase Closing, Issuer shall pay to Grantee the aggregate Repurchase
Price for the Registrable Securities being purchased by wire transfer of
immediately available funds or by delivering to Grantee a certified or bank
check payable to or on the order of Grantee in an amount equal to such aggregate
Repurchase Price, and Grantee will surrender to Issuer a certificate or
certificates evidencing such Registrable Securities. A purchase of Registrable
Securities by Issuer pursuant to this Section 7(e) shall be considered a Demand
Registration for purposes of Section 7(b) hereof.
(f) The registrations effected under this Section 7 shall be effected at
Issuer's expense except for underwriting commissions allocable to the
Registrable Securities. Issuer shall indemnify and hold harmless Grantee, its
affiliates and controlling persons and their respective officers, directors,
agents and representatives from and against any and all losses, claims, damages,
liabilities and expenses (including, without limitation, all out-of-pocket
expenses, investigation expenses, expenses incurred with respect to any judgment
and fees and disbursements of counsel and accountants) arising out of or based
upon any statements contained in, or omissions or alleged omissions from, each
registration statement (and related prospectus) filed pursuant to this
Section 7; PROVIDED, HOWEVER, that Issuer shall not be liable in any such case
to Grantee or any affiliate or controlling person of Grantee or any of their
respective officers, directors, agents or representatives to the extent that any
such loss, claim, damage, liability (or action or proceeding in respect thereof)
or expense arises out of or is based upon an untrue statement or omission or
alleged omission made in such registration statement or prospectus in reliance
upon, and in conformity with, written information furnished to Issuer
specifically for use in the preparation thereof by Grantee such affiliate,
controlling person, officer, director, agent or representative, as the case may
be.
8. PUT AND CALL.
(a) EXERCISE. At any time during which the Option is exercisable
pursuant to Section 2 (the "Repurchase Period"), upon demand by Grantee, Grantee
shall have the right to sell to Issuer (or any successor entity thereof), and
Issuer (or such successor entity) shall be obligated to repurchase from Grantee
(the "Put"), and upon demand by Issuer, Issuer (or any successor entity thereof)
shall have the right to purchase from Grantee and Grantee shall be obligated to
sell to Issuer (or any successor entity) (the "Call"), all or any portion of the
Option, to the extent not previously exercised, at the price set forth in
subparagraph (i) below, or all or any portion of the shares purchased by Parent
pursuant thereto, at a price set forth in subparagraph (ii) below:
(i) The difference between the "Market/Tender Offer Price" for
shares of Common Stock as of the date (the "Notice Date") notice of exercise of
the Put or Call, as the case may be, is given to the other party (defined as the
higher of (A) the price per share offered as of the Notice Date pursuant to any
tender or exchange offer or other Takeover Proposal which was made prior to the
Notice Date and not terminated or withdrawn as of the Notice Date (the "Tender
Price") or (B) the average of the closing prices of shares of Common Stock on
the Nasdaq National Market for the ten trading days immediately preceding the
Notice Date (the "Market Price")), and the Exercise Price, multiplied by the
number of shares purchasable pursuant to the Option (or portion thereof with
respect to which Grantee is exercising its rights under this Section 8), but
only if the Market/Tender Offer Price is greater than the Exercise Price.
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(ii) The Exercise Price paid by Parent for the shares acquired
pursuant to the Option plus the difference between the Market/Tender Offer Price
and the Exercise Price, but only if the Market/Tender Offer Price is greater
than the Exercise Price, multiplied by the number of shares so purchased.
(b) TENDER PRICE. For purposes of Section 8(a), the Tender Price shall
be the highest price per share offered pursuant to a tender or exchange offer or
other Takeover Proposal during the Repurchase Period.
(c) PAYMENT AND REDELIVERY OF OPTION OR SHARES. In the event Parent or
Company exercises its rights under this Section 8, Issuer shall, within ten
business days of the Notice Date, pay the required amount to Grantee in
immediately available funds and Grantee shall surrender to Issuer the Option or
the certificates evidencing the shares purchased by Grantee pursuant thereto,
and Grantee shall warrant that it owns such shares and that such shares are then
free and clear of all liens, claims, charges and encumbrances of any kind or
nature whatsoever.
9. REPRESENTATIONS AND WARRANTIES OF THE ISSUER. Issuer hereby represents
and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer. This Agreement is the valid and legally binding
obligation of Issuer, enforceable against Issuer in accordance with its terms.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
(c) The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not (i) conflict with,
or result in any violation or breach of any provision of the Certificate of
Incorporation, as amended to date, or Bylaws, as amended to date, of Issuer,
(ii) result in any violation or breach of, or constitute (with or without notice
or lapse of time, or both) a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit) under any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, contract or other agreement, instrument or obligation to which the Issuer
or any of its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound, or (iii) conflict or violate any permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Issuer or any of its Subsidiaries or
any of its or their properties or assets, except in the case of (ii) and
(iii) for any such violations, breaches, defaults, terminations, cancellations,
accelerations or conflicts which could not, individually or in the aggregate,
have a material adverse effect (as defined in the Merger Agreement) on Issuer
and its Subsidiaries, taken as a whole, or impair the ability of Issuer to
consummate the transactions contemplated by this Agreement.
(d) The Issuer has taken, and will in the future take, all steps
necessary to irrevocably exempt the transactions contemplated by this Agreement
from any applicable state takeover law and from any applicable charter or
contractual provision containing change of control or anti-takeover provisions.
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10. REPRESENTATIONS AND WARRANTIES OF THE GRANTEE. Grantee hereby
represents and warrants to Issuer as follows:
(a) Grantee has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Grantee and no other corporate proceedings on the part of
Grantee are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Grantee. This Agreement is the valid and legally binding
obligation of Grantee, enforceable against Grantee in accordance with its terms.
(b) The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not (i) conflict with,
or result in any violation or breach of any provision of the Certificate of
Incorporation, as amended to date, or Bylaws, as amended to date, of Grantee,
(ii) result in any violation or breach of, or constitute (with or without notice
or lapse of time, or both) a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit) under any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, contract or other agreement, instrument or obligation to which the
Grantee or any of its Subsidiaries is a party or by which any of them or any of
their properties or assets may be bound, or (iii) conflict or violate any
permit, concession, franchise, license, judgment, order, degree, statute, law,
ordinance, rule or regulation applicable to Grantee or any of its Subsidiaries
or any of its or their properties or assets, except in the case of (ii) and
(iii) for any such violations, breaches, defaults, terminations, cancellations,
accelerations or conflicts which could not, individually or in the aggregate,
have a material adverse effect (as defined in the Merger Agreement) on Grantee
and its Subsidiaries, taken as a whole, or impair the ability of Grantee to
consummate the transactions contemplated by this Agreement.
