As filed with the Securities and Exchange Commission on July 30, 1997
Registration No. 333-
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
COMPAQ COMPUTER CORPORATION
(Exact name of Registrant as specified in its charter)
--------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 3571 76-0011617
(State or Other Jurisdiction of (Primary Standard Industrial (IRS Employer
Incorporation or Organization) Classification Code Number) Identification No.)
20555 SH 249
Houston, Texas 77070
(281) 370-0670
(Address, Including Zip Code, and Telephone Number,
including Area Code, of Registrant's Principal Executive
Offices)
--------------------
J. David Cabello, Esq.
Senior Vice President,
General Counsel and Secretary
Compaq Computer Corporation
20555 SH 249
Houston, Texas 77070
(281) 370-0670
(Name, Address, Including Zip Code, and Telephone
Number, Including Area Code, of Agent for Service)
--------------------
copies to:
Christopher Mayer Josephine T. Parry Joseph W. Bartlett
David L. Caplan Vice President, General Counsel and Secretary Ira Greenstein
Davis Polk & Wardwell Tandem Computers Incorporated Morrison & Foerster LLP
450 Lexington Avenue 10435 North Tantau Avenue 1290 Avenue of the Americas
New York, New York 10017 Cupertino, California 95014 41st Floor
(212) 450-4000 (408) 285-6000 New York, New York 10104
(212) 468-8000
</TABLE>
Approximate Date of Commencement of Proposed Sale to Public: As soon as
practicable after the effectiveness of this Registration Statement and the
effective time (the "Effective Time") of the merger (the "Merger") of a
wholly-owned subsidiary of the Registrant with and into Tandem Computers
Incorporated ("Tandem") as described in the Agreement and Plan of Merger dated
as of June 22, 1997.
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. [ ]
--------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================================================
Proposed Maximum Proposed Maximum Amount of
Title of each Class of Amount to be Offering Aggregate Offering Registration
Securities to be Registered Registered(1) Price Per Unit Price (2) Fee(3)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share... 73,500,000 $51.25(2) $3,766,840,000 $1,141,466.67
==================================================================================================================================
</TABLE>
(1) Represents the number of shares of Common Stock, par value $0.01 per
share, of the Registrant ("Compaq Common Stock") to be issued in
connection with the Merger in exchange for shares of Common Stock, par
value $0.025 per share, of Tandem ("Tandem Common Stock"), determined
on the basis of the exchange ratio applicable in the Merger (0.525
shares of Compaq Common Stock for each share of Tandem Common Stock)
and the number of outstanding shares of Tandem Common Stock on July 28,
1997.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) and Rule 457(c) of the Securities Act of
1933, as amended (the "Securities Act"), based on the average of the
high and low prices of Tandem Common Stock on July 28, 1997 on the New
York Stock Exchange, which was $26.906.
(3) The registration fee for the securities registered hereby of $1,141,466.67
is being paid herewith. This fee has been calculated pursuant to Rule
457(f) under the Securities Act, as one thirty-third of one percent of
$3,766,840,000.
--------------------
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 of 1933 or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
==============================================================================
COMPAQ COMPUTER CORPORATION
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NUMBER LOCATION IN PROXY
IN FORM S-4 STATEMENT/PROSPECTUS
- --------------------------------------------------------------- ----------------------------------------------------------
<S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus............................. Facing Page of the Registration Statement; Outside
Front Cover Page of Proxy Statement/Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus................................................. Where You Can Find More Information; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information...................................... Outside Front Cover Page of Proxy Statement/Prospectus;
Summary; Risk Factors; Information Regarding New Tandem
Products; Interests of Certain Persons in the Merger and
Related Matters; The Merger; Comparative Per Share Market
Price and Dividend Information; Special Meeting; Where You Can
Find More Information
4. Terms of the Transaction................................... Outside Front Cover Page of Proxy Statement/Prospectus;
Summary; The Merger; The Merger Agreement; Special Meeting;
Comparison of Stockholder Rights; Description of Compaq Capital
Stock
5. Pro Forma Financial Information............................ Summary; Unaudited Pro Forma Combined Financial Statements
6. Material Contacts with the Company Being
Acquired................................................... Summary; The Merger; The Merger Agreement
7. Additional Information Required for Reoffering
by Persons and Parties Deemed to be
Underwriters............................................... *
8. Interests of Named Experts and Counsel..................... *
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities............. *
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants................ Summary; Where You Can Find More Information
11. Incorporation of Certain Information by
Reference.................................................. Where You Can Find More Information
12. Information with Respect to S-2 and S-3
Registrants................................................ *
13. Incorporation of Certain Information by
Reference.................................................. *
14. Information with Respect to Registrants Other
Than S-3 or S-2 Registrants................................ *
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies.................. Summary; Where You Can Find More Information
16. Information with Respect to S-2 or S-3
Companies.................................................. *
17. Information with Respect to Companies Other
Than S-2 or S-3 Companies.................................. *
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited......................... Outside Front Cover Page of Proxy Statement/Prospectus;
Summary; Interests of Certain Persons in the Merger and
Related Matters; The Merger; The Merger Agreement; Special
Meeting; Comparison of Stockholder Rights; Description of
Compaq Capital Stock; Where You Can Find More Information
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or in an
Exchange Offer............................................. *
</TABLE>
- --------------
* Omitted because the Item is inapplicable or the answer thereto is negative.
TANDEM COMPUTERS INCORPORATED
10435 NORTH TANTAU AVENUE
CUPERTINO, CA 95014
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 29, 1997
To the Stockholders of Tandem Computers Incorporated:
A Special Meeting of the Stockholders of Tandem Computers
Incorporated, a Delaware corporation ("Tandem"), will be held at 10:00 a.m.
California time, on Friday, August 29, 1997 at the headquarters of Tandem,
10435 North Tantau Avenue, Cupertino, CA 95014, for the following purposes:
1. To approve and adopt the Agreement and Plan of Merger (the
"Merger Agreement") dated as of June 22, 1997 among Tandem, Compaq
Computer Corporation ("Compaq") and Compaq-Project, Inc., a wholly-
owned subsidiary of Compaq ("Merger Subsidiary") pursuant to which
Merger Subsidiary will be merged with and into Tandem and each share of
Common Stock, $0.025 par value, of Tandem ("Tandem Common Stock") will
be converted into the right to receive 0.525 shares of Common Stock,
$0.01 par value, of Compaq.
2. To transact such other business as may properly come before
the meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on July
28, 1997 as the record date (the "Record Date") for the determination of the
holders of Tandem Common Stock entitled to notice of, and to vote at, the
Special Meeting. Holders of Tandem Common Stock as of the Record Date will be
entitled to vote at the Special Meeting or any adjournment or postponement
thereof. Approval and adoption of the Merger Agreement requires the
affirmative vote of a majority of the outstanding shares of Tandem Common
Stock entitled to vote thereon. As of the Record Date, there were 118,074,615
shares of Tandem Common Stock outstanding, each of which is entitled to one
vote with respect to each matter to be voted on at the Special Meeting. You
may revoke your proxy at any time prior to its exercise. Any stockholder
present at the Special Meeting or any adjournments or postponements thereof
may revoke his or her proxy and vote personally on each matter brought before
the Special Meeting.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL
MEETING. HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, YOU
ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS
POSSIBLE. A PRE-ADDRESSED ENVELOPE IS ENCLOSED FOR THAT PURPOSE. IF NO
INSTRUCTIONS ARE INDICATED ON YOUR PROXY, YOUR SHARES OF TANDEM COMMON STOCK
WILL BE VOTED "FOR" APPROVAL OF THE MERGER AGREEMENT. ANY STOCKHOLDER
ATTENDING THE SPECIAL MEETING MAY VOTE IN PERSON EVEN IF THAT STOCKHOLDER HAS
RETURNED A PROXY.
By Order of the Board of Directors
Josephine T. Parry
Secretary
Dated: July 30, 1997
Special Meeting of Stockholders
MERGER PROPOSED-YOUR
VOTE IS VERY IMPORTANT
The Board of Directors of Tandem Computers Incorporated has unanimously
approved a merger between Tandem and a subsidiary of Compaq Computer
Corporation, the world's largest supplier of personal computers. The merger
will combine Tandem's leadership in clustering technologies and enterprise
computing with Compaq's strengths in PC hardware and Intel-based servers. We
believe the merger will create a preeminent computer company able to offer a
vast array of products, services and support to its customers.
Your Board of Directors has determined that the merger is fair to you and is
in your best interests. The Board therefore recommends that you vote to
approve the merger and the related merger agreement.
If the merger is completed, Tandem stockholders will receive 0.525 shares of
Compaq common stock for each share of Tandem common stock. Compaq stockholders
will continue to own their existing shares after the merger.
We estimate that the shares of Compaq common stock to be issued to Tandem
stockholders will represent approximately 8.6% of the outstanding Compaq
common stock after the merger (assuming all Tandem and Compaq stock options
are exercised).
At the Special Meeting, Tandem stockholders will be asked to approve the
merger and the related merger agreement. The affirmative vote of the holders
of a majority of the outstanding shares of Tandem common stock (118,074,615
at July 28, 1997, the record date for the vote) is required to approve the
merger and related merger agreement. The merger cannot be completed unless
Tandem stockholders approve it. Stockholders of Compaq are not required to
approve the merger.
The date, time and place of the Special Meeting:
August 29, 1997
10:00 a.m.
Tandem Computers Incorporated
10435 North Tantau Avenue
Cupertino, CA 95014
This Proxy Statement/Prospectus provides you with detailed information about
the proposed merger. In addition, you may obtain information about Tandem and
Compaq from documents filed with the Securities and Exchange Commission. We
encourage you to read this entire document carefully.
Whether or not you plan to attend the Special Meeting, please take the time to
vote by completing and mailing the enclosed proxy card to us. If you sign,
date and mail your proxy card without indicating how you wish to vote, your
proxy will be counted as a vote in favor of the approval of the merger and the
related merger agreement. If you fail to return your card, the effect will be
a vote against the merger. YOUR VOTE IS VERY IMPORTANT.
On behalf of the Board of Directors of Tandem, we urge you to vote "FOR"
approval of the merger and the related merger agreement.
THOMAS J. PERKINS ROEL PIEPER
Chairman of the Board Chief Executive Officer
Neither the Securities and Exchange Commission nor any state securities
regulators have approved the Compaq common stock to be issued in the merger
or determined if this Proxy Statement/Prospectus is accurate or adequate.
Any representation to the contrary is a criminal offense.
Proxy Statement/Prospectus dated July 30, 1997 and first mailed to
stockholders on August 1, 1997.
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE MERGER.......................................1
ADDITIONAL QUESTIONS AND ANSWERS ABOUT THE MERGER FOR TANDEM EMPLOYEES.......3
SUMMARY......................................................................4
SELECTED HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA..........9
COMPARATIVE PER SHARE DATA..................................................14
RISK FACTORS................................................................16
Fixed Merger Consideration Despite Potential Changes in Stock
Prices....................................................................16
Integration of Operations...................................................16
Stock Ownership in Compaq...................................................16
INFORMATION REGARDING NEW TANDEM PRODUCTS...................................16
THE MERGER..................................................................17
General.....................................................................17
Background of the Business Relationship and the Merger......................17
Tandem's Reasons for the Merger; Recommendation of the Tandem Board.........19
Compaq's Reasons for the Merger.............................................20
Opinion of Tandem's Financial Advisor.......................................20
Forward-Looking Statements May Prove Inaccurate.............................26
Accounting Treatment........................................................27
Certain U.S. Federal Income Tax Consequences................................27
Regulatory Matters..........................................................28
No Appraisal Rights.........................................................29
Federal Securities Laws Consequences; Resale Restrictions...................29
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION.................31
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS...........................32
INTERESTS OF CERTAIN PERSONS IN THE MERGER AND RELATED MATTERS..............41
Tandem's Employment Agreements..............................................41
Board of Directors..........................................................41
Indemnification and Insurance...............................................42
Employment Arrangements.....................................................42
Ownership of Tandem Securities by Certain Beneficial Owners and Management;
Compensation and Benefits.................................................42
THE MERGER AGREEMENT........................................................43
Structure; Effective Time...................................................43
Merger Consideration........................................................43
Employee Stock Purchase Plan................................................43
Employee Stock Options......................................................43
Conversion of Shares........................................................44
Certain Covenants...........................................................44
Certain Representations and Warranties......................................46
Conditions to the Merger....................................................46
Termination of the Merger Agreement.........................................47
Other Expenses..............................................................48
Amendments; No Waivers......................................................48
Stock Option Agreement......................................................49
SPECIAL MEETING.............................................................50
Time and Place; Purpose.....................................................50
Record Date; Voting Rights and Proxies......................................50
Share Ownership of Management and Certain Stockholders......................50
Solicitation of Proxies.....................................................51
Quorum......................................................................51
Required Vote...............................................................51
COMPARISON OF STOCKHOLDER RIGHTS............................................51
General.....................................................................51
Comparison of Current Tandem Stockholder Rights and Rights of Compaq
Stockholders Following the Merger.........................................52
DESCRIPTION OF COMPAQ CAPITAL STOCK.........................................54
Authorized Capital Stock....................................................54
Compaq Common Stock.........................................................54
Compaq Preferred Stock......................................................55
Transfer Agent and Registrar................................................55
Stock Exchange Listing; Delisting and Deregistration of Tandem Common
Stock.....................................................................55
LEGAL MATTERS...............................................................55
EXPERTS.....................................................................55
FUTURE STOCKHOLDER PROPOSALS................................................56
WHERE YOU CAN FIND MORE INFORMATION.........................................56
LIST OF DEFINED TERMS.......................................................58
LIST OF ANNEXES
ANNEX A - Agreement and Plan of Merger
ANNEX B - Stock Option Agreement
ANNEX C - Opinion of Lehman Brothers
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: Why is Tandem proposing the merger? How will I benefit?
A: The proposed merger will combine Tandem's leadership in Microsoft
Windows NT clustering and enterprise computing with Compaq's strengths in PC
hardware and Intel-based servers. We believe that the merger will create a
company capable of offering the broadest range of reliable, scalable solutions
across the entire spectrum of business-critical computing. Tandem believes
that the merger will benefit stockholders by significantly accelerating the
execution of its strategy and increasing market share.
To review the background and reasons for the merger in greater detail, see
page 17.
Q: When is the Special Meeting?
A: The Special Meeting will take place on August 29, 1997. At the meeting,
Tandem stockholders will be asked to approve the merger and the related merger
agreement signed by Tandem and Compaq on June 22, 1997. Compaq stockholders
do not need to vote on the merger.
Q: What do I need to do now?
A: Please mail your signed proxy card in the enclosed return envelope as
soon as possible, so that your shares may be represented at the Special
Meeting. In addition, you may attend the Special Meeting in person, rather
than signing and mailing your proxy card.
Q: What do I do if I want to change my vote?
A: Just send in a later-dated, signed proxy card before the Special Meeting
or attend the meeting in person and vote.
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 on
how to vote. You should instruct your broker to vote your shares, following
the directions provided by your broker. Without instructions, your shares will
not be voted.
Q: Should I send in my stock certificates now?
A: No. If the merger is completed, we will send Tandem stockholders
written instructions for exchanging their share certificates. Compaq
stockholders will keep their certificates.
Q: Please explain what I will receive in the merger.
A: If the merger is completed, Tandem stockholders will have the right to
receive 0.525 shares of Compaq common stock in exchange for each share of
Tandem common stock they own.
Example:
bullet If you currently own 1,000 shares of Tandem common stock,
then after the merger you will receive 525 shares of Compaq
common stock. The value of the Compaq common stock that you
will receive depends on the price of Compaq common stock
immediately after the merger.
bullet On July 29, 1997 the closing price of Tandem common stock
on the New York Stock Exchange was $26.875. Applying the
0.525 exchange ratio, on that date, each holder of Tandem
common stock would be entitled to receive Compaq common stock
with a market value of approximately $27.891 for each
share of Tandem common stock. However, the market prices for
Tandem and Compaq common stock are likely to change between
now and the merger. You are urged to obtain current price
quotes for Tandem and Compaq common stock.
Compaq will not issue fractional shares. Instead, you will receive cash for
any fractional shares of Compaq common stock owed to you based on the market
value of Compaq common stock on the last trading day before the merger occurs.
Q: Has the exchange ratio changed since the announcement of the signing of
the merger agreement?
A: Yes. The exchange ratio has changed from 0.21 shares of Compaq common
stock to 0.525 shares as a result of Compaq's five-for-two stock split
announced on July 1, 1997.
Q: Will I owe any federal income tax as a result of the merger?
A: No, unless you receive cash for fractional shares. The exchange of
shares by Tandem stockholders will be tax-free to Tandem stockholders for
federal income tax purposes, except that Tandem stockholders will have to pay
tax on cash received for fractional shares.
Q: Does Compaq pay dividends?
A: Like Tandem, Compaq does not pay dividends. However, after the merger,
Compaq's Board of Directors may change that policy based on business
conditions, Compaq's financial condition and earnings and other factors.
Q: When do you expect the merger to be completed?
A: We are working toward completing the merger as quickly as possible. In
addition to Tandem stockholder approval, Tandem and Compaq must also obtain
regulatory approvals. We hope to complete the merger by September 1997.
Q: What if I also own shares of Compaq common stock?
Compaq common stock will not be affected by the merger. If you currently own
shares of Compaq common stock, you will continue to own those shares after the
merger.
Q: Whom should I call with questions?
A. If you have any questions about the merger, please call Roberta DeTata,
Director of Investor Relations at Tandem, at (408) 285-4363.
ADDITIONAL QUESTIONS AND ANSWERS ABOUT THE MERGER
FOR TANDEM EMPLOYEES
Q: What will happen to employee stock options held by Tandem employees?
A: The outstanding options will convert into options for Compaq common
stock, at the same 0.525 exchange ratio that applies to Tandem common stock.
Thus, for each share of Tandem common stock on which you have an option, you
will receive an option to purchase 0.525 shares of Compaq common stock. In
addition, the exercise price per share will be adjusted by dividing the
current exercise price by 0.525.
Example:
bullet An option to purchase 1,000 shares of Tandem common stock at an exercise
price of $10.00 per share will convert to an option to purchase 525
shares of Compaq common stock (1,000 x 0.525) at an exercise price of
$19.05 per share ($10.00/0.525).
Q: May I exercise stock options and sell Tandem common stock between now
and the completion of the merger?
A: Yes, subject to the timing limitations included in the Tandem Corporate
Policy Statement Regarding Stock Trading Restrictions and the additional
limitations on trading by persons defined as Tandem "affiliates," as described
on page 29.
Q: What will happen to Tandem's Employee Stock Purchase Plan ("ESPP")?
A: The ESPP will be terminated upon completion of the merger. The
participation period then in process will end. The funds that are accumulated
through your payroll deductions up until that time will be applied to purchase
shares of Tandem common stock. Those shares of Tandem common stock will then
be exchanged in the merger for Compaq common stock.
Q: How will shares of Tandem common stock held in the Tandem 401(k) Plan be
voted?
A: In the vote on the merger, shares held in the Tandem 401(k) Plan will be
voted by the Plan's trustee as the Plan participants may direct. If you are
a Plan participant with Tandem common stock allocated to your account, the
trustee will send you instructions on how to direct the trustee's vote on
these shares.
Q: What will happen in the merger to Tandem common stock held in the Tandem
401(k) Plan?
A: In the merger, the shares of Tandem common stock held in the Plan will
be exchanged for shares of Compaq common stock. The Compaq shares will be
allocated to individual participant accounts. After completion of the merger,
your 401(k) account will hold Compaq common stock, subject to the same plan
rules as now apply to Tandem common stock. The number of Compaq shares will
be based on the same exchange ratio described throughout this Proxy
Statement/Prospectus-- 0.525 shares of Compaq common stock for each share of
Tandem common stock.
Q: What are the tax consequences for Tandem common stock held in the Tandem
401(k) Plan?
A: Neither the 401(k) Plan nor Plan participants will be taxed upon the
exchange of shares held by the Plan. In the future, when you receive a Plan
distribution, the distribution will be subject to tax, including whatever
portion of that distribution is attributable to the Compaq common stock
received by your 401(k) Plan account in the merger.
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 understand the merger fully and for a more complete
description of the legal terms of the merger, you should read carefully this
entire document and the documents to which we have referred you. See "Where
You Can Find More Information" on page 56. We have included page references in
parentheses to direct you to a more complete description of the topics
presented in this summary.
The Companies
Tandem Computers Incorporated
19333 Vallco Parkway
Cupertino, CA 95014
(408) 285-6000
Tandem provides its customers with reliable, scalable, fault-tolerant
enterprise computer systems and client/server solutions. Stock exchanges
processing the bulk of the world's securities transactions use Tandem
technology and equipment, and a significant percentage of automated teller
machines (ATMs) run on Tandem systems. Credit card transactions, electronic
fund transfers, telecommunications, messaging systems and public e-mail
networks are all areas in which Tandem systems play a key role in promoting
commerce globally. Tandem is expanding its focus to include new products and
solutions that target high-growth opportunities in the Microsoft Windows NT
Server environment.
Compaq Computer Corporation
20555 SH 249
Houston, TX 77070
(281) 370-0670
Compaq is the largest supplier of personal computers in the world. Compaq
designs, develops, manufactures and markets a wide range of computing
products, and supplies approximately 10% of the expanding worldwide PC market.
Compaq also maintains a strong position in the distributed enterprise
solutions market with an approximate 30% worldwide market share in PC server
products. In the future, Compaq will continue to integrate hardware and
software to furnish the building blocks of personal and corporate computing
while participating in software and communications markets either directly or
through business alliances.
Tandem's Reasons for the Merger
The merger will combine Tandem's leadership in Microsoft Windows NT clustering
technology and enterprise computing with Compaq's strengths in PC hardware and
Intel-based servers. Tandem believes that the merger will serve to
significantly accelerate the execution of its strategy and help achieve market
leadership. At the same time, the merger should provide stockholder benefits
in terms of enhanced revenue growth, manufacturing cost improvements and cost
avoidance by leveraging Compaq's present and future product plans.
To review the reasons for the merger in greater detail, see page 19.
The Special Meeting
The Special Meeting will be held at 10:00 a.m. on August 29, 1997. At the
Special Meeting, Tandem stockholders will be asked to approve the merger and
the related merger agreement. The Special Meeting will be held at Tandem
Computers Incorporated, 10435 North Tantau Avenue, Cupertino, CA 95014.
Recommendation to Tandem Stockholders
The Tandem Board of Directors believes that the merger is in your best
interests and unanimously recommends that you vote "for" approval of the
merger and the related merger agreement.
Record Date; Voting Power
You are entitled to vote at the Special Meeting if you owned shares as of the
close of business on July 28, 1997, the Record Date.
On the Record Date, there were 118,074,615 shares of Tandem common stock
entitled to vote at the Special Meeting. Tandem stockholders will have one
vote at the Special Meeting for each share of Tandem common stock they own on
the Record Date.
Stockholder Vote Required to Approve the Merger
The favorable vote of the holders of a majority of the outstanding shares of
Tandem common stock is required to approve the merger and the related merger
agreement. Your failure to vote will have the effect of a vote against the
merger. A vote of Compaq stockholders is not required.
Share Ownership of Management and Certain Stockholders
On the Record Date, Tandem directors, executive officers and their affiliates
owned and were entitled to vote 2,590,692 shares of Tandem common stock, or
approximately 2.2% of the shares of Tandem common stock outstanding on the
Record Date.
The directors of Tandem have indicated that they intend to vote the Tandem
common stock owned by them "for" approval of the merger and the related merger
agreement.
The Merger
The merger agreement (Annex A) and related stock option agreement (Annex B)
are attached at the back of this Proxy Statement/Prospectus. We encourage you
to read both agreements as they are the legal documents that govern the merger.
What Tandem Stockholders Will Receive in the Merger (See page 43)
If the merger is approved, Tandem stockholders will have the right to receive
0.525 shares of Compaq common stock for each share of Tandem common stock they
own. This exchange ratio reflects the five-for-two stock split of Compaq
common stock announced on July 1, 1997. Compaq will not issue any
fractional shares. Instead, Tandem stockholders will receive cash for any
fractional shares of Compaq common stock owed to them, based on the market
value of Compaq common stock on the last trading day before the merger
occurs.
Tandem stockholders should not send in their stock certificates for exchange
until instructed to do so.
What Current Compaq Stockholders Will Hold After the Merger
Compaq stockholders will continue to own their existing shares after the
merger. Compaq stockholders should not send in their stock certificates in
connection with the merger.
Ownership of Compaq After the Merger
Compaq will issue approximately 72 million shares of Compaq common stock to
Tandem stockholders in the merger. Based on that number, following the merger,
Tandem stockholders will own approximately 8.6% of the outstanding Compaq
common stock (assuming all Tandem and Compaq stock options are exercised).
This information is based on the number of shares of Tandem and Compaq common
stock outstanding on July 28, 1997.
Compaq Dividend Policy Following the Merger
Like Tandem, Compaq does not pay dividends. However, after the merger,
Compaq's Board of Directors may change that policy based on business
conditions, Compaq's financial condition and earnings and other factors.
Interests of Officers and Directors in the Merger
When considering the Tandem Board's recommendation that Tandem stockholders
vote in favor of the merger, you should be aware that Tandem directors and
certain officers have agreements, stock options and other benefit plans that
may provide them with interests in the merger that are different from, or in
addition to, yours.
Seven Tandem officers have employment agreements under which they are entitled
to a cash payment as a result of Tandem's entering into the merger agreement,
and will be entitled to additional cash payments at the time the merger is
completed. Under the employment agreements, the total amount paid and to be
paid to these officers as a result of the merger is $7,107,000. The employment
agreements also provide for the continued employment (at higher levels of
compensation than their current levels) of the officers with Tandem after the
merger. Also, these agreements allow the officers to receive severance pay if
their employment is terminated under certain circumstances. The total amount
payable (based on August 1, 1997 compensation levels) if the employment of all
seven officers were to be terminated following the Merger is approximately
$29,635,000.
Thomas J. Perkins, Tandem's Chairman, will become a member of the Compaq Board
of Directors after the merger. In addition, Compaq has agreed to grant three
senior Tandem officers options to purchase an aggregate of 775,000 shares of
Compaq common stock after the merger. The exercise price of these options
will be the closing price of Compaq common stock on the day after the merger.
The Boards of both Tandem and Compaq were aware of these interests and
considered them in approving the merger. See page 41 for more information
concerning these arrangements.
Conditions to the Merger (See page 46)
The merger will be completed if certain conditions, including the following,
are met:
(1) the approval of Tandem stockholders;
(2) the absence of legal restraints or prohibitions that prevent the
completion of the merger;
(3) the absence of a material adverse change (as discussed on page 46)
since March 31, 1997 with respect to Tandem or Compaq;
(4) the receipt of letters from Tandem's and Compaq's independent
accountants confirming the assessment of management of Tandem and
Compaq, respectively, that the merger will qualify for pooling of
interests accounting treatment; and
(5) the receipt of legal opinions from Tandem's and Compaq's counsel
that the merger will qualify as a tax-free reorganization.
Termination of the Merger Agreement (See page 47)
The Boards of Directors of Tandem and Compaq may jointly agree in writing to
terminate the merger agreement without completing the merger. The merger
agreement may also be terminated in certain other circumstances, as follows:
(1) Either company may terminate the merger agreement if:
(a) the merger is not completed by December 31, 1997. However,
neither Tandem nor Compaq may terminate the merger agreement
if its breach is the reason the merger has not been completed;
(b) the stockholders of Tandem do not approve the merger; or
(c) a law or final court order prohibits the merger.
(2) Only Compaq may terminate the merger agreement if:
(a) a law or final court order prohibits Compaq's exercise of
its rights under the stock option agreement (see below);
(b) the Tandem Board withdraws or modifies its recommendation in
favor of the merger in a manner adverse to Compaq; or
(c) Tandem does not call the Special Meeting promptly, or
violates certain obligations not to solicit alternative
proposals and not to negotiate with, or provide non-public
information to, an entity (other than Compaq) seeking or
contemplating an acquisition of Tandem (see page 44).
Termination Fees and Expenses (See page 48)
Tandem must pay Compaq a termination fee of $55 million in cash if the merger
agreement is terminated in the following circumstances:
bullet the stockholders of Tandem do not approve the merger (but
only if a new acquisition proposal with respect to
Tandem is announced prior to the Special Meeting); or
bullet the Tandem Board withdraws or modifies its recommendation in
favor of the merger in a manner adverse to Compaq; or
bullet Tandem does not call the Special Meeting promptly, or violates certain
obligations not to solicit alternative proposals and not to negotiate
with, or provide non-public information to, an entity (other than
Compaq) seeking or contemplating an acquisition of Tandem.
If the merger agreement is terminated because the merger is not completed by
December 31, 1997, and the representations and warranties of one of the
companies were not true on the date the merger agreement was signed, then
(subject to certain other limitations) that company must pay to the other
company an amount equal to that company's reasonable expenses relating to the
transaction, but not in excess of $20 million.
Stock Option Agreement (See page 49 and Annex B)
Tandem has signed a stock option agreement under which it granted to Compaq an
option to purchase approximately 15% of Tandem's outstanding common stock in
the same circumstances that the $55 million termination fee referred to above
is payable to Compaq. The purpose of the stock option agreement is to
increase the likelihood that the merger will be completed. The agreement may
have the effect of discouraging entities other than Compaq from attempting to
merge with, or acquire, Tandem.
Regulatory Approvals (See page 28)
Tandem and Compaq are both required to make filings with or obtain approvals
from certain domestic and international regulatory authorities in connection
with the merger, including United States and European Community antitrust
authorities. It is expected that Tandem and Compaq will obtain all required
regulatory approvals prior to the Special Meeting. However, we cannot predict
whether Tandem and Compaq will obtain all required regulatory approvals on
that timetable, or whether any approvals will include conditions that would be
detrimental to Tandem or Compaq.
Accounting Treatment (See page 27)
Tandem and Compaq expect the merger to qualify as a pooling of interests,
which means that Tandem and Compaq will be treated as if they had always been
combined for accounting and financial reporting purposes. The availability of
this accounting treatment is a condition to the closing of the merger.
Fairness Opinion of Financial Advisor (See page 20)
In deciding to approve the merger, Tandem's Board considered an opinion from
its financial advisor, Lehman Brothers, as to the fairness of the exchange
ratio to its stockholders from a financial point of view. This opinion is
attached as Annex C to this Proxy Statement/Prospectus. We encourage you to
read this opinion.
Certain Federal Income Tax Consequences (See page 27)
Tandem and Compaq have structured the merger so that neither Tandem nor its
stockholders will recognize gain or loss for federal income tax purposes as a
result of the merger, except for taxes payable on cash received for fractional
shares. Receipt of legal opinions of counsel to Tandem and Compaq as to these
tax consequences is a condition to the merger.
Tax matters are very complicated and the tax consequences of the merger to you
will depend on the facts of your own situation. You should consult your tax
advisors for a full understanding of the tax consequences of the merger to you.
No Appraisal Rights (See page 29)
Under Delaware law, Tandem stockholders do not have any right to an appraisal
of the value of their shares in connection with the merger.
Comparative Per Share Market Price Information (See page 31)
Tandem and Compaq common stock are both listed on the New York Stock Exchange.
On June 20, 1997, the last full trading day prior to the public announcement
of the proposed merger, Tandem common stock closed at $15.000 and Compaq
common stock closed at $42.700 giving effect to the five-for-two stock split
announced on July 1, 1997. On July 29, 1997, Tandem common stock closed at
$26.875 and Compaq common stock closed at $53.125.
Listing of Compaq Common Stock
Compaq will list the shares of its common stock to be issued in the merger on
the New York Stock Exchange.
New Tandem Products
Tandem has incorporated clustering technology in its new S-Series servers.
For further information on this latest line of products, please see
"Information Regarding New Tandem Products" on page 16.
Forward-Looking Statements (See page 26)
This document (and documents that are incorporated by reference) includes
various forward-looking statements about Tandem, Compaq and the combined
company that are subject to risks and uncertainties. Forward-looking
statements include information concerning future results of operations of
Tandem, Compaq and the combined company. Also, statements including the words
"believes," "expects," "anticipates," "intends," "estimates" or similar
expressions are forward-looking statements. Stockholders should note that
many factors, some of which are discussed elsewhere in this document and in
the documents which Tandem and Compaq incorporate by reference, could affect
the future financial results of Tandem, Compaq and the combined company and
could cause actual results to differ materially from those expressed in
forward-looking statements contained or incorporated by reference in this
document. These factors include the following:
bullet a highly competitive environment in the computer market;
bullet difficulties in achieving gross margin and operating expense targets
based on competitive and market factors;
bullet gauging the rate of product transitions accurately and introducing new
products in the face of rapid technology cycles;
bullet differentiating products from those of competitors;
bullet competing successfully in the markets for new products;
bullet anticipating customer demand accurately and estimating the
production supplies needed to meet such demand; and
bullet successfully implementing the merger.
SELECTED HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
Sources of Information
Tandem and Compaq are providing the following information to aid you in your
analysis of the financial aspects of the merger. This information was derived
from the audited and unaudited financial statements of Tandem and Compaq for
their fiscal years 1992 through 1996 and, with respect to Tandem, for the
three-month periods ended March 31 and June 30, 1996 and 1997 and, with
respect to Compaq, for the six-month periods ended June 30, 1996 and 1997. The
selected historical consolidated statement of operations data of Tandem for
the fiscal years ended September 30, 1992 and 1993 have been restated to
reflect the adjustments required to present UB Networks, Inc. as a
discontinued operation.
The information is only a summary and you should read it in conjunction with
the historical financial statements (and related notes) contained in the annual
reports on Form 10-K and other information that Tandem and Compaq have filed
with the Securities and Exchange Commission and the more detailed pro forma
combined financial information included elsewhere in this Proxy
Statement/Prospectus. See "Where You Can Find More Information" on page 56
and "Unaudited Pro Forma Combined Financial Statements" on page 32.
How the Pro Forma Combined Financial Information Was Prepared
Tandem and Compaq expect that the merger will be accounted for as a "pooling
of interests," which means that for accounting and financial reporting purposes
the two companies will be treated as if they had always been combined. For a
more detailed description of pooling of interests accounting, see "The
Merger--Accounting Treatment" on page 27.
The unaudited pro forma combined financial information is presented to show
you what the Tandem and Compaq businesses might have looked like had they
always been combined. Tandem and Compaq did not adjust the combined amounts
for differences in the accounting methods used by the companies because both
companies believe that any such differences are not significant. The companies
may have performed differently if they had always been combined. You should
not rely on the pro forma combined information as being indicative of the
historical results that would have been achieved or the future results that
the combined company will experience after the merger. See "Unaudited Pro
Forma Combined Financial Statements" on page 32.
Periods Covered
The unaudited pro forma combined balance sheet assumes that the merger took
place on June 30, 1997 and combines Tandem's and Compaq's June 30, 1997
unaudited consolidated balance sheets. The unaudited pro forma combined
statements of income assume that the merger took place as of the beginning of
the periods presented and combine Tandem's consolidated statements of
operations for the six months ended June 30, 1997 and 1996 (unaudited) and the
fiscal years ended September 30, 1996, 1995 and 1994 with Compaq's
consolidated statement of income for the six months ended June 30, 1997 and
1996 (unaudited) and the years ended December 31, 1996, 1995 and 1994,
respectively. As permitted by Securities and Exchange Commission regulations,
Tandem's three-month period ended December 31, 1996 has been omitted from the
unaudited pro forma combined statements of income. Tandem's sales and income
from continuing operations were $435.7 million and $11.8 million, respectively,
for this period.
Merger-Related Expenses
Tandem and Compaq estimate that merger-related fees and expenses, consisting
primarily of transaction costs for fees of investment bankers, attorneys and
accountants, and financial printing and other related charges, will be
approximately $37.0 million. Tandem and Compaq will each record its share of
such costs as an expense when incurred. The impact of these fees and expenses
has been reflected as a reduction of pro forma combined stockholders' equity.
These charges are not reflected in the pro forma combined statements of income
or the pro forma combined per share data. The pro forma information does not
include any potential cost savings from the merger. The pro forma financial
information also reflects compensation expenses of $7.1 million arising in
connection with the merger.
Stock Split
All share and per share data have been adjusted to reflect Compaq's
five-for-two stock split announced on July 1, 1997.
<TABLE>
<CAPTION>
Unaudited Selected Pro Forma Combined Financial Data
(In millions, except per share amounts)
Six months ended
June 30, Year ended December 31,
-------------------------- ---------------------------------------------
1997 1996 1996 1995 1994
------- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
Pro Forma Combined Statement of Income
Data:(1,6)
Sales................................... $ 10,787 $ 9,142 $ 20,009 $ 16,675 $ 12,605
Income from continuing operations before
provision for income taxes (2, 3)...... 1,068 707 1,900 1,315 1,336
Income from continuing operations (2, 3) 669 477 1,308 885 1,021
Income from continuing operations per
common and common equivalent share
(4, 5)................................. $ 0.86 $ 0.63 $ 1.71 $ 1.18 $ 1.39
Shares used in computing income from
continuing operations per common and
common equivalent share (4,5).......... 777.6 755.1 765.7 749.7 735.4
Pro Forma Combined Balance Sheet Data: June 30, 1997
-------------
Current assets.......................... $ 10,713
Total assets............................ 13,070
Current liabilities..................... 4,814
Long-term debt.......................... 87
Stockholders' equity (1)................ 7,910
</TABLE>
See Accompanying Notes to Unaudited Selected Pro Forma Combined Financial Data.
NOTES TO UNAUDITED SELECTED PRO FORMA COMBINED FINANCIAL DATA
(1) Merger-related fees and expenses and compensation costs will be
approximately $37.0 million and $7.1 million. Tandem and Compaq will each
record its share of such costs as an expense when incurred. The impact of
these fees and expenses has been reflected as a reduction of pro forma
combined stockholders' equity. These charges are not reflected in the pro
forma combined statements of income data.
(2) Includes Tandem restructuring charges of $52 million in the year ended
1996 and the six months ended June 30, 1996 and a gain of $23 million in
the year ended 1994 related to the sale of subsidiaries. Excludes the
results of operations from discontinued operations to reflect UB Networks,
Inc. as a discontinued operation of Tandem for the years ended September
30, 1996, 1995 and 1994 and the six months ended June 30, 1997.
(3) Includes Compaq non-recurring and non-tax deductible charges of $208
million and $241 million for purchased in-process technology associated
with acquisitions in 1997 and 1995.
(4) The pro forma combined income from continuing operations per share,
presented on a fully diluted basis, is based upon the pro forma weighted
average number of common and common equivalent shares outstanding of Tandem
and Compaq for each period at the exchange ratio of 0.525 shares of Compaq
common stock for each share of Tandem common stock and is computed after
taking into consideration the dilutive effect of stock options.
(5) Adjusted to reflect Compaq's five-for-two stock split announced on July 1,
1997.
(6) Tandem's operating results for the three-month period ended December 31,
1996 have been omitted. Tandem's sales and income from continuing
operations were $435.7 million and $11.8 million, respectively, for this
period.
Tandem Selected Historical Consolidated Financial Data
(In millions, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30, Fiscal year ended September 30,
---------------- -------------------------------------------------------------
Historical Consolidated Statement of 1997 1996 1996 1995 1994 1993(2) 1992 (2)
Operations Data: ------ ----- ------ ----- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales............................... $970 $936 $1,900 $1,920 $1,739 $1,683 $1,689
Income (loss) from continuing
operations before provision for
income taxes (1).................. 86 (9) 24 127 164 (246) (23)
Income (loss) from continuing
operations (1).................... 68 (24) (5) 96 154 (308) (33)
Income (loss) from continuing
operations per common and
common equivalent share
- fully diluted (3)............. $ 0.54 $ (0.20) $ (0.04) $ 0.82 $ 1.35 $ (2.74) $ (0.30)
Shares used in computing income
(loss) from continuing
operations per common and
common equivalent share
- fully diluted (3)............. 125.0 117.5 117.5 118.2 113.4 112.3 109.2
June 30, September 30,
---------------- ---------------------------------------------------------------
Historical Consolidated Balance Sheet 1997 1996 1996 1995 1994 1993 1992
Data: ------ ----- ------- ------ ------ ------ -------
Current assets...................... $918 $855 $860 $970 $928 $851 $988
Total assets........................ 1,790 1,725 1,745 1,857 1,762 1,685 2,045
Current liabilities................. 568 580 583 670 737 862 631
Long-term debt...................... 87 79 75 76 86 86 94
Stockholders' investment............ 1,135 1,066 1,086 1,110 939 737 1,237
</TABLE>
(1) Includes restructuring charges of $52 million, $258 million and $103
million in the fiscal years ended September 30, 1996, 1993 and 1992,
respectively, and $52 million for the six months ended June 30, 1996. Also
includes a gain of $23 million in the fiscal year ended September 30, 1994
related to the sale of subsidiaries.
(2) All dollar and per share amounts restated to reflect the adjustments
required to present UB Networks, Inc. as a discontinued operation.
(3) Primary per common and common equivalent share data are presented as the
differences between such amounts and the fully diluted amount and is less
than 3% for all periods presented (except for the six months ended June 30,
1997).
Compaq Selected Historical Consolidated Financial Data
(In millions, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30, Year ended December 31,
-------------------- ---------------------------------------------------------
Historical Consolidated Statement of 1997 1996 1996 1995 1994 1993 1992
Income Data: ------- ------ ----- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales............................... $9,817 $8,206 $18,109 $14,755 $10,866 $7,191 $4,100
Income from continuing
operations before provision for
income taxes (1,2)................ 982 716 1,876 1,188 1,172 616 295
Income from continuing
operations (1,2).................. 601 501 1,313 789 867 462 213
Income from continuing
operations per common and
common equivalent share
- fully diluted (3)............... $ 0.84 $ 0.72 $ 1.87 $ 1.15 $ 1.28 $ 0.71 $ 0.34
Shares used in computing income
from continuing operations per
common and common
equivalent share
- fully diluted (3)............. 712.0 692.5 703.5 687.5 675.3 647.3 635.3
June 30, December 31,
-------------------- ---------------------------------------------------------
Historical Consolidated Balance Sheet 1997 1996 1996 1995 1994 1993 1992
Data: ------- ------ ------ ------ ------ ------ ------
Current assets...................... $ 9,795 $ 6,635 $ 9,169 $6,527 $5,158 $3,291 $2,318
Total assets........................ 11,280 7,991 10,526 7,818 6,166 4,084 3,142
Current liabilities................. 4,204 2,302 3,852 2,680 2,013 1,244 960
Long-term debt...................... -- 300 300 300 300 -- --
Stockholders' equity................ 6,817 5,164 6,144 4,614 3,674 2,654 2,006
</TABLE>
(1) Includes non-recurring and non-tax deductible charges of $208 million and
$241 million for purchased in-process technology associated with
acquisitions in 1997 and 1995.
(2) Includes restructuring charges of $12 million and $87 million in 1993 and
1992, respectively, and a realized gain on investment in an affiliated
company of $86 million in 1992.
(3) Adjusted to reflect Compaq's five-for-two stock split announced on July 1,
1997.
COMPARATIVE PER SHARE DATA
(Unaudited)
The following table summarizes the per share information for
Tandem and Compaq on an historical, pro forma combined and equivalent basis.
The pro forma information gives effect to the merger accounted for on a
pooling of interests basis, assuming that 0.525 shares of Compaq common stock
were issued for each share of Tandem common stock outstanding. You should
read this information together with the historical financial statements (and
related notes) included in the annual reports on Form 10-K and other
information that Tandem and Compaq have filed with the Securities and Exchange
Commission. See "Where You Can Find More Information" on page 56. You should
also read this information in connection with the pro forma combined financial
information set forth on page 32. You should not rely on the pro forma
combined information as being indicative of the results that would have been
achieved had the companies been combined or the future results that the
combined company will experience after the merger.
