<PAGE>
As filed with the Securities and Exchange Commission on September 7, 1999
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
EMC CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Massachusetts 3572 04-2680009
(State or other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
35 Parkwood Drive
Hopkinton, Massachusetts 01748
(508) 435-1000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------
Paul T. Dacier, Esq.
Vice President and General Counsel
EMC Corporation
35 Parkwood Drive
Hopkinton, Massachusetts 01748
(508) 435-1000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------
Copies to:
<TABLE>
<S> <C>
Margaret A. Brown, Esq. Edward D. Herlihy, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP Wachtell, Lipton, Rosen & Katz
One Beacon Street 51 West 52nd Street
Boston, Massachusetts 02108 New York, New York 10019
(617) 573-4800 (212) 403-1000
</TABLE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective and certain
other conditions under the merger agreement are met or waived.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [_]
---------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed Maximum
Amount Proposed Maximum Aggregate Amount of
Title of Each Class of to be Offering Price Offering Registration
Securities to be Registered Registered (1) Per Unit (2) Price (2) Fee (3)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, par value $.01 per
share.............................. 18,151,403 $18.1875 $330,128,629 $66,026
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Based on the estimated maximum number of shares of EMC common stock to be
issued in connection with the merger.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f) of the Securities Act of 1933, as amended, based upon the
average of the high and low sale prices of shares of the common stock of
Data General Corporation on the New York Stock Exchange on August 31, 1999.
(3) Estimated in accordance with Rule 457(c) and (f), solely for the purpose of
determining the registration fee. Represents the product of (i) $18.1875,
the average of the high and low prices reported on the New York Stock
Exchange on August 31, 1999 for Data General common stock, multiplied by
(ii) 55,645,010, the maximum number of shares of Data General common stock
which will be converted into shares of EMC common stock pursuant to the
merger. The entire amount of the registration fee has been offset by
amounts previously paid by Data General in connection with the filing of
preliminary proxy materials by Data General with the Commission on August
20, 1999 as permitted by Rule 457(b). Accordingly, no additional fee has
been paid.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[DATA GENERAL LOGO APPEARS HERE] September 7, 1999
Dear Data General Stockholder,
You are cordially invited to attend our special meeting of stockholders to
be held at State Street Bank and Trust Company, Enterprise Room, Fifth Floor,
225 Franklin Street, Boston, Massachusetts, on Thursday, October 7, 1999, at
9:00 a.m., local time.
At the special meeting, you will be asked to vote on the merger of Data
General Corporation and a wholly-owned subsidiary of EMC Corporation. In the
merger, if the average of the mean high and low prices of EMC common stock for
each of the 20 consecutive trading days ending on the fifth day prior to the
special meeting is $66.0625 or less, you will receive .3262 of a share of EMC
common stock for each share of Data General common stock that you own. If that
average price of EMC common stock is greater than $66.0625, for each share of
Data General common stock that you own, you will receive a fraction of a share
of EMC common stock equal to $21.55 divided by such average price of EMC common
stock. EMC common stock is listed on the New York Stock Exchange under the
trading symbol "EMC," and on September 3, 1999, EMC common stock closed at
$62.875 per share. You will receive cash for any fractional shares of EMC
common stock which you would otherwise receive in the merger.
We cannot complete the merger unless it is approved by the holders of a
majority of Data General common stock entitled to vote at the special meeting.
Only stockholders who hold their shares of Data General common stock at the
close of business on September 6, 1999 will be entitled to vote at the special
meeting.
After careful consideration, Data General's board of directors has
unanimously approved the merger agreement and determined that the merger is
fair to you and in your best interests and unanimously recommends that you vote
for the adoption of the merger agreement.
This proxy statement/prospectus provides you with detailed information
concerning Data General, EMC and the proposed merger. Please give all of the
information contained in this proxy statement/prospectus your careful
attention. In particular, you should carefully consider the discussion in the
section entitled "Risk Factors" beginning on page 14 of this proxy
statement/prospectus.
Please use this opportunity to take part in the affairs of Data General by
voting on the merger. IF YOU DO NOT VOTE BY PROXY OR IN PERSON AT THE SPECIAL
MEETING, IT WILL COUNT AS A VOTE AGAINST THE MERGER AGREEMENT. Whether or not
you plan to attend the meeting, please complete, sign, date and return the
accompanying proxy in the enclosed self-addressed stamped envelope. Returning
your proxy does NOT deprive you of your right to attend the meeting and to vote
your shares in person, should you choose to do so. YOUR VOTE IS VERY IMPORTANT.
We appreciate your interest in Data General and your consideration of this
matter.
[Signature of Ronald L. Skates appears here]
Ronald L. Skates
President and Chief Executive
Officer
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the merger described in the
proxy statement/prospectus or the EMC common stock to be issued in
connection with the merger, or passed upon the adequacy or accuracy of
this proxy statement/prospectus. Any representation to the contrary is a
criminal offense.
This proxy statement/prospectus is dated September 7, 1999 and was first
mailed to stockholders on or about September 8, 1999.
<PAGE>
DATA GENERAL CORPORATION
----------------
Notice of Special Meeting of Data General Stockholders
----------------
to be held on October 7, 1999
at 9:00 a.m.
To Data General Stockholders:
Notice is hereby given that a special meeting of stockholders of Data
General Corporation will be held on Thursday, October 7, 1999 at 9:00 a.m.
local time at State Street Bank and Trust Company, Enterprise Room, Fifth
Floor, 225 Franklin Street, Boston, Massachusetts, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the merger
agreement among EMC Corporation, a wholly-owned subsidiary of EMC and
Data General. In the merger, each outstanding share of Data General
common stock will be converted into the right to receive .3262 of a
share of EMC common stock, subject to certain adjustments described in
the attached proxy statement/prospectus.
2. To transact any other business that may properly come before the special
meeting or any adjournment.
These items of business are described in the attached proxy
statement/prospectus. Only holders of record of Data General common stock at
the close of business on September 6, 1999, the record date, are entitled to
vote on the matters listed in this Notice of Special Meeting of Data General
Stockholders. You may vote in person at the Data General special meeting even
if you have returned a proxy.
By Order of the Board of Directors,
[Signature of Carl E. Kaplan appears here]
Carl E. Kaplan
Secretary
Westboro, Massachusetts
September 7, 1999
Whether or Not You Plan to Attend the Meeting,
Please Complete, Sign, Date and Return the Accompanying Proxy
In the Enclosed Self-Addressed Stamped Envelope.
<PAGE>
[EMC logo appears here]
[Data General logo appears here]
PROXY STATEMENT PROSPECTUS
Table of Contents
<TABLE>
<S> <C>
Questions and Answers About the Merger..................................... 1
Summary of the Proxy Statement/Prospectus.................................. 3
The Companies............................................................ 3
Summary of the Transaction............................................... 4
Selected Financial Data.................................................. 9
EMC Corporation Selected Historical Consolidated Financial Data.......... 10
Data General Selected Historical Consolidated Financial Data............. 11
EMC Corporation Selected Unaudited Pro Forma Combined Financial Data..... 12
Unaudited Comparative Per Share Information.............................. 13
Risk Factors............................................................... 14
Risks Relating to the Merger............................................. 14
Risks Relating to the Investment in EMC.................................. 16
The Special Meeting of Data General Stockholders........................... 23
Date, Time and Place of the Special Meeting.............................. 23
Purpose of the Special Meeting........................................... 23
Stockholder Record Date for the Special Meeting.......................... 23
Vote of Data General Stockholders Required for Approval of Merger........ 23
Voting by Data General Directors and Executive Officers.................. 23
Voting of Proxies........................................................ 24
Revocability of Proxies.................................................. 24
Solicitation of Proxies.................................................. 24
The Merger................................................................. 25
Background to the Merger................................................. 25
Data General's Reasons for the Merger.................................... 27
Recommendation of Data General's Board of Directors...................... 28
Opinion of Data General's Financial Advisor.............................. 28
Interests of Certain Data General Directors and Officers in the Merger... 33
Completion and Effectiveness of the Merger............................... 36
Structure of the Merger and Conversion of Data General Common Stock...... 36
Exchange of Data General Stock Certificates for EMC Stock Certificates... 36
United States Federal Income Tax Consequences of the Merger.............. 37
Accounting Treatment of the Merger....................................... 38
Regulatory Filings and Approvals Required to Complete the Merger......... 38
Restrictions on Sales of Shares by Affiliates of Data General and EMC.... 39
Listing on the New York Stock Exchange of the Common Stock to be Issued
by EMC.................................................................. 40
Dissenters' and Appraisal Rights......................................... 40
Delisting and Deregistration of Data General Common Stock After the
Merger.................................................................. 40
The Merger Agreement....................................................... 41
The Stock Option Agreement................................................. 47
Operations After the Merger................................................ 48
Comparative Per Share Market Price Data.................................... 49
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Unaudited Pro Forma Combined Condensed Financial Information.............. 50
Comparison of Rights of Holders of Data General Common Stock and EMC
Common Stock............................................................. 58
Capitalization.......................................................... 58
Voting Rights........................................................... 58
Number of Directors..................................................... 58
Removal of Directors.................................................... 58
Filling Vacancies on the Board of Directors............................. 59
Removal of Officers..................................................... 59
Amendments to Corporate Charter......................................... 59
Amendments to By-Laws................................................... 59
Special Stockholder Meetings............................................ 60
Action by Consent of Stockholders....................................... 60
Inspection Rights....................................................... 60
Limitation of Personal Liability of Directors........................... 61
Dividends............................................................... 62
Stockholder Rights Plan................................................. 62
Relevant Business Combination Provisions and Statutes................... 63
Control Share Acquisition Statute....................................... 63
Legal Opinions............................................................ 64
Experts................................................................... 64
Stockholder Proposals..................................................... 64
Cautionary Factors Concerning Forward-Looking Statements.................. 65
Where You Can Find More Information....................................... 65
</TABLE>
ii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. As a Holder of Data General Common Stock, What Will I Receive in the Merger?
A. If the average of the mean high and low prices of EMC common stock for each
of the 20 consecutive trading days ending on the fifth day prior to the special
meeting is $66.0625 or less, you will receive .3262 of a share of EMC common
stock in exchange for each share of Data General common stock that you own. For
example, if you own 100 shares of Data General common stock, you will receive
32 shares of EMC common stock in exchange for your shares. No fractional shares
will be issued. You will receive cash for any fractional share you would
otherwise receive.
If such average price of EMC common stock is greater than $66.0625, for each
share of Data General common stock that you own, you will receive a fraction of
a share of EMC common stock equal to $21.55 divided by such average price of
EMC common stock.
Q. What are the U.S. Federal Income Tax Consequences of the Merger?
A. Data General and EMC have structured the merger so that, in general, Data
General stockholders will not recognize gain or loss for U.S. federal income
tax purposes in the merger on the exchange of their stock, except that Data
General stockholders will generally be taxed on any cash they receive in lieu
of a fractional share. Data General and EMC will not be obligated to complete
the merger unless we both receive legal opinions to this effect. After receipt
of stockholder approval, we may not waive the requirement that legal opinions
be provided unless further stockholder approval is obtained with appropriate
disclosure.
Because tax matters are complicated, we encourage you to contact your tax
advisors to determine the particular tax consequences of the merger to you. To
review the tax consequences to Data General stockholders in greater detail, see
pages 37 through 38 of this proxy statement/prospectus.
Q. If I Am Not Going to Attend the Stockholder Meeting, Should I Return My
Proxy Card Instead?
A. Yes. Please fill out and sign your proxy card and mail it to us in the
enclosed return envelope as soon as possible. If you do not attend the special
meeting, you must return your proxy card to ensure that your shares will be
represented at the special meeting.
Q. What Do I Do If I Want to Change My Vote After I Have Mailed My Proxy Card?
A. Send in a later-dated, signed proxy card to Data General's corporate
secretary before the special meeting or attend the special meeting in person
and vote.
Q. What Do I Need to Do Now?
A. Just mail your signed proxy card in the enclosed return envelope as soon as
possible, so that your shares may be represented at the meeting. In order to
assure that your vote is obtained, please give your proxy as instructed on your
proxy card even if you currently plan to attend the meeting in person. Data
General's board of directors unanimously recommends that its stockholders vote
in favor of the merger.
Q. If My Shares Are Held in "Street Name" by My Broker, Will My Broker Vote My
Shares for Me?
A. No. If you do not provide your broker with instructions on how to vote your
"street name" shares, your broker will not be permitted to vote them on the
merger. You should therefore be sure to provide your broker with instructions
on how to vote your shares.
If you do not give voting instructions to your broker, you will not be
counted as voting for purposes of the merger unless you appear in person at the
meeting.
1
<PAGE>
Q. Should I Send in My Stock Certificates Now?
A. No. After the merger is completed, we will send you written instructions for
exchanging your stock certificates.
Q. When Do You Expect the Merger to Be Completed?
A. We are working towards completing the merger as quickly as possible.
Assuming that both Data General and EMC satisfy or waive all of the conditions
to closing contained in the merger agreement, we anticipate that the closing of
the merger will occur in the fourth calendar quarter of 1999.
Q. Whom Should I Call with Additional Questions?
A. If you have questions about the merger, you should call Data General's
Investor Relations Department at (508) 898-6544.
2
<PAGE>
[EMC logo appears here]
[Data General logo appears here]
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS
This summary may not contain all of the information that is important to
you. You should carefully read this entire document and the other documents we
refer to for a more complete understanding of the merger. In particular, you
should read the documents attached to this proxy statement/prospectus,
including the merger agreement and the stock option agreement, which are
attached as Annexes A and B, respectively. In addition, we incorporate by
reference important business and financial information about Data General
Corporation and EMC Corporation into this proxy statement/prospectus. You may
obtain the information incorporated by reference into this proxy
statement/prospectus without charge by following the instructions in the
section entitled "Where You Can Find More Information" on page 65 of this proxy
statement/prospectus.
The Companies
Data General Corporation
4400 Computer Drive
Westboro, Massachusetts 01580
(508) 898-5000
Data General common stock is traded on the New York Stock Exchange and
London Stock Exchange under the symbol "DGN."
Data General designs, manufactures, markets and supports a family of open
computer systems including mass storage products and servers. Data General's
products provide solutions for customer applications such as database
management, transaction processing, decision support, accounting and finance,
healthcare information systems, telecommunications and video storage,
manufacturing planning and control, human resources management and data
warehousing. Data General focuses on providing solutions for businesses of all
sizes, healthcare providers and government agencies, and has a worldwide sales,
service and support network.
Data General was incorporated as a Delaware corporation in 1968. Unless the
context otherwise requires, references in this proxy statement/ prospectus to
"Data General" refer to Data General Corporation and its wholly-owned
subsidiaries. Data General's corporate headquarters is located at 4400 Computer
Drive, Westboro, Massachusetts 01580, and its telephone number is (508) 898-
5000.
EMC Corporation
35 Parkwood Drive
Hopkinton, Massachusetts 01748
(508) 435-1000
EMC common stock is traded on the New York Stock Exchange under the symbol
"EMC."
EMC and its subsidiaries design, manufacture, market and support a wide
range of enterprise systems and software products and related services for the
enterprise storage market worldwide. EMC's products provide solutions for a
wide range of customer information storage requirements, from the highest
performance mission critical applications to extremely high capacity business
support applications. EMC's solutions integrate with major open systems
operating systems such as UNIX, Microsoft Corporation's Windows NT and
International Business Machines Corporation's AS/400 as well as major mainframe
operating systems such as IBM's MVS.
EMC was incorporated as a Massachusetts corporation in 1979. Unless the
context otherwise requires, references in this proxy statement/ prospectus to
"EMC" refer to EMC Corporation and its wholly-owned subsidiaries. EMC's
corporate headquarters is located at 35 Parkwood Drive, Hopkinton,
Massachusetts 01748, and its telephone number is (508) 435-1000.
Emerald Merger Corporation is a newly-formed, wholly-owned Delaware
subsidiary of EMC, formed solely for the purpose of the merger. Emerald Merger
Corporation has no material assets or liabilities and has not engaged in
material operations since its incorporation. Emerald Merger Corporation's
corporate headquarters is located at 35 Parkwood Drive, Hopkinton,
Massachusetts 01748, and its telephone number is (508) 435-1000.
3
<PAGE>
Summary of the Transaction
Structure of the Transaction (see page 36)
Data General will merge with a subsidiary of EMC and become a wholly-owned
subsidiary of EMC. Following the merger, as a stockholder of EMC, you will have
an equity stake in Data General's parent company, EMC.
Stockholder Approval (see page 23)
The holders of a majority of the outstanding shares of Data General common
stock must adopt the merger agreement. EMC stockholders are not required to
adopt the merger agreement and will not vote on the merger.
You are entitled to cast one vote per share of Data General common stock you
owned as of September 6, 1999, the record date.
Recommendation of Data General's Board of Directors (see page 28)
After careful consideration, Data General's board of directors has
unanimously approved the merger agreement and determined that the merger is
fair to you and in your best interests and unanimously recommends that you vote
for the adoption of the merger agreement.
Opinion of Data General's Financial Advisor (see page 28)
Morgan Stanley & Co., Incorporated, Data General's financial advisor,
delivered an opinion to Data General's board of directors that, subject to the
considerations described in its opinion, the exchange ratio in the merger
agreement is fair from a financial point of view to Data General's
stockholders. The complete opinion of Morgan Stanley is attached as Annex C. We
urge you to read it in its entirety.
Procedure for Casting Your Vote if You are the Record Holder of Your Shares
(see page 24)
Please mail your signed proxy card in the enclosed return envelope as soon
as possible so that your shares of Data General common stock may be represented
at the special meeting. If you do not include instructions on how to vote your
properly executed proxy, your shares will be voted FOR adoption of the merger
agreement.
Procedure for Casting Your Vote if Your Shares are Held by Your Broker in
Street Name (see page 24)
Your broker will vote your shares only if you provide instructions on how to
vote by following the information provided to you by your broker. If you do not
provide your broker with voting instructions, your shares will not be voted at
the Data General special meeting and it will have the same effect as voting
against adoption of the merger agreement. Please mail your signed voting
instruction form in the enclosed envelope as soon as possible so that your
shares of Data General common stock may be represented at the special meeting.
Procedure for Changing Your Vote (see page 24)
If you want to change your vote, just send the Secretary of Data General a
later-dated, signed proxy card before the special meeting or attend the special
meeting in person. You may also revoke your proxy by sending written notice to
the Secretary of Data General before the special meeting.
Procedure for Exchanging Your Stock Certificates (see page 36)
After the merger is completed, we will send you written instructions for
exchanging your Data General stock certificates for EMC stock certificates. Do
not send your Data General stock certificates now.
Completion and Effectiveness of the Merger (see page 36)
We will complete the merger when all of the conditions to completion of the
merger are satisfied or waived. The merger will become effective when we file a
certificate of merger with the State of Delaware.
We are working toward completing the merger as quickly as possible. We
expect to complete the merger during the fourth calendar quarter of 1999.
4
<PAGE>
Conditions to Completion of the Merger (see page 44)
Our obligations to complete the merger are subject to the prior satisfaction
or waiver of several conditions. If either EMC or Data General waives any
conditions, Data General will consider the facts and circumstances at that time
and make a determination as to whether a resolicitation of proxies from Data
General stockholders is required. The conditions that must be satisfied or
waived before the completion of the merger include the following:
. the merger agreement must be adopted by Data General stockholders
. the applicable waiting periods under antitrust laws must expire or be
terminated
. no injunction or order preventing the completion of the merger or
prohibiting or limiting EMC's ownership of Data General may be in
effect or threatened
. Data General's and EMC's representations and warranties in the merger
agreement must be true and correct such that there are no material
adverse changes in their respective businesses
. Data General and EMC must have materially complied with their
agreements in the merger agreement
. Data General must obtain any required approvals and consents from third
parties relating to the merger
. Data General and EMC must each receive an opinion of tax counsel to the
effect that the merger will qualify as a tax-free reorganization
. EMC must be advised by its independent accountants that they concur
with EMC's conclusion that the merger can properly be accounted for as
a "pooling of interests" business combination
. the shares of EMC common stock to be issued to Data General
stockholders in the merger must have been approved for listing on the
New York Stock Exchange
Termination of the Merger Agreement (see page 45)
The merger agreement may be terminated under certain circumstances at any
time before the completion of the merger, as summarized below.
The merger agreement may be terminated by Data General's and EMC's mutual
consent.
The merger agreement may also be terminated by Data General or EMC if the
conditions to completion of the merger would not be satisfied because of a
breach or failure to perform an agreement in the merger agreement by the other
party or a representation or warranty of the other party in the merger
agreement becomes untrue, either of which is not cured within 10 business days
of notice.
In addition, the merger agreement may be terminated by Data General or EMC
under any of the following circumstances:
. if the merger is not completed by February 29, 2000
. if a final court order prohibiting the merger is issued and is not
appealable
. if the Data General stockholders do not adopt the merger agreement at
the special meeting
The merger agreement may be terminated by Data General if Data General
accepts a superior acquisition proposal pursuant to the merger agreement and
pays the termination fee to EMC.
Furthermore, the merger agreement may be terminated by EMC:
. if Data General or any of its officers or directors participate in
discussions or negotiations in breach of the merger agreement
. if Data General or any of its officers or directors are otherwise in
material breach of their non-solicitation obligations under the merger
agreement
. if Data General's board of directors fails to recommend adoption of the
merger
5
<PAGE>
agreement by the stockholders of Data General or does not call, give
notice of, convene and hold the special meeting of Data General
stockholders to vote on the merger agreement
. if Data General is prepared to accept a superior proposal for
acquisition from a third party
Payment of Termination Fee (see page 46)
Data General has agreed to pay EMC a termination fee of $44,630,000 if the
merger agreement is terminated in any of the following circumstances:
. if the merger agreement is terminated by EMC because Data General's
board of directors takes any of the actions described in the last
paragraph under "Termination of the Merger Agreement" above
. if the merger agreement is terminated because Data General's
stockholders do not adopt the merger agreement or the merger is not
completed by February 29, 2000 and
-- a transaction such as a merger or a sale of significant assets
involving Data General and a party other than EMC is publicly
proposed prior to the date of termination and
-- Data General enters into an agreement for or completes such a
transaction within one year following termination of the merger
agreement.
No Other Negotiations Involving Data General (see page 42)
Until the merger is completed or the merger agreement is terminated, Data
General has agreed not to directly or indirectly take any of the following
actions:
. solicit, initiate, facilitate or encourage any inquiries or proposals
that constitute or could reasonably be expected to lead to a proposal
to acquire Data General, or significant assets of Data General, by any
party other than EMC
. with respect to any person or entity that is pursuing such a
transaction:
-- engage in negotiations or discussions
-- provide any non-public information relating to Data General
However, Data General may engage in these acts, other than solicitation,
initiation, facilitation or encouragement, if both of the following occur:
. Data General's board of directors determines in its good faith judgment
based on the advice of a financial advisor of nationally recognized
reputation that a particular proposal will result in a transaction
providing aggregate value greater than the merger and that the
transaction is reasonably capable of being financed
. Data General's board of directors determines in good faith after
consultation with outside counsel that the failure to engage in the
prohibited negotiations or discussions or provide non-public
information is a breach of the board's fiduciary duties under
applicable law
EMC Required Data General to Enter Into a Stock Option Agreement Which May
Discourage Third Parties Who are Interested in Acquiring a Stake in Data
General (see page 47)
Data General entered into a stock option agreement with EMC which grants EMC
the option to buy up to 10,177,850 shares of Data General common stock, which
represents approximately 19.9% of the shares of Data General common stock
outstanding as of August 6, 1999, or approximately 16.6% after issuance of the
shares of Data General common stock subject to the option. The exercise price
of the option is $19.58 per share.
EMC required Data General to grant the option as a prerequisite to entering
into the merger agreement. The option may discourage third parties who are
interested in acquiring a significant stake in
6
<PAGE>
Data General and is intended by EMC to increase the likelihood that the merger
will be completed. EMC's total profit from the option agreement and the
termination fee is limited to $61,363,000.
The option is not currently exercisable, and EMC may only exercise the
option if the merger agreement is terminated in circumstances similar to those
in which the termination fee is payable. If the merger agreement is terminated
under circumstances in which the termination fee is not payable, the option
will terminate and may not be exercised by EMC.
We encourage you to read the stock option agreement in its entirety.
Interests of Certain Persons in the Merger (see page 33)
In addition to their interests as stockholders, the directors and executive
officers of Data General have interests in the merger that are different than,
or in addition to, your interests. These interests exist because of rights they
have pursuant to the terms of benefit and compensation plans maintained by Data
General and, in the case of the executive officers, pursuant to the terms of
severance agreements.
In addition, EMC will indemnify the officers and directors of Data General
for events occurring before the merger.
The Data General board of directors was aware of and discussed these
potentially conflicting interests when it approved the merger.
US Federal Income Tax Consequences of the Merger (see page 37)
We have structured the merger so that in general, EMC, Data General and
their respective stockholders will not recognize gain or loss for United States
federal income tax purposes in the merger, except for taxes payable because of
cash received by Data General stockholders instead of fractional shares. It is
a condition to the merger that we receive legal opinions to this effect.
Because tax matters are complicated, we encourage you to contact your tax
advisors to determine the particular tax consequences of the merger to you.
Accounting Treatment of the Merger (see page 38)
We intend to account for the merger as a "pooling of interests" business
combination. It is a condition to completion of the merger that EMC be advised
in writing by PricewaterhouseCoopers LLP that they concur with EMC's conclusion
that the merger can properly be accounted for as a "pooling of interests"
business combination, although this condition may be waived. Under the "pooling
of interests" method of accounting, our historical recorded assets and
liabilities will be carried forward to the combined company at their recorded
amounts. In addition, the operating results of the combined company will
include our operating results for the entire fiscal year in which the merger is
completed, and our historical reported operating results for prior periods will
be combined and restated as the operating results of the combined company.
Antitrust Approval Required to Complete the Merger (see page 38)
The merger is subject to antitrust laws. We have made the required filings
with the Department of Justice and the Federal Trade Commission, as well as
with foreign regulatory agencies. However, we are not permitted to complete the
merger until the applicable waiting periods have expired or terminated. We
believe that we have substantially complied with all requests for information
from the Department of Justice and the Federal Trade Commission. The Department
of Justice or the Federal Trade Commission, as well as a foreign regulatory
agency or government, state or private person, may challenge the merger at any
time before its completion.
Restrictions on the Ability to Sell EMC Stock (see page 39)
All shares of EMC common stock received by you in connection with the merger
will be freely transferable unless you are considered an "affiliate" of either
Data General or EMC under the Securities Act of 1933. Shares of EMC common
stock held by our affiliates may only be sold pursuant to a registration
statement or exemption under the Securities Act. In addition, such affiliates
are further
7
<PAGE>
restricted from selling their shares pursuant to the requirements of "pooling
of interests" accounting treatment.
You Do Not Have Dissenters' or Appraisal Rights (see page 40)
Under Delaware law, you are not entitled to dissenters' or appraisal rights
in the merger.
Where You Can Find More Information (see page 65)
If you have any questions about the merger, please call Data General's
Investor Relations Department at (508) 898-6544.
Forward-Looking Statements in this Proxy Statement/Prospectus (see page 65)
This proxy statement/prospectus and the documents incorporated by reference
into this proxy statement/prospectus contain forward-looking statements within
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995 with respect to Data General's and EMC's financial conditions, results of
operations and businesses and the expected impact of the merger on EMC's
financial performance. Words such as "anticipates," "expects," "intends,"
"plans," "believes," "seeks," "estimates," and similar expressions identify
forward-looking statements. These forward-looking statements are not guarantees
of future performance and are subject to risks and uncertainties that could
cause actual results to differ materially from the results contemplated by the
forward-looking statements. In evaluating the merger, you should carefully
consider the discussion of risks and uncertainties in the section entitled
"Risk Factors" beginning on page 14 of this proxy statement/prospectus.
8
<PAGE>
Selected Financial Data
The following tables present (1) selected historical financial data of EMC,
(2) selected historical financial data of Data General and (3) selected
unaudited pro forma combined financial data of EMC, which reflect the proposed
transaction and assumes the "pooling of interests" method of accounting.
The selected historical financial data of EMC has been derived from the
audited historical consolidated financial statements and related notes of EMC
for each of the fiscal years in the five-year period ended December 31, 1998
and the unaudited consolidated financial statements for the six months ended
June 30, 1999 and June 30, 1998. The selected historical financial data of Data
General has been derived from the audited historical consolidated financial
statements and related notes of Data General for each of the years in the five-
year period ended September 26, 1998 and the unaudited consolidated financial
statements for the nine months ended June 26, 1999 and June 27, 1998. The
historical information is only a summary, and you should read it in conjunction
with the historical financial statements and related notes contained in the
annual and quarterly reports for EMC and Data General which have been
incorporated by reference into, or mailed together with, this proxy
statement/prospectus. The selected unaudited pro forma combined financial data
has been derived from the unaudited pro forma combined condensed financial
information included elsewhere in this proxy statement/prospectus and should be
read in conjunction with the unaudited pro forma combined condensed financial
information and related notes.
9
<PAGE>
EMC Corporation
Selected Historical Consolidated Financial Data
(in millions, except per share data)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
----------------- ----------------------------------------------------------------
June 30, June 30, December 31, December 31, December 31, December 30, December 31,
1999 1998 1998 1997 1996 1995 1994
-------- -------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................ $2,420 $1,780 $3,974 $2,938 $2,274 $1,921 $1,377
Operating income........ 640 411 982 662 497 436 351
Net income.............. 510 336 793 539 386 327 251
Net income per share,
basic(1)............... $ 0.50 $ 0.34 $ 0.79 $ 0.55 $ 0.42 $ 0.36 $ 0.32
Net income per share,
diluted(1)............. $ 0.47 $ 0.32 $ 0.75 $ 0.52 $ 0.39 $ 0.34 $ 0.27
Weighted average shares,
basic(1)............... 1,011 996 1,000 987 927 901 776
Weighted average shares,
diluted(1)............. 1,091 1,073 1,078 1,051 997 993 934
</TABLE>
<TABLE>
<CAPTION>
As of
----------------------------------------------------------------
As of December 31, December 31, December 31, December 30, December 31,
June 30, 1999 1998 1997 1996 1995 1994
------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets............ $5,269 $4,569 $3,490 $2,294 $1,746 $1,318
Long-term obligations... 505 539 558 191 246 286
Stockholders' equity.... 3,887 3,324 2,376 1,637 1,140 728
</TABLE>
- --------
(1) All share and per share amounts have been restated to reflect all stock
splits.
10
<PAGE>
Data General Corporation
Selected Historical Consolidated Financial Data
(in millions, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
----------------- ---------------------------------------------------------------------
June 26, June 27, September 26, September 27, September 28, September 30, September 24,
1999 1998 1998 1997 1996 1995 1994
-------- -------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Total revenues.......... $1,077 $1,078 $1,462 $1,533 $1,322 $1,159 $1,121
Income (loss) from
operations(1).......... 3 (154) (149) 63 37 (76) (80)
Net income (loss)(1).... 15 (156) (152) 56 28 (47) (88)
Net income (loss) per
share, basic(1)........ $ 0.30 $(3.19) $(3.11) $ 1.35 $ 0.73 $(1.26) $(2.45)
Net income (loss) per
share, diluted(1)...... $ 0.30 $(3.19) $(3.11) $ 1.26 $ 0.68 $(1.26) $(2.45)
Weighted average shares,
basic.................. 50 49 49 41 39 37 36
Weighted average shares,
diluted................ 51 49 49 44 41 37 36
</TABLE>
<TABLE>
<CAPTION>
As of
---------------------------------------------------------------------
As of September 26, September 27, September 28, September 30, September 24,
June 26, 1999 1998 1997 1996 1995 1994
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets............ $1,018 $1,065 $1,135 $860 $832 $822
Long-term debt.......... 213 213 213 150 153 157
Stockholders' equity.... 411 385 519 329 280 309
</TABLE>
- --------
(1) In 1998, Data General incurred a restructuring charge totaling $135,
including approximately $82 related to employee termination benefits, asset
write-downs, and other exit costs which Data General recorded in operating
expenses and approximately $53 for capitalized software and inventory
write-downs included in cost of revenues. Also includes restructuring
charges of $43 and $35 recorded in operating expenses in 1995 and 1994,
respectively.
11
<PAGE>
EMC Corporation
Selected Unaudited Pro Forma Combined Financial Data
(in millions, except per share data)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
----------------- --------------------------------------
June 30, June 30, December 31, December 31, December 31,
1999 1998 1998 1997 1996
-------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................ $3,131 $2,493 $5,436 $4,488 $3,617
Operating income(2)..... 637 253 835 717 540
Net income(2)........... 509 176 654 588 420
Net income per share,
basic(1)(2)(3)......... $ 0.49 $ 0.17 $ 0.64 $ 0.59 $ 0.45
Net income per share,
diluted(1)(2)(3)....... $ 0.46 $ 0.17 $ 0.61 $ 0.56 $ 0.42
Weighted average shares,
basic(1)(3)............ 1,027 1,012 1,016 1,002 940
Weighted average shares,
diluted(1)(3).......... 1,108 1,089 1,095 1,066 1,011
</TABLE>
<TABLE>
<CAPTION>
As of
As of --------------------------------------
June 30, December 31, December 31, December 31,
1999 1998 1997 1996
-------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance Sheet Data:
Total assets.................... $6,287 $5,608 $4,602 $3,158
Long-term obligations........... 718 752 771 339
Stockholders' equity............ 4,278 3,729 2,901 1,978
</TABLE>
- --------
(1) All share and per share amounts have been restated to reflect all stock
splits.
(2) In 1998, Data General incurred a restructuring charge totaling $135,
including approximately $82 related to employee termination benefits, asset
write-downs, and other exit costs which Data General recorded in operating
expenses and approximately $53 for capitalized software and inventory
write-downs included in cost of revenues. On a pro forma combined basis,
net income for the six months ended June 30, 1998 and the twelve-month
period ended December 31, 1998 before these non-recurring charges was $0.29
and $0.72 per common share on a diluted basis, respectively.
(3) The unaudited pro forma combined share and per share data are based on Data
General stockholders receiving 0.3262 of a share of EMC common stock for
each share of Data General common stock. The actual exchange ratio may be
less than 0.3262.
12
<PAGE>
Unaudited Comparative Per Share Information
<TABLE>
<CAPTION>
As of or for As of or for As of or for the year ended
the six months the six --------------------------------------
ended months ended December 31, December 31, December 31,
June 30, 1999 June 30, 1998 1998 1997 1996
-------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
EMC Historical
Net income per common
share, basic(3)........ $0.50 $0.34 $0.79 $0.55 $0.42
Net income per common
share, diluted(3)...... $0.47 $0.32 $0.75 $0.52 $0.39
Book value per common
share.................. $3.84 $2.77 $3.30 $2.39 $1.72
</TABLE>
<TABLE>
<CAPTION>
As of or for As of or for As of or for the year ended
the six months the six --------------------------------------
ended months ended December 26, December 27, December 28,
June 26, 1999 June 27, 1998 1998 1997 1996
-------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Data General
Historical(1)
Net income (loss) per
common share,
basic(2)............... $(0.03) $ (3.26) $(2.83) $ 1.12 $0.86
Net income (loss) per
common share,
diluted(2)............. $(0.03) $ (3.26) $(2.83) $ 1.06 $0.82
Book value per common
share.................. $ 8.11 $ 7.70 $ 8.10 $10.77 $8.58
</TABLE>
<TABLE>
<CAPTION>
As of or for As of or for As of or for the year ended
the six months the six --------------------------------------
ended months ended December 31, December 31, December 31,
June 30, 1999 June 30, 1998 1998 1997 1996
-------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Pro Forma Combined
Net income per common
share, basic(2)(3)..... $0.49 $0.17 $0.64 $0.59 $0.45
Net income per common
share,
diluted(2)(3).......... $0.46 $0.17 $0.61 $0.56 $0.42
Book value per common
share.................. $4.15 $3.10 $3.64 $2.87 $2.05
</TABLE>
<TABLE>
<CAPTION>
As of or for As of or for As of or for the year ended
the six months the six --------------------------------------
ended months ended December 26, December 27, December 28,
June 26, 1999 June 27, 1998 1998 1997 1996
-------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Data General Per Share
Equivalents
Net income per common
share,
basic(2)(3)(4)......... $0.16 $0.06 $0.21 $0.19 $0.15
Net income per common
share,
diluted(2)(3)(4)....... $0.15 $0.05 $0.20 $0.18 $0.14
Book value per common
share.................. $1.35 $1.01 $1.19 $0.94 $0.67
</TABLE>
- --------
(1) The information for Data General for the six months ended June 26, 1999 and
June 27, 1998 and the twelve-month periods ending December 26, 1998,
December 27, 1997 and December 28, 1996 has been derived from Data
General's unaudited historical financial statements. This historical
financial information has been adjusted to conform to EMC's fiscal year.
(2) In 1998, Data General incurred a restructuring charge totaling $135,
including approximately $82 related to employee termination benefits, asset
write-downs, and other exit costs which Data General recorded in operating
expenses and approximately $53 for capitalized software and inventory
write-downs included in cost of revenues. On a pro forma combined basis,
net income for the six months ended June 30, 1998 and the twelve-month
period ended December 31, 1998 before these non-recurring charges was $0.29
and $0.72 per common share on a diluted basis, respectively.
(3) All share and per share amounts have been restated to reflect all stock
splits.
(4) The unaudited Data General pro forma per share equivalents are calculated
by multiplying the pro forma combined per share amounts by the exchange
ratio of 0.3262.
13
<PAGE>
RISK FACTORS
By voting in favor of the merger, you will be choosing to invest in EMC
common stock. In addition to the other information mailed with, contained in
or incorporated by reference into this proxy statement/prospectus, you should
carefully consider the following risk factors in determining whether to
approve the merger agreement.
Risks Relating to the Merger
Benefits of combining Data General and EMC may not be realized.
Data General and EMC entered into the merger agreement with the expectation
that the merger will result in certain benefits including, among other things,
benefits relating to enhanced revenues, product margins, technology and human
resources. There can be no assurance that Data General and EMC will realize
these benefits or that the merger will not result in the deterioration or loss
of significant business of the combined company. Costs incurred and
liabilities assumed in connection with the merger, including pending and
threatened disputes and litigation, could have a material adverse effect on
our business, financial condition and operating results.
EMC may have difficulty and incur substantial costs in integrating Data
General.
Data General and EMC entered into the merger agreement with the expectation
that the merger will result in certain benefits including, without limitation,
cost savings, operating efficiencies and other synergies. We cannot assure
you, however, that EMC will realize any of the anticipated benefits of the
merger. Integrating Data General and EMC will be a complex, time-consuming and
expensive process. Before the merger, Data General and EMC operated
independently, each with its own business, products, customers, employees,
culture and systems.
There may be substantial difficulties, costs and delays involved in
integrating Data General and EMC. These factors may include:
. potential difficulty in leveraging the technologies of the combined
company
. potential inefficiencies in manufacturing and shipping products to the
customers of the combined company
. perceived adverse changes in product offerings available to customers
or customer service standards
. costs and delays in implementing common systems and procedures and
costs and delays caused by communication difficulties
. diversion of management resources from the business of the combined
company
. potential incompatibility of business cultures and
. perceived uncertainty in career opportunities, compensation levels and
benefits available to employees
After the merger, Data General and EMC may combine many operations and
functions using common:
. information and communication systems
. operating procedures
. financial controls and
. human resource practices, including training, professional development
and benefit programs
14
<PAGE>
Any one or all of these factors may cause increased operating costs, lower
than anticipated financial performance or the loss of customers and employees.
Many of these factors are also outside the control of either company. The
failure to timely and efficiently integrate Data General and EMC could have a
material adverse effect on the combined company's business, financial condition
and operating results.
The value of the merger consideration will fluctuate with EMC's stock price.
At the effective time of the merger, each outstanding share of Data General
common stock will be exchanged for .3262 of a share of EMC common stock. This
exchange ratio will be adjusted if the average of the mean high and low trading
prices for a share of EMC common stock for each of the 20 trading days ending
on the fifth day prior to the date of the Data General stockholders' special
meeting is greater than $66.0625. Accordingly, although holders of Data General
common stock will know how many shares of EMC common stock they will receive in
connection with the merger when the vote on the merger proposal is cast at the
special meeting, they will not know the actual market value of such EMC common
stock. Stock price variations could be the result of changes in the business,
operations or prospects of EMC, Data General or the combined company, market
assessments of the likelihood that the merger will be consummated within the
anticipated time, general market and economic conditions and other factors both
within and beyond the control of EMC or Data General. Recent market prices of
EMC common stock and Data General common stock are set forth on page 49.