11. GRANTEE COMPLIANCE. Grantee shall acquire the Option Shares for
investment purposes only and not with a view to any distribution thereof in
violation of the Securities Act, and shall not sell any Option Shares purchased
pursuant to this Agreement except in compliance with the Securities Act.
12. ASSIGNMENT OF OPTION BY GRANTEE. Neither of the parties hereto may
assign any of its rights or obligations under this Option Agreement or the
Option created hereunder to any other person, without the express written
consent of the other party.
13. LIMITATION OF GRANTEE PROFIT.
(a) Notwithstanding any other provision of this Agreement, in no event
shall the Grantee's Total Profit (as hereinafter defined) exceed $19 million.
(b) As used herein, the term "Total Profit" shall mean the sum of
(before taxes) (i) the net cash amounts received by Grantee pursuant to
Section 8 and (ii) the amount received by Grantee pursuant to Section 9.1(b) of
the Merger Agreement.
14. APPLICATION FOR REGULATORY APPROVAL. Each of Grantee and Issuer will
use its commercially reasonable efforts to make all filings with, and to obtain
consents of, all third parties and governmental authorities necessary to the
consummation of the transactions contemplated by this Agreement, including
without limitation making application to list the shares of Common Stock
issuable hereunder on the Nasdaq National Market upon official notice of
issuance.
15. SPECIFIC PERFORMANCE. The parties hereto acknowledge that damages would
be an inadequate remedy for a breach of this Agreement by either party hereto
and that the obligations of
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<PAGE>
the parties hereto shall be enforceable by either party hereto through
injunctive or other equitable relief.
16. SEPARABILITY OF PROVISIONS. If any term, provision, covenant or
restriction contained in this Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions and covenants and
restrictions contained in this Agreement shall remain in full force and effect,
and shall in no way be affected, impaired or invalidated.
17. NOTICES. All notices, claims, demands and other communications
hereunder shall be deemed to have been duly given or made when delivered in
person, by overnight courier or by facsimile at the respective addresses of the
parties set forth in the Merger Agreement.
18. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed to be an original, but all of which
shall constitute one and the same agreement.
20. EXPENSES. Except as otherwise expressly provided herein or in the
Merger Agreement, each of the parties hereto shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.
21. ENTIRE AGREEMENT. Except as otherwise expressly provided herein or in
the Merger Agreement, this Agreement contains the entire agreement between the
parties with respect to the transactions contemplated hereunder and supersedes
all prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. Nothing in this Agreement, expressed or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
except as assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided herein. Any provision of
this Agreement may be waived only in writing at any time by the party that is
entitled to the benefits of such provision. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
22. FURTHER ASSURANCES. In the event of any exercise of the Option by
Grantee, Issuer and Grantee shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise. Nothing contained
in this Agreement shall be deemed to authorize Issuer or Grantee to breach any
provision of the Merger Agreement.
23. HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
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IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
<TABLE>
<S> <C>
BLUESTONE SOFTWARE, INC.
By: /s/ P. KEVIN KILROY
---------------------------------------------
Name: P. Kevin Kilroy
------------------------------------------
Title: Chairman and Chief Executive Officer
-------------------------------------------
HEWLETT-PACKARD COMPANY
By: /s/ DUANE ZITZNER
---------------------------------------------
Name: Duane Zitzner
------------------------------------------
Title: President, Computing Systems
-------------------------------------------
</TABLE>
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<PAGE>
APPENDIX C
VOTING AGREEMENT
VOTING AGREEMENT, dated as of October 24, 2000 (this "AGREEMENT"), among the
stockholders listed on the signature pages hereto (collectively, the
"STOCKHOLDERS" and each individually, a "STOCKHOLDER"), Bluestone
Software, Inc., a Delaware corporation (the "COMPANY"), and Hewlett-Packard
Company, a Delaware corporation ("PARENT"). Capitalized terms used and not
otherwise defined herein shall have the respective meanings assigned to them in
the Merger Agreement referred to below.
WHEREAS, as of the date hereof, each Stockholder owns of record and
beneficially shares of capital stock of the Company, as set forth opposite such
Stockholder's name on Schedule I hereto (such shares, or any other voting or
equity of securities of the Company hereafter acquired by any Stockholder prior
to the termination of this Agreement, being referred to herein collectively as
the "SHARES");
WHEREAS, concurrently with the execution of this Agreement, Parent and the
Company are entering into an Agreement and Plan of Merger, dated as of the date
hereof (the "MERGER AGREEMENT"), pursuant to which, upon the terms and subject
to the conditions thereof, a subsidiary of Parent will be merged with and into
the Company, and the Company will be the surviving corporation (the "MERGER");
and
WHEREAS, as a condition to the willingness of Parent to enter into the
Merger Agreement, Parent has required that the Stockholders agree, and in order
to induce Parent to enter into the Merger Agreement, the Stockholders are
willing to agree, to vote in favor of adopting the Merger Agreement and
approving the Merger, upon the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereby agree, severally and not jointly, as follows:
SECTION 1. DEFINITIONS. For purposes of this Voting Agreement:
(a) As used in this Agreement, "TAKEOVER PROPOSAL" shall mean any tender
or exchange offer involving the Company or any Subsidiary of the Company, any
proposal for a merger, consolidation or other business combination involving the
Company or any Subsidiary of the Company, any proposal or offer to acquire in
any manner an interest in excess of 15% of the outstanding equity securities of,
or a substantial portion of the business or assets of, the Company or any
Subsidiary of the Company, any proposal or offer with respect to any
recapitalization or restructuring with respect to the Company or any Subsidiary
of the Company or any proposal or offer with respect to any other transaction
similar to any of the foregoing with respect to such the Company or any
Subsidiary of the Company, other than pursuant to the transactions to be
effected pursuant to the Merger Agreement.