<TABLE>
<CAPTION>
Fiscal year ended September 30,
Six months ended ----------------------------------------------------
June 30, 1997 1996 1995 1994
---------------- ----------------------------------------------------
<S> <C> <C> <C> <C>
Historical Per Common Share-Tandem:
Income (loss) from continuing operations (1,2) $0.57 $(0.04) $0.82 $1.35
Book value (3)............................. 9.19 8.96
Year ended December 31,
----------------------------------------------------
1996 1995 1994
Equivalent Pro Forma Combined-Per Tandem ----------------------------------------------------
Common Share (4):
Income from continuing operations.......... $0.45 $0.90 $0.62 $0.73
Book value................................. 5.50 5.08
Historical Per Common Share-Compaq (5):
Income from continuing operations (1,6).... $0.84 $1.87 $1.15 $1.28
Book value (3)............................. 9.86 8.98
Pro Forma Combined-Per Compaq Common Share
(5,7):
Income from continuing operations (1,2,6,8) $0.86 $1.71 $1.18 $1.39
Book value (3)............................. 10.46 9.67
</TABLE>
See Accompanying Notes to Comparative per Share Data.
NOTES TO COMPARATIVE PER SHARE DATA
(1) This calculation uses the weighted average number of common shares
outstanding, including common share equivalents, if dilutive.
(2) Includes Tandem restructuring charges of $52 million ($0.07 per share on a
pro forma combined per Compaq common share basis) in the fiscal year ended
1996 and a gain of $23 million ($0.03 per share on a pro forma combined
per Compaq common share basis) in the fiscal year ended 1994 related to
the sale of subsidiaries. Excludes the results of operations from
discontinued operations to reflect UB Networks, Inc., as a discontinued
operation of Tandem in the fiscal years ended 1996, 1995 and 1994 and
the six months ended June 30, 1997.
(3) Computed by dividing stockholders' equity by the number of shares of
common stock outstanding at the end of the period on an historical or pro
forma combined basis.
(4) Amounts are calculated by multiplying the respective unaudited pro forma
combined per Compaq share amounts by the exchange ratio of 0.525 shares of
Compaq common stock for each share of Tandem common stock.
(5) Adjusted to reflect Compaq's five-for-two stock split announced on July 1,
1997.
(6) Includes Compaq non-recurring and non-tax deductible charges of $208
million and $241 million ($0.27 and $0.32 per share on a pro forma
combined per Compaq common share basis) for purchased in-process
technology associated with acquisitions in 1997 and 1995.
(7) Merger-related fees and expenses and compensation costs will be
approximately $37.0 million and $7.1 million. Tandem and Compaq will each
record its share of such costs as an expense when incurred. The impact of
these fees and expenses has been reflected as a reduction of pro forma
combined stockholders' equity. These charges are not reflected in the pro
forma combined statements of income data.
(8) Tandem's operating results for the three-month period ended December 31,
1996 have been omitted. Tandem's historical income from continuing
operations was $11.8 million ($0.02 per share on a pro forma combined per
Compaq common share basis) for this period.
RISK FACTORS
In addition to the other information included in this Proxy
Statement/Prospectus (including the matters addressed in "The
Merger--Forward-Looking Statements May Prove Inaccurate" on page 26), the
following risk factors should be considered carefully by Tandem stockholders
in determining whether to vote to approve the merger and the related merger
agreement.
Fixed Merger Consideration Despite Potential Changes in Stock Prices
Upon completion of the merger each share of Tandem common stock
will be converted into the right to receive 0.525 shares of Compaq common
stock. This exchange ratio is a fixed number and will not be adjusted in the
event of any increase or decrease in the price of either Tandem common stock
or Compaq common stock. The prices of Tandem common stock and Compaq common
stock when the merger takes place may vary from their prices at the date of
this Proxy Statement/Prospectus and at the date of the Special Meeting. Such
variations may be the result of changes in the business, operations or
prospects of Tandem or Compaq, market assessments of the likelihood that the
merger will be consummated, the timing thereof, and the prospects of Tandem,
Compaq or the combined company, regulatory considerations, general market and
economic conditions and other factors. Because the completion of the merger
may occur at a date later than the Special Meeting, there can be no assurance
that the prices of Tandem common stock and Compaq common stock on the date of
the Special Meeting will be indicative of their respective prices at the
completion of the merger.
Stockholders of Tandem are urged to obtain current market
quotations for Tandem common stock and Compaq common stock.
Integration of Operations
The merger involves the integration of two companies that have
previously operated independently, with focuses on different market segments
using different means of distribution. No assurance can be given that Compaq
will be able to integrate the operations of Tandem without encountering
difficulties or experiencing the loss of key Tandem employees, customers or
suppliers, or that the benefits expected from such integration will be
realized.
Stock Ownership in Compaq
Upon completion of the merger, Tandem stockholders will become
stockholders of Compaq. Compaq's business is different from that of Tandem,
and Compaq's results of operations, as well as the price of Compaq common
stock, will be affected by many factors different than those affecting
Tandem's results of operations and the price of Tandem common stock. See "The
Merger--Forward-Looking Statements May Prove Inaccurate" on page 26 for a
summary of many of the key factors that might affect Compaq and the price at
which the Compaq common stock may trade from time to time. Furthermore, the
performance of Compaq common stock over the past several years has been more
volatile than that of Tandem common stock. See "Comparative Per Share Market
Price And Dividend Information" on page 31.
INFORMATION REGARDING NEW TANDEM PRODUCTS
Tandem's S-Series server offerings now include Tandem's
ServerNet clustering technology. First customer shipment dates were: UNIX,
February 1996; Windows NT, November 1996; and Himalaya, June 1997. In
addition, the first customer shipment date for the CS150 ServerNet-based
product was June 1997. S-Series and CS150 product revenue accounted for
approximately 8% or $42 million of total revenue in Tandem's third fiscal
quarter of 1997, of which approximately $22 million related to the Himalaya
S-Series. There can be no assurance that revenues for these products will
continue at the same level.
Tandem expects no significant impact on the overall revenue
attributable to Himalaya servers (both K-Series and S-Series) as a result of
the introduction of the S-Series servers. S-Series Himalaya servers
interoperate with K-Series Himalaya servers. S-Series Himalaya servers are
expected to replace the sales of K-Series servers for new applications.
Tandem expects that sales of Himalaya servers for additional customer capacity
will be split between K-Series and S-Series servers for the next two to
three years. The S-Series Himalaya and S-Series NT servers have no impact
on the market success of the S-Series UNIX servers because Tandem's UNIX
products are focused on specific application areas in the
telecommunications industry.
THE MERGER
The discussion in this Proxy Statement/Prospectus of the Merger
and the principal terms of the Merger Agreement and the related Stock Option
Agreement is subject to, and qualified in its entirety by reference to, the
Merger Agreement and the Stock Option Agreement, copies of which are attached
to this Proxy Statement/Prospectus as Annex A and Annex B, respectively, and
are incorporated herein by reference. All share and per share data have been
adjusted to reflect Compaq's five-for-two stock split announced on July 1,
1997.
General
Tandem Computers Incorporated, a Delaware corporation
("Tandem"), and Compaq Computer Corporation, a Delaware corporation
("Compaq"), are furnishing this Proxy Statement/Prospectus to holders of
common stock, par value $0.25 per share of Tandem ("Tandem Common Stock"), in
connection with the solicitation of proxies by the Tandem Board of Directors
(the "Tandem Board") in connection with a special meeting of holders of
Tandem Common Stock (the "Special Meeting") to be held on August 29, 1997, and
at any adjournments or postponements thereof.
At the Special Meeting, holders of Tandem Common Stock will be
asked to vote upon a proposal to approve and adopt an Agreement and Plan of
Merger dated as of June 22, 1997 (the "Merger Agreement") among Compaq, Tandem
and Compaq-Project, Inc., a Delaware corporation and a wholly-owned subsidiary
of Compaq ("Merger Subsidiary").
The Merger Agreement provides, on the terms and subject to the
conditions set forth therein, (i) for the merger of Merger Subsidiary with and
into Tandem (the "Merger"), with Tandem surviving the Merger as a wholly-owned
subsidiary of Compaq, and (ii) that each share of Tandem Common Stock
outstanding immediately prior to the Effective Time, as defined herein (other
than shares owned by Tandem as treasury stock or by Compaq or any subsidiary
of Compaq), will be converted into the right to receive 0.525 shares (the
"Exchange Ratio") of common stock, par value $0.01 per share, of Compaq
("Compaq Common Stock"). The Merger will become effective (the "Effective
Time") at the time of filing of a certificate of merger with the Secretary of
State of the State of Delaware (or at such later time as is specified in the
certificate of merger), which is expected to occur as soon as practicable
after the last of the conditions precedent to the Merger set forth in the
Merger Agreement has been satisfied or waived.
Background of the Business Relationship and the Merger
In March 1996, Tandem and Compaq entered into a ServerNet
Technology Master Agreement relating to the companies' efforts to develop
commercially available clustering technology and establish Tandem's ServerNet
technology as a standard for interconnecting PC servers.
Mr. Roel Pieper, Tandem Chief Executive Officer, and Mr.
Eckhard Pfeiffer, Compaq President and Chief Executive Officer, were in
attendance at the Microsoft CEO conference in Seattle beginning on May 7,
1997. Mr. Pieper and Mr. Pfeiffer had breakfast on May 8, 1997 during which
they discussed the existing strategic alliance between Compaq and Tandem, the
potential for expanding the relationship between the two companies, the
emergence of Microsoft's NT Server as an enterprise-wide operating system as
well as the direction of the computer industry in general. Mr. Pfeiffer asked
Mr. Pieper to meet with John T. Rose, Senior Vice President for Compaq's
Enterprise Computing Group, during Microsoft's Scalability Day event to
further explore alignment of business strategies and potential synergies and
to determine whether there were additional opportunities for a closer working
relationship. Mr. Pieper and Mr. Rose met in New York in mid-May. In late
May, Mr. Pieper and Mr. Pfeiffer had several follow-up telephone conversations.
On June 11, Tandem President and Chief Operating Officer,
Enrico Pesatori, and Mr. Pieper met with Compaq Chief Financial Officer Earl
Mason, Mr. Rose and Mr. Pfeiffer in Houston and explored the possibility of a
business combination. This meeting was followed on June 12 by a telephone
conversation between Mr. Pieper and Mr. Pfeiffer. Over the ensuing weekend,
Mr. Pieper and Mr. Pfeiffer had further telephone conversations during which
they discussed the fundamental aspects of a potential merger.
On June 16, the Executive Committee of the Tandem Board
approved the initiation of formal merger negotiations. Management
representatives of Tandem and Compaq traveled to New York later the same day.
On June 17, lengthy meetings between Tandem and Compaq management took place,
as did a meeting of the Compaq Board of Directors (the "Compaq Board"). The
Compaq Board approved formal discussions of a potential combination with
Tandem at that meeting. In addition, the parties began their formal due
diligence reviews at this time.
Against this background, on June 17, the Tandem Executive
Committee authorized and directed a core group of senior managers to negotiate
and, if appropriate, propose to the Tandem Board a business combination with
Compaq. Drafts of a merger agreement and stock option agreement were
distributed on June 18. Over the next several days, the parties, together
with their legal and financial advisors, finalized their due diligence review
and negotiated the terms and conditions of the proposed merger. Drafts of the
agreements were delivered to the Tandem and Compaq Boards on June 21.
Discussions focused on a stock-for-stock merger. Such a merger
transaction was considered very attractive for the following major reasons:
bullet Tandem stockholders would continue to own an interest in the combined
company.
bullet The Merger would allow Tandem to accelerate implementation of its
strategies due to the significant resources of the combined operations
of Tandem and Compaq (the "Combined Company").
bullet The Merger would be tax-free to Tandem stockholders (other than taxes
payable on cash received for fractional shares).
bullet Pooling-of-interests accounting treatment would be available.
The exchange ratio was determined in arms'-length negotiations
between Tandem and Compaq in light of, among other things, the advice of
Tandem's and Compaq's respective financial advisors. Early in its discussions
with Tandem, Compaq indicated that the grant of a Tandem stock option to
Compaq was an integral element of Compaq's merger proposal and maintained that
position consistently during the course of negotiations.
At a special meeting held on June 22, the Tandem Board met to
discuss the proposed terms and conditions of the transaction. Mr. Pieper
reviewed the status of the transaction, Lehman Brothers, Tandem's financial
advisor, presented an analysis of the financial terms of the Merger, and
Morrison & Foerster LLP, Tandem's legal counsel, reviewed the terms and
conditions of the proposed transaction and the legal duties and
responsibilities of the Tandem Board. Following discussions, the Tandem Board
unanimously approved entering into the proposed Merger Agreement and Stock
Option Agreement.
The Compaq Board also held a special meeting on June 22 to
discuss the proposed transaction. At the meeting, Mr. Pfeiffer reviewed the
status of the transaction; the results of Compaq's due diligence review were
presented; representatives of Greenhill & Co., LLC and Morgan Stanley & Co.
Incorporated, Compaq's financial advisors, presented an analysis of the
financial terms of the proposed transaction; representatives of Davis Polk &
Wardwell, Compaq's legal counsel, outlined the terms of the proposed
transaction and presented the Compaq Board's legal duties and
responsibilities; and representatives of Price Waterhouse LLP, Compaq's
independent accountants, discussed applicable pooling issues. At the
conclusion of the meeting, the Compaq Board unanimously approved entering into
the proposed Merger Agreement and the Stock Option Agreement.
Final agreement on terms was reached on June 22, and the Merger
Agreement and Stock Option Agreement were signed by both companies. A joint
press release announcing the proposed Merger was issued on June 23.
Tandem's Reasons for the Merger; Recommendation of the Tandem Board
At its special meeting held on June 22, 1997, the Tandem Board,
by unanimous vote, (i) determined that the terms of the Merger Agreement and
the transactions contemplated thereby, including the Merger and the entry into
the Stock Option Agreement, are fair to and in the best interests of Tandem
and its stockholders, (ii) approved the Merger Agreement, the Stock Option
Agreement and the transactions contemplated thereby and (iii) recommended that
Tandem stockholders approve the Merger and the Merger Agreement. In reaching
the foregoing conclusions and recommendations, the Tandem Board considered a
number of factors, including the following:
Strategic Fit. Tandem recognizes the increasing demand for
open standards and computing solutions across the full enterprise spectrum.
The Tandem strategy is fundamentally linked to the growth opportunities
associated with the Microsoft Windows NT Server. In order to compete for
business-critical applications, this fast-growing environment requires the
infrastructure-level reliability and scalability for which Tandem is known.
The proposed merger will combine Compaq's strengths in PC hardware and
Intel-based servers with Tandem's leadership in Microsoft Windows NT
clustering technology and enterprise computing. Accordingly, the Tandem Board
concluded that a merger with Compaq would serve to accelerate the execution of
its strategy significantly and help achieve market leadership, while at the
same time providing stockholder benefits in terms of enhanced revenue growth,
manufacturing cost improvements and cost avoidance by leveraging Compaq's
present and future product plans.
Compatibility of the Companies and Potential Synergies.
Certain aspects of Tandem's and Compaq's businesses considered by the Tandem
Board in concluding that a combination of Tandem and Compaq could offer Tandem
and its stockholders unique opportunities include: (i) Tandem's and Compaq's
respective technologies, operations, and products, including the expected
benefits from offering a broader range of products and "one-stop" convenience
for systems, solutions and services; (ii) the complementary nature of Tandem's
and Compaq's product offerings; (iii) the strength and breadth of Tandem's
professional services and support capabilities and Compaq's distribution
channels; (iv) the integration of the companies' business strategies,
research and development, manufacturing capacities, operations, management,
customer bases and geographic scope; and (v) the potential synergy of the
combined companies in terms of manufacturing costs and purchasing power.
Additional Information, Factors and Risks Considered by the Tandem
Board. In addition to the factors outlined above, the Tandem Board made its
determination after careful consideration of, and based on, certain additional
factors, information and reports, including the following:
(i) Reports from management and legal advisors on the specific
terms of the relevant agreements, including the Merger Agreement and the
Stock Option Agreement, and other matters, including the fact that the
Merger is expected to be accounted for as a pooling of interests.
(ii) The companies' respective historical financial condition,
results of operations and estimated future results, (including those of
Tandem as a stand-alone entity); current financial market conditions and
historical market prices; trading information for Tandem Common Stock
and Compaq Common Stock; the consideration to be received by Tandem
stockholders in the Merger; and the percentage of the combined company
to be owned by Tandem stockholders following the Merger.
(iii) Analysis of how access to Compaq's significant resources
would enable Tandem to better implement its strategic plan; and how the
current and anticipated future consolidation within the computer
industry would affect Tandem's competitive position on a stand-alone
basis.
(iv) The ability of Tandem stockholders to participate in the
enhanced prospects of the combined company through ownership of Compaq
Common Stock.
(v) The financial and other analysis presented by Lehman
Brothers, including the oral opinion of Lehman Brothers (subsequently
confirmed in writing) that the Exchange Ratio was fair to Tandem and its
stockholders from a financial point of view as of the date of such
opinion. See "--Opinion of Tandem's Financial Advisor" below.
The Tandem Board also considered (i) the risk that the benefits
sought in the Merger would not be obtained, (ii) the risk that the Merger
would not be consummated, (iii) the effect of the public announcement of the
Merger on Tandem's sales, customer and supplier relationships, operating
results and ability to retain employees, and on the trading price of Tandem
Common Stock, (iv) the potentially substantial management time and effort that
will be required to consummate the Merger and integrate the operations of the
two companies, (v) the impact of the Merger on Tandem and Compaq employees,
(vi) the possibility that the Stock Option Agreement and certain provisions of
the Merger Agreement might have the effect of discouraging other persons
potentially interested in merging with or acquiring Tandem and (vii) other
matters described under "Risk Factors" and "--Forward Looking Statements May
Prove Inaccurate". In the judgment of the Tandem Board, the potential
benefits of the Merger outweighed these considerations.
The foregoing discussion of the information and factors
considered by the Tandem Board is not intended to be exhaustive but includes
all material factors considered. The Tandem Board did not assign relative
weight to the above factors. Rather, it viewed its position and
recommendation as being based on the totality of the information presented and
considered. In addition, individual members of the Tandem Board may have
given different weight to different factors.
Recommendation of the Tandem Board. The Tandem Board unanimously
recommends that the Tandem stockholders vote "for" the Merger and the Merger
Agreement.
Compaq's Reasons for the Merger
Compaq believes that the Merger will create a company poised to
assume leadership in a burgeoning and increasingly dynamic industry. The
Merger represents a commitment on the part of Compaq management to drive
toward open standards by accelerating the adoption of Microsoft Windows NT in
enterprise environments. Tandem, an established leader in enterprise
computing, has already launched a concerted effort to expand its focus to
include new products and solutions that target high-growth opportunities in
the Microsoft Windows NT Server environment and the Internet. Along these
lines, Tandem forged a strategic alliance with Microsoft Corporation in 1996
to accelerate both enterprise capabilities in, and customer adoption of, the
Microsoft Windows NT Server platform for business-critical computing
applications. Moreover, the Merger will more than double Compaq's field
resources from 4,000 to approximately 8,000 employees. The Merger is thus
indicative of Compaq management's bolstered commitment to customer
satisfaction. With over 30,000 outlets committed to serve customers,
Compaq will offer the largest worldwide reseller channel in the industry.
Opinion of Tandem's Financial Advisor
Lehman Brothers has acted as financial advisor to Tandem in
connection with the Merger. As part of its role as financial advisor to
Tandem, Lehman Brothers was engaged to render its opinion as to the fairness,
from a financial point of view, to Tandem's stockholders of the Exchange Ratio
to be offered to such stockholders in the Merger.
The full text of the written opinion of Lehman Brothers dated
the date of this Proxy Statement/Prospectus is attached as Annex C and is
incorporated herein by reference. Stockholders should read such opinion for a
discussion of assumptions made, factors considered and limitations on the
review undertaken by Lehman Brothers in rendering its opinion. The summary of
the Lehman Brothers opinion set forth in this Proxy Statement/Prospectus is
qualified in its entirety by reference to the full text of such opinion.
On June 22, 1997, in connection with the evaluation of the
Merger Agreement by the Tandem Board, Lehman Brothers rendered a written
opinion that, as of the date of such opinion, and subject to certain
assumptions, factors and limitations set forth in such written opinion as
described below, the Exchange Ratio to be offered to Tandem's stockholders in
the Merger was fair, from a financial point of view, to such stockholders.
Lehman Brothers has delivered to Tandem a subsequent opinion dated as of the
date of this Proxy Statement/Prospectus confirming its June 22, 1997 opinion.
No limitations were imposed by Tandem on the scope of Lehman
Brothers' investigation or the procedures to be followed by Lehman Brothers in
rendering its opinion. However, Lehman Brothers was not provided with and did
not have any access to any written financial forecasts or projections prepared
by the management of Compaq as to the future financial performance of Compaq
or the Combined Company. Lehman Brothers was not requested to and did not make
any recommendation to the Tandem Board as to the form or amount of
consideration to be received by Tandem stockholders in the Merger, which was
determined through arm's-length negotiations between Tandem and Compaq. In
arriving at its opinion, Lehman Brothers did not ascribe a specific range of
value to Tandem or Compaq, but made its determination as to fairness, from a
financial point of view, to Tandem's stockholders of the Exchange Ratio to be
offered, on the basis of the financial and comparative analysis described
below. Lehman Brothers' opinion was for the use and benefit of the Tandem
Board and was rendered to the Tandem Board in connection with its
consideration of the Merger. Lehman Brothers' opinion is not intended to be
and does not constitute a recommendation to any stockholder of Tandem as to
how such stockholder should vote with respect to the Merger. Lehman Brothers
was not requested to opine as to, and its opinion does not in any manner
address, Tandem's underlying business decision to proceed with or effect the
Merger.
In arriving at its opinion, Lehman Brothers reviewed and
analyzed: (i) the Merger Agreement and the specific terms of the Merger,
including with respect to the corporate governance and management of the
Combined Company following consummation of the Merger; (ii) publicly available
information concerning Tandem and Compaq that it believed to be relevant to
its analysis, including filings with the Securities and Exchange Commission
(the "SEC") through March 31, 1997; (iii) financial and operating information
with respect to the business, operations and prospects of Tandem and Compaq
furnished to it by Tandem and Compaq; (iv) a trading history of Tandem and
Compaq Common Stock from June 19, 1992 to June 19, 1997 and a comparison of
that trading history with those of other companies that it deemed relevant;
(v) a comparison of the historical financial results and present financial
condition of Tandem and Compaq with those of other companies that it deemed
relevant; (vi) the potential pro forma financial effects of the Merger on
Tandem and Compaq and a comparison of the relative financial contributions of
Tandem and Compaq to the Combined Company following consummation of the
Merger; and (vii) a comparison of the financial terms of the Merger with the
financial terms of certain other transactions that it deemed relevant. In
addition, Lehman Brothers had discussions with the management of both Tandem
and Compaq concerning their respective businesses, operations, assets,
financial conditions and prospects and the expected operating synergies and
strategic benefits expected to result from the combination of the businesses
of Tandem and Compaq and undertook such other studies, analyses and
investigations as it deemed appropriate.
In arriving at its opinion, Lehman Brothers assumed and relied
upon the accuracy and completeness of the financial and other information used
by it without assuming any responsibility for independent verification of such
information. Lehman Brothers further relied upon the assurances of the
management of both Tandem and Compaq that they were not aware of any facts or
circumstances that would make such information inaccurate or misleading. With
respect to the financial projections of Tandem, upon advice of Tandem, Lehman
Brothers assumed that such projections had been reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the
management of Tandem and that Tandem will perform substantially in accordance
with such projections. In arriving at its opinion, Lehman Brothers was not
provided with written financial forecasts or projections prepared by the
management of Compaq as to the future financial performance of Compaq or the
Combined Company, and instead, based upon indications from Compaq that it was
comfortable with the range of available estimates of research analysts with
respect to Compaq's future financial performance, Lehman Brothers assumed that
the publicly available estimates of research analysts were a reasonable basis
upon which to evaluate and analyze the future financial performance of Compaq.
In arriving at its opinion, Lehman Brothers did not conduct a physical
inspection of the properties and facilities of Tandem or Compaq, and Lehman
Brothers did not make or obtain any evaluations or appraisals of the assets or
liabilities of Tandem or Compaq. In arriving at its opinion, upon advice of
Tandem and its legal and accounting advisors, Lehman Brothers assumed that the
Merger would qualify (i) for a pooling of interests accounting treatment and
(ii) as a reorganization within the meaning of the Internal Revenue Code of
1986, as amended (the "Code"), and therefore as a tax-free transaction to the
stockholders of Tandem. Lehman Brothers' opinion necessarily was based upon
market, economic and other conditions as they existed on, and could be
evaluated as of, the date of its opinion.
In connection with its written opinion dated June 22, 1997,
Lehman Brothers performed a variety of financial and comparative analyses as
summarized below. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant method of financial and
comparative analysis and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. Furthermore, in arriving at its opinion, Lehman Brothers
did not attribute any particular weight to any analysis or factor considered
by it, but rather made qualitative judgments as to the significance and
relevance of each analysis and factor. Accordingly, Lehman Brothers believes
that its analyses must be considered as a whole and that considering any
portions of such analyses and factors without considering all analyses and
factors could create a misleading or incomplete view of the process underlying
its opinion. In its analysis, Lehman Brothers made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Tandem and Compaq. Any
estimates contained in these analyses are not necessarily indicative of actual
values or predictive of future results or values, which may be more or less
favorable than as set forth therein. In addition, analyses relating to the
value of businesses do not purport to be appraisals or to reflect the prices
at which businesses actually may be sold.
Transaction Terms. The implied value to be received by Tandem
stockholders on a per share basis, based upon the Exchange Ratio and the
$42.700 closing price of Compaq's stock on June 20, 1997 is $22.418.
Transaction Premium Analysis. Lehman Brothers reviewed the
premiums paid in selected transactions in the technology sector with
transaction values greater than $1.0 billion from January 1, 1995 through June
20, 1997 (the "Technology Transactions"). These transactions included
Hewlett-Packard Company's acquisition of VeriFone, Inc., Ascend
Communications, Inc.'s acquisition of Cascade Communications Corp., 3Com
Corporation's acquisition of US Robotics Corporation, Kohlberg Kravis Roberts
& Co.'s acquisition of Amphenol Corporation, KLA Instruments Corporation's
acquisition of Cheyenne Software, Inc., Hughes Electronics Corporation's
acquisition of PanAmSat Corporation, WorldCom, Inc.'s acquisition of MFS
Communications Company, Inc., MFS Communications Company, Inc.'s acquisition
of UUNet Technologies, Inc., Computer Sciences Corporation's acquisition of
Continuum Company, Inc., Cisco Systems, Inc.'s acquisition of StrataCom, Inc.,
CUC International Inc.'s acquisition of Davidson & Associates, Inc., Farnell
Electronics Plc's acquisition of Premier Industrial Corporation, Seagate
Technology, Inc.'s acquisition of Conner Peripherals, Inc., MCI Communications
Corporation's acquisition of SHL Systemhouse Incorporated, First Data
Corporation's acquisition of First Financial Management Corporation,
International Business Machines Corporation's acquisition of Lotus Development
Corporation, and Computer Associates International, Inc.'s acquisition of
Legent Corporation. Lehman Brothers calculated the premium per share paid by
the acquiror compared to the share price of the target company prevailing (i)
one week (the "One Week Premium") and (ii) one day (the "One Day Premium")
prior to the announcement of the transaction. Lehman Brothers noted that (i)
the One Week Premium associated with the Merger was 52.0% versus 40.3% for the
median of the Technology Transactions; and (ii) the One Day Premium associated
with the Merger was 49.5% versus 35.6% for the median of the Technology
Transactions. Lehman Brothers also noted that 72.2% of the transactions
analyzed had smaller premiums than the premium associated with the Merger.
Lehman Brothers also analyzed the growth in Tandem's stock
price that would potentially occur if Tandem's earnings per share grew at the
I/B/E/S (a service company used widely in the investment community to gather
earnings estimates from various research analysts) median projected five year
growth rate and Tandem's forward calendar year price/earnings multiple were
held constant. This analysis indicated that Tandem's stock price would not
reach the level implied by the Exchange Ratio for four to five years.
However, because the reasons for and the circumstances
surrounding each of the Technology Transactions were specific to such
transactions, and because of the inherent differences among the businesses,
operations and prospects of Tandem and the selected acquired companies
analyzed, Lehman Brothers believed that it was inappropriate to, and therefore
did not, rely solely on the quantitative results of the transaction premium
analysis and, accordingly, also made qualitative judgments concerning
differences between the terms and characteristics of these transactions the
Merger that would affect the transaction values of Tandem and such acquired
companies.
Comparable Transaction Analysis. Using publicly available
information, Lehman Brothers compared selected financial data for Tandem to
similar data for selected transactions in the computer industry (the
"Comparable Transactions"). These transactions included Gateway 2000 Inc.'s
pending acquisition of Advanced Logic Research, Inc., Apple Computer Inc.'s
acquisition of NeXT Software Inc., Silicon Graphics Inc.'s acquisition of Cray
Research, NEC Corporation's acquisition of Packard Bell Electronics Inc.,
Hewlett-Packard Company's acquisition of Convex Computer Coup., NEC
Corporation's acquisition of a minority equity stake in Packard Bell
Electronics Inc., Samsung Electronics Co. Ltd.'s acquisition of AST Research
Inc., Siemens Nixdorf Informations Systeme's acquisition of Pyramid Technology
Corp., ZEOS International Ltd.'s acquisition of Micron Computer Inc./Micron
Custom Manufacturing Services Inc., Bull HN Information Systems' acquisition
of Wang Laboratories' worldwide workflow and imaging system assets, Zenith
Data Systems-Groupe Bull's acquisition of a minority equity stake in Packard
Bell Electronics Inc., Silicon Graphics Inc.'s acquisition of MIPS Computer
Systems Inc., American Telephone & Telegraph Co.'s acquisition of Teradata
Corporation, Digital Equipment Corporation's acquisition of Mannesmann Kienzle
GmbH, American Telephone & Telegraph Co.'s acquisition of NCR Corporation,
Fujitsu Ltd.'s acquisition of International Computers Ltd., Channel
International's acquisition of Wyse Technology Inc., J.H. Whitney & Co.'s
acquisition of Prime Computer, Inc., Hewlett-Packard Company's acquisition of
Apollo Computers Inc., Olivetti SPA's acquisition of ISC Systems Corp., STC
Plc's acquisition of Computer Consoles, Inc., Unisys Corporation's acquisition
of Convergent, Inc., Nippon Mining Company, Limited's acquisition of Gould
Inc. and Burroughs Corporation's acquisition of Sperry Corporation. Lehman
Brothers reviewed the prices paid in the Comparable Transactions in terms of
the multiple of the Transaction Value (defined as the total consideration
paid) to (i) last twelve months net income (the "LTM Net Income Multiple");
(ii) estimated net income for the calendar year based on First Call and I/B/E/S
(service companies used widely by the investment community to gather earnings
estimates from various research analysts) data for the acquired entity (the
"Forward Net Income Multiple"); and (iii) book value (the "Book Value
Multiple"). Lehman Brothers also reviewed the prices paid in Comparable
Transactions in terms of the multiple of the Transaction Enterprise Value
(defined as the total consideration paid including total debt assumed less
cash and cash equivalents transferred to the acquiror) to (i) last twelve
months revenue (the "LTM Revenue Multiple"); (ii) last twelve months EBIT (the
"LTM EBIT Multiple"); (iii) last twelve months EBITDA (the "LTM EBITDA
Multiple"); (iv) assets minus cash (the "Non-Financial Assets Multiple"); and
(v) book value (the "Enterprise Book Value Multiple"). Lehman Brothers note
that (i) the LTM Net Income Multiple associated with the transaction was 26.8x
as compared to 17.9x for the median of the Comparable Transactions; (ii) the
Forward Net Income Multiple associated with the transaction was 19.2x as
compared to 18.5x for the median of the Comparable Transactions; (iii) the
Book Value Multiple was 2.58x as compared to 1.93x for the median of the
Comparable Transactions; (iv) the LTM Revenue Multiple was 1.43x as compared
to 0.92x for the median of the Comparable Transactions; (v) the LTM EBIT
Multiple was 22.4x as compared to 16.7x for the median of the Comparable
Transactions; (vi) the LTM EBITDA Multiple was 8.7x as compared to 8.9x for
the median of the Comparable Transactions; (vii) the Non-Financial Assets
Multiple was 18.2x as compared to 12.7x for the median of the Comparable
Transactions; and (viii) the Enterprise Book Value Multiple was 2.53x as
compared to 2.23x for the Comparable Transactions.
However, because the reasons for and the circumstances
surrounding each of the Comparable Transactions were specific to such
transactions, and because of the inherent differences among the businesses,
operations and prospects of Tandem and the selected acquired companies
analyzed, Lehman Brothers believed that it was inappropriate to, and therefore
did not, rely solely on the quantitative results of the comparable
transactions analysis and, accordingly, also made qualitative judgments
concerning differences between the terms and characteristics of these
transactions and the Merger that would affect the transaction values of Tandem
and such acquired companies.
Contribution Analysis. Lehman Brothers utilized publicly
available historical financial data regarding Tandem and Compaq and estimates
of future financial performance of Tandem and Compaq to calculate the relative
contributions of Tandem and Compaq to the pro forma Combined Company with
respect to revenues, operating income (defined as income before interest and
taxes) and net income for the calendar years 1995, 1996, 1997 and 1998. In
1995, Tandem would have contributed 11.4%, 4.5% and 4.0% of revenues,
operating income and net income, respectively, to the Combined Company. In
1996, Tandem would have contributed 9.6%, 5.2% and 5.8% of revenues, operating
income and net income, respectively, to the Combined Company. In 1997, Tandem
would contribute 8.0%, 6.4% and 7.4% of revenues, operating income and net
income, respectively, to the Combined Company. In 1998, Tandem would
contribute 7.5%, 6.8% and 8.1% of revenues, operating income and net income,
respectively, to the Combined Company. Lehman Brothers compared such
contributions to the pro forma ownership of the Combined Company by Tandem
stockholders. Such ownership would be approximately 8.6%, assuming exercise of
all outstanding Tandem and Compaq options.
Pro Forma Analysis. Based on the Exchange Ratio and the
financial projections for Tandem and Compaq on a stand-alone basis, Lehman
Brothers calculated the estimated pro forma financial results for the Combined
Company for 1997 and 1998. Lehman Brothers also prepared a separate 1998 pro
forma analysis that included Tandem revenue enhancements that the managements
of both Tandem and Compaq agreed were reasonable. These 1998 revenue
enhancements were calculated as 3% of Tandem projected 1998 revenue, holding
gross margins constant, assuming no additional marketing, general and
administrative expense and assuming a marginal tax rate of 40%. Lehman Brothers
noted that, assuming no cost savings as a result of the Merger and excluding
extraordinary charges, the Merger would be (i) 1.0% dilutive to Compaq's
stand-alone earnings per share ("EPS") in calendar year 1997 (pro forma EPS of
$6.24 as compared to $6.30), (ii) 0.1% accretive to Compaq's stand-alone EPS
in calendar year 1998 (pro forma EPS of $7.51 as compared to $7.50) and (iii)
0.9% accretive to Compaq's stand-alone EPS in calendar year 1998 when the
revenue enhancements discussed above were taken into account (pro forma EPS of
$7.57 as compared to $7.50). In connection with this analysis, Lehman
Brothers conducted financial due diligence with senior executives of Compaq.
Lehman Brothers was not provided with written financial forecasts or
projections prepared by management of Compaq as to the future financial
performance of Compaq or the Combined Company, and instead, based upon
indications from Compaq that it was comfortable with the range of available
estimates of research analysts with respect to Compaq's future financial
performance, Lehman Brothers assumed that publicly available estimates of
research analysts were a reasonable basis upon which to evaluate and analyze
the future financial performance of Compaq. In connection with these pro forma
calculations, Lehman Brothers also relied upon the most recent publicly
available information regarding shares outstanding, options outstanding and
weighted average exercise price of options for Tandem.
Stock Trading History. Lehman Brothers considered various
historical data concerning the history of the trading prices and volumes for
Tandem and Compaq Common Stock for the period from June 19, 1992 to June 19,
1997 and the relative stock price performances during this same period of
Tandem, Compaq and of selected companies engaged in businesses considered by
Lehman Brothers to be comparable to that of Tandem and Compaq. Specifically,
Lehman Brothers included in its review certain enterprise-wide hardware and PC
companies including Data General Corporation, Dell Computer Corporation,
Digital Equipment Corporation, Gateway 2000, Inc., Hewlett Packard Company,
International Business Machines Corporation, Sequent Computer Systems, Inc.,
Silicon Graphics Inc., Sun Microsystems, Inc. and Stratus Computer, Inc. (the
"Enterprise Hardware and PC Companies"). Lehman Brothers also reviewed certain
enterprise-wide software companies including Baan Company N.V., Computer
Associates International, Inc., Microsoft Corporation, Oracle Systems
Corporation, PeopleSoft Inc. and SAP AG (together the "Enterprise-Wide
Software Companies"). During this period, the closing stock price of Tandem
ranged from $8.625 to $19.750 per share, and the closing stock price of Compaq
ranged from $3.167 to $43.250 per share. During the one year period prior to
the announcement of the Merger, the closing stock price of Tandem ranged from
$9.250 to $15.125 per share, and the closing stock price of Compaq ranged from
$16.600 to $43.250 per share.
Comparable Company Analysis. Using publicly available
information, Lehman Brothers compared selected financial data of Tandem and
Compaq with similar data of the Enterprise Hardware and PC Companies and the
Enterprise-Wide Software Companies. For each of Tandem, Compaq and the
Enterprise Hardware and PC Companies and the Enterprise-Wide Software
Companies, Lehman Brothers calculated the multiple of the current stock price
to (i) the latest twelve months earnings per share (the "LTM P/E Multiple");
(ii) the estimated 1997 earnings per share (the "1997 P/E Multiple"), based on
data from First Call; and (iii) the estimated 1998 earnings per share (the
"1998 P/E Multiple"), also based on First Call data. Lehman Brothers noted
that as of June 20, 1997, (i) the LTM P/E Multiple for Tandem (based on a
price of $22.418) was 26.8x as compared to 20.5x for Compaq, 23.3x for the
median of the Enterprise Hardware and PC Companies and 58.3x for the median of
the Enterprise Software Companies; (ii) the 1997 P/E Multiple for Tandem
(based on a price of $22.418) was 19.7x as compared to 17.1x for Compaq, 18.0x
for the median of the Enterprise Hardware and PC Companies and 43.5x for the
median of the Enterprise-Wide Software Companies; and (iii) the 1998 P/E
Multiple for Tandem (based on a price of $22.418) was 17.8x as compared to
14.4x for Compaq, 14.6x for the median of the Enterprise Hardware and PC
Companies and 36.7x for the median of the Enterprise-Wide Software Companies.
In addition, Lehman Brothers calculated the Firm Value (defined as the market
value of the respective company's common equity plus total debt less cash and
cash equivalents) as a multiple of the latest twelve months revenues (the "LTM
Revenue Multiple"). Lehman Brothers noted that as of June 20, 1997, the LTM
Revenue Multiple for Tandem (based on a price of $22.418) was 1.43x as
compared to 1.44x for Compaq, 1.28x for the median of the Enterprise Hardware
and PC Companies and 10.95x for the median of the Enterprise-Wide Software
Companies.
However, because of the inherent differences between the
businesses, operations and prospects of Tandem and Compaq and the business,
operations and prospects of the companies included in the Enterprise Hardware
and PC Companies and the Enterprise-Wide Software Companies, Lehman Brothers
believed that it was inappropriate to, and therefore did not, rely solely on
the quantitative results of the comparable company analysis, and accordingly
also made qualitative judgments concerning differences between the financial
and operating characteristics and prospects of the companies included in the
Enterprise Hardware and PC Companies and the Enterprise-Wide Software Compares
and Tandem that would affect the public trading values of each. In particular,
Lehman Brothers judged the Enterprise Hardware and PC Companies to be the more
relevant set of comparables due to the more similar nature of the businesses
and customers of these companies to those of Tandem.
Engagement of Lehman Brothers. Lehman Brothers is an
internationally recognized investment banking firm and, as part of its
investment banking activities, is regularly engaged in the evaluation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive bids, secondary distributions of listed
and unlisted securities, private placements, and valuations for corporate and
other purposes.
Lehman Brothers has performed various financial advisory
services for Tandem in the past, including exploring possible business
combinations for Tandem during calendar year 1995 and acting as exclusive
financial advisor to Tandem in the January 1997 sale of its UB Networks
division to Newbridge Networks Corporation. Lehman Brothers received
customary fees for such services. Lehman Brothers received aggregate fees of
$570,516 for financial advisory services rendered to Tandem during the two
year period ending June 23, 1997. The engagement of Lehman Brothers in
connection with the Merger was formalized by an engagement letter dated June
18, 1997 between Tandem and Lehman Brothers pursuant to which Tandem has
agreed to pay Lehman Brothers (1) a retainer of $100,000, (2) a fee of
$1,000,000 for rendering its opinion and (3) a fee of 0.400% of the aggregate
value of the consideration received by Tandem's stockholders upon consummation
of the Merger, against which the $100,000 retainer and $1,000,000 opinion fee
would be credited. Tandem also has agreed to reimburse Lehman Brothers for
reasonable expenses incurred by Lehman Brothers and to indemnify Lehman
Brothers and certain related persons for certain liabilities that may arise
out of its engagement and the rendering of this opinion.
In the ordinary course of its business, Lehman Brothers
actively trades in the securities of Tandem and Compaq for its own account and
for the accounts of its customers and, accordingly, may at any time hold a
long or short position in such securities.
Forward-Looking Statements May Prove Inaccurate
This document (including documents that have been incorporated
herein by reference) includes various forward-looking statements about
Tandem, Compaq and the Combined Company that are subject to risks and
uncertainties. Forward-looking statements include the information
concerning future results of operations of Tandem, Compaq and the Combined
Company after the Effective Time, set forth under "Questions and Answers
About The Merger," "Summary," "--Background of the Business Relationship
and the Merger," "--Tandem's Reasons for the Merger; Recommendation of the
Tandem Board," "--Compaq's Reasons for the Merger," "--Opinion of Tandem's
Financial Advisor" and those preceded by, followed by or that otherwise
include the words "believes," "expects," "anticipates," "intends,"
"estimates" or similar expressions. For those statements, Tandem and
Compaq claim the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of
1995.
