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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 22, 1997
COMPAQ COMPUTER CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
Delaware 1-9026 76-0011617
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(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
20555 SH 249
Houston, Texas 77070
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(Address of Principal Executive Offices) (Zip Code)
(281) 370-0670
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(Registrant's telephone number, including area code)
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. Other Events.
On June 22, 1997, Compaq Computer Corporation, a Delaware
corporation ("Compaq"), Tandem Computers Incorporated, a Delaware corporation
("Tandem"), and Compaq-Project, Inc., a Delaware corporation and a wholly
owned subsidiary of Compaq ("Merger Subsidiary"), entered into an Agreement
and Plan of Merger (the "Merger Agreement"). Pursuant to the Merger Agreement
and subject to the terms and conditions set forth therein (including
termination or expiration of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976), Merger Subsidiary will be merged with and
into Tandem with Tandem to be the surviving corporation of such merger (the
"Merger"), and as a result of the Merger, Tandem will become a wholly owned
subsidiary of Compaq. At the Effective Time (as defined in the Merger
Agreement) of the Merger, each issued and outstanding share of common stock,
par value $.025 per share (the "Tandem Common Stock"), of Tandem (other than
treasury shares or shares held by Compaq or any subsidiary of Compaq) will be
converted into the right to receive 0.21 shares of common stock, par value
$0.01 per share, of Compaq.
In connection with the Merger Agreement, Tandem has entered
into a Stock Option Agreement ("Stock Option Agreement") with Compaq dated
June 22, 1997, pursuant to which Tandem has granted Compaq an irrevocable
option to purchase for $22.44 per share in cash up to 17,400,000 shares of
Tandem Common Stock in certain circumstances.
The foregoing description of the terms of the transactions is
qualified in its entirety by reference to the Merger Agreement and the Stock
Option Agreement. A copy of the Merger Agreement is filed as Exhibit 2.1 and
is incorporated herein by reference. A copy of the Stock Option Agreement is
filed as Exhibit 2.2 and is incorporated herein by reference.
ITEM 7. Exhibits.
Exhibit 2.1 Agreement and Plan of Merger dated as of June 22,
1997 among Tandem Computers Incorporated, Compaq
Computer Corporation and Compaq-Project, Inc.
Exhibit 2.2 Stock Option Agreement dated as of June 22, 1997
between Tandem Computers Incorporated and Compaq
Computer Corporation.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
COMPAQ COMPUTER CORPORATION
Dated: June 26, 1997 By: /s/ Earl L. Mason
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Name: Earl L. Mason
Title: Senior Vice President and
Chief Financial Officer
INDEX TO EXHIBITS
Sequential
Exhibit No. Description Page No.
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Exhibit 2.1 Agreement and Plan of Merger dated as of
June 22, 1997 among Tandem Computers
Incorporated, Compaq Computer
Corporation and Compaq-Project, Inc.
Exhibit 2.2 Stock Option Agreement dated as of June
22, 1997 between Tandem Computers
Incorporated and Compaq Computer
Corporation.
CONFORMED COPY
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
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ARTICLE 1
The Merger
Section 1.01. The Merger..............................................1
Section 1.02. Conversion of Shares....................................1
Section 1.03. Surrender and Payment...................................2
Section 1.04. Stock Options...........................................3
Section 1.05. Employee Stock Purchase Plan............................4
Section 1.06. Adjustments.............................................4
Section 1.07. Fractional Shares.......................................4
Section 1.08. Withholding Rights......................................4
Section 1.09. Lost Certificates.......................................5
ARTICLE 2
The Surviving Corporation
Section 2.01. Certificate of Incorporation............................5
Section 2.02. Bylaws..................................................5
Section 2.03. Directors and Officers..................................5
ARTICLE 3
Representations and Warranties of the Company
Section 3.01. Corporate Existence and Power...........................6
Section 3.02. Corporate Authorization.................................6
Section 3.03. Governmental Authorization..............................7
Section 3.04. Non-contravention.......................................7
Section 3.05. Capitalization..........................................8
Section 3.06. Subsidiaries............................................8
Section 3.07. SEC Filings.............................................9
Section 3.08. Financial Statements....................................9
Section 3.09. 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..................13
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...................17
Section 3.21. Antitakeover Statutes and Rights Agreement.............18
ARTICLE 4
Representations and Warranties of Parent
Section 4.01. Corporate Existence and Power..........................18
Section 4.02. Corporate Authorization................................18
Section 4.03. Governmental Authorization.............................19
Section 4.04. Non-contravention......................................19
Section 4.05. Capitalization.........................................19
Section 4.06. Subsidiaries...........................................20
Section 4.07. SEC Filings............................................21
Section 4.08. Financial Statements...................................21
Section 4.09. Disclosure Documents...................................22
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.............................................24
Section 4.14. Finders' Fees..........................................24
Section 4.15. Taxes..................................................24
Section 4.16. Employee Benefit Plans.................................24
Section 4.17. Environmental Matters..................................26
Section 4.18. Pooling; Tax Treatment.................................26
Section 4.19. Opinion of Financial Advisor...........................26
Section 4.20. Patents and Other Proprietary Rights...................27
ARTICLE 5
Covenants of the Company
Section 5.01. Conduct of the Company.................................28
Section 5.02. Stockholder Meeting; Proxy Material....................29
Section 5.03. Other Offers...........................................29
ARTICLE 6
Covenants of Parent
Section 6.01. Conduct of Parent......................................30
Section 6.02. Obligations of Merger Subsidiary.......................31
Section 6.03. Voting of Shares.......................................31
Section 6.04. Director and Officer Liability.........................31
Section 6.05. Registration Statement; Form S-8.......................31
Section 6.06. Stock Exchange Listing.................................31
Section 6.07. Employee Benefits......................................32
Section 6.08. Board Candidate........................................32
ARTICLE 7
Covenants of Parent and the Company
Section 7.01. Reasonable Best Efforts................................32
Section 7.02. Certain Filings........................................32
Section 7.03. Public Announcements...................................33
Section 7.04. Further Assurances.....................................33
Section 7.05. Notices of Certain Events..............................33
Section 7.06. Tax-free Reorganization; Pooling.......................34
Section 7.07. Affiliates.............................................34
Section 7.08. Access to Information; Confidentiality.................34
ARTICLE 8
Conditions to the Merger
Section 8.01. Conditions to the Obligations of Each Party............35
Section 8.02. Conditions to the Obligations of Parent
and Merger Subsidiary.....................36
Section 8.03. Conditions to the Obligations of the Company...........36
ARTICLE 9
Termination
Section 9.01. Termination............................................37
Section 9.02. Effect of Termination..................................38
ARTICLE 10
Miscellaneous
Section 10.01. Notices...............................................38
Section 10.02. Survival of Representations and Warranties............39