(b) "BENEFICIALLY OWN" or "BENEFICIAL OWNERSHIP" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT")), including pursuant to any agreement, arrangement
or understanding, whether or not in writing; provided that such beneficial
ownership shall be limited to securities (not including those that the Person
(as defined in the Exchange Act) has a right to acquire within 60 days unless so
acquired) over which such Person has sole or shared voting power. Without
duplicative counting of the same securities by the same holder, securities
Beneficially Owned by a Person shall include securities Beneficially Owned by
all other Persons with whom such Person would constitute a "group" within the
meaning of Section 13(d)(3) of the Exchange Act and over which such Person has
sole or shared voting power.
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SECTION 2. VOTING OF SHARES.
(a) Each Stockholder covenants and agrees that until the termination of
this Agreement in accordance with the terms hereof, at the meeting of the
Company's stockholders to consider the Merger Agreement and the Merger or any
other meeting of the stockholders of the Company, however called, and in any
action by written consent of the stockholders of the Company, such Stockholder
will vote, or cause to be voted, all of his, her or its respective Shares
(i) in favor of adoption of the Merger Agreement and approval of the Merger
contemplated by the Merger Agreement, as the Merger Agreement may be modified or
amended from time to time in a manner not adverse to such Stockholder, and
(ii) against any other Takeover Proposal.
(b) Each Stockholder hereby irrevocably grants to, and appoints, Parent,
and any individual designated in writing by it, and each of them individually,
as its proxy and attorney-in-fact (with full power of substitution), for and in
its name, place and stead, to vote his, her or its Shares at any meeting of the
stockholders of the Company called with respect to any of the matters specified
in, and in accordance and consistent with this Section 2. Each Stockholder
understands and acknowledges that Parent is entering into the Merger Agreement
in reliance upon the Stockholder's execution and delivery of this Agreement.
Each Stockholder hereby affirms that the irrevocable proxy set forth in this
Section 2(b) is given in connection with the execution of the Merger Agreement,
and that such irrevocable proxy is given to secure the performance of the duties
of such Stockholder under this Agreement. Except as otherwise provided for
herein, each Stockholder hereby (i) affirms that the irrevocable proxy is
coupled with an interest and may under no circumstances be revoked,
(ii) ratifies and confirms all that the proxies appointed hereunder may lawfully
do or cause to be done by virtue hereof and (iii) affirms that such irrevocable
proxy is executed and intended to be irrevocable in accordance with the
provisions of Section 212(e) of the Delaware General Corporation Law.
Notwithstanding any other provisions of this Agreement, the irrevocable proxy
granted hereunder shall automatically terminate upon the termination of this
Agreement.
SECTION 3. TRANSFER OF SHARES. Each Stockholder covenants and agrees that
such Stockholder will not directly or indirectly, (a) sell, assign, transfer
(including by merger, testamentary disposition, interspousal disposition
pursuant to a domestic relations proceeding or otherwise by operation of law),
pledge, encumber or otherwise dispose of any of the Shares, (b) deposit any of
the Shares into a voting trust or enter into a voting agreement or arrangement
with respect to the Shares or grant any proxy or power of attorney with respect
thereto which is inconsistent with this Agreement or (c) enter into any
contract, option or other arrangement or undertaking with respect to the direct
or indirect sale, assignment, transfer (including by merger, testamentary
disposition, interspousal disposition pursuant to a domestic relations
proceeding or otherwise by operation of law) or other disposition of any Shares.
Notwithstanding the foregoing, any Stockholder may sell, assign or transfer all
or any part of its Shares to any director, officer, stockholder, partner or
affiliate of such Stockholder provided that the transferee thereof agrees to and
becomes bound by this Agreement as a Stockholder by executing a counterpart
hereof.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each
Stockholder on its own behalf hereby severally (but not jointly) represents and
warrants to Parent with respect to itself and its, his or her ownership of the
Shares as follows:
(a) OWNERSHIP OF SHARES. On the date hereof, the Shares are Beneficially
Owned by Stockholder or its nominee. Stockholder has full voting power, with
respect to all of the Shares. Such Stockholder is the record and Beneficial
Owner.
(b) POWER, BINDING AGREEMENT. Stockholder has the legal capacity, power
and authority to enter into and perform all of its obligations, under this
Agreement. The execution, delivery and performance of this Agreement by
Stockholder will not violate any agreement to which Stockholder is a party,
including, without limitation, any voting agreement, stockholders' agreement,
partnership
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agreement or voting trust other than such violations which individually or in
the aggregate do not materially impair the ability of Stockholder to perform its
obligations hereunder. This Agreement has been duly and validly executed and
delivered by Stockholder and constitutes a valid and binding obligation of
Stockholder, enforceable against Stockholder in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity).
(c) NO CONFLICTS. The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated hereby will not, conflict
with or result in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, any
provision of any loan or credit agreement, note, bond, mortgage, indenture,
lease, or other agreement, instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Stockholder or any of its properties or assets, other than such conflicts,
violations or defaults or terminations, cancellations or accelerations which
individually or in the aggregate do not materially impair the ability of
Stockholder to perform its obligations hereunder.
SECTION 5. NO SOLICITATION. Prior to the termination of this Agreement in
accordance with its terms, each Stockholder agrees, in its individual capacity
as a stockholder of the Company, that it will not, nor will it authorize or
permit any of its employees, agents and representatives to, directly or
indirectly, (a) initiate, solicit or encourage any inquiries or the making of
any Takeover Proposal, (b) enter into any agreement with respect to any Takeover
Proposal, or (c) participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or take any other action
to facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any Takeover Proposal, except to the
extent that any such action is permitted by Section 6.6(a) of the Merger
Agreement.
SECTION 6. TERMINATION. This Agreement, including without limitation the
representations and warranties in Section 4, shall terminate upon the earliest
to occur of (i) the Effective Time or (ii) any termination of the Merger
Agreement in accordance with the terms thereof; provided that no such
termination shall relieve any party of liability for a willful breach hereof
prior to termination.
SECTION 7. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was 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. FIDUCIARY DUTIES. Each Stockholder is signing this Agreement
solely in such Stockholder's capacity as an owner of his, her or its respective
Shares, and nothing herein shall prohibit, prevent or preclude such Stockholder
or its affiliate from taking or not taking any action in his or her capacity as
an officer or director of the Company, including the recommendation of the
Merger Agreement, to the extent not in breach of the Merger Agreement.