Tandem and Compaq participate in a highly volatile industry
that is characterized by fierce industry-wide competition. Industry
participants confront aggressive pricing practices, continually changing
customer demand patterns, growing competition from well-capitalized high
technology and consumer electronics companies and rapid technological
development carried out in the midst of legal battles over intellectual
property rights. You should understand that the following important factors,
in addition to those discussed elsewhere in this document and the documents
which are incorporated by reference (see "Where You Can Find More Information"
on page 56), could affect the future financial results of Tandem, Compaq and
the Combined Company and could cause actual results to differ materially from
those expressed in forward-looking statements contained or incorporated by
reference in this document:
bullet a highly competitive environment in the computer market;
bullet difficulties in achieving gross margin and operating expense targets
based on competitive and market factors;
bullet adverse effects on inventory levels in the event of a drop in
worldwide demand for PC and server products, lower than anticipated
demand for one or more products, difficulties in managing product
transitions or component pricing movements that affect the value of
raw material inventory;
bullet gauging the rate of product transitions accurately and introducing
new products in the face of rapid technology cycles;
bullet ability to sell the inventory of older products at anticipated prices
and quantity despite product transitions;
bullet implementing the transition to reengineered internal processes in a
smooth and orderly manner without disrupting operations and while
maintaining profit margins;
bullet following alliance strategies while relying on third parties, some of
which compete with Tandem or Compaq in other areas or are completely
vertically integrated and deal directly with the end user;
bullet maintaining short design cycles while meeting evolving industry
performance standards;
bullet differentiating products from those of competitors;
bullet competing successfully in the markets for new products;
bullet anticipating customer demand accurately and estimating the production
supplies needed to meet such demand;
bullet distributing products quickly in response to customer demand;
bullet monitoring and managing the credit extended to third party resellers
and attempting to limit such credit risks by broadening distribution
channels, utilizing certain risk transfer instruments and obtaining
security interests;
bullet experiencing seasonally higher sales and earnings in the second half
of the year;
bullet minimizing fluctuations in currency that may positively or negatively
affect sales (as expressed in U.S. dollars), gross margins and
operating expenses and results of operations by using hedging programs
which attempt to limit currency exchange risks;
bullet changes in tax rates;
bullet future regulatory actions affecting the computer industry;
bullet market responses to pricing actions and promotional programs;
bullet a significant delay in the expected closing of the Merger; and
bullet successfully implementing the Merger as well as future acquisitions
in light of significant challenges in retaining key employees and
reconciling diverse corporate cultures, synchronizing project
roadmaps and business processes and efficiently integrating
logistics, marketing, product development and manufacturing
operations.
Accounting Treatment
The Merger is intended to qualify as a pooling of interests for
accounting and financial reporting purposes under generally accepted
accounting principles. Under this method of accounting, the recorded assets
and liabilities and the operating results of both Tandem and Compaq will be
carried forward to the operations of the Combined Company at their recorded
amounts. Results of operations will include the results of both Tandem and
Compaq for the entire fiscal year in which the Merger occurs.
Consummation of the Merger is conditioned upon receipt by each
of Tandem and Compaq from Ernst & Young LLP and Price Waterhouse LLP, their
respective independent accountants, of advice in writing and otherwise in form
and substance reasonably satisfactory to Tandem and Compaq, respectively,
confirming management's assessment that the Merger will qualify for pooling of
interest accounting treatment under generally accepted accounting principles
("GAAP"). See "The Merger Agreement--Conditions to the Merger" on page 46.
Certain events, including certain transactions with respect to Tandem Common
Stock or Compaq Common Stock by affiliates of Tandem or Compaq, respectively,
may prevent the Merger from qualifying as a pooling of interests for
accounting and financial reporting purposes. For information concerning
certain restrictions to be imposed on the transferability of Compaq Common
Stock to be received by affiliates in order, among other things, to ensure the
availability of pooling of interests accounting treatment, see "--Federal
Securities Laws Consequences; Resale Restrictions" on page 29.
Certain U.S. Federal Income Tax Consequences
Tax Opinion. Consummation of the Merger is conditioned upon the
receipt of opinions of Morrison & Foerster LLP, counsel to Tandem, and Davis
Polk & Wardwell, counsel to Compaq, to the effect that the Merger will qualify
as a tax-free reorganization under Section 368(a) of the Code and that each of
Tandem and Compaq will be a party to that reorganization within the meaning of
Section 368(b) of the Code. If Tandem or Compaq waives the condition to its
obligation to consummate the Merger relating to the receipt of the opinions
referred to above, Tandem will resolicit proxies from its stockholders with
respect to the Merger. In connection with any such resolicitation, Tandem will
inform its stockholders of any changes in the tax consequences of the Merger
to Tandem and its stockholders.
In rendering these opinions, Morrison & Foerster LLP and Davis
Polk & Wardwell will rely upon representations contained in letters from
Tandem and Compaq delivered for purposes of the opinions. The opinions will
also be based on the assumption that the Merger will be consummated in
accordance with the provisions of the Merger Agreement.
Certain Consequences of Reorganization Status. Provided that
the Merger constitutes a reorganization within the meaning of Section 368(a)
of the Code, for U.S. federal income tax purposes: (i) no gain or loss will
be recognized by the stockholders of Tandem upon the receipt of the Compaq
Common Stock in exchange for Tandem Common Stock in the Merger; (ii) the
aggregate adjusted tax basis of the shares of Compaq Common Stock to be
received by a stockholder of Tandem in the Merger will be the same as the
aggregated adjusted tax basis of the shares of Tandem Common Stock surrendered
in exchange therefor; (iii) the holding period of the shares of Compaq Common
Stock received by a stockholder of Tandem in exchange for the Tandem Common
Stock will include the holding period of the shares of Tandem Common Stock
surrendered in exchange therefor, provided that such shares of Tandem Common
Stock are held as capital assets at the Effective Time; (iv) a stockholder of
Tandem who receives cash in lieu of a fractional share of Compaq Common Stock
would generally recognize gain or loss equal to the difference, if any,
between the amount of cash received and such stockholder's adjusted tax basis
in the fractional share interest; and (v) Compaq stockholders will not be
taxed as a result of the Merger.
The foregoing discussion is intended only as a summary of the
material U.S. federal income tax consequences of the Merger and does not
purport to be a complete analysis or description of all potential tax effects
of the Merger. In addition, the discussion does not address all of the tax
consequences that may be relevant to particular taxpayers in light of their
personal circumstances or to taxpayers subject to special treatment under the
Code (for example, insurance companies, financial institutions, dealers in
securities, tax-exempt organizations, foreign corporations, foreign
partnerships or other foreign entities and individuals who are not citizens or
residents of the United States).
No information is provided herein with respect to the tax
consequences, if any, of the Merger under applicable foreign, state, local and
other tax laws. The foregoing discussion is based upon the provisions of the
Code, applicable Treasury regulations thereunder, Internal Revenue Service
rulings and judicial decisions, as in effect as of the date of this Proxy
Statement/ Prospectus. There can be no assurance that future legislative,
administrative or judicial changes or interpretations will not affect the
accuracy of the statements or conclusions set forth herein. Any such change
could apply retroactively and could affect the accuracy of such discussion. No
rulings have or will be sought from the Internal Revenue Service concerning
the tax consequences of the Merger.
Each stockholder of Tandem is urged to consult such
stockholder's own tax advisor as to the specific tax consequences to such
stockholder of the Merger under U.S. federal, state, local or any other
applicable tax laws.
Regulatory Matters
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), and the rules promulgated thereunder by the
Federal Trade Commission (the "FTC"), the Merger may not be consummated until
notifications have been given and certain information has been furnished to
the FTC and the Antitrust Division of the United States Department of Justice
(the "Antitrust Division") and specified waiting period requirements have been
satisfied. Tandem and Compaq have filed the required notification and report
forms under the HSR Act with the FTC and the Antitrust Division, and the
applicable waiting period is scheduled to expire at midnight on August 9,
1997. The FTC and the Antitrust Division have the authority to challenge the
Merger on antitrust grounds before or after the Merger is completed. Each
state in which Tandem or Compaq has operations may also review the Merger
under state antitrust laws.
Under Council Regulation No. 4064/89 of the European Community
("EC Merger Regulation") and accompanying regulations, the Merger may not be
consummated until notification has been given, certain information has been
furnished to the European Commission and the applicable waiting period has
expired. The European Commission is required to decide within one month
whether to approve the transaction or to initiate a more detailed
investigation. In the case of a detailed investigation, the European
Commission is required to reach a final decision within five months following
the initial notification. The applicable one month waiting period is scheduled
to expire at the close of business on August 12, 1997. The European
Commission has the authority to prohibit the Merger on antitrust grounds.
Regulatory approvals or filings may be required in one or more
additional jurisdictions.
Tandem and Compaq believe that they will obtain all required
regulatory approvals prior to the Special Meeting. However, it is not
possible to predict whether all such approvals will be forthcoming, the
timeframe for the receipt of such approvals or whether any governmental
authorities will impose conditions for granting the required approvals that
are unfavorable.
No Appraisal Rights
Section 262 of the Delaware General Corporation Law (the
"DGCL") provides appraisal rights (sometimes referred to as "dissenters'
rights") to stockholders of Delaware corporations in certain situations.
However, Section 262 appraisal rights are not available to stockholders of a
corporation, such as Tandem, (a) whose securities are listed on a national
securities exchange or are designated as a national market system security on
an interdealer quotation system by the National Association of Securities
Dealers, Inc. ("NASD") and (b) whose stockholders are not required to accept in
exchange for their stock anything other than stock of another corporation
listed on a national securities exchange or on an interdealer quotation system
by the NASD and cash in lieu of fractional shares. Because the Tandem Common
Stock is traded on such an exchange, the New York Stock Exchange, and because
the Tandem stockholders are being offered Compaq Common Stock, which is also
traded on the New York Stock Exchange, and cash in lieu of fractional shares,
stockholders of Tandem will not have appraisal rights with respect to the
Merger.
In addition, holders of Compaq Common Stock are not entitled to
appraisal rights under Delaware law in connection with the Merger.
Federal Securities Laws Consequences; Resale Restrictions
This Proxy Statement/Prospectus does not cover resales of the
Compaq Common Stock to be received by the stockholders of Tandem upon
consummation of the Merger, and no person is authorized to make any use of
this Proxy Statement/Prospectus in connection with any such resale.
All shares of Compaq Common Stock received by Tandem
stockholders in the Merger will be freely transferable, except that shares of
Compaq Common Stock received by persons who are deemed to be "affiliates" (as
such term is defined under the Securities Act of 1933, as amended (the "1933
Act")) of Tandem may be resold by them only in transactions permitted by the
resale provisions of Rule 145 (or Rule 144 in the case of such persons who
become affiliates of Compaq) or as otherwise permitted under the 1933 Act.
Persons who may be deemed to be affiliates of Tandem or Compaq generally
include individuals or entities that control, are controlled by, or are under
common control with, such party and may include certain officers and
directors of Tandem or Compaq as well as significant stockholders. The Merger
Agreement requires Tandem to use its reasonable best efforts to cause each of
its affiliates to execute a written agreement to the effect that such persons
will not offer or sell or otherwise dispose of any of the shares of Compaq
Common Stock issued to them in the Merger in violation of the 1933 Act or the
rules and regulations promulgated by the SEC thereunder.
SEC guidelines regarding qualifying for the pooling of
interests method of accounting would also limit sales by affiliates. SEC
guidelines indicate further that the pooling of interests method of accounting
generally would not be challenged on the basis of sales by affiliates of
Tandem or Compaq if they do not dispose of any of the shares they own or
shares they receive in connection with the Merger during the period beginning
30 days before the Effective Time and ending at such time as financial results
covering at least 30 days of combined operations of Tandem and Compaq have
been publicly filed by Compaq after the Merger. The Merger Agreement requires
Tandem and Compaq to use reasonable best efforts to cause each of its
affiliates to execute a written agreement prohibiting such affiliates from
selling, transferring or otherwise disposing of, or acquiring or selling any
options or other securities relating to securities of Tandem or Compaq that
would be intended to reduce such affiliate's risk relative to, any shares of
Tandem Common Stock or Compaq Common Stock beneficially owned by such
affiliate during such period.
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
Compaq Common Stock and Tandem Common Stock are listed on the
New York Stock Exchange (the "NYSE"). The Compaq ticker symbol on the NYSE is
CPQ. The Tandem ticker symbol on the NYSE is TDM.
The table below sets forth, for the calendar quarters
indicated, the reported high and low closing prices of Compaq Common Stock and
Tandem Common Stock as reported on the NYSE Composite Transaction Tape, in
each case based on published financial sources. Neither Compaq nor Tandem
declared any dividends on its common stock during any period covered by the
table.
Compaq Common Stock(1) Tandem Common Stock
Market Price Market Price
----------------------- -------------------
High Low High Low
--------- ------ -------- -------
1994
First Quarter................. $13.900 $9.719 $15.875 $11.250
Second Quarter................ 15.919 12.400 15.250 10.500
Third Quarter................. 15.600 12.300 16.500 11.375
Fourth Quarter................ 16.650 14.650 18.750 15.750
1995
First Quarter................. 17.550 12.800 19.750 15.500
Second Quarter................ 18.150 12.700 17.000 12.625
Third Quarter................. 21.700 18.000 17.250 11.750
Fourth Quarter................ 22.600 17.950 12.625 10.625
1996
First Quarter................. 21.200 14.600 11.375 8.875
Second Quarter................ 19.900 15.050 14.125 8.625
Third Quarter................. 25.900 16.600 12.500 9.250
Fourth Quarter................ 34.300 25.750 14.625 11.125
1997
First Quarter................. 34.700 28.800 14.375 11.250
Second Quarter................ 43.250 28.800 20.750 11.500
Third Quarter (through July
29, 1997)................... 56.350 40.750 28.563 20.547
- ----------------
(1) Adjusted for Compaq's five-for-two stock split announced on July 1, 1997.
On June 20, 1997, the last full trading day prior to the public
announcement of the proposed Merger, the closing price on the NYSE Composite
Transaction Tape was $42.700 per share of Compaq Common Stock and $15.000 per
share of Tandem Common Stock. On July 29, 1997, the most recent practicable
date prior to the printing of this Proxy Statement/Prospectus, the closing
price on the NYSE Composite Transaction Tape was $53.125 per share of Compaq
Common Stock and $26.875 per share of Tandem Common Stock. The market price
per share of Compaq Common Stock issuable in exchange for one Tandem Common
Share, based upon the Exchange Ratio of 0.525, would have been $22.418 and
$27.891 on June 20, 1997 and July 29, 1997, respectively.
Stockholders are urged to obtain current market quotations
prior to making any decision with respect to the Merger.
Compaq does not presently expect to pay dividends on Compaq
Common Stock after the Merger. The payment of dividends by Compaq in the
future will depend on business conditions, Compaq's financial condition and
earnings and other factors.
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements
are presented for illustrative purposes only and are not necessarily
indicative of the combined financial position or results of operations of
future periods or the results that actually would have been realized had
Tandem and Compaq been a combined company during the specified periods. The
unaudited pro forma combined financial statements, including the notes
thereto, are qualified in their entirety by reference to, and should be read
in conjunction with, the historical consolidated financial statements of
Tandem and Compaq, including the notes thereto, incorporated herein by
reference. See "Where You Can Find More Information" on page 56.
The following unaudited pro forma combined financial statements
give effect to the proposed Merger of Tandem and Compaq on a pooling of
interests basis. The unaudited pro forma combined financial statements are
based on the respective historical audited and unaudited consolidated
financial statements, including the notes thereto, of Tandem and Compaq, which
are incorporated herein by reference.
The unaudited pro forma combined balance sheet assumes that the
Merger took place on June 30, 1997 and combines Tandem's and Compaq's June 30,
1997 unaudited consolidated balance sheets. The unaudited pro forma combined
statements of income assume that the Merger took place as of the beginning of
the periods presented and combine Tandem's consolidated statements of
operations for the six months ended June 30, 1997 and 1996 (unaudited) and the
fiscal years ended September 30, 1996, 1995 and 1994 with Compaq's
consolidated statements of income for the six months ended June 30, 1997 and
1996 (unaudited) and the years ended December 31, 1996, 1995 and 1994,
respectively. As permitted by SEC regulations, Tandem's three-month period
ended December 31, 1996 has been omitted from the unaudited pro forma combined
statements of income. Tandem's sales and income from continuing operations
were $435.7 million and $11.8 million, respectively, for this period. The
interim operating results of Tandem and Compaq are not necessarily indicative
of the results that may be expected for their entire fiscal years ending
September 30, 1997 and December 31, 1997, respectively.
<TABLE>
<CAPTION>
Compaq and Tandem
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(Dollars in millions, except par value)
Pro Forma
Compaq Tandem Adjustments
June 30, June 30, (see designated Pro Forma
1997 1997 notes) Combined
-------- --------- ---------------- --------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................. $4,215 $228 $ $4,443
Short-term investments.................... 898 -- 898
Accounts receivable, net.................. 2,172 431 2,603
Inventories............................. 1,598 97 1,695
Deferred income taxes..................... 791 -- 791
Other current assets...................... 121 162 283
-------- --------- ---------- -------
Total current assets...................... 9,795 918 10,713
Property, plant and equipment, less accumulated
depreciation................................. 1,223 523 1,746
Other assets.................................... 262 349 611
-------- --------- ---------- -------
Total........................................... $11,280 $1,790 $ -- $13,070
======== ========= ========== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................... $2,421 $141 $ $2,562
Income taxes payable...................... 192 -- 192
Other current liabilities................. 1,591 427 42(2) 2,060
-------- --------- ---------- -------
Total current liabilities................. 4,204 568 42 4,814
-------- --------- ---------- -------
Long-term debt.................................. -- 87 87
-------- --------- ---------- -------
Deferred income taxes........................... 259 -- 259
-------- --------- ---------- -------
Stockholders' equity:
Preferred stock........................... -- -- --
Common stock and capital in excess of par
value (Compaq: 691.2 million shares;
Tandem 123.5 million shares; 756 million
shares on a pro forma combined basis)... 1,179 739 (97)(3) 1,821
Retained earnings......................... 5,638 500 (42)(2) 6,096
Accumulated translation adjustments....... -- (7) (7)
Treasury stock, at cost................... -- (97) 97 (3) --
-------- --------- ---------- -------
Total stockholders' equity................ 6,817 1,135 (42) 7,910
-------- --------- ---------- -------
Total........................................... $11,280 $1,790 $ -- $13,070
======== ========= ========== -------
</TABLE>
Compaq and Tandem
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Compaq Tandem Pro Forma
Six months Six months Adjustments
ended ended (see designated Pro Forma
June 30, 1997 June 30, 1997 notes) Combined
------------- -------------- --------------- ----------
<S> <C> <C> <C> <C>
Sales.............................................. $9,817 $970 $ $10,787
Cost of sales...................................... 7,370 463 7,833
------ ----- --------- -------
2,447 507 2,954
------ ----- --------- -------
Selling, general and administrative expense........ 1,021 288 1,309
Research and development costs..................... 250 136 386
Purchased in-process technology.................... 208 -- 208
Other income and expense, net...................... (14) (3) (17)
------ ----- --------- -------
1,465 421 1,886
------ ----- --------- -------
Income from continuing operations before provision
for income taxes.................................. 982 86 1,068
Provision for income taxes......................... 381 18 399
------ ----- --------- -------
Income from continuing operations.................. $ 601 $ 68 $ -- $ 669
====== ====== ========= =======
Income from continuing operations per common and
common equivalent share:
Primary......................................... $0.85 $0.57 $ 0.87
Assuming full dilution.......................... $0.84 $0.54 $ 0.86
Shares used in computing income from continuing
operations per common and common equivalent
share:
Primary......................................... 709.6 119.9 (57.0)(4) 772.5
Assuming full dilution.......................... 712.0 125.0 (59.4)(4) 777.6
</TABLE>
Compaq and Tandem
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME (Continued)
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Compaq Tandem Pro Forma
Six months Six months Adjustments
ended ended (see designated Pro Forma
June 30, 1996 June 30, 1996 notes) Combined
------------- ------------- --------------- ---------
<S> <C> <C> <C> <C>
Sales........................................... $8,206 $ 936 $ $ 9,142
Cost of sales................................... 6,400 463 6,863
------ ----- --------- -------
1,806 473 2,279
------ ----- --------- -------
Selling, general and administrative expense.... 871 291 1,162
Research and development costs.................. 197 139 336
Restructuring charge............................ -- 52 52
Other income and expense, net................... 22 -- 22
------ ----- --------- -------
1,090 482 1,572
------ ----- --------- -------
Income (loss) from continuing operations before
provision for income taxes.................... 716 (9) 707
Provision for income taxes...................... 215 15 230
------ ----- --------- -------
Income (loss) from continuing operations........ $ 501 $ (24) $ -- $ 477
====== ===== ========= =======
Income (loss) from continuing operations per
common and common equivalent share:
Primary..................................... $0.73 $(0.20) $ 0.63
Assuming full dilution...................... $0.72 $(0.20) $ 0.63
Shares used in computing income (loss) from
continuing operations per common and common
equivalent share:
Primary..................................... 691.0 117.5 (55.8)(4) 752.7
Assuming full dilution...................... 692.5 117.5 (54.9)(4) 755.1
</TABLE>
Compaq and Tandem
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME (Continued)
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Compaq Tandem Pro Forma
Year ended Year ended Adjustments
December 31, September 30, (see designated Pro Forma
1996 1996 notes) Combined
------------- ------------- --------------- ----------
<S> <C> <C> <C> <C>
Sales ............................................. $18,109 $ 1,900 $ $20,009
Cost of sales...................................... 13,913 942 14,855
------- ------- --------- -------
4,196 958 5,154
------- ------- --------- -------
Selling, general and administrative expense........ 1,912 595 2,507
Research and development costs..................... 407 288 695
Restructuring charge............................... -- 52 52
Other income and expense, net...................... 1 (1) --
------- ------- --------- -------
2,320 934 3,254
------- ------- --------- -------
Income from continuing operations before provision
for income taxes.................................. 1,876 24 1,900
Provision for income taxes......................... 563 29 592
------- ------- --------- -------
Income (loss) from continuing operations........... $ 1,313 $ (5) $ -- $ 1,308
======= ======= ========= =======
Income (loss) from continuing operations per
common and common equivalent share:
Primary......................................... $1.89 $ (0.04) $ 1.73
Assuming full dilution.......................... $1.87 $ (0.04) $ 1.71
Shares used in computing income (loss) from
continuing operations per common and common
equivalent share:
Primary......................................... 695.8 117.5 (55.5)(4) 757.8
Assuming full dilution.......................... 703.5 117.5 (55.3)(4) 765.7
</TABLE>
Compaq and Tandem
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME (Continued)
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Compaq Tandem Pro Forma
Year ended Year ended Adjustments
December 31, September 30, (see designated Pro Forma
1995 1995 notes) Combined
------------- ------------- --------------- ----------
<S> <C> <C> <C> <C>
Sales ............................................. $14,755 $1,920 $ $16,675
Cost of sales...................................... 11,367 924 12,291
------- ------ --------- -------
3,388 996 4,384
------- ------ --------- -------
Selling, general and administrative expense........ 1,594 592 2,186
Research and development costs..................... 270 282 552
Purchased in-process technology.................... 241 -- 241
Other income and expense, net...................... 95 (5) 90
------- ------ --------- -------
2,200 869 3,069
------- ------ --------- -------
Income from continuing operations before provision
for income taxes.................................. 1,188 127 1,315
Provision for income taxes......................... 399 31 430
------- ------ --------- -------
Income from continuing operations.................. $ 789 $ 96 $ -- $ 885
======= ====== ========= =======
Income from continuing operations per common and
common equivalent share:
Primary......................................... $ 1.15 $ 0.82 $ 1.19
Assuming full dilution.......................... $ 1.15 $ 0.81 $ 1.18
Shares used in computing income from continuing
operations per common and common equivalent
share:
Primary......................................... 684.0 118.2 (56.1)(4) 746.1
Assuming full dilution.......................... 687.5 118.5 (56.3)(4) 749.7
</TABLE>
Compaq and Tandem
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME (Continued)
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Compaq Tandem Pro Forma
Year ended Year ended Adjustments
December 31, September 30, (see designated Pro Forma
1994 1994 notes) Combined
------------ ------------- --------------- ----------
<S> <C> <C> <C> <C>
Sales ........................................ $10,866 $1,739 $ $12,605
Cost of sales................................. 8,139 746 8,885
------- ------ --------- -------
2,727 993 3,720
------- ------ --------- -------
Selling, general and administrative expense... 1,235 624 1,859
Research and development costs................ 226 232 458
Other income and expense, net................. 94 (27) 67
------- ------ --------- -------
1,555 829 2,384
------- ------ --------- -------
Income from continuing operations before
provision for income taxes.................. 1,172 164 1,336
Provision for income taxes.................... 305 10 315
------- ------ --------- -------
Income from continuing operations............. $ 867 $ 154 $ -- $ 1,021
======= ====== ========= =======
Income from continuing operations per
common and common equivalent share:
Primary................................... $ 1.29 $ 1.35 $ 1.40
Assuming full dilution.................... $ 1.28 $ 1.35 $ 1.39
Shares used in computing income from
continuing operations per common and
common equivalent share:
Primary................................... 671.5 113.4 (53.9)(4) 731.0
Assuming full dilution.................... 675.3 114.4 (54.3)(4) 735.4
</TABLE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The unaudited pro forma combined balance sheet combines the
Tandem and Compaq consolidated balance sheets as of June 30, 1997. The Tandem
consolidated statements of operations for the six months ended June 30, 1997
and 1996 (unaudited) and for the fiscal years ended September 30, 1996, 1995
and 1994 have been combined with the Compaq consolidated statements of income
for the six months ended June 30, 1997 and 1996 (unaudited) and for the years
ended December 31, 1996, 1995 and 1994, respectively. This presentation has
the effect of excluding Tandem's results of operations for the three-month
period ended December 31, 1996. Tandem's sales and income from continuing
operations were $435.7 million and $11.8 million, respectively, for this
period.
On a combined basis, there were no material transactions
between Tandem and Compaq during any period presented.
There are no material differences between the accounting
policies of Tandem and Compaq.
The pro forma combined provisions for income taxes do not
represent the amounts that would have resulted had Tandem and Compaq filed
consolidated income tax returns during the periods presented. Upon
consummation of the Merger, any unrecognized future deductible temporary
differences will be evaluated on a quarterly basis based upon the income tax
attributes of the Combined Company.
Note 2. Merger and Compensation Costs
Tandem and Compaq estimate they will incur direct transaction
costs of approximately $37.0 million associated with the Merger, consisting
primarily of investment banking, legal, accounting, financial printing, other
related fees and costs and regulatory filing fees. Compaq and Tandem will
each record its share of such costs as an expense when incurred. The pro
forma combined balance sheet gives effect to such expenses as if they had been
incurred as of June 30, 1997. These charges are not reflected in the pro
forma combined statements of income or the pro forma combined per share data.
As described in "Interests of Certain Persons in the Merger and
Related Matters," additional compensation costs have been incurred by Tandem
and will be incurred by the Combined Company pursuant to employment and bonus
agreements. Special incentive bonuses of $2.5 million incurred upon execution
of the Merger Agreement are included in Tandem's historical financial
statements as of June 30, 1997. An extraordinary efforts bonus of $4.5
million will be incurred upon the Effective Time of the Merger. This amount
has been reflected in the pro forma combined balance sheet and has not been
reflected in the pro forma combined statement of income as of June 30, 1997.
Costs related to continued employment provisions of $8.0
million, costs related to the performance bonus plans of $0.8 million, and
costs related to termination provisions of $29.6 million are dependent on
certain future events and as such will be charged to operations pursuant to
the agreements if and when such events occur.
Note 3. Pro Forma Adjustments
Treasury stock, at cost, was retired and charged to capital in
excess of par value.
Note 4. Pro Forma Net Income Per Share
The unaudited pro forma combined income from continuing
operations per common and common equivalent share is based upon the weighted
average number of common and common equivalent shares of Tandem and Compaq
common stock outstanding for each period at the exchange ratio of 0.525 shares
of Compaq Common Stock for each share of Tandem Common Stock and is computed
after taking into consideration the dilutive effect of stock options.
Note 5. Stock Split
Adjusted to reflect Compaq's five-for-two stock split announced
on July 1, 1997.
INTERESTS OF CERTAIN PERSONS IN THE MERGER AND RELATED MATTERS
In considering the recommendation of the Tandem Board with
respect to the Merger Agreement and the transactions contemplated thereby,
stockholders should be aware that certain members of the management of Tandem
and the Board of Directors of Tandem have interests in the Merger that are
different from, and in addition to, the interests of stockholders of Tandem.
Tandem's Employment Agreements
Seven of Tandem's executives have existing employment
agreements, entered into in 1995 or 1996, under which they will receive
payments as a result of the execution of the Merger Agreement, the
consummation of the Merger and related matters. The executives with these
agreements are Roel Pieper, Enrico Pesatori, John Losier, William Heil,
Josephine Parry, Gerald Peterson and Eric Doggett. These agreements will
remain in effect after the Effective Time.
The Merger constitutes a "Change of Control" for purposes of
each of the employment agreements. As a result, each of these executives is
entitled to the following, under his or her employment agreement: (i) upon
signing of the Merger Agreement, a special incentive bonus of $300,000 (or, in
the case of Mr. Pieper, $750,000); (ii) at the Effective Time, if the
executive then remains employed by Tandem or shall have been terminated
without "Cause" or shall have resigned for "Good Reason" (as those terms are
defined in the employment agreements), a special extraordinary efforts bonus
equal to the executive's annual base salary plus his or her annual incentive
target bonus, calculated assuming that Tandem achieves its incentive targets
for the current year; (iii) as of the Effective Time, the executive's target
incentive bonus for the full current year (without proration), based on
annualized performance through the Effective Time; (iv) continued employment
for six months after the Effective Time at a base salary equal to twice the
executive's base salary before the Effective Time and a bonus for the
six-month period equal to a full year's bonus under Tandem's incentive bonus
plan immediately before the Effective Time; and (v) continued employment for a
second six-month period either as a full-time employee, at a salary and bonus
equal to 75% of the salary and bonus during the first six months after the
Effective Time, or as a part-time consultant or employee, at a salary and
bonus equal to 50% of the salary and bonus during the first six months after
the Effective Date.
Also, under each of the employment agreements, if the executive
should be terminated without "Cause," or should resign for "Good Reason,"
during the 36 months following the Effective Date, the executive will be
entitled to a severance payment equal to 2-1/2 times the executive's annual
salary and annualized bonus (and, in the case of Messrs. Pesatori and Doggett,
accrued vacation, bonus and incentive plan amounts not previously paid) in
effect immediately before the Effective Time, and shall also be entitled to
continued medical and disability benefits for the period of 36 months from the
Effective Time.
To the extent that payments to any of these executives are
subject to the excise tax imposed by Section 4999 of the Code, subject to
certain limitations, the executive will also be entitled to sufficient cash
payments to cover the additional taxes, including any interest or penalties
with respect to these taxes.
As a result of the seven employment agreements, as of the
signing of the Merger Agreement, Tandem became obligated to pay special
incentive bonuses totaling $2,550,000. At the Effective Time, Tandem will
become obligated to pay special extraordinary efforts bonuses totaling
approximately $4,557,000. In the event that all seven executives were to be
terminated without "Cause" or were to resign with "Good Reason" following the
Effective Time, Tandem's aggregate additional liability to them under
employment agreements as a result of such termination (based on August 1, 1997
compensation levels) would be approximately $29,635,000.
Board of Directors
Pursuant to the Merger Agreement, Compaq has agreed that,
immediately after the Effective Time, it will increase the size of its Board
of Directors by one, and, subject to certain limitations, cause the candidate
recommended by Tandem's Board immediately prior to the Effective Time to be
elected as a member of the Compaq Board. Compaq has also agreed, subject to
satisfaction of Compaq's corporate governance standards, to nominate that
person for a full one-year term as a member of the Compaq Board at the first
annual meeting of Compaq's stockholders that occurs one year after the
Effective Time. The Tandem Board has designated Thomas J. Perkins, currently
Chairman of Tandem's Board, as its recommended candidate to the Compaq Board.
Mr. Perkins will receive the same benefits as those received by the other
members of Compaq's Board for service in such capacity. For further
information regarding Mr. Perkins, please refer to the Tandem Annual Report on
Form 10-K for the year ended September 30, 1996 (the "Tandem 10-K") and the
Tandem Proxy Statement on Schedule 14A dated December 10, 1996 (the "Tandem
Proxy"), both of which are incorporated herein by reference. See "Where You
Can Find More Information" on page 56.
Indemnification and Insurance
All Tandem directors have entered into indemnification
agreements with Tandem which provide that Tandem will maintain directors' and
officers' liability insurance and indemnify directors to the full extent
permitted by applicable law. Compaq has agreed in the Merger Agreement to
cause Tandem to assume the obligations set forth in the indemnification
agreements following the Effective Time. Further, under the terms of the
Merger Agreement, for a period of six years after the Effective Time, Compaq
is required to cause Tandem to indemnify the current and former officers and
directors of Tandem, to the extent provided in Tandem's certificate of
incorporation and bylaws in effect at the date of execution of the Merger
Agreement. In addition, for a period of six years after the Effective Time,
Compaq is obligated to cause Tandem to use Tandem's best efforts to maintain
in effect policies of directors' and officers' liability insurance that are no
less advantageous to such persons than are present policies covering each
person.
Employment Arrangements
Compaq has indicated to three senior Tandem officers, Messrs.
Pieper, Pesatori and Losier, that, after the Effective Time, they will remain
employed by Tandem in the respective positions that they now hold. Mr. Pieper
will thus remain Chief Executive Officer, Mr. Pesatori will remain President
and Chief Operating Officer, and Mr. Losier will remain Senior Vice President,
Worldwide Sales and Services, respectively, of Tandem. In addition, Mr.
Pieper will be appointed Senior Vice President of Compaq. No employment
agreements with these or any other employees of Tandem have been agreed upon
in connection with the Merger Agreement.
In addition, Compaq has agreed to grant Messrs. Pieper,
Pesatori and Losier non-qualified stock options with respect to 325,000,
250,000 and 200,000 shares, respectively, of Compaq Common Stock. These
options will be issued under Compaq's employee stock option plan, and will
have an exercise price equal to the closing price of Compaq Common Stock as of
the date following the Effective Time. These grants are consistent with
grants made to similarly-situated Compaq officers.
Ownership of Tandem Securities by Certain Beneficial Owners and Management;
Compensation and Benefits
Information regarding ownership of Tandem securities by certain
beneficial owners and management, as well as a description of Tandem's
compensation and benefit arrangements, is set forth in the Tandem 10-K and the
Tandem Proxy. See "Where You Can Find More Information" on page 56.
In addition to the arrangements described in the Tandem Proxy,
on June 30, 1997, Tandem established performance bonus plans for each of
Messrs. Pesatori and Losier, as well as Mr. Kenneth Barber, Tandem's Senior
Vice President, Finance and Corporate Controller, and Ms. Pauline Nist,
Tandem's Senior Vice President and General Manager, Parallel Systems Business
Unit, with respect to Tandem's performance for the quarter ended September 30,
1997. Under the plans, if Tandem meets a specified goal during its fourth
fiscal quarter, each such individual will receive a cash payment of $200,000.
THE MERGER AGREEMENT
This section of the Proxy Statement/Prospectus describes
certain aspects of the proposed Merger, including certain provisions of the
Merger Agreement and the Stock Option Agreement. The description of the Merger
Agreement and the Stock Option Agreement contained in this Proxy
Statement/Prospectus does not purport to be complete and is qualified in its
entirety by reference to the Merger Agreement and the Stock Option Agreement,
copies of which are attached hereto as Annex A and B, respectively, and which
are incorporated herein by reference. All Tandem stockholders are urged to
read carefully the Merger Agreement and the Stock Option Agreement in their
entirety.
Structure; Effective Time
The Merger Agreement contemplates the Merger of Merger
Subsidiary with and into Tandem, with Tandem surviving the Merger as a
wholly-owned subsidiary of Compaq. The Merger will become effective at the
time of filing a certificate of merger with the Secretary of State of the
State of Delaware (or such later time as is agreed in writing by the parties
and specified in the certificate of merger), which is expected to occur as
soon as practicable after the last condition precedent to the Merger set forth
in the Merger Agreement has been satisfied or waived.
Merger Consideration
The Merger Agreement provides that each share of Tandem Common
Stock outstanding immediately prior to the Effective Time (except as described
in the final sentence of this paragraph) will, at the Effective Time, be
converted into the right to receive 0.525 shares (the "Merger Consideration")
of Compaq Common Stock. The Merger Consideration reflects the five-for-two
stock split of Compaq Common Stock which was announced on July 1, 1997, after
the execution of the Merger Agreement. All shares of Tandem Common Stock that
are owned by Tandem as treasury stock and any shares of Tandem Common Stock
owned by Compaq or any subsidiary of Compaq will, at the Effective Time, be
canceled and no payment will be made for such shares.
Employee Stock Purchase Plan
Pursuant to the Merger Agreement, the Employee Stock Purchase
Plan (the "ESPP") will be terminated as of the Effective Time. The
participation period then in process will end. The funds that are accumulated
through payroll deductions of Tandem employees until that time will be applied
to purchase shares of Tandem Common Stock. Those shares of Tandem Common
Stock will then be exchanged in the Merger for Compaq Common Stock.
Employee Stock Options
At the Effective Time, each option to purchase shares of Tandem
Common Stock outstanding under any employee stock option or compensation plan
or arrangement of Tandem (except for the ESPP -- See "--Employee Stock Purchase
Plan" above), whether or not vested or exercisable, shall be converted into an
option to purchase shares of Compaq Common Stock (a "Substitute Option"). The
number of shares of Compaq Common Stock subject to such Substitute Option and
the exercise price thereunder shall be computed in compliance with the
requirements of Section 424(a) of the Code. Such Substitute Option shall be
subject to substantially all of the other terms and conditions of the original
option to which it relates. Prior to the Effective Time, Tandem will obtain
such consents, if any, as may be necessary to give effect to the transactions
contemplated by this paragraph. In addition, prior to the Effective Time,
Tandem will have taken all actions necessary to give effect to the
transactions contemplated by this paragraph. Tandem has represented in the
Merger Agreement that neither the execution of the Merger Agreement nor the
consummation of the transactions contemplated thereby will cause the
acceleration of vesting or lapse of repurchase rights or obligations with
respect to any employee stock option or other benefit under any stock option
plan or compensation plan or arrangement of Tandem. Except as contemplated by
this paragraph, Tandem has agreed that it will not, without the written consent
of Compaq, amend any outstanding options to purchase shares of Tandem Common
Stock (including accelerating the vesting or lapse of repurchase rights or
obligations).
Conversion of Shares
Prior to the Effective Time, Compaq will appoint an exchange
agent (the "Exchange Agent") for the purpose of exchanging certificates
representing shares of Tandem Common Stock for certificates representing
shares of Compaq Common Stock (and cash in lieu of fractional shares as
described below), and Compaq will deposit certificates representing shares of
Compaq Common Stock with the Exchange Agent for such purpose. Promptly after
the Effective Time, Compaq or the Exchange Agent will send each holder of
Tandem Common Stock a letter of transmittal for use in the exchange and
instructions explaining how to surrender certificates to the Exchange Agent.
Holders of Tandem Common Stock that surrender their certificates to the
Exchange Agent, together with a properly completed letter of transmittal, will
receive Compaq Common Stock certificates representing 0.525 shares of Compaq
Common Stock for each surrendered share of Tandem Common Stock. Holders of
unexchanged shares of Tandem Common Stock will not be entitled to receive any
dividends or other distributions payable by Compaq after the Effective Time
until their certificates are surrendered. Upon surrender, however, such
holders will receive accumulated dividends and distributions payable on the
related shares of Compaq Common Stock subsequent to the Effective Time, without
interest, together with cash in lieu of fractional shares (paid as described
in the following paragraph).
No fractional shares of Compaq Common Stock will be issued in
the Merger. Instead, Tandem stockholders that would otherwise be entitled to
receive fractional shares will receive cash for any fractional share of Compaq
Common Stock owed them based on the market value of Compaq Common Stock on the
trading day immediately preceding the Effective Time.
Certain Covenants
Interim Operations of Tandem. From the date of execution of the
Merger Agreement until the Effective Time, Tandem and its subsidiaries are
required to conduct their business in the ordinary course consistent with past
practice and to use their reasonable best efforts to preserve intact their
business organizations and relationships with third parties and to keep
available the services of their officers and employees. In particular, during
this period, Tandem may not, without Compaq's prior written consent, amend its
organizational documents; and neither Tandem nor its subsidiaries may, without
Compaq's prior written consent: enter into any merger or consolidation;
acquire a material amount of assets of any person; sell or otherwise dispose
of "material" assets (except pursuant to existing contracts or commitments,
and in the ordinary course consistent with past practice); take any action
that would make any representation and warranty of Tandem under the Merger
Agreement materially inaccurate in any respect; (subject to certain
exceptions) enter into any licensing agreement or other similar arrangement
with respect to any of its intellectual property rights; or agree or commit to
any of the foregoing.
Interim Operations of Compaq. From the date of execution of the
Merger Agreement until the Effective Time, Compaq and its subsidiaries are
required to conduct their business in the ordinary course consistent with past
practice and to use their best efforts to preserve intact their business
organizations and relationships with third parties and to keep available the
services of their officers and employees. In particular, during this period,
Compaq may not (subject to certain limited exceptions) amend its
organizational documents, and neither Compaq nor its subsidiaries may (subject
to certain limited exceptions) take any action that would make any
representation or warranty of Compaq under the Merger Agreement inaccurate in
any respect, or agree or commit to any of the foregoing.
Special Meeting; Proxy Material. Tandem shall cause a Special
Meeting to be duly called and held as soon as reasonably practicable for the
purpose of voting on the approval and adoption of the Merger Agreement. In
connection with the Special Meeting, Tandem will (i) promptly prepare and file
with the SEC, use its reasonable best efforts to have cleared by the SEC and
thereafter mail to its stockholders as promptly as practicable a proxy
statement for the Special Meeting and all other proxy materials for such
meeting and (ii) use its reasonable best efforts to obtain the necessary
approvals by its stockholders of the Merger Agreement and the transactions
contemplated thereby and (iii) otherwise comply with all legal requirements
applicable to such meeting.
No Solicitation by Tandem. Tandem has covenanted in the Merger
Agreement that it will not, and that it will cause its subsidiaries and the
directors, officers and financial and legal advisors of Tandem and its
subsidiaries not to, directly or indirectly, take any action to solicit,
initiate or encourage any Acquisition Proposal (as defined below) or engage in
negotiations with, or disclose any nonpublic information relating to Tandem or
any subsidiary of Tandem or afford access to the properties, books or records
of Tandem or any subsidiary of Tandem to, any person that may be considering
making, or has made, an Acquisition Proposal. "Acquisition Proposal" means any
offer or proposal for, or any indication of interest in, a merger,
consolidation or other business combination involving Tandem or any subsidiary
of Tandem or the acquisition of any equity interest in, or a substantial
portion of the assets of, Tandem or any subsidiary of Tandem, other than the
transactions contemplated by the Merger Agreement.
Tandem must notify Compaq promptly (and in no event later than
24 hours) after receipt of (i) any Acquisition Proposal, (ii) any indication
that any person is considering making an Acquisition Proposal or (iii) any
request for nonpublic information relating to Tandem or any subsidiary of
Tandem or for access to the properties, books or records of Tandem or any
subsidiary of Tandem by any person that may be considering making, or has
made, an Acquisition Proposal. Tandem has agreed to keep Compaq fully informed
of the status and details of any such Acquisition Proposal or request.
Pursuant to the Merger Agreement, Tandem has agreed to, and has agreed to
cause its subsidiaries and the directors, officers and financial and legal
advisors of Tandem and its subsidiaries to, cease immediately and cause to be
terminated all activities, discussions or negotiations, if any, with any
persons conducted with respect to any Acquisition Proposal prior to the
execution of the Merger Agreement. Notwithstanding the foregoing, Tandem or its
Board of Directors may take and disclose to Tandem's stockholders a position
with respect to an Acquisition Proposal by a third party to the extent
required under the Securities Exchange Act of 1934, as amended (the "1934
Act"), and may make such disclosure to Tandem stockholders as, in the judgment
of the Tandem Board with the advice of outside counsel, is required under
applicable law.
Tandem Board's Covenant to Recommend. The Tandem Board has
agreed to recommend the approval and adoption of the Merger Agreement to
Tandem stockholders. Notwithstanding the foregoing, the Tandem Board is
permitted to withdraw or modify in a manner adverse to Compaq its
recommendation, but only if and to the extent required, in response to an
unsolicited bona fide Acquisition Proposal, in order to comply with the Tandem
Board's fiduciary duties under applicable law as advised by Tandem's outside
counsel.