Section 10.03. Amendments; No Waivers................................40
Section 10.04. Expenses..............................................40
Section 10.05. Successors and Assigns................................41
Section 10.06. Governing Law.........................................41
Section 10.07. Jurisdiction..........................................41
Section 10.08. WAIVER OF JURY TRIAL..................................41
Section 10.09. Counterparts; Effectiveness...........................42
Section 10.10. Entire Agreement......................................42
Section 10.11. Captions..............................................42
Section 10.12. Severability..........................................42
Section 10.13. Specific Performance..................................42
Section 10.14. Definitions and Usage.................................42
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 1.01. 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 1.02. 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 1.02(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 1.03. 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 1.03(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 1.04. 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 1.05. 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 1.06. 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 1.07. 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 1.08. 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 1.09. 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 2.01. 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 2.02. 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 2.03. Directors and Officers. From and after the
Effective Time, until successors are duly elected or appointed and
qualified in accordance with applicable law, the directors of Merger
Subsidiary at the Effective Time shall be the directors of the Surviving
Corporation and 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 3.01. 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 3.02. 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 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, approved and adopted this Agreement and the Company
Stock Option Agreement and the transactions contemplated hereby and thereby
(including the Merger), and resolved (subject to Section 5.02) 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 5.02(a)).
Section 3.03. 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 the filing of a certificate of merger in accordance
with Delaware Law, 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 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 3.04. 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 violate the certificate of
incorporation or bylaws of the Company, assuming compliance with the matters
referred to in Section 3.03, violate any applicable law, rule, regulation,
judgment, injunction, order or decree, 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 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 3.05. 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 shares of capital stock or voting securities of the Company,
securities of the Company convertible into or exchangeable for shares of
capital stock or voting securities of the Company or 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 3.06. 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
shares of capital stock or other voting securities or ownership interests in
any of the Company's subsidiaries, 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 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 3.07. SEC Filings. (a) The Company has delivered to
Parent the Company's annual report on Form 10-K for its fiscal year ended
September 30, 1996, its quarterly reports on Form 10-Q for its fiscal
quarters ended after September 30, 1996, 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 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 3.07(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 3.08. 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 3.09. 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 4.09(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, 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; 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); 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; 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;
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 for
"pooling of interests" accounting treatment as described in (a) above or 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, the Company and its subsidiaries have not assigned, hypothecated or
otherwise encumbered any of the Company Intellectual Property Rights and
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 4.01. 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 4.02. 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 4.03. 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 the filing of a
certificate of merger in accordance with Delaware Law, 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 4.04. 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 violate the certificate of incorporation or bylaws of Parent or Merger
Subsidiary, assuming compliance with the matters referred to in Section 4.03,
violate any applicable law, rule, regulation, judgment, injunction, order or
decree, 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
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 4.05. 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 shares of capital stock or voting
securities of Parent, securities of Parent convertible into or exchangeable
for shares of capital stock or voting securities of Parent or 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 4.06. 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 shares of capital stock or other voting securities or ownership
interests in any of Parent's subsidiaries, 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 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 4.07. SEC Filings. (a) Parent has delivered to the
Company its annual report on Form 10-K for its fiscal year ended December
31, 1996, its quarterly reports on Form 10-Q for its fiscal quarters ended
after December 31, 1996, 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 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 4.07(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 4.08. 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 4.09. 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, 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; 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); 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; 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; 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
"pooling of interests" accounting treatment as described in (a) above or 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. 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 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
unenforce ability 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 5.01. 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 pursuant to existing contracts or commitments and
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 5.02. 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 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, use
its reasonable best efforts to obtain the necessary approvals by its
stockholders of this Agreement and the transactions contemplated hereby and
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 5.03. 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 6.01. 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 6.02. 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 6.03. 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 6.04. 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 6.05. 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 6.06. 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 6.07. 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 6.08. 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 7.01. 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 7.02. 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
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 7.03. 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 7.04. 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 7.05. 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 7.06. 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 8.01(f), 8.02(b) and 8.03(b).