SECTION 9. MISCELLANEOUS.
(a) This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings, both written and oral, between the parties with
respect thereto. This Agreement may not be amended, modified or rescinded except
by an instrument in writing signed by each of the parties hereto.
(b) If any term or other provision of this Agreement is invalid, illegal
or incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good
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faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in a mutually acceptable manner in order that the terms of this Agreement remain
as originally contemplated to the fullest extent possible.
(c) This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to the principles of conflicts
of law thereof.
(d) This Agreement may be executed in counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the
same instrument.
(e) The obligations and liabilities of the Stockholders under this
Agreement shall be several and not joint.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be signed individually or by its respective duly authorized officer as of the
date first written above.
<TABLE>
<S> <C>
HEWLETT-PACKARD COMPANY
By: /s/ CHARLES N. CHARNAS
---------------------------------------------
Name: Charles N. Charnas
------------------------------------------
Title: Assistant Secretary
-------------------------------------------
BLUESTONE SOFTWARE, INC.
By: /s/ PAUL T. PORRINI
---------------------------------------------
Name: Paul T. Porrini
------------------------------------------
Title: Senior Vice President and General Counsel
-------------------------------------------
STOCKHOLDERS:
APA EXCELSIOR IV, L.P.
By: APA Excelsior IV Partners, L.P.
---------------------------------------------
Its: General Partner
---------------------------------------------
By: Patricof & Co. Managers, Inc.
-------------------------------------
Its: General Partner
-------------------------------------
Signature /s/ GREGORY M. CASE
---------------------------------------
Print Name: Gregory M. Case
-------------------------------------
APA EXCELSIOR IV/OFFSHORE, L.P.
By: APA Excelsior IV Partners, L.P.
---------------------------------------------
Its: General Partner
---------------------------------------------
By: Patricof & Co. Managers, Inc.
-------------------------------------
Its: General Partner
-------------------------------------
Signature /s/ GREGORY M. CASE
---------------------------------------
Print Name: Gregory M. Case
-------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
PATRICOF PRIVATE INVESTMENT CLUB, L.P.
By: APA Excelsior IV Partners, L.P.
---------------------------------------------
Its: General Partner
---------------------------------------------
By: Patricof & Co. Managers, Inc.
-------------------------------------
Its: General Partner
-------------------------------------
Signature /s/ GREGORY M. CASE
---------------------------------------
Print Name: Gregory M. Case
-------------------------------------
P/A FUND, L.P.
By: Fostin Capital Partners II, L.P.
---------------------------------------------
Its: General Partner
---------------------------------------------
Signature /s/ WILLIAM C. HULLEY
---------------------------------------
Print Name: William C. Hulley
-------------------------------------
PAUL MELAN BAIADA GST EXEMPT TRUST
Signature /s/ J. MARK BAIADA
---------------------------------------
Print Name: J. Mark Baiada
-------------------------------------
Its: Co-Trustee
---------------------------------------------
Signature /s/ DIANE Y. BAIADA
---------------------------------------
Print Name: Diane Y. Baiada
-------------------------------------
Its: Co-Trustee
---------------------------------------------
PAUL MELAN BAIADA
Signature /s/ PAUL MELAN BAIADA
---------------------------------------
Print Name: Paul Melan Baiada
-------------------------------------
as an individual and in his representative
capacity
</TABLE>
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<PAGE>
APPENDIX D
[DEUTSCHE BANK SECURITIES, INC. LETTERHEAD]
October 24, 2000
Board of Directors
Bluestone Software, Inc.
300 Stevens Drive
Philadelphia, PA 19113
Gentlemen:
Deutsche Bank Securities Inc. ("Deutsche Bank") has acted as financial
advisor to Bluestone Software, Inc. ("Bluestone") in connection with the
proposed merger of Bluestone and Hewlett-Packard Company (the "Company")
pursuant to the Agreement and Plan of Merger, dated as of October 24, 2000,
among Bluestone, the Company and Sub, a direct wholly owned subsidiary of the
Company ("Sub") (the "Merger Agreement"), which provides, among other things,
for the merger of Sub with and into Bluestone (the "Transaction"), as a result
of which Bluestone will become a wholly owned subsidiary of the Company. As set
forth more fully in the Merger Agreement, as a result of the Transaction, each
share of the Common Stock, par value $0.001 per share, of Bluestone ("Bluestone
Common Stock") not owned directly or indirectly by the Company or Bluestone will
be converted into the right to receive .2433 shares (the "Exchange Ratio") of
Common Stock, par value $0.01 per share, of the Company ("Company Common
Stock"). The terms and conditions of the Transaction are more fully set forth in
the Merger Agreement.
You have requested Deutsche Bank's opinion, as investment bankers, as to the
fairness, from a financial point of view, to the holders of Bluestone Common
Stock of the Exchange Ratio.
In connection with Deutsche Bank's role as financial advisor to Bluestone
regarding this transaction, and in arriving at its opinion, Deutsche Bank has
reviewed certain publicly available financial and other information concerning
Bluestone and the Company and certain internal analyses and other information
furnished to it by Bluestone. Deutsche Bank has also held discussions with
members of senior management from both Bluestone and the Company regarding the
businesses and prospects of their respective companies. Deutsche Bank was
granted limited access to management of the Company for the purpose of
discussing the Company and the prospects of the Company and thus relied, with
your consent, primarily on publicly available information regarding these
topics. Moreover, we have not been provided information on the status of any
potential acquisitions by the Company, and accordingly, also with your consent,
have not considered the potential impact of such combinations in our analysis.
In the context of our engagement by Bluestone, we were not authorized to and did
not solicit third party indications of interest in acquiring all or any part of
Bluestone, or investigate any alternative transactions.
Deutsche Bank has (i) reviewed the reported prices and trading activity for
Bluestone Common Stock and Company Common Stock, (ii) compared certain financial
and stock market information for Bluestone and the Company with similar
information for certain other companies whose securities are publicly traded,
(iii) reviewed the financial terms of certain recent business combinations which
it deemed comparable in whole or in part, (iv) reviewed the Merger Agreement and
certain related documents, and (v) performed such other studies and analyses and
considered such other factors as it deemed appropriate.
Deutsche Bank has not assumed responsibility for independent verification
of, and has not independently verified, any information, whether publicly
available or furnished to it, concerning Bluestone or the Company, including,
without limitation, any financial information, forecasts or
D-1
<PAGE>
Bluestone Software, Inc.