Reasonable Best Efforts. Each party has agreed to use its
reasonable best efforts to take, or cause to be taken, all actions and to do,
or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate the transactions contemplated by
the Merger Agreement and the Stock Option Agreement.
Certain Employee Benefits Matters. The Merger Agreement
provides that, for one year following the Effective Time, the employees of
Tandem and its subsidiaries will be provided compensation and benefits that
are, in the reasonable judgment of Compaq, substantially comparable in the
aggregate to those provided by Tandem to its employees as of the date of the
Merger Agreement, excluding all forms of stock-based or equity-based
compensation (other than the ESPP). After the Effective Time, Compaq shall
recognize service with Tandem and its subsidiaries as service for all purposes
under any employee benefit plan or arrangement maintained by Compaq. The
Tandem Incentive Plan and Senior Executive Incentive Plan of Tandem will
remain in effect through September 30, 1997. Notwithstanding the foregoing,
neither Compaq, Tandem nor any of their respective subsidiaries shall be
obligated to continue the employment of any person for any period.
Indemnification and Insurance of Tandem Directors and Officers.
Pursuant to the Merger Agreement, (i) Compaq has agreed that for six years
after the Effective Time, it will cause Tandem to indemnify and hold harmless
the present and former directors and officers of Tandem, to the extent
provided under Tandem's Certificate of Incorporation and bylaws in effect on
the date of the Merger Agreement, against certain liabilities; (ii) Compaq
will cause Tandem to use best efforts to maintain in effect for six years
after the Effective Time certain directors' and officers' liability insurance
coverage for Tandem directors and officers; and (iii) Compaq has agreed to
cause Tandem to assume obligations under certain director indemnification
agreements, all as more fully described under "Interests of Certain Persons in
the Merger and Related Matters--Indemnification and Insurance" on page 42.
Certain Other Covenants. The Merger Agreement contains certain
mutual covenants of the parties, including covenants relating to: actions to
be taken so as not to jeopardize the intended tax or accounting treatment of
the Merger; public announcements; notification of certain matters; access to
information; identification of affiliates; further assurances; cooperation in
connection with certain governmental filings and in obtaining consents and
approvals; and confidential treatment of non-public information.
The Merger Agreement also contains certain covenants of Compaq,
including covenants requiring Compaq to: use its reasonable best efforts to
list the Compaq Common Stock to be issued in connection with the Merger on the
NYSE on or prior to the Effective Time; promptly prepare and file a
registration statement (of which this Proxy Statement/Prospectus is a part)
and use reasonable best efforts to have such registration statement declared
effective; take all action necessary to cause Merger Subsidiary to perform its
obligations under the Merger Agreement and to consummate the Merger on the
terms and conditions set forth in the Merger Agreement; to vote all shares of
Tandem Common Stock beneficially owned by it in favor of adoption of the
Merger Agreement at the Special Meeting; and, immediately following the
Effective Time, to (i) increase the size of its Board of Directors by one and
(ii) subject to certain limitations, cause the candidate recommended by the
Tandem Board immediately prior to the Effective Time (x) to be elected as a
member of the Compaq Board until the first Compaq Annual Meeting after the
Effective Time and (y) to be nominated for one additional one year term. See
"Interests of Certain Persons in the Merger and Related Matters--Board of
Directors" on page 41.
Certain Representations and Warranties
The Merger Agreement contains, subject to certain exceptions,
reciprocal representations and warranties made by Tandem and Compaq as to,
among other things: due organization and good standing; corporate
authorization to enter into the contemplated transactions; governmental
approvals required in connection with the contemplated transactions; absence
of any breach of organizational documents and certain material agreements as a
result of the contemplated transactions; capitalization; ownership of
subsidiaries; filings with the SEC; financial statements; information included
in this Proxy Statement/Prospectus; absence of certain material changes
(including changes which would have a material adverse effect) since March 31,
1997; absence of undisclosed material liabilities; compliance with laws and
court orders; litigation; finders' fees; tax matters; employee matters;
environmental matters; pooling and tax treatment of the Merger; receipt of
opinions of financial advisors; and patents and other proprietary rights.
"Material adverse effect" means any change, effect, event, occurrence or state
of facts that has had, or would reasonably be expected to have, a material
adverse effect on the business, operations, assets, liabilities, condition
(financial or otherwise) or results of operations of Compaq and its
subsidiaries, taken as a whole, or Tandem and its subsidiaries, taken as a
whole, as the case may be.
In addition, Tandem has represented to Compaq that neither
Section 203 of the DGCL nor any other antitakeover or similar statute or
regulation applies or purports to apply to the transactions contemplated by
the Merger Agreement or the Stock Option Agreement, and that it has taken all
action necessary to render the rights issued pursuant to the terms of Tandem's
Rights Agreement inapplicable to the Merger Agreement, the Stock Option
Agreement and the transactions contemplated thereby.
The representations and warranties in the Merger Agreement do
not survive the Effective Time.
Conditions to the Merger
Conditions to Each Party's Obligations to Effect the Merger.
The obligations of Compaq, Tandem and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following conditions:
(i) receipt of the approval of Tandem stockholders;
(ii) the applicable waiting period under the HSR
Act and EC Merger Regulation having expired or been terminated;
(iii) no applicable law or regulation, judgment, injunction,
order or decree prohibiting or enjoining the consummation of the
Merger;
(iv) the registration statement of which this Proxy
Statement/Prospectus is a part having become effective under
the 1933 Act and not being subject to any stop order or related
proceedings by the SEC;
(v) the shares of Compaq Common Stock to be issued in the
Merger having been approved for listing on the NYSE, subject to
official notice of issuance; and
(vi) Tandem and Compaq each having received letters from
Ernst & Young LLP and Price Waterhouse LLP , respectively,
confirming management's assessment that the Merger will qualify
for pooling of interests accounting treatment under GAAP.
Conditions to the Obligations of Compaq and Merger Subsidiary.
The obligations of Compaq and Merger Subsidiary to effect the Merger are
further subject to the satisfaction of the following conditions:
(i) the performance in all material respects by Tandem of
its obligations under the Merger Agreement at or prior to the
Effective Time;
(ii) the representations and warranties of Tandem
contained in the Merger Agreement being true in all material
respects at and as of the Effective Time as if made at and as of
such time; and
(iii) Compaq having received the legal opinion of Davis
Polk & Wardwell to the effect that the Merger will be treated for
federal income tax purposes as a reorganization qualifying under
the provisions of Section 368(a) of the Code and that each of
Compaq, Merger Subsidiary and Tandem will be a party to the
reorganization within the meaning of Section 368(b) of the Code.
Conditions to the Obligations of Tandem. The obligation of
Tandem to effect the Merger is further subject to the satisfaction of the
following conditions:
(i) the performance in all material respects by Compaq
and Merger Subsidiary of their obligations under the Merger
Agreement at or prior to the Effective Time;
(ii) the representations and warranties of Compaq
contained in the Merger Agreement being true in all material
respects at and as of the Effective Time as if made at and as of
such time; and
(iii) Tandem having received the legal opinion of Morrison
& Foerster LLP to the effect that the Merger will be treated for
federal income tax purposes as a reorganization qualifying under
the provisions of Section 368(a) of the Code and that each of
Compaq, Merger Subsidiary and Tandem will be a party to the
reorganization within the meaning of Section 368(b) of the Code.
Termination of the Merger Agreement
Right to Terminate. The Merger Agreement may be terminated at
any time prior to the Effective Time as follows:
(i) by mutual written consent of Tandem and Compaq;
(ii) by either Tandem or Compaq: (a) if the Merger
has not been consummated by December 31, 1997 (but neither Tandem
nor Compaq may terminate if its breach is the reason that the Merger
has not been consummated); (b) if the stockholders of Tandem fail
to approve and adopt the Merger Agreement at the Special Meeting (or
any adjournment thereof); or (c) any law or regulation makes
consummation of the Merger illegal or otherwise prohibited or if any
judgment, injunction, order or decree enjoining Tandem or Compaq
from consummating the Merger is entered and such injunction,
judgment, order or decree has become final and non-appealable; or
(iii) by Compaq: if (a) any law or regulation makes
the exercise of Compaq's rights under the Stock Option Agreement
illegal or otherwise prohibited or if any judgment, injunction,
order or decree enjoining such exercise is entered and such
judgment, injunction, order or decree has become final and
non-appealable; (b) the Tandem Board has withdrawn or modified in a
manner adverse to Compaq its approval or recommendation of the
Merger; or (c) Tandem violates its obligation set forth above under
"--Certain Covenants--No Solicitation by Tandem," does not call a
special meeting of its stockholders to consider the Merger or does
not use its reasonable best efforts to prepare the proxy materials.
See "--Certain Covenants--Special Meeting; Proxy Material" and
"--Certain Covenants--No Solicitation by Tandem" on page 44 for
discussion of these covenants.
If the Merger Agreement is validly terminated, no provision
thereof shall survive (except for the provisions relating to confidentiality,
expenses, governing law, jurisdiction and waiver of a jury trial) and such
termination shall be without any liability on the part of any party, unless
such party is in willful or grossly negligent breach of any provision of the
Merger Agreement. The confidentiality agreement entered into between Tandem
and Compaq on June 13, 1997 will continue in effect notwithstanding
termination of the Merger Agreement.
Termination Fee and Expenses Payable by Tandem. Tandem has
agreed to pay Compaq an amount equal to $55 million if the Merger Agreement is
terminated in the circumstances described in paragraph (ii) (b) under "--Right
to Terminate" (but only if an Acquisition Proposal with respect to Tandem is
publicly announced prior to the stockholder vote) or in the circumstances
described in paragraph (iii)(b) or (iii)(c) under "--Right to Terminate."
Tandem has agreed to reimburse Compaq for its reasonable
expenses (not to exceed $20 million) incurred in connection with the
transactions contemplated by the Merger Agreement if (i) the Merger Agreement
is terminated because the Merger is not consummated on or before December 31,
1997, (ii) any representation or warranty made by Tandem in the Merger
Agreement was not true and correct when made and (iii) the condition described
in paragraph (ii) under "--Conditions to the Merger--Conditions to the
Obligations of Compaq and Merger Subsidiary" is not satisfied.
Expenses Payable by Compaq. Compaq has agreed to reimburse
Tandem for its reasonable expenses (not to exceed $20 million) incurred in
connection with the transactions contemplated by the Merger Agreement if (i)
the Merger Agreement is terminated because the Merger is not consummated on or
before December 31, 1997, (ii) any representation or warranty made by Compaq
in the Merger Agreement was not true and correct when made and (iii) the
condition described in paragraph (ii) under "--Conditions to the
Merger--Conditions to the Obligations of Tandem" is not satisfied.
Other Expenses
Except as described above, all costs and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
will be paid by the party incurring such costs or expenses. Tandem and Compaq
estimate that Merger-related fees and expenses, consisting primarily of
transaction costs for fees and expenses of investment bankers, attorneys and
accountants and financial printing and other related charges, will total
approximately $37.0 million assuming the Merger is completed, of which
approximately $20.2 million is attributable to Compaq and approximately $16.8
million to Tandem.
Amendments; No Waivers
Any provision of the Merger Agreement may be amended or waived
prior to the Effective Time only if the amendment or waiver is in writing and
signed, in the case of an amendment, by Tandem, Compaq and Merger Subsidiary,
and, in the case of a waiver, by the party against whom the waiver is to be
effective; provided that after the approval of the Merger Agreement by the
stockholders of Tandem, no amendment or waiver shall, without the further
approval of such stockholders, reduce the amount or change the kind of
consideration to be received in exchange for any shares of capital stock of
Tandem.
Stock Option Agreement
General. Simultaneously with the execution and delivery of the
Merger Agreement, Tandem and Compaq entered into a Stock Option Agreement (the
"Stock Option Agreement") pursuant to which Tandem granted Compaq an option
("Option") to purchase up to 17,400,000 shares of Tandem Common Stock (subject
to adjustment as discussed below) at a price per share of $22.44 in certain
circumstances.
The following is a summary of certain provisions of the Stock
Option Agreement. The Stock Option Agreement is attached hereto as Annex B and
is incorporated herein by reference.
Exercise of the Stock Option. The Option is exercisable at any
time after the occurrence of any event (a "Trigger Event") entitling Compaq to
receive the Termination Fee pursuant to the Merger Agreement (see
"--Termination of the Merger Agreement--Termination Fee and Expenses Payable
by Tandem" on page 48). The Option expires upon the earliest to occur of (i)
the Effective Time, (ii) 18 months after the first occurrence of a Trigger
Event, (iii) five years from the date of the Stock Option Agreement (June 22,
2002) or (iv) termination of the Merger Agreement prior to the occurrence of a
Trigger Event if, but only if, the Merger Agreement is terminated for reasons
that are not directly or indirectly related to (a) the commencement of, or any
person's direct or indirect indication of interest in making, an Acquisition
Proposal or (b) the breach of Tandem's non-solicitation obligation (see
"Certain Covenants--No Solicitation by Tandem" on page 44) or (c) its
obligation to call the Special Meeting or certain other Tandem covenants.
Compaq may purchase shares of Tandem Common Stock under the Option after the
occurrence of any event described in the previous sentence, provided that the
Option was exercised prior to such occurrence. Any purchase of Tandem Common
Stock upon exercise of the Option is subject to certain conditions, including
compliance with the HSR Act.
Adjustments Upon Changes in Capitalization or Merger. The
number and type of securities subject to the Option and the purchase price
therefor will be adjusted for any change in Tandem's capital stock by reason
of a stock dividend, split-up, merger, recapitalization, combination, exchange
of shares or similar transaction, such that Compaq will receive (upon exercise
of the Option) the number and class of securities that Compaq would have
received if the Option had been exercised immediately prior to the occurrence
of such event (or the record date therefor, if applicable). In the event
Tandem issues additional shares of common stock, the number of shares of
common stock subject to the Option will be adjusted, so that, after such
issuance, it equals 15% of the shares of Tandem's common stock then outstanding
(without giving effect to shares subject to or issued pursuant to the Option.)
In the event that Tandem (i) enters into an agreement to consolidate with or
merge into any person, where Tandem is not the surviving or continuing
corporation, other than Compaq or one of its subsidiaries, (ii) permits any
person other than Compaq or one of its subsidiaries to merge into Tandem in
such a way that in connection with such merger the shares of common stock of
Tandem outstanding immediately prior to the Merger are changed into or
exchanged to stock or other securities of Tandem or any other person or cash
or any other property, or the shares of common stock of Tandem outstanding
immediately prior to the consummation of such merger represents less than 50%
of the outstanding voting securities of the merged company, or (iii) sells or
otherwise transfers all or substantially all of its assets to any person other
than Compaq or one of its subsidiaries, then, in each such case, the relevant
transaction agreement must provide that the Option will, upon the consummation
of such transaction, be converted into or exchanged for an option to acquire
the number and class of shares or other securities or property Compaq would
have received in respect of common stock of Tandem if the Option had been
exercised immediately prior to such consolidation, merger, sale or transfer
(or the record date therefor, if applicable).
Registration Rights and Listing. Compaq has certain rights to
require registration by Tandem of any shares purchased pursuant to the Option
under the securities laws.
Assignability. The Stock Option Agreement is binding upon
Tandem and Compaq and their successors and assigns. It may not be assigned by
Tandem except by operation of law. Compaq may assign part or all of the
Agreement to any of its affiliates.
Effect of Stock Option Agreement. The Stock Option Agreement is
intended to increase the likelihood that the Merger will be consummated on the
terms set forth in the Merger Agreement. Consequently, certain aspects of the
Stock Option Agreement may have the effect of discouraging persons who might
now or prior to the Effective Time be interested in acquiring all of or a
significant interest in Tandem from considering or proposing such an
acquisition, even if such persons were prepared to offer a price per share for
Tandem Common Stock higher than the market price.
SPECIAL MEETING
This Proxy Statement/Prospectus is furnished in connection with
the solicitation of proxies from the holders of Tandem Common Stock by the
Tandem Board for use at the Special Meeting. This Proxy Statement/Prospectus
and accompanying form of proxy are first being mailed to the stockholders of
Tandem on or about August 1, 1997.
Time and Place; Purpose
The Special Meeting will be held at 10:00 a.m., California
time, on August 29, 1997 at the headquarters of Tandem Computers Incorporated,
10435 North Tantau Avenue, Cupertino, California 95014. At the Special Meeting
(and any adjournment or postponement thereof), the stockholders of Tandem will
be asked to consider and vote upon the approval and adoption of the Merger
Agreement and the Merger and such other matters as may properly come before
the Special Meeting.
Tandem stockholder approval of the Merger Agreement and the
Merger is required by the DGCL.
The Tandem Board has unanimously approved the terms of the
Merger Agreement and the consummation of the Merger contemplated thereby,
unanimously believes that the terms of the Merger Agreement and the Merger are
fair to, and in the best interests of, Tandem and its stockholders, and
unanimously recommends that holders of Tandem Common Stock vote "for" approval
of the Merger and the Merger Agreement.
Record Date; Voting Rights and Proxies
Only holders of record of Tandem Common Stock at the close of
business on July 28, 1997 (the "Record Date") are entitled to notice of and to
vote at the Special Meeting. As of the Record Date, there were 118,074,615
shares of Tandem Common Stock outstanding, each of which entitled the holder
thereof to one vote.
All shares of Tandem Common Stock represented by properly
executed proxies will, unless such proxies have been previously revoked, be
voted in accordance with the instructions indicated in such proxies. If no
instructions are indicated, such shares of Tandem Common stock will be voted
"for" approval of the Merger and the Merger Agreement. Tandem does not know of
any matters other than the approval of the Merger and the related Merger
Agreement that are to come before the Special Meeting. If any other matter or
matters are properly presented for action at the Special Meeting, the persons
named in the enclosed form of proxy and acting thereunder will have the
discretion to vote on such matters in accordance with their best judgment. A
stockholder who has given a proxy may revoke it at any time prior to its
exercise by giving written notice of revocation to Tandem by signing and
returning a later dated proxy, or by voting in person at the Special Meeting.
Votes cast by proxy or in person at the Special Meeting will be tabulated by
the inspector of election appointed for the meeting.
Share Ownership of Management and Certain Stockholders
On the Record Date, Tandem directors, executive officers, and
their affiliates owned and were entitled to vote 2,590,692 shares of Tandem
Common Stock, or approximately 2.2% of the shares of Tandem Common Stock
outstanding on the Record Date.
Solicitation of Proxies
Proxies are being solicited by and on behalf of the Tandem
Board. In addition to solicitation by use of the mails, proxies may be
solicited by directors, officers and employees of Tandem in person or by
telephone, telegram or other means of communication. Such directors, officers
and employees will not be additionally compensated, but may be reimbursed for
out-of-pocket expenses incurred in connection with such solicitation.
Arrangements have also been made with brokerage firms, banks, custodians,
nominees and fiduciaries for the forwarding of proxy solicitation materials
to owners of Tandem Common Stock held of record by such persons and in
connection therewith such firms will be reimbursed for reasonable expenses
incurred in forwarding such materials. Tandem has retained Corporate Investor
Communications, Inc. ("CIC") to assist in the solicitation of proxies from its
stockholders. The total fees and expenses of CIC are estimated to aggregate
$11,500.
Tandem stockholders should not send any certificates
representing Tandem Common Stock with their proxy cards. Following the
Effective Time, Tandem stockholders will receive instructions for the
surrender and exchange of such stock certificates.
In the case of shares held in the Tandem 401(k) Plan, voting
instructions are being solicited by the Plan trustee, who will vote the shares
as instructed by Plan participants.
Quorum
The presence in person or by properly executed proxy of a
majority of the issued and outstanding shares of Tandem Stock entitled to vote
is necessary to constitute a quorum at the Special Meeting.
Required Vote
Approval of the Merger and the Merger Agreement requires the
affirmative vote of a majority of the outstanding shares of Tandem Common
Stock. Accordingly, any failure to vote will have the effect of a vote
against the Merger and the Merger Agreement.
Under NYSE rules, brokers who hold shares in street name for
customers have the authority to vote on certain "routine" proposals when they
have not received instructions from beneficial owners. Furthermore, such
brokers are precluded from exercising their voting discretion with respect to
the approval and adoption of non-routine matters such as the Merger and the
Merger Agreement and, thus, absent specific instructions from the beneficial
owner of such shares, brokers are not empowered to vote such shares with
respect to the Merger and the Merger Agreement. These "broker non-votes" will
therefore have the effect of a vote against the Merger and the Merger
Agreement.
COMPARISON OF STOCKHOLDER RIGHTS
General
The rights of Compaq stockholders are currently governed by the
DGCL and the certificate of incorporation and bylaws of Compaq (the "Compaq
Charter" and the "Compaq Bylaws," respectively). The rights of Tandem
stockholders are currently governed by the DGCL and the certificate of
incorporation and bylaws of Tandem (the "Tandem Charter" and the "Tandem
Bylaws," respectively). Accordingly, upon consummation of the Merger, the
rights of Compaq stockholders and of Tandem stockholders who become Compaq
stockholders in the Merger will be governed by the DGCL, the Compaq Charter
and the Compaq Bylaws. The following is a summary of the principal differences
between the current rights of Tandem stockholders and those of Compaq
stockholders following the Merger.
The following summary is not intended to be complete and is
qualified in its entirety by reference to the DGCL, the Compaq Charter, the
Compaq Bylaws, the Tandem Charter and the Tandem Bylaws. Copies of the Compaq
Charter, the Compaq Bylaws, the Tandem Charter and the Tandem Bylaws are
incorporated by reference herein and will be sent to holders of shares of
Compaq Common Stock and Tandem Common Stock upon request. See "Where You Can
Find More Information" on page 56.
Comparison of Current Tandem Stockholder Rights and Rights of Compaq
Stockholders Following the Merger
The Compaq Charter is not being amended in connection with the
Merger. The Compaq Bylaws are not being amended in connection with the
Merger, other than to increase the number of directors on the Compaq Board
from ten to eleven so that Mr. Perkins may become a director of Compaq at the
Effective Time. See "--Board of Directors" below.
The rights of Tandem stockholders under the DGCL and the Tandem
Charter and Tandem Bylaws prior to the Merger are substantially the same as
the rights of Compaq stockholders (including Tandem stockholders who become
Compaq stockholders as a result of the Merger) under the DGCL and the Compaq
Charter and Compaq Bylaws, with the following principal exceptions.
Authorized Capital Stock. The authorized capital stock of
Tandem consists of 400,000,000 shares of Tandem Common Stock (of which
4,000,000 shares are designated junior common stock) and 2,400,000 shares of
preferred stock, par value $0.10 per share (of which 800,000 shares are
designated Series A Participating Preferred Stock (the "Tandem Series A
Preferred Stock")). The authorized capital of Compaq is set forth under
"Description of Compaq Capital Stock--Authorized Capital Stock" on page 54.
Board of Directors. The Tandem Charter provides that the
number of directors shall be not fewer than nine nor greater than fifteen
persons, with the exact number to be determined by resolution of a majority of
the Tandem Board. Pursuant to the Tandem Charter, the Tandem Board is divided
into three classes, with directors of each class serving until the third
annual meeting of stockholders after the annual meeting at which that class
was elected. Tandem currently has eleven directors.
The Tandem Charter provides for cumulative voting for the
election of directors, so that each stockholder is entitled to a number of
votes equal to the number of voting shares held by the stockholder multiplied
by the number of directors to be elected. Such votes may be all cast for a
single nominee or distributed among two or more nominees.
Nominations of persons for election to the Tandem Board may be
made by the Tandem Board (or a nominating committee thereof), or by any Tandem
stockholder according to the procedures described in the Tandem Bylaws. Under
the Tandem Bylaws, vacancies in the Tandem Board must be filled by resolution
of a majority of the Tandem Board (or a sole director, if applicable), and any
director so appointed will hold office until the next annual election of
directors of that class.
The Tandem Bylaws provide that the directors may be removed
from office, but only for cause, by vote of the holders of a majority of
shares entitled to vote at an election of directors.
The Compaq Bylaws provide that the number of directors shall be
not fewer than five or greater than ten persons, with the exact number to be
determined by resolution of a majority of the Compaq Board. Compaq currently
has ten directors. In connection with the Merger, the Compaq Bylaws will be
amended to increase the number of directors to eleven. Under the Compaq
Bylaws, Compaq directors are elected at the annual meeting of stockholders for
a one-year term. Neither the Compaq Charter nor the Compaq Bylaws provide for
cumulative voting for election of directors. Nominations of persons for
election to the Compaq Board may be made by or at the direction of the Compaq
Board, or by Compaq stockholders according to the procedures described in the
Compaq Bylaws. Under the Compaq Bylaws, vacancies in the Compaq Board may be
filled by resolution of a majority of the Compaq Board (or a sole director, if
applicable), and any director so appointed will hold office until the next
annual meeting of stockholders. The Compaq Charter and the Compaq Bylaws do
not contain provisions regarding the removal of directors, and accordingly the
matter would be governed by the DGCL. The DGCL provides that directors may be
removed (with or without cause) by vote of the holders of a majority of shares
entitled to vote at an election of directors.
Special Meetings of Stockholders. The Tandem Bylaws provide
that special meetings of stockholders may be called by the president, and
shall be called by the president or secretary at the written request of a
majority of the Tandem Board. The Compaq Bylaws provide that special meetings
of stockholders may be called by the Compaq Board.
Amendment of Corporate Charter and Bylaws. The Tandem Charter
provides that certain indemnification provisions contained therein may only be
amended by the affirmative vote of at least 80% of the voting power of all of
the then outstanding shares of Tandem capital stock entitled to vote in an
election of directors, voting together as a single class. The Tandem Charter
further provides that the affirmative vote of the holders of two-thirds of the
outstanding shares of Tandem Series A Preferred Stock is required for any
amendment to the Tandem Charter which would materially adversely effect the
powers, preferences or special rights of such holders. (There are currently no
shares of Tandem Series A Preferred Stock outstanding.) The Compaq Charter
does not contain provisions relating to its amendment. Accordingly, amendment
of any other provision of the Tandem Charter, and any provision of the Compaq
Charter, would be governed by the DGCL. The DGCL provides that a charter
amendment requires the approval of a majority of the company's board of
directors and the approval of the holders of a majority of the voting power of
the then outstanding capital stock of the company.
The Tandem Bylaws expressly provide for their amendment by a
majority of the Tandem Board. Under the DGCL, amendment of a company's bylaws
may also be made by holders of a majority of the voting power of the then
outstanding capital stock of the company. The Compaq Bylaws expressly provide
for their amendment by either the Compaq Board or a majority of the Compaq
stockholders.
Voting Rights. The Tandem Common Stock is the only outstanding
class of Tandem capital stock entitled to vote generally on all matters
submitted to Tandem stockholders, including the election of directors and the
approval of the Merger and the Merger Agreement. Each outstanding share of
Tandem Common Stock is entitled to one vote on all matters submitted to Tandem
stockholders. (There are currently no shares of Tandem Series A Preferred
Stock outstanding.)
The outstanding voting securities of Compaq are the shares of
Compaq Common Stock. Under the DGCL each share of Compaq Common Stock is
entitled to one vote on all matters submitted to Compaq stockholders.
Removal of Officers. The Tandem Bylaws permit the removal of
any officer by an affirmative vote of a majority of the Tandem Board. The
Compaq Bylaws permit the Compaq Board to remove any officer elected by the
Board or appointed by the President at any time with or without cause. The
Compaq Bylaws also permit the President to remove any officer he has appointed
with or without cause.
Rights Plan. Tandem has entered into a Rights Agreement (as
amended, the "Rights Agreement"), with BankBoston N.A. as rights agent (the
"Rights Agent"). Pursuant to the Rights Agreement, rights (each, a "Right")
attach to each share of Tandem Common Stock outstanding and entitle the
registered holder to purchase from Tandem one-two hundredth (adjusted to
reflect the split of the Tandem Common Stock effected in May 1987) of a share
of Series A Preferred Stock at a purchase price of $125 (the "Purchase
Price"), subject to adjustment. Each share of Tandem Common Stock outstanding
has attached thereto one Right.
The Rights will separate from the Tandem Common Stock (i) upon
the earlier of (A) 10 days following a public announcement that a person or
group of affiliated or associated persons (an "Acquiring Person") has acquired
or obtained the right to acquire beneficial ownership of 20% or more of the
outstanding shares of Tandem Common Stock (the "Stock Acquisition Date") or
(B) 10 business days following the commencement of a tender offer or exchange
offer that would result in a person or group beneficially owning 30% or more
of such outstanding shares of Tandem Common Stock, or (ii) such later date as
may be fixed by the Tandem Board (the date of any such event, the
"Distribution Date"). Until the Distribution Date, (i) the Rights will be
evidenced by Tandem Common Stock certificates and will be transferred with and
only with Tandem Common Stock certificates, (ii) new Tandem Common Stock
certificates will contain a notation incorporating the Rights Agreement by
reference and (iii) the transfer of any certificates representing outstanding
Tandem Common Stock outstanding will also constitute the transfer of the
Rights associated with Tandem Common Stock represented by such certificate.
In the event that an Acquiring Person becomes the beneficial
owner of 20% or more of the then outstanding shares of Tandem Common Stock in
an acquisition which has not met certain requirements (a "Fair Offer for All
Shares"), each holder of a Right (other than the Acquiring Person) will
thereafter have the right to receive upon exercise Tandem Common Stock having
a value twice the exercise price of the Right.
If, following a Stock Acquisition Date, Tandem engages in a
merger or business combination transaction in which Tandem is not the
surviving corporation (other than a merger consummated pursuant to a "Fair
Offer for All Shares"), each holder of the Right will thereafter have the
right to receive, upon exercise of the Right, common stock of the acquiring
party having a value twice the exercise price of the right.
The Rights are not exercisable until the Distribution Date and
will expire at the close of business on June 16, 1998 unless earlier redeemed
by Tandem as further described in the Rights Plan. At no time will the holder
of the Rights as such have any voting power or any rights as a stockholder.
Subject to certain exceptions, any of the provisions of the Rights Agreement
may be amended by the Tandem Board prior to the Distribution Date.
Pursuant to the Merger Agreement and the Stock Option
Agreement, Tandem has amended the Rights Plan so as to render the Rights
inapplicable to the Merger and the other transactions contemplated by the
Merger Agreement and the Stock Option Agreement. See "The Merger
Agreement--Certain Representations and Warranties" on page 46.
The above summary of the Rights Agreement does not purport to
be complete and is qualified in its entirety by reference to the terms and
conditions of the Rights Agreement. See "Where You Can Find More Information"
on page 56.
Compaq does not have a Rights Plan.
DESCRIPTION OF COMPAQ CAPITAL STOCK
The summary of the terms of the capital stock of Compaq set
forth below does not purport to be complete and is qualified by reference to
the Compaq Charter and Compaq Bylaws. Copies of the Compaq Charter and Compaq
Bylaws are incorporated by reference herein and will be sent to holders of
shares of Compaq Common Stock and Tandem Common Stock upon request. See "Where
You Can Find More Information" on page 56.
Authorized Capital Stock
Under the Compaq Charter, Compaq's authorized capital stock
consists of 1,000,000,000 shares of Compaq Common Stock and 10,000,000 shares
of Preferred Stock, par value $0.01 per share (the "Preferred Stock").
Compaq Common Stock
The holders of Compaq Common Stock are entitled to one vote for
each share held of record on all matters submitted to a vote of stockholders.
Subject to preferences that may be applicable to any outstanding Preferred
Stock, holders of Compaq Common Stock are entitled to receive ratably such
dividends as may be declared by the Compaq Board out of funds legally
available therefor. In the event of a liquidation or dissolution of Compaq,
holders of Compaq Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities and the liquidation preference of any
outstanding Preferred Stock.
Holders of Compaq Common Stock have no preemptive rights and
have no rights to convert their Compaq Common Stock into any other securities.
All of the outstanding shares of Compaq Common Stock are, and the shares of
Compaq Common Stock issued pursuant to the Merger will be, duly authorized,
validly issued, fully paid and nonassessable.
Compaq Preferred Stock
The Compaq Board is authorized to designate any series of
Preferred Stock and the powers, preferences and rights of the shares of such
series and the qualifications, limitations or restrictions thereof without
further action by the holders of Compaq Common Stock. As of the Record Date,
no shares of Preferred Stock were issued or outstanding.
The Compaq Board may create and issue a series of preferred
stock with rights, privileges or restrictions, and adopt a stockholder rights
plan, having the effect of discriminating against an existing or prospective
holder of such securities as a result of such security holder beneficially
owning or commencing a tender offer for a substantial amount of Compaq Common
Stock. One of the effects of authorized but unissued and unreserved shares of
capital stock may be to render more difficult or discourage an attempt by a
potential acquiror to obtain control of Compaq by means of a merger, tender
offer, proxy contest or otherwise, and thereby protect the continuity of
Compaq's management. The issuance of such shares of capital stock may have the
effect of delaying, deferring or preventing a change in control of Compaq
without any further action by the stockholders of Compaq. Compaq has no
present intention to adopt a stockholder rights plan, but could do so without
stockholder approval at any future time.
Transfer Agent and Registrar
BankBoston N.A. is the transfer agent and registrar for the
Compaq Common Stock.
Stock Exchange Listing; Delisting and Deregistration of Tandem Common Stock
It is a condition to the Merger that the shares of Compaq
Common Stock issuable in the Merger be approved for listing on the NYSE on or
prior to the Effective Time, subject to official notice of issuance. If the
Merger is consummated, Tandem Common Stock will cease to be listed on the NYSE.
LEGAL MATTERS
The validity of the Compaq Common Stock to be issued to Tandem
stockholders pursuant to the Merger will be passed upon by Davis Polk &
Wardwell, special counsel to Compaq. It is a condition to the consummation of
the Merger that Tandem and Compaq receive opinions from Morrison & Foerster
LLP and Davis Polk & Wardwell, respectively, with respect to the tax treatment
of the Merger. See "The Merger--Certain U.S. Federal Income Tax Consequences"
and "The Merger Agreement--Conditions to the Merger" on pages 27 and 46,
respectively.
EXPERTS
The consolidated financial statements incorporated in this
Proxy Statement/Prospectus by reference to the Annual Report on Form 10-K for
Compaq for the year ended December 31, 1996 have been so incorporated in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
The consolidated financial statements and schedule of Tandem
and its subsidiaries included in or incorporated by reference in the Tandem
10-K have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports thereon included in or incorporated by reference
therein and incorporated herein by reference. Such consolidated financial
statements and schedule are incorporated herein by reference in reliance upon
such reports given upon the authority of such firm as experts in accounting
and auditing.
FUTURE STOCKHOLDER PROPOSALS
Any Compaq stockholder who intends to submit a proposal for
inclusion in the proxy materials for the 1998 annual meeting of Compaq
stockholders must submit such proposal to the Secretary of Compaq by November
7, 1997. Tandem expects to hold an annual meeting of stockholders in the
first calender quarter of 1998 unless the Merger is completed prior thereto.
Any Tandem stockholder who intends to submit a proposal for inclusion in the
proxy materials for the 1998 annual meeting of Tandem, if any, must submit
such proposal to the Secretary of Tandem by August 12, 1997.
SEC rules set forth standards as to what stockholder proposals
are required to be included in a proxy statement for an annual meeting.
WHERE YOU CAN FIND MORE INFORMATION
Tandem and Compaq file annual, quarterly and special reports,
proxy statements and other information with the SEC. You may read and copy any
reports, statements or other information filed by either company at the SEC's
public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information on
the public reference rooms. The companies' SEC filings are also available
to the public from commercial document retrieval services and at the web
site maintained by the SEC at "http://www.sec.gov."
Compaq filed a Registration Statement on Form S-4 to register
with the SEC the Compaq Common Stock to be issued to Tandem stockholders in
the Merger. This Proxy Statement/Prospectus is a part of that Registration
Statement and constitutes a prospectus of Compaq in addition to being a proxy
statement of Tandem for the Special Meeting. As allowed by SEC rules, this
Proxy Statement/Prospectus does not contain all the information you can find
in the Registration Statement or the exhibits to the Registration Statement.
The SEC allows Tandem and Compaq to "incorporate by reference"
information into this Proxy Statement/Prospectus, which means important
information may be disclosed to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is deemed
to be part of this Proxy Statement/Prospectus, except for any information
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 have been previously filed with
the SEC. These documents contain important information about our companies and
their finances.
<TABLE>
<S> <C>
Compaq SEC Filings (File No. 1-9026) Period
Annual Report on Form 10-K Year ended December 31, 1996.
Quarterly Reports on Form 10-Q Quarters ended June 30, 1997 and March 31, 1997.
Current Reports on Form 8-K Filed July 11, 1997; July 2, 1997; June 26, 1997; June 24,
1997; May 15, 1997; April 16, 1997; April 10, 1997; and
January 22, 1997.
Proxy Statement on Schedule 14A for 1997 Dated March 7, 1997.
Annual Meeting
Tandem SEC Filings (File No. 0-9134) Period
Annual Report on Form 10-K Year ended September 30, 1996.
Quarterly Reports on Form 10-Q Quarters ended March 31, 1997 and December 31, 1996.
Current Reports on Form 8-K Filed July 23, 1997; June 26, 1997; and February 3, 1997.
Proxy Statement on Schedule 14A for 1997 Dated December 10, 1996.
Annual Meeting
</TABLE>
Tandem and Compaq are also incorporating by reference
additional documents that either company may file with the SEC between the
date of this Proxy Statement/Prospectus and the date of the Special Meeting.
Compaq has supplied all information contained or incorporated
by reference in this Proxy Statement/Prospectus relating to Compaq, and Tandem
has supplied all such information relating to Tandem.
If you are a stockholder, Tandem may have sent you some of the
documents incorporated by reference, but you can obtain any of them through
either company or the SEC. Documents incorporated by reference are available
from either company 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 party at the following address:
Tandem Computers Incorporated Compaq Computer Corporation
10435 North Tantau Avenue 20555 SH 249
Cupertino, CA 95014 Houston, TX 77070
Tel: (408) 285-4363 Tel: (800) 433-2391
Attention: Director of Investor Attention: Investor Relations
Relations web site: http://www.compaq.com
If you would like to request documents from either company,
please do so by August 22, 1997 to receive them before the Special Meeting.
You should rely only on the information contained or
incorporated by reference in this Proxy Statement/Prospectus to vote on the
approval of the Merger Agreement and the Merger. Neither Tandem nor Compaq
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 July 30, 1997. You should not assume that the
information contained in the 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 Compaq Common Stock
in the Merger shall create any implication to the contrary.
Tandem, Himalaya, NonStop, ServerNet, and the Tandem logo are
trademarks or registered trademarks of Tandem Computers Incorporated in the
United States and/or other countries. Microsoft and Windows NT are either
trademarks or registered trademarks of Microsoft Corporation in the United
States and/or other countries. UB Networks is a trademark of Ungermann-Bass
Networks, Inc. Compaq and the Compaq logo are registered trademarks of Compaq
Computer Corporation. All other brand and product names are trademarks or
registered trademarks of their respective companies.
LIST OF DEFINED TERMS
Defined Term Page No.
- ------------ -------
1933 Act....................................................................29
1934 Act....................................................................45
1997 P/E Multiple...........................................................25
1998 P/E Multiple...........................................................25
Acquiring Person............................................................53
Antitrust Division..........................................................28
Book Value Multiple.........................................................23
CIC.........................................................................51
Code........................................................................22
Combined Company............................................................18
Compaq......................................................................17
Compaq Board................................................................18
Compaq Bylaws...............................................................51
Compaq Charter..............................................................51
Compaq Common Stock.........................................................17
Comparable Transactions.....................................................23
DGCL........................................................................29
Distribution Date...........................................................53
EC Merger Regulation........................................................28
Effective Time..............................................................17
Enterprise Book Value Multiple..............................................23
Enterprise Hardware and PC Companies........................................24
Enterprise-Wide Software Companies..........................................24
EPS.........................................................................24
ESPP........................................................................43
Exchange Agent..............................................................44
Exchange Ratio..............................................................17
Fair Offer for All Shares...................................................54
Forward Net Income Multiple.................................................23
FTC.........................................................................28
GAAP........................................................................27
HSR Act.....................................................................28
LTM EBIT Multiple...........................................................23
LTM EBITDA Multiple.........................................................23
LTM Net Income Multiple.....................................................23
LTM P/E Multiple............................................................25
LTM Revenue Multiple........................................................23
Merger......................................................................17
Merger Agreement............................................................17
Merger Consideration........................................................43
Merger Subsidiary...........................................................17
NASD........................................................................29
Non-Financial Assets Multiple...............................................23
NYSE........................................................................31
One Day Premium.............................................................22
One Week Premium............................................................22
Option......................................................................49
Preferred Stock.............................................................54
Purchase Price..............................................................53
Record Date.................................................................50
Right.......................................................................53
Rights Agent................................................................53
Rights Agreement............................................................53
SEC.........................................................................21
Special Meeting.............................................................17
Stock Acquisition Date......................................................53
Stock Option Agreement......................................................49
Substitute Option...........................................................43
Tandem......................................................................17
Tandem 10-K.................................................................42
Tandem Board................................................................17
Tandem Bylaws...............................................................51
Tandem Charter..............................................................51
Tandem Common Stock.........................................................17
Tandem Proxy................................................................42
Tandem Series A Preferred Stock.............................................51
Technology Transactions.....................................................22
Trigger Event...............................................................49
ANNEX A
AGREEMENT AND PLAN OF MERGER
dated as of
June 22, 1997
among
TANDEM COMPUTERS INCORPORATED
COMPAQ COMPUTER CORPORATION
and
COMPAQ-PROJECT, INC.