We encourage Data General stockholders to obtain current market quotations
for EMC common stock and Data General common stock. The future market prices of
EMC common stock and Data General common stock cannot be guaranteed or
predicted.
The merger may result in a loss of customers, suppliers and employees.
Certain customers, including end users, resellers and original equipment
manufacturers, may seek alternative sources of product and/or service after the
announcement of the merger due to, among other reasons, a desire not to do
business with the combined company or perceived concerns that the combined
company may not continue to support and develop certain product lines.
Management of Data General and EMC anticipate that the combined company could
experience some customer attrition by reason of announcement of the merger or
after the merger. Difficulties in combining operations can also result in the
loss of key employees or suppliers and potential disputes or litigation with
customers, suppliers, resellers or others. There can be no assurance that any
steps by management to counter such potential increased customer, supplier or
employee attrition will be effective. Failure by management to control
attrition could have a material adverse effect on the combined company's
business, financial condition and operating results.
EMC's failure to qualify for "pooling of interests" accounting treatment would
create the need to account for the purchase of goodwill, which will negatively
impact the future earnings of EMC.
The merger is intended to be treated for accounting purposes as a "pooling
of interests." If, however, this expected accounting treatment does not occur
and the merger is nevertheless consummated, EMC will have to account for its
purchase of Data General's goodwill and other intangible assets. Purchase
accounting will negatively affect EMC's earnings, as goodwill and other
intangible assets would be amortized over a period of years and cause decreased
earnings for each quarter during those years. Although EMC will receive a
letter from its independent public accountants concurring with EMC's management
that the merger will qualify for "pooling of interests" accounting treatment
and Data General will receive a letter from its independent public accountants
concurring with Data General's management that no conditions exist that would
preclude Data General's ability to be a party in the merger to be accounted for
as a "pooling of interests," such opinions are not binding on the Securities
and Exchange Commission and do not take into account transactions that may
occur subsequent to the merger date that would disallow "pooling of interests"
accounting.
15
<PAGE>
Substantial expenses will be incurred and payments made even if the merger is
not consummated.
Stockholders must always bear in mind that the merger may not be
consummated. Whether or not the merger is consummated, Data General and EMC
will incur substantial expenses in pursuing the merger. In addition, if the
merger is terminated under certain circumstances, Data General may be required
to pay EMC termination fees under the merger agreement in an amount up to
$44,630,000, and EMC may be entitled to purchase up to 10,177,850 shares of
Data General common stock at a per share price of $19.58, subject to certain
limitations. EMC's total profit from the option agreement and the termination
fee is limited to $61,363,000. This option could dilute Data General's existing
stockholders and discourage other potential acquirors from seeking to enter
into a business combination with Data General. See "The Merger Agreement--
Payment of Termination Fee" on page 46 and "The Stock Option Agreement" on page
47.
Risks Relating to the Investment in EMC
If EMC's suppliers do not meet its quality or delivery requirements, EMC could
have decreased revenues and earnings.
EMC purchases several sophisticated components and products from a limited
number of qualified suppliers, certain of which are its competitors. These
components and products include disk drives, high density memory components and
power supplies. EMC has experienced delivery delays from time to time because
of high industry demand or the inability of some vendors to consistently meet
its quality requirements. If any of its suppliers were to fail to meet the
quality or delivery requirements needed to satisfy customer orders for its
products, EMC could lose some time-sensitive customer orders and could have
significantly decreased revenues and earnings.
Additionally, EMC periodically transitions its product line to new disk
drive technologies. The importance of transitioning its customers smoothly to
new product lines, along with its historically uneven pattern of quarterly
sales, intensifies the risk that a supplier who fails to meet its delivery or
quality requirements will have an adverse impact on EMC's revenues and
earnings.
EMC may be unable to keep pace with the rapid changes in its industry.
The computer storage market is characterized by rapid technological change,
frequent new product introductions and evolving industry standards. Customer
preferences in this market are difficult to predict and changes in those
preferences could render EMC's current or future products unmarketable. The
introduction of products embodying new technologies by EMC's competitors and
the emergence of new industry standards could render existing products as well
as new products being introduced obsolete and unmarketable. In addition, as a
significant number of EMC's products are designed to be fully compatible with
the computers and operating systems of IBM and others, EMC's business could
also be adversely affected by modifications in the design or configuration of
these computer systems.
EMC's success depends upon its ability to address the increasingly
sophisticated needs of customers, to enhance existing products and to develop
and introduce, on a timely basis, new competitive products (including
enhancements to existing hardware and software) that keep pace with
technological developments and emerging industry standards, including
developments and standards with respect to the Internet. Risks inherent in the
transition to new products include the difficulty in forecasting customer
demand accurately, the inability to expand production to meet demand for new
products or contract production of products being replaced and delays in
initial shipments of new products. Further risks inherent in new product
introductions include the uncertainty of price-performance relative to products
of competitors, competitors' responses to the introductions and the desire by
customers to evaluate new products for longer periods of time. There can be no
assurance that EMC will be able to effectively manage the transitions to new
products or new technologies. If EMC cannot successfully identify, manage,
develop, manufacture or market product enhancements or new products, its
business will be materially and adversely affected.
16
<PAGE>
The markets EMC serves are highly competitive, and EMC may lack financial or
other resources to compete effectively.
There is strong competition in the computer storage industry. EMC competes
with many companies, certain of which have substantially greater financial,
marketing and technological resources, larger distribution capabilities,
earlier access to customers and a greater overall market presence than EMC.
EMC's business may be adversely affected by the announcement or introduction of
new products by its competitors, including hardware, software and services,
price reductions of its competitors' equipment or services and the
implementation of certain marketing strategies by its competitors.
Competitive pricing could adversely affect EMC's revenues and earnings.
Competitive pricing pressures exist in the computer storage market and have
had and may in the future have an adverse effect on EMC's revenues and
earnings. There also has been and may continue to be a willingness on the part
of certain competitors to reduce prices in order to preserve or gain market
share, which EMC cannot foresee. EMC believes that pricing pressures are likely
to continue.
To date, EMC has been able to manage its component and product design costs.
However, there can be no assurance that EMC will be able to continue to achieve
reductions in component and product design costs. The relative and varying
rates of product price and component cost declines could have an adverse effect
on EMC's earnings.
Changes in foreign laws, rules or regulations or other conditions could impair
EMC's international sales.
A substantial portion of EMC's revenues is derived from sales outside the
United States. In addition, a substantial portion of EMC's products is
manufactured outside of the United States. Accordingly, EMC's future results
could be adversely affected by a variety of factors, including changes in
foreign currency exchange rates, changes in a specific country's or region's
political or economic conditions, trade restrictions, import or export
licensing requirements, the overlap of different tax structures or changes in
international tax laws, changes in regulatory requirements, compliance with a
variety of foreign laws and regulations and longer payment cycles in certain
countries.
Risks associated with EMC's indirect channels of distribution may adversely
affect EMC's financial results.
EMC derives a significant percentage of its product revenues from indirect
channels of distribution, including resellers, systems integrators and
distributors. EMC's financial results could be adversely affected if its
contracts with its indirect channels of distribution were terminated, if EMC's
relationship with such indirect channels were to deteriorate or if the
financial condition of its indirect channels were to weaken. There can be no
assurance that EMC will be successful in maintaining or expanding these
indirect channels of distribution. If EMC is not successful, EMC may lose
certain sales opportunities. Furthermore, the partial reliance on indirect
channels of distribution may materially reduce the visibility to management of
potential orders, thereby making it more difficult to accurately forecast such
orders. In addition, there can be no assurance that indirect channels will not
develop or market products in competition with EMC in the future.
17
<PAGE>
Historically uneven sales patterns could reduce EMC's quarterly revenues and
earnings.
EMC's quarterly sales have historically reflected an uneven pattern in which
a disproportionate percentage of a quarter's total sales occur in the last
month and weeks and days of each quarter. This pattern makes prediction of
revenues, earnings and working capital for each financial period especially
difficult and uncertain and increases the risk of unanticipated variations in
quarterly results and financial condition. The uneven sales pattern is a result
of many factors including:
. the significant size of EMC's average product price in relation to its
customers' budgets, resulting in long lead times for customers'
budgetary approval, which tends to be given late in a quarter
. the tendency of customers to wait until late in a quarter to commit to
purchase in the hope of obtaining more favorable pricing from one or
more competitors seeking their business
. the fourth quarter influence of customers spending their remaining
capital budget authorization prior to new budget constraints in the
first quarter of the following year
. seasonal influences
EMC's uneven sales pattern also makes it extremely difficult to predict
near-term demand and adjust manufacturing capacity accordingly. If orders vary
substantially from the predicted demand, the ability to assemble, test and ship
orders received in the last weeks and days of each quarter may be limited,
which could adversely affect quarterly revenues and earnings.
In addition, EMC's revenues in any quarter are substantially dependent on
orders booked and shipped in that quarter, and its backlog at any particular
time is not necessarily indicative of future sales levels. This is because:
. EMC manufactures its products on the basis of its forecast of near-
term demand and maintains inventory in advance of receipt of firm
orders from customers
. EMC generally ships products shortly after receipt of the order
. customers may reschedule orders with little or no penalty
These are additional factors making the prediction of revenues extremely
difficult. Further, any unexpected decline in revenues without a corresponding
and timely slowdown in expenses could have a material adverse effect on EMC's
business, results of operations or financial condition.
EMC may have difficulty managing its growth.
EMC has a history of rapid growth. EMC's future operating results will
depend on its management's ability to manage growth, including, but not limited
to, hiring and retaining significant numbers of qualified employees,
forecasting revenues, controlling expenses and managing its assets. An
unexpected decline in the growth rate of revenues without a corresponding and
timely reduction in expense growth or a failure to manage other aspects of
growth could have a material adverse effect on EMC's business, results of
operations or financial condition.
EMC's business may suffer if it is unable to attract and retain key personnel.
EMC's continued growth and success depends to a significant extent on the
continued service of senior management and other key employees and the hiring
of new qualified employees. Competition for highly skilled personnel is intense
in the high technology industry. There can be no assurance that EMC will be
successful in continuously recruiting new personnel or in retaining existing
personnel. The loss of one or more key employees or EMC's inability to attract
additional qualified employees or retain other employees could have a material
adverse effect on EMC's business, results of operations or financial condition.
18
<PAGE>
Manufacturing risks could directly impair EMC's financial results.
EMC's products operate near the limits of electronic and physical
performance and are designed and manufactured with relatively small tolerances.
If flaws in design, production, assembly or testing were to occur by EMC or its
suppliers, EMC could experience a rate of failure in its products that would
result in substantial repair or replacement costs and potential damage to EMC's
reputation. Continued improvement in manufacturing capabilities and control of
material and manufacturing quality and costs are critical factors in the future
growth of EMC. EMC frequently revises and updates manufacturing and test
processes to address engineering and component changes to its products and
evaluates the reallocation of manufacturing resources among its facilities.
There can be no assurance that EMC's efforts to monitor, develop and implement
appropriate test and manufacturing processes for its products will be
sufficient to permit EMC to avoid a rate of failure in its products that
results in substantial delays in shipment, significant repair or replacement
costs and potential damage to EMC's reputation, any of which could have a
material adverse effect on EMC's business, results of operations or financial
condition.
EMC's business could be materially adversely affected as a result of the risks
associated with acquisitions.
As part of its business strategy, EMC seeks to acquire businesses that offer
complementary products, services or technologies. These acquisitions are
accompanied by the risks commonly encountered in an acquisition of a business
including, among other things:
. the effect of the acquisition on its financial and strategic position
. the failure of an acquired business to further EMC's strategies
. the difficulty of integrating the acquired business
. the diversion of EMC's management's attention from other business
concerns
. the impairment of relationships with customers of the acquired
business
. the potential loss of key employees of the acquired company
. the maintenance of uniform company-wide standards, procedures and
policies
These factors could have a material adverse effect on EMC's revenues and
earnings. EMC expects that the consideration paid for future acquisitions, if
any, could be in the form of cash, stock, rights to purchase stock or a
combination of these. To the extent that EMC issues shares of stock or other
rights to purchase stock in connection with any future acquisition, existing
stockholders will experience dilution and potentially decreased earnings per
share.
EMC's business could be materially adversely affected as a result of the risks
associated with alliances.
EMC has alliances with leading software, relational database and enterprise
application companies, and EMC plans to continue its strategy of developing key
alliances. There can be no assurance that EMC will be successful in its ongoing
strategic alliances or that EMC will be able to find further suitable business
relationships as it develops new products. EMC works with these leading
software, relational database and enterprise application companies to integrate
its storage systems with their software applications. Any failure to continue
or expand such relationships could have a material adverse effect on EMC's
business, results of operations or financial condition.
There can be no assurance that companies with which EMC has strategic
alliances, certain of which have substantially greater financial, marketing and
technological resources than EMC, will not develop or market products in
competition with EMC in the future, discontinue their alliances with EMC or
form alliances with EMC's competitors.
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EMC's business may suffer if it cannot protect its intellectual property.
EMC generally relies upon patent, copyright, trademark and trade secret laws
and contract rights in the United States and in other countries to establish
and maintain EMC's proprietary rights in its technology and products. However,
there can be no assurance that any of EMC's proprietary rights will not be
challenged, invalidated or circumvented. In addition, the laws of certain
countries do not protect EMC's proprietary rights to the same extent as do the
laws of the United States. Therefore, there can be no assurance that EMC will
be able to adequately protect its proprietary technology against unauthorized
third-party copying or use, which could adversely affect EMC's competitive
position. Further, there can be no assurance that EMC will be able to obtain
licenses to any technology that it may require to conduct its business or that,
if obtainable, such technology can be licensed at a reasonable cost.
From time to time, EMC receives notices from third parties claiming
infringement by EMC's products of third-party patent or other intellectual
property rights. Responding to any such claim, regardless of its merit, could
be time-consuming, result in costly litigation, divert management's attention
and resources and cause EMC to incur significant expenses. In the event there
is a temporary or permanent injunction entered prohibiting EMC from marketing
or selling certain of its products or a successful claim of infringement
against EMC requiring EMC to pay royalties to a third party, and EMC fails to
develop or license a substitute technology, EMC's business, results of
operations or financial condition could be materially adversely affected.
Year 2000 problems may disrupt EMC's business.
The information provided below constitutes a "Year 2000 Readiness
Disclosure" under the Year 2000 Information and Readiness Disclosure Act.
Certain computer hardware and software is unable to appropriately interpret
the upcoming calendar year 2000. These systems and software refer to years in
terms of their final two digits only and may interpret the year 2000 as the
year 1900 in error. Therefore, they will need to be modified prior to the year
2000 in order to remain functional. EMC has established a Year 2000 program
that involves assessing EMC's key hardware and software, assessing Year 2000
compliance by third parties with which EMC has a material relationship,
assessing Year 2000 compliance of EMC's products, and modifying and testing
hardware and software in EMC's internal systems and products, where necessary.
EMC has completed an assessment of the hardware and software in its core
business information systems and has substantially completed the necessary
modifications. EMC has also completed an assessment of the hardware and
software in other information systems used in its operations and has
substantially completed the necessary modifications. In addition, EMC has
completed an assessment of the hardware and software used in its business that
is not supported by EMC's information systems department. The necessary
modifications have been substantially completed for such hardware and software.
EMC has contacted key vendors and suppliers and other third parties whose
systems failures could potentially have a significant impact on EMC's
operations. EMC has received certifications of Year 2000 compliance from
substantially all of its key vendors and suppliers. EMC continues to make
progress in receiving certifications of Year 2000 compliance from other vendors
and suppliers and in assessing questionnaire responses and related information
from other third parties.
EMC has designed and tested the current versions of its Symmetrix series of
products and the current versions of its other products to be Year 2000
compliant. Some of EMC's customers are running earlier versions of its
Symmetrix series of products and other products that have not been tested for
Year 2000 compliance. EMC has made upgrades available for the older versions of
its Symmetrix series of products and for certain other of its older products so
that such products will test as Year 2000 compliant.
EMC believes the assessment and remediation phase of its Year 2000
conversion program is substantially complete, although the testing phase and
the contingency planning phase will continue extensively throughout
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1999. The total cost of such program has not had, and EMC does not anticipate
that the total cost of such program will have, a material effect on its
business, results of operations or financial condition.
The most reasonably likely worst case scenarios regarding the Year 2000
issue would include a hardware failure, the corruption or loss of data
contained in EMC's internal information systems, a failure affecting EMC's key
vendors, suppliers or customers, the failure of infrastructure services
provided by government agencies or other third parties and customer
dissatisfaction related to the performance of EMC's products.
EMC is currently developing a Year 2000 contingency plan. EMC expects its
contingency plan will include, among other things, manual "work-arounds" for
hardware and software failures, as well as substitution of systems, if
required.
Further information about EMC's Year 2000 readiness is available at EMC's
website at http://www.emc.com/year2000/.
After the merger, the combined company intends to continue the testing phase
and the contingency planning phase of its Year 2000 compliance program. The
combined company also plans to continue to develop a Year 2000 contingency
plan. There can be no assurance that conversion of the combined company's
hardware and software will be successful, that key third parties will have
successful conversion programs, that the combined company's products will not
contain undetected errors or defects associated with Year 2000 date functions,
or that other factors relating to Year 2000 compliance, including but not
limited to litigation, will not have a material adverse effect on the combined
company's business, results of operations or financial condition.
Euro conversion issues may affect EMC's business.
On January 1, 1999, 11 of the 15 member countries of the European Union
established fixed conversion rates between their existing sovereign currencies
and the Euro. The Euro is currently the common legal currency in such
countries. The Euro trades on currency exchanges and is available for non-cash
transactions. The participating countries are issuing sovereign debt
exclusively in Euros and have redenominated outstanding sovereign debt. The
participating countries no longer control their own monetary policies by
directing independent interest rates for the legacy currencies. Instead, the
authority to direct monetary policy, including money supply and official
interest rates for the Euro, is exercised by the European Central Bank.
The legacy currencies will remain legal tender in the participating
countries as denominations of the Euro between January 1, 1999 and January 1,
2002. During this period, public and private parties may pay for goods and
services using either the Euro or the participating country's legacy currency
on a "no compulsion, no prohibition" basis. However, conversion rates are no
longer computed directly from one legacy currency to another. Instead, a
triangular process is applied whereby an amount denominated in one legacy
currency is first converted into the Euro. The resultant Euro-denominated
amount is then converted into the third legacy currency.
EMC has developed and implemented the necessary modifications for the
technical adaptation of its internal IT and other systems to accommodate Euro-
denominated transactions. EMC is currently assessing certain business
implications of conversion to the Euro, including the long term competitive
implications of the conversion and the impact on market risk with respect to
financial instruments. At this time, management is also in the process of
evaluating other impacts of this conversion on EMC, including the potential
actions which may or may not be taken by EMC's competitors and suppliers.
Litigation that EMC may become involved in may adversely affect EMC's financial
condition.
In the ordinary course of business, EMC may become involved in litigation,
administrative proceedings and governmental proceedings. Such matters can be
time-consuming, divert management's attention and resources and cause EMC to
incur significant expenses. Furthermore, there can be no assurance that the
results of any of these actions will not have a material adverse effect on its
business, results of operations or financial condition.
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Changes in regulations could adversely affect EMC's financial results.
EMC's business, results of operations and financial condition could be
adversely affected if laws, regulations or standards relating to EMC or its
products were newly implemented or changed.
EMC's stock price is volatile.
EMC's stock price, like that of other technology companies, is subject to
significant volatility because of factors such as:
. the announcement of new products, services or technological
innovations by EMC or its competitors
. quarterly variations in its operating results
. changes in revenue or earnings estimates by the investment community
. speculation in the press or investment community
In addition, EMC's stock price may be affected by general market conditions
and domestic and international economic factors unrelated to its performance.
Because of these factors, recent trends should not be considered reliable
indicators of future stock prices or financial results.
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THE SPECIAL MEETING OF DATA GENERAL STOCKHOLDERS
This proxy statement/prospectus is being furnished to you in connection with
the solicitation of proxies by Data General's board of directors in connection
with the proposed merger for use at the special meeting. This proxy
statement/prospectus is first being furnished to stockholders of Data General
on or about September 8, 1999.
Date, Time and Place of the Special Meeting
The special meeting of the stockholders of Data General is scheduled to be
held as follows:
Thursday, October 7, 1999
9:00 a.m., local time
State Street Bank and Trust Company
Enterprise Room, Fifth Floor
225 Franklin Street
Boston, Massachusetts
Purpose of the Special Meeting
The special meeting is being held so that the stockholders of Data General
may consider and vote upon a proposal to adopt the merger agreement among EMC,
a wholly-owned subsidiary of EMC and Data General and transact any other
business that properly comes before the special meeting or any adjournment.
If the stockholders of Data General approve the merger and adopt the merger
agreement, a wholly-owned subsidiary of EMC will merge into Data General, and
Data General will survive the merger as a wholly-owned subsidiary of EMC.
After careful consideration, Data General's board of directors has
unanimously approved the merger agreement and determined that the merger is
fair to you and in your best interests and unanimously recommends that you vote
for the adoption of the merger agreement.
Stockholder Record Date for the Special Meeting
Data General's board of directors has fixed the close of business on
September 6, 1999, as the record date for determination of Data General
stockholders entitled to notice of and entitled to vote at the special meeting.
On the record date, there were 51,204,990 shares of Data General common stock
issued and outstanding, held by approximately 9,262 holders of record.
Vote of Data General Stockholders Required for Approval of the Merger
A majority of the outstanding shares of Data General common stock entitled
to vote at the special meeting must be represented, either in person or by
proxy, to constitute a quorum at the special meeting. The affirmative vote of
the holders of at least a majority of Data General's common stock outstanding
and entitled to vote at the special meeting is required to adopt the merger
agreement. You are entitled to one vote for each share of Data General common
stock held by you on the record date for each proposal to be presented to
stockholders of Data General at the special meeting.
Voting by Data General Directors and Executive Officers
As of the record date for the special meeting, directors and executive
officers of Data General and their affiliates beneficially owned and were
entitled to vote approximately 482,023 shares of Data General common stock,
which represented approximately 0.9% of all outstanding shares of Data General
common stock entitled to vote at the special meeting. Each Data General
director and executive officer has indicated his or her present intention to
vote, or cause to be voted, the Data General common stock owned by him or her
for adoption of the merger agreement.
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Voting of Proxies
All shares of Data General common stock represented by properly executed
proxies received before or at the special meeting will, unless the proxies are
revoked, be voted in accordance with the instructions indicated thereon. You
are urged to mark the box on the proxy to indicate how to vote your shares.
If a properly executed proxy is returned and the stockholder has abstained
from voting on the proposal, the Data General common stock represented by the
proxy will be considered present at the special meeting for purposes of
determining a quorum and for purposes of calculating the vote, but will not be
considered to have been voted in favor of approval of the adoption of the
merger agreement. If you are the record holder and no instructions are
indicated on a properly executed proxy, your shares will be voted FOR adoption
of the merger agreement. If you hold your shares in "street name" and an
executed proxy is returned by your broker which indicates that the broker does
not have discretionary authority to vote on adoption of the merger agreement,
the shares will be considered present at the meeting for purposes of
determining the presence of a quorum and of calculating the vote, but will not
be considered to have been voted in favor of approval of adoption of the merger
agreement. YOUR BROKER WILL VOTE YOUR SHARES ONLY IF YOU PROVIDE INSTRUCTIONS
ON HOW TO VOTE BY FOLLOWING THE INFORMATION PROVIDED TO YOU BY YOUR BROKER.
Because adoption of the merger agreement requires the affirmative vote of at
least a majority of Data General's common stock outstanding as of the record
date, any failure to return your proxy or to provide instructions to your
broker will have the same effect as a vote AGAINST adoption of the merger
agreement.
Data General does not expect that any matter other than adoption of the
merger agreement will be brought before the special meeting. If, however, other
matters are properly presented, the persons named as proxies will vote in
accordance with their judgment with respect to those matters, unless authority
to do so is withheld in the proxy.
Revocability of Proxies
You may revoke your proxy at any time before it is voted by (i) notifying in
writing the Secretary of Data General, Attention: Assistant Secretary, Mail
Stop E-132, 4400 Computer Drive, Westboro, Massachusetts 01580, (ii) granting a
subsequent proxy or (iii) appearing in person and voting at the special
meeting. Attendance at the special meeting will not in and of itself constitute
revocation of a proxy.
Solicitation of Proxies
Data General and EMC will share equally all expenses incurred in connection
with the printing and mailing of this proxy statement/prospectus to Data
General's stockholders and the filing fees related to the registration
statement of which this proxy statement/prospectus forms a part. Data General
has retained Morrow & Co., Inc., at a customary fee plus reimbursement of
expenses, to assist in the solicitation of proxies. Data General and Morrow &
Co., Inc. will also request banks, brokers and other intermediaries holding
shares beneficially owned by others to send this proxy statement/prospectus to
and obtain proxies from the beneficial owners and will reimburse the holders
for their reasonable expenses in so doing.
Stockholders should not send stock certificates with their proxies. A
transmittal form with instructions for the surrender of stock certificates of
Data General common stock will be mailed to Data General stockholders as soon
as practicable after completion of the merger.
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THE MERGER
This section of the proxy statement/prospectus describes material aspects of
the proposed merger, including the merger agreement and the stock option
agreement. While we believe that the description covers the material terms of
the merger and the related transactions, this summary may not contain all of
the information that is important to you. You should read this entire document
and the other documents we refer to carefully for a more complete understanding
of the merger.
Background to the Merger
On June 1, 1999, Michael C. Ruettgers, President and Chief Executive Officer
of EMC, contacted Ronald L. Skates, President and Chief Executive Officer of
Data General, to indicate interest in a possible business combination between
EMC and Data General.
Between June 8, 1999 and June 18, 1999, Messrs. Ruettgers and Skates
discussed the merits and possible terms of a potential transaction and other
items relating to the businesses of Data General and EMC.
On June 25, 1999, representatives of EMC met with representatives of EMC's
financial advisor, Lehman Brothers, Inc., regarding Lehman Brothers'
representation of EMC in connection with a possible transaction with Data
General. From this date through the execution of the definitive merger
agreement, members of EMC's management regularly discussed the possible
business combination with Lehman Brothers.
On July 1, 1999, Mr. Ruettgers, members of EMC's management and
representatives of EMC's financial advisor met with Mr. Skates, members of Data
General's management and representatives of Data General's financial advisor,
Morgan Stanley & Co. Incorporated, to conduct preliminary due diligence
investigations on Data General and EMC, respectively. Members of EMC's and Data
General's managements communicated regularly with each other through the
execution of the definitive merger agreement.
On July 7, 1999, at a regularly scheduled meeting, Data General's board of
directors was apprised of the status of the discussions with EMC and gave Mr.
Skates authority to continue those discussions. From that point on, Mr. Skates
was in regular contact with all board members, apprising them of the status of
the discussions with EMC.
From July 1, 1999 through July 20, 1999, members of EMC's and Data General's
managements continued to conduct due diligence investigations of Data General
and EMC, respectively. In addition, Messrs. Ruettgers and Skates continued to
discuss the possible terms of a proposed business combination.
From July 20, 1999 through the execution of the definitive merger agreement,
representatives of EMC, including Lehman Brothers, met with representatives of
Data General, including Morgan Stanley, to discuss various business issues,
including valuation, and to conduct further due diligence, including financial
and legal due diligence, on Data General and EMC. During this same period, Data
General and EMC commenced drafting and negotiating the terms of definitive
documentation for a proposed business combination.
On July 30, 1999, members of EMC's management and representatives of Lehman
Brothers gave a presentation on the possible financial terms of the proposed
business combination to the acquisition committee of the board of directors of
EMC.
On August 4, 1999, EMC's board of directors held a special meeting to
discuss the recent communications with Data General and the advantages of the
proposed business combination with Data General and authorized the appropriate
officers of EMC to continue with formal negotiations.
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From August 4, 1999 through August 6, 1999, members of management of Data
General and EMC, along with their respective legal and financial advisors,
continued to meet and discuss the terms of the proposed business combination
between Data General and EMC. During such time, representatives of Data General
and EMC discussed the principal terms of the proposed merger agreement and
other related documents, including the following:
. conduct of the business of Data General pending the closing
. termination rights under the merger agreement
. representations, warranties and covenants to be made by the parties
In addition, there was discussion of the stock option agreement proposed to be
entered into by Data General and EMC.
On August 6, 1999, Messrs. Ruettgers and Skates held discussions concerning
key terms of the proposed business combination. They reached tentative
agreement on the exchange ratio for Data General common stock and discussed
other key terms of the proposed transaction. Following these discussions, EMC's
board of directors met to discuss the recent communications with Data General,
and EMC's management and EMC's financial and legal advisors gave presentations
on the financial and other terms of the proposed business combination and
reviewed the status of the transaction, including the following:
. status of negotiations of the proposed business combination
. results of EMC's due diligence review
. benefits and potential risks of the proposed transaction with Data
General
. financial review of the proposed business combination
. review of the principal terms of the merger agreement and related
documents
. details related to the proposed business combination that still
required resolution
In addition, EMC's legal advisors discussed the directors' legal duties in
considering the proposed business combination and strategic alternatives and
further discussed the terms of the merger agreement and related documents.
EMC's financial advisor reviewed the rationale for, and financial analyses
relating to, the proposed business combination with Data General. In addition,
at the meeting, EMC's financial advisor provided its opinion that the exchange
ratio to be paid by EMC pursuant to the merger agreement was fair, from a
financial point of view, to EMC. Following discussion, EMC's board of directors
unanimously determined that the proposed business combination was advisable and
approved the merger agreement and the stock option agreement in the forms
presented and authorized management to finalize the details of the merger
agreement and the stock option agreement.
Also on August 6, 1999, Data General's board of directors met to discuss the
recent communications with EMC, and Data General's management and Data
General's financial and legal advisors gave presentations on the financial and
other terms of the proposed business combination and reviewed the status of the
transaction including the following:
. status of negotiations of the proposed business combination
. results of Data General's due diligence review
. benefits and potential risks of the proposed transaction with EMC
. financial review of the proposed business combination
. review of the principal terms of the merger agreement and related
documents
. details related to the proposed business combination that still
required resolution
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Data General's legal advisors discussed the directors' legal duties in
considering the proposed business combination and strategic alternatives and
further discussed the terms of the merger agreement and related documents. Data
General's financial advisor reviewed the rationale for, and financial analyses
relating to, the proposed business combination with EMC. In addition, at the
meeting, Data General's financial advisor provided its opinion that the
exchange ratio pursuant to the merger agreement was fair, from a financial
point of view, to Data General's stockholders. Following discussion, Data
General's board of directors unanimously determined that the proposed business
combination was advisable and approved the merger agreement and the stock
option agreement in the forms presented, authorized management to finalize the
details of the merger agreement and resolved to recommend that Data General's
stockholders adopt the merger agreement and the stock option agreement.
Data General and EMC entered into the merger agreement and the stock option
agreement on August 6, 1999.
On August 9, 1999, Data General and EMC issued a press release announcing
the transaction.
Data General's Reasons for the Merger
The Data General board believes that the transaction will allow the combined
company to address customer requirements in the rapidly growing mid-range
storage market, an approximately $10 billion market in 1998.
In reaching its decision to approve the merger agreement and the option
agreement, the Data General board consulted with management of Data General, as
well as its financial and legal advisors, and considered a variety of factors,
including the following:
. The fact that the exchange ratio represented a 48% premium over the
market price of Data General common stock as of August 6, 1999, and
the board's belief that Data General's stockholders are expected to
benefit from future appreciation in the value of EMC common stock.
. The Data General board's belief that:
. Combining Data General's CLARiiON storage products with EMC's
industry-leading software, distribution and services capabilities
will result in the world's most advanced midrange storage
solutions and will enable the combined company to fully address
all of its customers' online storage needs in both new and
existing markets, and
. Data General's AViiON server business will benefit from its status
as a separate unit of EMC to serve more effectively and
efficiently the computing needs of the worldwide NT and UNIX
markets, continuing to focus in the healthcare sector.
. The Data General board's belief that EMC will be able to leverage Data
General's core research and development expertise in Intel-based
processor systems and high-performance operating systems across EMC's
existing range of products.
. The Data General board's conclusion that EMC will be able to more
effectively market and sell Data General's CLARiiON systems,
especially in the online storage market.
. The business, operations, financial condition, earnings and prospects
of each of Data General and EMC. In making its determination, the Data
General board took into account the results of Data General's due
diligence review of EMC's business.
. The anticipated financial impact of the proposed transaction on EMC's
future financial performance.
. The terms of the merger, the merger agreement and the option agreement
as negotiated (including the possibility that the proposed merger
agreement and the option agreement might discourage other parties that
might have an interest in Data General).
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. The Data General board's belief that, while no assurances could be
given, the level of execution risk in connection with the merger was
moderate, and that the business and financial advantages contemplated
in connection with the merger were likely to be achieved within a
reasonable time frame.
. The belief of senior management of Data General and of the Data
General board that the cultures of EMC and Data General are generally
compatible and that their respective managements possess complementary
skills and expertise.
. The structure of the merger which is intended to qualify as a tax-free
"reorganization" for U.S. federal income tax purposes and as a
"pooling of interests" for accounting purposes.
. The opinion of Morgan Stanley to the Data General board that, as of
the date of the merger agreement, based on and subject to the
considerations set forth in their opinion, the exchange ratio was fair
from a financial point of view to the holders of Data General common
stock. See "--Opinion of Data General's Financial Advisor."
The combined company's ability to achieve these results depends on various
factors, a number of which will be beyond its control, including economic
conditions, unanticipated changes in business conditions and the regulatory
environment, and, therefore, there can be no assurance that these results will
be achieved. See "Cautionary Factors Concerning Forward-Looking Statements."
This discussion of the information and factors considered by Data General's
board of directors is not intended to be exhaustive but includes all material
factors considered by the board. In reaching its determination to approve and
recommend the merger, Data General's board of directors did not assign any
relative or specific weights to those factors, and individual directors may
have given differing weights to differing factors. Data General's board of
directors is unanimous in its recommendation that Data General stockholders
vote for approval of the merger agreement and related transactions.
Recommendation of Data General's Board of Directors
After careful consideration, your board of directors has unanimously
approved the merger agreement and determined that the merger is fair to you and
in your best interest and unanimously recommends that you vote for the adoption
of the merger agreement.
In considering the recommendation of Data General's board of directors with
respect to the merger agreement, you should be aware that certain directors and
executive officers of Data General have certain interests in the merger that
are different from, or are in addition to, the interests of Data General's
stockholders generally. Please see the section entitled "Interests of Certain
Data General Directors and Officers in the Merger" on page 33 of this proxy
statement/prospectus.
Opinion of Data General's Financial Advisor
Pursuant to a letter agreement dated as of October 26, 1998, Morgan Stanley
was engaged to provide financial advisory services and a financial fairness
opinion in connection with any potential business combination affecting Data
General. Morgan Stanley was selected by Data General's board of directors to
act as Data General's financial advisor based on Morgan Stanley's
qualifications, expertise and reputation and its knowledge of the business and
affairs of Data General. At the telephonic meeting of Data General's board of
directors on August 6, 1999, Morgan Stanley rendered its oral opinion,
subsequently confirmed in writing, that as of August 6, 1999, and based upon
and subject to the various considerations set forth in the opinion, the
exchange ratio pursuant to the agreement was fair from a financial point of
view to the holders of Data General common stock.
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THE OPINION OF MORGAN STANLEY IS ATTACHED AS ANNEX C TO THIS PROXY
STATEMENT/PROSPECTUS. DATA GENERAL STOCKHOLDERS ARE URGED TO, AND SHOULD, READ
THE OPINION CAREFULLY AND IN ITS ENTIRETY. MORGAN STANLEY'S OPINION IS DIRECTED
TO DATA GENERAL'S BOARD OF DIRECTORS AND ADDRESSES ONLY THE FAIRNESS OF THE
EXCHANGE RATIO PURSUANT TO THE AGREEMENT FROM A FINANCIAL POINT OF VIEW TO THE
HOLDERS OF SHARES OF DATA GENERAL'S COMMON STOCK AS OF THE DATE OF THE OPINION.
MORGAN STANLEY'S OPINION DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER AND
DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF DATA GENERAL STOCK AS TO
HOW TO VOTE AT THE DATA GENERAL SPECIAL MEETING. THE SUMMARY OF THE OPINION OF
MORGAN STANLEY SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
In connection with rendering its opinion, Morgan Stanley, among other
things:
. reviewed certain publicly available financial statements and other
information of Data General and EMC, respectively;
. reviewed certain internal financial statements and other financial and
operating data concerning Data General prepared by the management of
Data General;
. discussed certain financial projections prepared by the management of
Data General;
. reviewed information relating to certain strategic, financial and
operational benefits anticipated from the merger prepared by the
management of Data General;
. discussed the past and current operations and financial condition and
the prospects of Data General with senior executives of Data General;
. reviewed the reported prices and trading activity for the Data General
common stock and EMC common stock;
. compared the financial performance of the Company and EMC and the
prices and trading activity of the Data General common stock and the
EMC common stock with that of certain other comparable publicly-traded
companies and their securities;
. reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
. participated in discussions and negotiations among representatives of
Data General and EMC and their financial and legal advisors;
. reviewed the merger agreement, and certain related documents; and
. considered such other factors as Morgan Stanley deemed appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon without
independent verification the accuracy and completeness of the information
Morgan Stanley reviewed for the purposes of this opinion. With respect to the
internal financial statements and other financial and operating data and
discussions relating to strategic, financial and operational benefits
anticipated from the merger provided by Data General, Morgan Stanley assumed
that they were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of Data
General. With the consent of Data General, Morgan Stanley relied upon the
publicly available estimates of certain research analysts with respect to EMC.
Morgan Stanley relied upon the assessment by the management of Data General of
its ability to retain key employees of Data General.
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Morgan Stanley also relied upon, without independent verification, the
assessment by the management of Data General of:
. the strategic and other benefits expected to result from the merger;
. Data General's and EMC's technologies, products and services;
. the timing and risks associated with the integration of Data General
and EMC; and
. the validity of, and risks associated with, Data General's and EMC's
existing and future technologies, products and services.
Morgan Stanley did not made any independent valuation or appraisal of the
assets or liabilities or technology of Data General or EMC, nor was Morgan
Stanley furnished with any such appraisals. Also, Morgan Stanley excluded from
its opinion the effect of certain extraordinary non-operating assets and
liabilities. In addition, Morgan Stanley assumed that the merger will be
accounted as a "pooling of interests" business combination in accordance with
U.S. generally accepted accounting principles and the merger will be treated as
a tax-free reorganization and/or exchange pursuant to the Internal Revenue Code
of 1986 and will be consummated in accordance with the terms set forth in the
merger agreement. Morgan Stanley's opinion is necessarily based on financial,
economic, market and other conditions as in effect on, and the information made
available to it as of, August 6, 1999.
The following is a brief summary of some of the analyses performed by Morgan
Stanley in connection with its oral opinion and the preparation of its opinion
letter dated August 6, 1999. These summaries of financial analyses include
information presented in tabular format. In order to fully understand the
financial analyses used by Morgan Stanley, the tables must be read together
with the text of each summary. The tables alone do not constitute a complete
description of the financial analyses.
Comparative Stock Price Performance. Morgan Stanley reviewed the recent
stock price performance of Data General and EMC and compared such performance
with that of the following indices:
. Large Enterprise Hardware Index
. Compaq Computer Corporation
. Dell Computer Corporation
. Hewlett-Packard Company
. International Business Machines Corporation
. Sun Microsystems, Inc.
. Small Enterprise Hardware Index
. Auspex Systems, Inc.
. Network Appliance, Inc.
. NCR Corporation
. Silicon Graphics, Inc.
. Unisys Corporation
Morgan Stanley observed that over the period from January 1, 1998 to August
4, 1999, the market price of the Data General common stock decreased 17.9%,
compared with an increase in the Large Enterprise Hardware Index of 78.2%, and
an increase of 137.1% for the Small Enterprise Hardware Index. Morgan Stanley
also observed that over the period from January 1, 1998 to August 4, 1999, the
EMC common stock price increased 343.7%.
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Analysis of Selected Precedent Transactions. Morgan Stanley reviewed a
number of related transactions which consisted of:
. the acquisition of Sequent Computer Systems, Inc. by International
Business Machines Corporation;
. the acquisition of Stratus Computer, Inc. by Ascend Communications,
Inc.;
. the acquisition of Digital Equipment Corporation by Compaq Computer
Corporation;
. the acquisition of Amdahl Corporation by Fujitsu International, Inc.;
. the acquisition of Tandem Computers, Inc. by Compaq Computer
Corporation;
. the acquisition of Advanced Logic Research, Inc. by Gateway 2000,
Inc.;
. the acquisition of a 19.99% interest in Packard Bell Electronics Inc.
by NEC Corporation; and
. the acquisition of Pyramid Technology Corporation by Siemens AG.