October 24, 2000
Page 2
projections considered in connection with the rendering of its opinion.
Accordingly, for purposes of its opinion, Deutsche Bank has assumed and relied
upon the accuracy and completeness of all such information and Deutsche Bank has
not conducted a physical inspection of any of the properties or assets, and has
not prepared or obtained any independent evaluation or appraisal of any of the
assets or liabilities, of Bluestone or the Company. In rendering its opinion,
Deutsche Bank expresses no view as to the reasonableness of such forecasts and
projections or the assumptions on which they are based. Deutsche Bank's opinion
is necessarily based upon economic, market and other conditions as in effect on,
and the information made available to it as of, the date hereof.
For purposes of rendering its opinion, Deutsche Bank has assumed that, in
all respects material to its analysis, the representations and warranties of
Bluestone, the Company and Sub contained in the Merger Agreement are true and
correct, Bluestone, the Company, and Sub will each perform all of the covenants
and agreements to be performed by it under the Merger Agreement and all
conditions to the obligations of each of Bluestone, the Company, and Sub to
consummate the Transaction will be satisfied without any waiver thereof.
Deutsche Bank has also assumed that all material governmental, regulatory or
other approvals and consents required in connection with the consummation of the
Transaction will be obtained and that in connection with obtaining any necessary
governmental, regulatory or other approvals and consents, or any amendments,
modifications or waivers to any agreements, instruments or orders to which
either Bluestone or the Company is a party or is subject or by which it is
bound, no limitations, restrictions or conditions will be imposed or amendments,
modifications or waivers made that would have a material adverse effect on
Bluestone or the Company or materially reduce the contemplated benefits of the
Transaction to the Company. In addition, you have informed Deutsche Bank, and
accordingly for purposes of rendering its opinion Deutsche Bank has assumed,
that the Transaction will be tax-free to each of Bluestone and the Company and
their respective stockholders and that the Transaction will be accounted for as
a purchase.
This opinion is addressed to, and for the use and benefit of, the Board of
Directors of Bluestone and is not a recommendation to the stockholders of
Bluestone to approve the Transaction. This opinion is limited to the fairness,
from a financial point of view, to the holders of Bluestone Common Stock of the
Exchange Ratio, and Deutsche Bank expresses no opinion as to the merits of the
underlying decision by Bluestone to engage in the Transaction.
Deutsche Bank will be paid a fee for its services as financial advisor to
Bluestone in connection with the Transaction, a substantial portion of which is
contingent upon consummation of the Transaction. We are an affiliate of Deutsche
Bank AG (together with its affiliates, the "DB Group"). One or more members of
the DB Group have, from time to time, provided investment banking, commercial
banking (including extension of credit) or other financial services to Bluestone
and the Company or their affiliates for which it has received compensation,
including Bluestone's initial public offering and follow-on offering. In
connection with the completion of a private placement offering for Bluestone in
May of 1999, Deutsche Bank also received warrants to purchase 150,448 shares of
Bluestone Common Stock, at a strike price of $15.00 per share, which have not
been exercised to date. In the ordinary course of business, members of the DB
Group may actively trade in the securities and other instruments and obligations
of Bluestone and the Company for their own accounts and for the accounts of
their customers. Accordingly, the DB Group may at any time hold a long or short
position in such securities, instruments and obligations.
D-2
<PAGE>
Bluestone Software, Inc.
October 24, 2000
Page 3
Based upon and subject to the foregoing, it is Deutsche Bank's opinion as
investment bankers that the Exchange Ratio is fair, from a financial point of
view, to the holders of Bluestone Common Stock.
Very truly yours,
DEUTSCHE BANK SECURITIES INC.
By /s/ DEUTSCHE BANK SECURITIES INC.
--------------------------------------
D-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Delaware law, Hewlett-Packard's amended and restated
certificate of incorporation provides that no director of Hewlett-Packard will
be personally liable to Hewlett-Packard or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability:
- for any breach of duty of loyalty to Hewlett-Packard or to its
stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- for unlawful payment of dividends or unlawful stock repurchases or
redemptions under Section 174 of the Delaware General Corporation Law; or
- for any transaction from which the director derived an improper personal
benefit.
Hewlett-Packard's amended and restated certificate of incorporation further
provides that Hewlett-Packard must indemnify its directors and executive
officers and may indemnify its other officers, employees and agents to the
fullest extent permitted by Delaware law. Hewlett-Packard believes that
indemnification under its amended and restated certificate of incorporation
covers negligence and gross negligence on the part of indemnified parties.
Hewlett-Packard has entered into indemnification agreements with each of its
directors and certain officers. These agreements, among other things, require
Hewlett-Packard to indemnify each director and officer for certain expenses
including attorneys' fees, judgments, fines and settlement amounts incurred by
any such person in any action or proceeding, including any action by or in the
right of Hewlett-Packard, arising out of the person's services as a director or
officer to Hewlett-Packard, any subsidiary of Hewlett-Packard or to any other
company or enterprise for which the person provides services at
Hewlett-Packard's request.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- ------------------------------------------------------------
<S> <C>
2(a) Master Separation and Distribution Agreement between
Hewlett-Packard Company and Agilent Technologies, Inc.
effective as of August 12, 1999, which appears as Exhibit 2
to Registrant's Annual Report on Form 10-K for the fiscal
year ended October 31, 1999, which exhibit is incorporated
herein by reference.
2(b) Agreement and Plan of Merger dated as of October 24, 2000,
among Hewlett-Packard Company, Beta Acquisition Corporation
and Bluestone Software, Inc. (included as Appendix A to the
prospectus/proxy statement).
2(c) Stock Option Agreement between Hewlett-Packard Company and
Bluestone Software, Inc., dated as of October 24, 2000
(included as Appendix B to the prospectus/proxy statement).
2(d) Voting Agreement among Hewlett-Packard Company, Bluestone
Software, Inc. and certain stockholders of Bluestone
Software, Inc. (included as Appendix C to the
prospectus/proxy statement).
3(a) Registrant's Amended and Restated Certificate of
Incorporation, which appears as Exhibit 3(a) to Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
April 30, 1998, which exhibit is incorporated herein by
reference.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- ------------------------------------------------------------
<S> <C>
3(b) Registrant's Amended By-Laws, which appears as Exhibit 3(b)
to Registrant's Annual Report on Form 10-K for the fiscal
year ended October 31, 1999, which exhibit is incorporated
herein by reference.