TABLE OF CONTENTS
------------
Page
----
ARTICLE 1
The Merger
Section 1.1. The Merger............................................. 1
Section 1.2. Conversion of Shares................................... 1
Section 1.3. Surrender and Payment.................................. 2
Section 1.4. Stock Options.......................................... 3
Section 1.5. Employee Stock Purchase Plan........................... 4
Section 1.6. Adjustments............................................ 4
Section 1.7. Fractional Shares...................................... 4
Section 1.8. Withholding Rights..................................... 4
Section 1.9. Lost Certificates...................................... 5
ARTICLE 2
The Surviving Corporation
Section 2.1. Certificate of Incorporation........................... 5
Section 2.2. Bylaws................................................. 5
Section 2.3. Directors and Officers................................. 5
ARTICLE 3
Representations and Warranties of the Company
Section 3.1. Corporate Existence and Power.......................... 6
Section 3.2. Corporate Authorization................................ 6
Section 3.3. Governmental Authorization............................. 7
Section 3.4. Non-contravention...................................... 7
Section 3.5. Capitalization......................................... 8
Section 3.6. Subsidiaries........................................... 8
Section 3.7. SEC Filings............................................ 9
Section 3.8. Financial Statements................................... 10
Section 3.9. Disclosure Documents................................... 10
Section 3.10. Absence of Certain Changes............................. 10
Section 3.11. No Undisclosed Material Liabilities.................... 12
Section 3.12. Compliance with Laws and Court Orders.................. 12
Section 3.13. Litigation............................................. 13
Section 3.14. Finders' Fees.......................................... 13
Section 3.15. Taxes.................................................. 13
Section 3.16. Employee Benefit Plans................................. 14
Section 3.17. Environmental Matters.................................. 15
Section 3.18. Pooling; Tax Treatment................................. 16
Section 3.19. Opinion of Financial Advisor........................... 16
Section 3.20. Patents and Other Proprietary Rights................... 16
Section 3.21. Antitakeover Statutes and Rights Agreement............. 17
ARTICLE 4
Representations and Warranties of Parent
Section 4.1. Corporate Existence and Power.......................... 18
Section 4.2. Corporate Authorization................................ 18
Section 4.3. Governmental Authorization............................. 18
Section 4.4. Non-contravention...................................... 19
Section 4.5. Capitalization......................................... 19
Section 4.6. Subsidiaries........................................... 20
Section 4.7. SEC Filings............................................ 21
Section 4.8. Financial Statements................................... 21
Section 4.9. Disclosure Documents................................... 21
Section 4.10. Absence of Certain Changes............................. 22
Section 4.11. No Undisclosed Material Liabilities.................... 23
Section 4.12. Compliance with Laws and Court Orders.................. 23
Section 4.13. Litigation............................................. 23
Section 4.14. Finders' Fees.......................................... 23
Section 4.15. Taxes.................................................. 23
Section 4.16. Employee Benefit Plans................................. 24
Section 4.17. Environmental Matters.................................. 25
Section 4.18. Pooling; Tax Treatment................................. 26
Section 4.19. Opinion of Financial Advisor........................... 26
Section 4.20. Patents and Other Proprietary Rights................... 26
ARTICLE 5
Covenants of the Company
Section 5.1. Conduct of the Company................................. 27
Section 5.2. Stockholder Meeting; Proxy Material.................... 28
Section 5.3. Other Offers........................................... 29
ARTICLE 6
Covenants of Parent
Section 6.1. Conduct of Parent...................................... 29
Section 6.2. Obligations of Merger Subsidiary....................... 30
Section 6.3. Voting of Shares....................................... 30
Section 6.4. Director and Officer Liability......................... 30
Section 6.5. Registration Statement; Form S-8....................... 30
Section 6.6. Stock Exchange Listing................................. 31
Section 6.7. Employee Benefits...................................... 31
Section 6.8. Board Candidate........................................ 31
ARTICLE 7
Covenants of Parent and the Company
Section 7.1. Reasonable Best Efforts................................ 32
Section 7.2. Certain Filings........................................ 32
Section 7.3. Public Announcements................................... 32
Section 7.4. Further Assurances..................................... 32
Section 7.5. Notices of Certain Events.............................. 33
Section 7.6. Tax-free Reorganization; Pooling....................... 33
Section 7.7. Affiliates............................................. 33
Section 7.8. Access to Information; Confidentiality................. 34
ARTICLE 8
Conditions to the Merger
Section 8.1. Conditions to the Obligations of Each Party............ 34
Section 8.2. Conditions to the Obligations of Parent and Merger
Subsidiary......................................... 35
Section 8.3. Conditions to the Obligations of the Company........... 35
ARTICLE 9
Termination
Section 9.1. Termination............................................ 36
Section 9.2. Effect of Termination.................................. 37
ARTICLE 10
Miscellaneous
Section 10.1. Notices................................... 37
Section 10.2. Survival of Representations and Warranties 39
Section 10.3. Amendments; No Waivers.................... 39
Section 10.4. Expenses.................................. 39
Section 10.5. Successors and Assigns.................... 40
Section 10.6. Governing Law............................. 40
Section 10.7. Jurisdiction.............................. 40
Section 10.8. Waiver of Jury Trial...................... 40
Section 10.9. Counterparts; Effectiveness............... 41
Section 10.10. Entire Agreement.......................... 41
Section 10.11. Captions.................................. 41
Section 10.12. Severability.............................. 41
Section 10.13. Specific Performance...................... 41
Section 10.14. Definitions and Usage..................... 41
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of June 22, 1997 among
Tandem Computers Incorporated, a Delaware corporation (the "Company"), Compaq
Computer Corporation, a Delaware corporation ("Parent"), and Compaq-Project,
Inc., a Delaware corporation and a wholly owned subsidiary of Parent ("Merger
Subsidiary").
The parties hereto agree as follows:
ARTICLE 1
The Merger
Section 1.1. The Merger. (a) At the Effective Time, Merger
Subsidiary shall be merged (the "Merger") with and into the Company in
accordance with the General Corporation Law of the State of Delaware
("Delaware Law"), whereupon the separate existence of Merger Subsidiary shall
cease, and the Company shall be the surviving corporation (the "Surviving
Corporation").
(b) As soon as practicable after satisfaction or, to the extent
permitted hereunder, waiver of all conditions to the Merger set forth herein
the Company and Merger Subsidiary will file a certificate of merger (the
"Certificate of Merger") with the Delaware Secretary of State and make all
other filings or recordings required by Delaware Law in connection with the
Merger. The Merger shall become effective at such time (the "Effective Time")
as the Certificate of Merger is duly filed with the Delaware Secretary of
State (or at such later time as may be agreed in writing by the parties hereto
and specified in the Certificate of Merger).
(c) From and after the Effective Time, the Surviving Corporation
shall possess all the rights, powers, privileges and franchises and be subject
to all of the obligations, liabilities, restrictions and disabilities of the
Company and Merger Subsidiary, all as provided under Delaware Law.
Section 1.2. Conversion of Shares. At the Effective Time:
(a) each share of common stock, $.025 par value, of the Company
("Company Stock") outstanding immediately prior to the Effective Time shall
(except as otherwise provided in Section 1.2(b)) be converted into the right to
receive 0.21 shares (the "Merger Consideration") of common stock, $.01 par
value, of Parent ("Parent Stock");
(b) each share of Company Stock held by the Company as treasury
stock or owned by Parent or any of its subsidiaries immediately prior to the
Effective Time shall be canceled, and no payment shall be made with respect
thereto; and
(c) each share of common stock of Merger Subsidiary outstanding
immediately prior to the Effective Time shall be converted into and become one
share of common stock of the Surviving Corporation with the same rights,
powers and privileges as the shares so converted and shall constitute the only
outstanding shares of capital stock of the Surviving Corporation.
Section 1.3. Surrender and Payment. (a) Prior to the
Effective Time, Parent shall appoint an agent (the "Exchange Agent") for the
purpose of exchanging certificates representing Company Stock (the
"Certificates") for the Merger Consideration. As of the Effective Time, Parent
will make available to the Exchange Agent, as needed, the Merger Consideration
to be paid in respect of shares of Company Stock. Promptly after the Effective
Time, Parent will send, or will cause the Exchange Agent to send, to each
holder of shares of Company Stock at the Effective Time a letter of transmittal
for use in such exchange (which shall specify that the delivery shall be
effected, and risk of loss and title shall pass, only upon proper delivery of
the Certificates to the Exchange Agent).
(b) Each holder of shares of Company Stock that have been converted
into the right to receive the Merger Consideration will be entitled to receive,
upon surrender to the Exchange Agent of a Certificate, together with a
properly completed letter of transmittal, the Merger Consideration in respect
of the Company Stock represented by such Certificate. Until so surrendered,
each such Certificate shall, after the Effective Time, represent for all
purposes only the right to receive such Merger Consideration.
(c) If any portion of the Merger Consideration is to be paid to a
person (as defined in Section 10.14) other than the person in whose name the
Certificate is registered, it shall be a condition to such payment that the
Certificate so surrendered shall be properly endorsed or otherwise be in proper
form for transfer and that the person requesting such payment shall pay to the
Exchange Agent any transfer or other taxes required as a result of such
payment to a person other than the registered holder of such Certificate or
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable.
(d) After the Effective Time, there shall be no further
registration of transfers of shares of Company Stock. If, after the Effective
Time, Certificates are presented to the Surviving Corporation, they shall be
canceled and exchanged for the consideration provided for, and in accordance
with the procedures set forth, in this Article.
(e) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to Section 1.3(a) that remains unclaimed by the
holders of shares of Company Stock six months after the Effective Time shall
be returned to Parent, upon demand, and any such holder who has not exchanged
shares of Company Stock for the Merger Consideration in accordance with this
Section prior to that time shall thereafter look only to Parent for payment of
the Merger Consideration in respect of such shares of Company Stock.
Notwithstanding the foregoing, Parent shall not be liable to any holder of
shares of Company Stock for any amount paid to a public official pursuant to
applicable abandoned property laws. Any amounts remaining unclaimed by holders
of shares of Company Stock two years after the Effective Time (or such earlier
date immediately prior to such time as such amounts would otherwise escheat to
or become property of any governmental entity) shall, to the extent permitted
by applicable law, become the property of Parent free and clear of any claims
or interest of any person previously entitled thereto.
(f) No dividends, interest or other distributions with respect to
securities of Parent constituting part of the Merger Consideration shall be
paid to the holder of any unsurrendered Certificates until such Certificates
are surrendered as provided in this Section. Upon such surrender, there
shall be paid, without interest, to the person in whose name the securities of
Parent have been registered, all dividends, interest and other distributions
payable in respect of such securities on a date subsequent to, and in respect
of a record date after, the Effective Time.
Section 1.4. Stock Options. At the Effective Time, each
option to purchase shares of Company Stock outstanding under any employee stock
option or compensation plan or arrangement of the Company, whether or not
exercisable, and whether or not vested, shall be canceled, and Parent shall
issue in exchange therefor an option to purchase shares of Parent Stock (a
"Substitute Option"). The number of shares of Parent Stock subject to such
Substitute Option and the exercise price thereunder shall be computed in
compliance with the requirements of Section 424(a) of the Internal Revenue
Code of 1986 (the "Code") and such Substitute Option shall be subject to
substantially all of the other terms and conditions of the original option to
which it relates. Prior to the Effective Time, the Company will obtain such
consents, if any, as may be necessary to give effect to the transactions
contemplated by this Section. In addition, prior to the Effective Time, the
Company will make any amendments to the terms of such stock option or
compensation plans or arrangements that are necessary to give effect to the
transactions contemplated by this Section. The Company represents that
neither the execution of this Agreement nor the consummation of the
transactions contemplated hereby will cause the acceleration of vesting or
lapse of repurchase rights or obligations with respect to any employee stock
option or other benefit under any stock option plan or compensation plan or
arrangement of the Company. Except as contemplated by this Section, the
Company will not, after the date hereof, without the written consent of Parent,
amend any outstanding options to purchase shares of Company Stock (including
accelerating the vesting or lapse of repurchase rights or obligations).
Section 1.5. Employee Stock Purchase Plan. As of the
Effective Time, the Company's Employee Stock Purchase Plan shall be
terminated. The rights of participants in such Plan with respect to any
offering period then underway under such Plan shall be determined by treating
the last business day prior to the Effective Time as the last day of such
offering period and by making such other pro-rata adjustments as may be
necessary to reflect the reduced offering period but otherwise treating such
offering period as a fully effective and completed offering period for all
purposes of such Plan. Prior to the Effective Time, the Company shall take
all actions (including, if appropriate, amending the terms of the Company's
Employee Stock Purchase Plan) that are necessary to give effect to the
transactions contemplated by this Section.
Section 1.6. Adjustments. If at any time during the period
between the date of this Agreement and the Effective Time, any change (other
than cancellation of the Company's Stock Purchase Plan) in the outstanding
shares of capital stock of Parent shall occur, including by reason of any
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, or any stock dividend thereon with a record date
during such period, the Merger Consideration shall be adjusted appropriately.
Section 1.7. Fractional Shares. No fractional shares of
Parent Stock shall be issued in the Merger. All fractional shares of Parent
Stock that a holder of shares of Company Stock would otherwise be entitled to
receive as a result of the Merger shall be aggregated and if a fractional
share results from such aggregation, such holder shall be entitled to receive,
in lieu thereof, an amount in cash determined by multiplying the closing sale
price of the Parent Stock on the New York Stock Exchange on the trading day
immediately preceding the Effective Time by the fraction of a share of Parent
Stock to which such holder would otherwise have been entitled.
Section 1.8. Withholding Rights. Each of the Surviving
Corporation and Parent shall be entitled to deduct and withhold from the
consideration otherwise payable to any person pursuant to this Article such
amounts as it is required to deduct and withhold with respect to the making of
such payment under any provision of federal, state, local or foreign tax law.
To the extent that amounts are so withheld by the Surviving Corporation or
Parent, as the case may be, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
Company Stock in respect of which such deduction and withholding was made by
the Surviving Corporation or Parent, as the case may be.
Section 1.9. Lost Certificates. If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact
by the person claiming such Certificate to be lost, stolen or destroyed and,
if required by the Surviving Corporation, the posting by such person of a
bond, in such reasonable amount as the Surviving Corporation may direct, as
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen
or destroyed Certificate the Merger Consideration to be paid in respect of the
shares of Company Stock represented by such Certificates as contemplated by
this Article.
ARTICLE 2
The Surviving Corporation
Section 2.1. Certificate of Incorporation. The certificate of
incorporation of Merger Subsidiary in effect at the Effective Time shall be
the certificate of incorporation of the Surviving Corporation until amended
in accordance with applicable law, except that Article 1 shall be amended
to read "The name of the company is Tandem Computers Incorporated."
Section 2.2. Bylaws. The bylaws of Merger Subsidiary in
effect at the Effective Time shall be the bylaws of the Surviving
Corporation until amended in accordance with applicable law.
Section 2.3. Directors and Officers. From and after the
Effective Time, until successors are duly elected or appointed and
qualified in accordance with applicable law, (i) the directors of Merger
Subsidiary at the Effective Time shall be the directors of the Surviving
Corporation and (ii) the officers of the Company at the Effective Time
shall be the officers of the Surviving Corporation. The Company's Board of
Directors will cause the aforementioned directors of Merger Subsidiary to
constitute "Continuing Directors" for purposes of Paragraph 15 of the
Company's 1997 Stock Plan and for purposes of any analogous provision of
any other stock-based plan of the Company.
ARTICLE 3
Representations and Warranties of the Company
The Company represents and warrants to Parent that, except as
disclosed in the Company Schedule of Exceptions:
Section 3.1. Corporate Existence and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all corporate powers and all
governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted, except for those licenses,
authorizations, permits, consents and approvals the absence of which would
not, individually or in the aggregate, have a material adverse effect (as
defined in Section 10.14) on the Company. The Company is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where such qualification is necessary, except for those jurisdictions where
failure to be so qualified would not, individually or in the aggregate, have a
material adverse effect on the Company. The Company has heretofore delivered
to Parent true and complete copies of the certificate of incorporation and
bylaws of the Company as currently in effect.
Section 3.2. Corporate Authorization. (a) The execution,
delivery and performance by the Company of this Agreement and the Company Stock
Option Agreement dated the date hereof ("Company Stock Option Agreement") and
the consummation of the transactions contemplated hereby and thereby are
within the Company's corporate powers and, except for the required approval of
the Company's stockholders in connection with the consummation of the Merger,
have been duly authorized by all necessary corporate action. The affirmative
vote of the holders of a majority of the outstanding shares of Company Stock
is the only vote of the holders of any of the Company's capital stock
necessary in connection with the consummation of the Merger. No other vote of
the holders of the Company's capital stock is necessary in connection with
this Agreement or the Company Stock Option Agreement or the consummation of
the transactions contemplated hereby and thereby. This Agreement and the
Company Stock Option Agreement constitute valid and binding agreements of the
Company.
(b) The Company's Board of Directors, at a meeting duly called and
held, has (i) determined that this Agreement, the Company Stock Option
Agreement and the transactions contemplated hereby and thereby (including the
Merger) are fair to and in the best interests of the Company's stockholders,
(ii) approved and adopted this Agreement and the Company Stock Option
Agreement and the transactions contemplated hereby and thereby (including the
Merger), and (iii) resolved (subject to Section 5.2) to recommend approval and
adoption of this Agreement by its stockholders. The Company has been advised
that the Company's Chief Executive Officer and President intend to vote in
favor of the approval and adoption of this Agreement at the Company
Stockholder Meeting (as defined in Section 5.2(a)).
Section 3.3. Governmental Authorization. The execution,
delivery and performance by the Company of this Agreement and the Company Stock
Option Agreement and the consummation by the Company of the transactions
contemplated hereby and thereby require no action by or in respect of, or
filing with, any governmental body, agency, official or authority other than
(a) the filing of a certificate of merger in accordance with Delaware Law, (b)
compliance with any applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 ("HSR Act"), the Securities Act of 1933 ("1933 Act"),
the Securities Exchange Act of 1934 ("1934 Act"), foreign or state securities
or Blue Sky laws and Council Regulation No. 4064/89 of the European Community
(the "EC Merger Regulation"), and (c) any other filings, approvals or
authorizations which, if not obtained, would not, individually or in the
aggregate, have a material adverse effect on the Company or materially impair
the ability of the Company to consummate the transactions contemplated by this
Agreement or by the Company Stock Option Agreement.
Section 3.4. Non-contravention. The execution, delivery and
performance by the Company of this Agreement and the Company Stock Option
Agreement and the consummation by the Company of the transactions contemplated
hereby and thereby do not and will not (i) violate the certificate of
incorporation or bylaws of the Company, (ii) assuming compliance with the
matters referred to in Section 3.3, violate any applicable law, rule,
regulation, judgment, injunction, order or decree, (iii) require any consent or
other action by any person under, constitute a default under, or give rise to
any right of termination, cancellation or acceleration of any right or
obligation of the Company or any of its subsidiaries or to a loss of any
benefit to which the Company or any of its subsidiaries is entitled under any
provision of any agreement or other instrument binding upon the Company or any
of its subsidiaries or any license, franchise, permit, certificate, approval
or other similar authorization affecting, or relating in any way to, the
assets or business of the Company or any of its subsidiaries or (iv) result
in the creation or imposition of any Lien on any asset of the Company or any
of its subsidiaries except, in the case of clauses (ii), (iii) and (iv), for
such matters as would not, individually or in the aggregate, have a material
adverse effect on the Company or materially impair the ability of the Company
to consummate the transactions contemplated by this Agreement or the Company
Stock Option Agreement. "Lien" means, with respect to any property or asset,
any mortgage, lien, pledge, charge, security interest, encumbrance or other
adverse claim of any kind in respect of such property or asset.
Section 3.5. Capitalization. The authorized capital stock of
the Company consists of 396,000,000 shares of Company Stock, 4,000,000 shares
of junior common stock, $.025 par value, and 2,400,000 shares of preferred
stock, $.10 par value (of which 800,000 shares are designated as Series A
Participating Preferred Stock). No shares of junior common stock or preferred
stock have been issued. As of June 20, 1997, there were outstanding
116,601,373 shares of Company Stock and options to purchase an aggregate of
19,607,561 shares of Company Stock at an average exercise price of $12.852 per
share (of which options to purchase an aggregate of 10,573,000 shares of
Company Stock were exercisable). All outstanding shares of capital stock of
the Company have been duly authorized and validly issued and are fully paid
and non-assessable. Except as set forth in this Section and except for changes
since June 20, 1997 resulting from the exercise of employee stock options
outstanding on such date, there are no outstanding (i) shares of capital stock
or voting securities of the Company, (ii) securities of the Company convertible
into or exchangeable for shares of capital stock or voting securities of the
Company or (iii) options or other rights to acquire from the Company or other
obligation of the Company to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of the Company. There are no outstanding obligations of the Company
or any of its subsidiaries to repurchase, redeem or otherwise acquire any
securities referred to in clauses (i), (ii) or (iii) above.
Section 3.6. Subsidiaries. (a) Each subsidiary (as defined in
Section 10.14) of the Company is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, has all corporate powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted, except for those licenses, authorizations, permits,
consents and approvals the absence of which would not, individually or in the
aggregate, have a material adverse effect on the Company. Each subsidiary of
the Company is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction where such qualification is necessary,
except for those jurisdictions where failure to be so qualified would not,
individually or in the aggregate, have a material adverse effect on the
Company. All material subsidiaries of the Company and their respective
jurisdictions of incorporation are identified in the Company's annual report
on Form 10-K for the fiscal year ended September 30, 1996 ("Company 10-K").
(b) All of the outstanding capital stock of, or other voting
securities or ownership interests in, each subsidiary of the Company is owned
by the Company, directly or indirectly, free and clear of any Lien and free of
any other limitation or restriction (including any restriction on the right to
vote, sell or otherwise dispose of such capital stock or other voting
securities or ownership interests), other than any restrictions imposed under
the 1933 Act. Except as set forth in this Section, there are no outstanding
(i) shares of capital stock or other voting securities or ownership interests
in any of the Company's subsidiaries, (ii) securities of the Company or any of
its subsidiaries convertible into or exchangeable for shares of capital stock
or other voting securities or ownership interests in any of the Company's
subsidiaries or (iii) options or other rights to acquire from the Company or
any of its subsidiaries, or other obligation of the Company or any of its
subsidiaries to issue, any capital stock or other voting securities or
ownership interests in, or any securities convertible into or exchangeable for
any capital stock or other voting securities or ownership interests in, any of
the Company's subsidiaries. There are no outstanding obligations of the
Company or any of its subsidiaries to repurchase, redeem or otherwise acquire
any of the securities referred to in clauses (i), (ii) or (iii) above.
Section 3.7. SEC Filings. (a) The Company has delivered to
Parent (i) the Company's annual report on Form 10-K for its fiscal year ended
September 30, 1996, (ii) its quarterly reports on Form 10-Q for its fiscal
quarters ended after September 30, 1996, (iii) its proxy or information
statements relating to meetings of, or actions taken without a meeting by, the
stockholders of the Company held since September 30, 1996 and (iv) all of its
other reports, statements, schedules and registration statements filed with the
Securities and Exchange Commission ("SEC") since September 30, 1996 (the
documents referred to in this Section 3.7(a) being referred to collectively as
the "Company SEC Filings") . The Company's quarterly report on Form 10-Q for
its fiscal quarter ended March 31, 1997 is referred to herein as the "Company
10-Q".
(b) As of its filing date, each Company SEC Filing complied as to
form in all material respects with the applicable requirements of the 1933 Act
and the 1934 Act.
(c) As of its filing date, each Company SEC Filing filed pursuant
to the 1934 Act did not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
(d) Each such registration statement, as amended or supplemented,
if applicable, filed pursuant to the 1933 Act did not, as of the date such
statement or amendment became effective, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.
Section 3.8. Financial Statements. The audited consolidated
financial statements and unaudited consolidated interim financial statements
of the Company included in the Company SEC Filings fairly present, in
conformity with generally accepted accounting principles applied on a
consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of the Company and its subsidiaries as of the
dates thereof and their consolidated results of operations and cash flows for
the periods then ended (subject to normal year-end adjustments in the case of
any unaudited interim financial statements). For purposes of this Agreement,
"Company Balance Sheet" means the consolidated balance sheet of the Company as
of March 31, 1997 set forth in the Company 10-Q and "Company Balance Sheet
Date" means March 31, 1997.
Section 3.9. Disclosure Documents. (a) The proxy or
information statement of the Company to be filed with the SEC in connection
with the Merger (the "Company Proxy Statement") and any amendments or
supplements thereto will, when filed, comply as to form in all material
respects with the applicable requirements of the 1934 Act. At the time the
Company Proxy Statement or any amendment or supplement thereto is first mailed
to stockholders of the Company and at the time such stockholders vote on the
approval and adoption of this Agreement, the Company Proxy Statement, as
supplemented or amended, if applicable, will not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to
make the statements contained therein, in the light of the circumstances under
which they were made, not misleading. The foregoing representations and
warranties will not apply to statements or omissions included in the Company
Proxy Statement or any amendment or supplement thereto based upon information
furnished to the Company by Parent for use therein.
(b) None of the information furnished to Parent for use in (or
incorporation by reference in) the Registration Statement (as defined in
Section 4.9(a)) or any amendment or supplement thereto will contain, at the
time the Registration Statement or any amendment or supplement thereto becomes
effective or at the Effective Time, 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 contained therein not misleading.
Section 3.10. Absence of Certain Changes. Since the Company
Balance Sheet Date, the business of the Company and its subsidiaries has been
conducted in the ordinary course consistent with past practices and there has
not been:
(a) any event, occurrence, development or state of circumstances or
facts which would, individually or in the aggregate, have a material adverse
effect on the Company (other than adverse effects on revenues resulting from
the announcement, fact or any aspect of the transactions contemplated by this
Agreement);
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of the Company,
or any repurchase, redemption or other acquisition by the Company or any of its
subsidiaries of any outstanding shares of capital stock or other securities
of, or other ownership interests in, the Company or any of its subsidiaries;
(c) except for amendments to the Company's Rights Agreement
contemplated by Section 3.21, any amendment of any material term of any
outstanding security of the Company or any of its subsidiaries;
(d) any incurrence, assumption or guarantee by the Company or any
of its subsidiaries of any material indebtedness for borrowed money other than
in the ordinary course and in amounts and on terms consistent with past
practices;
(e) any creation or other incurrence by the Company or any of its
subsidiaries of any Lien on any material asset other than in the ordinary
course consistent with past practices;
(f) any making of any material loan, advance or capital
contributions to or investment in any person other than loans, advances or
capital contributions to or investments in wholly-owned subsidiaries of the
Company made in the ordinary course consistent with past practices;
(g) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of the Company or any
of its subsidiaries which would, individually or in the aggregate, have a
material adverse effect on the Company;
(h) any transaction or commitment made, or any contract or
agreement entered into, by the Company or any of its subsidiaries relating to
its assets or business (including the acquisition or disposition of any
assets) or any relinquishment by the Company or any of its subsidiaries of any
contract or other right, in either case, material to the Company and its
subsidiaries, taken as a whole, other than transactions and commitments in the
ordinary course consistent with past practices and those contemplated by this
Agreement;
(i) any change in any method of accounting, method of tax
accounting, or accounting practice by the Company or any of its subsidiaries,
except for any such change required by reason of a concurrent change in
generally accepted accounting principles or Regulation S-X promulgated under
the 1934 Act;
(j) any (i) grant of any severance or termination pay to (x) any
employee of the Company or any of its subsidiaries (other than officers (as
defined in Section 10.14) or directors) other than ordinary course grants in
amounts consistent with past practices or (y) any director or officer of the
Company or any of its subsidiaries, (ii) increase in benefits payable under any
existing severance or termination pay policies or employment agreements, (iii)
entering into of any employment, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with any director
or officer of the Company or any of its subsidiaries, (iv) establishment,
adoption or amendment (except as required by applicable law) of any collective
bargaining, bonus, profit sharing, thrift, pension, retirement, deferred
compensation, compensation, stock option, restricted stock or other benefit
plan or arrangement covering any director, officer or employee of the Company
or any of its subsidiaries, or (v) increase in compensation, bonus or other
benefits payable to directors or officers;
(k) any material labor dispute, other than routine individual
grievances, or, to the knowledge of the Company, any activity or proceeding
by a labor union or representative thereof to organize any employees of the
Company or any of its subsidiaries, which employees were not subject to a
collective bargaining agreement at the Company Balance Sheet Date, or any
material lockouts, strikes, slowdowns, work stoppages or threats thereof by or
with respect to such employees; or
(l) any tax election, other than those consistent with past
practice, not required by law or any settlement or compromise of any tax
liability in either case that is material to the Company and its subsidiaries,
taken as a whole.
Section 3.11. No Undisclosed Material Liabilities. There are
no liabilities of the Company or any of its subsidiaries of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, and there is no existing condition, situation or set of
circumstances which could reasonably be expected to result in such a
liability, other than:
(a) liabilities or obligations provided for in the Company Balance
Sheet or disclosed in the notes thereto;
(b) other liabilities or obligations (including, without
limitation, liabilities and obligations incurred in the ordinary course of
business), which would not, individually or in the aggregate, have a material
adverse effect on the Company; and
(c) liabilities or obligations under this Agreement.
Section 3.12. Compliance with Laws and Court Orders. The
Company and each of its subsidiaries is and has been in compliance with, and
to the knowledge (as defined in Section 10.14) of the Company, is not under
investigation with respect to and has not been threatened to be charged with or
given notice of any violation of, any applicable law, rule, regulation,
judgment, injunction, order or decree, except for such matters as would not,
individually or in the aggregate, have a material adverse effect on the
Company.
Section 3.13. Litigation. Except as set forth in the Company
SEC Filings prior to the date hereof, there is no action, suit, investigation,
audit or proceeding pending against, or to the knowledge of the Company
threatened against or affecting, the Company or any of its subsidiaries or any
of their respective properties before any court or arbitrator or any
governmental body, agency or official which would, individually or in the
aggregate, have a material adverse effect on the Company.
Section 3.14. Finders' Fees. Except for Lehman Brothers and
Bain & Company, a copy of whose engagement agreements has been provided to
Parent, there is no investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on behalf of the Company
or any of its subsidiaries who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
Section 3.15. Taxes. Except as set forth in the Company
Balance Sheet (including the notes thereto) and except as would not,
individually or in the aggregate, have a material adverse effect on the
Company, (i) all tax returns, statements, reports and forms (collectively, the
"Company Returns") required to be filed with any taxing authority by, or with
respect to, the Company and its subsidiaries have been filed in accordance
with all applicable laws; (ii) the Company and its subsidiaries have timely
paid all taxes shown as due and payable on the Company Returns that have been
so filed, and, as of the time of filing, the Company Returns correctly
reflected the facts regarding the income, business, assets, operations,
activities and the status of the Company and its subsidiaries (other than
taxes which are being contested in good faith and for which adequate reserves
are reflected on the Company Balance Sheet); (iii) the Company and its
subsidiaries have made provision for all taxes payable by the Company and its
subsidiaries for which no Company Return has yet been filed; (iv) the charges,
accruals and reserves for taxes with respect to the Company and its
subsidiaries reflected on the Company Balance Sheet are adequate under United
States generally accepted accounting principles ("GAAP") to cover the tax
liabilities accruing through the date thereof; (v) there is no action, suit,
proceeding, audit or claim now proposed or pending against or with respect to
the Company or any of its subsidiaries in respect of any tax where there is a
reasonable possibility of an adverse determination; (vi) neither the Company
nor any of its subsidiaries has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code; and (vii)
neither the Company nor any of its subsidiaries has been a member of an
affiliated, consolidated, combined or unitary group other than one of which
the Company was the common parent.
Section 3.16. Employee Benefit Plans. (a) The Company has
provided Parent with a list identifying each material "employee benefit plan",
as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974 ("ERISA"), each employment, severance or similar contract, plan,
arrangement or policy applicable to any director or officer of the Company and
each material plan or arrangement, (written or oral), providing for
compensation, bonuses, profit-sharing, stock option or other stock related
rights or other forms of incentive or deferred compensation, vacation benefits,
insurance coverage (including any self-insured arrangements), health or
medical benefits, disability benefits, workers' compensation, supplemental
unemployment benefits, severance benefits and post-employment or retirement
benefits (including compensation, pension, health, medical or life insurance
benefits) which is maintained, administered or contributed to by the Company
or any of its affiliates (as defined in Section 10.14) and covers any employee
or former employee of the Company or any of its affiliates, or under which the
Company or any of its affiliates has any liability. Copies of such "employee
benefit plans" (and, if applicable, related trust agreements) and all
amendments thereto and written interpretations thereof have been furnished to
Parent together with the most recent annual report (Form 5500 including, if
applicable, Schedule B thereto) prepared in connection with any such plan.
Such plans are referred to collectively herein as the "Company Employee Plans".
(b) Each Company Employee Plan has been maintained in compliance
with its terms and with the requirements prescribed by any and all statutes,
order, rules and regulations (including but not limited to ERISA and the Code)
which are applicable to such Plan, except where failure to so comply would
not, individually or in the aggregate, have a material adverse effect on the
Company.
(c) At no time has the Company or any person who was at that time
an affiliate of the Company maintained an employee benefit plan subject to
Title IV of ERISA.
(d) Each Company Employee Plan which is intended to be qualified
under Section 401(a) of the Code is so qualified and has been so qualified
during the period from its adoption to date, and each trust forming a part
thereof is exempt from tax pursuant to Section 501(a) of the Code.
(e) No director or officer or, to the knowledge of the Company,
other employee of the Company or any of its subsidiaries will become entitled
to any retirement, severance or similar benefit or enhanced or accelerated
benefit solely as a result of the transactions contemplated hereby. Without
limiting the generality of the foregoing, no amount required to be paid or
payable to or with respect to any employee of the Company or any of its
subsidiaries in connection with the transactions contemplated hereby (either
solely as a result thereof or as a result of such transactions in conjunction
with any other event) will be an "excess parachute payment" within the meaning
of Section 280G of the Code.
(f) No Company Employee Plan provides post-retirement health and
medical, life or other insurance benefits for retired employees of the Company
or any of its subsidiaries.
(g) There has been no amendment to, written interpretation or
announcement (whether or not written) by the Company or any of its affiliates
relating to, or change in employee participation or coverage under, any
Company Employee Plan which would increase materially the expense of
maintaining such Company Employee Plan above the level of the expense incurred
in respect thereof for the 12 months ended on the Company Balance Sheet Date.
Section 3.17. Environmental Matters. (a) Except as set forth
in the Company SEC Filings prior to the date hereof and except as would not,
individually or in the aggregate, have a material adverse effect on the
Company,
(i) no notice, notification, demand, request for
information, citation, summons or order has been received, no
complaint has been filed, no penalty has been assessed, and no
investigation, action, claim, suit, proceeding or review is pending
or, to the knowledge of the Company, is threatened by any
governmental entity or other person relating to or arising out of
any Environmental Law;
(ii) the Company is and has been in compliance with all
Environmental Laws and all Environmental Permits; and
(iii) there are no liabilities of or relating to the Company
or any of its subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise arising
under or relating to any Environmental Law and there are no facts,
conditions, situations or set of circumstances which could
reasonably be expected to result in or be the basis for any such
liability.
(b) Neither the Company nor any of its subsidiaries owns or leases
or has owned or leased any real property in New Jersey or Connecticut.
(c) The following terms shall have the meaning set forth below:
"Company" and "its subsidiaries" shall, for purposes of this
Section, include any entity which is, in whole or in part, a corporate
predecessor of the Company or any of its subsidiaries.
"Environmental Laws" means any federal, state, local or foreign
law (including, without limitation, common law), treaty, judicial decision,
regulation, rule, judgment, order, decree, injunction, permit or governmental
restriction or requirement or any agreement with any governmental authority
or other third party, relating to human health and safety or the environment
and arising from the use, presence, disposal, discharge or release of
pollutants, contaminants, wastes or chemicals or any toxic, radioactive,
ignitable, corrosive, reactive or otherwise hazardous substances, wastes or
materials.
"Environmental Permits" means, with respect to any person, all
permits, licenses, franchises, certificates, approvals and other similar
authorizations of governmental authorities relating to or required by
Environmental Laws and affecting, or relating in any way to, the business of
such person as currently conducted.
Section 3.18. Pooling; Tax Treatment. (a) The Company intends
that the Merger be accounted for under the "pooling of interests" method under
the requirements of Opinion No. 16 (Business Combinations) of the Accounting
Principles Board of the American Institute of Certified Public Accountants
(APB No. 16), as amended by Statements of the Financial Accounting Standards
Board, and the related interpretations of the American Institute of Certified
Public Accountants, the Financial Accounting Standards Board, and the rules
and regulations of the SEC.
(b) Neither the Company nor any of its affiliates has taken or
agreed to take any action that would prevent the Merger from qualifying (i)
for "pooling of interests" accounting treatment as described in (a) above
or (ii) as a reorganization within the meaning of Section 368 of the Code
(a "368 Reorganization").
Section 3.19. Opinion of Financial Advisor. The Company's
Board of Directors has received the opinion of Lehman Brothers, financial
advisor to the Company, to the effect that, as of the date of this Agreement,
the Merger Consideration is fair to the Company's stockholders from a
financial point of view, and such opinion has not been withdrawn.
Section 3.20. Patents and Other Proprietary Rights. The
Company and its subsidiaries have rights to use, whether through ownership,
licensing or otherwise, all patents, trademarks, service marks, trade names,
copyrights, trade secrets, and other proprietary rights and processes of which
the Company is aware that are material to its business as now conducted
(collectively the "Company Intellectual Property Rights"). Except for such
matters as would not, individually or in the aggregate, have a material
adverse effect on the Company, (a) the Company and its subsidiaries have not
assigned, hypothecated or otherwise encumbered any of the Company Intellectual
Property Rights and (b) none of the licenses included in the Company
Intellectual Property Rights purports to grant sole or exclusive licenses to
another person including, without limitation, sole or exclusive licenses
limited to specific fields of use. To the best of the Company's knowledge,
the patents owned by the Company and its subsidiaries are valid and
enforceable and any patent issuing from patent applications of the Company and
its subsidiaries will be valid and enforceable, except as such invalidity or
unenforceability would not, individually or in the aggregate, have a material
adverse effect on the Company. The Company has no knowledge of any
infringement by any other person of any of the Company Intellectual Property
Rights, and the Company and its subsidiaries have not, to the Company's
knowledge, entered into any agreement to indemnify any other party against any
charge of infringement of any of the Company Intellectual Property Rights,
except for such matters as would not, individually or in the aggregate, have a
material adverse effect on the Company. To the best of the Company's
knowledge, the Company and its subsidiaries have not and do not violate or
infringe any intellectual property right of any other person, and neither the
Company nor any of its subsidiaries have received any communication alleging
that it violates or infringes the intellectual property right of any other
person, except for such matters as would not, individually or in the
aggregate, have a material adverse effect on the Company. Except for such
matters as would not, individually or in the aggregate, have a material
adverse effect in the Company, the Company and its subsidiaries have not been
sued for infringing any intellectual property right of another person. None
of the Company Intellectual Property Rights or other know-how relating to the
business of the Company and its subsidiaries, the value of which to the
Company is contingent upon maintenance of the confidentiality thereof, has
been disclosed by the Company or any affiliate thereof to any person other
than those persons who are bound to hold such information in confidence
pursuant to confidentiality agreements or by operation of law.
Section 3.21. Antitakeover Statutes and Rights Agreement. The
Board of Directors of the Company has approved this Agreement and the Company
Stock Option Agreement and the transactions contemplated hereby and thereby,
and neither Section 203 of the Delaware Law nor any other antitakeover or
similar statute or regulation applies or purports to apply to the transactions
contemplated hereby or thereby. The Company has taken all action necessary to
render the rights issued pursuant to the terms of the Company's Rights
Agreement inapplicable to the Merger, this Agreement, the Company Stock Option
Agreement and the other transactions contemplated hereby and thereby.
ARTICLE 4
Representations and Warranties of Parent
Parent represents and warrants to the Company that, except
as disclosed in the Parent Schedule of Exceptions:
Section 4.1. Corporate Existence and Power. Each of Parent and
Merger Subsidiary is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and Parent has all
corporate powers and all governmental licenses, authorizations, permits,
consents and approvals required to carry on its business as now conducted,
except for those licenses, authorizations, permits, consents and approvals the
absence of which would not, individually or in the aggregate, have a material
adverse effect on Parent. Parent is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified would not, individually or in the aggregate, have a material
adverse effect on Parent. Parent has heretofore delivered to the Company true
and complete copies of the certificate of incorporation and bylaws of Parent as
currently in effect. Since the date of its incorporation, Merger Subsidiary
has not engaged in any activities other than in connection with or as
contemplated by this Agreement.
Section 4.2. Corporate Authorization. The execution, delivery
and performance by Parent and Merger Subsidiary of this Agreement, and by
Parent of the Company Stock Option Agreement, and the consummation by Parent
and Merger Subsidiary of the transactions contemplated hereby and thereby are
within the corporate powers of Parent and Merger Subsidiary and have been duly
authorized by all necessary corporate action. This Agreement constitutes a
valid and binding agreement of each of Parent and Merger Subsidiary, and the
Company Stock Option Agreement constitutes a valid and binding agreement of
Parent.
Section 4.3. Governmental Authorization. The execution,
delivery and performance by Parent and Merger Subsidiary of this Agreement and
by Parent of the Company Stock Option Agreement and the consummation by Parent
and Merger Subsidiary of the transactions contemplated hereby and thereby
require no action by or in respect of, or filing with, any governmental body,
agency, official or authority other than (a) the filing of a certificate of
merger in accordance with Delaware Law, (b) compliance with any applicable
requirements of the HSR Act, the 1933 Act, the 1934 Act, foreign or state
securities or Blue Sky laws and the EC Merger Regulation, and (c) any other
filings, approvals or authorizations which, if not obtained, would not,
individually or in the aggregate, have a material adverse effect on Parent or
materially impair the ability of the Parent to consummate the transactions
contemplated by this Agreement or by the Company Stock Option Agreement.
Section 4.4. Non-contravention. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and by Parent of
the Company Stock Option Agreement, and the consummation by Parent and Merger
Subsidiary of the transactions contemplated hereby and thereby do not and will
not (i) violate the certificate of incorporation or bylaws of Parent or Merger
Subsidiary, (ii) assuming compliance with the matters referred to in Section
4.3, violate any applicable law, rule, regulation, judgment, injunction, order
or decree, (iii) require any consent or other action by any person under,
constitute a default under, or give rise to any right of termination,
cancellation or acceleration of any right or obligation of Parent or any of
its subsidiaries or to a loss of any benefit to which Parent or any of its
subsidiaries is entitled under any provision of any agreement or other
instrument binding upon Parent or any of its subsidiaries or any license,
franchise, permit, certificate, approval or other similar authorization
affecting, or relating in any way to, the assets or business of Parent or any
of its subsidiaries or (iv) result in the creation or imposition of any Lien
on any asset of Parent or any of its subsidiaries except, in the case of
clauses (ii), (iii) and (iv), for such matters as would not, individually or
in the aggregate, have a material adverse effect on Parent or materially
impair the ability of Parent to consummate the transactions contemplated by
this Agreement or by the Company Stock Option Agreement.
Section 4.5. Capitalization. (a) The authorized capital stock
of Parent consists of 1,000,000,000 shares of Parent Stock, and 10,000,000
shares of preferred stock , $.01 par value. No shares of preferred stock have
been issued. As of June 19, 1997, there were outstanding 276,436,009 shares
of Parent Stock and options to purchase an aggregate of 25,628,058 shares of
Parent Stock at an average exercise price of $42.88 per share (of which
options to purchase an aggregate of 11,774,823 shares of Parent Stock were
exercisable). All outstanding shares of capital stock of Parent have been duly
authorized and validly issued and are fully paid and non-assessable. Except as
set forth in this Section and except for changes since June 19, 1997 resulting
from the transactions contemplated hereby, the exercise of stock options or the
grant of stock based compensation to directors or employees or from the
issuance of stock in connection with a merger or other acquisition or business
combination determined by Parent's Board of Directors to be in the best
interests of Parent and its stockholders, there are no outstanding (i) shares
of capital stock or voting securities of Parent, (ii) securities of Parent
convertible into or exchangeable for shares of capital stock or voting
securities of Parent or (iii) options or other rights to acquire from Parent
or other obligation of Parent to issue, any capital stock, voting securities
or securities convertible into or exchangeable for capital stock or voting
securities of Parent. There are no outstanding obligations of Parent or any
of its subsidiaries to repurchase, redeem or otherwise acquire any securities
referred to in clauses (i), (ii) or (iii) above.
(b) The shares of Parent Stock to be issued as part of the Merger
Consideration have been duly authorized and when issued and delivered in
accordance with the terms of this Agreement, will have been validly issued and
will be fully paid and non-assessable and the issuance thereof is not subject
to any preemptive or other similar right.
Section 4.6. Subsidiaries. (a) Each subsidiary of Parent is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation, has all corporate powers and all
governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted, except for those licenses,
authorizations, permits, consents and approvals the absence of which would
not, individually or in the aggregate, have a material adverse effect on
Parent. Each subsidiary of Parent is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified would not, individually or in the aggregate, have a material
adverse effect on Parent. All material subsidiaries of Parent and their
respective jurisdictions of incorporation are identified in Parent's annual
report on Form 10-K for the fiscal year ended December 31, 1996 ("Parent
10-K").