Morgan Stanley compared some publicly available statistics for the
transactions listed above to the relevant financial statistics for Data General
based on the value of Data General implied by the exchange ratio and the
closing price for the Data General common stock and EMC common stock as of
August 4, 1999.
The following table presents the low, median and high, 1 trading day and 1
month prior to announcement, offer price premia for the precedent transactions
and low, median and high last twelve months revenue multiple implied by the
precedent transactions, compared to the respective offer price and revenue
multiple for the merger as of August 4, 1999.
<TABLE>
<CAPTION>
Offer Price Premium
----------------------------
1 Day Prior
to 30 Days Prior Last Twelve Months
Announcement to Announcement Revenue/Aggregate Value
------------ --------------- -----------------------
<S> <C> <C> <C>
Precedent Transactions
Low.................. 3.2% 29.2% 0.30x
Median............... 15.5% 40.7% 0.77x
High................. 49.5% 65.0% 1.79x
Data General......... 53.6% 38.0% 0.66x
</TABLE>
No transaction utilized as a comparison in the precedent transactions
analysis is identical to the merger. In evaluating the precedent transactions,
Morgan Stanley made judgments and assumptions with regard to industry
performance, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of Data General or EMC,
such as the impact of competition on Data General or EMC and the industry
generally, industry growth and the absence of any adverse material change in
the financial condition and prospects of Data General or EMC or the industry or
the financial markets in general. Mathematical analysis, such as determining
the median, is not in itself a meaningful method of using comparable
transaction data.
Discounted Equity Value. Morgan Stanley performed an analysis of the present
value per share of Data General on a standalone basis based on Data General's
future trading price. Morgan Stanley observed that based on a revenue estimate
for fiscal year 2001, a range of net income per share estimates based on a
range of operating profit margins in fiscal year 2001 ranging from 2% to 4%,
illustrative net income multiples ranging from 10.0 times to 17.5 times and
illustrative discount rates ranging from 14% to 16%, the present value per
share of Data General common stock on a standalone basis ranged from $4.04 to
$14.13.
Sum of Parts Analysis. Morgan Stanley performed an analysis of Data General
assuming separation of Data General into its material components including its
two primary businesses: Server Hardware and Storage Hardware.
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Morgan Stanley compared financial information of the Storage Hardware
business with publicly available information for the Storage Hardware Companies
which consisted of companies comprising the Large Enterprise Hardware Index,
Small Enterprise Hardware Index, EMC Corporation, Storage Technology
Corporation and Box Hill Systems Corporation. For this analysis, Morgan Stanley
examined a range of estimates based on securities research analysts. The
following table presents, as of August 4, 1999, the low, median and high for
the Storage Hardware Companies of the estimated aggregate value, defined as
market capitalization plus total debt less cash and cash equivalents, to
projected calendar year 1999 revenue multiples.
AGGREGATE VALUE TO PROJECTED CALENDAR YEAR 1999 REVENUE
<TABLE>
<CAPTION>
Low Median High
--- ------ ----
<S> <C> <C> <C>
Storage Hardware Companies............................... 0.6 1.9 11.7
</TABLE>
Based on this data, Morgan Stanley calculated a value of the Storage
Business of $6.92 to $11.54 per share of Data General common stock.
Morgan Stanley also compared the publicly available statistics for the
aforementioned precedent transactions to the relevant financial statistics for
the Storage Business. Based on this analysis, Morgan Stanley calculated a value
of the Storage Business of $4.13 to $8.26.
Morgan Stanley also performed an analysis of the discounted equity value of
the Storage Business on a standalone basis. Morgan Stanley observed that based
on an estimate range of annual revenue growth of 25% to 35% through fiscal
years 2001 and 2003, a range of net income estimates based on a range of
operating profit margins in fiscal year 2001 and 2003 ranging from 7% to 11%, a
calendar year 2000 earnings multiple of 17.5x and a weighted average cost of
capital of 13%, the present value of the Storage Hardware business per share of
Data General common stock ranged from $9.00 to $17.50.
Morgan Stanley also compared the publicly available statistics for the
aforementioned precedent transactions to the relevant financial statistics for
the total Server Business. Based on this analysis, Morgan Stanley calculated a
value of the Server Business of $0.00 to $7.50 per share of Data General common
stock.
In the sum of the parts analysis, Morgan Stanley also analyzed the value of
the present value of the tax benefits of the net operating losses incurred by
Data General, the total indebtedness and an estimate of the excess cash on the
Data General balance sheet and an estimate of certain transaction related
expenses and liabilities. Based on its analysis, Morgan Stanley calculated an
estimated net value of the items of approximately ($0.50) per share of Data
General common stock.
Based on the sum of the parts analysis, Morgan Stanley calculated a range of
values of Data General ranging from $6.49 to $21.67 per share of Data General
common stock.
Pro Forma Merger Analysis. Morgan Stanley analyzed the pro forma impact of
the merger on EMC's projected earnings per share for the calendar year 2000.
Such analysis was based on earnings projections by securities analysts for both
companies. Based on this analysis, Morgan Stanley observed that, assuming that
the merger was treated as a pooling transaction, the merger would result in
earnings per share dilution for EMC shareholders of 1.9% for calendar year 2000
before taking into account any one-time charges or synergies.
In connection with the review of the merger by Data General's board of
directors, Morgan Stanley performed a variety of financial and comparative
analyses for purposes of its opinion given in connection therewith. The
preparation of a fairness opinion is a complex process and is not necessarily
susceptible to a partial analysis or summary description. In arriving at its
opinion, Morgan Stanley considered the results of all its analyses as a whole
and did not attribute any particular weight to any analysis or factor
considered by it. Morgan Stanley believes that selecting any portion of its
analyses, without considering all analyses, would create an incomplete view of
the process underlying its opinion. In addition, Morgan Stanley may have given
various analyses and factors more or less weight than other analyses and
factors, and may have deemed various assumptions more or less probable than
other assumptions, so that the ranges of valuations resulting from any
particular analysis described above should not be taken to be Morgan Stanley's
view of the actual value of Data General.
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<PAGE>
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Data General or EMC. Any
estimates contained in Morgan Stanley's analysis are not necessarily indicative
of future results or actual values, which may be significantly more or less
favorable than those suggested by such estimates. The analyses performed were
prepared solely as part of Morgan Stanley's analysis of the fairness of the
exchange ratio pursuant to the merger agreement from a financial point of view
to the holders of Data General common stock and were conducted in connection
with the delivery of the Morgan Stanley opinion to Data General's board of
directors. The analyses do not purport to be appraisals or to reflect the
prices at which Data General common stock or EMC common stock might actually
trade. The exchange ratio pursuant to the merger agreement and other terms of
the merger agreement were determined through arm's-length negotiations between
Data General and EMC and were approved by Data General's board of directors.
Morgan Stanley provided advice to Data General during such negotiations;
however, Morgan Stanley did not recommend any specific consideration to Data
General or that any specific consideration constituted the only appropriate
consideration for the merger. In arriving at its opinion, Morgan Stanley was
not authorized to solicit, and did not solicit, interest from any party with
respect to the acquisition, business combination or other extraordinary
transaction involving Data General, although in the course of its engagement,
it did provide advice to Data General in connection with potential business
combinations with parties other than EMC. In addition, as described above,
Morgan Stanley's opinion and presentation to Data General's board of directors
was one of many factors taken into consideration by Data General's board of
directors in making its decision to approve the merger. Consequently, the
Morgan Stanley analyses as described above should not be viewed as
determinative of the opinion of Data General's board of directors with respect
to the value of Data General or of whether Data General's board of directors
would have been willing to agree to a different consideration.
Data General's board of directors retained Morgan Stanley based upon Morgan
Stanley's qualifications, experience and expertise. Morgan Stanley is an
internationally recognized investment banking and advisory firm. Morgan
Stanley, as part of its investment banking and financial advisory business, is
continuously engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for corporate and other purposes. In the ordinary
course of Morgan Stanley's trading and brokerage activities, Morgan Stanley or
its affiliates may at any time hold long or short positions, may trade or
otherwise effect transactions, for its own account or for the account of
customers in the equity or debt securities or senior loans of Data General or
EMC.
Pursuant to an engagement letter dated October 26, 1998, Morgan Stanley
provided financial advisory services and a financial fairness opinion in
connection with a potential business combination affecting Data General, and
Data General has agreed to pay Morgan Stanley a customary fee in connection
with if the merger is completed. Data General has also agreed to reimburse
Morgan Stanley for expenses incurred by Morgan Stanley in performing its
services. In addition, Data General has also agreed to indemnify Morgan Stanley
and its affiliates, their respective directors, officers, agents and employees
and each person, if any, controlling Morgan Stanley or any of its affiliates
against liabilities and expenses, including liabilities under the federal
securities laws, related to or arising out of Morgan Stanley's engagement and
any related transactions.
In the past three years, Data General retained Morgan Stanley for financing
and advisory assignments for which Morgan Stanley was paid customary fees.
Interests of Certain Data General Directors and Officers in the Merger
When considering the recommendation of Data General's board of directors,
you should be aware that certain Data General directors and executive officers
have interests in the merger that are different from, or are in addition to,
yours. Several executive officers of Data General have employment or severance
agreements and may become entitled to specific benefits under employee benefit
plans as a result of the merger. The Data General board of directors was aware
of and discussed these potentially conflicting interests when it approved the
merger.
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<PAGE>
Employment Agreements
Data General has entered into change of control employment agreements with
16 executives, including Mr. Skates, Ethan Allen, Jr., William J. Cunningham
and Joel Schwartz, which provide for severance payments following termination
of their employment with Data General. The employment agreements continue in
effect for three years following the occurrence of a change of control of
Data General. Approval of the merger will constitute a change of control for
purposes of the employment agreements.
If, following a change of control, the executive's employment is
involuntarily terminated without cause or terminated by the executive for good
reason (as defined in the employment agreement) within three years of the
change of control, the executive is entitled to receive from Data General as
severance pay a lump-sum payment equal to the total of three times such
executive's:
. annual base salary and
. the greater of (a) the highest annual incentive compensation payments
earned in respect of the three-year period immediately preceding the
change of control and (b) the annual bonus earned in respect of the
most recent fiscal year during the three-year period following the
change in control (the "highest annual bonus").
Each of the 16 executives would also be entitled to a pro rata bonus through
the date of termination (based on the highest annual bonus), payment equal to
the value of three years' additional age and service under Data General's
qualified and nonqualified pension plans and to continuation of health and
other insurance benefits for a period of three years following termination.
Assuming completion of the merger in the fourth calendar quarter of 1999, if
the employment of each of the 16 executives were terminated immediately
following the merger, the executives would receive, in the aggregate, payments
and benefits of approximately $54,000,000. In addition, Data General would be
required to make additional payments necessary to make whole the executives
with respect to any excise taxes imposed by section 4999 of the Internal
Revenue Code in respect of any payments, subject to such excise tax, including
the severance payment and accelerated vesting of equity.
Data General has established a trust fund to ensure the proper payment of
its obligations under the employment agreements.
Data General Stock Option Plans
Any option that is not exercised before the date the merger becomes
effective will be converted into an option to purchase the number of shares of
EMC common stock equal to the number of shares of Data General common stock
which could have been obtained upon the exercise of the option immediately
prior to the time the merger becomes effective. In connection with the merger,
stock options with respect to approximately 1,596,333 shares, with an average
weighted exercise price of $14.34, that are held by 16 executives of Data
General will become fully vested and exercisable, and all restrictions imposed
by the plan relating to the disposition and resale of shares of Data General
common stock received by such executives and the non-employee directors upon
the exercise of stock options will immediately lapse.
Other Data General Plans
Supplemental Retirement Benefit Plans
The Data General supplemental retirement benefit plan provides participants
in the plan, including executive officers, with retirement benefits in excess
of those provided under the tax-qualified pension plan. Upon a change in
control of Data General, among other things, participants in the supplemental
retirement benefit plan will fully vest in their benefit under the plan.
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<PAGE>
In December 1994, the Board of Directors adopted a supplemental retirement
benefit to provide Mr. Skates a retirement benefit to supplement that available
to him under Data General's pension plan and supplemental plan. The
supplemental benefit provides that if Mr. Skates retires from service with Data
General at age 65, he will receive from Data General's pension plan, current
supplemental plan and the supplemental benefit a combined joint and survivor
annuity equal to 60% of the average of his three highest years of cash
compensation excluding any bonuses he may be awarded. If Mr. Skates retires
prior to attaining age 65, the 60% benefit rate will be reduced by two
percentage points for each year his retirement precedes age 65. If at any time
Mr. Skates dies, is terminated due to disability, is terminated by the board or
directors without cause, or his employment is terminated other than for cause
after a change in control, payment of the above-described benefit may commence
prior to age 65, at the reduced rate described above. Approval of the merger
will constitute a change in control for purposes of Mr. Skates' supplemental
retirement benefit. Data General has established a trust fund to ensure the
proper payment of its obligation under Mr. Skates' supplemental retirement
plan.
1997 Restricted Bonus
In September 1997, Data General awarded Mr. Skates a $7,000,000 restricted
bonus, which vests annually over a three-year period commencing September 28,
1997. The bonus becomes fully vested upon a change in control of Data General.
Approval of the merger will constitute a change in control for purposes of the
1997 restricted bonus.
1999 Fiscal Year Bonus
In November 1998, Data General approved a fiscal 1999 bonus opportunity for
Mr. Skates based upon performance against specified earnings-per-share goals
(subject to a maximum of 300% of base salary) or, if greater, performance
measured on the basis of the increase (if any) in Data General's market
capitalization during the 1999 fiscal year, subject to a maximum bonus of $3.5
million, which maximum does not apply in the event of a change in control. The
merger will constitute a change in control, and the bonus will be payable on
the closing of the merger.
Non-Employee Director Retirement Plan
Under Data General's non-employee director retirement program, a non-
employee director who retires from the board of directors after reaching age 72
or after completing at least five years of service will receive a retirement
benefit equal to the highest board retainer paid to the director during his
years of service to the date of the director's retirement, which benefit is
payable for a period of years (not to exceed 15 years) equal to the director's
service on the board. The five-year eligibility service requirement is waived,
among other things, in the event of a retirement within two years after a
change in control.
Stock Compensation Plan for Non-Employee Directors
The stock compensation plan for non-employee directors permits directors to
defer a portion of their cash compensation and to have such deferred
compensation accumulate as if it were invested in Data General common stock.
Under the plan, in connection with a transaction such as the merger, any
outstanding deferral periods end, and each participant is entitled to have his
unit account distributed in shares of Data General common stock immediately
prior to the consummation of a covered transaction.
Indemnification and Insurance
The merger agreement provides that all rights to indemnification,
advancement of litigation expenses and limitation of personal liability
existing in favor of the directors, officers and employees of Data General and
its subsidiaries as provided in the Data General charter and Data General by-
laws will be assumed by EMC and
35
<PAGE>
the surviving corporation in the merger and will continue in full force and
effect in accordance with their terms. The merger agreement provides that for
four years after the effective time of the merger, EMC will maintain policies
of directors' and officers' fiduciary liability insurance for acts or omissions
occurring prior to the effective time of the merger, on terms no less
advantageous than those in effect on the date of the merger agreement.
Completion and Effectiveness of the Merger
The merger will be completed when all of the conditions to completion of the
merger are satisfied or waived, including adoption of the merger agreement by
the stockholders of Data General. The merger will become effective upon the
filing of a certificate of merger with the State of Delaware.
We are working towards completing the merger as quickly as possible. We
expect to complete the merger during the fourth calendar quarter of 1999.
Structure of the Merger and Conversion of Data General Common Stock
In accordance with the merger agreement and Delaware law, a newly-formed and
wholly-owned subsidiary of EMC will be merged with and into Data General. As a
result of the merger, the separate corporate existence of the newly-formed
subsidiary of EMC will cease and Data General will survive the merger as a
wholly- owned subsidiary of EMC.
Upon completion of the merger, each outstanding share of Data General common
stock, other than shares held by Data General and Data General's subsidiaries,
will be converted into the right to receive .3262 of a fully paid and
nonassessable share of EMC common stock, subject to certain adjustments. If the
average of the mean high and low per share trading prices of EMC common stock
for each of the 20 consecutive trading days ending on the fifth day prior to
the special meeting is equal to or less than $66.0625, you will receive .3262
of a share of EMC common stock in exchange for each share of Data General
common stock that you own. If such average price of EMC common stock is greater
than $66.0625, for each share of Data General common stock that you own, you
will receive a number of shares of EMC common stock equal to the quotient
obtained by dividing $21.55 by such average price of EMC common stock. The
number of shares of EMC common stock issuable in the merger will be
proportionately adjusted for any additional future stock split, stock dividend
or similar event with respect to Data General common stock or EMC common stock
effected between the date of the merger agreement and the completion of the
merger.
No certificate or scrip representing fractional shares of EMC common stock
will be issued in connection with the merger. Instead you will receive cash,
without interest, in lieu of a fraction of a share of EMC common stock.
Specifically, the exchange agent in the merger will sell a number of shares of
EMC common stock equal to the aggregate number of fractional shares that would
otherwise be issuable in the merger and will remit to you an amount equal to
your pro rata portion of the proceeds of these sales.
Exchange of Data General Stock Certificates for EMC Stock Certificates
When the merger is completed, the exchange agent will mail to you a letter
of transmittal and instructions for use in surrendering your Data General stock
certificates in exchange for EMC stock certificates. When you deliver your Data
General stock certificates to the exchange agent along with a properly executed
letter of transmittal and any other required documents, your Data General stock
certificates will be canceled and you will receive EMC stock certificates
representing the number of full shares of EMC common stock to which you are
entitled under the merger agreement. You will receive payment in cash, without
interest, in lieu of any fractional shares of EMC common stock which would have
been otherwise issuable to you as a result of the merger.
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<PAGE>
You should not submit your Data General stock certificates for exchange
unless and until you receive the transmittal instructions and a form of letter
of transmittal from the exchange agent.
You are not entitled to receive any dividends or other distributions on EMC
common stock until the merger is completed and you have surrendered your Data
General stock certificates in exchange for EMC stock certificates.
If there is any dividend or other distribution on EMC common stock with a
record date after the merger and a payment date prior to the date you surrender
your Data General stock certificates in exchange for EMC stock certificates,
you will receive it with respect to the whole shares of EMC common stock issued
to you promptly after they are issued. If there is a dividend or other
distribution on EMC common stock with a record date after the merger and a
payment date after the date you surrender your Data General stock certificates
in exchange for EMC stock certificates, you will receive it with respect to the
whole shares of EMC common stock issued to you promptly after the payment date.
EMC will only issue an EMC stock certificate or a check in lieu of a
fractional share in a name other than the name in which a surrendered Data
General stock certificate is registered if you present the exchange agent with
all the documents required to show and effect the unrecorded transfer of
ownership and show that you paid any applicable stock transfer taxes.
United States Federal Income Tax Consequences of the Merger
The following general discussion summarizes the anticipated material United
States federal income tax consequences of the merger to holders of Data General
common stock who exchange such stock for EMC common stock in the merger. This
discussion addresses only such stockholders who hold their Data General common
stock as a capital asset and does not address all of the United States federal
income tax consequences that may be relevant to particular stockholders in
light of their individual circumstances or to stockholders who are subject to
special rules, such as:
. financial institutions,
. tax-exempt organizations,
. insurance companies,
. dealers in securities or foreign currencies,
. traders in securities who elect to apply a mark-to-market method of
accounting,
. foreign holders,
. persons who hold such shares as a hedge against currency risk or as
part of a straddle, constructive sale or conversion transaction, or
. holders who acquired their shares upon the exercise of employee stock
options or otherwise as compensation.
The following discussion is not binding on the Internal Revenue Service. It
is based upon the Internal Revenue Code, laws, regulations, rulings and
decisions in effect as of the date of this proxy statement/prospectus, all of
which are subject to change, possibly with retroactive effect. Tax consequences
under state, local and foreign laws, and under any federal laws not pertaining
to the income tax, are not addressed.
Holders of Data General common stock are strongly urged to consult their tax
advisors as to the specific tax consequences to them of the merger, including
the applicability and effect of federal, state, local and foreign income and
other tax laws in their particular circumstances.
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<PAGE>
Data General and EMC will not be obligated to complete the merger unless (i)
Data General receives an opinion from Wachtell, Lipton, Rosen & Katz, special
counsel to Data General, substantially to the effect that for U.S. federal
income tax purposes, the merger will qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, and (ii) EMC receives
an opinion from Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to
EMC, substantially to the effect that for U.S. federal income tax purposes, the
merger will qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code. The conditions relating to the tax opinions are not
waivable by Data General or EMC after receipt of either the Data General
stockholder approval or the EMC stockholder approval unless further stockholder
approval is obtained with appropriate disclosure. The opinions will be based on
customary assumptions and representations made by, among others, Data General,
EMC and Emerald Merger Corporation. An opinion of counsel is not binding on the
Internal Revenue Service or any court. No ruling has been, or will be, sought
by the Internal Revenue Service as to the United States federal income tax
consequences of the merger.
Assuming the merger qualifies as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, holders of Data General common
stock who exchange their Data General common stock solely for EMC common stock
in the merger will not recognize gain or loss for United States federal income
tax purposes, except with respect to cash, if any, they receive instead of a
fractional share of EMC common stock. Each holder's aggregate tax basis in the
EMC common stock received in the merger will be the same as his or her
aggregate tax basis in the Data General common stock surrendered in the merger,
decreased by the amount of any tax basis allocable to any fractional share
interest for which cash is received. The holding period of the EMC common stock
received in the merger by a holder of Data General common stock will include
the holding period of the Data General common stock that he or she surrendered
in the merger.
A holder of Data General common stock who receives cash instead of a
fractional share of EMC common stock will recognize gain or loss equal to the
difference between the amount of cash received and his or her tax basis in the
EMC common stock that is allocable to the fractional share exchanged therefor.
That gain or loss generally will constitute capital gain or loss. In the case
of an individual stockholder, any such capital gain generally will be subject
to a maximum United States federal income tax rate of 20% if the individual has
held his or her Data General common stock for more than 12 months at the
effective time of the merger. The deductibility of capital losses is subject to
limitations for both individuals and corporations.
Accounting Treatment of the Merger
Data General and EMC intend to account for the merger as a "pooling of
interests" business combination. It is a condition to completion of the merger
that EMC be advised by PricewaterhouseCoopers LLP that they concur with EMC's
conclusion that the transactions contemplated by the merger agreement can
properly be accounted for as a "pooling of interests" business combination,
although this condition may be waived by EMC. Under the "pooling of interests"
method of accounting, as of the effective time of the merger, the historical
recorded assets and liabilities of Data General will be carried forward to
those of EMC at their recorded amounts. In addition, the operating results of
the combined company will include Data General and EMC's operating results for
the entire fiscal year in which the merger is completed, and Data General and
EMC's historical reported operating results for prior periods will be combined
and restated as the operating results of the combined company.
Regulatory Filings and Approvals Required to Complete the Merger
United States Antitrust. The merger is subject to the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 which prevents some
transactions from being completed until required information and materials are
furnished to the Antitrust Division of the Department of Justice and the
Federal Trade Commission and certain waiting periods end or expire. On August
13, 1999, Data General and EMC each filed a Notification and Report Form with
the Antitrust Division of the Department of Justice and the Federal Trade
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<PAGE>
Commission. We believe that we have substantially complied with all requests
for information from the Department of Justice and the Federal Trade
Commission. The requirements of Hart-Scott-Rodino will be satisfied if the
merger is completed within one year from the termination of the waiting period.
However, the Antitrust Division of the Department of Justice or the Federal
Trade Commission may challenge the merger on antitrust grounds either before or
after expiration of the waiting period. Accordingly, at any time before or
after the completion of the merger, either the Antitrust Division of the
Department of Justice or the Federal Trade Commission could take action under
the antitrust laws as it deems necessary or desirable in the public interest,
or other persons could take action under the antitrust laws, including seeking
to enjoin the merger. Additionally, at any time before or after the completion
of the merger, notwithstanding that the applicable waiting period expired or
ended, any state could take action under the antitrust laws as it deems
necessary or desirable in the public interest. There can be no assurance that a
challenge to the merger will not be made or that, if a challenge is made, we
will prevail.
European Union. Data General and EMC each conduct business in member states
of the European Union. Council Regulation 4064/89 requires notification to and
approval by the European Commission of certain mergers or acquisitions
involving parties with aggregate worldwide sales and individual European Union
sales exceeding certain thresholds before such mergers or acquisitions are
implemented. Data General and EMC have sales that exceed these thresholds. A
single notification to the European Commission eliminates any need to submit
notifications of the merger to national competition authorities in member
states within the European Economic Area. Additional filings may be necessary
in countries outside the European Economic Area.
The European Commission must review the merger to determine whether or not
it is compatible with the common market and, accordingly, whether or not to
permit it to proceed. A merger or acquisition which does not create or
strengthen a dominant position as a result of which effective competition would
be significantly impeded in the common market or in a substantial part of the
common market is considered to be compatible with the common market and must be
allowed to proceed. On September 3, 1999, Data General and EMC submitted a
complete notification of the merger to the European Commission to enable it to
examine whether the merger raises serious doubts with regard to its
compatibility with the common market. The European Commission has one month to
decide whether there are serious doubts, or if the European Commission fails to
reach a decision, the merger will be deemed to be approved.
Additional Filings. In addition, the parties will make any necessary filings
in any other applicable jurisdictions.
Restrictions on Sales of Shares by Affiliates of Data General and EMC
The shares of EMC common stock to be issued in connection with the exchange
will be registered under the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder (the "Securities Act"), and will be
freely transferable under the Securities Act, except for shares of EMC common
stock issued to any person who is deemed to be an "affiliate" of either EMC or
Data General at the time of the special meeting. Persons who may be deemed to
be affiliates include individuals or entities that control, are controlled by,
or are under common control of either EMC or Data General and may include some
of either EMC's or Data General's officers and directors, as well as their
principal stockholders. Affiliates may not sell their shares of EMC common
stock acquired in connection with the merger except pursuant to:
. an effective registration statement under the Securities Act covering
the resale of those shares
. an exemption under paragraph (d) of Rule 145 under the Securities Act
. any other applicable exemption under the Securities Act
EMC's registration statement on Form S-4, of which this proxy
statement/prospectus forms a part, does not cover the resale of shares of EMC
common stock to be received by affiliates in the merger.
39
<PAGE>
Listing on the New York Stock Exchange of the Common Stock to be Issued by EMC
EMC will use reasonable best efforts to cause the shares of EMC common stock
to be issued in the merger to be approved for listing on the New York Stock
Exchange, subject to official notice of issuance, before the completion of the
merger.
Dissenters' and Appraisal Rights
Under Delaware law, you are not entitled to exercise dissenter's or
appraisal rights as a result of the merger or to demand payment for your shares
of Data General common stock.
Delisting and Deregistration of Data General Common Stock After the Merger
If the merger is completed, Data General common stock will be delisted from
the New York Stock Exchange and the London Stock Exchange and will be
deregistered under the Securities Exchange Act of 1934.
40
<PAGE>
THE MERGER AGREEMENT
The following description summarizes the material provisions of the merger
agreement. Stockholders should read carefully the merger agreement, which is
attached as Annex A to this proxy statement/prospectus.
Please note that the italicized terms Acquisition Proposal and Superior
Proposal used in this section are defined on page 43.
Our Representations and Warranties. We each made a number of representations
and warranties in the merger agreement relating to, among other things:
. corporate organization and similar corporate matters of Data General
and EMC
. subsidiaries of Data General
. capitalization of Data General and EMC
. authorization, execution, delivery, performance and enforceability of
the merger agreement and stock option agreement by Data General and
EMC
. absence of a breach of the certificate of incorporation, by-laws, laws
or material agreements by Data General, or of the articles of
organization, by-laws or laws by EMC as a result of the merger
. governmental consents, approvals, orders and authorizations required
in connection with the merger
. Data General's and EMC's filings and reports with the Securities and
Exchange Commission
. absence of certain changes or events in Data General's or EMC's
businesses since March 27, 1999 and March 31, 1999, respectively
. absence of undisclosed liabilities of Data General or EMC
. the absence of undisclosed litigation involving Data General or EMC
. Data General's employee benefit plans
. filing of tax returns and payment of taxes by Data General
. compliance with applicable laws by Data General
. intellectual property and year 2000 matters of Data General
. the accuracy of information supplied by Data General and EMC in
connection with this proxy statement/prospectus and the registration
statement of which it is a part
. the treatment of the merger as a "pooling of interests" for accounting
purposes and as a tax-free reorganization under the Internal Revenue
Code
. the inapplicability of Data General's stockholders rights agreement or
"poison pill" to the merger and related transactions
. the absence of discussions with another party with respect to an
Acquisition Proposal by Data General
. receipt of a fairness opinion by Data General from its financial
advisor
. payment of fees to finders and financial advisors in connection with
the merger agreement
The representations and warranties in the merger agreement are complicated
and not easily summarized. We urge you to carefully read the articles of the
merger agreement entitled "Representations and Warranties of the Company" and
"Representations and Warranties of Parent and Merger Sub."
41
<PAGE>
Data General's Conduct of Business Before Completion of the Merger. Data
General agreed that until the completion of the merger or unless EMC consents
in writing, each of Data General and its subsidiaries will, except as otherwise
agreed, operate its businesses in good faith with the goal of:
. maintaining its business in a manner consistent with past practice and
in compliance in all material respects with all applicable laws and
regulations
. preserving substantially intact its business organization
. keeping available the services of its current officers, employees and
consultants
. preserving its present relationships with customers, suppliers and
others having significant business relations with them
Data General also agreed that until the completion of the merger or unless
EMC consents in writing, Data General and its subsidiaries would, except as
otherwise agreed, conduct their business in compliance with specific
restrictions relating, among other restrictions, to the following:
. modification of Data General's certificate of incorporation or by-laws
. the issuance, reclassification or redemption of securities
. the disposition of Data General's assets
. issuance of dividends or other distributions
. the acquisition of assets or other entities
. the incurrence of indebtedness
. entrance into or modification of certain contracts
. capital expenditures
. employees and employee benefits
. accounting policies and procedures
. tax elections and liabilities
The agreements related to the conduct of Data General's business in the
merger agreement are complicated and not easily summarized. We urge you to
carefully read the article of the merger agreement entitled "Conduct of
Business."
No Other Negotiations Involving Data General. Until the merger is completed
or the merger agreement is terminated, Data General has agreed that Data
General and its subsidiaries will not take any of the following actions:
. solicit, initiate, facilitate or knowingly encourage any Acquisition
Proposal or any inquiry or proposal that could reasonably be expected
to lead to any Acquisition Proposal
. engage in negotiations or discussions or provide non-public
information to any person relating to any Acquisition Proposal
Data General has agreed to provide EMC with detailed information about any
Acquisition Proposal it receives.
However, Data General may, after providing notice to EMC, furnish
information and participate in discussions or negotiations regarding a Superior
Proposal which was not solicited by it and did not result from a breach of the
merger agreement, if Data General's board of directors determines in good faith
that the failure to engage in the prohibited negotiations or discussions or
provide the non-public information would be a breach of fiduciary duties to the
stockholders of Data General under applicable law.
42
<PAGE>
An Acquisition Proposal is any inquiry, proposal or offer involving Data
General and its subsidiaries other than the transaction contemplated by the
merger agreement for any of the following:
. any direct or indirect acquisition or purchase of a business that
constitutes 15% or more of the net revenues, net income or assets of
Data General and its subsidiaries, taken as a whole
. any direct or indirect acquisition or purchase of a business that
constitutes 15% or more of any class of equity securities of Data
General or any of its subsidiaries
. any tender offer or exchange offer that if consummated would result in
any person beneficially owning 15% or more of any class of equity
securities of Data General or any of its subsidiaries
. a merger or other transaction involving Data General or any of its
subsidiaries
A Superior Proposal is a proposal made by a third party:
. to acquire more than 50% of the combined voting power, or
substantially all of the assets, of Data General
. on terms which the Data General board of directors determines in its
good faith judgment (based on advice of a financial advisor) to be
more favorable to the Data General stockholders than the merger
. for which financing, to the extent required, is then committed or
which, in the good faith judgment of the Data General board of
directors, is reasonably capable of being obtained by that party
Data General's Employee Benefit Plans. Following the effective time of the
merger, EMC will give Data General employees full credit for their service with
Data General and its subsidiaries under the EMC benefit plans in which such
employees are eligible to participate for purposes of:
. eligibility
. vesting
. levels of benefits (but not for benefit accruals under any defined
benefit pension plan)
EMC will also waive limitations as to pre-existing conditions or limitations
and waiting periods under any group health plans in which Data General
employees and their eligible dependents will be eligible to participate after
completion of the merger. EMC will provide Data General employees with credit
for any co-payments and deductibles paid for expenses incurred before
completion of the merger in satisfying any applicable deductible or out-of-
pocket limits for expenses under any group health plans in which former Data
General employees will be eligible to participate after completion of the
merger.
Data General shall take all necessary and appropriate action to terminate
the Data General Corporation Savings and Investment Plan as may be reasonably
requested by EMC, provided that such action does not preclude the immediate
participation of eligible Data General employees in any successor plan.
Treatment of Data General Stock Options. Upon completion of the merger, each
stock option issued by Data General will be assumed by EMC, including options
under each of the following Data General plans:
. Restricted Stock Option Plan
. Employee Stock Option Plan
. 1998 Employee Stock Option Plan
. 1994 Non-Employee Director Stock Option Plan
. 1997 Non-Officer Employee Stock Option Plan
. 1998 Non-Employee Director Stock Option Plan
43
<PAGE>
Upon completion of the merger, each outstanding option to purchase Data
General common stock will be converted into an option to purchase the number of
shares of EMC common stock equal to the exchange ratio multiplied by the number
of shares of Data General common stock subject to such option before the
merger, rounded down to the nearest whole share. The exercise price for each
converted option will be equal to the exercise price per share of each Data
General stock option divided by the exchange ratio, rounded up to the nearest
whole cent.
The other terms of each option and the Data General option plans referred to
above under which the options were issued will continue to apply in accordance
with their terms, including any provisions providing for vesting and
acceleration. Upon completion of the merger, each outstanding award, including
restricted stock, stock equivalents and stock units, under any employee
incentive or benefit plans, programs or arrangements maintained by Data General
which provide for grants of equity-based awards will be amended or converted
into a similar instrument of EMC, with adjustments to preserve their value. The
other terms of each Data General award, and the plans or agreements under which
they were issued, will continue to apply in accordance with their terms,
including any provisions providing for vesting and acceleration.
Conditions to Completion of the Merger. The respective obligations of Data
General and EMC to complete the merger and the other transactions contemplated
by the merger agreement are subject to the satisfaction or waiver of various
conditions which include, in addition to other customary closing conditions,
the following:
. EMC's registration statement on Form S-4 must be effective
. the merger agreement must be adopted by the holders of a majority of
the outstanding shares of Data General common stock
. all applicable regulatory approvals and consents required to complete
the merger must be received and all applicable waiting periods under
applicable domestic and foreign antitrust laws must have expired or
been terminated
. no law, regulation or order must be enacted or issued which has the
effect of making the merger illegal or otherwise prohibiting
completion of the merger substantially on the terms contemplated by
the merger agreement
. the receipt of opinions of counsel to the effect that the merger will
qualify as a reorganization under Section 368(a) of the Internal
Revenue Code
. no governmental action or proceeding must be pending or threatened
which has the effect of prohibiting or limiting EMC's ownership of
Data General upon completion of the merger
. the shares of EMC common stock to be issued in the merger must be
approved for listing, subject to official notice of issuance, on the
New York Stock Exchange
EMC's obligation to effect the merger is also subject to the satisfaction or
waiver of the following conditions:
. all consents, waivers, approvals, authorizations and orders required
to be obtained, and all filings required to be made, must be obtained
and made by Data General, except where the failure to obtain consents
will not have a material adverse effect on Data General
. EMC must receive letters from PricewaterhouseCoopers LLP stating that
the business combination to be effected by the merger will qualify as
a "pooling of interests" transaction under generally accepted
accounting principles
. Data General must receive letters from PricewaterhouseCoopers LLP
stating that they agree with management's conclusion that neither Data
General nor its subsidiaries has taken or agreed to take any action
that would prevent EMC from accounting for the business combination to
be effected by the merger as a "pooling of interests" transaction
under generally accepted accounting principles
44
<PAGE>
. Data General's affiliates must deliver executed affiliate agreements
to EMC, which are in full force and effect
In addition, each party's obligation to effect the merger is further subject
to the satisfaction or waiver of the following additional conditions:
. the representations and warranties of the other party set forth in the
merger agreement must be true and correct without reference to any
qualification as to materiality such that the aggregate effect of any
inaccuracies in such representations and warranties will not have a
material adverse effect, in each case as of the date of the merger
agreement and at and as of the date the merger is to be completed as
if made at and as of that time
. the other party to the merger agreement must have performed or
complied in all material respects with all of its agreements and
covenants required by the merger agreement
The merger agreement provides that a "material adverse effect" means, when
used in connection with Data General or EMC, any change, effect or circumstance
that has occurred prior to the date of determination of the material adverse
effect, that, individually or when taken together with all other such similar
or related changes, effects or circumstances, is materially adverse to the
business, assets, financial condition or results of operations of Data General
or EMC or is reasonably likely to materially delay or prevent the consummation
of the transactions contemplated by the merger agreement. However, there will
be no material adverse effect to the extent that any change, effect or
circumstance results from, among other things:
. changes in laws or interpretations thereof by courts or governmental
entities
. changes in generally accepted accounting principles
. changes in economic conditions or changes affecting generally
companies in the industries in which Data General or EMC operate
. disruptions to the business of Data General or EMC as to which Data
General or EMC, as the case may be, bears the burden of proof in
establishing are directly attributable to the announcement of the
merger agreement or the actions of the other party to the merger
agreement or its affiliates
Termination of the Merger Agreement. The merger agreement may be terminated
at any time prior to completion of the merger, whether before or after adoption
of the merger agreement by Data General stockholders:
. by mutual consent of Data General and EMC
. by EMC or Data General if the merger is not completed before February
29, 2000, except that the right to terminate the merger agreement is
not available to any party whose failure to fulfill any obligation
under the merger agreement has been a cause of the failure to complete
the merger on or before February 29, 2000
. by EMC or Data General if there is any order of a court or
governmental authority permanently prohibiting the completion of the
merger which is final and nonappealable, unless the party relying on
that order has not complied with certain of its obligations under the
merger agreement
. by EMC or Data General if the merger agreement fails to receive the
requisite vote for adoption by the stockholders of Data General at the
Data General special meeting
. by EMC upon a breach or failure to perform any of Data General's
representations, warranties, covenants or agreements set forth in the
merger agreement, which breach or failure to perform would cause
certain closing conditions to not be satisfied and which breach is not
cured within 10 business days of notice of that breach
45
<PAGE>
. by Data General upon a breach or failure to perform any of EMC's
representations, warranties, covenants or agreements set forth in the
merger agreement, which breach or failure to perform would cause
certain closing conditions to not be satisfied and which breach is not
cured within 10 business days of notice of that breach
. by Data General in response to certain Acquisition Proposals, provided
Data General pays EMC the appropriate termination fee
. by EMC:
. if Data General or any of its officers or directors participate in
discussions or negotiations in breach of the merger agreement
. if Data General or any of its officers or directors are otherwise in
material breach of its non-solicitation obligations under the merger
agreement
. if Data General's board of directors fails to recommend adoption of
the merger agreement by the stockholders of Data General or does not
call, give notice of, convene and hold the special meeting of Data
General stockholders to vote on the merger agreement
. if Data General fails to use its best efforts to solicit from its
stockholders proxies in favor of the merger agreement
Payment of Termination Fee. Data General will pay to EMC a termination fee
of $44,630,000 upon the earliest to occur of the following events:
. the entry by Data General into an agreement with respect to, or the
consummation of, any Acquisition Proposal or the acquisition by any
person of beneficial ownership of 20% or more of the equity or voting
interests of Data General in any such case within one year after the
termination of the merger agreement if the merger agreement should be
terminated because the merger has not been completed as of February
29, 2000 or if the stockholders of Data General should fail to approve
the merger agreement if, prior to such termination, an Acquisition
Proposal shall have been publicly announced or otherwise become
publicly known or any person shall have publicly announced an
intention, whether or not conditional, to make an Acquisition Proposal
. the termination of the merger agreement by EMC:
. if Data General or any of its officers or directors participate in
discussions or negotiations in breach of the merger agreement
. if Data General or any of its officers or directors are otherwise in
material breach of their non-solicitation obligations under the
merger agreement
. if Data General's board of directors fails to recommend adoption of
the merger agreement by the stockholders of Data General or does not
call, give notice of, convene or hold the special meeting of Data
General stockholders to vote on the merger agreement
. the termination of the merger agreement by Data General as a result of
accepting a Superior Proposal
Extension, Waiver and Amendment of the Merger Agreement. We may amend the
merger agreement before completion of the merger. However, after the Data
General stockholders adopt the merger agreement, no change will be which by law
requires further approval by Data General stockholders.