4(a) Indenture dated as of October 14, 1997 among Registrant and
Chase Trust Company of California regarding Liquid Yield
Option Notes due 2017 which appears as Exhibit 4.2 to
Registrant's Registration Statement on Form S-3
(Registration No. 333-44113), which exhibit is incorporated
herein by reference.
4(b) Supplemental Indenture dated as of March 16, 2000 among
Registrant and Chase Trust Company of California regarding
Liquid Yield Option Notes due 2017 which appears as
Exhibit 4(b) to Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended July 31, 2000, which exhibit is
incorporated herein by reference.
4(c) Form of Registrant's 7.15% Global notes due June 15, 2005
and related Officers' Certificate, which appear as
Exhibits 4.1 and 4.3 to Registrant's Form 8-K filed on
June 15, 2000, which exhibits are incorporated herein by
reference.
4(d) Senior Indenture, which appears as Exhibit 4.1 to
Registrant's Registration Statement on Form S-3 dated
February 18, 2000, as amended by Amendment No. 1 thereto
dated March 17, 2000 (Registration No. 333-30786), which
exhibit is incorporated herein by reference.
5 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
8(a) Tax opinion of Skadden, Arps, Slate, Meagher & Flom LLP.**
8(b) Tax opinion of Pepper Hamilton LLP.**
10(a) Registrant's 1985 Incentive Compensation Plan, as amended,
which appears as Exhibit 10(a) to Registrant's Annual
Report on Form 10-K for the fiscal year ended October 31,
1999, which exhibit is incorporated herein by reference.
10(b) Registrant's 1985 Incentive Compensation Plan, as amended,
stock option agreement, which appears as Exhibit 10(b) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended October 31, 1999, which exhibit is incorporated herein
by reference.
10(c) Registrant's Excess Benefit Retirement Plan, amended and
restated as of November 1, 1999 which appears as
Exhibit 10(c) to Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended July 31, 2000, which exhibit is
incorporated by reference herein.
10(d) Registrant's 1990 Incentive Stock Option Plan, as amended,
which appears as Exhibit 10(d) to Registrant's Annual Report
on Form 10-K for the fiscal year ended October 31, 1999,
which exhibit is incorporated herein by reference.
10(e) Registrant's 1990 Incentive Stock Option Plan, as amended,
stock option agreement, which appears as Exhibit 10(e) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended October 31, 1999, which exhibit is incorporated herein
by reference.
10(f) Registrant's 1995 Incentive Stock Plan, as amended, which
appears as Exhibit 10(f) to Registrant's Annual Report on
Form 10-K for the fiscal year ended October 31, 1999, which
exhibit is incorporated herein by reference.
10(g) Registrant's 1995 Incentive Stock Plan, as amended, stock
option and restricted stock agreements, which appears as
Exhibit 10(g) to Registrant's Annual Report on Form 10-K for
the fiscal year ended October 31, 1999, which exhibit is
incorporated herein by reference.
10(h) Registrant's 1997 Director Stock Plan which appears as
Exhibit 99 to Registrant's Form S-8 filed on March 7, 1997,
which exhibit is incorporated herein by reference.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- ------------------------------------------------------------
<S> <C>
10(i) Registrant's Executive Deferred Compensation Plan, Amended
and Restated effective November 1, 1999, which appears as
Exhibit 10(i) to Registrant's Annual Report on Form 10-K for
the fiscal year ended October 31, 1999, which exhibit is
incorporated herein by reference.
10(j) VeriFone, Inc. Amended and Restated 1992 Non-Employee
Directors' Stock Option Plan which appears as Exhibit 99.1
to Registrant's Form S-8 filed on July 1, 1997, which
exhibit is incorporated herein by reference.
10(k) VeriFone, Inc. Amended and Restated Incentive Stock Option
Plan and form of agreement which appears as Exhibit 99.2 to
Registrant's Form S-8 filed on July 1, 1997, which exhibit
is incorporated herein by reference.
10(l) VeriFone, Inc. Amended and Restated 1987 Supplemental Stock
Option Plan and form of agreement which appears as
Exhibit 99.3 to Registrant's Form S-8 filed on July 1, 1997,
which exhibit is incorporated herein by reference.
10(m) Enterprise Integration Technologies Corporation 1991 Stock
Plan and form of agreement which appears as Exhibit 99.4 to
Registrant's Form S-8 filed on July 1, 1997, which exhibit
is incorporated herein by reference.
10(n) VeriFone, Inc. Amended and Restated Employee Stock Purchase
Plan which appears as Exhibit 99.1 to Registrant's Form S-8
filed on July 1, 1997, which exhibit is incorporated herein
by reference.
10(o) Registrant's 1998 Subsidiary Employee Stock Purchase Plan
and the Subscription Agreement which appear as Appendices E
and E-1 to Registrant's Proxy Statement dated January 12,
1998, respectively, which appendices are incorporated herein
by reference.
10(p) Transition Agreement, dated May 20, 1999, between Registrant
and Lewis E. Platt which appears as Exhibit 10(ee) to
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 31, 1999, which exhibit is incorporated
herein by reference.
10(q) Employment Agreement, dated May 20, 1999, between Registrant
and Robert P. Wayman which appears as Exhibit 10(ff) to
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 31, 1999, which exhibit is incorporated
herein by reference.
10(r) Employment Agreement, dated July 17, 1999, between
Registrant and Carleton S. Fiorina which appears as
Exhibit 10(gg) to Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended July 31, 1999, which
exhibit is incorporated herein by reference.
10(s) Executive Transition Program which appears as
Exhibit 10(hh) to Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended July 31, 1999, which
exhibit is incorporated herein by reference.
10(t) Incentive Stock Plan Stock Option Agreement (Non-Qualified),
dated July 17, 1999, between Registrant and Carleton S.
Fiorina which appears as Exhibit 10(ii) to Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
July 31, 1999, which exhibit is incorporated herein by
reference.
10(u) Restricted Stock Agreement, dated July 17, 1999, between
Registrant and Carleton S. Fiorina which appears as
Exhibit 10(jj) to Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended July 31, 1999, which
exhibit is incorporated herein by reference.