(b) All of the outstanding capital stock of, or other voting
securities or ownership interests in, each subsidiary of Parent, is owned by
Parent, directly or indirectly, free and clear of any Lien and free of any
other limitation or restriction (including any restriction on the right to
vote, sell or otherwise dispose of such capital stock or other voting
securities or ownership interests), other than any restrictions imposed under
the 1933 Act. Except as set forth in this Section, there are no outstanding
(i) shares of capital stock or other voting securities or ownership interests
in any of Parent's subsidiaries, (ii) securities of Parent or any of its
subsidiaries convertible into or exchangeable for shares of capital stock or
other voting securities or ownership interests in any of its subsidiaries or
(iii) options or other rights to acquire from Parent or any of its
subsidiaries, or other obligation of Parent or any of its subsidiaries to
issue, any capital stock or other voting securities or ownership interests in,
or any securities convertible into or exchangeable for any capital stock or
other voting securities or ownership interests in, any of Parent's
subsidiaries. There are no outstanding obligations of Parent or any of its
subsidiaries to repurchase, redeem or otherwise acquire any of the securities
referred to in clauses (i), (ii) or (ii) above.
Section 4.7. SEC Filings. (a) Parent has delivered to the
Company (i) its annual report on Form 10-K for its fiscal year ended December
31, 1996, (ii) its quarterly reports on Form 10-Q for its fiscal quarters
ended after December 31, 1996, (iii) its proxy or information statements
relating to meetings of or actions taken without a meeting by Parent's
stockholders held since December 31, 1996, and (iv) all of its other reports,
statements, schedules and registration statements filed with the SEC since
December 31, 1996 (the documents referred to in this Section 4.7(a) being
referred to collectively as the "Parent SEC Filings"). The Parent's quarterly
report on Form 10-Q for its fiscal quarter ended March 31, 1997 is referred to
herein as the "Parent 10-Q".
(b) As of its filing date, each Parent SEC Filing complied as to
form in all material respects with the applicable requirements of the 1933 Act
and the 1934 Act.
(c) As of its filing date, each Parent SEC Filing filed pursuant
to the 1934 Act did not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
(d) Each such registration statement as amended or supplemented, if
applicable, filed pursuant to the 1933 Act did not, as of the date such
statement or amendment became effective, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.
Section 4.8. Financial Statements. The audited consolidated
financial statements and unaudited consolidated interim financial statements
of Parent included in the Parent SEC Filings fairly present, in conformity
with generally accepted accounting principles applied on a consistent basis
(except as may be indicated in the notes thereto), the consolidated financial
position of Parent and its subsidiaries as of the dates thereof and their
consolidated results of operations and cash flows for the periods then ended
(subject to normal year-end adjustments in the case of any unaudited interim
financial statements). For purposes of this Agreement, "Parent Balance Sheet"
means the consolidated balance sheet of Parent as of March 31, 1997 set forth
in the Parent 10-Q and "Parent Balance Sheet Date" means March 31, 1997.
Section 4.9. Disclosure Documents. (a) The registration
statement of Parent to be filed with the SEC with respect to the offering of
Parent Stock in connection with the Merger (the "Registration Statement") and
any amendments or supplements thereto will, when filed, comply as to form in
all material respects with the applicable requirements of the 1933 Act. At the
time the Registration Statement or any amendment or supplement thereto becomes
effective and at the Effective Time, the Registration Statement, as amended or
supplemented, if applicable, shall 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 contained therein not misleading.
The foregoing representations and warranties will not apply to statements or
omissions included in the Registration Statement or any amendment or
supplement thereto based upon information furnished to Parent or Merger
Subsidiary by the Company for use therein.
(b) None of the information furnished to the Company for use in
(or incorporation by reference in) the Company Proxy Statement or any
amendment or supplement thereto will contain, at the time the Company Proxy
Statement or any amendment or supplement thereto is first mailed to
stockholders of the Company or at the time the stockholders vote on the
approval and adoption of this Agreement, any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements contained therein, in the light of the circumstances under which
they were made, not misleading.
Section 4.10. Absence of Certain Changes. Since the Parent
Balance Sheet Date, the business of Parent and its subsidiaries has been
conducted in the ordinary course consistent with past practices, and there has
not been:
(a) any event, occurrence, development or state of circumstances or
facts which would, individually or in the aggregate, have a material adverse
effect on Parent (other than adverse effects on revenues resulting from the
announcement, fact or any aspect of the transactions contemplated by this
Agreement);
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of Parent, or
any repurchase, redemption or other acquisition by Parent or any of its
subsidiaries of any outstanding shares of capital stock or other securities
of, or other ownership interests in, the Parent or any of its subsidiaries;
(c) any change in any method of accounting, method of tax
accounting, or accounting practice by Parent or any of its subsidiaries, except
for any such change required by reason of a concurrent change in GAAP or
Regulation S-X promulgated under the 1934 Act;
(d) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of Parent or any of its
subsidiaries which would, individually or in the aggregate, have a material
adverse effect on Parent; or
(e) any material labor dispute, other than routine individual
grievances, or, to the knowledge of Parent, any activity or proceeding by a
labor union or representative thereof to organize any employees of Parent or
any of its subsidiaries, which employees were not subject to a collective
bargaining agreement at the Parent Balance Sheet Date, or any material
lockouts, strikes, slowdowns, work stoppages or threats thereof by or with
respect to such employees.
Section 4.11. No Undisclosed Material Liabilities. There are
no liabilities of Parent or any of its subsidiaries of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
and there is no existing condition, situation or set of circumstances which
could reasonably be expected to result in such a liability, other than:
(a) liabilities or obligations provided for in the Parent Balance
Sheet or disclosed in the notes thereto;
(b) other liabilities or obligations (including, without
limitation, liabilities and obligations incurred in the ordinary course of
business), which would not, individually or in the aggregate, have a material
adverse effect on Parent; and
(c) liabilities or obligations under this Agreement.
Section 4.12. Compliance with Laws and Court Orders. Parent
and each of its subsidiaries is and has been in compliance with, and to the
knowledge of Parent, is not under investigation with respect to and has not
been threatened to be charged with or given notice of any violation of, any
applicable law, rule, regulation, judgment, injunction, order or decree, except
for such matters as would not, individually or in the aggregate, have a
material adverse effect on Parent.
Section 4.13. Litigation. Except as set forth in the Parent
SEC Filings prior to the date hereof, there is no action, suit, investigation,
audit, or proceeding pending against, or to the knowledge of Parent threatened
against or affecting, Parent or any of its subsidiaries or any of their
respective properties before any court or arbitrator or any governmental body,
agency or official which would, individually or in the aggregate, have a
material adverse effect on Parent.
Section 4.14. Finders' Fees. Except for Greenhill & Co.
L.L.C. and Morgan Stanley & Co. Incorporated, a copy of whose engagement
agreements have been provided to the Company, there is no investment banker,
broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of Parent or any of its subsidiaries who might be
entitled to any fee or commission in connection with the transactions
contemplated by this Agreement.
Section 4.15. Taxes. Except as set forth in the Parent
Balance Sheet (including the notes thereto) and except as would not,
individually or in the aggregate, have a material adverse effect on Parent,
(i) all tax returns, statements, reports and forms (collectively, the "Parent
Returns") required to be filed with any taxing authority by, or with respect
to, Parent and its subsidiaries have been filed in accordance with all
applicable laws; (ii) Parent and its subsidiaries have timely paid all taxes
shown as due and payable on the Parent Returns that have been so filed, and,
as of the time of filing, the Parent Returns correctly reflected the facts
regarding the income, business, assets, operations, activities and the status
of Parent and its subsidiaries (other than taxes which are being contested in
good faith and for which adequate reserves are reflected on the Parent Balance
Sheet); (iii) Parent and its subsidiaries have made provision for all taxes
payable by Parent and its subsidiaries for which no Parent Return has yet been
filed; (iv) the charges, accruals and reserves for taxes with respect to
Parent and its subsidiaries reflected on Parent Balance Sheet are adequate
under GAAP to cover the tax liabilities accruing through the date thereof; (v)
there is no action, suit, proceeding, audit or claim now proposed or pending
against or with respect to Parent or any of its subsidiaries in respect of any
tax where there is a reasonable possibility of an adverse determination; (vi)
neither the Parent nor any of its subsidiaries has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code; and (vii) neither the Parent nor any of its subsidiaries has been a
member of an affiliated, consolidated, combined or unitary group other than
one of which the Parent was the common parent.
Section 4.16. Employee Benefit Plans. (a) Each Parent Employee
Plan, as hereinafter defined, has been maintained in compliance with its terms
and with the requirements prescribed by any and all statutes, order, rules and
regulations (including but not limited to ERISA and the Code) which are
applicable to such Plan, except where failure to so comply would not,
individually or in the aggregate, have a material adverse effect on Parent.
For purposes of this Agreement, "Parent Employee Plan" shall mean each
material "employee benefit plan" as defined in Section 3(3) of ERISA, each
employment, severance or similar contract, plan, arrangement or policy and
each plan or arrangement, (written or oral), providing for compensation,
bonuses, profit-sharing, stock option or other stock related rights or other
forms of incentive or deferred compensation, vacation benefits, insurance
coverage (including any self-insured arrangements), health or medical benefits,
disability benefits, workers' compensation, supplemental unemployment
benefits, severance benefits and post-employment or retirement benefits
(including compensation, pension, health, medical or life insurance benefits)
which is maintained, administered or contributed to by Parent or any affiliate
of Parent and covers any employee or former employee of Parent or any
affiliate of Parent or under which Parent or any affiliate of Parent has any
liability.
(b) At no time has Parent or any person who was at that time an
affiliate of Parent maintained an employee benefit plan subject to Title IV of
ERISA.
(c) Each Parent Employee Plan which is intended to be qualified
under Section 401(a) of the Code is so qualified and has been so qualified
during the period from its adoption to date, and each trust forming a part
thereof is exempt from tax pursuant to Section 501(a) of the Code.
(d) Except as disclosed in writing to the Company prior to the date
hereof, there has been no amendment to, written interpretation or announcement
(whether or not written) by Parent or any of its affiliates relating to, or
change in employee participation or coverage under, any Parent Employee Plan
which would increase materially the expense of maintaining such Parent
Employee Plan above the level of the expense incurred in respect thereof for
the 12 months ended on the Parent Balance Sheet Date.
(e) No director or officer or, to the knowledge of Parent, other
employee of Parent or any of its subsidiaries will become entitled to any
retirement, severance or similar benefit or enhanced or accelerated benefit
solely as a result of the transactions contemplated hereby. Without limiting
the generality of the foregoing, no amount required to be paid or payable to or
with respect to any employee of Parent or any of its subsidiaries in connection
with the transactions contemplated hereby (either solely as a result thereof or
as a result of such transactions in conjunction with any other event) will be
an "excess parachute payment" within the meaning of Section 280G of the Code.
Section 4.17. Environmental Matters. Except as set forth in
the Parent SEC Filings prior to the date hereof and except as would not,
individually or in the aggregate, have a material adverse on Parent,
(i) no notice, notification, demand, request for
information, citation, summons or order has been received, no
complaint has been filed, no penalty has been assessed, and no
investigation, action, claim, suit, proceeding or review is pending
or, to the knowledge of Parent, is threatened by any governmental
entity or other person relating to or arising out of any
Environmental Law;
(ii) Parent is and has been in compliance with all
Environmental Laws and all Environmental Permits; and
(iii) there are no liabilities of or relating to Parent or any
of its subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise arising
under or relating to any Environmental Law, and there are no facts,
conditions, situations or set of circumstances which could
reasonably be expected to result in or be the basis for any such
liability.
"Parent" and "its subsidiaries" shall, for purposes of this
Section, include any entity which is, in whole or in part, a corporate
predecessor of Parent or any of its subsidiaries.
Section 4.18. Pooling; Tax Treatment. (a) Parent intends that
the Merger be accounted for under the "pooling of interests" method under the
requirements of Opinion No. 16 (Business Combinations) of the Accounting
Principles Board of the American Institute of Certified Public Accountants
(APB No. 16), as amended by Statements of the Financial Accounting Standards
Board, and the related interpretations of the American Institute of Certified
Public Accountants, the Financial Accounting Standards Board, and the rules
and regulations of the SEC.
(b) Neither Parent nor any of its affiliates has taken or agreed
to take any action that would prevent the Merger from qualifying for (i)
"pooling of interests" accounting treatment as described in (a) above or (ii)
as a 368 Reorganization.
Section 4.19. Opinion of Financial Advisor. Parent's Board of
Directors has received the opinions of Greenhill & Co. L.L.C. and Morgan
Stanley & Co. Incorporated, financial advisors to Parent, to the effect that,
as of the date of this Agreement, the Merger Consideration is fair to Parent's
stockholders from a financial point of view, and such opinions have not been
withdrawn.
Section 4.20. Patents and Other Proprietary Rights. (a)
Parent and its subsidiaries have rights to use, whether through ownership,
licensing or otherwise, all patents, trademarks, service marks, trade names,
copyrights, trade secrets, and other proprietary rights and processes of which
the Parent is aware that are material to its business as now conducted
(collectively the "Parent Intellectual Property Rights"). Except for such
matters as would not, individually or in the aggregate, have a material
adverse effect on Parent, (a) Parent and its subsidiaries have not assigned,
hypothecated or otherwise encumbered any of the Parent Intellectual Property
Rights and (b) none of the licenses included in the Parent Intellectual
Property Rights purports to grant sole or exclusive licenses to another
person, including, without limitation, sole or exclusive licenses limited to
specific fields of use. To the best of Parent's knowledge, the patents owned
by Parent and its subsidiaries are valid and enforceable and any patent
issuing from patent applications of Parent and its subsidiaries will be valid
and enforceable, except as such invalidity or unenforceability would not,
individually or in the aggregate, have a material adverse effect on Parent.
Parent has no knowledge of any infringement by any other person of any of the
Parent Intellectual Property Rights, and Parent and its subsidiaries have not,
to Parent's knowledge, entered into any agreement to indemnify any other party
against any charge of infringement of any of the Parent Intellectual Property
Rights, except for such matters as would not, individually or in the
aggregate, have a material adverse effect on Parent. To the best of Parent's
knowledge, Parent and its subsidiaries have not and do not violate or infringe
any intellectual property right of any other person, and neither Parent nor
any of its subsidiaries have received any communication alleging that it
violates or infringes the intellectual property right of any other person,
except for such matters as would not, individually or in the aggregate, have a
material adverse effect on Parent. Except for such matters as would not,
individually or in the aggregate, have a material effect on Parent, Parent and
its subsidiaries have not been sued for infringing any intellectual property
right of another person. None of the Parent Intellectual Property Rights or
other know-how relating to the business of Parent and its subsidiaries, the
value of which to Parent is contingent upon maintenance of the confidentiality
thereof, has been disclosed by Parent or any affiliate thereof to any person
other than those persons who are bound to hold such information in confidence
pursuant to confidentiality agreements or by operation of law.
ARTICLE 5
Covenants of the Company
The Company agrees that:
Section 5.1. Conduct of the Company. The Company agrees that
from the date hereof until the Effective Time, except with the prior written
consent of Parent, the Company and its subsidiaries shall conduct their
business in the ordinary course consistent with past practice and shall use
their reasonable best efforts to preserve intact their business organizations
and relationships with third parties and to keep available the services of
their present officers and employees. Without limiting the generality of the
foregoing, from the date hereof until the Effective Time:
(a) the Company will not adopt or propose any change in its
certificate of incorporation or bylaws;
(b) the Company will not, and will not permit any of its
subsidiaries to, merge or consolidate with any other person or acquire a
material amount of assets of any other person;
(c) the Company will not, and will not permit any of its
subsidiaries to, sell, lease, license or otherwise dispose of any material
assets or property except (i) pursuant to existing contracts or commitments
and (ii) in the ordinary course consistent with past practice;
(d) the Company will not, and will not permit any of its
subsidiaries, to take any action that would make any representation and
warranty of the Company hereunder materially inaccurate in any respect at, or
as of any time prior to, the Effective Time;
(e) the Company will not, and will not permit any of its
subsidiaries to enter into any licensing agreement or other similar
arrangement with respect to any Company Intellectual Property Right, except
that:
(i) ServerNet software may be licensed to non-affiliates of
the Company in the ordinary course of business on terms and
conditions not materially different than under ServerNet software
licenses existing as of the date hereof;
(ii) NonStop software may be licensed to non-affiliates of
the Company identified in writing to Parent prior to the date
hereof on terms and conditions mutually acceptable to the Company
and Parent; and
(iii) operating systems and other software products may be
licensed to the Company's customers in the ordinary course of
business consistent with past practices.
(f) the Company will not, and will not permit any of its
subsidiaries to, agree or commit to do any of the foregoing.
Section 5.2. Stockholder Meeting; Proxy Material. (a) The
Company shall cause a meeting of its stockholders (the "Company Stockholder
Meeting") to be duly called and held as soon as reasonably practicable for the
purpose of voting on the approval and adoption of this Agreement. In
connection with such meeting, the Company will (i) promptly prepare and file
with the SEC, use its reasonable best efforts to have cleared by the SEC and
thereafter mail to its stockholders as promptly as practicable the Company
Proxy Statement and all other proxy materials for such meeting, (ii) use its
reasonable best efforts to obtain the necessary approvals by its stockholders
of this Agreement and the transactions contemplated hereby and (iii) otherwise
comply with all legal requirements applicable to such meeting.
(b) Except as provided in the next sentence, the Board of
Directors of the Company shall recommend approval and adoption of this
Agreement by the Company's stockholders. The Board of Directors of the
Company shall be permitted to withdraw or modify in a manner adverse to Parent
its recommendation to its stockholders, but only if and to the extent
required, in response to an unsolicited bona fide written Acquisition
Proposal, in order to comply with the fiduciary duties of the Board of
Directors under applicable law as advised by the Company's outside counsel.
For purposes of this Agreement, "Acquisition Proposal" means any offer or
proposal for, or any indication of interest in, a merger, consolidation or
other business combination involving the Company or any of its subsidiaries or
the acquisition of any equity interest in, or a substantial portion of the
assets of, the Company or any of its subsidiaries, other than the transactions
contemplated by this Agreement.
Section 5.3. Other Offers. From the date hereof until the
termination hereof, the Company and its subsidiaries, and the officers,
directors, financial or legal advisors of the Company and its subsidiaries
will not, directly or indirectly, (i) take any action to solicit, initiate or
encourage any Acquisition Proposal or (ii) engage in negotiations with, or
disclose any nonpublic information relating to the Company or any of its
subsidiaries or afford access to the properties, books or records of the
Company or any of its subsidiaries to, any person that may be considering
making, or has made, an Acquisition Proposal. The Company will promptly (and
in no event later than 24 hours after receipt of the relevant Acquisition
Proposal) notify Parent (which notice shall be provided orally and in writing
and shall identify the person making the Acquisition Proposal and set forth
the material terms thereof) after receipt of any Acquisition Proposal,
indication that any person is considering making an Acquisition Proposal or
request for nonpublic information relating to the Company or any of its
subsidiaries or for access to the properties, books or records of the Company
or any of its subsidiaries by any person who is considering making or has made
an Acquisition Proposal. The Company will keep Parent fully informed of the
status and details of any such Acquisition Proposal or request. The Company
shall, and shall cause its subsidiaries and the directors, officers and
financial and legal advisors of the Company and its subsidiaries to, cease
immediately and cause to be terminated all activities, discussions or
negotiations, if any, with any persons conducted heretofore with respect to
any Acquisition Proposal. Notwithstanding any provision of this Section,
nothing in this Section shall prohibit the Company or its Board of Directors
from taking and disclosing to the Company's stockholders a position with
respect to an Acquisition Proposal by a third party to the extent required
under the 1934 Act or from making such disclosure to the Company's
stockholders which, in the judgment of the Board of Directors with the advice
of outside counsel, is required under applicable law; provided that nothing in
this sentence shall affect the obligations of the Company and its Board of
Directors under any other provision of this Agreement.
ARTICLE 6
Covenants of Parent
Parent agrees that:
Section 6.1. Conduct of Parent. Parent agrees that from the
date hereof until the Effective Time, Parent and its subsidiaries shall
conduct their business in the ordinary course consistent with past practice
and shall use their best efforts to preserve intact their business
organizations and relationships with third parties and to keep available the
services of their present officers and employees. Without limiting the
generality of the foregoing, and except as disclosed in the Parent Schedule of
Exceptions, from the date hereof until the Effective Time:
(a) Parent will not adopt or propose any change in its certificate
of incorporation or bylaws;
(b) Parent will not, and will not permit any of its subsidiaries
to, take any action that would make any representation and warranty of Parent
hereunder inaccurate in any respect at, or as of any time prior to, the
Effective Time; and
(c) Parent will not, and will not permit any of its subsidiaries
to, agree or commit to do any of the foregoing.
Section 6.2. Obligations of Merger Subsidiary. Parent will
take all action necessary to cause Merger Subsidiary to perform its
obligations under this Agreement and to consummate the Merger on the terms and
conditions set forth in this Agreement.
Section 6.3. Voting of Shares. Parent agrees to vote all
shares of Company Stock beneficially owned by it in favor of adoption of this
Agreement at the Company Stockholder Meeting.
Section 6.4. Director and Officer Liability. For six years
after the Effective Time, Parent will cause the Surviving Corporation to
indemnify and hold harmless the present and former officers and directors of
the Company in respect of acts or omissions occurring prior to the Effective
Time to the extent provided under the Company's certificate of incorporation
and bylaws in effect on the date hereof. For six years after the Effective
Time, Parent will cause the Surviving Corporation to use its best efforts to
provide officers' and directors' liability insurance in respect of acts or
omissions occurring prior to the Effective Time covering each such person
currently covered by the Company's officers' and directors' liability
insurance policy on terms with respect to coverage and amount no less
favorable than those of such policy in effect on the date hereof. At the
Effective Time, Surviving Corporation shall assume the Company's obligations
under the Directors' Indemnification Agreements in the form provided to Parent
prior to the date hereof.
Section 6.5. Registration Statement; Form S-8. Parent shall
promptly prepare and file with the SEC under the 1933 Act the Registration
Statement (and Registration Statements on Form S-8 as necessary to register
shares of Parent Stock underlying Substitute Options), and shall use its
reasonable best efforts to cause the Registration Statement (and such
Registration Statements on Form S-8) to be declared effective by the SEC as
promptly as practicable. Parent shall promptly take any action required to be
taken under foreign or state securities or Blue Sky laws in connection with
the issuance of Parent Stock in the Merger or pursuant to Substitute Options.
Section 6.6. Stock Exchange Listing. Parent shall use its
reasonable best efforts to cause the shares of Parent Stock to be issued in
connection with the Merger (and the shares of Parent Stock underlying
Substitute Options) to be listed on the New York Stock Exchange, subject to
official notice of issuance.
Section 6.7. Employee Benefits. For one year following the
Effective Time, the employees of the Company and its subsidiaries will be
provided compensation and benefits that are, in the reasonable judgment of
Parent, substantially comparable in the aggregate to those provided by the
Company to its employees as of the date hereof, excluding all forms of
stock-based or equity-based compensation (other than the Company's Stock
Purchase Plan). After the Effective Time, Parent shall recognize service with
the Company and its subsidiaries as service for all purposes under any
employee benefit plan or arrangement maintained by Parent. The TIP and SEIP
plans of the Company will remain in effect through September 30, 1997.
Nothing in this Section shall obligate Parent, the Company or any of their
respective subsidiaries to continue the employment of any person for any
period.
Section 6.8. Board Candidate. Parent agrees that, immediately
following the Effective Time, it will (a) increase the size of its Board of
Directors (the "Parent Board") by one, and (b) cause, subject to the following
sentence, the candidate recommended by the Company's Board of Directors
immediately prior to the Effective Time (the "Company Candidate") to be
elected as a member of the Parent Board. The Company Candidate shall (i) be
"independent" as such term is applied under the corporate governance standards
of the Parent Board and (ii) be otherwise satisfactory to Parent, in its
reasonable judgment. Such candidate shall continue to serve as a director of
Parent until the first Annual Meeting of the Parent next following the
Effective Time, and, subject to meeting Parent's corporate governance
standards applicable to all director nominees, shall be nominated for
reelection (to serve one additional one-year term) at such Annual Meeting by
the Parent Board.
ARTICLE 7
Covenants of Parent and the Company
The parties hereto agree that:
Section 7.1. Reasonable Best Efforts. Subject to the terms and
conditions of this Agreement, each party will use its reasonable best efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement and the Company
Stock Option Agreement.
Section 7.2. Certain Filings. The Company and Parent shall
cooperate with one another (i) in connection with the preparation of the
Company Proxy Statement and the Registration Statement, (ii) in determining
whether any action by or in respect of, or filing with, any governmental body,
agency, official, or authority 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 Company Stock Option Agreement and (iii) in taking such
actions or making any such filings, furnishing information required in
connection therewith or with the Company Proxy Statement or the Registration
Statement and seeking timely to obtain any such actions, consents, approvals
or waivers.
Section 7.3. Public Announcements. Parent and the Company will
consult with each other before issuing any press release or making any public
statement with respect to this Agreement or the transactions contemplated
hereby and, except as may be required by applicable law or any listing
agreement with any national securities exchange, will not issue any such press
release or make any such public statement prior to such consultation.
Section 7.4. Further Assurances. At and after the Effective
Time, the officers and directors of the Surviving Corporation will be
authorized to execute and deliver, in the name and on behalf of the Company or
Merger Subsidiary, any deeds, bills of sale, assignments or assurances and to
take and do, in the name and on behalf of the Company or Merger Subsidiary, any
other actions and things to vest, perfect or confirm of record or otherwise in
the Surviving Corporation any and all right, title and interest in, to and
under any of the rights, properties or assets of the Company acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with,
the Merger.
Section 7.5. Notices of Certain Events. Each of the Company and
Parent shall promptly notify the other party hereto of:
(a) any notice or other communication from any person alleging that
the consent of such person is or may be required in connection with the
transactions contemplated by this Agreement or the Company Stock Option
Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement or the Company Stock Option Agreement; and
(c) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge threatened against, relating to or involving or
otherwise affecting such party that, if pending on the date of this Agreement,
would have been required to have been disclosed pursuant to Section 3.12,
3.13, 3.17, 4.12, 4.13 or 4.17 (as the case may be) or that relate to the
consummation of the transactions contemplated by this Agreement or the Company
Stock Option Agreement.
Section 7.6. Tax-free Reorganization; Pooling. (a) Prior to
the Effective Time, each party shall use its best efforts to cause the Merger
to qualify as a 368 Reorganization, and will not take any action reasonably
likely to cause the Merger not to so qualify. Parent shall not take, or cause
the Company to take, any action after the Effective Time reasonably likely to
cause the Merger not to qualify as a 368 Reorganization.
(b) Each party will use its reasonable best efforts to cause the
Merger to qualify for pooling of interest accounting treatment as described in
Sections 3.18 and 4.18 and will not take any action (or suffer any omission)
reasonably likely to cause the Merger not to so qualify.
(c) Each party shall use reasonable best efforts to obtain the
opinions referred to in Sections 8.1(f), 8.2(b) and 8.3(b).
Section 7.7. Affiliates. (a) Within 45 days following the
date of this Agreement, the Company shall deliver to Parent a letter
identifying all known persons who may be deemed affiliates of the Company
under Rule 145 of the 1933 Act or under applicable SEC accounting releases
with respect to pooling of interests accounting treatment. The Company shall
use its reasonable best efforts to obtain a written agreement from each person
who may be so deemed as soon as practicable and, in any event, at least 30
days prior to the Effective Time, substantially in the form of Exhibit A
hereto.
(b) Within 45 days following the date of this Agreement, Parent
shall deliver to the Company a letter identifying all known persons who may be
deemed affiliates of Parent under Rule 145 of the 1933 Act or under applicable
SEC accounting releases with respect to pooling of interests accounting
treatment. Parent shall use its reasonable best efforts to obtain a written
agreement from each person who may be so deemed as soon as practicable and, in
any event, at least 30 days prior to the Effective Time, substantially in the
form of Exhibit B hereto.
Section 7.8. Access to Information; Confidentiality. (a)
From the date hereof until the Effective Time, the Company and Parent will
give to the other party, its counsel, financial advisors, auditors and other
authorized representatives reasonable access to the offices, properties, books
and records of such party, furnish to the other party and its
representatives such financial and other data and information as such party
and its representatives may reasonably request and instruct its own
employees and representatives to cooperate with the other party in its
investigations. Any investigation pursuant to this Section shall be conducted
in such manner as not to interfere unreasonably with the conduct of the
business of the Company and Parent, as the case may be. No investigation
pursuant to this Section shall affect any representation or warranty made by
any party hereunder.
(b) All information obtained by Parent or the Company pursuant
to this Section shall be kept confidential in accordance with, and shall
otherwise be subject to the terms of, the Confidentiality Agreement dated June
13, 1997 between Parent and the Company.
ARTICLE 8
Conditions to the Merger
Section 8.1. Conditions to the Obligations of Each Party. The
obligations of the Company, Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following conditions:
(a) this Agreement shall have been approved and adopted by the
stockholders of the Company in accordance with Delaware Law;
(b) any applicable waiting period under the HSR Act and the EC
Merger Regulation relating to the Merger shall have expired or been
terminated;
(c) no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation of the
Merger;
(d) the Registration Statement shall have been declared effective
and no stop order suspending the effectiveness of the Registration Statement
shall be in effect and no proceedings for such purpose shall be pending before
or threatened by the SEC;
(e) the shares of Parent Stock to be issued in the Merger (as well
as the shares of Parent Stock to be issued upon exercise of Substitute Options)
shall have been approved for listing on the NYSE, subject to official notice of
issuance;
(f) Parent and the Company shall have received the advice of Price
Waterhouse LLP and Ernst & Young LLP, in writing and otherwise in form and
substance reasonably satisfactory to Parent and the Company, that confirms
Parent management's assessment (in the case of Price Waterhouse LLP) and
Company management's assessment (in the case of Ernst & Young LLP) that the
Merger will qualify for pooling of interest accounting treatment under GAAP.
Section 8.2. Conditions to the Obligations of Parent and Merger
Subsidiary. The obligations of Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following further conditions:
(a) 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, the representations and warranties of the Company contained
in this Agreement and in any certificate or other writing delivered by the
Company pursuant hereto shall be true in all material respects at and as of the
Effective Time as if made at and as of such time and Parent shall have
received a certificate signed by an executive officer of the Company (which
certificate shall not impose any personal liability on such officer) to the
foregoing effect;
(b) Parent shall have received an opinion of Davis Polk & Wardwell
in form and substance reasonably satisfactory to Parent, on the basis of
certain facts, representations and assumptions set forth in such opinion,
dated the Effective Time, to the effect that the Merger will be treated for
federal income tax purposes as a reorganization qualifying under the
provisions of Section 368(a) of the Code and that each of Parent, Merger
Subsidiary and the Company will be a party to the reorganization within the
meaning of Section 368(b) of the Code. In rendering such opinion, such
counsel shall be entitled to rely upon representations of officers of Parent
and the Company substantially in the form of Exhibits C and D hereto.
Section 8.3. Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction of the following further conditions:
(a) each of Parent and Merger Subsidiary 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, the representations and
warranties of Parent and Merger Subsidiary contained in this Agreement and in
any certificate or other writing delivered by Parent or Merger Subsidiary
pursuant hereto shall be true in all material respects at and as of the
Effective Time as if made at and as of such time and the Company shall have
received a certificate signed by an executive officer of Parent and Merger
Subsidiary (which certificate shall not impose any personal liability on such
officer) to the foregoing effect;
(b) The Company shall have received an opinion of Morrison &
Foerster LLP in form and substance reasonably satisfactory to the Company, on
the basis of certain facts, representations and assumptions set forth in such
opinion, dated the Effective Time, to the effect that the Merger will be
treated for federal income tax purposes as a reorganization qualifying under
the provisions of Section 368(a) of the Code and that each of Parent, Merger
Subsidiary and the Company will be a party to the reorganization within the
meaning of Section 368(b) of the Code. In rendering such opinion, such
counsel shall be entitled to rely upon representations of officers of Parent
and the Company substantially in the form of Exhibits C and D hereto.
ARTICLE 9
Termination
Section 9.1. Termination. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of this Agreement by the Board of Directors of
the Company or Parent or the stockholders of the Company):
(a) by mutual written agreement of the Company and Parent;
(b) by either the Company or Parent, if
(i) the Merger has not been consummated on or before
December 31, 1997; provided that the right to terminate this
Agreement pursuant to this Section shall not be available to any
party whose breach of any provision of this Agreement results in
the failure of the Merger to be consummated by such time;
(ii) there shall be any law or regulation that makes
consummation of the Merger illegal or otherwise prohibited or if
any judgment, injunction, order or decree enjoining any party from
consummating the Merger is entered and such judgment, injunction,
order or decree shall have become final and non-appealable; or
(iii) this Agreement shall not have been approved and adopted
in accordance with Delaware Law by the Company's stockholders at
the Company Stockholder Meeting (or any adjournment thereof).
(c) by Parent, if
(i) there shall be any law or regulation that makes the
exercise of Parent's rights (including the purchase of shares of
Company Stock) under the Company Stock Option Agreement illegal or
otherwise prohibited or if any judgment, injunction, order or
decree enjoining such exercise is entered and such judgment,
injunction, order or decree shall have become final and non-
appealable; or
(ii) (x) the Board of Directors of the Company shall have
withdrawn or modified in a manner adverse to Parent its approval or
recommendation of the Merger or (y) there shall be any breach of
any provision of Section 5.2(a) or 5.3.
The party desiring to terminate this Agreement pursuant to this
Section 9.1 (other than pursuant to Section 9.1(a)) shall give notice of such
termination to the other party.
Section 9.2. Effect of Termination. If this Agreement is
terminated pursuant to Section 9.1, this Agreement shall become void and of no
effect with no liability on the part of any party hereto, except that (i) the
agreements contained in Sections 7.8(b), 10.4, 10.6, 10.7 and 10.8 shall
survive the termination hereof and (ii) no such termination shall release any
party of any liabilities or damages resulting from any willful or grossly
negligent breach by that party of any provision of this Agreement.
ARTICLE 10
Miscellaneous
Section 10.1. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including
facsimile transmission) and shall be given,
if to Parent or Merger Subsidiary, to:
J. David Cabello, Esq.
Senior Vice President
General Counsel and Secretary
Compaq Computer Corporation
20555 SH 249
Houston, TX 77070
Fax: 281-518-8209
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Fax: (212) 450-4800
Attention: Christopher Mayer
if to the Company, to:
Roel Pieper
Chief Executive Officer
Tandem Computers Incorporated
19333 Vallco Parkway
Cupertino, CA 95014-2599
Fax: 408-285-2772
and
Josephine T. Parry
Vice President, General Counsel
& Secretary
10435 N. Tantau Avenue, LOC 200-16
Cupertino, CA
Fax: 408-285-4677
with a copy to:
Morrison & Foerster LLP
755 Page Mill Road
Palo Alto, California 94304
Fax: (415) 494-0792
Attention: William D. Sherman
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
Fax: (212) 468-7900
Attention: Joseph W. Bartlett
or such other address or fax number as such party may hereafter specify for
the purpose by notice to the other parties hereto. All such notices, requests
and other communications shall be deemed received on the date of receipt by
the recipient thereof if received prior to 5 p.m. in the place of receipt and
such day is a business day in the place of receipt. Otherwise, any such
notice, request or communication shall be deemed not to have been received
until the next succeeding business day in the place of receipt.
Section 10.2. Survival of Representations and Warranties. The
representations and warranties and agreements contained herein and in any
certificate or other writing delivered pursuant hereto shall not survive the
Effective Time except for the agreements set forth in Sections 6.4, 6.7, 6.8,
7.8(b), 10.4, 10.6, 10.7 and 10.8.
Section 10.3. Amendments; No Waivers. (a) Any provision of
this Agreement may be amended or waived prior to the Effective Time if, but
only if, such amendment or waiver is in writing and is signed, in the case of
an amendment, by each party to this Agreement or in the case of a waiver, by
the party against whom the waiver is to be effective; provided that after the
adoption of this Agreement by the stockholders of the Company, no such
amendment or waiver shall, without the further approval of such stockholders,
reduce the amount or change the kind of consideration to be received in
exchange for any shares of capital stock of the Company.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights
or remedies provided by law.
Section 10.4. Expenses. (a) Except as otherwise provided in
this Section, all costs and expenses incurred in connection with this Agreement
shall be paid by the party incurring such cost or expense.
(b) The Company agrees to pay Parent in immediately available funds
by wire transfer an amount equal to $55 million promptly, but in no event
later than two business days, after the termination of this Agreement as a
result of the occurrence of any of the events set forth in:
(i) Section 9.1(b)(iii); provided that an Acquisition
Proposal shall have been publicly announced at any time prior to
the date of such stockholder vote; or
(ii) Section 9.1(c)(ii).
(c) The Company agrees to pay Parent in immediately available funds
by wire transfer an amount equal to Parent's reasonable expenses incurred in
connection with this transaction (but not to exceed $20 million) if (x) this
Agreement shall have been terminated pursuant to Section 9.1(b)(i), (y) any
representation or warranty made by the Company in this Agreement shall not
have been true and correct as of the date hereof, and (z) the condition in
Section 8.2(a) relating to representations and warranties shall not have been
satisfied. Such payment shall be made promptly, and in no event later than
two business days, after such termination.
(d) Parent agrees to pay the Company in immediately available funds
by wire transfer an amount equal to the Company's reasonable expenses incurred
in connection with this transaction (but not to exceed $20 million) if (x)
this Agreement shall have been terminated pursuant to Section 9.1(b)(i), (y)
any representation or warranty made by Parent in this Agreement shall not have
been true and correct as of the date hereof, and (z) the condition in Section
8.3(a) relating to representations and warranties shall not have been
satisfied. Such payment shall be made promptly, and in no event later than
two business days, after such termination.
Section 10.5. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of each other party hereto, except that Parent
or Merger Subsidiary may transfer or assign, in whole or from time to time in
part, to one or more of their affiliates, the right to enter into the
transactions contemplated by this Agreement, but any such transfer or
assignment will not relieve Parent or Merger Subsidiary of its obligations
hereunder.
Section 10.6. Governing Law. This Agreement shall be governed
by and construed in accordance with the law of the State of Delaware.
Section 10.7. Jurisdiction. Any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or
in connection with, this Agreement or the transactions contemplated hereby may
be brought in any federal court located in the State of Delaware or any
Delaware state court, and each of the parties hereby consents to the
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to
the laying of the venue of any such suit, action or proceeding in any such
court or that any such suit, action or proceeding which is brought in any such
court has been brought in an inconvenient form. Process in any such suit,
action or proceeding may be served on any party anywhere in the world, whether
within or without the jurisdiction of any such court. Without limiting the
foregoing, each party agrees that service of process on such party as provided
in Section 10.1 shall be deemed effective service of process on such party.
Section 10.8. Waiver of Jury Trial. EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
Section 10.9. Counterparts; Effectiveness. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
No provision of this Agreement is intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
Section 10.10. Entire Agreement. This Agreement, the Company
Stock Option Agreement and the Confidentiality Agreement constitute the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersedes all prior agreements and understandings, both oral
and written, between the parties with respect to the subject matter hereof and
thereof.
Section 10.11. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
Section 10.12. 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 or unenforceable, 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
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any parts. Upon
such a determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent
possible.
Section 10.13. 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 to which they are entitled at law or in equity.
Section 10.14. Definitions and Usage. (a) For purposes of this
Agreement:
"affiliate" means, with respect to any person, any other person
directly or indirectly controlling, controlled by, or under common control
with such person.
"knowledge" of any person which is not an individual means the
knowledge of such person's officers after reasonable inquiry.
"material adverse effect" means, when used in connection with
Parent or the Company, any change, effect, event, occurrence or state of facts
that has had, or would reasonably be expected to have, a material adverse
effect on the business, operations, assets, liabilities, condition (financial
or otherwise) or results of operations of Parent and its subsidiaries, taken
as a whole, or the Company and its subsidiaries, taken as a whole, as the case
may be.
"officer" means (i) in the case of Parent and the Company, any
executive officer of Parent or the Company, as applicable, within the meaning
of Rule 3b-7 of the 1934 Act as well as (ii) in the case of the Company, the
Vice President and General Managers of the Company's Americas, Europe, Japan
and Asia-Pacific regions.
"person" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
"subsidiary" means, with respect to any person, any entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at any time directly or indirectly owned by such person.
A reference in this Agreement to any statute shall be to such
statute as amended from time to time, and to the rules and regulations
promulgated thereunder.
(b) Each of the following terms is defined in the Section set forth
1933 Act........................................ 3.3
1934 Act........................................ 3.3
368 Reorganization.............................. 3.18
Acquisition Proposal............................ 5.2(b)
Company 10-K.................................... 3.6
Company 10-Q.................................... 3.7(a)(iv)
Company Balance Sheet Date...................... 3.8
Company Balance Sheet........................... 3.8
Company Employee Plan........................... 3.16(a)
Company Proxy Statement......................... 3.9(a)
Company SEC Filings............................. 3.7(a)(iv)
Company Stock................................... 1.2(a)
Company Stock Option Agreement.................. 3.2(a)
Company Stockholder Meeting..................... 5.2(a)
Delaware Law.................................... 1.1(a)
EC Merger Regulation............................ 3.3
Effective Time.................................. 1.1(b)
Environmental Laws.............................. 3.17(c)
Environmental Permits........................... 3.17(c)
ERISA........................................... 3.16(a)
GAAP............................................ 3.15
HSR Act......................................... 3.3
Lien............................................ 3.4
Merger.......................................... 1.1
Merger Consideration............................ 1.2(a)
Parent 10-Q..................................... 4.7(a)(iv)
Parent Balance Sheet............................ 4.8
Parent Balance Sheet Date....................... 4.8
Parent Employee Plan............................ 4.16
Parent SEC Filings.............................. 4.7(a)(iv)
Parent Stock.................................... 1.2(a)
Registration Statement.......................... 4.9(a)
SEC............................................. 3.7(a)(iv)
Surviving Corporation........................... 1.1(a)
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the day and
year first above written.
TANDEM COMPUTERS
INCORPORATED
By: /s/ Roel Pieper
------------------------
Roel Pieper
Vice Chairman and
Chief Executive Officer
COMPAQ COMPUTER CORPORATION
By: /s/ Eckhard Pfeiffer
------------------------
Eckhard Pfeiffer
President and Chief Executive Officer
COMPAQ-PROJECT, INC.
By: /s/ John T. Rose
------------------------
John T. Rose
President
EXHIBIT A
TO ANNEX A
AFFILIATE'S LETTER
(Tandem Computers Incorporated)
____________, 1997
Compaq Computer Corporation
20555 SH 249
Houston, TX 77070
Tandem Computers Incorporated
19333 Vallco Parkway
Cupertino, CA 95014-2599
Ladies and Gentlemen:
The undersigned has been advised that as of the date of this
letter the undersigned may be deemed to be an "affiliate" of Tandem Computers
Incorporated, a Delaware corporation ("Company"), as the term "affiliate" is
defined for purposes of paragraphs (c) and (d) of Rule 145 of the rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended
(the "Act"). Pursuant to the terms of the Agreement and Plan of Merger dated
as of June 22, 1997 (the "Agreement") among Company, Compaq Computer
Corporation, a Delaware corporation ("Parent"), and Compaq-Project, Inc., a
Delaware corporation and a wholly owned subsidiary of Parent ("Merger
Subsidiary"), Merger Subsidiary will be merged with and into Company with
Company to be the surviving corporation in the merger (the "Merger").
As a result of the Merger, the undersigned will receive shares
of Common Stock, par value $.01 per share, of Parent (the "Parent Common
Stock") in exchange for shares owned by the undersigned of Common Stock, par
value $.025 per share, of Company (the "Company Common Stock").
The undersigned represents, warrants and covenants to Parent and
Company that as of the date the undersigned receives any Parent Common Stock
as a result of the Merger:
A. The undersigned shall not make any sale, transfer or other
disposition of the Parent Common Stock in violation of the Act or the Rules
and Regulations.
B. The undersigned has carefully read this letter and the
Agreement and discussed the requirements of such documents and other
applicable limitations upon the undersigned's ability to sell, transfer or
otherwise dispose of the Parent Common Stock to the extent the undersigned
felt necessary with the undersigned's counsel or counsel for Company.