Either of us may extend the other's time for the performance of any of the
obligations or other acts under the merger agreement, waive any inaccuracies in
the other's representations and warranties and waive compliance by the other
with any of the agreements or conditions contained in the merger agreement. If
any of either of our conditions or other obligations are waived, we will
consider the facts and circumstances at that time and make a determination as
to whether a resolicitation of proxies is appropriate.
46
<PAGE>
THE STOCK OPTION AGREEMENT
The following description summarizes the material provisions of the stock
option agreement. Stockholders should read carefully the stock option
agreement, which is attached as Annex B to this proxy statement/prospectus.
General. EMC required Data General to enter into the stock option agreement
as a prerequisite to entering into the merger agreement. The stock option
agreement grants EMC the option to buy up to 10,177,850 shares of Data General
common stock, or such number of shares of Data General common stock as
represents 19.9% of outstanding Data General common stock, at an exercise price
of $19.58 per share.
The option is intended to increase the likelihood that the merger will be
completed. Consequently, aspects of the stock option agreement may have the
effect of discouraging persons who might now or at any time be interested in
acquiring all or a significant interest in Data General or its assets before
completion of the merger.
Exercise of the Option. Except as described below, EMC may exercise the
option, in whole or part at any time or from time to time from the date on
which EMC first has the right to receive the termination fee. The option will
terminate and not become exercisable upon any of the following:
. the effective time of the merger
. the termination of the merger agreement pursuant to that agreement,
unless on or after that termination EMC may be entitled to receive the
termination fee
. one year after termination of the merger agreement pursuant to that
agreement, unless on or after that termination, EMC may be entitled to
receive the termination fee
Cash Payment for the Option. Instead of purchasing shares of Data General
common stock under the option agreement, EMC may exercise its right to have
Data General pay to EMC an amount per share of Data General common stock equal
to the number of shares of Data General common stock subject to the option
agreement multiplied by the difference between:
. the higher of (1) the average closing price per share of Data General
common stock, for the 10 trading days commencing on the 12th trading
day immediately preceding the closing date of the merger as reported
on The New York Stock Exchange (or, if not listed on The New York
Stock Exchange, as reported on any other national securities exchange
or national securities quotation system on which Data General common
stock is listed or quoted, as reported in The Wall Street Journal
(Northeast edition), or, if not reported thereby, any other
authoritative source) and (2) the highest price per share of Data
General common stock paid pursuant to any Acquisition Proposal (as
defined on page 43) or proposed to be paid pursuant to any agreement
relating to an Acquisition Proposal and
. the exercise price of the option.
In addition, the stock option agreement provides that in no event will EMC's
total profit from the stock option plus any termination fee paid to EMC exceed
$61,363,000 in the aggregate and, if EMC's total profit from the option would
otherwise exceed such amount, EMC is required to:
. reduce the number of shares of Data General common stock subject to
the option
. deliver to Data General for cancellation shares of Data General common
stock previously purchased by EMC
. pay cash to Data General or
. do any combination of the foregoing, so that EMC's total profit from
the stock option plus the termination fee so paid to EMC does not
exceed $61,363,000 after taking into account the foregoing actions.
Registration Rights and Listing. EMC has certain rights to require
registration by Data General of any shares purchased under the option under the
securities laws if necessary for EMC to be able to sell such shares and to
require the listing of such shares on the New York Stock Exchange.
47
<PAGE>
OPERATIONS AFTER THE MERGER
Following the merger, EMC may integrate some or all of Data General's
operations or continue Data General's operations as a wholly-owned subsidiary
of EMC. The stockholders of Data General will become stockholders of EMC, and
their rights as stockholders will be governed by EMC's Restated Articles of
Organization, as currently in effect, the EMC Restated By-Laws and the laws of
the Commonwealth of Massachusetts. See "Comparison of Rights of Holders of Data
General Common Stock and EMC Common Stock."
48
<PAGE>
COMPARATIVE PER SHARE MARKET PRICE DATA
Data General common stock is traded on the New York Stock Exchange and the
London Stock Exchange under the symbol "DGN." EMC common stock is traded on the
New York Stock Exchange under the symbol "EMC."
The following table sets forth, for the calendar quarters indicated, the
high and low sale prices per share of Data General and EMC common stock, as
adjusted for all stock splits, as reported on the New York Stock Exchange.
<TABLE>
<CAPTION>
Data General EMC
Common Stock Common Stock
----------------- -----------------
High Low High Low
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1996:
First Quarter........................ 19 1/8 11 1/2 5 1/2 3 7/8
Second Quarter....................... 17 5/8 12 1/8 5 25/32 4 1/2
Third Quarter........................ 14 1/4 9 5 25/32 4 1/4
Fourth Quarter....................... 16 12 7/8 8 21/32 5 1/2
1997:
First Quarter........................ 20 3/4 14 1/8 9 29/32 8 1/32
Second Quarter....................... 26 3/4 15 3/8 10 5/32 8 1/8
Third Quarter........................ 37 15/16 25 15 7/16 9 51/64
Fourth Quarter....................... 27 1/2 15 3/4 16 1/4 11 13/16
1998:
First Quarter........................ 21 5/16 13 3/8 19 11/32 12 19/32
Second Quarter....................... 19 13/16 13 15/16 23 15/32 18
Third Quarter........................ 16 1/4 7 30 15/16 22 1/4
Fourth Quarter....................... 21 13/16 9 42 1/2 22 19/32
1999:
First Quarter........................ 21 1/2 9 5/8 64 7/8 43 1/2
Second Quarter....................... 15 7/16 9 15/16 67 7/16 47 3/4
Third Quarter (through September 3,
1999)............................... 19 1/4 9 15/16 64 7/8 53 5/8
</TABLE>
The following table sets forth the high and low sales prices per share of
Data General common stock and EMC common stock as reported on the New York
Stock Exchange on (1) August 6, 1999, the business day preceding public
announcement that Data General and EMC had entered into the merger agreement
and (2) September 3, 1999, the last full trading day for which prices were
available at the time of printing of this proxy statement/prospectus.
<TABLE>
<CAPTION>
Data General EMC
Common Stock Common Stock
------------------ ---------------
High Low High Low
--------- -------- ------- -------
<S> <C> <C> <C> <C>
August 6, 1999............................ $13 5/8 $12 3/4 $62 1/2 $59 1/4
September 3, 1999......................... $18 13/16 $18 5/16 $63 3/8 $62
</TABLE>
Because the market price of EMC common stock that you will receive in
connection with the acquisition of Data General may increase or decrease before
the vote on the merger agreement at the special meeting, you are urged to
obtain current market quotations.
49
<PAGE>
Unaudited Pro Forma Combined Condensed Financial Information
The following unaudited pro forma combined condensed financial information
gives effect to the merger using the "pooling of interests" method of
accounting, after giving effect to the pro forma adjustments described in the
accompanying notes. The unaudited pro forma combined condensed financial
information should be read in conjunction with the audited historical
consolidated financial statements and related notes of EMC and Data General,
which are incorporated by reference into this proxy statement/prospectus.
The unaudited pro forma combined condensed statements of operations give
effect to the merger as if it had occurred at the beginning of the periods
presented. Data General's fiscal year ends on the last Saturday in September.
The Data General financial information has been recast to conform to EMC's
December 31 fiscal year end. The unaudited pro forma combined condensed
statements of operations for each year in the three-year period ended
December 31, 1998 combine the audited historical consolidated statements of
operations of EMC for each year in the three-year period ended December 31,
1998 and the unaudited consolidated historical statements of operations of Data
General for each year in the three-year period ended December 26, 1998. The
unaudited pro forma combined condensed statements of operations for the six
months ended June 30, 1999 and 1998 combine the unaudited historical
consolidated statements of operations of EMC for the six months ended June 30,
1999 and 1998 and the unaudited historical consolidated statements of
operations of Data General for the six months ended June 26, 1999 and June 27,
1998.
The unaudited pro forma combined condensed balance sheet gives effect to the
merger as if it had occurred on June 30, 1999. The unaudited pro forma combined
condensed balance sheet combines the unaudited condensed historical
consolidated balance sheets of EMC as of June 30, 1999 and Data General as of
June 26, 1999.
The unaudited pro forma combined condensed financial information has been
prepared in accordance with generally accepted accounting principles in the
United States. These principles require management to make extensive use of
estimates and assumptions that affect that reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. The unaudited pro forma combined condensed financial information is
presented for illustrative purposes only and does not purport to be indicative
of the operating results or financial position that would have actually
occurred if the merger had been in effect on the dates indicated, nor is it
necessarily indicative of future operating results or financial position of the
merged companies. The pro forma adjustments are based on the information and
assumptions available at the time of the printing of this proxy
statement/prospectus.
50
<PAGE>
EMC Corporation
Unaudited Pro Forma Combined Condensed Statement of Operations (1)
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Historical
-----------------------------------
EMC Data General
For the six-month For the six-month Pro
period ended period ended Pro Forma Forma
June 30, 1999 June 26, 1999 Adjustments Combined
----------------- ----------------- ----------- --------
<S> <C> <C> <C> <C>
Revenues:
Net sales............. $2,266 $ 517 $2,783
Service and rental.... 154 194 348
------ ------ ------
2,420 711 3,131
Costs and expenses:
Cost of sales......... 983 357 1,340
Cost of service and
rental revenues...... 115 122 237
Research and
development.......... 212 58 270
Selling, general and
administrative....... 470 177 647
------ ------ ------
Operating income
(loss)................. 640 (3) 637
Investment income....... 53 6 59
Interest expense........ (10) (7) (17)
Other income (expense),
net.................... (3) 4 1
------ ------ ------
Income before taxes..... 680 -- 680
Income tax provision.... 170 1 171
------ ------ ------
Net income (loss)....... $ 510 $ (1) $ 509
====== ====== ======
Net income (loss) per
weighted average share,
basic (2) (3).......... $ 0.50 ($0.03) $ 0.49
Net income (loss) per
weighted average share,
diluted (2) (3)........ $ 0.47 ($0.03) $ 0.46
Weighted average shares,
basic (2) (3).......... 1,011 50 1,027
Weighted average shares,
diluted (2) (3)........ 1,091 50 1,108
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
51
<PAGE>
EMC Corporation
Unaudited Pro Forma Combined Condensed Statement of Operations (1)
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Historical
-------------------------
Data General
EMC For the For the
six-month six-month
period ended period ended Pro
June 30, June 27, Pro Forma Forma
1998 1998 Adjustments Combined
------------ ------------ ----------- --------
<S> <C> <C> <C> <C>
Revenues:
Net sales..................... $1,725 $ 518 $2,243
Service and rental............ 55 195 250
------ ------ --- ------
1,780 713 2,493
Costs and expenses:
Cost of sales (7)............. 847 435 1,282
Cost of service and rental
revenues..................... 51 123 174
Research and development...... 140 61 201
Selling, general and
administrative............... 331 170 501
Restructuring charge (7)...... -- 82 82
------ ------ --- ------
Operating income (loss)......... 411 (158) 253
Investment income............... 47 7 54
Interest expense................ (10) (7) (17)
------ ------ --- ------
Income (loss) before taxes...... 448 (158) 290
Income tax provision (benefit).. 112 2 114
------ ------ --- ------
Net income (loss)............... $ 336 $ (160) $ 176
====== ====== === ======
Net income (loss) per weighted
average share,
basic (2) (3).................. $ 0.34 ($3.26) $ 0.17
Net income (loss) per weighted
average share,
diluted (2) (3)................ $ 0.32 ($3.26) $ 0.17
Weighted average shares, basic
(2) (3)........................ 996 49 1,012
Weighted average shares, diluted
(2) (3)........................ 1,073 49 1,089
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
52
<PAGE>
EMC Corporation
Unaudited Pro Forma Combined Condensed Statement of Operations (1)
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Historical
---------------------------
EMC Data General
For the Twelve-month
Year ended period ended Pro
December 31, December 26, Pro Forma Forma
1998 1998 Adjustments Combined
------------ -------------- ----------- --------
<S> <C> <C> <C> <C>
Revenues:
Net sales.................. $3,791 $1,069 $4,860
Service and rental......... 183 393 576
------ ------ --- ------
3,974 1,462 5,436
Costs and expenses:
Cost of sales (7).......... 1,779 821 2,600
Cost of service and rental
revenues.................. 150 246 396
Research and development... 315 120 435
Selling, general, and
administrative............ 748 340 1,088
Restructuring charge (7)... -- 82 82
------ ------ --- ------
Operating income (loss)...... 982 (147) 835
Investment income............ 101 13 114
Interest expense............. (20) (15) (35)
Other income (expense), net.. (5) 6 1
------ ------ --- ------
Income (loss) before taxes... 1,058 (143) 915
Income tax provision
(benefit)................... 265 (4) 261
------ ------ --- ------
Net income (loss)............ $ 793 $ (139) $ 654
====== ====== === ======
Net income (loss) per
weighted average share,
basic (2) (3)............... $ 0.79 $(2.83) $ 0.64
Net income (loss) per
weighted average share,
diluted (2) (3)............. $ 0.75 $(2.83) $ 0.61
Weighted average shares,
basic (2) (3)............... 1,000 49 1,016
Weighted average shares,
diluted (2) (3)............. 1,078 49 1,095
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
53
<PAGE>
EMC Corporation
Unaudited Pro Forma Combined Condensed Statement of Operations (1)
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Historical
---------------------------
Data General
EMC For the Twelve-month
Year ended period ended Pro
December 31, December 27, Pro Forma Forma
1997 1997 Adjustments Combined
------------ -------------- ----------- --------
<S> <C> <C> <C> <C>
Revenues:
Net sales.................. $2,863 $1,160 $4,023
Service and rental......... 75 390 465
------ ------ --- ------
2,938 1,550 4,488
Costs and expenses:
Cost of sales.............. 1,520 797 2,317
Cost of service and rental
revenues.................. 51 245 296
Research and development... 221 111 332
Selling, general, and
administrative............ 484 342 826
------ ------ --- ------
Operating income............. 662 55 717
Investment income............ 70 12 82
Interest expense............. (15) (16) (31)
Other income (expense), net.. 1 -- 1
------ ------ --- ------
Income before taxes.......... 718 51 769
Income tax provision......... 179 2 181
------ ------ --- ------
Net income................... $ 539 $ 49 $ 588
====== ====== === ======
Net income per weighted
average share, basic(2)(3).. $ 0.55 $ 1.12 $ 0.59
Net income per weighted
average share,
diluted(2)(3)............... $ 0.52 $ 1.06 $ 0.56
Weighted average shares,
basic(2)(3)................. 987 44 1,002
Weighted average shares,
diluted(2)(3)............... 1,051 46 1,066
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
54
<PAGE>
EMC Corporation
Unaudited Pro Forma Combined Condensed Statement of Operations (1)
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Historical
---------------------------
EMC Data General
For the Twelve-month
Year ended period ended Pro
December 31, December 28, Pro Forma Forma
1996 1996 Adjustments Combined
------------ -------------- ----------- --------
<S> <C> <C> <C> <C>
Revenues:
Net sales.................. $2,218 $ 946 $3,164
Service and rental......... 56 397 453
------ ------ --- ------
2,274 1,343 3,617
Costs and expenses:
Cost of sales.............. 1,211 626 1,837
Cost of service and rental
revenues.................. 38 259 297
Research and development... 161 102 263
Selling, general, and
administrative............ 367 313 680
------ ------ --- ------
Operating income............. 497 43 540
Investment income............ 34 7 41
Interest expense............. (12) (13) (25)
------ ------ --- ------
Income before taxes.......... 519 37 556
Income tax provision......... 133 3 136
------ ------ --- ------
Net income................... $ 386 $ 34 $ 420
====== ====== === ======
Net income per weighted
average share, basic (2)
(3)......................... $ 0.42 $ 0.86 $ 0.45
Net income per weighted
average share, diluted (2)
(3)......................... $ 0.39 $ 0.82 $ 0.42
Weighted average shares,
basic (2) (3)............... 927 39 940
Weighted average shares,
diluted (2) (3)............. 997 42 1,011
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
information.
55
<PAGE>
EMC Corporation
Unaudited Pro Forma Combined Condensed Balance Sheet (1)
(in millions)
<TABLE>
<CAPTION>
Historical
---------------------
EMC Data General Pro
June 30, June 26, Pro Forma Forma
ASSETS 1999 1999 Adjustments Combined
------ -------- ------------ ----------- --------
<S> <C> <C> <C> <C>
Current assets:
Cash, cash equivalents, and short-
term investments................. $1,347 $ 269 $1,616
Trade and notes receivable, net... 1,136 293 1,429
Inventories....................... 522 127 649
Deferred income taxes............. 65 -- 65
Other assets...................... 63 30 93
------ ------ ------
Total current assets................ 3,133 719 3,852
Long-term investments............... 1,093 -- 1,093
Notes receivable, net............... 55 1 56
Property, plant and equipment, net.. 724 199 923
Deferred income taxes............... 26 -- 26
Intangible and other assets, net.... 238 99 337
------ ------ ------
Total assets.................... $5,269 $1,018 $6,287
====== ====== ======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
<S> <C> <C> <C> <C>
Current Liabilities:
Current portion of long-term
obligations...................... $ 9 $ -- $ 9
Accounts payable.................. 257 120 377
Accrued expenses (5).............. 281 191 20 492
Income taxes payable.............. 210 6 216
Deferred revenue.................. 57 52 109
------ ------ ------
Total current liabilities........... 814 369 1,203
Deferred income taxes............... 62 -- 62
Long-term debt...................... 491 213 704
Notes payable....................... 14 -- 14
Other liabilities................... 1 25 26
------ ------ ------
Total liabilities............... 1,382 607 2,009
------ ------ ------
Commitments and contingencies
Stockholders' equity (5)............ 3,887 411 (20) 4,278
------ ------ ------
Total liabilities and
stockholders' equity........... $5,269 $1,018 $6,287
====== ====== ======
</TABLE>
- --------
See accompanying notes to unaudited pro forma combined condensed financial
information.
56
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL INFORMATION
(1) EMC has a calendar year end, and Data General's fiscal year ends on the
last Saturday in September. The pro forma combined balanced sheet assumes
that the merger took place June 30, 1999 and combines Data General's
unaudited June 26, 1999 consolidated balance sheet and EMC's unaudited
June 30, 1999 balance sheet. The pro forma combined statements of income
assume the merger took place as of the beginning of the periods presented
and combines the following:
(a) Data General's unaudited consolidated statements of income for the
six-month periods ending June 26, 1999 and June 27, 1998 and for the
twelve-month periods ending December 26, 1998, December 27, 1997 and
December 28, 1996.
(b) EMC's unaudited consolidated statements of income for the six-month
periods ending June 30, 1999 and 1998 and for the fiscal years ending
December 31, 1998, 1997 and 1996.
Data General's six-month period ended June 26, 1999 has been derived by
combining the unaudited results for the quarters ended March 27, 1999 and
June 26, 1999. Data General's six-month period ended June 27, 1998 has been
derived in a similar manner. Data General's twelve-month period ended
December 26, 1998 has been derived by combining the unaudited results for
the quarters ended March 28, 1998, June 27, 1998, September 26, 1998 and
December 26, 1998. Data General's twelve-month periods ended December 27,
1997 and December 28, 1996 have been derived in a similar manner.
(2) On October 21, 1997, EMC announced a 2-for-1 stock split in the form of a
100% stock dividend with a record date of October 31, 1997 and a
distribution date of November 17, 1997. On February 24, 1999, EMC
announced a 2-for-1 stock split in the form of a 100% stock dividend with
a record date of May 14, 1999 and a distribution date of May 28, 1999. All
EMC share and per share amounts have been restated to reflect these stock
splits for all periods presented.
(3) The pro forma combined per share amounts are based on the combined
weighted average number of shares of EMC common stock and Data General
common stock outstanding for all periods presented based on Data General
stockholders receiving 0.3262 of a share of EMC common stock for each
share of Data General common stock.
(4) There were no material transactions between EMC and Data General during
any of the periods presented.
(5) Total transaction costs to be incurred by EMC and Data General in
connection with the merger are estimated to be approximately $20 million.
These costs are related to legal, printing, accounting, financial advisory
services and other expenses and will be charged against income upon
consummation of the merger.
(6) A restructuring charge to operations by the combined company is expected
to occur subsequent to the merger to reflect the combination of the two
companies. Such charges, which have not yet been estimated, may include
amounts with respect to payments under employment agreements, the
elimination of excess facilities, the write-off of certain assets, changes
to employee benefit plans and severance costs. Additionally, the combined
company expects to record in the second quarter of 1999 a tax benefit
reflecting the amount of Data General's deferred tax assets which are more
likely than not to be realized by the combined company. The effects of
these costs have not been reflected in the pro forma combined condensed
financial information.
(7) In the quarter ended June 27, 1998, Data General incurred a restructuring
charge totaling $135 million, including approximately $82 million related
to employee termination benefits, asset write-downs and other exit costs
which Data General recorded in operating expenses and approximately $53
million for capitalized software and inventory write-downs included in
cost of revenues. On a pro forma combined basis, net income for the six
months ended June 30, 1998 and the twelve-month period ended December 31,
1998 before these non-recurring charges was $0.29 and $0.72 per share of
common stock on a diluted basis, respectively.
(8) Certain financial statement balances of Data General have been
reclassified to conform with EMC's financial statement presentation.
57
<PAGE>
COMPARISON OF RIGHTS OF HOLDERS OF DATA GENERAL COMMON STOCK
AND EMC COMMON STOCK
The rights of EMC stockholders are currently governed by the Massachusetts
Business Corporation Law ("MBCL"), EMC's restated articles of organization, as
amended ("EMC Charter") and EMC's amended and restated by-laws ("EMC By-Laws").
The rights of Data General stockholders are currently governed by the Delaware
General Corporation Law ("DGCL"), Data General's restated certificate of
incorporation, as amended ("Data General Charter") and Data General's by-laws,
as amended ("Data General By-Laws"). Upon completion of the merger, the rights
of Data General stockholders who become stockholders of EMC in the merger will
be governed by the MBCL, the EMC Charter and the EMC By-Laws.
The following description summarizes the material differences which may
affect the rights of stockholders of Data General and EMC but is not a complete
statement of all such differences, or a complete description of the specific
provisions referred to in this summary. The identification of specific
differences is not intended to indicate that other equally or more significant
differences do not exist. You should read carefully the relevant provisions of
the DGCL, the Data General Charter, the Data General By-Laws, the MBCL, the EMC
Charter and the EMC By-Laws.
Capitalization
Data General. The total authorized shares of capital stock of Data General
consist of (1) 150,000,000 shares of common stock, par value $.01 per share,
and (2) 1,000,000 shares of preferred stock, par value $.01 per share. As of
August 6, 1999, there were 51,145,010 shares of Data General common stock
outstanding and no shares of Data General preferred stock outstanding.
EMC. The total authorized shares of capital stock of EMC consist of (1)
3,000,000,000 shares of common stock, par value $.01 per share, and (2)
25,000,000 shares of preferred stock, par value $.01 per share. As of June 30,
1999, there were 1,013,385,208 shares of EMC common stock outstanding and no
shares of EMC preferred stock outstanding.
Voting Rights
Data General. Each holder of Data General common stock is entitled to one
vote for each share held of record and may not cumulate votes for the election
of directors.
EMC. Each holder of EMC common stock is entitled to one vote for each share
held of record, unless provided by the EMC Charter and may not cumulate votes
for the election of directors.
Number of Directors
Data General. Data General's board of directors currently consists of seven
members. The Data General By-Laws provide that the number of directors shall be
not less than three and not more than 15. Within the limits previously
specified, the number of directors shall be determined by resolution of the
board or directors or by the stockholders at the annual meeting.
EMC. EMC's board of directors currently consists of seven members. The EMC
By-Laws state that the number of directors shall be fixed at any time or from
time to time only by the affirmative vote of a majority of the directors then
in office, but shall not be less than three. There is no upper limit to the
number of directors.
Removal of Directors
Data General. The DGCL provides that directors of Data General may be
removed with or without cause by the holders of a majority of voting shares at
an election of directors.
58
<PAGE>
EMC. The EMC By-Laws and the MBCL provide that the directors may be removed
from office, but only for cause, by vote of the holders of a majority of shares
entitled to vote at an election of directors and only after reasonable notice
and an opportunity to be heard by the stockholders. The MBCL defines "cause" in
this context to mean (a) conviction of a felony, (b) declaration of unsound
mind by order of court, (c) gross dereliction of duty, (d) commission of an
action involving moral turpitude, or (e) commission of an action which
constitutes intentional misconduct or knowing violation of law if such action
in either event results in both an improper substantial personal benefit and a
material injury to the corporation.
Filling Vacancies on the Board of Directors
Data General. A vacancy or newly created directorship resulting from an
increase in the number of directors may be filled by a majority of directors
then in office, even if less than a quorum. If no directors are in office, an
election is held. If the number of directors to be replaced represents more
than a majority of the board of directors as constituted immediately prior to
such replacement, the Court of Chancery of the State of Delaware may, upon
application of stockholders holding at least 10% of the voting stock, order an
election to fill vacancies or replace directors chosen by the board of
directors then in office.
EMC. A vacancy or newly created directorship, whether resulting from an
increase in the size of the board of directors, the death, resignation,
disqualification, or removal of a director may be filled solely by the
affirmative vote of a majority of the remaining directors then in office, even
if less than a quorum.
Removal of Officers
Data General. The Data General By-Laws provide that any officer elected or
appointed by the board of directors may be removed at any time by the
affirmative vote of a majority of the board of directors.
EMC. The EMC By-Laws provide that the board of directors may remove any
officer elected by the board of directors with or without cause by the vote of
the majority of the directors then in office. Any officer may be removed for
cause only after reasonable notice and an opportunity to be heard before the
board of directors.
Amendments to Corporate Charter
Data General. Under the DGCL, a certificate of incorporation may be amended
by approval of the board of directors of the corporation and the affirmative
vote of the holders of a majority of the outstanding shares entitled to vote
for the amendment, unless a higher vote is required by the corporation's
certificate of incorporation.
The Data General Charter provides that amendments to the Data General
Charter may be made by vote of a majority of the outstanding stock entitled to
vote. However, amendments to Article NINTH, and other charter provisions
requiring supermajority votes, require a vote of not less than two-thirds, or
such other applicable supermajority) of the voting stock of Data General held
by stockholders other than an Acquiring Person, provided, that if a majority of
the Continuing Directors vote to amend the certificate of incorporation, then
only a majority stockholder vote is required.
EMC. The EMC Charter provides that certain business combination provisions
may not be amended except by the affirmative vote of holders of at least 80% of
the outstanding shares of the corporation's capital stock entitled to vote in
an election of directors, voting as a single class, provided, that if there is
a related person owning at least 10% of the outstanding shares of capital
stock, such action must also be approved by the affirmative vote of holders of
67% of such shares held by disinterested stockholders.
Amendments to By-Laws
Data General. The Data General By-Laws provide that they may be amended by
the stockholders or by the board of directors, when such power is conferred
upon the board of directors by the Data General Charter, at any regular meeting
of the stockholders or of the board of directors or at a special meeting of the
59
<PAGE>
stockholders or the board of directors if notice of such amendment of the Data
General By-Laws is contained in the notice of such special meeting. The Data
General Charter confers power upon the board of directors to amend the Data
General By-Laws.
EMC. The EMC By-Laws provide that they may be amended at any annual or
special meeting of the stockholders called for the purpose, of which the notice
shall specify the subject matter of the proposed amendment by vote of the
stockholders. The EMC By-Laws may also be amended by a vote of a majority of
the directors then in office, except that the directors may not take any action
to amend the indemnification or amendment provisions of the EMC By-Laws.
Special Stockholder Meetings
Data General. The Data General By-Laws provide that a special meeting of the
stockholders may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or the request in writing of stockholders entitled to vote generally
in the election of directors, owning at least two-thirds of the issued and
outstanding Data General capital stock. The request shall state the purpose of
the proposed meeting.
EMC. The EMC By-Laws provide that a special meeting of the stockholders may
be called by the president at the direction of the chairman of the board of
directors or by a majority of directors, and shall be called by the clerk upon
the written application of stockholders holding at least 85% of the capital
stock of the corporation entitled to vote at the proposed meeting. The request
shall state the purpose of the proposed meeting.
Action by Consent of Stockholders
Data General. Under the DGCL and the Data General By-Laws, any action
required or permitted to be taken by stockholders at a meeting may be taken
without a meeting if all the stockholders who would have been entitled to vote
to take such action if a meeting were held, consent to the action in writing
and the written consents are filed with the records of the meetings of
stockholders.
EMC. The EMC By-Laws provide that any action required or permitted to be
taken by stockholders at a meeting may be taken without a meeting if all
stockholders entitled to vote on the matter consent to the action in writing
and the written consents are filed with the records of the meetings of
stockholders. Such consents shall be treated for all purposes as a vote at a
meeting.
Inspection Rights
Data General. Under the DGCL, every stockholder has the right to examine, in
person or by agent or attorney, during the usual hours for business, for any
proper purpose the corporation's stock ledger, a list of its stockholders and
its other books and records, and to make copies or extracts therefrom. In order
to exercise the foregoing right, a stockholder must submit a written demand to
the corporation, under oath, stating the purpose of the inspection. Upon
refusal of the corporation (or its agent or an officer of the corporation) to
permit an inspection demanded by a stockholder, or upon the failure to reply to
a stockholder's demand within five business days after such demand has been
made, a stockholder may apply to the Court of Chancery to compel the
inspection. Where a stockholder seeks to have the Court of Chancery compel an
inspection of the corporation's books and records, other than its stock ledger
or list of stockholders, the stockholder must first establish that it has
complied with the formal requirements of making a demand for inspection and
that the inspection is for a proper purpose. For purposes of this provision of
the DGCL, a "proper purpose" is one that is reasonably related to such person's
interest as a stockholder.
EMC. The MBCL requires that every domestic corporation maintain in
Massachusetts, and make available for inspection by its stockholders, the
original, or attested copies of, the corporation's articles of
60
<PAGE>
organization, by-laws, records of all meetings of incorporators and
stockholders, and the stock and transfer records listing the names of all
stockholders and their record addresses and the amount of stock held by each.
The MBCL further provides that if any officer or agent of a corporation having
charge of such corporate records (or copies thereof) refuses or neglects to
exhibit them in legible form or to produce for examination a list of
stockholder names, records, addresses and amount of stock held by each, such
officer or agent of the corporation will be liable to any stockholder for
actual damages sustained by reason of such refusal or neglect. However, in an
action for damages or a proceeding in equity under the foregoing provision, it
is a defense to such action that the actual purpose and reason for the
inspection being sought is to secure a list of stockholders or other
information for the purpose of selling the list or other information or of
using them for purposes other than in the interest of the person seeking them,
as a stockholder, relative to the affairs of the corporation. The foregoing
rights relating to inspection are deemed to include the right to copy materials
and to be represented by agent or counsel in exercising these rights. In
addition to the rights of inspection provided by the MBCL, a stockholder of a
Massachusetts corporation has a common law right to inspect additional
documents which, if such request is refused by the corporation, may be obtained
by petitioning a court for the appropriate order. In petitioning a court for
such an order, the granting of which is discretionary, the stockholder has the
burden of demonstrating (i) that he is acting in good faith and for the
purposes of advancing the interests of the corporation and protecting his own
interest as a stockholder and (ii) that the requested documents are relevant to
those purposes.
The EMC Charter provides that no stockholder shall have any right to examine
any property or any books, accounts or other writings of the corporation if
there is reasonable ground for belief that such examination will for any reason
be adverse to the interests of the corporation, and a vote of the directors
refusing permission to make such examination and setting forth that in the
opinion of the directors such examination would be adverse to the interests of
the corporation shall be prima facie evidence that such examination would be
adverse to the interests of the corporation. Every such examination shall be
subject to such reasonable regulations as the directors may establish in regard
thereto.
Limitation of Personal Liability of Directors
Data General. The Data General Charter provides that no director of Data
General shall be personally liable for monetary damages for breach of fiduciary
duty as a director. However, no such provision can eliminate the liability of a
director for:
. any breach of the director's duty of loyalty to the corporation or its
stockholders
. acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of the law
. violation of Section 174 of the DGCL regarding unlawful payment of
dividends or unlawful stock purchases or redemptions
. any transaction from which the director derived an improper personal
benefit
EMC. The EMC By-Laws provide that no director of EMC shall be personally
liable for monetary damages for breach of fiduciary duty as a director.
However, no such provision can eliminate the liability of a director for any
matter as to which a director is adjudicated in any proceeding not to have
acted in good faith in the reasonable belief that his action was in the best
interests of EMC or in the best interests of the participants or beneficiaries
of any employee benefit plan; provided, however, that as to any matter disposed
of by a compromise payment by such director pursuant to a consent decree or
otherwise, no indemnification for said payment shall be provided unless such
compromise shall be approved as in the best interests of EMC after that notice
that it involves such indemnification:
. by a disinterested majority of the directors then in office or
. by a majority of the disinterested directors then in office, provided
that there has been obtained an opinion in writing of independent legal
counsel to the effect that such director appears to have acted in good
faith in the reasonable belief that his action was in the best
interests of EMC or
61
<PAGE>
. by the holders of a majority of the outstanding stock at the time
entitled to vote for directors, voting as a single class, exclusive of
any stock owned by any interested director.
Dividends
Data General. The Data General By-Laws provide that the Data General board
of directors may declare dividends upon the capital stock of Data General at
any regular or special meeting. Data General may pay dividends in cash, in
property, or in shares of capital stock subject to the Data General Charter.
EMC. The EMC Charter provides that the EMC board of directors may declare
dividends upon the capital stock of EMC from time to time, as permitted by law.
Stockholder Rights Plan
Data General. Rights, first issued to holders of record of Data General
common stock on October 20, 1986, entitle the holder to purchase from Data
General one one-hundredth of a share of Series A Junior Participating Preferred
Stock at an exercise price of $100 per one one-hundredth of a share, subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement, which was renewed and restated as of October 19, 1996 and amended as
of August 6, 1999.
The rights will not be exercisable until the earlier of:
. 10 business days after a person acquires at least 20% of the
outstanding shares of Data General common stock
. 10 business days after a person commences a tender offer which would
result in the person beneficially owning at least 20% of the
outstanding shares of Data General common stock and
. 10 business days after the board of directors declares a person to be
an "Adverse Person" upon a determination that such person has become
the beneficial owner of at least 15% of the outstanding common stock
and a determination by a majority of the directors, who were directors
prior to the date of the Rights Agreement and any person who if
subsequently elected to the board of directors if recommended or
approved by a majority of such directors (the "Continuing Directors")
that such person has certain objectives adverse to those of Data
General and its stockholders or that such person's ownership is causing
or is reasonably likely to cause a material adverse impact on the
business or prospects of Data General.
Rights "flip-in" and entitle the holder to purchase Data General common
stock having a value of twice the Right's exercise price if:
. a person becomes the beneficial owner of 25% of the Data General common
stock (except pursuant to a tender offer for all stock at a fair price)
. an Acquiring Person merges with Data General and Data General survives
and the Data General common stock is not changed or exchanged
. there occurs any reclassification of securities of Data General that
increases by more than 1% the proportionate share of outstanding Data
General common stock owned by an Acquiring Person or
. a person is declared to be an Adverse Person
Rights "flip-over" and entitle the holder to purchase common stock of an
acquiror having a value of twice the Right's exercise price if, following the
date any person becomes an Acquiring Person:
. Data General merges with the acquirer and its common stock is changed
or exchanged or
. more than 50% of Data General's assets are sold or otherwise
transferred
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The board of directors generally may redeem the Rights at $.01 per Right at
any time until the tenth day following a public announcement that a person has
become an Acquiring Person, provided that the board of directors may not redeem
the Rights after a person has been declared an Adverse Person.
The Rights Agreement was amended as of August 6, 1999 so that the Rights are
not exercisable by virtue of any action taken by EMC in connection with the
transactions contemplated by the merger agreement or the stock option
agreement.
EMC. EMC does not have a stockholder rights plan.
Relevant Business Combination Provisions and Statutes
Data General. The DGCL provides that if a person acquires 15% or more of the
stock of a Delaware corporation without the approval of the board of directors
of that corporation, such person may not engage in certain transactions with
the corporation for a period of three years. The statute contains certain
exceptions to this prohibition. If, for example, the board of directors
approves the acquisition of stock or the transaction prior to the time that the
person becomes an interested stockholder, or if the interested stockholder
acquires 85% of the voting stock of the corporation (excluding voting stock
owned by directors who are also officers and certain employee stock plans) in
one transaction, or if the transaction is approved by the board of directors
and the affirmative vote of two-thirds of the holders of the outstanding voting
stock which is not owned by the interested stockholder, then the prohibition on
business combinations is not applicable.
The Data General Charter provides that any business combination (including
any merger, sale of assets with fair market value in excess of $50,000,000,
issuance of securities of Data General to a person owning at least 20% of the
outstanding capital stock ("Acquiring Person"), recapitalization, merger or
consolidation increasing the voting power of an Acquiring Person, liquidation
or dissolution, any agreement or arrangement providing for any of the
foregoing, or any other transaction which requires stockholder approval under
the DGCL) with an Acquiring Person or its affiliates or associates requires the
vote of two-thirds of the holders of outstanding voting stock not held by an
Acquiring Person, voting as a single class, unless the business combination is
approved by the Continuing Directors.
EMC. The MBCL provides that, if a person acquires 5% or more of the stock of
a Massachusetts corporation without the approval of the board of directors of
that corporation, such person may not engage in certain transactions with the
corporation for a period of three years. The statute contains certain
exceptions to this prohibition. If, for example, the board of directors
approves the subject transaction prior to the time that the person becomes an
interested stockholder, or if the interested stockholder acquires 90% of the
voting stock of the corporation (excluding voting stock owned by directors who
are also officers and certain employee stock plans) in one transaction, or if
the transaction is approved by the board of directors and by the affirmative
vote of two-thirds of the holders of the outstanding voting stock which is not
owned by the interested stockholder, then the prohibition on business
combinations is not applicable. EMC has opted out of this provision of the
MBCL.
Control Share Acquisition Statute. Under the Massachusetts Control Share
Acquisition Statute, a person who acquires beneficial ownership of shares of
stock of a corporation in a threshold amount equal to greater than one-fifth,
one-third, or a majority of the voting stock of the corporation (a "control
share acquisition"), must obtain the approval of a majority of shares entitled
to vote generally in the election of directors (excluding (i) any shares owned
by such person acquiring or proposing to acquire beneficial ownership of shares
in a control share acquisition, (ii) any shares owned by any officer of the
corporation and (iii) any shares owned by any employee of the corporation who
is also a director of the corporation) in order to vote the shares that such
person acquires in crossing the foregoing thresholds. The statute does not
require that such person consummate the purchase before the stockholder vote is
taken.
63
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The Massachusetts Control Share Acquisition statute permits, to the extent
authorized by a corporation's articles of organization or by-laws, redemption
of all shares acquired by an acquiring person in a control share acquisition
for fair value (which is to be determined in accordance with procedures adopted
by the corporation) if (i) no control share acquisition statement is delivered
by the acquiring person or (ii) a control share acquisition statement has been
delivered and voting rights were not authorized for such shares by the
stockholders in accordance with applicable law.
The Massachusetts Control Share Acquisition statute permits a Massachusetts
corporation to elect not to be governed by the statute's provisions, by
including a provision in the corporations's articles of organization or bylaws
pursuant to which the corporation opts out of the statute. The EMC By-Laws
contain such an opt-out provision.
LEGAL OPINIONS
The legality of the shares of EMC common stock offered by this proxy
statement/prospectus will be passed upon for EMC by Paul T. Dacier, Vice
President and General Counsel of EMC. As of June 30, 1999, Mr. Dacier owned
100,449 shares of EMC common stock and options for 112,768 shares of EMC common
stock.