10(v) Restricted Stock Unit Agreement, dated July 17, 1999,
between Registrant and Carleton S. Fiorina which appears as
Exhibit 10(kk) to Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended July 31, 1999, which
exhibit is incorporated herein by reference.
10(w) Registrant's 2000 Stock Plan which appears as Appendix A to
Registrant's Proxy Statement dated January 18, 2000, which
appendix is incorporated herein by reference.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- ------------------------------------------------------------
<S> <C>
10(x) Registrant's 2000 Employee Stock Purchase Plan which appears
as Appendix B to Registrant's Proxy Statement dated
January 18, 2000, which appendix is incorporated herein by
reference.
10(y) Registrant's Pay-for-Results Plan which appears as
Appendix C to Registrant's Proxy Statement dated
January 18, 2000, which appendix is incorporated herein by
reference.
23(a) Consent of Independent Accountants (Hewlett-Packard
Company).
23(b) Consent of Independent Accountants (Bluestone Software,
Inc.).
23(c) Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5).
23(d) Consent of Deutsche Bank Securities Inc.
24 Power of Attorney.*
99(a) Form of Bluestone Software, Inc. Proxy.
99(b) Opinion of Deutsche Bank Securities Inc., dated October 24,
2000 (included as Appendix D to the prospectus/proxy
statement).
</TABLE>
------------------------
* Previously filed.
** To be filed by post-effective amendment.
(b) FINANCIAL STATEMENT SCHEDULES
No schedules are included in the foregoing financial statements because the
required information is inapplicable or is presented in the financial statements
or related notes thereto.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required in Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering;
II-4
<PAGE>
(4) That, prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other Items of the applicable form;
(5) That every prospectus (i) that is filed pursuant to paragraph (4)
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Securities Act of 1933 and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof;
(6) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 20 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue;
(7) To respond to requests for information that is incorporated by reference
into the prospectus pursuant to items 4, 10(b), 11 or 13 of Form S-4, within one
business day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes information
contained in the documents filed subsequently to the effective date of the
registration statement through the date of responding to the request; and
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 1 to Registration Statement on
Form S-4 to be signed on its behalf by the undersigned, thereunto duly
authorized, in Palo Alto, California, on the 8th day of December, 2000.
<TABLE>
<S> <C> <C>
HEWLETT-PACKARD COMPANY
By: /s/ CHARLES N. CHARNAS
-----------------------------------------
Charles N. Charnas
ASSISTANT SECRETARY AND SENIOR MANAGING
COUNSEL
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement on Form S-4 has been signed by the following
persons in the capacities indicated on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
President, Chief Executive
/s/ CARLETON S. FIORINA* Officer and Chairman of
------------------------------------------- the Board (Principal December 8, 2000
Carleton S. Fiorina Executive Officer)
Executive Vice President
Finance and
/s/ ROBERT P. WAYMAN* Administration, Chief
------------------------------------------- Financial Officer and December 8, 2000
Robert P. Wayman Director (Principal
Financial Officer)
/s/ RAYMOND W. COOKINGHAM* Vice President and
------------------------------------------- Controller (Principal December 8, 2000
Raymond W. Cookingham Accounting Officer)
/s/ PHILIP M. CONDIT*
------------------------------------------- Director December 8, 2000
Philip M. Condit
/s/ RICHARD A. HACKBORN*
------------------------------------------- Director December 8, 2000
Richard A. Hackborn
/s/ DR. GEORGE A. KEYWORTH II*
------------------------------------------- Director December 8, 2000
Dr. George A. Keyworth II
/s/ SUSAN P. ORR*
------------------------------------------- Director December 8, 2000
Susan P. Orr
</TABLE>
<TABLE>
<S> <C>
*By: /s/ CHARLES N. CHARNAS
---------------------------------
Charles N. Charnas
(ATTORNEY-IN-FACT)
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- ------------------------------------------------------------
<S> <C>
2(a) Master Separation and Distribution Agreement between
Hewlett-Packard Company and Agilent Technologies, Inc.
effective as of August 12, 1999, which appears as Exhibit 2
to Registrant's Annual Report on Form 10-K for the fiscal
year ended October 31, 1999, which exhibit is incorporated
herein by reference.
2(b) Agreement and Plan of Merger dated as of October 24, 2000,
among Hewlett-Packard Company, Beta Acquisition Corporation
and Bluestone Software, Inc. (included as Appendix A to the
prospectus/proxy statement).
2(c) Stock Option Agreement between Hewlett-Packard Company and
Bluestone Software, Inc., dated as of October 24, 2000
(included as Appendix B to the prospectus/proxy statement).
2(d) Voting Agreement among Hewlett-Packard Company, Bluestone
Software, Inc. and certain stockholders of Bluestone
Software, Inc. (included as Appendix C to the
prospectus/proxy statement).
3(a) Registrant's Amended and Restated Certificate of
Incorporation, which appears as Exhibit 3(a) to Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
April 30, 1998, which exhibit is incorporated herein by
reference.
3(b) Registrant's Amended By-Laws, which appears as Exhibit 3(b)
to Registrant's Annual Report on Form 10-K for the fiscal
year ended October 31, 1999, which exhibit is incorporated
herein by reference.
4(a) Indenture dated as of October 14, 1997 among Registrant and
Chase Trust Company of California regarding Liquid Yield
Option Notes due 2017 which appears as Exhibit 4.2 to
Registrant's Registration Statement on Form S-3
(Registration No. 333-44113), which exhibit is incorporated
herein by reference.
4(b) Supplemental Indenture dated as of March 16, 2000 among
Registrant and Chase Trust Company of California regarding
Liquid Yield Option Notes due 2017 which appears as
Exhibit 4(b) to Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended July 31, 2000, which exhibit is
incorporated herein by reference.
4(c) Form of Registrant's 7.15% Global notes due June 15, 2005
and related Officers' Certificate, which appear as
Exhibits 4.1 and 4.3 to Registrant's Form 8-K filed on
June 15, 2000, which exhibits are incorporated herein by
reference.
4(d) Senior Indenture, which appears as Exhibit 4.1 to
Registrant's Registration Statement on Form S-3 dated
February 18, 2000, as amended by Amendment No. 1 thereto
dated March 17, 2000 (Registration No. 333-30786), which
exhibit is incorporated herein by reference.