C. The undersigned has been advised that the issuance of Parent
Common Stock to the undersigned pursuant to the Merger will be registered with
the Commission under the Act on a Registration Statement on Form S-4.
However, the undersigned has also been advised that, since at the time the
Merger is submitted for a vote of the stockholders of Company, the undersigned
may be deemed to be an affiliate of Company, the undersigned may not sell,
transfer or otherwise dispose of the Parent Common Stock issued to the
undersigned in the Merger unless (i) such sale, transfer or other disposition
has been registered under the Act, (ii) such sale, transfer or other
disposition is made in conformity with Rule 145 promulgated by the Commission
under the Act, or (iii) in the opinion of counsel reasonably acceptable to
Parent, or pursuant to a "no action" letter obtained by the undersigned from
the staff of the Commission, such sale, transfer or other disposition is
otherwise exempt from registration under the Act; provided, however, that in
any such case, such sale, assignment or transfer shall only be permitted if,
in the opinion of counsel for Parent, such transaction would not have,
directly or indirectly, any adverse consequences for Parent with respect to
the treatment of the Merger for tax purposes.
D. The undersigned understands that Parent is under no
obligation to register the sale, transfer or other disposition of the Parent
Common Stock by the undersigned or on the undersigned's behalf under the Act
or to take any other action necessary in order to enable such sale, transfer
or other disposition by the undersigned in compliance with an exemption from
such registration.
E. The undersigned also understands that there will be placed
on the certificates for the Parent Common Stock issued to the undersigned or
any substitution thereof, a legend stating in substance:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT
OF 1933 APPLIES. THE SECURITIES REPRESENTED BY THIS CERTIFICATE
MAY BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF ONLY IN
ACCORDANCE WITH THE TERMS OF A LETTER AGREEMENT BETWEEN THE
REGISTERED HOLDER HEREOF AND PARENT, A COPY OF WHICH AGREEMENT IS
ON FILE AT THE PRINCIPAL OFFICES OF PARENT."
F. The undersigned also understands that unless the transfer
by the undersigned of the undersigned's Parent Common Stock has been registered
under the Act or is a sale made in conformity with the provisions of Rule 145
under the Act, Parent reserves the right to put the following legend on the
certificates issued to the undersigned's transferee:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM
A PERSON WHO RECEIVED SUCH SECURITIES IN A TRANSACTION TO WHICH
RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SECURITIES HAVE NOT BEEN ACQUIRED BY THE HOLDER WITH A VIEW
TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF
WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
OF 1933."
It is understood and agreed that the legends set forth in
paragraphs E and F above and any stop transfer legends pursuant to paragraph G
shall be removed by delivery of substitute certificates without such legend if
(i) the securities represented thereby have been registered for sale by the
undersigned under the 1933 Act or (ii) Parent has received either an opinion
of counsel, which opinion and counsel shall be reasonably satisfactory to
Parent, or a "no-action" letter obtained by the undersigned from the staff of
the Commission, to the effect that the restrictions imposed by Rule 145 under
the Act no longer apply to the undersigned.
G. The undersigned understands that the Merger is intended to
be accounted for using the "pooling-of-interests" method and that such
treatment for financial accounting purposes is dependent upon the accuracy of
certain of the representations and warranties, and the undersigned's
compliance with certain of the covenants and agreements, set forth herein.
Accordingly, the undersigned will not sell, transfer or otherwise dispose of
the undersigned's interests in, or acquire or sell any options or other
securities relating to securities of Parent or Company that would be intended
to reduce the undersigned's risk relative to, any shares of common stock of
either Parent or Company beneficially owned by the undersigned, during the
period commencing on the 30th day prior to the effectiveness of the Merger and
ending at such time as results covering at least 30 days of post-Merger
combined operations have been published by Parent, in the form of a quarterly
earnings report, an effective registration statement filed with the Securities
Exchange Commission ("SEC"), a report to the SEC on Form 10-K, 10-Q or 8-K, or
any other public filing or announcement which includes such combined results
of operations (the "Combined Financial Results Report"). The undersigned also
understand that stop transfer instructions will be given to the transfer
agents of Parent and Company in order to prevent any breach of the covenants
and agreements the undersigned makes in this Section G, although such stop
transfer instructions will be promptly rescinded upon the publication of the
Combined Financial Results Report.
H. The undersigned further understands and agrees that the
representations, warranties, covenants and agreements of the undersigned set
forth herein are for the benefit of Parent, Company and the Surviving
Corporation (as defined in the Merger Agreement) and will be relied upon by
such entities and their respective counsel and accountants.
I. The undersigned understands and agrees that this letter
agreement shall apply to all shares of the capital stock of Parent and Company
that are deemed to be beneficially owned by the undersigned pursuant to
applicable federal securities laws.
Execution of this letter should not be considered an admission
on the part of the undersigned that the undersigned is an "affiliate" of
Company as described in the first paragraph of this letter or as a waiver of
any rights the undersigned may have to object to any claim that the
undersigned is such an affiliate on or after the date of this letter.
Very truly yours,
By: _______________________
Name:
Accepted this ____ day of
____________, 1997.
COMPAQ COMPUTER
CORPORATION
By:-----------------------------
Name:
Title:
EXHIBIT B
TO ANNEX A
AFFILIATE'S LETTER RELATING TO POOLING
(Compaq Computer Corporation)
_________, 1997
Compaq Computer Corporation
20555 SH 249
Houston, TX 77070
Tandem Computers Incorporated
19333 Vallco Parkway
Cupertino, CA 95014-2599
Ladies and Gentlemen:
Pursuant to the terms of the Agreement and Plan of Merger dated
as of June 22, 1997 (the "Agreement") among Compaq Computer Corporation, a
Delaware corporation ("Parent"), Tandem Computers Incorporated, a Delaware
corporation ("Company"), and Compaq-Project, Inc., a Delaware corporation
("Merger Subsidiary"), Merger Subsidiary will be merged with and into Company
with Company to be the surviving corporation in the Merger (the "Merger").
I represent, warrant and covenant with and to Parent and Company
that:
A. I understand that the Merger is intended to be accounted for
using the "pooling-of-interests" method and that such treatment for financial
accounting purposes is dependent upon the accuracy of certain of the
representations and warranties, and my compliance with certain of the
covenants and agreements, set forth herein. Accordingly, I will not sell,
transfer or otherwise dispose of my interests in, or acquire or sell any
options or other securities relating to securities of Parent or Company that
would be intended to reduce my risk relative to, any shares of common stock of
either Parent or Company beneficially owned by me, during the period commencing
on the 30th day prior to the effectiveness of the Merger and ending at such
time as results covering at least 30 days of post-Merger combined operations
have been published by Parent, in the form of a quarterly earnings report, an
effective registration statement filed with the Securities Exchange Commission
("SEC"), a report to the SEC on Form 10-K, 10-Q or 8-K, or any other public
filing or arrangement which concludes such combined results of operations (the
"Combined Financial Results Report").
B. I also understand that stop transfer instructions will be
given to the transfer agents of Parent and Company in order to prevent any
breach of the covenants and agreements I make in paragraph A, although such
stop transfer instructions will be promptly rescinded upon the publication of
the Combined Financial Results Report.
C. I understand and agree that this letter agreement shall
apply to all shares of the capital stock of Parent and Company that are deemed
to be beneficially owned by me pursuant to applicable federal securities laws.
Very truly yours,
-------------------
Name:
Accepted this ____ day of
____________, 1997.
COMPAQ COMPUTER
CORPORATION
By:______________________
Name:
Title:
EXHIBIT C
TO ANNEX A
COMPANY REPRESENTATION LETTER
[Effective Time]
Morrison & Foerster LLP
755 Page Hill Road
Palo Alto, CA 94304
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Ladies and Gentlemen:
In connection with the opinions to be delivered pursuant to
Sections 8.2(b) and 8.3(b) of the Agreement and Plan of Merger (the
"Agreement")(1) dated June 22, 1997, among Compaq Computer Corporation, a
Delaware corporation ("Parent"), Compaq-Project, Inc., a Delaware corporation
and a wholly-owned subsidiary of Parent ("Merger Subsidiary"), and Tandem
Computers Incorporated, a Delaware corporation ("Company"), the undersigned
officers of Company hereby certify and represent as to Company that the facts
relating to the merger (the "Merger") of Merger Subsidiary with and into
Company pursuant to the Agreement and as described in the Company Proxy
Statement dated _________, 1997 (the "Proxy Statement") are true, correct and
complete in all respects at the date hereof and will be true, correct and
complete in all respects at the Effective Time and that:
- ------------
(1)References contained in this Certificate to the Agreement include, unless
the context otherwise requires, each document attached as an exhibit or annex
thereto.
1. The consideration to be received in the Merger by holders of
Company Stock was determined by arm's length negotiations between the
managements of Parent and Company. In connection with the Merger, no holder
of Company Stock will receive in exchange for such stock, directly or
indirectly, any consideration other than Parent Stock and cash in lieu of a
fractional share thereof.
2. There is no plan or intention by any of the holders of Company
Stock who own 5% or more of the Company Stock, and to the knowledge of the
management of Company, there is no plan or intention on the part of the
remaining holders of Company Stock to sell, exchange, transfer or otherwise
dispose (including by transactions such as a short sale which would have the
economic effect of a disposition) of a number of shares of Parent Stock to be
received by them in connection with the Merger that would reduce the Company
shareholders' ownership of Parent Stock to a number of shares having a value,
as of the Effective Time, of less than 50% of the total value of all of the
formerly outstanding stock of Company immediately prior to the Effective Time.
For purposes of this representation, shares of Company Stock exchanged for
cash or other property or exchanged for cash in lieu of fractional shares of
Parent Stock are treated as outstanding shares of Company Stock at the
Effective Time. Moreover, shares of Company Stock that are sold, redeemed or
disposed of prior to the Merger and in contemplation or as part of the Merger,
and shares of Parent Stock that are held by holders of Company Stock at or
prior to the Effective Time and that are otherwise sold, redeemed or disposed
of subsequent to the Merger will be taken into account for purposes of this
representation.
3. After the Merger, to the knowledge of the management of
Company, Company will hold at least 90% of the fair market value of the net
assets and at least 70% of the fair market value of the gross assets held by
Merger Subsidiary immediately prior to the Merger and at least 90% of the fair
market value of the net assets and at least 70% of the fair market value of
the gross assets held by Company immediately prior to the Merger. For
purposes of this representation, assets of Merger Subsidiary or Company held
immediately prior to the Merger include amounts paid or incurred by Merger
Subsidiary or Company in connection with the Merger, including amounts used
to pay Company's reorganization expenses and all payments, redemptions and
distributions made in contemplation or as part of the Merger. Any dispositions
in contemplation or as part of the Merger of assets held by Company prior to
the Merger will be for fair market value.
4. In the Merger, to the knowledge of the management of Company,
Merger Subsidiary will have no liabilities (other than immaterial liabilities
related to its incorporation) assumed by Company and will not transfer to
Company any assets subject to liabilities.
5. No assets of Company have been sold, transferred or otherwise
disposed of which would prevent Parent from continuing the historic business
of Company or from using a significant portion of Company's historic business
assets in a business following the merger.
6. Company and the holders of Company Stock each will pay its or
their own expenses, if any, incurred in connection with or as part of the
Merger or related transactions. Company has not paid or will not pay,
directly or indirectly, any expenses (including transfer taxes) incurred by any
holder of Company Stock in connection with or as part of the Merger or any
related transactions. Company has not agreed to assume, nor will it directly
or indirectly assume, any expense or other liability, whether fixed or
contingent, of any holder of Company Stock.
7. There is no intercorporate indebtedness existing between Parent
and Company or between Merger Subsidiary and Company that was issued, acquired
or will be settled at a discount.
8. Company has no authorized stock other than Company Stock,
junior common stock, par value $.025 per share, and preferred stock, par value
$.10 per share. At the date hereof, the only capital stock of Company issued
and outstanding is Company Stock.
9. In the Merger, shares of Company Stock representing control of
Company, as defined in Section 368(c) of the Code, will be exchanged solely
for voting stock of Parent. For purposes of this representation, any shares of
Company Stock exchanged for cash or other property will be treated as
outstanding Company Stock at the Effective Time.
10. There exist no options, warrants, convertible securities or
other rights to acquire Company stock, other than certain rights held by
Microsoft Corporation to acquire 1 million shares of Company Stock and rights
pursuant to employee stock options and employee stock purchase plans in
existence as of the date of the Agreement.
11. In the Merger, no liabilities of the shareholders of Company
will be assumed by Parent and none of the Company Stock acquired by Parent will
be subject to liabilities. Furthermore, to the knowledge of the management of
Company, there is no plan or intention for Parent to assume any liabilities of
Company.
12. Company is not an "investment company" within the meaning of
Section 368(a)(2)(F) of the Code.
13. Company is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
14. At the Effective Time, the total fair market value of the
assets of Company exceeds the total liabilities of Company assumed, including
the amount of any liabilities to which the assets of Company are subject.
15. The payment of cash in lieu of fractional shares of Parent
Stock in the Merger is solely for the purpose of avoiding the expense and
inconvenience to Parent of issuing fractional shares and does not represent
separately bargained-for consideration. The total cash consideration that
will be paid in the Merger to holders of Company Stock instead of issuing
fractional shares of Parent Stock will not exceed __% of the total
consideration that will be issued in the Merger to holders of Company Stock.
The fractional share interests of each holder of Company Stock will be
aggregated and, to the knowledge of the management of Company, no holder of
Company Stock will receive cash in an amount equal to or greater than the
value of one full share of Parent Stock.
16. None of the employee compensation received by any
shareholder-employees of Company is or will be separate consideration for, or
allocable to, any of their shares of Company Stock to be surrendered in the
Merger. None of the shares of Parent Stock received by any
shareholder-employee of Company in the Merger is or will be separate
consideration for, or allocable to, any employment, consulting or similar
arrangement. Any compensation paid or to be paid to any shareholder of
Company who will be an employee of or perform advisory services for Parent,
Merger Subsidiary, Company, or any affiliate thereof after the Merger, will be
determined by bargaining at arm's length.
17. Since the date of the Agreement, except for the issuance of
Company Stock pursuant to the rights described in paragraph 10 hereof,
Company has not issued any additional shares of Company Stock.
18. No holders of Company Stock have dissenters' rights with
respect to the Merger under applicable laws.
19. Except as disclosed in the Company's Schedule of Exceptions,
Company has not redeemed any of its stock, made any distributions with respect
to its stock, or disposed of any of its assets in contemplation or as part of
the Merger, excluding for purposes of this representation regular, normal
dividends and common stock acquired in the ordinary course of business in
connection with employee incentive and benefit programs, or other programs or
arrangements in existence on the date hereof.
20. The Merger is being effected for bona fide business reasons and
will be carried out strictly in accordance with the Agreement, and none of the
material terms and conditions therein have been or will be waived or modified.
21. Company will not take any position on any Federal, state or
local income or franchise tax return, or take any other tax reporting position
that is inconsistent with the treatment of the Merger as a reorganization
within the meaning of Section 368(a) of the Code, unless otherwise required by
a "determination" (as defined in Section 1313(a)(1) of the Code) or by
applicable state or local income or franchise tax law.
We understand that Morrison & Foerster LLP and Davis Polk &
Wardwell will rely on this Certificate in rendering their opinions as to
certain United States Federal income tax consequences of the Merger and we will
promptly and timely inform them if, after signing this Certificate, we have
reason to believe that any of the facts described herein or in the Proxy
Statement or any of the representations made in this Certificate are untrue,
incorrect or incomplete in any respect.
Very truly yours,
TANDEM COMPUTERS
INCORPORATED
By:_____________________
Title:__________________
EXHIBIT D
TO ANNEX A
PARENT CORPORATION REPRESENTATION LETTER
[Effective Time]
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Morrison & Foerster LLP
755 Page Hill Road
Palo Alto, CA 94304
geLadies and Gentlemen:
In connection with the opinion to be delivered pursuant to
Sections 8.2(b) and 8.3(b) of the Agreement and Plan of Merger (the
"Agreement")(2) dated June __, 1997, among Compaq Computer Corporation, a
Delaware corporation ("Parent"), Compaq-Project, Inc., a Delaware corporation
and a wholly-owned subsidiary of Parent ("Merger Subsidiary"), and Tandem
Computers Incorporated, a Delaware corporation ("Company"), the undersigned
officers of Parent and Merger Subsidiary hereby certify and represent as to
Parent and Merger Subsidiary that the facts relating to the merger (the
"Merger") of Merger Subsidiary with and into Company pursuant to the Agreement
and as described in the Company Proxy Statement dated ________, 1997 (the
"Proxy Statement"), are true, correct and complete in all respects at the date
hereof and will be true, correct and complete in all respects at the Effective
Time and that:
- ------------
(2)References contained in this Certificate to the Agreement include, unless
the context otherwise requires, each document attached as an exhibit or annex
thereto.
1. The consideration to be received in the Merger by holders of
Company Stock was determined by arm's length negotiations between the
managements of Parent and Company. In connection with the Merger, no holder
of Company Stock will receive in exchange for such stock, directly or
indirectly, any consideration other than Parent Stock and cash in lieu of a
fractional share thereof.
2. To the knowledge of the management of Parent and Merger
Subsidiary, there is no plan or intention on the part of the holders of Company
Stock to sell, exchange, transfer or otherwise dispose (including by
transactions such as a short sale which would have the economic effect of a
disposition) of a number of shares of Parent Stock to be received by them in
connection with the Merger that would reduce the Company shareholder's
ownership of Parent Stock to a number of shares having a value, as of the
Effective Time, of less than 50% of the total value of all of the formerly
outstanding stock of Company immediately prior to the Effective Time. For
purposes of this representation, shares of Company Stock exchanged for cash
or other property or exchanged for cash in lieu of fractional shares of Parent
Stock are treated as outstanding shares of Company Stock at the Effective
Time. Moreover, shares of Company Stock that are sold, redeemed or disposed
of prior to the Merger and in contemplation or as part of the Merger, and
shares of Parent Stock that are held by holders of Company Stock at or prior
to the Effective Time and that are otherwise sold, redeemed, or disposed of
subsequent to the Merger will be taken into account for purposes of this
representation.
3. After the Merger, to the knowledge of the management of Parent,
Company will hold at least 90% of the fair market value of the net assets and
at least 70% of the fair market value of the gross assets held by Merger
Subsidiary immediately prior to the Merger, and at least 90% of the fair
market value of the net assets and at least 70% of the fair market value of the
gross assets held by Company immediately prior to the Merger. For purposes
of this representation, assets of Merger Subsidiary or Company held
immediately prior to the Merger include amounts paid or incurred by Merger
Subsidiary or Company in connection with the Merger, including amounts used
to pay reorganization expenses and all payments, redemptions and distributions
made in contemplation or as part of the Merger. Any dispositions in
contemplation or as part of the Merger of assets held by Merger Subsidiary
prior to the Merger will be for fair market value.
4. Prior to the Merger, Parent will be in control of Merger
Subsidiary within the meaning of Section 368(c) of the Internal Revenue Code
of 1986, as amended (the "Code"). Merger Subsidiary has been formed solely
in order to consummate the Merger, and at no time has or will Merger
Subsidiary conduct any business activities or other operations of any kind
other than the issuance of its stock to Parent prior to the Effective Time.
5. Following the Merger, Company has no plan or intention to issue
and Parent has no plan or intention to cause Company to issue additional
shares of stock that would result in Parent losing control of Company within
the meaning of Section 368(c) of the Code.
6. Neither Parent nor any corporation affiliated with Parent has
any plan or intention to purchase, redeem or otherwise acquire any of the
Parent Stock issued pursuant to the Merger.
7. Parent has no plan or intention to liquidate Company, to merge
Company with or into another corporation, to sell, exchange, transfer or
otherwise dispose of any stock of Company or to cause Company to sell,
exchange, transfer or otherwise dispose of any of its assets or of any assets
acquired from Merger Subsidiary in the Merger, except for (i) dispositions
made in the ordinary course of business, (ii) transfers described in Section
368(a)(2)(C) of the Code, or (iii) asset dispositions to the extent that all
such dispositions, sale, transfer or exchange of assets will not, in the
aggregate, violate paragraph 3 of this letter.
8. In the Merger, Merger Subsidiary will have no liabilities
(other than immaterial liabilities related to its incorporation) assumed by
Company and will not transfer to Company any assets subject to liabilities.
9. Following the Merger, Company will continue (and Parent will
cause Company to continue) its historic business or use a significant portion
of its historic business assets in a business.
10. Parent and Merger Subsidiary each will pay its or their own
expenses, if any, incurred in connection with or as part of the Merger or
related transactions. Neither Parent nor Merger Subsidiary has paid or will
pay, directly or indirectly, any expenses (including transfer taxes) incurred
by any holder of Company Stock in connection with or as part of the Merger or
any related transactions. Neither Parent nor Merger Subsidiary has agreed to
assume, nor will it directly or indirectly assume, any expense or other
liability, whether fixed or contingent, of any holder of Company Stock.
11. There is no intercorporate indebtedness existing between Parent
and Company or between Merger Subsidiary and Company that was issued, acquired
or will be settled at a discount.
12. All shares of Parent Stock into which shares of Company Stock
will be converted pursuant to the Merger will be newly issued or treasury
shares, and will be issued by Parent directly to holders of Company Stock
pursuant to the Merger.
13. In the Merger, shares of Company Stock representing control of
Company, as defined in Section 368(c) of the Code, will be exchanged solely
for voting stock of Parent. For purposes of this representation, any shares of
Company Stock exchanged for cash or other property will be treated as
outstanding Company Stock at the Effective Time.
14. In the Merger, no liabilities of shareholders of Company will
be assumed by Parent, and none of the Company Stock acquired by Parent will be
subject to liabilities. Furthermore, there is no plan or intention for Parent
to assume any liabilities of Company.
15. Neither Parent nor Merger Subsidiary is an "investment
company" within the meaning of Section 368(a)(2)(F) of the Code.
16. The payment of cash in lieu of fractional shares of Parent
Stock in the Merger is solely for the purpose of avoiding the expense and
inconvenience to Parent of issuing fractional shares and does not represent
separately bargained-for consideration. The total cash consideration that
will be paid in the Merger to holders of Company Stock instead of issuing
fractional shares of Parent Stock will not exceed __% of the total
consideration that will be issued in the Merger to holders of Company Stock.
The fractional share interests of each holder of Company Stock will be
aggregated and, to the knowledge of the management of Parent, no holder of
Company Stock will receive cash in an amount equal to or greater than the
value of one full share of Parent Stock.
17. None of the employee compensation received by any
shareholder-employees of Company is or will be separate consideration for, or
allocable to, any of their shares of Company Stock to be surrendered in the
Merger. None of the shares of Parent Stock to be received by any
shareholder-employee of Company in the Merger is or will be separate
consideration for, or allocable to, any employment, consulting or similar
arrangement. Any compensation paid or to be paid to any shareholder of
Company who will be an employee of or perform advisory services for Parent,
Merger Subsidiary, Company, or any affiliate thereof after the Merger, will be
determined by bargaining at arm's length.
18. During the past 5 years, none of Parent or any subsidiary
thereof has owned or owns, beneficially or of record, any class of stock of
Company or any securities of Company or any instrument giving the holder the
right to acquire any such stock or securities.
19. The Merger is being effected for bona fide business reasons and
will be carried out strictly in accordance with the Agreement, as described in
the Proxy Statement, and none of the material terms and conditions therein
have been or will be waived or modified.
20. The Merger Agreement and the documents described in the Merger
Agreement represent the entire understanding of Parent, Merger Subsidiary, and
Company with respect to the Merger.
21. Neither Parent nor Merger Subsidiary will take any position on
any Federal, state or local income or franchise tax return, or take any other
tax reporting position, that is inconsistent with the treatment of the Merger
as a reorganization within the meaning of Section 368(a) of the Code, unless
otherwise required by a "determination" (as defined in Section 1313(a)(1) of
the Code) or by applicable state or local income or franchise tax law.
We understand that Davis Polk & Wardwell and Morrison & Foerster
LLP will rely on this Certificate in rendering their opinions as to certain
United States Federal income tax consequences of the Merger and we will
promptly and timely inform them if, after signing this Certificate, we have
reason to believe that any of the facts described herein or in the Proxy
Statement or any of the representations made in this Certificate are untrue,
incorrect or incomplete in any respect.
Very truly yours,
COMPAQ COMPUTER CORPORATION
By:________________________
Title:_____________________
COMPAQ-PROJECT, INC.
By:_______________________
Title:____________________
ANNEX B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT dated as of June 22, 1997 between Tandem
Computers Incorporated, a Delaware corporation (the "Company"), and Compaq
Computer Corporation, a Delaware corporation (the "Grantee").
W I T N E S S E T H :
WHEREAS, Company and Grantee are simultaneously with the
execution and delivery of this Agreement entering into a Merger Agreement (the
"Merger Agreement") pursuant to which, among other things, Company will, upon
the terms and subject to the conditions stated therein, merge with a
subsidiary of Grantee; and
WHEREAS, in order to induce Grantee to enter into the Merger
Agreement, Company has agreed to grant to Grantee the Stock Option (as
hereinafter defined), upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and in the Merger Agreement, and for other good
and valuable consideration, the adequacy of which is hereby acknowledged, the
parties hereto agree as follows:
1. Grant of Stock Option. Company hereby grants to Grantee an
irrevocable option (the "Stock Option") to purchase for $22.44 per share (the
"Exercise Price") in cash up to 17,400,000 shares (the "Shares") of its common
stock, $.025 par value (the "Common Stock").
2. Exercise of Stock Option. (a) Grantee may, subject to the
provisions of this Section, exercise the Stock Option, in whole or in part, at
any time or from time to time, after the occurrence of a Trigger Event and
prior to the Termination Date. "Trigger Event" means the occurrence of an
event that will entitle Parent to receive the payment contemplated by Section
10.04(b) of the Merger Agreement. "Termination Date" means the earliest to
occur of (i) the Effective Time (as defined in the Merger Agreement); (ii) the
date 18 months after the first occurrence of a Trigger Event; (iii) five years
from the date hereof; or (iv) the termination of the Merger Agreement if, but
only if, the Merger Agreement is terminated for reasons that are not directly
or indirectly related to (x) the commencement of, or any person's direct or
indirect indication of interest inmaking, an Acquisition Proposal (as defined
in the Merger Agreement) or (y) the breach of any provision of Section 5.02(a)
or 5.03 thereof. Notwithstanding the occurrence of the Termination Date,
Grantee shall be entitled to purchase shares of Common Stock pursuant to any
exercise of the Stock Option if Grantee exercised the Stock Option prior to the
occurrence of the Termination Date.
(b) Grantee may purchase Shares pursuant to the Stock Option
only if both of the following conditions are satisfied: (i) no preliminary or
permanent injunction or other order, decree or ruling against the sale or
delivery of the Shares issued by any federal or state court of competent
jurisdiction in the United States is in effect at such time and (ii) any
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act") shall have expired or been terminated at or prior
to such time.
(c) If Grantee wishes to exercise the Stock Option, it shall
do so by giving Company written notice to such effect, specifying the number
of Shares to be purchased and a place and closing date not earlier than one
business day nor later than 10 business days from the date of the notice. If
the closing cannot be consummated on such date because any condition to the
purchase of Shares has not been satisfied or as a result of any restriction
arising under any applicable law or regulation, the closing shall occur five
days (or such earlier time as Grantee may specify) after satisfaction of all
such conditions and the cessation of all such restrictions.
(d) At any closing, (i) Grantee shall make payment to
Company of the aggregate purchase price for the Shares to be purchased by
delivery to Company of a certified, cashier's or bank check payable to the
order of Company or otherwise as mutually agreed and (ii) Company shall
deliver to Grantee a certificate representing the purchased Shares, registered
in the name of Grantee or its designee.
3. Representations and Warranties of Company. Company hereby
represents and warrants to Grantee as follows:
(a) Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware. The execution, delivery and performance by Company of
this Agreement and the consummation of the transactions
contemplated hereby (i) are within Company's corporate powers, (ii)
have been duly authorized by all necessary corporate action, (iii)
require no action by or in respect of, or filing with, any
governmental body, agency, official, except for any filings
required to be made under the HSR Act, (iv) do not contravene, or
constitute a default under, any provision of applicable law or
regulation or of the certificate of incorporation or by-laws of
Company or of any judgment, injunction, order or decree binding
upon Company or any of its subsidiaries and (v) will not require
any consent, approval or notice under and will not conflict with,
or result in the breach or termination of any provision of or
constitute a default (with or without the giving of notice or the
lapse of time or both) under, or allow the acceleration of the
performance of, any material obligation of Company or any of its
subsidiaries under, or result in the creation of a lien, charge or
encumbrance upon, any of the properties, assets or business of
Company or any of its subsidiaries under any indenture, mortgage,
deed of trust, lease, licensing agreement, contract, instrument or
other agreement to which Company or any of its subsidiaries is a
party or by which Company or any of its subsidiaries or any of
their respective assets or properties is subject or bound. This
Agreement has been duly executed and delivered by Company and
constitutes a valid and binding agreement of Company.
(b) Except for any filings required to be made under the
HSR Act, Company has taken all necessary corporate and other action
to authorize and reserve and to permit it to issue, and at all
times from the date hereof until such time as the obligation to
deliver Shares upon the exercise of the Stock Option terminates,
will have reserved for issuance, upon any exercise of the Stock
Option, the number of Shares subject to the Stock Option (less the
number of Shares previously issued upon any partial exercise of the
Stock Option). All of the Shares to be issued pursuant to the
Stock Option have been duly authorized and, upon issuance and
delivery thereof pursuant to this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable, and shall
be delivered free and clear of all claims, liens, charges,
encumbrances and security interest. Shares issued upon exercise of
the Stock Option will not be subject to any preemptive or similar
rights. The Board of Directors of Company has taken all necessary
action to render the Company's Rights Plan inapplicable to the
exercise of the Stock Option.
(c) The representations and warranties of Company contained
in the Merger Agreement are true and correct.
4. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Company that any Shares acquired upon exercise of
the Stock Option will not be sold or otherwise disposed of by Grantee except
in compliance with the Securities Act of 1933, as amended (the "Securities
Act").
5. Adjustment Upon Changes in Capitalization or Merger. (a) In
the event of any change in Company's capital stock by reason of a stock
dividend, split-up, merger, recapitalization, combination, exchange of shares,
or similar transaction, the type and number of shares or securities subject
to the Stock Option, and the Exercise Price thereof, will be adjusted
appropriately, and proper provision will be made in the agreements governing
such transaction, so that Grantee will receive upon exercise of the Stock
Option the number and class of shares or other securities or property that
Grantee would have received in respect of Common Stock if the Stock Option
had been exercised immediately prior to such event or the record date
therefor, as applicable. Without limiting the parties' relative rights and
obligations under the Merger Agreement, if any additional shares of Common
Stock are issued after the date of this Agreement (other than pursuant to an
event described in the first sentence of this Section), the number of shares
of Common Stock subject to the Stock Option will be adjusted so that, after
such issuance, it equals 15% of the number of shares of Common Stock then
issued and outstanding, without giving effect to any shares subject to or
issued pursuant to the Stock Option.
(b) Without limiting the parties' relative rights and
obligations under the Merger Agreement, in the event that Company enters into
an agreement (i) to consolidate with or merge into any person, other than
Grantee or one of its subsidiaries, and Company will not be the continuing or
surviving corporation in such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its subsidiaries, to merge into Company
and Company will be the continuing or surviving corporation, but in connection
with such merger, the shares of Common Stock outstanding immediately prior to
the consummation of such merger will be changed into or exchanged for stock or
other securities of Company or any other person or cash or any other property,
or the shares of Common Stock outstanding immediately prior to the
consummation of such merger will, after such merger, represent less than 50%
of the outstanding voting securities of the merged company, or (iii) to sell
or otherwise transfer all or substantially all of its assets to any person,
other than Grantee or one of its subsidiaries, then, and in each such case,
the agreement governing such transaction will make proper provision so that
the Stock Option will, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into, or exchanged
for, an option with identical terms appropriately adjusted to acquire the
number and class of shares or other securities or property that Grantee would
have received in respect of Common Stock if the Stock Option had been
exercised immediately prior to such consolidation, merger, sale or transfer or
the record date therefor, as applicable and make any other necessary
adjustments.
6. Further Assurances; Remedies. (a) Company agrees to execute
and deliver such other documents and instruments and take such further actions
as may be necessary or appropriate or as Grantee may reasonably request in
order to ensure that Grantee receives the full benefits of this Agreement.
Prior to the Termination Date, Company will refrain from taking any action
which would have the effect of preventing or disabling Company from delivering
the Shares to Grantee upon any exercise of the Stock Option, or from otherwise
performing its obligations under this Agreement.
(b) The parties agree that Grantee would be irreparably damaged if
for any reason Company failed to issue any of the Shares (or other securities
or property deliverable pursuant to Section 5) upon exercise of the Stock
Option or to perform any of its other obligations under this Agreement, and
that Grantee would not have an adequate remedy at law for money damages in
such event. Accordingly, Grantee shall be entitled to specific performance and
injunctive and other equitable relief to enforce the performance of this
Agreement by Company. This provision is without prejudice to any other rights
that Grantee may have against Company for any failure to perform its
obligations under this Agreement.
(c) The Board of Directors of Company shall take such further
action as is requested by Grantee to render the Rights Plan inapplicable to the
exercise of the Stock Option.
7. HSR Filing; Listing of Shares; Notification of Record Dates.
(a) Promptly after the date hereof, and from time to time thereafter if
necessary, Grantee and Company shall each file with the Federal Trade
Commission and the Antitrust Division of the United States Department of
Justice all required pre-merger notification and report forms and other
documents and exhibits required to be filed under the HSR Act to permit the
purchase of the Shares pursuant hereto. Company agrees to use its reasonable
best efforts to assist Grantee in satisfying the condition described in
Section 2(b)(ii).
(b) Promptly after the date hereof, and from time to time
thereafter if necessary, Company will apply to list all of the Shares subject
to the Stock Option on the New York Stock Exchange and will use its best
efforts to obtain approval of such listing as soon as practicable.
(c) Company shall give Grantee at least 10 days' prior written
notice before setting the record date for determining the holders of record of
shares of Common Stock entitled to notice of, or to vote on, any matter, to
receive any dividend or distribution or to participate in any rights offering
or other matter, or to receive any other benefit or right, with respect to
shares of Common Stock.
8. Registration of the Shares. (a) If Grantee requests Company
in writing to register under the Securities Act any of the Shares purchased by
Grantee hereunder, Company will use its best efforts to cause the offering of
the Shares so specified in such request to be registered as soon as practicable
so as to permit the sale or other distribution by Grantee of the Shares
specified in its request (and to keep such registration in effect for a period
of at least 90 days), and in connection therewith prepare and file as promptly
as reasonably possible (but in no event later than 60 days from receipt of
Grantee's request) a registration statement under the Securities Act to effect
such registration on an appropriate form, which would permit the sale of the
Shares by Grantee in the manner specified by Grantee in its request. Company
shall not be obligated to make effective more than three registration
statements pursuant to the foregoing sentence.
(b) Company shall notify Grantee in writing not less than 10 days
prior to filing a registration statement under the Securities Act (other than a
filing on Form S-4 or S-8) with respect to any Common Stock. If Grantee wishes
to have any portion of its Shares included in such registration statement, it
shall advise Company in writing to that effect within two business days
following receipt of such notice, and Company will thereupon include the
number of Shares indicated by Grantee under such Registration Statement.
(c) Any registration statement prepared and filed under this
Section 8 and any sale covered thereby, will be at Company's expense except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto. In connection with any
registration pursuant to this Section 8, Company and Grantee will provide each
other and any underwriter of the offering with customary representations,
warranties, covenants, indemnification, and contribution in connection with
such registration.
9. Miscellaneous. (a) Amendments. 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.
(b) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by delivery in person or by
cable, telegram or telex (with copies by registered or certified mail, postage
prepaid, return receipt requested), to the respective parties as follows:
To Grantee:
J. David Cabello, Esq.
Senior Vice President
General Counsel & Secretary
Compaq Computer Corporation
20555 SH 249
Houston, TX 77070
Fax: 281-518-8209
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Fax: (212) 450-4800
Attention: Christopher Mayer
To Company:
Roel Pieper
Chief Executive Officer
Tandem Computers Incorporated
19333 Vallco Parkway
Cupertino, CA 95014-2599
and
Josephine T. Parry
Vice President, General Counsel
& Secretary
10435 N. Tantau Avenue, LOC 200-16
Cupertino, CA
Fax: 408-285-4677
with a copy to:
Morrison & Foerster LLP
755 Page Mill Road
Palo Alto, California 94304
Fax: (415) 494-0792
Attention: William D. Sherman
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
Fax: (212) 468-7900
Attention: Joseph W. Bartlett
or to such other address as either party may have furnished to
the other in writing in accordance herewith, except that notices of change of
address shall only be effective upon receipt.
(c) Severability. If any term, provision, covenant or restriction
of this Agreement is held to be invalid, void or unenforceable, 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.
(d) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
(e) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
(f) Headings. The section headings herein are for convenience only
and shall not affect the construction hereof.
(g) Assignment. This Agreement shall be binding upon each party
hereto and such party's successors and assigns. This Agreement shall not be
assignable by Company, except by operation of law, but may be assigned by
Grantee in whole or in part to any affiliate of Grantee.
(h) Survival. All representations, warranties and covenants
contained herein shall survive the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby, except as
otherwise provided herein.
(i) Time of the Essence. The parties agree that time shall be of
the essence in the performance of obligations hereunder.
IN WITNESS WHEREOF, Company and Grantee have caused this
Agreement to be duly executed as of the day and year first above written.
TANDEM COMPUTERS
INCORPORATED
By: /s/ Roel Pieper
-----------------------
Roel Pieper
Vice Chairman and
Chief Executive Officer
COMPAQ COMPUTER CORPORATION
By: /s/ Eckhard Pfeiffer
------------------------
Eckhard Pfeiffer
President and Chief Executive Officer
ANNEX C
LEHMAN BROTHERS
July 30, 1997
Board of Directors
Tandem Computers Incorporated
10435 N. Tantau Avenue
LOC 200-01
Cupertino, CA 94014-3548
Members of the Board:
We understand that the Board of Directors of Tandem Computers
Incorporated ("Tandem" or the "Company") has approved a merger between Tandem
and Compaq Computer Corporation ("Compaq") (the "Proposed Transaction")
pursuant to which a wholly-owned subsidiary of Compaq will be merged with
Tandem and all outstanding shares of common stock of Tandem will be
exchanged for shares of common stock of Compaq at an exchange ratio of
0.525 shares of Compaq common stock for each share of Tandem common stock
(the "Exchange Ratio"). In addition, all outstanding options to purchase
shares of common stock of Tandem will be exchanged for options to purchase
shares of common stock of Compaq at the Exchange Ratio. The terms and
conditions of the Proposed Transaction are set forth in more detail in the
Agreement and Plan of Merger dated June 22, 1997 between Tandem and Compaq
(the "Agreement").
We have been requested by the Board of Directors of the Company to
render our opinion with respect to the fairness, from a financial point of
view, to the Company's stockholders of the Exchange Ratio to be offered to
such stockholders in the Proposed Transaction. We have not been requested
to opine as to, and our opinion does not in any manner address, the
Company's underlying business decision to proceed with or effect the
Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the
Agreement and the specific terms of the Proposed Transaction, (2) publicly
available information concerning the Company and Compaq that we believe to
be relevant to our analysis, (3) financial and operating information with
respect to the business, operations and prospects of the Company and Compaq
furnished to us by the Company and Compaq, (4) trading histories of the
Company's and Compaq's common stock from June 20, 1992 to the present and a
comparison of such trading histories with those of other companies that we
deemed relevant, (5) a comparison of the historical financial results and
present financial condition of the Company and Compaq with those of other
companies that we deemed relevant, (6) publicly available estimates of the
future financial performances of the Company and Compaq prepared by
research analysts, (7) a comparison of the financial terms of the Proposed
Transaction with the financial terms of certain other transactions that we
deemed relevant, and (8) the potential pro forma financial effects of the
Proposed Transaction on Tandem and Compaq and a comparison of the relative
contributions of Tandem and Compaq to the combined company following
consummation of the Proposed Transaction. In addition, we have had
discussions with the management of the Company and Compaq concerning their
respective businesses, operations, assets, financial conditions and
prospects and the operating synergies and strategic benefits expected to
result from a combination of the businesses of the Company and Compaq and
have undertaken such other studies, analyses and investigations as we
deemed appropriate.
In arriving at our opinion, we have assumed and relied upon the
accuracy and completeness of the financial and other information used by us
without assuming any responsibility for independent verification of such
information and have further relied upon the assurances of the managements
of the Company and Compaq that they are not aware of any facts or
circumstances that would make such information inaccurate or misleading.
With respect to the financial projections of the Company, upon advice of
the Company we have assumed that such projections have been reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of the management of the Company as to the future financial
performance of the Company and that the Company will perform substantially
in accordance with such projections. In arriving at our opinion, with the
consent of the Company, we were not provided with and did not have any
access to any financial forecasts or projections prepared by the management
of Compaq as to the future financial performance of Compaq, and
accordingly, in performing our analysis, upon advice of Compaq, we have
assumed that the publicly available estimates of research analysts are a
reasonable basis upon which to evaluate and analyze the future financial
performance of Compaq and that Compaq will perform substantially in
accordance with such estimates. We also have not conducted a physical
inspection of the properties and facilities of the Company or Compaq and
have not made or obtained any evaluations or appraisals of the assets or
liabilities of the Company. Upon advice of the Company and its legal and
accounting advisors, we have assumed that the Proposed Transaction will
qualify (i) for pooling-of-interests accounting treatment and (ii) as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended, and therefore as a tax-free transaction to the
stockholders of the Company. Our opinion necessarily is based upon market,
economic and other conditions as they exist on, and can be evaluated as of,
the date of this letter.
Based upon and subject to the foregoing, we are of the opinion as of
the date hereof that, from a financial point of view, the Exchange Ratio to
be offered to the Company's stockholders in the Proposed Transaction is
fair to such stockholders.
We have acted as financial advisor to the Company in connection
with the Proposed Transaction and will receive a fee for our services which
is contingent upon the consummation of the Proposed Transaction. In
addition, the Company has agreed to indemnify us for certain liabilities
that may arise out of the rendering of this opinion. We also have
performed various investment banking services for the Company in the past
and have received customary fees for such services. In the ordinary course
of our business, we actively trade in the equity securities of the Company
and Compaq for our own account and for the accounts of our customers and,
accordingly, may at any time hold a long or short position in such
securities.
This opinion is for the use and benefit of the Board of Directors of
the Company and is rendered to the Board of Directors in connection with its
consideration of the Proposed Transaction. This opinion is not intended to
be and does not constitute a recommendation to any stockholder of the
Company as to how such stockholder should vote with respect to the Proposed
Transaction.
Very truly yours,
LEHMAN BROTHERS
By: /s/ Frederick Frank
---------------------------
Frederick Frank
Vice Chairman
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Exculpation. Section 102(b)(7) of the DGCL permits a
corporation to include in its certificate of incorporation a provision
eliminating or limiting the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that such provision may not eliminate or limit
the liability of a director for any breach of the director's duty of loyalty
to the corporation or its stockholders, for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
for the payment of unlawful dividends, or for any transaction from which the
director derived an improper personal benefit.
The Compaq Charter limits the personal liability of a director
to Compaq and its stockholders for monetary damages for a breach of fiduciary
duty as a director to the fullest extent permitted by the DGCL.