Certain United States federal income tax consequences of the merger will be
passed upon for Data General by its special counsel, Wachtell, Lipton, Rosen &
Katz, and certain United States federal income tax consequences of the merger
will be passed upon for EMC by its special counsel, Skadden, Arps, Slate,
Meagher & Flom LLP.
EXPERTS
The financial statements incorporated in this proxy statement/prospectus by
reference to the Annual Report on Form 10-K of EMC for the year ended December
31, 1998 have been incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The financial statements incorporated in this proxy statement/prospectus by
reference to the Annual Report on Form 10-K of Data General for the year ended
September 26, 1998 have been incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
STOCKHOLDER PROPOSALS
Data General will hold a Year 2000 Annual Meeting of its stockholders only
if the merger is not consummated before the time of the annual meeting. In the
event that this meeting is held, pursuant to the Data General By-Laws, any
stockholder proposals submitted to Data General after October 29, 1999 will be
untimely and not be considered at the Year 2000 Annual Meeting.
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<PAGE>
CAUTIONARY FACTORS CONCERNING FORWARD-LOOKING STATEMENTS
Some of the information set forth or incorporated by reference in this proxy
statement/prospectus constitutes forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements include the information concerning possible or assumed future
benefits of the merger to EMC and the stockholders of Data General after the
proposed merger. When we use such words as "believes," "expects,"
"anticipates," or similar expressions, we are making forward-looking
statements. All such forward-looking statements are necessarily only estimates
of future results, and there can be no assurance that actual results will not
materially differ from expectations. Factors which could cause actual results
to differ from expectations include, among others, one-time events and other
important factors disclosed previously and from time to time in Data General
and EMC's other filings with the Commission, as well as the risks and
uncertainties described under "Risk Factors."
WHERE YOU CAN FIND MORE INFORMATION
Data General and EMC are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith file
reports, proxy and information statements and other information with the
Commission. Such reports, proxy and information statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
NW, Washington, D.C. 20549, and at the following Regional Offices of the
Commission: New York Regional Office, Seven World Trade Center, Suite 1300, New
York, New York 10048 and Chicago Regional Office, Northwest Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may be obtained by mail at prescribed rates from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, NW, Washington,
D.C. 20549. The Commission maintains a web site that contains reports, proxy
and information statements and other information regarding registrants that
file electronically with the Commission. The address of the site is
http://www.sec.gov. EMC common stock is listed on the New York Stock Exchange,
and Data General common stock is listed on the New York Stock Exchange and the
London Stock Exchange. Reports and other information concerning Data General
and EMC may also be inspected at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
The following documents filed with the Commission by EMC are incorporated by
reference in this proxy statement/prospectus:
. Annual Report on Form 10-K for the fiscal year ended December 31, 1998
(SEC file number 001-09853 and filing date of March 11, 1999)
. Definitive Proxy Statement on Schedule 14A (SEC file number 001-09853
and filing date of March 19, 1999)
. Current Report on Form 8-K for the period ended May 6, 1999 (SEC file
number 001-09853 and filing date of May 6, 1999)
. Quarterly Report on Form 10-Q for the period ended March 31, 1999 (SEC
file number 001-09853 and filing date of May 13, 1999)
. Current Report on Form 8-K for the period ended August 6, 1999 (SEC
file number 001-09853 and filing date of August 11, 1999)
. Quarterly Report on Form 10-Q for the period ended June 30, 1999 (SEC
file number 001-09853 and filing date of August 13, 1999)
65
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The following documents filed with the Commission by Data General are
incorporated by reference in this proxy statement/prospectus:
. Annual Report on Form 10-K for the fiscal year ended September 26,
1998 (SEC file number 001-07352 and filing date of December 17, 1998)
. Definitive Proxy Statement on Schedule 14A for the period ended
January 27, 1999 (SEC file number 001-07352 and filing date of
December 17, 1998)
. Quarterly Report on Form 10-Q for the period ended December 26, 1998
(SEC file number 001-07352 and filing date of February 4, 1999)
. Quarterly Report on Form 10-Q for the period ended March 27, 1999 (SEC
file number 001-07352 and filing date of May 6, 1999)
. Quarterly Report on Form 10-Q for the period ended June 26, 1999 (SEC
file number 001-07352 and filing date of August 5, 1999)
. Current Report on Form 8-K for the period ended August 6, 1999 (SEC
file number 001-07352 and filing date of August 11, 1999)
All documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 after the date of this proxy
statement/prospectus and before the date of the special meeting are
incorporated by reference into and will become a part of this proxy
statement/prospectus from the date of filing of those documents.
Any statement contained in a document of EMC incorporated or deemed to be
incorporated by reference into this proxy statement/prospectus will be deemed
to be modified or superseded for purposes of this proxy statement/prospectus to
the extent that a statement contained in this proxy statement/prospectus or any
other subsequently filed document that is deemed to be incorporated by
reference into this proxy statement/prospectus modifies or supersedes the
statement. Any statement so modified or superseded will not be deemed, except
as so modified or superseded, to constitute a part of this proxy
statement/prospectus.
The documents incorporated by reference into this proxy statement/prospectus
are available from us upon request. We will provide a copy of any and all of
the information that is incorporated by reference in this proxy
statement/prospectus (not including exhibits to the information unless those
exhibits are specifically incorporated by reference into this proxy
statement/prospectus) to any person, without charge, upon written or oral
request. Any request for documents should be made by September 30, 1999 to
ensure timely delivery of the documents.
Request for documents relating to Requests for documents relating to EMC
Data General should be directed to: should be directed to:
Data General Corporation EMC Corporation
4400 Computer Drive 35 Parkwood Drive
Westboro, Massachusetts 01580 Hopkinton, Massachusetts 01748
(508) 898-5000 (508) 435-1000
If you have any questions about the merger, please call Data General's
Investor Relations Department at (508) 898-6544. You may also call EMC's
Investor Relations Department at (508) 435-1000.
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ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
EMC CORPORATION,
EMERALD MERGER CORPORATION
and
DATA GENERAL CORPORATION
Dated as of August 6, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
Article I THE MERGER............................................... A-1
Section 1.1 The Merger............................................... A-1
Section 1.2 Consummation of the Merger............................... A-1
Section 1.3 Effects of the Merger.................................... A-1
Section 1.4 Certificate of Incorporation of the Surviving
Corporation.............................................. A-2
Section 1.5 By-Laws of the Surviving Corporation..................... A-2
Section 1.6 Directors and Officers of the Surviving Corporation...... A-2
Section 1.7 Closing.................................................. A-2
Article II CONVERSION AND EXCHANGE OF SECURITIES.................... A-2
Section 2.1 Conversion of Capital Stock.............................. A-2
Section 2.2 Exchange of Certificates................................. A-3
Section 2.3 Material Adverse Effect.................................. A-6
Article III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............ A-6
Section 3.1 Organization and Qualification; Subsidiaries............. A-6
Section 3.2 Certificate of Incorporation and By-Laws................. A-7
Section 3.3 Capitalization........................................... A-7
Section 3.4 Authority Relative to this Agreement..................... A-8
Section 3.5 Section 203 of the DGCL Not Applicable................... A-8
Section 3.6 Agreements, Contracts and Commitments.................... A-8
Section 3.7 No Conflict; Required Filings and Consents............... A-9
Section 3.8 Compliance; Permits...................................... A-9
Section 3.9 SEC Filings; Financial Statements........................ A-10
Section 3.10 Absence of Certain Changes or Events..................... A-10
Section 3.11 No Undisclosed Liabilities............................... A-10
Section 3.12 Absence of Litigation.................................... A-11
Section 3.13 Employee Benefit Plans, Options and Employment
Agreements............................................... A-11
Section 3.14 Labor Matters............................................ A-12
Section 3.15 Properties; Encumbrances................................. A-12
Section 3.16 Taxes.................................................... A-13
Section 3.17 Environmental Matters.................................... A-14
Section 3.18 Intellectual Property.................................... A-15
Section 3.19 Insurance................................................ A-15
Section 3.20 Restrictions on Business Activities...................... A-16
Section 3.21 Registration Statement; Proxy Statement/Prospectus....... A-16
Section 3.22 Interested Party Transactions............................ A-16
Section 3.23 Change in Control Payments............................... A-16
Section 3.24 Year 2000 Compliance..................................... A-16
Section 3.25 Pooling; Tax Matters..................................... A-17
Section 3.26 Rights Agreement......................................... A-18
Section 3.27 No Existing Discussions.................................. A-18
Section 3.28 Opinion of Financial Advisor............................. A-18
Section 3.29 Brokers.................................................. A-18
Section 3.30 Affiliates............................................... A-18
Article IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.. A-18
Section 4.1 Organization and Qualification........................... A-18
Section 4.2 Capitalization........................................... A-19
Section 4.3 Authority Relative to this Agreement..................... A-19
</TABLE>
i
<PAGE>
<TABLE>
<C> <S> <C>
Section 4.4 No Conflict, Required Filings and Consents................ A-19
Section 4.5 SEC Filings; Financial Statements......................... A-20
Section 4.6 Absence of Certain Changes or Events...................... A-20
Section 4.7 Absence of Litigation..................................... A-20
Section 4.8 Registration Statement; Proxy Statement/Prospectus........ A-20
Section 4.9 Brokers................................................... A-21
Section 4.10 Ownership of Merger Sub; No Prior Activities.............. A-21
Section 4.11 Pooling; Tax Matters...................................... A-21
Article V CONDUCT OF BUSINESS....................................... A-21
Section 5.1 Conduct of Business by the Company Pending the Merger..... A-21
Section 5.2 Advice of Changes......................................... A-23
Section 5.3 Cooperation............................................... A-23
Section 5.4 Company Stock Purchase Plan............................... A-23
Article VI ADDITIONAL AGREEMENTS..................................... A-23
Section 6.1 Access to Information; Confidentiality.................... A-23
Section 6.2 No Solicitation........................................... A-24
Section 6.3 Proxy Statement/Prospectus; Registration Statement........ A-25
Section 6.4 Company Stockholders Meeting.............................. A-26
Section 6.5 Legal Conditions to Merger................................ A-26
Section 6.6 Agreements with Respect to Affiliates..................... A-26
Section 6.7 Tax-Free Reorganization................................... A-26
Section 6.8 Pooling Accounting........................................ A-27
Section 6.9 Letters of Accountants.................................... A-27
Section 6.10 Public Announcements...................................... A-27
Section 6.11 Listing of Parent Shares.................................. A-27
Section 6.12 Employee Benefits; 401(k) Plan............................ A-27
Section 6.13 Stock Plans............................................... A-28
Section 6.14 Consents.................................................. A-28
Section 6.15 Rights Plan............................................... A-28
Section 6.16 Indemnification and Insurance............................. A-28
Section 6.17 Company 6% Convertible Subordinated Notes................. A-29
Section 6.18 Additional Agreements; Reasonable Best Efforts............ A-29
Article VII CONDITIONS TO THE MERGER.................................. A-29
Section 7.1 Conditions to Obligation of Each Party to Effect the
Merger.................................................... A-29
Section 7.2 Additional Conditions to Obligations of Parent and Merger
Sub....................................................... A-30
Section 7.3 Additional Conditions to Obligation of the Company........ A-31
Article VIII TERMINATION............................................... A-31
Section 8.1 Termination............................................... A-31
Section 8.2 Effect of Termination..................................... A-32
Section 8.3 Fees and Expenses......................................... A-32
Article IX GENERAL PROVISIONS........................................ A-33
Section 9.1 Nonsurvival of Representations; Warranties and
Agreements................................................ A-33
Section 9.2 Notices................................................... A-33
Section 9.3 Certain Definitions....................................... A-34
Section 9.4 Amendment................................................. A-34
Section 9.5 Extension; Waiver......................................... A-35
Section 9.6 Headings.................................................. A-35
Section 9.7 Severability.............................................. A-35
Section 9.8 Entire Agreement, No Third Party Beneficiaries............ A-35
Section 9.9 Assignment................................................ A-35
</TABLE>
ii
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<TABLE>
<C> <S> <C>
Section 9.10 Interpretation......................................... A-35
Section 9.11 Failure or Indulgence Not Waiver; Remedies Cumulative.. A-35
Section 9.12 Governing Law.......................................... A-35
Section 9.13 Counterparts........................................... A-36
List of Exhibits
----------------
Exhibit A Form of Stock Option Agreement
Exhibit B Form of Affiliate Agreement
</TABLE>
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger, dated as of August 6, 1999 (this "Agreement"),
by and among EMC Corporation, a Massachusetts corporation ("Parent"), Emerald
Merger Corporation, a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), and Data General Corporation, a Delaware corporation
(the "Company").
Whereas, the respective Boards of Directors of Parent, Merger Sub and the
Company have each determined that it is advisable and in the best interests of
their respective stockholders that Parent acquire the Company pursuant to the
terms and conditions of this Agreement, and, in furtherance of such
acquisition, such Boards of Directors have approved the merger of Merger Sub
with and into the Company (the "Merger") in accordance with the terms of this
Agreement and the applicable provisions of the General Corporation Law of the
State of Delaware ("DGCL");
Whereas, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to Parent's willingness to enter into this
Agreement, Parent and the Company have entered into a Stock Option Agreement,
dated as of the date hereof, the form of which is attached as Exhibit A hereto
(the "Stock Option Agreement"), pursuant to which the Company has granted
Parent an option to purchase shares of common stock, par value $.01 per share,
of the Company ("Company Common Stock");
Whereas, for United States federal income tax purposes, it is intended that
the Merger shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and that
this Agreement shall be, and is hereby, adopted as a plan of reorganization for
purposes of Section 368(a) of the Code; and
Whereas, for accounting purposes, it is intended that the Merger shall be
accounted for as a pooling of interests;
Now, Therefore, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below and in
the Stock Option Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.2), Merger Sub shall
merge with and into the Company in accordance with the DGCL, the separate
corporate existence of Merger Sub shall cease, and the Company shall continue
as the surviving corporation in the Merger. The Company, in its capacity as the
corporation surviving the Merger, is hereinafter sometimes referred to as the
"Surviving Corporation."
Section 1.2 Consummation of the Merger. In order to effectuate the Merger,
on the Closing Date (as defined in Section 1.7), the Company shall cause a
certificate of merger (the "Certificate of Merger") to be filed with the
Secretary of State of the State of Delaware, in such form as required by, and
executed in accordance with, the DGCL. The Merger shall be effective as of the
time of filing of the Certificate of Merger (the "Effective Time").
Section 1.3 Effects of the Merger. The Merger shall have the effects
provided for in Section 259 of the DGCL.
A-1
<PAGE>
Section 1.4 Certificate of Incorporation of the Surviving Corporation. At
and after the Effective Time, the Certificate of Incorporation of Merger Sub
(the "Merger Sub Charter"), as in effect immediately prior to the Effective
Time, shall be the Certificate of Incorporation of the Surviving Corporation,
until amended in accordance with the DGCL, except that the name of the
Surviving Corporation shall be Data General Corporation.
Section 1.5 By-Laws of the Surviving Corporation. At and after the Effective
Time, the By-laws of Merger Sub (the "Merger Sub By-Laws"), as in effect
immediately prior to the Effective Time, shall be the By-laws of the Surviving
Corporation, until amended in accordance with the DGCL.
Section 1.6 Directors and Officers of the Surviving Corporation.
(a) The directors of Merger Sub immediately prior to the Effective Time
shall be the initial directors of the Surviving Corporation and shall hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualified in the manner provided in the Certificate of
Incorporation or By-laws of the Surviving Corporation or as otherwise provided
by law.
(b) The officers of the Company immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation and shall hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualified in the manner provided in the Certificate of
Incorporation or By-laws of the Surviving Corporation or as otherwise provided
by law.
Section 1.7 Closing. Subject to the provisions of this Agreement, the
closing of the Merger (the "Closing") shall take place at 10:00 a.m., E.S.T.,
at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, One Beacon Street,
Boston, Massachusetts on a date to be specified by Parent and the Company which
shall be no later than the second business day after satisfaction or waiver of
each of the conditions set forth in Article VII or on such other date and such
other time and place as Parent and the Company shall agree. The date on which
the Closing shall occur is referred to herein as the "Closing Date."
ARTICLE II
CONVERSION AND EXCHANGE OF SECURITIES
Section 2.1 Conversion of Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
Company Common Stock or capital stock of Merger Sub:
(a) Company Common Stock. Subject to this Article II, each share of Company
Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares to be cancelled in accordance with Section 2.1(b)) shall be
converted into the right to receive .3262 (as such ratio is adjusted pursuant
to Section 2.1(e), the "Exchange Ratio") of a share of Parent Common Stock,
payable upon the surrender of the Certificates (as defined in Section 2.2(b)).
All such shares of Company Common Stock, when so converted, shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each holder of a Certificate representing any such shares shall
cease to have any rights with respect thereto, except the right to receive the
shares of Parent Common Stock pursuant to this Section 2.1(a), any dividends or
other distributions payable pursuant to Section 2.2(c) and any cash in lieu of
fractional shares payable pursuant to Section 2.2(d), all to be issued or paid
in consideration therefor upon the surrender of such Certificates in accordance
with Section 2.2, without interest (collectively, the "Merger Consideration").
Notwithstanding the foregoing, the Exchange Ratio shall be adjusted to reflect
fully the effect of any stock split, reverse split, reclassification, stock
dividend (including any dividend or distribution of securities convertible into
Parent Common Stock), reorganization, recapitalization or other like change
with respect to Parent Common Stock or Company Common Stock occurring after the
date hereof and prior to the Effective Time.
A-2
<PAGE>
(b) Cancellation of Treasury Stock and Parent-Owned Stock. All shares of
Company Common Stock that are (i) held by the Company as treasury shares or
(ii) owned by Parent or any wholly owned Subsidiary (as defined below) of
Parent, shall be cancelled and retired and cease to exist, and no securities of
Parent or other consideration shall be delivered in exchange therefor. As used
in this Agreement, the word "Subsidiary" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which (A) such party or any other Subsidiary of such party is a general partner
(excluding partnerships, the general partnership interests of which held by
such party or any Subsidiary of such party do not have a majority of the voting
interest in such partnership), (B) such party or any Subsidiary of such party
owns in excess of a majority of the outstanding equity or voting securities or
(C) at least a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries.
(c) Capital Stock of Merger Sub. Each share of common stock, par value $.01
per share, of Merger Sub ("Merger Sub Common Stock") issued and outstanding
immediately prior to the Effective Time shall be converted into and become one
fully paid and nonassessable share of common stock, par value $.01 per share,
of the Surviving Corporation.
(d) Stock Options. Outstanding options to purchase shares of Company Common
Stock shall be treated in the manner set forth in Section 6.13 hereof.
(e) Adjustments to Exchange Ratio. In the event the average of the mean high
and low per share trading prices on the New York Stock Exchange (the "NYSE") of
shares of Parent Common Stock (as reported for the NYSE Composite Transactions
in the Wall Street Journal) for each of the 20 consecutive trading days ending
on the fifth day prior to the Company Stockholders Meeting (as defined in
Section 3.21) to consider approval and adoption of this Agreement and the
Merger (the "Pre-Closing Average Price") is greater than $66.0625, then the
Exchange Ratio shall be adjusted such that each share of Company Common Stock
is converted into the right to receive a number of shares of Parent Common
Stock equal to the quotient obtained by dividing (A) $21.55 by (B) the Pre-
Closing Average Price.
Section 2.2 Exchange of Certificates.
(a) Exchange Agent. Prior to the Closing Date, Parent shall designate a bank
or trust company to act as Exchange Agent hereunder (the "Exchange Agent"). As
soon as practicable after the Effective Time, Parent shall deposit with or for
the account of the Exchange Agent stock certificates representing the number of
shares of Parent Common Stock issuable pursuant to Section 2.1(a) in exchange
for outstanding shares of Company Common Stock, which shares of Parent Common
Stock shall be deemed to have been issued at the Effective Time. From time to
time, Parent shall make available to the Exchange Agent sufficient cash to make
all cash payments in lieu of fractional shares pursuant to Section 2.2(d).
(b) Exchange Procedures. As soon as practicable after the Effective Time,
Parent will instruct the Exchange Agent to mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "Certificates")
that were converted pursuant to Section 2.1(a) into the right to receive shares
of Parent Common Stock (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Exchange Agent
and shall be in such form and have such other provisions as Parent may
reasonably specify that are not inconsistent with the terms of this Agreement),
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such letter of transmittal,
duly executed, and such other customary documents as may be required pursuant
to such instructions, the holder of such Certificate shall be entitled to
receive in exchange therefor (A) certificates evidencing that number of whole
shares of Parent Common Stock which such holder has the right to receive in
accordance with Section 2.1(a) in respect of the shares of Company Common Stock
formerly evidenced by such Certificate, (B) any dividends or other
distributions to which such holder is entitled pursuant to Section
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2.2(c), and (C) any cash in lieu of any fractional shares of Parent Common
Stock to which such holder is entitled pursuant to Section 2.2(d), after giving
effect to any tax withholdings, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of shares of
Company Common Stock which is not registered in the transfer records of the
Company as of the Effective Time, a certificate representing the proper number
of shares of Parent Common Stock may be issued to a transferee if the
Certificate evidencing such Company Common Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer pursuant to this Section 2.2(b) and by evidence that any applicable
stock transfer taxes have been paid. Until so surrendered, each outstanding
Certificate that, prior to the Effective Time, represented shares of Company
Common Stock will be deemed from and after the Effective Time, for all
corporate purposes, to represent only the right to receive upon surrender a
certificate representing shares of Parent Common Stock, any dividends or other
distributions payable pursuant to Section 2.2(c) and any cash in lieu of any
fractional shares of Parent Common Stock payable pursuant to Section 2.2(d).
(c) Distributions With Respect to Unexchanged Parent Shares. No dividends or
other distributions with respect to shares of Parent Common Stock for which the
record date is after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common Stock
they are entitled to receive until the holder of such Certificate surrenders
such Certificate. Subject to applicable law, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing whole shares of Parent Common Stock issued in exchange therefor,
without interest, at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore
paid with respect to such whole shares of Parent Common Stock. Promptly
following the date which is six months after the Effective Time, the Exchange
Agent shall deliver to the Surviving Corporation all cash, certificates and
other documents in its possession relating to the transactions described in
this Agreement, and any holders of Company Common Stock who have not
theretofore complied with this Article II shall look thereafter only to the
Surviving Corporation for the shares of Parent Common Stock, any dividends or
distributions thereon, and any cash in lieu of fractional shares thereof to
which they are entitled pursuant to this Article II.
(d) No Fractional Shares.
(i) No certificates or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of
certificates formerly representing shares of Company Common Stock pursuant
to this Article II; no dividend, stock split or other change in the capital
structure of Acquiror shall relate to any fractional security; and such
fractional interests shall not entitle the owner thereof to vote or to any
rights of a security holder.
(ii) As promptly as practicable following the Effective Time, the
Exchange Agent will determine the excess of (A) the number of whole shares
of Parent Common Stock delivered to the Exchange Agent by Parent pursuant
to Section 2.2(a) over (B) the aggregate number of whole shares of Parent
Common Stock to be distributed to holders of Company Common Stock pursuant
to Section 2.2(b) (such excess being herein called the "Excess Shares").
Following the Effective Time, the Exchange Agent will, on behalf of former
stockholders of the Company, sell the Excess Shares at then-prevailing
prices on the New York Stock Exchange, Inc. (the "NYSE"), all in the manner
provided in Section 2.2(d)(iii).
(iii) The sale of the Excess Shares by the Exchange Agent will be
executed on the NYSE through one or more member firms of the NYSE and will
be executed in round lots to the extent practicable. The Exchange Agent
will use reasonable efforts to complete the sale of the Excess Shares as
promptly following the Effective Time as, in the Exchange Agent's sole
judgment, is practicable consistent with obtaining the best execution of
such sales in light of prevailing market conditions. Until the net proceeds
of such sale or sales have been distributed to the holders of Company
Common Stock, the Exchange Agent will hold such proceeds in trust for the
former holders of Company Common Stock (the "Common Shares Trust"). The
Surviving Corporation will pay all commissions, transfer taxes and other
out-of-pocket transaction costs, including the expenses and compensation of
the Exchange Agent incurred in
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connection with such sale of the Excess Shares. The Exchange Agent will
determine the portion of the Common Shares Trust to which each former
holder of Company Common Stock is entitled, if any, by multiplying the
amount of the aggregate net proceeds comprising the Common Shares Trust by
a fraction, the numerator of which is the amount of the fractional share
interest to which such former holder of Company Common Stock is entitled
(after taking into account all shares of Company Common Stock held at the
Effective Time by such holder) and the denominator of which is the
aggregate amount of fractional share interests to which all holders of
Company Common Stock are entitled. For purposes of this Section 2.2(d),
shares of Company Common Stock of any former holder represented by two or
more certificates may be aggregated and in no event shall any holder be
paid an amount of cash in respect of more than one share of Parent Common
Stock.
(iv) As soon as practicable after the determination of the amount of
cash, if any, to be paid to the former holders of Company Common Stock with
respect to any fractional share interests, the Exchange Agent will hold
such cash amounts for the benefit of, and pay such cash amounts to, such
former holders of Company Common Stock subject to and in accordance with
the terms of Section 2.2(b).
(e) Transfers of Ownership. If any certificate for shares of Parent Common
Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition to the
issuance thereof that the Certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Parent or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Parent Common Stock in any name other than that of the registered holder of the
Certificate surrendered, or have established to the satisfaction of Parent or
any agent designated by it that such tax has been paid or is not payable.
(f) No Liability. Neither Parent, Merger Sub nor the Company shall be liable
to any holder of Company Common Stock or Parent Common Stock, as the case may
be, for such shares (or dividends or distributions with respect thereto)
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law following the passage of time specified therein.
(g) Withholding Rights. Parent or the Exchange Agent shall be entitled to
deduct and withhold from the Merger Consideration otherwise payable pursuant to
this Agreement to any holder of Company Common Stock such amounts as Parent or
the Exchange Agent is required to deduct and withhold with respect to the
making of such payment under the Code, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by Parent or the
Exchange Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Parent Common
Stock in respect of which such deduction and withholding was made by Parent or
the Exchange Agent.
(h) No Further Ownership Rights in Company Stock. At the Effective Time, the
stock transfer books of the Company shall be closed and thereafter there shall
be no further registration of transfers on the stock transfer books of the
Company or the Surviving Corporation of the shares of Company Common Stock
which were outstanding immediately prior to such time. If, after such time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article II.
(i) Lost, Stolen or Destroyed Certificates. In the event any Certificates
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, such shares of Parent Common
Stock as may be required pursuant to Section 2.1(a) as well as the other Merger
Consideration as provided in this Article II; provided, however, that Parent
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed Certificates to deliver an
agreement of indemnification in form satisfactory to Parent, or a bond in such
sum as Parent may reasonably direct as indemnity against any claim that may be
made against Parent or the Exchange Agent with respect to the Certificates
alleged to have been lost, stolen or destroyed.
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(j) Taking of Necessary Action; Further Action. Each of Parent, Merger Sub
and the Company will take all such reasonable and lawful action as may be
necessary or appropriate in order to effectuate the Merger in accordance with
this Agreement as promptly as possible. If, at any time after the Effective
Time, any such further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub immediately prior to the Effective Time are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action.
Section 2.3 Material Adverse Effect.
(a) The term "Company Material Adverse Effect" means any change, effect or
circumstance that, individually or when taken together with all other such
similar or related changes, effects or circumstances that have occurred prior
to the date of determination of the occurrence of the Company Material Adverse
Effect, (i) is materially adverse to the business, assets (including intangible
assets), financial condition or results of operations of the Company or (ii) is
reasonably likely to materially delay or prevent the consummation of the
transactions contemplated hereby; provided however, that "Company Material
Adverse Effect" shall not be deemed to include the impact of (A) changes in
laws or interpretations thereof by courts or Governmental Entities (as defined
herein), (B) changes in generally accepted accounting principles, (C) changes
in economic conditions affecting generally companies in the industries in which
the Company operates, (D) disruptions to the business of the Company as to
which the Company bears the burden of proof in establishing are directly
attributable to (x) the announcement of this Agreement and the transactions
contemplated hereby or (y) the actions of the other party hereto or its
affiliates and (E) the matter set forth in Section 2.3 of the Disclosure
Schedule.
(b) The term "Parent Material Adverse Effect" means any change, effect or
circumstance that, individually or when taken together with all other such
similar or related changes, effects or circumstances that have occurred prior
to the date of determination of the occurrence of the Parent Material Adverse
Effect, (i) is materially adverse to the business, assets (including intangible
assets), financial condition or results of operations of Parent or (ii) is
reasonably likely to materially delay or prevent the consummation of the
transactions contemplated hereby; provided however, that "Parent Material
Adverse Effect" shall not be deemed to include the impact of (A) changes in
laws or interpretations thereof by courts or Governmental Entities, (B) changes
in generally accepted accounting principles, (C) changes in economic conditions
affecting generally companies in the industries in which Parent operates and
(D) disruptions to the business of Parent as to which Parent bears the burden
of proof in establishing are directly attributable to (x) the announcement of
this Agreement and the transactions contemplated hereby or (y) the actions of
the other party hereto or its affiliates.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that, except as
set forth in the written disclosure schedule prepared by the Company which is
dated as of the date hereof that is arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article III and previously
delivered to Parent in connection herewith (the "Disclosure Schedule")
(disclosure in any paragraph of the Disclosure Schedule shall qualify only the
corresponding paragraph in this Article III), as of the date of this Agreement,
except where another date is specified:
Section 3.1 Organization and Qualification; Subsidiaries. The Company and
each of its Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and
has the requisite corporate power and authority necessary to own, lease and
operate the properties it purports to own, lease or operate and to carry on its
business as it is now being conducted or
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presently proposed to be conducted. The Company and each of its Subsidiaries is
duly qualified or licensed as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that could not reasonably be
expected to have a Company Material Adverse Effect. A true, complete and
correct list of all of the Company's Subsidiaries, together with the
jurisdiction of incorporation of each Subsidiary, the authorized capitalization
of each Subsidiary, and the percentage of each Subsidiary's outstanding capital
stock owned by the Company or another Subsidiary, is set forth in Section 3.1
of the Disclosure Schedule. Except as set forth in the Company SEC Reports (as
defined in Section 3.9), the Company does not directly or indirectly own any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity, excluding
securities in any publicly traded company held for investment by the Company
and comprising less than one percent of the outstanding stock of such company.
Section 3.2 Certificate of Incorporation and By-Laws. The Company has
heretofore furnished to Parent a true, complete and correct copy of its
Restated Certificate of Incorporation, as amended to date (the "Company
Charter"), and By-Laws, as amended to date (the "Company By-Laws"), and has
made available to Parent true, complete and correct copies of the charter and
by-laws (or equivalent organizational documents), as amended to date, of each
of its Subsidiaries (the "Subsidiary Documents"). Such Company Charter, Company
By-Laws and Subsidiary Documents are in full force and effect. Neither the
Company nor any of its Subsidiaries is in violation of any of the provisions of
the Company Charter, Company By-Laws or Subsidiary Documents, as the case may
be.
Section 3.3 Capitalization.
(a) The authorized capital stock of the Company consists of 150,000,000
shares of Company Common Stock, and 1,000,000 shares of preferred stock, par
value $.01 per share (the "Preferred Stock"). As of the date hereof, 51,145,010
shares of Company Common Stock are issued and outstanding; 8,122,000 shares of
Company Common Stock are reserved for issuance on conversion of the Company's
6% Convertible Subordinated Notes due 2004; an aggregate of 5,835,796 shares of
Company Common Stock are reserved for issuance upon exercise of options granted
pursuant to the Company's Restricted Stock Option Plan, Employee Stock Option
Plan, 1998 Employee Stock Option Plan, 1994 Non-Employee Director Stock Option
Plan, 1998 Non-Employee Director Stock Option Plan and Employee Qualified Stock
Purchase Plan; 208,053 shares of Company Common Stock are issued and held in
the treasury of the Company; and 600,000 shares of Preferred Stock have been
designated Series A Junior Participating Preferred pursuant to the Company's
Rights Agreement, Renewed and Restated dated as of October 19, 1996 (the
"Company Rights Agreement"), none of which are issued and outstanding. The
option plans referenced in the preceding sentence shall be referred to herein
collectively as the "Company Stock Option Plans." All shares of Company Common
Stock subject to issuance as specified above, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
shall be duly authorized, validly issued, fully paid and nonassessable. No
material change in such capitalization has occurred since March 31, 1999. All
of the outstanding shares of capital stock of each of the Company's
Subsidiaries are duly authorized, validly issued, fully paid and nonassessable,
and all such shares (other than directors' qualifying shares in the case of
foreign Subsidiaries) are owned by the Company or a Subsidiary of the Company
free and clear of all security interests, liens, claims, pledges, agreements,
limitations in voting rights, charges or other encumbrances of any nature
whatsoever (collectively, "Liens"). There are no accrued and unpaid dividends
with respect to any outstanding shares of capital stock of the Company.
(b) Except as described under Section 3.2(a) of this Agreement or as set
forth in Section 3.3(b) of the Disclosure Schedule, there are no equity
securities of any class of the Company or any of its Subsidiaries or any
security exchangeable into or exercisable for such equity securities, issued,
reserved for issuance or outstanding. Except as described under Section 3.2(a)
of this Agreement or as set forth in Section 3.3(b) of the
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Disclosure Schedule, there are no options, warrants, calls, rights, commitments
or agreements of any character to which the Company or any of its Subsidiaries
is a party, or by which the Company or any of its Subsidiaries is bound,
obligating the Company or any of it Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock of
the Company or any of its Subsidiaries or obligating the Company or any of its
Subsidiaries to grant, extend or accelerate the vesting of or enter into any
such option, warrant, call, right, commitment or agreement. There are no voting
trusts, proxies or other similar agreements or understandings with respect to
the shares of capital stock of the Company or any of its Subsidiaries. There
are no obligations, contingent or otherwise, of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of the Company or any of its Subsidiaries or to provide funds to or make
any investment (in the form of a loan, capital contribution or otherwise) in
any such Subsidiary or any other entity.
Section 3.4 Authority Relative to this Agreement. Subject only to the
approval of the Company's stockholders described below, the Company has all
necessary corporate power and authority to execute and deliver this Agreement,
the Stock Option Agreement and each instrument required hereby to be executed
and delivered by it at the Closing and to perform its obligations hereunder and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement, the Stock Option Agreement and each instrument required
hereby to be executed and delivered at the Closing by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part of
the Company, subject only to the approval of this Agreement and the Merger by
the Company's stockholders under the DGCL and the Company Charter by the
affirmative vote of the holders of a majority of outstanding shares of Company
Common Stock. This Agreement and the Stock Option Agreement have been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent and Merger Sub, as applicable,
constitute legal, valid and binding obligations of the Company, enforceable in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights and
by general equitable principles (regardless of whether enforceability is
considered in a proceeding in equity or at law). The Board of Directors of the
Company has determined that it is advisable and in the best interests of the
Company's stockholders for the Company to enter into a business combination
with Parent upon the terms and subject to the conditions of this Agreement, and
has recommended that the Company's stockholders approve and adopt this
Agreement and the Merger.
Section 3.5 Section 203 of the DGCL Not Applicable. The Board of Directors
of the Company has taken all actions so that the restrictions contained in
Section 203 of the DGCL applicable to a "business combination" (as defined in
Section 203 of the DGCL) will not apply to the execution, delivery or
performance of this Agreement or the Stock Option Agreement or the consummation
of the Merger or the other transactions contemplated by this Agreement or by
the Stock Option Agreement.
Section 3.6 Agreements, Contracts and Commitments.
(a) Section 3.6(a) of the Disclosure Schedule sets forth a list of (i) all
material original equipment manufacturer agreements with respect to the
Company's CLARiiON business, (ii) all material customer contracts with respect
to the Company's AViiON business, (iii) all material supplier agreements, (iv)
all Company agreements containing non-competition or similar restrictive
provisions with respect to the Company, and (v) all agreements which, as of the
date hereof, the Company is required to file as "material contracts" with the
Securities and Exchange Commission (the "SEC") pursuant to the requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
(b) (i) Neither the Company nor any of its Subsidiaries has breached, is in
default under, or has received written notice of any breach of or default
under, any agreements, contracts or other instruments required to be disclosed
in Section 3.6(a) of the Disclosure Schedule (each, a "Material Contract"),
(ii) to the Company's knowledge, no other party to any Material Contract has
breached or is in default of any of its obligations
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thereunder, (iii) each Material Contract is in full force and effect, except in
any such case for breaches, defaults or failures to be in full force and effect
that is not currently having or would not have a Company Material Adverse
Effect and (iv) each Material Contract is a legal, valid and binding obligation
of the Company or its Subsidiary and each of the other parties thereto,
enforceable in accordance with its terms, except that the enforcement thereof
may be limited by (A) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (B) general principles of equity.
Section 3.7 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement, the Stock Option Agreement
or any instrument required hereby to be executed and delivered by the Company
at the Closing does not, and the performance of this Agreement or the Stock
Option Agreement by the Company will not, (i) conflict with or violate the
Company Charter or Company By-Laws, (ii) conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to the Company or any of
its Subsidiaries or by which its or any of their respective properties is bound
or affected, or (iii) result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default), or
impair the Company's or any of its Subsidiaries' rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any of the properties or assets of the Company or any of
its Subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries or its or any of their respective properties
is bound or affected, except in the case of (ii) and (iii) for any such
conflicts, violations, breaches, defaults or other occurrences that would not
have a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement, the Stock Option Agreement
or any instrument required hereby to be executed and delivered by the Company
at the Closing does not, and the performance of this Agreement or the Stock
Option Agreement by the Company or its Subsidiaries will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any court, administrative or regulatory agency or commission or other
governmental authority or instrumentality (whether domestic or foreign, a
"Governmental Entity"), except (i) the filing of the pre-merger notification
report under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (ii) the filing of a Registration Statement on Form S-
4 (the "Registration Statement") with the SEC in accordance with the Securities
Act of 1933, as amended (the "Securities Act"), and the filing of the Proxy
Statement/Prospectus (as defined in Section 3.21) with the SEC under the
Exchange Act, (iii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws and the laws of any foreign country, (iv) the
filing and recordation of appropriate merger or other documents as required by
the DGCL and (v) such other consents, approvals, authorizations or permits
which, if not obtained or made, would not have a Company Material Adverse
Effect.
Section 3.8 Compliance; Permits.
(a) Neither the Company nor any of its Subsidiaries is in conflict with, or
in default or violation of (and has not received any notices of violation with
respect to), any law, rule, regulation, order, judgment or decree applicable to
the Company or any of its Subsidiaries or by which its or any of their
respective properties is bound or affected, and the Company is not aware of any
such conflict, default or violation thereunder, except in each case for any
such conflicts, defaults or violations which could not reasonably be expected
to have a Company Material Adverse Effect.
(b) The Company and its Subsidiaries hold all permits, licenses, easements,
variances, exemptions, consents, certificates, authorizations, registrations,
orders and other approvals from Governmental Entities that are material to the
operation of the business of the Company and its Subsidiaries taken as a whole
as it is now being conducted (collectively, the "Company Permits"). The Company
Permits are in full force and effect, have not been violated in any respect
that would have a Company Material Adverse Effect and, to the best
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knowledge of the Company, no suspension, revocation or cancellation thereof has
been threatened and there is no action, proceeding or investigation pending or,
to the Company's knowledge, threatened regarding suspension, revocation or
cancellation of any Company Permits, except where the suspension, revocation or
cancellation of such Company Permits could not reasonably be expected to have a
Company Material Adverse Effect.
Section 3.9 SEC Filings; Financial Statements.
(a) The Company has timely filed and made available to Parent all forms,
reports, schedules, statements and other documents, including any exhibits
thereto, required to be filed by the Company with the SEC since September 26,
1998 (collectively, the "Company SEC Reports"). The Company SEC Reports (i) at
the time filed, complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be,
and (ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material
fact required to be stated in such Company SEC Reports or necessary in order to
make the statements in such Company SEC Reports, in light of the circumstances
under which they were made, not misleading. None of the Company's Subsidiaries
are required to file any forms, reports, schedules, statements or other
documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes), contained in the Company SEC Reports, including any Company
SEC Reports filed after the date of this Agreement until the Closing, complied,
as of its respective date, in all material respects with all applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, was prepared in accordance with generally accepted accounting
principles ("GAAP") (except as may be indicated in the notes thereto) applied
on a consistent basis throughout the periods involved and fairly presented the
consolidated financial position of the Company and its Subsidiaries as at the
respective dates and the consolidated results of its operations and cash flows
for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount. The unaudited
balance sheet of the Company as of March 27, 1999 is referred to herein as the
"Company Balance Sheet."