5 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
8(a) Tax opinion of Skadden, Arps, Slate, Meagher & Flom LLP.**
8(b) Tax opinion of Pepper Hamilton LLP.**
10(a) Registrant's 1985 Incentive Compensation Plan, as amended,
which appears as Exhibit 10(a) to Registrant's Annual
Report on Form 10-K for the fiscal year ended October 31,
1999, which exhibit is incorporated herein by reference.
10(b) Registrant's 1985 Incentive Compensation Plan, as amended,
stock option agreement, which appears as Exhibit 10(b) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended October 31, 1999, which exhibit is incorporated herein
by reference.
10(c) Registrant's Excess Benefit Retirement Plan, amended and
restated as of November 1, 1999 which appears as
Exhibit 10(c) to Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended July 31, 2000, which exhibit is
incorporated by reference herein.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- ------------------------------------------------------------
<S> <C>
10(d) Registrant's 1990 Incentive Stock Option Plan, as amended,
which appears as Exhibit 10(d) to Registrant's Annual Report
on Form 10-K for the fiscal year ended October 31, 1999,
which exhibit is incorporated herein by reference.
10(e) Registrant's 1990 Incentive Stock Option Plan, as amended,
stock option agreement, which appears as Exhibit 10(e) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended October 31, 1999, which exhibit is incorporated herein
by reference.
10(f) Registrant's 1995 Incentive Stock Plan, as amended, which
appears as Exhibit 10(f) to Registrant's Annual Report on
Form 10-K for the fiscal year ended October 31, 1999, which
exhibit is incorporated herein by reference.
10(g) Registrant's 1995 Incentive Stock Plan, as amended, stock
option and restricted stock agreements, which appears as
Exhibit 10(g) to Registrant's Annual Report on Form 10-K for
the fiscal year ended October 31, 1999, which exhibit is
incorporated herein by reference.
10(h) Registrant's 1997 Director Stock Plan which appears as
Exhibit 99 to Registrant's Form S-8 filed on March 7, 1997,
which exhibit is incorporated herein by reference.
10(i) Registrant's Executive Deferred Compensation Plan, Amended
and Restated effective November 1, 1999, which appears as
Exhibit 10(i) to Registrant's Annual Report on Form 10-K for
the fiscal year ended October 31, 1999, which exhibit is
incorporated herein by reference.
10(j) VeriFone, Inc. Amended and Restated 1992 Non-Employee
Directors' Stock Option Plan which appears as Exhibit 99.1
to Registrant's Form S-8 filed on July 1, 1997, which
exhibit is incorporated herein by reference.
10(k) VeriFone, Inc. Amended and Restated Incentive Stock Option
Plan and form of agreement which appears as Exhibit 99.2 to
Registrant's Form S-8 filed on July 1, 1997, which exhibit
is incorporated herein by reference.
10(l) VeriFone, Inc. Amended and Restated 1987 Supplemental Stock
Option Plan and form of agreement which appears as
Exhibit 99.3 to Registrant's Form S-8 filed on July 1, 1997,
which exhibit is incorporated herein by reference.
10(m) Enterprise Integration Technologies Corporation 1991 Stock
Plan and form of agreement which appears as Exhibit 99.4 to
Registrant's Form S-8 filed on July 1, 1997, which exhibit
is incorporated herein by reference.
10(n) VeriFone, Inc. Amended and Restated Employee Stock Purchase
Plan which appears as Exhibit 99.1 to Registrant's Form S-8
filed on July 1, 1997, which exhibit is incorporated herein
by reference.
10(o) Registrant's 1998 Subsidiary Employee Stock Purchase Plan
and the Subscription Agreement which appear as Appendices E
and E-1 to Registrant's Proxy Statement dated January 12,
1998, respectively, which appendices are incorporated herein
by reference.
10(p) Transition Agreement, dated May 20, 1999, between Registrant
and Lewis E. Platt which appears as Exhibit 10(ee) to
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 31, 1999, which exhibit is incorporated
herein by reference.
10(q) Employment Agreement, dated May 20, 1999, between Registrant
and Robert P. Wayman which appears as Exhibit 10(ff) to
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 31, 1999, which exhibit is incorporated
herein by reference.
10(r) Employment Agreement, dated July 17, 1999, between
Registrant and Carleton S. Fiorina which appears as
Exhibit 10(gg) to Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended July 31, 1999, which
exhibit is incorporated herein by reference.
10(s) Executive Transition Program which appears as
Exhibit 10(hh) to Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended July 31, 1999, which
exhibit is incorporated herein by reference.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- ------------------------------------------------------------
<S> <C>
10(t) Incentive Stock Plan Stock Option Agreement (Non-Qualified),
dated July 17, 1999, between Registrant and Carleton S.
Fiorina which appears as Exhibit 10(ii) to Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
July 31, 1999, which exhibit is incorporated herein by
reference.
10(u) Restricted Stock Agreement, dated July 17, 1999, between
Registrant and Carleton S. Fiorina which appears as
Exhibit 10(jj) to Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended July 31, 1999, which
exhibit is incorporated herein by reference.
10(v) Restricted Stock Unit Agreement, dated July 17, 1999,
between Registrant and Carleton S. Fiorina which appears as
Exhibit 10(kk) to Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended July 31, 1999, which
exhibit is incorporated herein by reference.
10(w) Registrant's 2000 Stock Plan which appears as Appendix A to
Registrant's Proxy Statement dated January 18, 2000, which
appendix is incorporated herein by reference.
10(x) Registrant's 2000 Employee Stock Purchase Plan which appears
as Appendix B to Registrant's Proxy Statement dated
January 18, 2000, which appendix is incorporated herein by
reference.
10(y) Registrant's Pay-for-Results Plan which appears as
Appendix C to Registrant's Proxy Statement dated
January 18, 2000, which appendix is incorporated herein by
reference.
23(a) Consent of Independent Accountants (Hewlett-Packard
Company).
23(b) Consent of Independent Accountants (Bluestone Software,
Inc.).
23(c) Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5).
23(d) Consent of Deutsche Bank Securities Inc.
24 Power of Attorney.*
99(a) Form of Bluestone Software, Inc. Proxy.
99(b) Opinion of Deutsche Bank Securities Inc., dated October 24,
2000 (included as Appendix D to the prospectus/proxy
statement).
</TABLE>
------------------------
* Previously filed.
** To be filed by post-effective amendment.