Indemnification. Section 145 of the DGCL permits a corporation
to indemnify any of its directors or officers who was or is a party, or is
threatened to be made a party to any third party proceeding by reason of the
fact that such person is or was a director or officer of the corporation,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reason to believe that such person's conduct was
unlawful. In a derivative action, i.e., one by or in the right of a
corporation, the corporation is permitted to indemnify directors and officers
against expenses (including attorneys' fees) actually and reasonably incurred
by them in connection with the defense or settlement of an action or suit if
they acted in good faith and in a manner that they reasonably believed to be
in or not opposed to the best interests of the corporation, except that no
indemnification shall be made if such person shall have been adjudged liable
to the corporation, unless and only to the extent that the court in which the
action or suit was brought shall determine upon application that the defendant
directors or officers are fairly and reasonably entitled to indemnity for such
expenses despite such adjudication of liability.
The Compaq Bylaws provide for indemnification of directors and
officers of Compaq against liability they may incur in their capacities as
such to the fullest extent permitted by applicable law.
Insurance. Compaq has in effect directors' and officers'
liability insurance with a limit of $100 million and fiduciary liability
insurance with a limit of $25 million. The fiduciary liability insurance
covers actions of directors and officers as well as other employees with
fiduciary responsibilities under ERISA.
Tandem Directors and Officers. The Merger Agreement provides
that (i) for six years after the Effective Time Compaq will cause Tandem to
indemnify and hold harmless the present and former directors or officers of
Tandem in respect of acts or omissions occurring prior to the Effective Time
to the fullest extent permitted by the DGCL for damages and liabilities, (ii)
for a period of six years after the Effective Time Compaq will cause Tandem to
use its best efforts to provide directors' and officers' liability insurance
in respect of acts or omissions occurring prior to the Effective Time on terms
with respect to coverage and amount no less favorable than as in effect on
June 22, 1997 and (iii) from and after the Effective Time, Compaq will cause
Tandem to assume obligations under certain indemnification agreements with
Tandem directors currently in effect.
Item 21. Exhibits and Financial Statement Schedules.
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- ------ ----------- ----
<S> <C> <C>
2.a Agreement and Plan of Merger dated as of June 22, 1997 among the
Registrant, Tandem Computers Incorporated and Compaq-Project, Inc.
(included as Annex A to the Proxy Statement/Prospectus contained in this
Registration Statement).
2.b Stock Option Agreement dated as of June 22, 1997 between the Registrant
and Tandem Computers Incorporated (included as Annex B to the Proxy
Statement/Prospectus contained in this Registration Statement).
3.a Restated Certificate of Incorporation of Registrant (incorporated herein by
reference to Exhibit 3.1 to the Registrant's Form 10-Q for the quarter
ended September 30, 1996).
3.b By-Laws of Registrant, Amended and Restated as of September 29, 1995.
4.a Specimen Common Stock Certificate (incorporated by reference to
Exhibit 1 to the Registrant's Registration Statement on Form 8-A dated
April 30, 1984).
4.b Senior Debt Indenture dated as of March 1, 1994 between the Registrant
and NationsBank of Texas, National Association, Trustee (incorporated by
reference to Exhibit 4.a to the Registrant's Registration Statement No.
33-63436 on Form S-3).
4.c Specimen of the Registrant's 6 1/2% senior notes due March 1999
(incorporated by reference to the Registrant's Form 8-K dated March 10,
1994 (the "March 1994 Form 8-K")).
4.d Specimen of the Registrant's 7 1/4% senior notes due March 15, 2004
(incorporated by reference to the March 1994 Form 8-K).
5 Opinion of Davis Polk & Wardwell regarding the validity of the securities
being registered.
8.a Form of opinion of Davis Polk & Wardwell regarding certain federal
income tax consequences relating to the Merger.
8.b Form of opinion of Morrison & Foerster LLP regarding certain federal
income tax consequences relating to the Merger.
23.a Consent of Price Waterhouse LLP.
23.b Consent of Ernst & Young LLP.
23.c Consent of Davis Polk & Wardwell (included in the opinion filed as
Exhibits 5 and 8(b) to this Registration Statement).
23.d Consent of Morrison & Foerster LLP (included in the opinion filed as
Exhibit 8(b) to this Registration Statement).
23.e Consent of Lehman Brothers.
24 Power of Attorney (included on the signature page of the Registration
Statement).
99.a Consent of Thomas J. Perkins to be named as a nominee for director of
Compaq Computer Corporation.
99.b Form of Tandem Computers Incorporated Proxy Card.
99.c Form of Proxy Card to be distributed to Participants in the Tandem
Computers Incorporated 401(k) Investment Plan.
</TABLE>
Item 22. Undertakings.
(a) 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 by 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;
(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.
(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), 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 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.
(6) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant
to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated
by reference in the registration statement 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.
(b) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the Proxy
Statement/Prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form, 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 documents filed subsequent to the effective date of
the registration statement through the date of responding to the request.
(c) The undersigned registrant hereby undertakes 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.
(d) 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 foregoing provisions, 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on July 30, 1997.
COMPAQ COMPUTER CORPORATION
(Registrant)
Date: July 30, 1997 By: /s/ Eckhard Pfeiffer
----------------------------------
Eckhard Pfeiffer
President and Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes
and appoints Eckhard Pfeiffer and Earl L. Mason, and each of them, as his or
her true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities, to sign any and all amendments (including
post-effective amendments) and supplements to this Registration Statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and hereby grants to
such attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done, as fully to
all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or either
of them, or his or their substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the following persons on
behalf of the Registrant in the capacities and on the dates indicated.
Signature Title Date
- --------------------------- ----------------------------- --------------
/s/ Eckhard Pfeiffer President and Director July 30, 1997
- --------------------------- (principal executive officer)
(Eckhard Pfeiffer)
/s/ Earl L. Mason Senior Vice President and July 30, 1997
- --------------------------- Chief Financial Officer
(Earl L. Mason) (principal financial officer
and principal accounting
officer)
/s/ Benjamin M. Rosen Chairman of the July 30, 1997
- --------------------------- Board of Directors
(Benjamin M. Rosen)
/s/ Lawrence T. Babbio, Jr. Director July 30, 1997
- ---------------------------
(Lawrence T. Babbio, Jr.)
/s/ Robert Ted Enloe, III Director July 30, 1997
- ---------------------------
(Robert Ted Enloe, III)
/s/ George H. Heilmeier Director July 30, 1997
- ---------------------------
(George H. Heilmeier)
/s/ George E. R. Kinnear II Director July 30, 1997
- ---------------------------
(George E. R. Kinnear II)
/s/ Peter N. Larson Director July 30, 1997
- ---------------------------
(Peter N. Larson)
/s/ Kenneth L. Lay Director July 30, 1997
- ---------------------------
(Kenneth L. Lay)
/s/ Kenneth Roman Director July 30, 1997
- ---------------------------
(Kenneth Roman)
/s/ Lucille S. Salhany Director July 30, 1997
- ---------------------------
(Lucille S. Salhany)
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit
Number Description Page
- ------ ----------- ----
<S> <C> <C>
2.a Agreement and Plan of Merger dated as of June 22, 1997 among the
Registrant, Tandem Computers Incorporated and Compaq-Project, Inc.
(included as Annex A to the Proxy Statement/Prospectus contained in this
Registration Statement).
2.b Stock Option Agreement dated as of June 22, 1997 between the Registrant
and Tandem Computers Incorporated (included as Annex B to the Proxy
Statement/Prospectus contained in this Registration Statement).
3.a Restated Certificate of Incorporation of Registrant (incorporated herein by
reference to Exhibit 3.1 to the Registrant's Form 10-Q for the quarter
ended September 30, 1996).
3.b By-Laws of Registrant, Amended and Restated as of September 29, 1995.
4.a Specimen Common Stock Certificate (incorporated by reference to
Exhibit 1 to the Registrant's Registration Statement on Form 8-A dated
April 30, 1984).
4.b Senior Debt Indenture dated as of March 1, 1994 between the Registrant
and NationsBank of Texas, National Association, Trustee (incorporated by
reference to Exhibit 4.a to the Registrant's Registration Statement No.
33-63436 on Form S-3).
4.c Specimen of the Registrant's 6 1/2% senior notes due March 1999
(incorporated by reference to the Registrant's Form 8-K dated March 10,
1994 (the "March 1994 Form 8-K")).
4.d Specimen of the Registrant's 7 1/4% senior notes due March 15, 2004
(incorporated by reference to the March 1994 Form 8-K).
5 Opinion of Davis Polk & Wardwell regarding the validity of the securities
being registered.
8.a Form of opinion of Davis Polk & Wardwell regarding certain federal
income tax consequences relating to the Merger.
8.b Form of opinion of Morrison & Foerster LLP regarding certain federal
income tax consequences relating to the Merger.
23.a Consent of Price Waterhouse LLP.
23.b Consent of Ernst & Young LLP.
23.c Consent of Davis Polk & Wardwell (included in the opinion filed as
Exhibits 5 and 8(b) to this Registration Statement).
23.d Consent of Morrison & Foerster LLP (included in the opinion filed as
Exhibit 8(b) to this Registration Statement).
23.e Consent of Lehman Brothers.
24 Power of Attorney (included on the signature page of the Registration
Statement).
99.a Consent of Thomas J. Perkins to be named as a nominee for director of
Compaq Computer Corporation.
99.b Form of Tandem Computers Incorporated Proxy Card.
99.c Form of Proxy Card to be distributed to Participants in the Tandem
Computers Incorporated 401(k) Investment Plan.
</TABLE>
Exhibit 3.b
Amended and Restated
September 29, 1995
BYLAWS OF COMPAQ COMPUTER CORPORATION
ARTICLE I
Offices
Section 1.1. Registered Office. The registered office of the
Corporation in the State of Delaware shall be in the City of Wilmington,
County of New Castle, and the name of its registered agent shall be The
Corporation Trust Company.
Section 1.2. Other Offices. The Corporation may also have
offices at such other places both within and without the State of Delaware as
the Board of Directors may from time to time determine or the business of the
Corporation may require.
Article II
Meetings of Stockholders
Section 2.1. Place of Meeting. All meetings of stockholders
shall be held at such place, either within or without the State of Delaware,
as shall be designated from time to time by the Board of Directors.
Section 2.2. Annual Meeting. The annual meeting of stockholders
for the election of directors shall be held at such date and time as shall be
designated from time to time by the Board of Directors.
Section 2.3. Special Meeting. Special meetings of the
stockholders, for any purpose or purposes, unless otherwise prescribed by the
General Corporate Law of the State of Delaware as the same may be amended from
time to time ("Delaware Law") or the certificate of incorporation of the
Corporation (the "Certificate of Incorporation"), may be called by the Board of
Directors. The Board shall fix the time and place, either within or without
the State of Delaware, for such meeting and shall state the purpose of such
meeting.
Section 2.4. Notice of Meeting. Unless otherwise provided by
Delaware Law, written notice of any meeting of stockholders, stating the time,
place and purpose, shall be given to each stockholder entitled to vote at the
meeting not less than 10 nor more than 60 days before the meeting.
Section 2.5. Quorum. The holders of a majority of the shares of
capital stock entitled to vote at the meeting, present in person or represented
by proxy, shall constitute a quorum at any meeting of stockholders except as
otherwise provided by Delaware Law. The holders of a majority of the shares
of capital stock present in person or represented by proxy and entitled to
vote, whether or not a quorum is present, shall have power to adjourn the
meeting from time to time.
Section 2.6. Voting. Directors shall be elected by a plurality
of the votes of the shares present in person or represented by proxy at a
meeting of stockholders and entitled to vote on the election of directors.
When a quorum is present at any meeting of stockholders, the vote of the
holders of a majority of the shares of capital stock entitled to vote at the
meeting, present in person or represented by proxy, shall decide any other
question brought before such meeting, unless the question is one upon which,
by express provision of Delaware Law, a different vote is required, in which
case such express provision shall govern such question.
Section 2.7. Consent of Stockholders. Any action required to be
taken at any annual or special meeting of stockholders, or any action which
may be taken at any annual or special meeting of stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall be signed by the
holders of outstanding capital stock having not less than the minimum number
of votes that would be necessary to authorize or take such action at a meeting
at which all shares entitled to vote were present and voted and shall be
delivered to the Corporation as required by Delaware Law. The record date for
a consent in writing shall be established in accordance with Section 2.8 of
these Bylaws. Prompt notice of the taking of any corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
Section 2.8. Fixing Record Date for Action By Consent of
Stockholders. In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors shall fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted by the Board
of Directors, and which date shall not be more than 10 days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. Any stockholder of record seeking to have the stockholders
authorize or take corporate action by written consent shall, by written notice
to the Secretary, request the Board of Directors to fix a record date. The
Board of Directors shall promptly, but in all events within 10 days after the
date on which such a request is received, adopt a resolution fixing the record
date. If the Board of Directors shall fail to establish a record date in a
timely manner and prior action by the Board of Directors is not required by
Delaware Law, the record date for determining stockholders entitled to consent
to corporate action in writing without a meeting shall be the first date on
which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the Corporation as required by Delaware Law. If no
record date has been fixed by the Board of Directors and prior action by the
Board of Directors is required by Delaware Law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board of Directors adopts the resolution taking such prior action.
Section 2.9. Nomination of Directors. Only persons who are
nominated in accordance with the procedures set forth in this Section shall be
eligible to serve as directors. Nominations of persons for election to the
Board of Directors of the Corporation may be made at a meeting of stockholders
(a) by or at the direction of the Board of Directors or (b) by any stockholder
of the Corporation who is a stockholder of record at the time of giving of
notice provided for in this Section, who shall be entitled to vote for the
election of directors at the meeting and who complies with the notice
procedures set forth in this Section. For any nomination to be properly
brought before a stockholder meeting by a stockholder, the stockholder must
have given timely notice of the nomination in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation not
less than 90 days prior to the anniversary date of the immediately preceding
annual meeting of stockholders (or, if the date of the meeting is more than 30
days before or after such anniversary date, not less than 90 days prior to the
date of such meeting; provided, however, that in the event that public
disclosure of the date of the meeting is made less than 100 days before the
date of the meeting, notice by the stockholder must be received not later than
the close of business on the 10th day following such public disclosure. Such
stockholder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election as a director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934
(including such person's written consent to serving as a director if elected);
and (b) as to the stockholder giving the notice (i) the name and address, as
they appear on the Corporation's books of such stockholder, (ii) the class and
number of shares of the Corporation which are beneficially owned by such
stockholder and (iii) a description of all arrangements or understandings
between each such stockholder and any nominee or any other person or persons
(naming such person or persons) in connection with or relating to the making
of the nomination or nominations to serve on the Board of Directors if
elected. At the request of the Board of Directors, any person nominated by
the Board of Directors for election as a director shall furnish to the
Secretary of the Corporation the information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee.
Notwithstanding anything in these bylaws to the contrary, no person shall be
eligible to serve as a director of the Corporation unless nominated in
accordance with the procedures set forth in this Section. If the Chairman of
the meeting shall determine, based on the facts, that a nomination was not
made in accordance with the procedures prescribed by this Section, he shall so
declare to the meeting and the defective nomination shall be disregarded.
Notwithstanding the foregoing provisions of this Section, a stockholder shall
also comply with all applicable requirements of the Securities Exchange Act of
1934, and the rules and regulations thereunder, with respect to the matters
set forth in this Section.
Section 2.10. Notice of Business. At any meeting of the
stockholders, only such business shall be conducted as shall have been brought
before the meeting (a) by or at the direction of the Board of Directors or (b)
by any stockholder of the Corporation who is a stockholder of record at the
time of giving of the notice provided for in this Section, who shall be
entitled to vote at such meeting and who complies with the notice procedures
set forth in this Section. For business to be properly brought before a
stockholder meeting by a stockholder, the stockholder must have given timely
notice of the business in writing to the Secretary of the Corporation. To be
timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation not less than 90 days prior
to the anniversary date of the immediately preceding annual meeting of
stockholders (or if the date of the meeting is more than 30 days before or
after such anniversary date, not less than 90 days prior to the date of such
meeting; provided, however, that in the event that public disclosure of the
date of the meeting is made less than 100 days before the date of the meeting,
notice by the stockholder must be received not later than the close of
business on the 10th day following such public disclosure). Such
stockholder's notice shall set forth as to each matter the stockholder
proposes to bring before the meeting (a) a brief description of the business
desired to be brought before the meeting and the reasons for conducting such
business at the meeting, (b) the name and address, as they appear on the
Corporation's books of the stockholder proposing such business, (c) the class
and number of shares of the Corporation which are beneficially owned by the
stockholder and (d) any material interest of the stockholder in such business.
Notwithstanding anything in these bylaws to the contrary, no business shall be
conducted at a stockholder meeting except in accordance with the procedures
set forth in this Section. If the Chairman of the meeting shall determine,
based on the facts, that business was not properly brought before the meeting
in accordance with the provisions of this Section, he shall so declare to the
meeting and any such business not properly brought before the meeting shall
not be transacted. Notwithstanding the foregoing provisions of this Section,
a stockholder shall also comply with all applicable requirements of the
Securities Exchange Act of 1934, and the rules and regulations thereunder,
with respect to the matters set forth in this Section.
ARTICLE III
Board of Directors
Section 3.1. Powers. The business and affairs of the Corporation
shall be managed by or under the direction of its Board of Directors except as
otherwise provided by Delaware Law or the Certificate of Incorporation.
Section 3.2. Number, Election, and Term. The number of directors
which shall constitute the whole Board shall not be less than five and not more
than ten. Such number of directors shall from time to time be fixed by
resolution of the Board of Directors. The directors shall be elected at the
annual meeting of stockholders, except as provided in Section 3.3, and each
director elected shall hold office until his successor shall be elected and
shall qualify or his earlier death, resignation or removal. Directors need
not be residents of Delaware or stockholders of the Corporation.
Section 3.3. Vacancies, Additional Directors, Removal From
Office. If any vacancy occurs on the Board of Directors caused by death,
resignation or removal from office of any director or otherwise, or if any new
directorship is created by an increase in the authorized number of directors,
a majority of the directors then in office or the sole remaining director may
choose a successor or fill the newly created directorship; and a director so
chosen shall hold office until the next annual election and until his
successor shall be elected and shall qualify or his earlier death, resignation
or removal.
Section 3.4. Regular Meeting. A regular meeting of the Board of
Directors shall be held each year, without notice other than these bylaws, at
the place of, and immediately following, the annual meeting of stockholders,
and other regular meetings of the Board of Directors shall be held at such time
and place as the Board of Directors may provide, by resolution, either within
or without the State of Delaware, without other notice than such resolution.
Section 3.5. Special Meeting. A special meeting of the Board of
Directors may be called by the Chairman of the Board or by the President and
shall be called by the Secretary on the written request of any two directors.
The Chairman or President so calling, or the two directors so requesting, any
such meeting shall fix the time and place, either within or without the State
of Delaware, for such meeting.
Section 3.6. Notice of Special Meeting. Written notice of special
meetings of the Board of Directors shall be given to each director at least 48
hours prior to the time of such meeting. Any director may waive notice of any
meeting. The attendance of a director at any meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting
for the purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any special meeting of the Board of
Directors need be specified in the notice or waiver of notice of such meeting.
Section 3.7. Quorum. A majority of the Board of Directors then in
office shall constitute a quorum for the transaction of business at any meeting
of the Board of Directors, and the act of a majority of the directors present
at any meeting at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically provided by Delaware Law
or the Certificate of Incorporation. The directors present at any meeting of
the Board of Directors, whether or not a quorum is present, may adjourn the
meeting from time to time, without notice other than announcement at the
meeting. At the adjourned meeting, the Board of Directors may transact any
business which might have been transacted at the original meeting.
Section 3.8. Action Without Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee of the Board, may be taken without a meeting, if all members of the
Board or of such committee, as the case may be, consent to the action in
writing and such written consent is filed with the minutes of proceedings of
the Board or committee.
Section 3.9. Telephonic Meetings. Members of the Directors, or any
committee of the Board, may participate in a meeting of the Board of
Directors, or such committee, as the case may be, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.
Section 3.10. Compensation. The Board of Directors shall have
authority to fix the compensation of directors, including fees and
reimbursement of expenses.
Section 3.11. Committees of Directors. There shall be an Audit
Committee and a Compensation Committee, each of which shall consist of not
less than three independent directors of the Corporation. The Board of
Directors may, by resolution passed by a majority of the whole Board,
designate one or more additional committees, including, if they shall so
determine, an Executive Committee, each such committee to consist of one or
more directors of the Corporation. To the extent provided in the resolution
and subject to limitations under Delaware Law, any such committee shall have
and may exercise such of the powers and authority of the Board of Directors
in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of such committee. Each committee of directors shall
keep regular minutes of its proceedings and report the same to the Board of
Directors when required.
ARTICLE IV
Officers
Section 4.1. Principal Officers. The principal officers of the
Corporation shall be a Chairman of the Board, a President, one or more Vice
Presidents (any one or more of whom may be designated Executive Vice President
or Senior Vice President) and a Secretary. The Corporation may also have
such other principal officers, which may include a Vice Chairman or Chief
Financial Officer, as the Board may in its discretion elect. Any two or more
offices, other than the offices of President and Secretary, may be held by the
same person. The Chairman (and any Vice Chairman) shall be elected from among
the directors. With the foregoing exception, none of the other officers need
be a director, and none of the officers need be a stockholder of the
Corporation.
Section 4.2. Election and Term of Office. The principal officers
of the Corporation shall be elected annually by the Board of Directors at its
first regular meeting held after the annual meeting of stockholders or as soon
thereafter as conveniently possible. Each such principal officer shall hold
office until his successor shall have been chosen and shall have qualified or
until his earlier death, resignation or removal, or until he shall cease to be
a director in the case of the Chairman or any Vice Chairman.
Section 4.3. Other Officers. In addition to the principal
officers enumerated in Section 4.1, the Corporation may have one or more other
officers, which may include staff or division officers, as the Board of
Directors may elect or the President shall in his discretion appoint. Each
such other officer shall hold office for such period and have such title and
responsibilities as the Board of Directors or the President shall determine and
may be removed in accordance with Section 4.4.
Section 4.4. Removal and Resignation. Any officer elected by the
Board of Directors or appointed by the President may be removed at any time
with or without cause by the Board of Directors. Any officer appointed by the
President may be removed at any time with or without cause by the President.
Any officer may resign at any time by giving written notice to the Board of
Directors or to the Secretary of the Corporation.
Section 4.5. Vacancies. Any vacancy occurring in any principal
office of the Corporation by death, resignation, removal or otherwise, may be
filled by the Board of Directors for the unexpired portion of the term.
Section 4.6. Salaries. The salaries of all principal officers of
the Corporation shall be fixed by the Board of Directors or pursuant to its
direction and the salaries of all other officers shall be fixed by the
President or pursuant to his direction and reviewed by the Board of Directors
or a committee of the Board. No officer shall be prevented from receiving such
salary by reason of his also being a director.
Section 4.7. Chairman of the Board. The Chairman of the Board
shall preside at all meetings of the Board of Directors of the Corporation. In
the Chairman's absence, such duties shall be attended to by the President. The
Chairman shall formulate and submit to the Board of Directors matters of
general policy for the Corporation and shall perform such other duties as may
be prescribed by the Board of Directors.
Section 4.8. President. The President shall be the chief
executive officer of the Corporation and, subject to the control of the Board
of Directors, shall in general supervise and control the business and affairs
of the Corporation. The President shall preside at all meetings of the
stockholders and, in the absence of the Chairman of the Board, shall preside
at all meetings of the Board of Directors. He may also preside at any such
meeting attended by the Chairman of the Board if he is so designated by the
Chairman. He or any officer designated by him may attend, vote at and grant
proxies to be used at any meeting of stockholders of any other corporation in
which this Corporation may hold stock. In general he shall perform all other
duties normally incident to the office of President and such other duties as
may be prescribed by the Board of Directors from time to time.
Section 4.9. Vice President. In the absence of the President, or
in the event of his inability or refusal to act, any Vice President designated
by the Board shall perform the duties and exercise the powers of the
President. The Vice Presidents shall perform such other duties as from time
to time may be assigned to them by the President or the Board of Directors.
Section 4.10. Secretary. The Secretary shall (a) keep the
minutes of the meetings of the stockholders, the Board of Directors and
committees of the Board of Directors; (b) see that all notices are duly given
in accordance with the provisions of these bylaws and as required by law; (c)
be custodian of the corporate records and of the seal of the Corporation; (d)
have general charge of the stock transfer books of the Corporation; and (e) in
general, perform all duties normally incident to the office of Secretary and
such other duties as from time to time may be assigned to him by the President
or the Board of Directors.
ARTICLE V
Dividends
Section 5.1. Declaration. Subject to limitations contained in
Delaware Law and the Certificate of Incorporation, the Board of Directors may
declare and pay dividends upon the shares of capital stock of the Corporation,
which dividends may be paid either in cash, securities of the Corporation or
other property.
ARTICLE VI
Indemnification
Section 6.1. Third Party Actions. The Corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he is or was a director, a
nominee for director nominated by the Board of Directors (a "nominee"),
officer or employee of the corporation, or is or was serving at the request of
the Corporation as a director, officer or employee of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit
or proceeding if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement or conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation,
and, with respect to any criminal action or proceeding, had reasonable cause
to believe that his conduct was unlawful.
Section 6.2. Actions by or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by
or in the right of the Corporation to procure a judgment in its favor by reason
of the fact that he is or was a director, nominee, officer or employee of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer or employee of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 6.3. Determination of Conduct. The determination that a
director, nominee, officer or employee has met the applicable standard of
conduct set forth in Sections 6.1 and 6.2 (unless indemnification is ordered by
a court) shall be made (1) by the Board of Directors by a majority vote of a
quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such quorum is not obtainable, or even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
Section 6.4. Payment of Expenses in Advance. Expenses (including
attorneys' fees) incurred in defending any civil, criminal or investigative
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director, nominee, officer or employee to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the Corporation as authorized in this Article.
Section 6.5. Definition. For purposes of this Article,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, nominees, officers, and employees, so that any person who is or was
a director, officer or employee of such constituent corporation, or is or was
serving at the request of such constituent corporation as director, officer or
employee of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article, with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence
had continued.
Section 6.6. Indemnity Not Exclusive. The indemnification or
advancement of expenses provided under this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any other bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office. Notwithstanding anything in this Article to the contrary, the
Corporation shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal or investigative by reason of the fact that
he is or was a director, nominee, officer or employee of the Corporation, or
was serving at the request of the Corporation as a director, officer or
employee of another corporation, partnership, joint venture, trust or other
enterprise, to the fullest extent permitted by applicable law.
Section 6.7. Continuation. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Article for acts occurring
at the time such director, nominee, officer or employee was a director,
nominee, officer or employee of the Corporation shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased
to be a director, nominee, officer or employee and shall inure to the benefit
of the heirs, executors and administrators of such a person.
ARTICLE VII
Miscellaneous
Section 7.1. Seal. The corporate seal shall have inscribed on it
the name of the Corporation, and the words "Corporate Seal, Delaware." The
seal may be used by causing it or a facsimile of the seal to be impressed or
affixed or otherwise reproduced.
Section 7.2. Books. The books of the Corporation may be kept
(subject to any provision contained in Delaware Law) outside the State of
Delaware at the offices of the Corporation at Houston, Texas, or at such other
place or places as may be designated from time to time by the Board of
Directors.
ARTICLE VIII
Amendment
These bylaws may be amended or repealed, or new bylaws may be
adopted, by the stockholders entitled to vote on the matter at any annual or
special meeting or by the Board of Directors.
Exhibit 5
[Letterhead of Davis Polk & Wardwell]
July 30, 1997
Compaq Computer Corporation
20555 SH 249
Houston, TX 77070
Ladies and Gentlemen:
We have acted as counsel to Compaq Computer Corporation
("Compaq") in connection with Compaq's Registration Statement on Form S-4 (the
"Registration Statement") filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"), relating
to the registration by Compaq of shares (the "Shares") of common stock, par
value $.01 per share, of Compaq to be issued in connection with the merger
of Compaq-Project Inc. ("Merger Subsidiary"), a wholly-owned subsidiary of
Compaq, with and into Tandem Computers Incorporated ("Tandem") pursuant to
the terms of the Agreement and Plan of Merger dated as of June 22, 1997,
among Compaq, Tandem and Merger Subsidiary (the "Merger Agreement").
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates and other instruments, and have conducted such other
investigations of fact and law, as we have deemed necessary or advisable for
the purposes of this opinion.
In rendering this opinion we have assumed that prior to the
issuance of any of the Shares (i) the Registration Statement, as then amended,
will have become effective under the Securities Act, (ii) the stockholders of
Tandem will have approved and adopted the Merger Agreement and (iii) the
transactions contemplated by the Merger Agreement are consummated.
On the basis of the foregoing, we are of the opinion that the
Shares have been duly authorized and the Shares, when issued and delivered in
accordance with the terms and conditions of the Merger Agreement, will be
validly issued, fully paid and non-assessable.
We are members of the Bar of the State of New York and the
foregoing opinion is limited to the laws of the State of New York, the federal
laws of the United States of America and the General Corporation Law of the
State of Delaware.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement. In addition, we consent to the reference to us
under the caption "Legal Matters" in the Proxy Statement/Prospectus
constituting a part of the Registration Statement.
Very truly yours,
/s/ Davis Polk & Wardwell
Davis Polk & Wardwell
Exhibit 8.a
212-450-4000
___________, 1997
Agreement and Plan of Merger
Dated as of June 22, 1997
Among Tandem Computers Incorporated, Compaq Computer
Corporation and Compaq-Project, Inc.
Dear Ladies and Gentleman:
We have acted as counsel for Compaq Computer Corporation, a
Delaware corporation ("Compaq"), in connection with the proposed merger (the
"Merger") of Compaq-Project, Inc., a Delaware corporation and a wholly owned
subsidiary of Compaq ("Merger Subsidiary"), with and into Tandem Computers
Incorporated, a Delaware corporation ("Tandem") pursuant to an Agreement and
Plan of Merger dated as of June 22, 1997 (the "Merger Agreement"), among
Tandem, Compaq and Merger Subsidiary. Under the Merger Agreement each issued
and outstanding share of Tandem common stock not owned directly or indirectly
by Tandem or Compaq will be converted into the right to receive Compaq common
stock.
In that connection, you have requested our opinion regarding
certain Federal income tax consequences of the Merger. In providing our
opinion, we have examined the Merger Agreement, the Proxy Statement/Prospectus
of Compaq and Tandem to be dated as of _________, 1997 (the "Proxy
Statement/Prospectus"), and such other documents and corporate records as we
have deemed necessary or appropriate for purposes of our opinion. In addition,
we have assumed that (i) the Merger will be consummated in the manner
contemplated by the Proxy Statement/Prospectus and in accordance with the
provisions of the Merger Agreement and (ii) the representations made to us by
Compaq and Tandem in their respective letters to us dated ________, 1997, and
delivered to us for purposes of this opinion are accurate and complete.
Based upon the foregoing, in our opinion, the Merger will be
treated for Federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code") and Compaq and Tandem will each be a party to that reorganization
within the meaning of Section 368(b) of the Code. Accordingly, no gain or
loss will be recognized by the stockholders of Tandem upon their exchange of
Tandem stock for Compaq stock under Section 354 of the Code (except to the
extent such a stockholder receives cash in lieu of fractional shares); and
neither Compaq nor any of its stockholders will recognize gain or loss as a
result of the Merger.
The opinions expressed herein are based upon existing statutory,
regulatory and judicial authority, any of which may be changed at any time with
retroactive effect. In addition, our opinions are based solely on the
documents that we have examined, the additional information that we have
obtained, and the statements contained in the letters from Compaq and Tandem
referred to above, which we have assumed will be true as of the effective time
of the Merger. Our opinions cannot be relied upon if any of the facts
pertinent to the Federal income tax treatment of the Merger stated in such
documents or in such additional information is, or later becomes, inaccurate,
or if any of the statements contained in the letters from Compaq or Tandem
referred to above are, or later become, inaccurate. Finally, our opinions are
limited to the tax matters specifically covered hereby, and we have not been
asked to address, nor have we addressed, any other tax consequences of the
Merger or any other transactions.
We hereby consent to the inclusion of this opinion as an
exhibit to the Registration Statement and to the reference to us in the Proxy
Statement/Prospectus under the captions "The Merger--Certain U.S. Federal
Income Tax Consequences", "The Merger Agreement--Conditions to the Merger" and
"Legal Matters."
This opinion is being provided solely for the benefit of
Compaq. No other person or party shall be entitled to rely on this opinion.
Very truly yours,
Davis Polk & Wardwell
Compaq Computer Corporation
20555 SH 249
Houston, Texas 77070
Exhibit 8.b
______________, 1997
Tandem Computers Incorporated
10435 North Tantau Avenue
Cupertino, California 95014
Re: Agreement and Plan of Merger Dated as of June 22, 1997 Among
Tandem Computers Incorporated, Compaq Computer Corporation
and Compaq-Project, Inc.
Ladies and Gentlemen:
This opinion is being delivered to you in connection with the
proposed Merger (the "Merger") of Compaq-Project, Inc., a Delaware corporation
("Merger Subsidiary"), a wholly-owned subsidiary of Compaq Computer
Corporation, a Delaware corporation ("Compaq") with and into Tandem Computers
Incorporated, a Delaware corporation ("Tandem"), pursuant to the Agreement and
Plan of Merger dated as of June 22, 1997 (the "Agreement") among Tandem,
Compaq and Merger Subsidiary. The Merger is described in the Registration
Statement on Form S-4 of Parent dated as of , 1997, including the
Proxy Statement/Prospectus, and the appendices thereto (the "Registration
Statement"). Unless otherwise indicated, capitalized terms not defined herein
shall have the meanings ascribed to them in the Agreement or in the letters
dated , 1997 delivered to Morrison & Foerster LLP by Tandem and
Compaq (the "Representation Letters").
In our capacity as counsel to Tandem with respect to the
Merger, and for purposes of rendering this opinion, we have examined and
relied upon the Agreement, the Representation Letters, the Registration
Statement, and such other documents as we considered relevant to our analysis.
We have assumed that all parties to the Agreement to any other documents
examined by us have acted, and will act, in accordance with the terms of such
Agreement or documents and that the Merger will be consummated at the
Effective Time pursuant to the terms and conditions set forth in the
Agreement. Further, we have assumed that all representations contained in the
Agreement, as well as those representations contained in the Representation
Letters are, and at the Effective Time will be, true and complete in all
material respects. In our examination of documents , we have assumed the
authenticity of original documents , the accuracy of copies, the
genuineness of signatures, and the legal capacity of signatories.
The conclusions expressed herein represent our judgment of the
proper treatment of certain aspects of the Merger under the income tax laws of
the United States based upon the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury Regulations, rulings and other pronouncements of the
Internal Revenue Service (the "IRS") currently in effect, and judicial
decisions, all of which are subject to change, prospectively or retroactively.
No assurance can be given that such changes will not take place, or that such
changes would not affect the conclusions expressed herein. Furthermore, our
opinion represents only our best judgment of how a court would conclude if
presented with the issues addressed herein and is not binding upon either the
IRS or any court. Thus, no assurance can be given that a position taken in
reliance on our opinion will not be challenged by the IRS or rejected by a
court.
Our opinion relates solely to the tax consequences of the
Merger under the federal income tax laws of the United States, and we express
no opinion (and no opinion should be inferred) regarding the tax consequences
of the Merger under the laws of any other jurisdiction. This opinion
addresses only the specific issues set forth below, and does not address any
other tax consequences that may result from the Merger or any other
transaction (including any transaction undertaken in connection with the
Merger).
No opinion is expressed as to any transaction other than the
Merger as described in the Agreement or as to any transaction whatsoever,
including the Merger, if all the transactions described in the Agreement are
not consummated in accordance with the terms of such Agreement and without
waiver or breach of any material provision thereof, or if all the
representations, warranties, statements and assumptions upon which we relied
are not true and accurate at all relevant times. In the event any one of the
statements, representations, warranties or assumptions upon which we have
relied to issue this opinion is incorrect, our opinion might be adversely
affected and may not be relied upon.
On the basis of, and subject to the foregoing, and in reliance
upon the representations described above, we are of the opinion that:
(1) The Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code;
(2) Each of Tandem, Compaq and Merger Subsidiary will be a
party to the reorganization within the meaning of Section 368(b) of the Code;
and
(3) The discussion under the caption "The Merger - Certain
Federal Income Tax Consequences" in the Proxy Statement/Prospectus, subject to
the limitations, qualifications and conditions stated in such discussion,
expresses our opinion as to the material United States federal income tax
consequences to Tandem, Compaq, Merger Subsidiary and the shareholders of
Tandem if the Merger is effected according to the terms of the Agreement.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the use of our name under the captions
"The Merger--Certain U.S. Federal Income Tax Consequences", "The Merger
Agreement--Conditions to the Merger" and "Legal Matters" in the Proxy
Statement/Prospectus. In giving this consent, we do not hereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended.
Very truly yours,
Morrison & Foerster LLP
Exhibit 23.a
CONSENT OF PRICE WATERHOUSE LLP,
INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Proxy
Statement/Prospectus constituting part of this Registration Statement on Form
S-4 of Compaq Computer Corporation ("Compaq") of our report dated January 21,
1997, which appears on page 54 of Compaq's 1996 Annual Report to Shareholders,
which is incorporated by reference in its Annual Report on Form 10-K for the
year ended December 31, 1996. We also consent to the incorporation by
reference of our report on the Financial Statement Schedule, which appears on
page 13 of such Annual Report on Form 10-K. We also consent to the reference
to us under the heading "Experts" in such Proxy Statement/Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Houston, Texas
July 30, 1997
Exhibit 23.b
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Proxy Statement/Prospectus constituting part of this Registration Statement on
Form S-4 of Compaq Computer Corporation and to the incorporation by reference
therein of our reports dated October 22, 1996, with respect to the
consolidated financial statements and schedule of Tandem Computers
Incorporated included in or incorporated by reference in its Annual Report on
Form 10-K for the year ended September 30, 1996, filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
San Jose, California
July 29, 1997
Exhibit 23.e
CONSENT OF LEHMAN BROTHERS INC.
We hereby consent to the use of our opinion letter dated June 22, 1997 to the
Board of Directors of Tandem Computers Incorporated ("Tandem"), included as
Annex C to the Proxy Statement/Prospectus which forms a part of the
Registration Statement on Form S-4 relating to the proposed merger of Tandem
and Compaq Computer Corporation, and to the references therein to such opinion
under the captions "Summary-Fairness Opinion of Financial Advisor" and
"Opinion of Tandem's Financial Advisor."
In giving such consent, we do not admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of
1993, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder, nor do we thereby admit that we are experts with
respect to any part of such Registration Statement within the meaning of the
term "experts" as used in the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission thereunder.
LEHMAN BROTHERS INC.
By: /s/ John Stuart Francis
------------------------
July 30, 1997
Exhibit 99.a
CONSENT OF THOMAS J. PERKINS
The undersigned hereby consents to the inclusion of his name in the Proxy
Statement/Prospectus constituting a part of this Registration Statement on Form
S-4 as a person to become a director of Compaq Computer Corporation ("Compaq")
upon consummation of the merger of Compaq-Project, Inc., a wholly-owned
subsidiary of Compaq, with and into Tandem Computers Incorporated.
Signature: /s/ Thomas J. Perkins
-----------------------
Thomas J. Perkins
Date: July 30, 1997
Exhibit 99.b
TANDEM COMPUTERS INCORPORATED
Notice of
SPECIAL MEETING OF STOCKHOLDERS
To be held August 29, 1997
To Our Stockholders:
Tandem Computers Incorporated's Special Meeting of Stockholders will be
held Friday, August 29, 1997, at 10:00 A.M. at Tandem's headquarters, 10435
N. Tantau, Building 200, Cupertino, California.
Details of the business to be conducted at this Special Meeting are
provided in the enclosed Notice of Special Meeting of Stockholders and Proxy
Statement.
Stockholders of record at the close of business on July 28, 1997, will be
entitled to vote at the Special Meeting or any adjournments thereof.
PROXY
DETACH HERE
TANDEM COMPUTERS INCORPORATED
Proxy Solicited By Board of Directors
For Special Meeting August 29, 1997
Thomas J. Perkins and Roel Pieper, or either of them, each with the power
of substitution, are hereby authorized to represent and vote as designated on
the reverse side the shares of the undersigned at the Special Meeting of
Stockholders of Tandem Computers Incorporated to be held on Friday, August 29,
1997, or at any adjournment or postponement of the Special Meeting.
Shares represented by this proxy will be voted as directed by the
stockholder. If no such directions are indicted, the proxies will have
authority to vote FOR Item 1, and as said proxies deem advisable on such other
matters as may properly come before the Meeting.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE [SEE REVERSE SIDE]
DETACH HERE
[ X ] Please mark
votes as in
this example.
PLEASE MARK, DATE, SIGN, AND RETURN
The Board of Directors recommends a vote FOR item 1.
1. To approve and adopt the Merger FOR AGAINST ABSTAIN
Agreement, dated as of June 22, [ ] [ ] [ ]
1997, by and among Tandem
Computers Incorporated, Compaq
Computer Corporation, and a wholly
owned subsidiary of Compaq
Computer Corporation.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please sign exactly as your name appears on this proxy. If signing
for estates, trusts, or corporations, title or capacity should be
stated. If shares are held jointly, each holder should sign.
Signature:______________ Date:_____ Signature:_______________ Date:_____
Exhibit 99.c
TANDEM COMPUTERS INCORPORATED
Notice of
SPECIAL MEETING OF STOCKHOLDERS
To be held August 29, 1997
To Our Stockholders:
Tandem Computers Incorporated's Special Meeting of Stockholders will be
held Friday, August 29, 1997, at 10:00 A.M. at Tandem's headquarters, 10435
N. Tantau, Building 200, Cupertino, California.
Details of the business to be conducted at this Special Meeting are
provided in the enclosed Notice of Special Meeting of Stockholders and Proxy
Statement.
Stockholders of record at the close of business on July 28, 1997, will be
entitled to vote at the Special Meeting or any adjournments thereof.
DETACH HERE
PROXY
TANDEM COMPUTERS INCORPORATED
Proxy Solicited By Trustee of the Tandem Computers Incorporated
401(k) Investment Plan
For Special Meeting August 29, 1997
The Trustee of the Tandem Computers Incorporated 401(k) Investment Plan
(the "Plan") is hereby authorized to represent and vote as designated on the
reverse side the shares of the undersigned that (i) have been allocated to the
account of the undersigned or (ii) have not been allocated to the account of
the undersigned but for which the undersigned is entitled to give voting
direction, at the Special Meeting of Stockholders of Tandem Computers
Incorporated to be held on Friday, August 29, 1977, or at any adjournment or
postponement of the Special Meeting.
Listed on the reverse of this card are the number of shares of Tandem
Computers Incorporated Common Stock allocated to your account in the Plan.
You may direct the Trustee to vote such shares and your pro rata portion of the
unallocated shares represented by this proxy at the Special Meeting. If a
vote is not specified, the Trustee shall vote your shares in the same
proportion as the shares held in the Plan for which voting direction has been
received.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE [SEE REVERSE SIDE]
DETACH HERE
[ X ] Please mark
votes as in
this example.
PLEASE MARK, DATE, SIGN, AND RETURN
The Board of Directors recommends a vote FOR item 1.
1. To approve and adopt the Merger FOR AGAINST ABSTAIN
Agreement, dated as of June 22, [ ] [ ] [ ]
1997, by and among Tandem
Computers Incorporated, Compaq
Computer Corporation, and a wholly
owned subsidiary of Compaq
Computer Corporation.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please sign exactly as your name appears on this proxy. If signing
for estates, trusts, or corporations, title or capacity should be
stated. If shares are held jointly, each holder should sign.
Signature:______________ Date:_____ Signature:_______________ Date:_____