Section 3.10 Absence of Certain Changes or Events. Since the date of the
Company Balance Sheet, the Company has conducted its business in the ordinary
course consistent with past practice and, since such date, there has not
occurred: (i) any change, development, event or other circumstance, situation
or state of affairs that has had or may be reasonably expected to have a
Company Material Adverse Effect; (ii) any amendments to or changes in the
Company Charter or Company By-Laws; (iii) any damage to, destruction or loss of
any asset of the Company or any of its Subsidiaries (whether or not covered by
insurance) that could reasonably be expected to have a Company Material Adverse
Effect; (iv) any material change by the Company in its accounting methods,
principles or practices; (v) any material revaluation by the Company of any of
its assets, including, without limitation, writing down the value of inventory
or writing off notes or accounts receivable other than in the ordinary course
of business consistent with past practice; (vi) any sale of a material amount
of assets (tangible or intangible) of the Company; or (vii) any other action or
event that would have required the consent of Parent pursuant to Section 5.1
had such action or event occurred after the date of this Agreement.
Section 3.11 No Undisclosed Liabilities. Except as disclosed in the Company
SEC Reports, neither the Company nor any of its Subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise), except liabilities
(a) adequately provided for in the Company Balance Sheet, (b) incurred in the
ordinary course of business consistent with past practice and not required
under GAAP to be reflected in the Company Balance Sheet, (c) incurred since the
date of the Company Balance Sheet in the ordinary course of business consistent
with past practice, (d) incurred in connection with this Agreement or (e) which
would not reasonably be expected to have a Company Material Adverse Effect.
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Section 3.12 Absence of Litigation. There are no claims, actions, suits,
proceedings or investigations (i) pending against the Company or any of its
Subsidiaries or any properties or assets of the Company or of any of its
Subsidiaries or (ii) to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, or any properties or assets of the Company
or of any of its Subsidiaries, in each case, which claims, actions, suits,
proceedings or investigations could reasonably be expected to have a Company
Material Adverse Effect.
Section 3.13 Employee Benefit Plans, Options and Employment Agreements.
(a) Section 3.13(a) of the Disclosure Schedule lists all material employee
benefit plans of the Company, its Subsidiaries or any trade or business (as
"ERISA Affiliates") whether or not incorporated, that together with the Company
would be deemed a single employer within the meaning of Section 4001(b) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
including without limitation any employment agreements or any pension,
retirement, profit-sharing, bonus, stock option, incentive, deferred
compensation, severance, termination pay, welfare or other plan, contract,
arrangement or practice in which one or more employees (including, without
limitation, former employees or beneficiaries of employees or former employees)
of the Company or a Subsidiary participates or is eligible to participate (the
"Plans"). For these purposes, such Plans shall include, without limitation, any
employee benefit plan (as such term is described in Section 3(3) of ERISA, or
any plan, practice or arrangement that constitutes a "fringe benefit" plan,
vacation plan or policy, sick leave program, medical, disability or life
insurance plan (including, without limitation, those employment or other
agreements that contain "golden parachute" provisions). Neither the Company nor
any of its Subsidiaries has established or maintains any plan, program or
arrangement to provide post-retirement medical benefits to any employee, former
employee or beneficiary of any employee or former employee, other than coverage
mandated by applicable law. Each Plan has been administered in compliance with
its terms and is in compliance with ERISA and the regulations promulgated
thereunder (to the extent applicable), as well as with all other applicable
federal, state and local statutes and regulations except as disclosed on
Section 3.13(a) of the Disclosure Schedule.
(b) Each Plan that is intended to qualify (the "Qualified Plans") under
Section 401(a) of the Code have been determined by the Internal Revenue Service
(the "IRS") to be so qualified. Except as disclosed in Section 3.13(a) of the
Disclosure Schedule, all reports and other documents required by law or
contract to be filed with any Governmental Entity or distributed to plan
participants or beneficiaries have been timely filed or distributed. Copies of
the Plans and any amendments or trusts related thereto, Form 5500 (including
financial audits and schedules thereto as required by law) for the immediately
preceding three years, summary plan descriptions, and the most recent
determination letters or determination letter requests have been made available
to Parent. Neither the Company nor any of its Subsidiaries nor any Plan has
engaged in any transaction prohibited under the provisions of Section 4975 of
the Code or Section 406 of ERISA. No Plan has incurred an accumulated funding
deficiency, as defined in Section 412(a) of the Code and Section 302 of ERISA,
and neither the Company nor any of its Subsidiaries has incurred any resulting
liability for excise tax under Sections 4975 or 4976 of the Code or penalty
pursuant to Sections 409 or 502(i) of ERISA due to the IRS or the Pension
Benefit Guaranty Corporation (the "PBGC"). The Company further represents that:
(1) there has been no termination, partial termination or discontinuance
of contributions to any Qualified Plan without notice to and approval
by the IRS, except as disclosed in Section 3.13(a) of the Disclosure
Schedule;
(2) no Qualified Plan which is subject to the provisions of Title IV of
ERISA (a "Title IV Plan") has been terminated;
(3) there have been no "reportable events" (as such phrase is defined in
Section 4043 of ERISA) with respect to any Qualified Plan except as
disclosed in Section 3.13(a) of the Disclosure Schedule; and
(4) the Company and its ERISA Affiliates have not incurred and do not
expect to incur any liability under Section 4062 of ERISA or with
respect to any "multi-employer plan" (as such term is defined in
Section 4001(a)(3) of ERISA).
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(c) Section 3.13(c) of the Disclosure Schedule sets forth a true, complete
and correct list of (i) all employment or consulting agreements with employees
of the Company or any of its Subsidiaries obligating the Company or any of its
Subsidiaries to make annual cash payments in an amount exceeding $100,000; (ii)
all employees of the Company or any of its Subsidiaries who have executed a
non-competition agreement with the Company or any of its Subsidiaries; (iii)
all severance agreements, programs and policies of the Company or any of its
Subsidiaries with or relating to its employees, in each case with outstanding
commitments exceeding $100,000, excluding programs and policies required to be
maintained by law; and (iv) all plans, programs, agreements and other
arrangements of the Company or any of its Subsidiaries with or relating to its
employees which contain change in control provisions. True, complete and
correct copies of each of the foregoing agreements to which the chief executive
officer of the Company is a party have been made available to Parent.
(d) No liability under Title IV or Section 302 of ERISA has been incurred by
the Company or any ERISA Affiliate that has not been satisfied in full, and no
condition exists that presents a material risk to the Company or any ERISA
Affiliate of incurring any such liability, other than liability for premiums
due the PBGC (which premiums have been paid when due).
(e) With respect to each Title IV Plan, the present value of accrued
benefits under such plan, based upon the actuarial assumptions used for funding
purposes in the most recent actuarial report prepared by such plan's actuary
with respect to such plan did not exceed, as of its latest valuation date, the
then current value of the assets of such plan allocable to such accrued
benefits.
(f) All contributions required to be made with respect to any Plan on or
prior to the Effective Time have been timely made or are reflected on the
Company's balance sheet. There are no pending, threatened or anticipated claims
by or on behalf of any Plan, by any employee or beneficiary covered under any
such Plan, or otherwise involving any such Plan (other than routine claims for
benefits).
(g) Except as disclosed in Section 3.13(g) of the Disclosure Schedule, the
consummation of the transactions contemplated by this Agreement will not,
either alone or in combination with another event, (i) entitle any current or
former employee or officer of the Company or any Subsidiary to severance pay,
unemployment compensation or any other payment, except as expressly provided in
this Agreement, or (ii) accelerate the time of payment or vesting, or increase
the amount of compensation due any such employee or officer. Except as
disclosed in Section 3.13(g) of the Disclosure Schedule, there is no contract,
agreement, plan or arrangement, including but not limited to the provisions of
this Agreement, covering any employee or former employee of the Company or any
of its Subsidiaries that, individually or collectively, could give rise to the
payment of any amount that would not be deductible pursuant to Sections 280G or
162(m) of the Code.
Section 3.14 Labor Matters. (a) There are no controversies pending or, to
the knowledge of the Company or any of its Subsidiaries, threatened, between
the Company or any of its Subsidiaries and any of their respective employees,
consultants or independent contractors, which controversies have or could
reasonably be expected to have a Company Material Adverse Effect; (b) neither
the Company nor any of its Subsidiaries is a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company or its Subsidiaries, nor does the Company or any of its Subsidiaries
know of any activities or proceedings of any labor union to organize any such
employees; and (c) neither the Company nor any of its Subsidiaries has any
knowledge of any labor disputes, strikes, slowdowns, work stoppages, lockouts,
or threats thereof, by or with respect to any employees of, or consultants or
independent contractors to, the Company or any of its Subsidiaries.
Section 3.15 Properties; Encumbrances. The Company and each of its
Subsidiaries have good, valid and marketable title to, or a valid leasehold
interest in, all the properties and assets which it purports to own or lease
(real, personal and mixed, tangible and intangible), including, without
limitation, all the properties and assets reflected in the Company Balance
Sheet (except for personal property sold since the date of the Company Balance
Sheet in the ordinary course of business consistent with past practice), except
as could not reasonably be expected to have a Company Material Adverse Effect.
All properties and assets reflected in the
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Company Balance Sheet are free and clear of all Liens, except for Liens
reflected on the Company Balance Sheet and Liens for current taxes not yet due
and other Liens that do not materially detract from the value or impair the use
of the property or assets subject thereto.
Section 3.16 Taxes.
(a) For purposes of this Agreement, "Tax" or "Taxes" shall mean taxes, fees,
levies, duties, tariffs, imposts and governmental impositions or charges of any
kind in the nature of (or similar to) taxes, payable to any federal, state,
local or foreign taxing authority, including without limitation (i) income,
franchise, profits, gross receipts, ad valorem, net worth, value added, sales,
use, service, real or personal property, special assessments, capital stock,
license, payroll, withholding, employment, social security, workers'
compensation, unemployment compensation, utility, severance, production,
excise, stamp, occupation, premiums, windfall profits, transfer and gains
taxes, and (ii) interest, penalties, additional taxes and additions to tax
imposed with respect thereto; and "Tax Returns" shall mean returns, reports and
information statements with respect to Taxes required to be filed with the IRS
or any other taxing authority, domestic or foreign, including without
limitation, consolidated, combined or unitary tax returns.
(b) Other than as disclosed in Section 3.16(b) of the Disclosure Schedule,
the Company and its Subsidiaries have filed with the appropriate taxing
authorities all Tax Returns required to be filed by them, except where the
failure to file such Tax Returns would not have a Company Material Adverse
Effect. All Taxes due and owing by the Company and its Subsidiaries have been
paid or adequately reserved for, except to the extent any failure to pay or
reserve would not, individually or in the aggregate, have a Company Material
Adverse Effect or except to the extent such Taxes are being contested in good
faith by appropriate proceedings (to the extent that any such proceedings are
required). There are no Tax Liens on any assets of the Company or any
Subsidiary thereof other than liens relating to Taxes not yet due and payable.
Neither the Company nor any of its Subsidiaries has granted any waiver of any
statute of limitations with respect to, or any extension of a period for the
assessment of, any Tax. The accruals and reserves for Taxes (including deferred
taxes) reflected in the Company Balance Sheet are in all material respects
adequate to cover all Taxes accruable through the date thereof (including
interest and penalties, if any, thereon and Taxes being contested) in
accordance with GAAP applied on a consistent basis with the Company Balance
Sheet.
(c) Neither the Company nor any of its Subsidiaries is, or has been, a
United States real property holding corporation (as defined in Section
897(c)(2) of the Code) during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
(d) The Company and each of its Subsidiaries have withheld with respect to
its employees all federal and state Taxes required to be withheld, except to
the extent any failure to withhold would not, individually or in the aggregate,
have a Company Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has been delinquent in the payment of any Tax, except to the
extent any failure to pay such Tax would not, individually or in the aggregate,
have a Company Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has received any written notice of any Tax deficiency outstanding,
proposed or assessed against the Company or any of its Subsidiaries. Except as
disclosed in Section 3.16(d) of the Disclosure Schedule, neither the Company
nor any of its Subsidiaries has received any written notice of any audit
examination, deficiency, refund litigation, proposed adjustment or matter in
controversy with respect to any Return of the Company or any of its
Subsidiaries. Neither the Company nor any of its Subsidiaries has filed any
consent agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subSection (f) asset (as
defined in Section 341(f)(4) of the Code) owned by the Company. Neither the
Company nor any of its Subsidiaries is a party to or bound by any tax
indemnity, tax sharing or tax allocation agreements. Except for the group of
which the Company and its Subsidiaries are now currently members, neither the
Company nor any of its Subsidiaries has ever been a member of an affiliated
group of corporations within the meaning of Section 1504 of the Code. Neither
the Company nor any of its Subsidiaries has agreed to make nor is it required
to make any material adjustment under Section 481(a) of the Code by reason of a
change in accounting method or otherwise.
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(e) As soon as practicable after the public announcement of the execution of
this Agreement, the Company will provide Parent with written schedules of (i)
the taxable years of the Company for which the statute of limitations with
respect to Taxes have not expired, (ii) with respect to Taxes, those years for
which examinations have been completed, those years for which examinations are
presently being conducted, those years for which examinations have not yet been
initiated and those years for which required Tax Returns have not yet been
filed, (iii) all elections with respect to Taxes affecting the Company as of
the date hereof, (iv) the Company's basis in each Subsidiary, (v) the earnings
and profits (including any adjustment required by Section 1503(e) of the Code)
for each Subsidiary, and (vi) the foreign countries in which the Company or its
Subsidiaries has or has had a permanent establishment, as defined in any
applicable Tax treaty or convention between the United States and such foreign
country.
Section 3.17 Environmental Matters.
(a) The Company and its Subsidiaries are in full compliance with all
applicable Environmental Laws (as defined below); neither the Company nor any
of its Subsidiaries has received any communication whether from a Governmental
Entity, citizens group, employee or otherwise, that alleges that the Company or
any of its Subsidiaries are not in such full compliance; and, to the Company's
best knowledge, there are no circumstances that may prevent or interfere with
such full compliance in the future.
(b) There is no Environmental Claim (as defined below) pending against the
Company or any of its Subsidiaries or, to the Company's best knowledge,
threatened against any person or entity whose liability for any Environmental
Claim the Company or any of its Subsidiaries have or may have retained or
assumed either contractually or by operation of law.
(c) There are no past or present actions, activities, circumstances,
conditions, events or incidents, including the Release, emission, discharge or
disposal of any Materials of Environmental Concern (as defined below), that
could form the basis of any Environmental Claim against the Company or any of
its Subsidiaries or, to the Company's best knowledge, against any person or
entity whose liability for any Environmental Claim the Company or any of its
Subsidiaries have or may have retained or assumed either contractually or by
operation of law.
(d) The Company and its Subsidiaries have delivered or otherwise made
available for inspection to Parent true, complete and correct copies and
results of any reports, studies, analyses, tests or monitoring possessed or
initiated by the Company or its Subsidiaries pertaining to Materials of
Environmental Concern in, on, beneath or adjacent to any property currently or
formerly owned, operated or leased by the Company or its Subsidiaries or
regarding the Company's or its Subsidiaries' compliance with applicable
Environmental Laws.
(e) "Environmental Claim" means any claim, action, cause of action,
investigation or notice by any person or entity alleging potential liability
arising out of, based on or resulting from (i) the presence, or release into
the environment, of any Material of Environmental Concern at any location,
whether or not owned by the Company or any of its Subsidiaries or (ii)
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law.
(f) "Environmental Laws" means all federal, state, local and foreign laws
and regulations relating to pollution or protection of human health or the
environment, including without limitation laws and regulations relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern and all laws and regulations with regard to
recordkeeping, notification, disclosure and reporting requirements respecting
Materials of Environmental Concern.
(g) "Materials of Environmental Concern" means all substances defined as
Hazardous Substances, Oils, Pollutants or Contaminants in the National Oil and
Hazardous Substances Pollution Contingency Plan, 40 C.F.R. (S) 300.5, or
defined as such by, or regulated as such under, any Environmental Law.
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(h) "Release" means any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, dispersal, leaching or migration into
the indoor or outdoor environment (including, without limitation, ambient air,
surface water, groundwater and surface or subsurface strata) or into or out of
any property, including the movement of Materials of Environmental Concern
through or in the air, soil, surface water, groundwater or property.
Section 3.18 Intellectual Property.
(a) The Company or its Subsidiaries owns, or is licensed or otherwise
possesses legally enforceable rights to use, all patents, trademarks, trade
names, service marks, copyrights, and any applications therefor, technology,
mask works, schematics, know-how, computer software programs or applications,
and tangible or intangible proprietary information or material that are used in
the business of the Company and its Subsidiaries as currently conducted (the
"Company Intellectual Property Rights"). Set forth in Section 3.18(a) of the
Disclosure Schedule is a list of all Company-owned patents, trademarks and
copyrights.
(b) Either the Company or one of its Subsidiaries is the sole and exclusive
owner of all right, title and interest in and to (free and clear of any Liens),
or is the exclusive or non-exclusive licensee of, the Company Intellectual
Property Rights, and, in the case of Company Intellectual Property Rights owned
by the Company or any of its Subsidiaries, has sole and exclusive rights (and
is not contractually obligated to pay any compensation to any third party in
respect thereof) to the use thereof and the material covered thereby. Except as
set forth in Section 3.18(b) of the Disclosure Schedule, no claims with respect
to the Company Intellectual Property Rights have been asserted or are, to the
Company's knowledge, threatened by any person (i) to the effect that the
manufacture, sale, licensing or use of any of the products or services of the
Company or any of its Subsidiaries as now manufactured, sold or licensed or
used or proposed for manufacture, use, sale or licensing by the Company or any
of its Subsidiaries infringes on any intellectual property rights of any third
party, (ii) against the use by the Company or any of its Subsidiaries of any
trademarks, service marks, trade names, trade secrets, copyrights, patents,
technology or know-how and applications used in the business of the Company and
its Subsidiaries as currently conducted or as presently proposed to be
conducted, or (iii) challenging the ownership or use by the Company or any of
its Subsidiaries or the validity of any of the Company Intellectual Property
Rights. All patents and registered trademarks, service marks and copyrights
held by the Company and its Subsidiaries and used in the business of the
Company or its Subsidiaries as currently conducted or as presently proposed to
be conducted are valid, subsisting, in full force and effect, and have not
expired or been cancelled or abandoned. Except as set forth in Section 3.18(b)
of the Disclosure Schedule, to the knowledge of the Company, there is no
unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property Rights by any third party, including any employee or
former employee of the Company or any of its Subsidiaries. No Company
Intellectual Property Right or product or service of the Company or any of its
Subsidiaries is subject to any outstanding decree, order, judgment or
stipulation restricting in any manner the use, sale or licensing thereof by the
Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries has entered into any agreement (other than exclusive distribution
agreements) under which the Company or its Subsidiaries is restricted from
using or licensing any Company Intellectual Property Right or selling or
otherwise distributing any of its products or services.
(c) Except as set forth in Section 3.18(c) of the Disclosure Schedule, the
consummation of the transactions contemplated hereby will not result in any
loss or impairment of the Company or any Subsidiary's ownership of or right to
use any of the material Company Intellectual Property, nor require the consent
of any Governmental Entity or third party with respect to any of the material
Company Intellectual Property.
Section 3.19 Insurance. All fire and casualty, general liability, business
interruption, product liability, sprinkler and water damage insurance policies
and other forms of insurance maintained by the Company or any of its
Subsidiaries are with reputable insurance carriers, provide adequate coverage
for all normal risks incident to the business of the Company and its
Subsidiaries and their respective properties and assets and are in character
and amount and with such deductibles and retained amounts as generally carried
by persons engaged in similar businesses and subject to the same or similar
perils or hazards.
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Section 3.20 Restrictions on Business Activities. Except for this Agreement,
to the best of the Company's knowledge, there is no agreement, judgement,
injunction, order or decree binding upon the Company or any of its Subsidiaries
which has or could reasonably be expected to have the effect of prohibiting or
impairing any material business practice of the Company or any of its
Subsidiaries, acquisition of material property by the Company or any of its
Subsidiaries or the conduct of business by the Company or any of its
Subsidiaries as currently conducted or as proposed to be conducted by the
Company.
Section 3.21 Registration Statement; Proxy Statement/Prospectus. The
information supplied by the Company for inclusion in the Registration Statement
shall not at the time the Registration Statement is declared effective by the
SEC contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The information supplied by the Company for inclusion or
incorporation by reference in the proxy statement/prospectus (as amended or
supplemented, the "Proxy Statement/Prospectus") to be sent to the stockholders
of the Company in connection with the meeting of the stockholders of the
Company to consider the Merger (the "Company Stockholders Meeting"), shall not,
on the date the Proxy Statement/Prospectus (or any amendment thereof or
supplement thereto) is first mailed to stockholders or at the time of the
Company Stockholders Meeting contain any statement which, at such time and in
light of the circumstances under which it shall be made, is false or misleading
with respect to any material fact, or shall omit to state any material fact
necessary in order to make the statements made therein not false or misleading;
or omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies for the
Company Stockholders Meeting which has become false or misleading. If at any
time prior to the Company Stockholders Meeting any event relating to the
Company or any of its respective affiliates, officers or directors should be
discovered by the Company which should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement/Prospectus, the
Company shall promptly inform Parent. The Proxy Statement/Prospectus shall
comply in all material respects as to form and substance with the requirements
of the Securities Act, the Exchange Act and the rules and regulations
thereunder. Notwithstanding the foregoing, the Company makes no representation
or warranty with respect to any information supplied by Parent or Merger Sub
which is contained in any of the foregoing documents.
Section 3.22 Interested Party Transactions. Except as set forth in Section
3.22 of the Disclosure Schedule, since the date of the Company's proxy
statement dated December 17, 1998, no event has occurred that would be required
to be reported as a Certain Relationship or Related Transaction, pursuant to
Item 404 of Regulation S-K promulgated by the SEC.
Section 3.23 Change in Control Payments. Except as set forth in Section 3.13
or Section 3.23 of the Disclosure Schedule, neither the Company nor any of its
Subsidiaries have any plans, programs or agreements to which they are parties,
or to which they are subject, pursuant to which payments (or acceleration of
benefits) may be required upon, or may become payable directly or indirectly as
a result of, a change of control of the Company.
Section 3.24 Year 2000 Compliance.
(a) All of (i) the internal systems used in the business or operations of
the Company and its Subsidiaries, including without limitation computer
hardware systems, software, applications, firmware, equipment containing
embedded microchips and other embedded systems, and (ii) the software,
hardware, firmware and other technology that constitute part of the products
and services manufactured, marketed, licensed or sold by the Company or any of
its Subsidiaries to third parties are Year 2000 Compliant (as defined below)
and will not be adversely affected with respect to functionality,
interoperability, connectivity, performance, reliability or volume capacity
(including without limitation the processing, storage, recall and reporting of
data) by the passage of any date, including without limitation the year change
from December 31, 1999 to January 1, 2000.
(b) To the Company's knowledge, all third-party systems used in connection
with the business, products, services or operations of the Company or any of
its Subsidiaries, including without limitation any system
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belonging to any of the Company's or its Subsidiaries' vendors, co-venturers,
service providers or customers are Year 2000 Compliant. The Company and its
Subsidiaries have received satisfactory written assurances and warranties from
all of their respective vendors, co-venturers, service providers and customers
that are material to the ongoing operation of the business of the Company and
its Subsidiaries that past and future products, software, equipment, components
or systems provided by such parties are (or in the case of future products,
will be) Year 2000 Compliant.
(c) The Company has conducted "year 2000" audits with respect to (i) each of
the internal systems used in the business, products, services and operations of
the Company and its Subsidiaries, including without limitation computer
hardware systems, software, applications, firmware, equipment containing
embedded microchips and other embedded systems, and (ii) all of the software,
applications, hardware, firmware and other technology which constitute part of
the products and services manufactured, marketed, performed or sold by the
Company or any of its Subsidiaries or licensed by the Company or any of its
Subsidiaries to third parties. The Company has obtained "year 2000"
certifications with respect to all material third-party systems used in
connection with the business or operations of the Company and its Subsidiaries,
including without limitation systems belonging to the vendors, co-venturers,
service providers and customers of the Company of any or its Subsidiaries. The
Company has made available to Parent true, complete and correct copies of all
"year 2000" audits, certifications, reports and other similar documents that
have been prepared or performed by or on behalf of the Company or any third
party with respect to the systems, business, operations, products or services
of the Company or any of its Subsidiaries.
(d) Except as set forth in Section 3.24 of the Disclosure Schedule, neither
the Company nor any of its Subsidiaries has provided any representation,
warranty or guarantee for any product sold or licensed, or service provided, by
the Company or its Subsidiaries to the effect that such product or service (i)
complies with or accounts for the fact of the year change from December 31,
1999 to January 1, 2000, (ii) will not be adversely affected with respect to
functionality, interoperability, connectivity, performance, reliability or
volume capacity (including without limitation the processing storage, recall
and reporting of data) by the passage of any date, including without limitation
the year change from December 31, 1999 to January 1, 2000 or (iii) is otherwise
Year 2000 Compliant.
(e) For purposes of this Agreement, "Year 2000 Compliant" means that the
applicable system, product, service or item:
(i) will accurately receive, record, store, provide, recognize, recall
and process all date and time data from, during, into and between the years
1999, 2000 and 2001, and all years pertinent thereafter;
(ii) will accurately perform all date-dependent calculations and
operations (including without limitation, mathematical operations, sorting,
comparing and reporting) from, during, into and between the years 1999,
2000 and 2001, and all pertinent years thereafter; and
(iii) will not malfunction, cease to function or provide invalid or
incorrect results as a result of (A) the change of years from 1999 to 2000
or from 2000 to 2001, (B) date data, including date data which represents
or references different centuries, different dates during 1999, 2000 and
2001, or more than one century or (c) the occurrence of any particular
date;
in each case without human intervention, provided, in each case, that all
software, applications, hardware and other systems used in conjunction with
such system or item that are not owned or licensed by the Company or its
Subsidiaries correctly exchange date data with or provide data to such system
or item.
Section 3.25 Pooling; Tax Matters. Neither the Company nor any of its
affiliates has taken or agreed to take any action or failed to take any action
that would prevent (a) Parent from accounting for the business combination to
be effected by the Merger as a pooling of interests or (b) the Merger from
constituting a reorganization within the meaning of Section 368(a) of the Code.
Without limiting the effect of a breach of any
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other representation or warranty set forth in this Agreement, the failure of
this representation to be true and correct, shall, if as a result the Merger is
not able to be accounted for as a pooling of interests or a reorganization
within the meaning of Section 368(a) of the Code, constitute a breach of this
Agreement by the Company for the purposes of Section 8.1(e).
Section 3.26 Rights Agreement. The Company has taken all action necessary to
ensure that so long as this Agreement shall not have been terminated pursuant
to Article VIII, (i) neither Parent nor Merger Sub shall, by virtue of the
execution and delivery of this Agreement or the Stock Option Agreement or the
consummation of the transactions contemplated hereby or thereby, be deemed an
"Acquiring Person" (as that term is defined in the Company Rights Agreement)
and (ii) no "Rights" (as that term is defined in the Company Rights Agreement)
are issued or required to be issued to the stockholders of the Company by
virtue of the execution and delivery of this Agreement or the Stock Option
Agreement or the consummation of the transactions contemplated hereby or
thereby. As of the date of this Agreement, the Company has not amended the
Company Rights Agreement, redeemed the Rights thereunder or taken any other
action to make the Company Rights Agreement or the Rights thereunder
inapplicable, in each case, with respect to (a) any person or entity other than
Parent or Merger Sub or (b) any Acquisition Proposal (as defined in Section
6.2(a)) (or any other substantially similar proposal).
Section 3.27 No Existing Discussions. As of the date hereof, the Company is
not engaged, directly or indirectly, in any discussions or negotiations with
any other party with respect to an Acquisition Proposal or any other
substantially similar proposal.
Section 3.28 Opinion of Financial Advisor. The financial advisor of the
Company, Morgan Stanley Dean Witter, has delivered to the Company an opinion
dated the date of this Agreement to the effect that as of the date of this
Agreement, the consideration to be received in the Merger by the stockholders
of the Company is fair, from a financial point of view, to the stockholders of
the Company. The Company has provided a complete and correct copy of such
opinion to Parent.
Section 3.29 Brokers. No broker, finder or investment banker (other than
Morgan Stanley Dean Witter, whose brokerage, finder's or other fee will be paid
by the Company) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company or any of its
Subsidiaries. The Company has heretofore furnished to Parent a complete and
correct copy of all agreements between the Company and Morgan Stanley Dean
Witter pursuant to which such firm would be entitled to any payment relating to
the transactions contemplated hereunder.
Section 3.30 Affiliates. Section 3.30 of the Disclosure Schedule contains a
true, complete and correct list of all persons who, as of the date hereof, to
the best knowledge of the Company, may be deemed to be affiliates of the
Company excluding all its Subsidiaries but including all directors and
executive officers of the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company that:
Section 4.1 Organization and Qualification. Parent and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its respective incorporation and
has the requisite corporate power and authority necessary to own, lease and
operate the properties it purports to own, lease or operate and to carry on its
business as it is now being conducted or presently proposed to be conducted.
Parent is duly qualified or licensed as a foreign corporation to do business,
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and is in good standing, in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its activities
makes such qualification or licensing necessary, except for such failures to be
so duly qualified or licensed and in good standing that could not reasonably be
expected to have a Parent Material Adverse Effect.
Section 4.2 Capitalization.
(a) The authorized capital stock of Parent consists of 3,000,000,000 shares
of Parent Common Stock and 25,000,000 shares of preferred stock, par value $.01
per share ("Parent Preferred Stock"). As of June 30, 1999, 1,013,385,208 shares
of Parent Common Stock were outstanding.
(b) All of the shares of Parent Common Stock to be issued in the Merger have
been duly authorized by all necessary corporate action and will be, when issued
in accordance with this Agreement, duly authorized, validly issued, fully paid
and nonassessable.
(c) The authorized capital stock of Merger Sub consists of 100 shares of
Merger Sub Common Stock, all of which are issued and outstanding and fully paid
and nonassessable.
Section 4.3 Authority Relative to this Agreement. Each of Parent and Merger
Sub has all necessary corporate power and authority to execute and deliver this
Agreement, the Stock Option Agreement and each instrument required hereby to be
executed and delivered by it at Closing and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement, the Stock Option Agreement and each instrument
required hereby to be executed and delivered at Closing by Parent and Merger
Sub and the consummation by Parent and Merger Sub of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Parent and Merger Sub. This Agreement and the
Stock Option Agreement have been duly and validly executed and delivered by
Parent and Merger Sub and, assuming the due authorization, execution and
delivery by the Company, constitutes legal, valid and binding obligations of
Parent and Merger Sub, enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights and by general equitable principles (regardless
of whether enforceability is considered in a proceeding in equity or at law).
Section 4.4 No Conflict, Required Filings and Consents.
(a) The execution and delivery of this Agreement, the Stock Option Agreement
and each instrument required hereby to be executed and delivered at Closing by
Parent and Merger Sub do not, and the performance of this Agreement or the
Stock Option Agreement by Parent and Merger Sub will not, (i) conflict with or
violate the Restated Articles of Organization, as amended, of Parent (the
"Parent Charter"), the Amended and Restated By-Laws of Parent (the "Parent By-
Laws"), the Merger Sub Charter or the Merger Sub By-Laws or (ii) conflict with
or violate any law, rule, regulation, order, judgment or decree applicable to
Parent or Merger Sub by which its or their respective properties are bound or
affected, except in the case of (ii) for any such conflicts, violations,
breaches, defaults or other occurrences that could not reasonably be expected
to have a Parent Material Adverse Effect.
(b) The execution and delivery of this Agreement, the Stock Option Agreement
or any instrument required hereby to be executed and delivered by Parent and
Merger Sub does not, and the performance of this Agreement or the Stock Option
Agreement by Parent and Merger Sub will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Entity, except (i) the filing of the pre-merger notification report under the
HSR Act, (ii) the filing of the Registration Statement with the SEC in
accordance with the Securities Act, and the filing of the Proxy
Statement/Prospectus with the SEC under the Exchange Act, (iii) such consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable federal and state securities laws and the laws
of any foreign country, (iv) the
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filing and recordation of appropriate merger or other documents as required by
the DGCL and (v) such other consents, approvals, authorizations or permits
which, if not obtained or made, would not be reasonably likely to have a Parent
Material Adverse Effect.
Section 4.5 SEC Filings; Financial Statements.
(a) parent has timely filed and made available to the Company all forms,
reports, schedules, statements and other documents required to be filed by
Parent with the SEC since December 31, 1998 (collectively, the "Parent SEC
Reports"). The Parent SEC Reports (i) at the time filed, complied in all
material respects with the applicable requirements of the Securities Act and
the Exchange Act, as the case may be, and (ii) did not at the time they were
filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated in such
Parent SEC Reports or necessary in order to make the statements in such Parent
SEC Reports, in light of the circumstances under which they were made, not
misleading. None of Parent's Subsidiaries are required to file any forms,
reports, schedules, statements or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes), contained in the Parent SEC Reports, including any Parent
SEC Reports filed after the date of this Agreement until the Closing, complied,
as of its respective date, in all material respects with all applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, was prepared in accordance with GAAP applied on a consistent
basis throughout the periods involved and fairly presented the consolidated
financial position of Parent and its Subsidiaries as at the respective dates
and the consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or are not
expected to be material in amount. The unaudited balance sheet of Parent as of
March 31, 1999 is referred to herein as the "Parent Balance Sheet."
Section 4.6 Absence of Certain Changes or Events. Since the date of the
Parent Balance Sheet and except as disclosed in the Parent SEC Reports, Parent
has conducted its business in the ordinary course consistent with past practice
and, since such date, there has not occurred: (i) any change, development,
event or other circumstance, situation or state of affairs that has had or may
be reasonably expected to have a Parent Material Adverse Effect; (ii) any
amendments to or changes in the Parent Charter or Parent By-Laws, except for
the amendment to the Parent Charter approved by the stockholders of Parent on
May 5, 1999; (iii) any damage to, destruction or loss of any asset of Parent or
any of its Subsidiaries (whether or not covered by insurance) that could
reasonably be expected to have a Parent Material Adverse Effect; (iv) any
material change by Parent in its accounting methods, principles or practices;
(v) any material revaluation by Parent of any of its assets, including, without
limitation, writing down the value of inventory or writing off notes or
accounts receivable other than in the ordinary course of business consistent
with past practice; or (vi) any sale of a material amount of assets (tangible
or intangible) of Parent.
Section 4.7 Absence of Litigation. Except as disclosed in the Parent SEC
Reports, there are no claims, actions, suits, proceedings or investigations
(i)pending against Parent or any of its Subsidiaries or any properties or
assets of Parent or of any of its Subsidiaries or (ii) to the knowledge of
Parent, threatened against Parent or any of its Subsidiaries, or any properties
or assets of Parent or of any of its Subsidiaries, in each case, which claims,
actions, suits, proceedings or investigations could reasonably be expected to
have a Parent Material Adverse Effect.
Section 4.8 Registration Statement; Proxy Statement/Prospectus. The
information supplied by Parent for inclusion in the Registration Statement
shall not at the time the Registration Statement is declared effective by the
SEC contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The information supplied by Parent for inclusion or
incorporation by reference in the Proxy Statement/Prospectus to be sent to the
stockholders of the Company in connection with
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the Company Stockholders Meeting, shall not, on the date the Proxy
Statement/Prospectus (or any amendment thereof or supplement thereto) is first
mailed to stockholders or at the time of the Company Stockholders Meeting,
contain any statement which, at such time and in light of the circumstances
under which it shall be made, is false or misleading with respect to any
material fact, or shall omit to state any material fact necessary in order to
make the statements made therein not false or misleading; or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Company Stockholders
Meeting which has become false or misleading. If at any time prior to the
Company Stockholders Meeting any event relating to Parent or any of its
respective affiliates, officers or directors should be discovered by Parent
which should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement/Prospectus, Parent shall promptly inform the
Company. The Registration Statement shall comply in all material respects as to
form and substance with the requirements of the Securities Act, the Exchange
Act and the rules and regulations thereunder. Notwithstanding the foregoing,
Parent makes no representation or warranty with respect to any information
supplied by the Company which is contained in any of the foregoing documents.
Section 4.9 Brokers. No broker, finder or investment banker (other than
Lehman Brothers Inc., whose brokerage, finder's or other fee will be paid by
Parent) is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent.
Section 4.10 Ownership of Merger Sub; No Prior Activities. As of the date
hereof and as of the Effective Time, except for obligations or liabilities
incurred in connection with its incorporation or organization and the
transactions contemplated by this Agreement and except for this Agreement and
any other agreements or arrangements contemplated by this Agreement, Merger Sub
has not and will not have incurred, directly or indirectly, any obligations or
liabilities or engaged in any business activities of any type or kind
whatsoever or entered into any agreements or arrangements with any person.
Section 4.11 Pooling; Tax Matters. Neither Parent nor any of its affiliates
has taken or agreed to take any action or failed to take any action that would
prevent (a) Parent from accounting for the business combination to be effected
by the Merger as a pooling of interests or (b) the Merger from constituting a
reorganization within the meaning of Section 368(a) of the Code. Without
limiting the effect of a breach of any other representation or warranty set
forth in this Agreement, the failure of this representation to be true and
correct shall, if as a result the Merger is not able to be accounted for as a
reorganization within the meaning of Section 368(a) of the Code, constitute a
breach of this Agreement by Parent for purposes of Section 8.1(f).
ARTICLE V
CONDUCT OF BUSINESS
Section 5.1 Conduct of Business by the Company Pending the Merger. The
Company covenants and agrees that, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, unless Parent shall otherwise agree in writing, the
Company shall conduct its business and shall cause the businesses of its
Subsidiaries to be conducted only in, and the Company and its Subsidiaries
shall not take any action except in, the ordinary course of business and in a
manner consistent with past practice and in compliance in all material respects
with all applicable laws and regulations; and the Company shall use reasonable
best efforts to preserve substantially intact the business organization of the
Company and its Subsidiaries, to keep available the services of the current
officers, employees and consultants of the Company and its Subsidiaries and to
preserve the present relationships of the Company and its Subsidiaries with
customers, suppliers and other persons with which the Company or any of its
Subsidiaries has significant business relations. By way of amplification and
not limitation, except as contemplated by this Agreement or set forth in
Section 5.1 of the Disclosure Schedule, the Company shall not
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and shall not permit its Subsidiaries to, during the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, directly or indirectly do, or propose to do,
any of the following without the prior written consent of Parent:
(a) amend or otherwise change the Company Charter or Company By-Laws;
(b) issue, sell, pledge, dispose of or encumber, or authorize the issuance,
sale, pledge, disposition or encumbrance of, any shares of capital stock of any
class, or any options, warrants, convertible securities or other rights of any
kind to acquire any shares of capital stock, or any other ownership interest
(including, without limitation, any phantom interest) in the Company, any of
its Subsidiaries or affiliates, other than pursuant to the exercise of
currently outstanding options under the Company Stock Option Plans;
(c) sell, pledge, dispose of or encumber any assets of the Company or any of
its Subsidiaries (except for (i) sales of assets in the ordinary course of
business and in a manner consistent with past practice, not to exceed
$1,000,000 in the aggregate, (ii) dispositions of obsolete or worthless assets,
or (iii) sales of immaterial assets not in excess of $100,000);
(d) (i) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
any of its capital stock, except that a wholly owned Subsidiary of the Company
may declare and pay a dividend to its parent, (ii) split, combine or reclassify
any of its capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (iii) amend the terms or change the period of exercisability
of, purchase, repurchase, redeem or otherwise acquire, or permit any Subsidiary
to purchase, repurchase, redeem or otherwise acquire, any of its securities or
any securities of its Subsidiaries, or any option, warrant or right, directly
or indirectly, to acquire any such securities, or propose to do any of the
foregoing, other than pursuant to the exercise of currently outstanding options
under the Company Stock Option Plans;
(e) (i) acquire (by merger, consolidation or acquisition of stock or assets)
any corporation, partnership or other business organization or division
thereof; (ii) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse or otherwise as an accommodation
become responsible for, the obligations of any person, or make any loans or
advances or capital contributions to or investments in any other person, except
in the ordinary course of business and consistent with past practice; (iii)
enter into or amend any material contract or agreement, or enter into, renew,
amend or terminate any lease relating to real property; (iv) authorize any
capital expenditures or purchase of fixed assets which are, in the aggregate,
in excess of $30,000,000 for the Company and its Subsidiaries taken as a whole;
or (v) enter into or amend any contract, agreement, commitment or arrangement
to effect any of the matters prohibited by this Section 5.1(e);
(f) increase the compensation payable or to become payable to its directors,
officers or employees (except such increases payable to non-officer employees
made in the ordinary course of business consistent with past practice), grant
any severance or termination pay to, or enter into or amend any employment or
severance agreement with, any director, officer (except for officers who are
terminated on an involuntary basis) or other employee of the Company or any of
its Subsidiaries, establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any current or former directors, officers or
employees, pay any bonuses to any officer of the Company (except as set forth
in Section 5.1(f) of the Disclosure Schedule), materially change any actuarial
assumption or other assumption used to calculate funding obligations with
respect to any pension or retirement plan, or change the manner in which
contributions to any such plan are made or the basis on which such
contributions are determined, except, in each case, as may be required by law
or contractual commitments which are existing as of the date hereof and listed
in Section 3.13 of the Disclosure Schedule;
(g) take any action to change accounting policies or procedures (including,
without limitation, procedures with respect to revenue recognition, payments of
accounts payable and collection of accounts receivable), except as required by
GAAP;
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(h) make any material Tax election inconsistent with past practice or settle
or compromise any material federal, state, local or foreign Tax liability or
agree to an extension of a statute of limitations, except to the extent the
amount of any such settlement has been reserved for in the financial statements
contained in the Company SEC Reports filed prior to the date of this Agreement;
(i) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of business
and consistent with past practice of liabilities reflected or reserved against
in the financial statements contained in the Company SEC Reports filed prior to
the date of this Agreement or incurred in the ordinary course of business and
consistent with past practice; or
(j) take, or agree in writing or otherwise to take, any of the actions
described in Sections 5.1 (a) through (i) above, or any action which would make
any of the representations or warranties of the Company contained in this
Agreement untrue or incorrect or prevent the Company from performing or cause
the Company not to perform its covenants hereunder, in each case, such that the
conditions set forth in Sections 7.2(a) or 7.2(b), as the case may be, would
not be satisfied.