Section 7.07. 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 7.08. 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 8.01. Conditions to the Obligations of Each Party. he
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 8.02. 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 8.03. 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 9.01. 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 5.02(a) or 5.03.
The party desiring to terminate this Agreement pursuant to this Section 9.01
(other than pursuant to Section 9.01(a)) shall give notice of such
termination to the other party.
Section 9.02. Effect of Termination. If this Agreement is
terminated pursuant to Section 9.01, this Agreement shall become void and of
no effect with no liability on the part of any party hereto, except that the
agreements contained in Sections 7.08(b), 10.04, 10.06, 10.07 and 10.08 shall
survive the termination hereof and 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 10.01. 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 10.02. 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 6.04, 6.07,
6.08, 7.08(b), 10.04, 10.06, 10.07 and 10.08.
Section 10.03. 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 10.04. 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 9.01(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 9.01(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 9.01(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 8.02(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 9.01(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 8.03(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 10.06. 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 10.05. Governing Law. This Agreement shall be governed
by and construed in accordance with the law of the State of Delaware.
Section 10.07. 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 10.01 shall be deemed effective
service of process on such party.
Section 10.08. 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 10.09. 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 opposite such terms:
1933 Act....................................... 3.03
1934 Act....................................... 3.03
368 Reorganization............................. 3.18
Acquisition Proposal........................... 5.02(b)
Company 10-K................................... 3.06
Company 10-Q................................... 3.07(a)(iv)
Company Balance Sheet Date..................... 3.08
Company Balance Sheet.......................... 3.08
Company Employee Plan.......................... 3.16(a)
Company Proxy Statement........................ 3.09(a)
Company SEC Filings............................ 3.07(a)(iv)
Company Stock.................................. 1.02(a)
Company Stock Option Agreement................. 3.02(a)
Company Stockholder Meeting.................... 5.02(a)
Delaware Law................................... 1.01(a)
EC Merger Regulation........................... 3.03
Effective Time................................. 1.01(b)
Environmental Laws............................. 3.17(c)
Environmental Permits.......................... 3.17(c)
ERISA.......................................... 3.16(a)
GAAP........................................... 3.15
HSR Act........................................ 3.03
Lien........................................... 3.04
Merger......................................... 1.01
Merger Consideration........................... 1.02(a)
Parent 10-Q.................................... 4.07(a)(iv)
Parent Balance Sheet........................... 4.08
Parent Balance Sheet Date...................... 4.08
Parent Employee Plan........................... 4.16
Parent SEC Filings............................. 4.07(a)(iv)
Parent Stock................................... 1.02(a)
Registration Statement......................... 4.09(a)
SEC............................................ 3.07(a)(iv)
Surviving Corporation.......................... 1.01(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
AFFILIATE'S LETTER
(Tandem Computers Incorporated)
____________, 1997
Compaq Computer Corporation
20555 SH 249
Houston, TX 77070
Tandem Computers Incoporated
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
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
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 8.02(b) and 8.03(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. 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.
- ----------
(1) References contained in this Certificate to the Agreement include, unless
the context otherwise requires, each document attached as an exhibit or
annex thereto.
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
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
Ladies and Gentlemen:
In connection with the opinion to be delivered pursuant to
Sections 8.02(b) and 8.03(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:
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) References contained in this Certificate to the Agreement include, unless
the context otherwise requires, each document attached as an exhibit or
annex thereto.
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:__________________________
CONFORMED COPY
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: 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 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 are within Company's corporate powers,
have been duly authorized by all necessary corporate action, 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, 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 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 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, 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 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