Section 5.2 Advice of Changes. Parent and the Company shall promptly advise
the other party orally and in writing to the extent it has knowledge of (i) any
representation or warranty made by it (and, in the case of Parent, made by
Merger Sub) contained in this Agreement or the Stock Option Agreement becoming
untrue or inaccurate in any respect where the failure of such representation to
be so true and correct (without giving effect to any limitation as to
"materiality," "Company Material Adverse Effect" or "Parent Material Adverse
Effect" set forth therein), individually or in the aggregate, has had or is
reasonably likely to have a Company Material Adverse Effect or Parent Material
Adverse Effect, as the case may be, (ii) the failure by it (and, in the case of
Parent, by Merger Sub) to comply in any material respect with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement or the Stock Option Agreement and (iii)
any change or event having, or which is reasonably likely to have, a Company
Material Adverse Effect or a Parent Material Adverse Effect, as the case may
be, on such party or the ability for the conditions set forth in Article VII to
be satisfied; provided, however, that no such notification shall affect in any
manner the representations, warranties, covenants or agreements of the parties
(or remedies with respect thereto) or any matter set forth in the Disclosure
Schedule or the conditions to the obligations of the parties under this
Agreement or the Stock Option Agreement.
Section 5.3 Cooperation. Subject to compliance with applicable law, from the
date hereof until the Effective Time, (a) the Company shall confer on a regular
and frequent basis with one or more representatives of the Parent to report
operational matters that are material and the general status of ongoing
operations and (b) each of Parent and the Company shall promptly provide the
other party or its counsel with copies of all filings made by such party with
any Governmental Entity in connection with this Agreement, the Merger and the
transactions contemplated hereby and thereby.
Section 5.4 Company Stock Purchase Plan. The Company shall take all
necessary and appropriate actions with respect to the Company Employee
Qualified Stock Purchase Plan so that (a) the offering period ending July 31,
1999 is the final offering period under such plan and (b) such plan is
terminated immediately prior to the Effective Time, without any additional
offering periods having commenced thereunder.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Access to Information; Confidentiality. The Company shall (and
shall cause its Subsidiaries and its and their respective officers, directors,
employees, auditors and agents to) afford to Parent and to Parent's officers,
employees, financial advisors, legal counsel, accountants, consultants and
other
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representatives reasonable access during normal business hours throughout the
period prior to the Effective Time to all of its books and records (other than
privileged documents) and its properties, plants and personnel and, during such
period, the Company shall furnish promptly to Parent a copy of each report,
schedule and other document filed or received by it pursuant to the
requirements of federal securities laws, provided that no investigation
pursuant to this Section 6.1 shall affect any representations or warranties
made herein or the conditions to the obligations of the respective parties to
consummate the Merger. Unless otherwise required by law, each party agrees that
it (and its Subsidiaries and its and their respective representatives) shall
hold in confidence all non-public information acquired in accordance with the
terms of the Non-Disclosure Agreement dated June 30, 1999 between Parent and
the Company (the "Confidentiality Agreement").
Section 6.2 No Solicitation.
(a) The Company and each of its Subsidiaries and affiliates shall not,
directly or indirectly, through any officer, director, employee, representative
or agent of the Company or any of its Subsidiaries (and it shall use reasonable
efforts to cause such officers, directors, employees, representatives and
agents not to, directly or indirectly), (i) solicit, initiate, facilitate or
encourage any inquiries or proposals that constitute, or could reasonably be
expected to lead to, an Acquisition Proposal (as herein defined) or (ii) engage
in negotiations or discussions concerning, or provide any non-public
information to any person or entity relating to, any Acquisition Proposal;
provided, however, that if, at any time prior to the date of the Company
Stockholders Meeting (the "Applicable Period"), the Board of Directors of the
Company determines in good faith, after consultation with outside counsel, that
it is necessary to do so in order to comply with its fiduciary duties to the
Company's stockholders under applicable law, the Company may, in response to a
Superior Proposal (as defined in Section 6.2(b)) which was not solicited by it
or which did not otherwise result from a breach of this Section 6.2(a), and
subject to providing prior written notice of its decision to take such action
to Parent (a "Section 6.2 Notice") and compliance with Section 6.2(c), (x)
furnish information with respect to the Company and its Subsidiaries to any
person making an Superior Proposal pursuant to a confidentiality agreement
containing terms no less favorable to the Company than the Confidentiality
Agreement and (y) participate in discussions or negotiations regarding such
Superior Proposal. For purposes of this Agreement, "Acquisition Proposal" means
any inquiry, proposal or offer from any person relating to any direct or
indirect acquisition or purchase of a business that constitutes 15% or more of
the net revenues, net income or the assets of the Company and its Subsidiaries,
taken as a whole, or 15% or more of any class of equity securities of the
Company or any of its Subsidiaries, any tender offer or exchange offer that if
consummated would result in any person beneficially owning 15% or more of any
class of equity securities of the Company or any of its Subsidiaries, or any
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company or any of its
Subsidiaries, other than the transactions contemplated by this Agreement.
(b) Except as expressly permitted by this Section 6.2, neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw or
modify, or propose publicly to withdraw or modify, in a manner adverse to
Parent, the approval or recommendation by such Board of Directors or such
committee of the Merger or this Agreement, (ii) approve or recommend, or
propose publicly to approve or recommend, any Acquisition Proposal, or (iii)
cause the Company to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement related to any Acquisition
Proposal. Notwithstanding the foregoing, during the Applicable Period, in
response to a Superior Proposal which was not solicited by the Company and
which did not otherwise result from a breach of Section 6.2(a), the Board of
Directors of the Company may (subject to this and the following sentences)
terminate this Agreement, but only at a time that is during the Applicable
Period and is after the fifth business day following Parent's receipt of
written notice advising Parent that the Board of Directors of the Company is
prepared to accept a Superior Proposal, specifying the material terms and
conditions of such Superior Proposal and identifying the person making such
Superior Proposal. For purposes of this Agreement, a "Superior Proposal" means
any proposal made by a third party to acquire, directly or indirectly,
including pursuant to a tender offer, exchange offer, merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction, for consideration consisting of cash and/or securities, more than
50% of the combined voting power of the shares
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of Company Common Stock then outstanding or all or substantially all the assets
of the Company and otherwise on terms which the Board of Directors of the
Company determines in its good faith judgment (based on the advice of a
financial advisor of nationally recognized reputation) to be more favorable to
the Company's stockholders than the Merger and for which financing, to the
extent required, is then committed or which, in the good faith judgment of the
Board of Directors of the Company, is reasonably capable of being obtained by
such third party.
(c) The Company agrees that as of the date hereof, it, its Subsidiaries and
affiliates (and their respective officers, directors, employees,
representatives and agents) shall immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any person (other
than Parent or its representatives) conducted heretofore with respect to any
Acquisition Proposal. The Company shall notify Parent immediately after receipt
by the Company (or its advisors) of any Acquisition Proposal or any request for
nonpublic information in connection with an Acquisition Proposal or for access
to the properties, books or records of the Company or any of its Subsidiaries
by any person or entity that informs the Company that it is considering making,
or has made, an Acquisition Proposal. Such notice to Parent shall be made
orally and in writing and shall indicate in reasonable detail the identity of
the offeror and the terms and conditions of such proposal, inquiry or contact.
The Company shall keep Parent informed of all material developments and the
status of any Acquisition Proposal, any negotiations or discussions with
respect to any Acquisition Proposal or any request for nonpublic information in
connection with any Acquisition Proposal or for access to the properties, books
or records of the Company or any of its Subsidiaries by any person or entity
that is considering making, or has made, an Acquisition Proposal. The Company
shall provide Parent with copies of all documents received from or delivered or
sent to any person or entity that is considering making or has made an
Acquisition Proposal.
(d) Nothing contained in this Section 6.2 shall prohibit the Company from
taking and disclosing to its stockholders a position contemplated by Rule 14e-
2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders if, in the good faith judgment of the Board of Directors
of the Company, after consultation with outside counsel, failure so to disclose
would be inconsistent with its obligations under applicable law; provided,
however, that neither the Company nor its Board of Directors nor any committee
thereof shall withdraw or modify, or propose publicly to withdraw of modify,
its position with respect to this Agreement or the Merger or approve or
recommend, or propose publicly to approve or recommend, an Acquisition
Proposal.
Section 6.3 Proxy Statement/Prospectus; Registration Statement.
(a) As promptly as practicable after execution of this Agreement, Parent and
the Company shall in consultation with each other prepare, and the Company
shall file with the SEC, preliminary proxy materials which shall constitute the
Proxy Statement/Prospectus. As promptly as practicable after comments are
received from the SEC thereon and after the furnishing by the Company and
Parent of all information required to be contained therein, (i) the Company
shall file with the SEC the Proxy Statement/Prospectus and (ii) Parent shall
file with the SEC the Registration Statement. The Company and Parent shall use
all reasonable efforts to cause the Registration Statement to become effective
as soon thereafter as practicable.
(b) The Company shall use all reasonable efforts to mail the Proxy
Statement/Prospectus to the stockholders of the Company as soon as practicable
after the Registration Statement is declared effective by the SEC. Subject to
the Company's right to terminate this Agreement pursuant to Section 6.2(b), the
Proxy Statement/Prospectus shall include the recommendation of the Board of
Directors of the Company in favor of the Merger.
(c) The Company shall furnish Parent with all information concerning the
Company and the holders of its capital stock and shall take such other action
as Parent may reasonably request in connection with the Registration Statement
and the issuance of the shares of Parent Common Stock. If at any time prior to
the Effective Time any event or circumstance relating to the Company, Parent or
any of their respective Subsidiaries, affiliates, officers or directors should
be discovered by such party which should be set forth in an
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amendment or a supplement to the Registration Statement or Proxy
Statement/Prospectus, such party shall promptly inform the other thereof and
take appropriate action in respect thereof.
(d) The Company and Parent shall make any necessary filing with respect to
the Merger under the Securities Act and the Exchange Act and the rules and
regulations thereunder.
Section 6.4 Company Stockholders Meeting.
(a) The Company shall, subject to and in accordance with applicable law and
the Company Charter and Company By-Laws, promptly and duly call, give notice
of, convene and hold the Company Stockholders Meeting to be held as promptly as
practicable following the date upon which the Registration Statement becomes
effective for the purpose of voting on the Merger and this Agreement. Subject
to its right to terminate this Agreement pursuant to Section 6.2(b), the
Company will, through its Board of Directors, recommend to its stockholders the
approval and adoption of this Agreement, the Merger and the other transactions
contemplated thereby and will use its best efforts to solicit from its
stockholders proxies in favor of the Merger and this Agreement.
(b) At or prior to the Closing, the Company shall deliver to Parent a
certificate of its Corporate Secretary setting forth the voting results from
the Company Stockholders Meeting.
Section 6.5 Legal Conditions to Merger. Each of Parent and, subject to
Section 6.2, the Company will use all reasonable best efforts to comply
promptly with all legal requirements which may be imposed with respect to the
Merger (which actions shall include, without limitation, furnishing all
information required under the HSR Act and in connection with approvals of or
filings with any other Governmental Entity) and will promptly cooperate with
and furnish information to each other in connection with any such requirements
imposed upon any of them or any of their Subsidiaries in connection with the
Merger. Each of Parent and the Company will, and will cause its Subsidiaries
to, take all reasonable actions necessary to obtain (and will cooperate with
each other in obtaining) any consent, authorization, order or approval of, or
any exemption by, any Governmental Entity required to be obtained or made by
Parent, the Company or any of their Subsidiaries in connection with the Merger
or taking of any action contemplated thereby or by this Agreement.
Section 6.6 Agreements with Respect to Affiliates. The Company will cause
each person who is identified in Section 3.30 of the Disclosure Schedule and
any other person who may be or become an "affiliate" of the Company as of the
time of the Company Stockholders Meeting for purposes of Rule 145 under the
Securities Act ("Rule 145") to deliver to Parent, as soon as practicable but
not later than thirty days preceding the Effective Time, a written agreement
(an "Affiliate Agreement") in connection with restrictions on affiliates under
Rule 145 and pooling of interests accounting treatment, substantially in the
form of Exhibit B hereto. The Company shall provide prompt notice to Parent of
any such other person who may be or become an "affiliate" of the Company as of
the time of the Company Stockholders Meeting who is not identified in Section
3.30 of the Disclosure Schedule.
Section 6.7 Tax-Free Reorganization. Parent and the Company intend that the
Merger will qualify as a reorganization within the meaning of Section 368(a) of
the Code. Parent and the Company shall each use its reasonable best efforts to
cause the Merger to so qualify. The parties agree and acknowledge that if (i)
Parent has, not later than three days prior to the Effective Time, provided
written notice to the Company of its intention to merge the Surviving
Corporation with and into Parent with Parent surviving the merger (the
"Upstream Merger"), and (ii) the Company consents to the Upstream Merger, which
consent shall not be unreasonably withheld, then the Upstream Merger shall
occur immediately following the Effective Time. Neither Parent nor the Company
shall knowingly take any action, or knowingly fail to take any action, that
would be reasonably likely to jeopardize the qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
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Section 6.8 Pooling Accounting. Parent and the Company shall each use its
reasonable best efforts to cause the business combination to be effected by the
Merger to be accounted for as a pooling of interests for accounting purposes.
Neither Parent nor the Company shall knowingly take any action, or knowingly
fail to take any action, that would be reasonably likely to jeopardize the
treatment of the Merger as a pooling of interests for accounting purposes. Each
of Parent and the Company agrees to take such action as may be reasonably
required to negate the impact of any past actions which to its knowledge could
be reasonably likely to jeopardize the treatment of the Merger as a pooling of
interests for accounting purposes.
Section 6.9 Letters of Accountants.
(a) Parent shall use its reasonable best efforts to cause to be delivered to
the Company (i) a letter of PricewaterhouseCoopers LLP, Parent's independent
auditors, dated a date within two business days before the date on which the
Registration Statement shall become effective and addressed to the Company, in
form and substance reasonably satisfactory to the Company and customary in
scope and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Registration Statement,
which letter shall be brought down to the Effective Time, and (ii) the letter
of PricewaterhouseCoopers LLP referred to in Section 7.2(d).
(b) The Company shall use its reasonable best efforts to cause to be
delivered to Parent (i) a letter of PricewaterhouseCoopers LLP, the Company's
independent auditors, dated a date within two business days before the date on
which the Registration Statement shall become effective and addressed to
Parent, in form and substance reasonably satisfactory to Parent and customary
in scope and substance for letters delivered by independent public accountants
in connection with registration statements similar to the Registration
Statement, which letter shall be brought down to the Effective Time, and (ii)
the letter of PricewaterhouseCoopers LLP referred to in Section 7.2(d).
Section 6.10 Public Announcements. Parent and the Company shall consult with
each other before issuing any press release or making any public statement with
respect to the Merger or this Agreement and shall not issue any such press
release or make any such public statement without the prior written consent of
the other party, which shall not be unreasonably withheld or delayed; provided,
however, that a party may, without the prior consent of the other party, issue
such press release or make such public statement as may upon the advice of
counsel be required by law or the rules and regulations of the NYSE if it has
used all reasonable efforts to consult with the other party prior thereto.
Section 6.11 Listing of Parent Shares. Parent shall use its reasonable best
efforts to have authorized for listing on the NYSE, upon official notice of
issuance, the shares of Parent Common Stock to be issued in the Merger.
Section 6.12 Employee Benefits; 401(k) Plan.
(a) From and after the Effective Time, Parent will, or will cause the
Surviving Corporation to, recognize the prior service with the Company or its
Subsidiaries of each employee of the Company or its Subsidiaries as of the
Effective Time (the "Company Employees") in connection with all employee
benefit plans of Parent or its affiliates in which Company Employees are
eligible to participate following the Effective Time, for purposes of
eligibility, vesting and levels of benefits (but not for purposes of benefit
accruals under any defined benefit pension plan). From and after the Effective
Time, Parent will, or will cause the Surviving Corporation to (i) cause any
pre-existing conditions or limitations and eligibility waiting periods under
any group health plans of Parent or its affiliates to be waived with respect to
Company Employees and their eligible dependents and (ii) give each Company
Employee credit for the plan year in which the Effective Time occurs towards
applicable deductibles and annual out-of-pocket limits for expenses incurred
prior to the Effective Time. Notwithstanding anything contained herein to the
contrary, Parent and its Subsidiaries agree to honor in accordance with their
terms and not contest all benefits accrued or vested as of the Effective Time
under the employee benefit plans and agreements of the Company and its
Subsidiaries (including those set forth in Section 3.13 of the Disclosure
Schedule), including, without limitation, any rights or benefits arising as a
result of the transactions
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contemplated by this Agreement (either alone or in combination with any other
event); it being understood that for purposes of all such plans and agreements,
the transactions contemplated by this Agreement are, or will be deemed to be, a
"change of control".
(b) Prior to the Effective Time, the Company shall take such actions as
Parent may reasonably request so as to enable the Surviving Corporation to
effect as of the Effective Time such actions relating to the Data General
Corporation Savings and Investment Plan (the "401(k) Plan") as Parent may deem
necessary or appropriate, subject to the terms of the 401(k) Plan and
applicable law and provided that such action does not preclude the immediate
participation of the Company Employees in any successor plan.
Section 6.13 Stock Plans.
(a) Each option granted to a Company employee to acquire shares of Company
Common Stock (a "Company Stock Option") that is issued under a Company Stock
Option Plan (other than the Company Qualified Employee Stock Purchase Plan) and
which is outstanding immediately prior to the Effective Time, whether or not
then vested or exercisable, shall, effective as of the Effective Time, become
and represent an option to acquire the number of shares of Parent Common Stock
(a "Substitute Option") determined by multiplying (i) the number of shares of
Company Stock subject to such Company Stock Option immediately prior to the
Effective Time by (ii) the Exchange Ratio (rounded down to the nearest whole
share), at an exercise price per share of Parent Common Stock (increased to the
nearest whole cent) equal to the exercise price per share of such Company Stock
Option divided by the Exchange Ratio; provided, however, that in the case of
any Company Stock Option to which Section 421 of the Code applies by reason of
its qualification as an incentive stock option under Section 422 of the Code,
the conversion formula shall be adjusted if necessary to comply with Section
424(a) of the Code. After the Effective Time, except as provided above in this
Section 6.13, each Substitute Option shall be exercisable upon the same terms
and conditions as were applicable to the related Company Stock Option
immediately prior to the Effective Time.
(b) Prior to the Effective Time, the Company shall (i) obtain any consents
from holders of Company Stock Options and (ii) amend the terms of its equity
incentive plans or arrangements, in each case as is necessary to give effect to
the provisions of paragraph (a) of this Section 6.13.
Section 6.14 Consents. The Company shall use all reasonable best efforts to
obtain all necessary consents, waivers and approvals under any of the Company's
material agreements, contracts, licenses or leases in connection with the
Merger, including without limitation each of the consents listed in Section
6.14 of the Disclosure Schedule.
Section 6.15 Rights Plan. So long as this Agreement shall not have been
terminated pursuant to Article 8, the Company shall not redeem the Company
Rights, or amend or modify (other than to delay the Distribution Date (as
defined in the Company Rights Agreement) or to render the Rights inapplicable
to the Merger or any action permitted under this Agreement) or terminate the
Company Rights Agreement (including any such redemption, amendment,
modification or termination which would make the Company Rights Agreement or
Rights inapplicable to any Acquisition Proposal, prior to the Effective Time).
The Company shall take all action necessary so that none of Parent or Merger
Sub will be an "Acquiring Person" under the Company Rights Agreement and to
ensure that neither the Company Rights Agreement nor the Rights will apply to
Parent or Merger Sub as a result of this Agreement, the Stock Option Agreement
or the transactions contemplated hereby or thereby.
Section 6.16 Indemnification and Insurance.
(a) All rights to indemnification, advancement of litigation expenses and
limitation of personal liability existing in favor of the directors, officers
and employees of the Company and its Subsidiaries under the provisions existing
on the date hereof in the Company Charter or Company By-Laws shall, with
respect to any matter existing or occurring at or prior to the Effective Time
(including the transactions contemplated by this Agreement), survive the
Effective Time, and, as of the Effective Time, Parent and the Surviving
Corporation
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shall assume all obligations of the Company in respect thereof as to any claim
or claims asserted prior to or within a four-year period immediately after the
Effective Time.
(b) For a period of four years after the Effective Time, the Surviving
Corporation shall cause to be maintained in effect the current policies of
directors' and officers' and fiduciary liability insurance maintained by the
Company (provided that the Surviving Corporation may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous to former officers and directors of
the Company) only with respect to claims arising from facts or events which
occurred at or before the Effective Time; provided, however, that in no event
shall the Surviving Corporation be required to expend pursuant to this Section
6.16(b) more than an aggregate amount equal to 150% of current aggregate annual
premiums paid by the Company for such insurance (the "Maximum Amount") (which
premiums the Company represents and warrants to be $108,000 in the aggregate).
If the amount of the aggregate annual premiums necessary to maintain or procure
such insurance coverage exceeds the Maximum Amount, the Surviving Corporation
during such four-year period shall maintain or procure as much coverage as
possible for aggregate annual premiums not to exceed the Maximum Amount.
Section 6.17 Company 6% Convertible Subordinated Notes. Effective at the
Effective Time, the Company shall enter into a supplemental indenture under the
Indenture dated as of May 21, 1997 between the Company and the Bank of New
York, as Trustee (the "Indenture"), providing for the Company's 6% Convertible
Subordinated Notes after the Effective Time to be convertible into shares of
Parent Common Stock as provided in Section 15.6 of the Indenture.
Section 6.18 Additional Agreements; Reasonable Best Efforts. Subject to the
terms and conditions of this Agreement, each of the parties agrees to use all
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 and make effective the transactions
contemplated by this Agreement.
ARTICLE VII
CONDITIONS TO THE MERGER
Section 7.1 Conditions to Obligation of Each Party to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(a) Effectiveness of the Registration Statement. The Registration Statement
shall have been declared effective by the SEC under the Securities Act. No stop
order suspending the effectiveness of the Registration Statement shall have
been issued by the SEC and no proceedings for that purpose and no similar
proceeding in respect of the Proxy Statement/Prospectus shall have been
initiated or threatened by the SEC;
(b) Stockholder Approval. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the stockholders of the Company;
(c) HSR Act and Other Approvals. The waiting period applicable to the
consummation of the Merger under the HSR Act and under any other legal
requirement (including without limitation any authorization, consent, order or
approval, or dedication, filing or expiration of any waiting period) of any
Governmental Entity shall have expired or been terminated, as the case may be,
and any requirements of other jurisdictions applicable to the consummation of
the Merger shall have been satisfied, unless the failure of such requirements
to be satisfied does not constitute a Company Material Adverse Effect or Parent
Material Adverse Effect;
(d) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect, nor shall any proceeding
brought by any
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administrative agency or commission or other Governmental Entity seeking any of
the foregoing be pending; and there shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger which makes the consummation of the Merger illegal;
(e) Tax Opinions. (i) Parent shall have received an opinion of its tax
counsel, Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to Parent,
based on reasonably requested representation letters and customary assumptions,
dated as of the Closing Date, substantially to the effect that for U.S. federal
income tax purposes the Merger will qualify as a reorganization within the
meaning of Section 368(a) of the Code and (ii) the Company shall have received
an opinion of its tax counsel, Wachtell, Lipton, Rosen & Katz, special counsel
to the Company, based on reasonably requested representation letters and
customary assumptions, dated as of the Closing Date, substantially to the
effect that for U.S. federal income tax purposes the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Code. The opinion
conditions referred to in the preceding sentence shall not be waivable after
receipt of the stockholder approval referred to in Section 7.1(b), unless
further stockholder approval is obtained with appropriate disclosure;
(f) Governmental Actions. There shall not be pending or threatened any
action or proceeding (or any investigation or other inquiry that might result
in such an action or proceeding) by any Governmental Entity or administrative
agency before any Governmental Entity, administrative agency or court of
competent jurisdiction, nor shall there be in effect any judgment, decree or
order of any Governmental Entity, administrative agency or court of competent
jurisdiction, in either case, seeking to prohibit or limit Parent from
exercising all material rights and privileges pertaining to its ownership of
the Surviving Corporation or the ownership or operation by Parent of all or a
material portion of the business or assets of Parent, or seeking to compel
Parent to dispose of or hold separate all or any material portion of the
business or assets of Parent (including the Surviving Corporation and its
subsidiaries), as a result of the Merger or the transactions contemplated by
this Agreement; and
(g) NYSE Listing. The shares of Parent Common Stock issuable in the Merger
shall have been authorized for listing on the NYSE upon official notice of
issuance.
Section 7.2 Additional Conditions to Obligations of Parent and Merger
Sub. The obligations of Parent and Merger Sub to effect the Merger are also
subject to the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement shall be true and correct
without reference to any qualification as to materiality such that the
aggregate effect of any inaccuracies in such representations and warranties
will not have a Company Material Adverse Effect, in each case as of the date of
this Agreement and (except to the extent such representations speak as of an
earlier date) as of the Closing Date as though made on and as of the Closing
Date, except for changes contemplated by this Agreement; and Parent and Merger
Sub shall have received a certificate signed on behalf of the Company by the
chief executive officer and chief financial officer of the Company to such
effect;
(b) Agreements and Covenants. The Company shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date; and Parent and Merger Sub shall have received a certificate signed by the
chief executive officer and the chief financial officer of the Company to such
effect;
(c) Consents Obtained. All consents, waivers, approvals, authorizations and
orders required to be obtained, and all filings required to be made, by the
Company for the authorization, execution and delivery of this Agreement and the
consummation by it of the transactions contemplated hereby shall have been
obtained and made by the Company except where the failure to obtain such
consents, waivers, approvals, authorizations or orders or to make such filings,
in the aggregate shall not be or have a Company Material Adverse Effect;
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(d) Opinion of Accountants. Parent shall have received letters from
PricewaterhouseCoopers LLP, dated a date within two business days of the Proxy
Statement/Prospectus and within two business days of the Closing Date and
addressed to Parent, stating that the business combination to be effected by
the Merger will qualify as a pooling of interests transaction under generally
accepted accounting principles. The Company shall have received (and delivered
to Parent copies of) letters from PricewaterhouseCoopers LLP, dated a date
within two business days of the Proxy Statement/Prospectus and within two
business days of the Closing Date and addressed to the Company, stating that
neither the Company nor any of its Subsidiaries has taken or agreed to take
any action that (without giving effect to this Agreement, the transactions
contemplated hereby, or any action taken or agreed to be taken by Parent or
any of its Subsidiaries) would prevent Parent from accounting for the business
combination to be effected by the Merger as a pooling of interests transaction
under generally accepted accounting principles; and
(e) Affiliate Agreements. Parent shall have received from each person
within the time frame specified in Section 6.6 who is identified in Section
3.30 of the Disclosure Schedule or in any notice delivered by the Company to
Parent pursuant to Section 6.6 as an "affiliate" of the Company, an Affiliate
Agreement, and such Affiliate Agreement shall be in full force and effect.
Section 7.3 Additional Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is also subject to the
following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Parent and Merger Sub contained in this Agreement shall be true
and correct without reference to any qualification as to materiality such that
the aggregate effect of any inaccuracies in such representations and
warranties will not have a Parent Material Adverse Effect, in each case as of
the date of this Agreement and (except to the extent such representations
speak as of an earlier date) as of the Closing Date as though made on and as
of the Closing Date, except for changes contemplated by this Agreement; and
the Company shall have received a certificate signed on behalf of the Company
by the chief executive officer and chief financial officer of Parent to such
effect; and
(b) Agreements and Covenants. Parent and Merger Sub shall have performed or
complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by them at or prior to the
Closing Date; and the Company shall have received a certificate signed by the
chief executive officer and the chief financial officer of Parent to such
effect.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, notwithstanding approval thereof by the stockholders of
the Company:
(a) by mutual written consent duly authorized by the Boards of Directors of
Parent and the Company;
(b) by either Parent or the Company if the Merger shall not have been
consummated by February 29, 2000 (provided that the right to terminate this
Agreement under this Section 8.1(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of
or resulted in the failure of the Merger to occur on or before such date);
(c) by either Parent or the Company if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued a nonappealable final order, decree or ruling or taken any other action
having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger (provided that the party seeking to terminate pursuant
to this Section 8.1(c) shall have complied with its obligations under Section
6.5 and used its reasonable best efforts to have any such order, decree,
ruling or other action vacated or lifted);
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(d) by either Parent or the Company, if at the Company Stockholders Meeting
(including any adjournment or postponement), the requisite vote of the
stockholders of the Company in favor of this Agreement and the Merger shall not
have been obtained;
(e) by Parent, if the Company shall have breached or failed to perform any
of its representations, warranties, covenants or other agreements contained in
this Agreement, which breach or failure to perform would cause the conditions
set forth in Sections 7.2(a) or 7.2(b) to not be satisfied and which breach
shall not have been cured within 10 business days following receipt by the
Company of written notice of such breach from Parent;
(f) by the Company, if Parent shall have breached or failed to perform any
of its representations, warranties, covenants or other agreements contained in
this Agreement, which breach or failure to perform would cause the conditions
set forth in Sections 7.3(a) or 7.3(b), to not be satisfied and which breach
shall not have been cured within 10 business days following receipt by Parent
of written notice of such breach from the Company;
(g) by the Company in accordance with the provisions of Section 6.2(b);
provided that the termination described in this clause (g) shall not be
effective unless and until the Company shall have paid to Parent in full the
fee and expense reimbursement described in Section 8.3; or
(h) by Parent (i) if the Company or any of its officers or directors
participate in discussions or negotiations in breach of Section 6.2; (ii) if
the Company or any of its officers or directors are otherwise in material
breach of Section 6.2; or (iii) in the event of a breach of Section 6.4(a).
Section 8.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 8.1, this Agreement shall forthwith become void
and there shall be no liability on the part of any party hereto or any of its
affiliates, directors, officers or stockholders except (i) that the provisions
of Sections 3.29, 4.9, 8.3, this Section 8.2 and Article IX hereof shall
survive termination and (ii) nothing herein shall relieve any party from
liability for any willful breach hereof. The Confidentiality Agreement shall
survive termination of this Agreement as provided therein.
Section 8.3 Fees and Expenses.
(a) Except as set forth in this Section 8.3, all fees and expenses incurred
in connection with this Agreement and the transactions contemplated hereby
shall be paid by the party incurring such expenses, whether or not the Merger
is consummated; provided, however, that Parent and the Company shall share
equally all fees and expenses, other than attorneys' fees and expenses,
incurred in connection with the printing and filing of the Proxy
Statement/Prospectus (including any preliminary materials related thereto), the
Registration Statement (including financial statements and exhibits) and any
amendments or supplements thereto and filings under the HSR Act.
(b) The Company shall reimburse Parent for all fees and expenses of Parent
actually incurred relating to the transactions contemplated by this Agreement
prior to termination (including without limitation fees and expenses of
Parent's counsel, accountants and financial advisors), upon the termination of
this Agreement (i) by Parent or the Company pursuant to Section 8.1(d), (ii) by
Parent pursuant to Sections 8.1(e) or 8.1(h) or (iii) by the Company pursuant
to Section 8.1(g).
(c) The Company shall pay Parent a termination fee of $44,630,000 upon the
earliest to occur of the following events (each, a "Termination Event"):
(i) the entry by the Company into an agreement with respect to, or the
consummation of, any Acquisition Proposal or the acquisition by any person
of beneficial ownership of 20% or more of the equity or voting interests of
the Company in any such case within one year of the termination of this
Agreement pursuant to Sections 8.1(b) or 8.1(d) if prior to such
termination an Acquisition Proposal shall
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have been publicly announced or otherwise become publicly known or any
person shall have publicly announced an intention (whether or not
conditional) to make an Acquisition Proposal;
(ii) the termination of this Agreement by Parent pursuant to Section
8.1(h); or
(iii) the termination of this Agreement by the Company pursuant to
Section 8.1(g).
(d) The expenses and fees, if applicable, payable pursuant to Sections
8.3(b) and 8.3(c) shall be paid promptly, but in no event later than the date
of the first to occur of the events described in Sections 8.3(b)(i), (ii) or
(iii) or 8.3(c)(i), (ii) or (iii); provided, that in no event shall the Company
be required to pay the expenses and fees of Parent, if, immediately prior to
the termination of this Agreement, Parent was in material breach of its
obligations under this Agreement. The Company acknowledges that the agreements
contained in Section 8.3(c) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Parent
would not enter into this Agreement; accordingly, if the Company fails promptly
to pay the amount due pursuant to Section 8.3(c), and, in order to obtain such
payment, Parent commences a suit which results in a judgment against the
Company for the fee set forth in Section 8.3(c), the Company shall pay to
Parent its costs and expenses (including attorneys' fees and expenses) in
connection with such suit, together with interest on the amount of the fee at
the prime rate of Citibank, N.A. in effect on the date such payment was
required to be made.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Nonsurvival of Representations; Warranties and Agreements. None
of the representations, warranties or agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for the agreements contained in Articles I and II, Sections 6.10,
6.12, 6.13, 6.16, 6.17, 6.18, 8.2 and 8.3, the last sentence of Section 9.4,
this Article IX and the Affiliate Agreements. The Confidentiality Agreement
shall survive the execution and delivery of this Agreement pursuant to its
terms and conditions.
Section 9.2 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made if and when delivered personally or by overnight courier to the parties
at the following addresses or sent by electronic transmission, with
confirmation received, to the telecopy numbers specified below (or at such
other address or telecopy number for a party as shall be specified by like
notice):
(a) If to Parent or Merger Sub:
EMC Corporation
35 Parkwood Drive
Hopkinton, MA 01748
Attention: Vice President, Corporate Development
Telecopier No.: 508-435-6915
Telephone No.: 508-435-1000
With a copy to:
EMC Corporation
35 Parkwood Drive
Hopkinton, MA 01748
Attention: Office of the General Counsel
Telecopier No.: 508-497-6915
Telephone No.: 508-435-1000
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(b) If to the Company:
Data General Corporation
4400 Computer Drive
Westboro, MA 01580
Attention: Ronald L. Skates
Telecopier No.: 508-898-7568
Telephone No.: 508-898-5000
With a copy to:
Wachtell, Rosen, Lipton & Katz
51 West 52nd Street
New York, NY 10019-6150
Attention: Edward D. Herlihy
Telecopier No.: 212-403-2000
Telephone No.: 212-403-1000
Section 9.3 Certain Definitions. For purposes of this Agreement, the term:
(a) "affiliate" means a person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned person; including, without limitation, any
partnership or joint venture in which the first mentioned person (either alone,
or through or together with any other subsidiary) has, directly or indirectly,
an interest of 5% or more;
(b) "beneficial owner" with respect to any shares of Company Common Stock
means a person who shall be deemed to be the beneficial owner of such shares
(i) which such person or any of its affiliates or associates (as such term is
defined in Rule 12b-2 of the Exchange Act) beneficially owns, directly or
indirectly, (ii) which such person or any of its affiliates or associates has,
directly or indirectly, (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time), pursuant to
any agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (B) the right to
vote pursuant to any agreement, arrangement or understanding, or (iii) which
are beneficially owned, directly or indirectly, by any other persons with whom
such person or any of its affiliates or associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any shares;
(c) "business day" means any day other than a Saturday or Sunday or any day
on which banks in The Commonwealth of Massachusetts are required or authorized
to be closed;
(d) "control" including the terms "controlled by" and "under common control
with" means the possession, directly or indirectly or as trustee or executor,
of the power to direct or cause the direction of the management or policies of
a person, whether through the ownership of stock, as trustee or executor, by
contract or credit arrangement or otherwise; and
(e) "person" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in
Section 13(d)(3) of the Exchange Act).
Section 9.4 Amendment. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; provided, however, that, after approval of
the Merger by the stockholders of the Company, no amendment may be made which
by law requires further approval by such stockholders without such further
approval. This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
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Section 9.5 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(b) waive any inaccuracies in the representations and warranties of any other
party hereto contained herein or in any document delivered pursuant hereto or
(c) waive compliance with any of the agreements or conditions of any other
party hereto contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
Section 9.6 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 9.7 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto 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 to the end
that the transactions contemplated hereby are fulfilled to the fullest extent
possible.
Section 9.8 Entire Agreement, No Third Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein, including the
Confidentiality Agreement) (a) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof, and (b) is
not intended to confer upon any person other than the parties hereto any rights
or remedies hereunder, other than the persons intended to benefit from the
provisions of Section 6.16, who shall have the right to enforce such provisions
directly.
Section 9.9 Assignment. This Agreement shall not be assigned by operation of
law or otherwise, except that Parent and Merger Sub may assign all or any of
their rights hereunder to any wholly owned subsidiary thereof; provided,
however, that no such assignment pursuant to this Section 9.9 shall relieve
Parent of its obligations hereunder.
Section 9.10 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation."
Section 9.11 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude any
other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
Section 9.12 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of The Commonwealth of
Massachusetts, without regard to the conflict of law provisions thereof,
provided that the Merger of Merger Sub with and into the Company shall be
effected in accordance with the applicable provisions of the DGCL. Each of the
parties hereto agrees that any action or proceeding brought to enforce the
rights or obligations of any party hereto under this Agreement will be
commenced and maintained in any court of competent jurisdiction located in The
Commonwealth of Massachusetts. Each of the parties hereto further agrees that
process may be served upon it by certified mail, return receipt requested,
addressed as more generally provided in Section 9.2 hereof, and consents to the
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exercise of jurisdiction of a court of the Commonwealth of Massachusetts over
it and its properties with respect to any action, suit or proceeding arising
out of or in connection with this Agreement or the transactions contemplated
hereby or the enforcement of any rights under this Agreement.
Section 9.13 Counterparts. This Agreement may be executed in two or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
In Witness Whereof, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
EMC CORPORATION
By: /s/ Michael C. Ruettgers
-----------------------------------
Name: Michael C. Ruettgers
Title: President and Chief
Executive Officer
EMERALD MERGER CORPORATION
By: /s/ Michael C. Ruettgers
-----------------------------------
Name: Michael C. Ruettgers
Title: President and Chief
Executive Officer
DATA GENERAL CORPORATION
By: /s/ Ronald L. Skates
-----------------------------------
Name: Ronald L. Skates
Title: President and Chief
Executive Officer
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<PAGE>
Exhibit B
to Merger Agreement
Affiliate Letter
To Whom it May Concern:
The undersigned, a holder of shares of common stock, par value $.01 per
share ("Dragon Common Stock"), of Data General Corporation, a Delaware
corporation ("Dragon"), is entitled to receive in connection with the merger
(the "Merger") of a subsidiary of EMC Corporation, a Massachusetts corporation
("Emerald"), with and into Dragon, securities of Emerald, as the parent of the
surviving corporation in the Merger (the "Parent Securities"). The undersigned
acknowledges that the undersigned may be deemed an "affiliate" of Dragon within
the meaning of Rule 145 ("Rule 145") promulgated under the Securities Act of
1933, as amended (the "Securities Act"), by the Securities and Exchange
Commission (the "SEC") and may be deemed an "affiliate" of Dragon for purposes
of qualifying the Merger for pooling of interests accounting treatment under
Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations, although nothing contained herein should be construed as an
admission of either such fact.
If in fact the undersigned were an affiliate under the Securities Act, the
undersigned's ability to sell, assign or transfer the Parent Securities
received by the undersigned in exchange for any shares of Dragon Common Stock
in connection with the Merger may be restricted unless such transaction is
registered under the Securities Act or an exemption from such registration is
available. The undersigned understands that such exemptions are limited and the
undersigned has obtained or will obtain advice of counsel as to the nature and
conditions of such exemptions, including information with respect to the
applicability to the sale of such securities of Rules 144 and 145(d)
promulgated under the Securities Act. The undersigned understands that Emerald
will not be required to maintain the effectiveness of any registration
statement under Securities Act for the purposes of resale of Parent Securities
by the undersigned.
The undersigned hereby represents to and covenants with Emerald that the
undersigned will not sell, assign or transfer any of the Parent Securities
received by the undersigned in exchange for shares of Dragon Common Stock in
connection with the Merger except (i) pursuant to an effective registration
statement under the Securities Act, (ii) in conformity with the volume and
other limitations of Rule 145 or (iii) in a transaction which, in the opinion
of counsel to Emerald or as described in a "no-action" or interpretive letter
from the Staff of the SEC specifically issued with respect to a transaction to
be engaged in by the undersigned, is not required to be registered under the
Securities Act.
The undersigned hereby further represents to and covenants with Emerald that
the undersigned will not, within the 30 days preceding the effective time of
the Merger, sell, transfer, or otherwise dispose of any shares of Dragon Common
Stock held by the undersigned and that the undersigned will not sell, transfer
or otherwise dispose of any Parent Securities received by the undersigned in
connection with the Merger until after such time as results covering at least
30 days of post-Merger combined operations of Dragon and Emerald have been
published by Emerald, in the form of a quarterly earnings report, an effective
registration statement filed with the 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, except as would not otherwise reasonably be
expected to adversely affect the qualification of the Merger as a pooling-of-
interests.
In the event of a sale or other disposition by the undersigned of Parent
Securities pursuant to Rule 145, the undersigned will supply Emerald with
evidence of compliance with such Rule, in the form of a letter in the form of
Annex I hereto and the opinion of counsel or no-action letter referred to
above. The undersigned understands that Emerald may instruct its transfer agent
to withhold the transfer of any Parent Securities disposed of by the
undersigned, but that (provided such transfer is not prohibited by any other
provision of this
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letter agreement) upon receipt of such evidence of compliance, Emerald shall
cause the transfer agent to effectuate the transfer of the Parent Securities
sold as indicated in such letter.
Emerald covenants that it will take all such actions as may be reasonably
available to it to permit the sale or other disposition of Parent Securities by
the undersigned under Rule 145 in accordance with the terms thereof.
The undersigned acknowledges and agrees that the legends set forth below
will be placed on certificates representing Parent Securities received by the
undersigned in connection with the Merger or held by a transferee thereof,
which legends will be removed by delivery of substitute certificates upon
receipt of an opinion in form and substance reasonably satisfactory to Emerald
from independent counsel reasonably satisfactory to Emerald to the effect that
such legends are no longer required for purposes of the Securities Act.
There will be placed on the certificates for Parent Securities issued to the
undersigned, or any substitutions therefor, a legend stating in substance:
"The shares represented by this certificate were issued pursuant to a
business combination which is being accounted for as a pooling of
interests, in a transaction to which Rule 145 promulgated under the
Securities Act of 1933, as amended, applies. The shares 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.
The shares may not be sold, pledged or otherwise transferred (i) until such
time as Emerald shall have published financial results covering at least 30
days of combined operations after the Effective Time and (ii) except in
accordance with an exemption from the registration requirements of the
Securities Act of 1933."
The undersigned acknowledges that (i) the undersigned has carefully read
this letter and understands the requirements hereof and the limitations imposed
upon the distribution, sale, transfer or other disposition of Parent Securities
and (ii) the receipt by Emerald of this letter is an inducement to Emerald's
obligations to consummate the Merger.
Very truly yours,
Dated: , 1999
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<PAGE>
Annex I
To Exhibit B
To Merger Agreement
[Name] [Date]
On , the undersigned sold the securities of EMC Corporation, a
Massachusetts corporation ("Emerald"), described below in the space provided
for that purpose (the "Securities"). The Securities were received by the
undersigned in connection with the merger of a subsidiary of Emerald with and
into Data General Corporation, a Delaware corporation.
Based upon the most recent report or statement filed by Emerald with the
Securities and Exchange Commission, the Securities sold by the undersigned were
within the prescribed limitations set forth in paragraph (e) of Rule 144
promulgated under the Securities Act of 1933, as amended (the "Securities
Act").
The undersigned hereby represents that the Securities were sold in "brokers'
transactions" within the meaning of Section 4(4) of the Securities Act or in
transactions directly with a "market maker" as that term is defined in Section
3(a)(38) of the Securities Exchange Act of 1934, as amended. The undersigned
further represents that the undersigned has not solicited or arranged for the
solicitation of orders to buy the Securities, and that the undersigned has not
made any payment in connection with the offer or sale of the Securities to any
person other than to the broker who executed the order in respect of such sale.
Very truly yours,
[Space to be provided for description of the Securities.]
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<PAGE>
ANNEX B
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of August 6, 1999 (this "Agreement"),
between Data General Corporation, a Delaware corporation ("Dragon"), and EMC
Corporation, a Massachusetts corporation ("Emerald").
Whereas, Dragon, Emerald and Emerald Merger Corporation, a Delaware
corporation and a wholly-owned subsidiary of Emerald ("Sub"), propose to enter
into an Agreement and Plan of Merger, of even date herewith (the "Merger
Agreement"), which provides that, among other things, upon the terms and
subject to the conditions thereof, Sub will be merged with and into Dragon,
with Dragon continuing as the surviving corporation; and
Whereas, as a condition to the willingness of Emerald to enter into the
Merger Agreement, Emerald has required that Dragon agree, and in order to
induce Emerald to enter into the Merger Agreement Dragon has agreed, to grant
Emerald an option to purchase certain shares of common stock, par value $.01
per share, of Dragon ("Dragon Common Stock"), in accordance with the terms of
this Agreement.
Now, Therefore, in consideration of the foregoing and the mutual covenants
and agreements contained herein and in the Merger Agreement, and intending to
be legally bound hereby, the parties hereto hereby agree as follows:
ARTICLE I
THE STOCK OPTION
Section 1.1 Grant of Stock Option. Dragon hereby grants to Emerald an
irrevocable option (the "Stock Option") to purchase up to 10,177,850 shares
(the "Option Shares") of Dragon Common Stock, including the associated rights
(the "Dragon Rights") to purchase shares of Dragon capital stock pursuant to
the Rights Agreement, Renewed and Restated as of October 19, 1996, between
Dragon and The Bank of New York, as Rights Agent (the "Rights Agreement"), in
the manner set forth below and at a price of $19.58 per Option Share, as
adjusted in accordance with the provisions of Section 1.5 hereof (such price,
as adjusted if applicable, the "Purchase Price"); provided, however, that in no
event (including any adjustment under Section 1.5 hereof) shall the number of
shares of Dragon Common Stock for which this Stock Option is exercisable exceed
19.9% of Dragon's issued and outstanding shares of Dragon Common Stock without
giving effect to any Option Shares subject to or issued pursuant to the Stock
Option. All references in this Agreement to shares of Dragon Common Stock
issued to Emerald hereunder shall be deemed to include the Dragon Rights
associated therewith. Capitalized terms used herein but not defined herein
shall have the meanings set forth in the Merger Agreement.
Section 1.2 Exercise of Stock Option.
(a) Subject to the satisfaction of the conditions set forth in Section 1.3
hereof, the Stock Option may be exercised by Emerald, in whole or in part, at
any time or from time to time after the occurrence of an Exercise Event (as
defined below) and prior to the Termination Date (as defined below).
(b) An "Exercise Event" shall occur for purposes of this Agreement upon the
occurrence of any event or circumstance which, pursuant to the terms of Section
8.3(c) of the Merger Agreement, would entitle Emerald to payment of the
termination fee specified in Section 8.3(c) of the Merger Agreement.
(c) The "Termination Date" shall occur for purposes of this Agreement upon
the first to occur of any of the following:
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(i) the Effective Time (as defined in the Merger Agreement);
(ii) the date on which the Merger Agreement is terminated pursuant to
Section 8.1 thereof, unless on or after such termination Emerald may have
the right to receive the termination fee described in Section 8.3(c) of the
Merger Agreement, including upon the occurrence of certain events; or
(iii) the date which is one year after the date on which the Merger
Agreement is terminated pursuant to Section 8.1 thereof, if on or after
such termination Emerald may be entitled to receive the termination fee
described in Section 8.3(c) of the Merger Agreement, including upon the
occurrence of certain events;
provided that, with respect to clause (iii) above, if the Stock Option cannot
be exercised as of such date by reason of any applicable judgment, decree, law,
regulation or order, or by reason of the waiting period under the HSR Act, then
the Termination Date shall be extended until fifteen days after such impediment
has been removed or such waiting period has expired.
(d) Dragon shall notify Emerald in writing as promptly as practicable, and
in any event within 24 hours, of the occurrence of any Exercise Event, it being
understood that the giving of such notice by Dragon shall not be a condition to
the right of Emerald to exercise the Stock Option or for an Exercise Event to
have occurred.
(e) In the event Emerald is entitled to and wishes to exercise the Stock
Option, Emerald shall send a written notice (an "Exercise Notice") to Dragon
specifying the total number of Option Shares Emerald wishes to purchase, the
denominations of the certificate or certificates evidencing such Option Shares
which Emerald wishes to receive, a date (a "Closing Date"), which shall be a
business day which is at least five business days after delivery of such
notice, and place for the closing of such purchase (a "Closing").
(f) Upon receipt of an Exercise Notice, Dragon shall be obligated to deliver
to Emerald the number of Option Shares specified therein, in accordance with
the terms of this Agreement, on the later of (i) the Closing Date and (ii) the
first business day on which the conditions specified in Section 1.3 hereof
shall be satisfied.
(g) If, at any time during the period commencing on an Exercise Event and
ending on the Termination Date, Emerald sends to Dragon an Exercise Notice
indicating Emerald's election to exercise its right (the "Cash-Out Right")
pursuant to this Section 1.2(g), then Dragon shall pay to Emerald, on the
Closing Date, in exchange for the cancellation of the Option with respect to
such number of Option Shares subject thereto as Emerald specifies in the
Exercise Notice, an amount in cash equal to such number of Option Shares
multiplied by the difference between (i) the higher of (A) the average closing
price, for the 10 trading days commencing on the 12th trading day immediately
preceding the Closing Date, per share of Dragon Common Stock as reported on The
New York Stock Exchange (or, if not listed on The New York Stock Exchange, as
reported on any other national securities exchange or national securities
quotation system on which Dragon Common Stock is listed or quoted, as reported
in The Wall Street Journal (Northeast edition), or, if not reported thereby,
any other authoritative source) and (B) the highest price per share of Dragon
Common Stock paid pursuant to any Acquisition Proposal (as defined in the
Merger Agreement) or proposed to be paid pursuant to any agreement relating to
an Acquisition Proposal and (ii) the Purchase Price. Notwithstanding the
termination of the Stock Option, Emerald will be entitled to exercise its
rights under this Section 1.2(g) if it has exercised such rights in accordance
with the terms hereof prior to the termination of the Stock Option.
(h)(i) Notwithstanding any other provision of this Agreement or any
provision of the Merger Agreement, in no event shall the sum of (x) the
Total Option Profit (as hereinafter defined) and (y) the termination fee
payable under Section 8.3(c) of the Merger Agreement (the "Termination
Fee") exceed in the aggregate $61,363,000 and, if the total amount that
otherwise would be received by Emerald would exceed such amount, Emerald,
at its sole election, shall either (a) reduce the number of shares of
Dragon Common Stock subject to the Option, (b) deliver to Dragon for
cancellation shares of Dragon Common
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Stock previously purchased by Emerald, (c) pay cash to Dragon or (d) take
any action representing any combination of the preceding clauses (a), (b)
and (c), so that Emerald's actually realized Total Option Profit, when
aggregated with such Termination Fee so paid to Emerald, shall not exceed
$61,363,000 after taking into account the foregoing actions.
(ii) Notwithstanding any other provision of this Agreement or any
provision of the Merger Agreement, this Stock Option may not be exercised
for a number of shares as would, as of the date of exercise, result in a
Notional Total Option Profit (as hereinafter defined) which, together with
any Termination Fee theretofore paid to Emerald, would exceed in the
aggregate $61,363,000; provided, however, that nothing in this clause (ii)
shall restrict any exercise of the Option permitted hereby on any
subsequent date if exercise at such time would otherwise be permitted by
this clause (ii).
(iii) As used herein, the term "Total Option Profit" shall mean the
aggregate amount (before taxes) of the following: (A) the amount received
by Emerald pursuant to Section 1.2(g), (B)(x) the amount received by
Emerald pursuant to the sale of Option Shares to any unaffiliated party
(including pursuant to Section 3.2(e)), valuing any non-cash consideration
at its fair market value, less (y) Emerald's purchase price for such Option
Shares, and (C) any equivalent amount resulting from the adjustments
contemplated under Section 1.5.
(iv) As used herein, the term "Notional Total Option Profit" with
respect to any number of shares of Dragon Common Stock as to which Emerald
has delivered an Exercise Notice shall be the Total Option Profit
determined as of the date of deliver of such Exercise Notice assuming that
the Stock Option were exercised on such date for such number of shares of
Dragon Common Stock and assuming that such shares, together with all other
Option Shares held by Emerald and its affiliates as of such date, were sold
for cash at the closing market price for the Dragon Common Stock as of the
close of business on the preceding trading day (less customary brokerage
commissions or underwriting discounts).
Section 1.3 Conditions to Delivery of Option Shares. The obligation of
Dragon to deliver Option Shares upon any exercise of the Stock Option is
subject to the satisfaction of the following conditions:
(a) All waiting periods, if any, under the HSR Act applicable to the
issuance of Option Shares hereunder shall have expired or been terminated; and
(b) There shall be no preliminary or permanent injunction or other order
issued by any court of competent jurisdiction preventing or prohibiting such
exercise of the Stock Option or the delivery of the Option Shares in respect of
such exercise.
Section 1.4 Closings. At each Closing, simultaneously with the delivery by
Emerald of the aggregate Purchase Price for Option Shares being acquired,
Dragon will deliver to Emerald a certificate or certificates evidencing the
number of Option Shares specified in Emerald's Exercise Notice, registered in
the name of Emerald or its nominee, and, if the Stock Option should be
exercised in part only, a new Stock Option evidencing the rights of Emerald
thereof to purchase the balance of the shares (or other securities) purchasable
hereunder. All payments made by Emerald to Dragon pursuant to this Section 1.4
shall be made, at the option of Emerald, (a) by wire transfer of immediately
available funds, or (b) by delivery to Dragon of a certified or bank check or
checks payable to or to the order of Dragon.
Section 1.5 Adjustments Upon Share Issuances, Changes in Capitalization,
etc.
(a) In the event of any change in Dragon Common Stock or in the number of
outstanding shares of Dragon Common Stock by reason of a stock dividend, split-
up, recapitalization, combination, exchange of shares or similar transaction or
any other change in the corporate or capital structure of Dragon (including,
without limitation, the declaration or payment of an extraordinary dividend of
cash, securities or other property), the type and number of shares or
securities to be issued by Dragon upon exercise of the Stock Option, and the
Purchase Price thereof, shall be adjusted appropriately, and proper provision
shall be made in
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the agreements governing such transaction or change, so that Emerald shall
receive upon exercise of the Stock Option the number and class of shares or
other securities or property that Emerald would have received in respect to
Dragon Common Stock if the Stock Option had been exercised immediately prior to
such transaction or change, or the record date therefor, as applicable.
(b) In the event that Dragon shall enter into an agreement (i) to
consolidate with or merge into any person, other than Emerald or one of its
Subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Emerald or one
of its Subsidiaries, to merge into Dragon and Dragon shall be the continuing or
surviving corporation, but, in connection with such merger, the then
outstanding shares of Dragon Common Stock shall be changed into or exchanged
for stock or other securities of Dragon or any other person or cash or any
other property, or then outstanding shares of Dragon Common Stock shall after
such merger represent less than 5% of the outstanding shares and share
equivalents of the surviving corporation or (iii) to sell or otherwise transfer
all or substantially all of its assets to any person, other than Emerald or one
of its Subsidiaries, then, in each such case, proper provision shall be made in
the agreements governing such transaction so that Emerald shall receive upon
exercise of the Stock Option the number and class of shares or other securities
or property that Emerald would have received in respect of Dragon Common Stock
if the Stock Option had been exercised immediately prior to such transaction,
or the record date therefor, as applicable.
(c) No adjustment made in accordance with this Section 1.5 shall constitute
or be deemed a waiver of any breach of any of Dragon's representations,
warranties, covenants, agreements or obligations contained in the Merger
Agreement.
(d) The provisions of this Agreement, including, without limitation,
Sections 1.1, 1.2, 1.4 and 3.2 shall apply with appropriate adjustments to any
securities for which the Stock Option becomes exercisable pursuant to this
Section 1.5.
Section 1.6 Restrictive Legend. Each certificate representing Option Shares
issued to Emerald hereunder shall include a legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD ONLY
IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF DRAGON
Section 2.1 Representations and Warranties of Dragon. Dragon represents and
warrants to Emerald that (a) Dragon is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
all requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement, (b) the execution
and delivery by Dragon of this Agreement and the consummation by Dragon of the
transactions contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of Dragon, (c) this Agreement has been
duly executed and delivered by Dragon and constitutes the valid and binding
obligation of Dragon, enforceable against Dragon in accordance with its terms,
(d) Dragon has taken all necessary corporate action to authorize and reserve
and permit it to issue, and at all times from the date hereof through the
Termination Date shall have reserved, all the Option Shares issuable pursuant
to this Agreement, and Dragon will take all necessary corporate action to
authorize and reserve and permit it to issue all additional shares of Dragon
Common Stock or other securities which may be issued pursuant to Section 1.5
hereof, all of which, upon their issuance and delivery in accordance with the
terms of this Agreement, shall be duly authorized, validly issued, fully paid
and nonassessable, shall be delivered free and clear of all security interests,
liens, claims, pledges, options, rights of
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first refusal, agreements, limitations on Emerald's voting rights, charges and
other encumbrances of any nature whatsoever (other than this Agreement) and
shall not be subject to any preemptive rights, and (e) the execution and
delivery of this Agreement by Dragon does not, and the consummation by Dragon
of the transactions contemplated by this Agreement will not, (i) conflict with,
or result in any violation or breach of any provision of the Certificate of
Incorporation, as amended to date, or Bylaws, as amended to date, of Dragon,
(ii) result in any violation or breach of, or constitute (with or without
notice or lapse of time, or both) a default (or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit) under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, contract or other agreement, instrument or
obligation to which the Dragon or any of its Subsidiaries is a party or by
which any of them or any of their properties or assets may be bound, or (iii)
conflict or violate any permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Dragon
or any of its Subsidiaries or any of its or their properties or assets, except
in the case of (ii) and (iii) for any such violations, breaches, defaults,
terminations, cancellations, accelerations or conflicts which would not be
reasonably likely to have a Material Adverse Effect (as defined in the Merger
Agreement) on Dragon and its Subsidiaries, taken as a whole, or impair the
ability of Dragon to consummate the transactions contemplated by this
Agreement. The provisions of Section 203 of the General Corporation Law of the
State of Delaware will not, prior to the termination of this Agreement, apply
to this Agreement or the transactions contemplated hereby. Dragon has taken,
and will in the future take, all steps necessary to irrevocably exempt the
transactions contemplated by this Agreement from any other applicable state
takeover law and from any applicable charter or contractual provision
containing change of control or anti-takeover provisions. Dragon has taken all
action so that the entering into of this Agreement, the acquisition of shares
of Dragon Common Stock hereunder and the other transactions contemplated hereby
do not and will not result in the grant of any rights to any person under the
Rights Agreement or enable or require the Dragon Rights to be exercised,
distributed or triggered.
ARTICLE III
COVENANTS OF DRAGON
Section 3.1 Listing; Other Action.
(a) Dragon shall, at its expense, use reasonable best efforts to cause the
Option Shares to be authorized for listing on the New York Stock Exchange (the
"NYSE"), upon official notice of issuance, as promptly as practicable following
an Exercise Event, and will provide prompt notice to the NYSE of the issuance
of each Option Share, unless the delivery of the Option Shares is satisfied
with shares of Dragon Common Stock held in treasury by Dragon then listed on
the NYSE.
(b) Dragon shall use its reasonable best efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated hereunder,
including, without limitation, using its reasonable best efforts to obtain all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental entities. Without limiting the generality of the
foregoing, Dragon shall when required in order to effect the transactions
contemplated hereunder make all filings and submissions under the HSR Act as
promptly as practicable.
Section 3.2 Registration.
(a) As used in this Agreement, "Registrable Securities" means each of the
Option Shares issued to Emerald hereunder and any other securities issued in
exchange for, or issued as dividends or otherwise on or in respect of, any of
such Option Shares.
(b) At any time or from time to time within three years of the first
Closing, Emerald may make a written request to Dragon for registration under
and in accordance with the provisions of the Securities Act with
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respect to all or any part of the Registrable Securities (a "Demand
Registration"). A Demand Registration may be, at the option of Emerald, a shelf
registration or a registration involving an underwritten offering. As soon as
reasonably practicable after Emerald's request for a Demand Registration,
Dragon shall file one or more registration statements on any appropriate form
with respect to all of the Registrable Securities requested to be so
registered; provided that Dragon will not be required to file any such
registration statement during any period of time (not to exceed 60 days after
such request in the case of clause (i) below or 90 days in the case of clauses
(ii) or (iii) below) when (i) Dragon is in possession of material non-public
information which it reasonably believes would be detrimental to be disclosed
at such time and, in the written opinion of outside counsel to Dragon, such
information would have to be disclosed if a registration statement were filed
at that time, (ii) Dragon is required under the Securities Act to include
audited financial statements for any period in such registration statement that
are not yet available for inclusion therein, or (iii) Dragon determines, in its
reasonable judgment, that such registration would interfere with any financing,
acquisition or other material transaction involving Dragon or any of its
affiliates. Dragon shall use its best efforts to have the Demand Registration
declared effective as soon as reasonably practicable after such filing and to
keep the Demand Registration continuously effective for a period of at least
ninety days following the date on which the Demand Registration is declared
effective, in the case of an underwritten offering, or at least six months
following the date on which the Demand Registration is declared effective, in
the case of a shelf registration; provided that, if for any reason the
effectiveness of any Demand Registration is suspended, the required period of
effectiveness shall be extended by the aggregate number of days of each such
suspension; and provided, further, that the effectiveness of any Demand
Registration may be terminated if and when all of the Registrable Securities
covered thereby shall have been sold. Emerald shall be entitled to two Demand
Registrations. If any Demand Registration involves an underwritten offering,
(i) Emerald shall have the right to select the managing underwriter, which
shall be reasonably acceptable to Dragon (it being agreed by Dragon that Lehman
Brothers Inc. would be acceptable to Dragon) and (ii) Dragon shall enter into
an underwriting agreement in customary form.
(c) If at any time within three years of the first Closing, Dragon proposes
to file a registration statement under the Securities Act with respect to any
shares of any class of its equity securities to be sold for the account of
Dragon (other than a registration statement on Form S-4 or Form S-8 or any
successor form), and the registration form to be used may be used for the
registration of Registrable Securities, then Dragon shall in each case give
written notice of such proposed filing to Emerald at least twenty days before
the anticipated filing date, and Emerald shall have the right to include in
such registration such number of Registrable Securities a Emerald may request
(such request to be made by written notice to Dragon within fifteen days
following Emerald's receipt from Dragon of such notice of proposed filing).
Dragon shall use its best efforts to cause the managing underwriter of any
proposed underwritten offering to permit Emerald to include in such offering
all Registrable Securities requested by Emerald to be included in the
registration for such offering on the same terms and conditions as any similar
securities of Dragon included therein. Notwithstanding the foregoing, if the
managing underwriter of such offering advises Emerald that, in the reasonable
opinion of such underwriter, the amount of Registrable Securities which Emerald
requests to be included in such offering would materially and adversely affect
the success of such offering, then the amount of Registrable Securities to be
offered shall be reduced to the extent necessary to reduce the total amount of
securities to be included in such offering to the amount recommended by such
underwriter; provided, however, that if the amount of Registrable Securities
shall be so reduced, Dragon shall not be permitted to include in such
registration any securities of Dragon other than securities to be issued by
Dragon and Registrable Securities.
(d) In the event that Registrable Securities are included in a "piggyback"
registration statement pursuant to Section 3.2(c) hereof, Emerald agrees not to
effect any public sale or distribution of the issue being registered or a
similar security of Dragon, or any securities convertible into or exchangeable
or exercisable for such securities, including a sale pursuant to Rule 144 under
the Securities Act, during the ten business days prior to, and during the 90-
day period beginning on, the effective date of such registration statement
(except as part of such registration), if and to the extent timely notified in
writing by Dragon, in the case of a non-underwritten public offering, or by the
managing underwriter, in the case of an underwritten public offering. In the
event that Emerald requests a Demand Registration or if Registrable Securities
are included in a
B-6
<PAGE>
"piggyback" registration pursuant to Section 3.2(c) hereof, Dragon agrees not
to effect any public sale or distribution of the issue being registered or a
similar security of Dragon, or any securities convertible into or exchangeable
or exercisable for such securities, during the period from such request until
90 days after the effective date of such registration statement (except as part
of such registration or pursuant to a registration of securities on Form S-4 or
Form S-8 or any successor form).
(e) Notwithstanding anything to the contrary contained herein, in the event
that Emerald requests a Demand Registration or a "piggyback" registration of
Registrable Securities pursuant to Section 3.2(b) or 3.2(c) hereof,
respectively, Dragon shall have the right to purchase all, but not less than
all, of the Registrable Securities requested to be so registered, upon the
terms and subject to the conditions set forth in this Section 3.2(e). If Dragon
wishes to exercise such purchase right, then within two business days following
receipt of a request for a Demand Registration or a "piggyback" registration,
Dragon shall send a written notice (a "Repurchase Notice") to Emerald
specifying that Dragon wishes to exercise such purchase right, a date for the
closing of such purchase, which shall not be more than five business days after
delivery of such Repurchase Notice, and a place for the closing of such
purchase (a "Repurchase Closing"). Upon delivery of a Repurchase Notice, a
binding agreement shall be deemed to exist between Emerald and Dragon providing
for the purchase by Dragon of the Registrable Securities requested to be
registered by Emerald, upon the terms and subject to the conditions set forth
in this Section 3.2(e). The purchase price per share or other unit of
Registrable Securities (the "Repurchase Price") shall equal the average per
share or per unit closing price as quoted on the NYSE (or if not then quoted
thereon, on such other exchange or quotation system on which the Registrable
Securities are quoted) for the period of five trading days ending on the
trading day immediately prior to the day on which Emerald requests a Demand
Registration or a "piggyback" registration of the Registrable Securities which
Dragon subsequently elects to purchase. Emerald's obligation to deliver any
Registrable Securities at a Repurchasing Closing shall be subject to the
condition that, at such Repurchase Closing, Dragon shall have delivered to
Emerald a certificate signed on behalf of Dragon by Dragon's chief executive
officer and chief financial officer, which certificate shall be satisfactory in
form and substance to Emerald, to the effect that the purchase by Dragon of
such Registrable Securities (i) is permitted under applicable Delaware
corporate law and under the fraudulent conveyance provisions of the federal
bankruptcy code and (ii) does not violate any material agreement to which
Dragon or any of its subsidiaries is a party or by which any of their
properties or assets is bound. At any Repurchase Closing, Dragon shall pay to
Emerald the aggregate Repurchase Price for the Registrable Securities being
purchased by wire transfer of immediately available funds or by delivering to
Emerald a certified or bank check payable to or on the order of Emerald in an
amount equal to such aggregate Repurchase Price, and Emerald will surrender to
Dragon a certificate or certificates evidencing such Registrable Securities. No
purchase of Registrable Securities by Dragon pursuant to this Section 3.2(e)
shall reduce or otherwise modify Dragon's registration obligations under this
Section 3.2 (including, without limitation, the number of Demand Registrations
which Dragon is obligated to effect) with respect to any Registrable Securities
held by Emerald following such purchase.
(f) The registrations effected under this Section 3.2 shall be effected at
Dragon's expense except for underwriting commissions allocable to the
Registrable Securities. Dragon shall indemnify and hold harmless Emerald, its
affiliates and controlling persons and their respective officers, directors,
agents and representatives from and against any and all losses, claims,
damages, liabilities and expenses (including, without limitation, all out-of-
pocket expenses, investigation expenses, expenses incurred with respect to any
judgment and fees and disbursements of counsel and accountants) arising out of
or based upon any statements contained in, or omissions or alleged omissions
from, each registration statement (and related prospectus) filed pursuant to
this Section 3.2; provided, however, that Dragon shall not be liable in any
such case to Emerald or any affiliate or controlling person of Emerald or any
of their respective officers, directors, agents or representatives to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon an untrue statement
or omission or alleged omission made in such registration statement or
prospectus in reliance upon, and in conformity with, written information
furnished to Dragon specifically for use in the preparation thereof by Emerald
such affiliate, controlling person, officer, director, agent or representative,
as the case may be.
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<PAGE>
ARTICLE IV
COVENANTS OF EMERALD
Section 4.1 Distribution. Emerald shall acquire the Option Shares for
investment purposes only and not with a view to any distribution thereof in
violation of the Securities Act, and shall not sell any Option Shares purchased
pursuant to this Agreement except in compliance with the Securities Act.
ARTICLE V
MISCELLANEOUS
Section 5.1 Expenses. Except as otherwise provided herein or in the Merger
Agreement, all costs and expenses incurred in connection with the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses.
Section 5.2 Further Assurances. Dragon and Emerald will execute and deliver
all such further documents and instruments and take all such further action as
may be necessary in order to consummate the transactions contemplated hereby.
Section 5.3 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement is not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
Section 5.4 Entire Agreement. This Agreement and the Merger Agreement
(together with the documents referred to therein) constitute the entire
agreement between the parties and supersede all prior agreements and
understandings, both written and oral, between the parties, or any of them,
with respect to the subject matter hereof.
Section 5.5 Assignment. This Agreement shall not be assigned by either party
without the prior written consent of the other party.
Section 5.6 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its successors and
permitted assigns. Nothing in this Agreement, express or implied, is intended
to or shall confer upon any other person any right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
Section 5.7 Amendment; Waiver. This Agreement may not be amended except by
an instrument in writing signed by the parties hereto. Either party hereto may
with respect to the other party (i) extend the time for the performance of any
obligation or other act, (ii) waive any inaccuracy in the representations and
warranties contained herein or in any document delivered pursuant hereto or
(iii) waive compliance with any agreement or condition contained herein. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby.
Section 5.8 Severability. If any term or other provision of this Agreement
is held by a court or other competent authority to be invalid, illegal or
incapable of being enforced by any rule of law, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and
effect. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable
law to the end that the transactions contemplated hereby are fulfilled to the
extent possible.
Section 5.9 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given as of the date delivered, sent or
transmitted if delivered, sent or transmitted in accordance with the Merger
Agreement.
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<PAGE>
Section 5.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts,
without giving effect to the principles of conflicts of law thereof.
Section 5.11 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 5.12 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which shall constitute one and the same agreement.
In Witness Whereof, Emerald and Dragon have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
EMC CORPORATION
By: /s/ Michael C. Ruettgers
----------------------------------
Name: Michael C. Ruettgers
Title: President and Chief
Executive Officer
DATA GENERAL CORPORATION
By: /s/ Ronald L. Skates
----------------------------------
Name: Ronald L. Skates
Title: President and Chief
Executive Officer
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<PAGE>
ANNEX C
MORGAN STANLEY DEAN WITTER
TWO INTERNATIONAL PLACE
BOSTON, MA 02110
(617) 856-8700
August 6, 1999
Board of Directors
Data General Corporation
4400 Computer Drive
Westboro, MA 01580
Members of the Board:
We understand that Data General Corporation ("Data General" or the
"Company"), EMC Corporation ("EMC") and Buyer Acquisition Corp., a wholly owned
subsidiary of EMC ("Acquisition Sub") propose to enter into an Agreement and
Plan of Merger, substantially in the form of the draft dated August 6, 1999
(the "Agreement"), which provides, among other things, for the merger (the
"Merger") of Acquisition Sub with and into Data General. Pursuant to the
Merger, Data General will become a wholly owned subsidiary of EMC and each
outstanding share of common stock, par value $0.01 per share (the "Data General
Common Stock") of the Company, other than shares held in treasury or held by
EMC or any affiliate of EMC or as to which dissenters' rights have been
perfected, will be converted into the right to receive 0.3262 (the "Exchange
Ratio") shares of common stock, par value $0.01 per share, of EMC (the "EMC
Common Stock") subject to certain adjustments. The terms and conditions of the
Merger are more fully set forth in the Agreement.
You have asked for our opinion as to whether the Exchange Ratio pursuant to
the Agreement is fair from a financial point of view to the holders of Data
General Common Stock
For purposes of the opinion set forth herein, we have:
(1) reviewed certain publicly available financial statements and
other information of Data General and EMC, respectively;
(2) reviewed certain internal financial statements and other
financial and operating data concerning Data General prepared by
the management of Data General;
(3) discussed certain financial projections prepared by the
management of Data General;
(4) reviewed information relating to certain strategic, financial and
operational benefits anticipated from the Merger prepared by the
management of Data General;
(5) discussed the past and current operations and financial condition
and the prospects of Data General with senior executives of Data
General;
(6) reviewed the reported prices and trading activity for the Data
General Common Stock and EMC Common Stock;
(7) compared the financial performance of the Company and EMC and the
prices and trading activity of the Data General Common Stock and
the EMC Common Stock with that of certain other comparable
publicly-traded companies and their securities;
(8) reviewed the financial terms, to the extent publicly available,
of certain comparable acquisition transactions;
(9) participated in discussions and negotiations among
representatives of Data General and EMC and their financial and
legal advisors;
(10) reviewed the Agreement, and certain related documents; and
(11) considered such other factors as we have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the internal financial statements
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<PAGE>
MORGAN STANLEY DEAN WITTER
and other financial and operating data and discussions relating to strategic,
financial and operational benefits anticipated from the Merger provided by Data
General, we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgements of the future
financial performance of Data General. With the consent of Data General, we
have relied upon the publicly available estimates of certain research analysts
with respect to EMC. We have relied upon the assessment by the management of
Data General of its ability to retain key employees of Data General. We have
also relied upon, without independent verification, the assessment by the
management of Data General (i) the strategic and other benefits expected to
result from the Merger, (ii) Data General's and EMC's technologies, products
and services, (iii) the timing and risks associated with the integration of
Data General and EMC, and (iv) the validity of, and risks associated with, Data
General's and EMC's existing and future technologies, products or services. We
have not made any independent valuation or appraisal of the assets or
liabilities or technology of Data General or EMC, nor have we been furnished
with any such appraisals. Also, we have excluded from this opinion the effect
of certain extraordinary non-operating assets and liabilities. In addition, we
have assumed that the Merger will be accounted as a "pooling-of-interests"
business combination in accordance with U.S. generally accepted accounting
principles and the Merger will be treated as a tax-free reorganization and/or
exchange pursuant to the Internal Revenue Code of 1986 and will be consummated
in accordance with the terms set forth in the Agreement. Our opinion is
necessarily based on financial, economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition of the Company
or any of its assets, although in the course of our engagement, we did provide
advice to Data General in connection with potential business combinations with
parties other than EMC.
We have acted as financial advisor to the Board of Directors of the Company
in connection with this transaction and will receive a fee for our services. In
the past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for Data General and EMC and have
received fees for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of the Company only and may not be used for any other purpose without
our prior written consent, except that this opinion may be included in its
entirety in any filing made by the Company in respect of the transaction with
the Securities and Exchange Commission. In addition, Morgan Stanley expresses
no opinion or recommendation as to how shareholders of the Company should vote
at the shareholders' meeting held in connection with the Merger.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the Exchange Ratio pursuant to the Agreement is fair from a
financial point of view to the holders of Data General Common Stock.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Cordell G. Spencer
------------------------------------
Cordell G. Spencer
Managing Director
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Limitation of Liability and Indemnification of Directors
Section 67 of Chapter 156B of the Massachusetts General Law authorizes a
corporation to indemnify any director, officer, employee or other agent of the
corporation to whatever extent specified in or authorized by (i) the articles
of organization, (ii) a by-law adopted by the stockholders or (iii) a vote
adopted by the holders of a majority of the shares of stock entitled to vote on
the election of directors.
Article 6(k) of the Registrant's Restated Articles of Association provides
as follows:
No director of the corporation shall be personally liable to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director to the extent provided by applicable law notwithstanding any provision
of law imposing such liability; provided, however, that to the extent, and only
to the extent, required by Section 13(b) (1 1/2) or any successor provision of
the Massachusetts Business Corporation Law, this provision shall not eliminate
or limit the liability of a director (i) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under sections 61 or 62 of the Massachusetts Business
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. This provision shall not be construed in any way so
as to impose or create liability. The foregoing provisions of this Article 6(k)
shall not eliminate the liability of a director for any act or omission
occurring prior to the date on which this Article 6(k) becomes effective. No
amendment to or repeal of Article this 6(k) shall apply to or have any effect
on the liability or alleged liability of any director of the corporation for or
with respect to any acts or omission of such director occurring prior to such
amendment or repeal.
In addition, Article Section 7 of the Registrant's Amended and Restated By-
Laws, entitled "Indemnification of Directors and Officers," provides as
follows:
The corporation shall, to the extent legally permissible, indemnify each of
its directors and officers (including persons who act at its request as
directors, officers or trustees of another organization or in any capacity with
respect to any employee benefit plan) against all liabilities and expenses,
including amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and counsel fees, reasonably incurred by him in connection with
the defense or disposition of any action, suit or other proceeding, whether
civil or criminal, in which he may be involved or with which he may be
threatened, while in office or thereafter, by reason of his being or having
been such a director or officer, except with respect to any matter as to which
he shall have been adjudicated in any proceeding not to have acted in good
faith in the reasonable belief that his action was in the best interests of the
corporation (any person serving another organization in one or more of the
indicated capacities at the request of the corporation who shall have acted in
good faith in the reasonable belief that his action was in the best interests
of such other organization to be deemed as having acted in such manner with
respect to the corporation) or, to the extent that such matter related to
service with respect to any employee benefit plan, in the best interest of the
participants or beneficiaries of such employee benefit plan; provided, however,
that as to any matter disposed of by a compromise payment by such director or
officer, pursuant to a consent decree or otherwise, no indemnification either
for said payment or for any other expenses shall be provided unless such
compromise shall be approved as in the best interests of the corporation, after
notice that it involves such indemnification: (a) by a disinterested majority
of the directors then in office; or (b) by a majority of the disinterested
directors then in office, provided that there has been obtained an opinion in
writing of independent legal counsel to the effect that such director or
officer appears to have acted in good faith in the reasonable belief that his
action was in the best interests of the corporation; or (c) by the holders of a
majority of the outstanding stock at the time entitled to vote for directors,
voting as a single class, exclusive of any stock owned by any interested
director or officer. Expenses, including counsel fees, reasonably incurred by
any director or officer in connection with the defense or disposition of any
such action, suit or other
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<PAGE>
proceeding may be paid from time to time by the corporation in advance of the
final disposition thereof upon receipt of an undertaking by such director or
officer to repay the amounts so paid to the corporation if it is ultimately
determined that indemnification for such expenses is not authorized under this
Section 7. The right of indemnification hereby provided shall not be exclusive
of or affect any other rights to which any director or officer may be entitled.
As used in this Section, the terms, "director" and "officer" include their
respective heirs, executors and administrators, and an "interested" director or
officer is one against whom in such capacity the proceedings in question or
another proceeding on the same or similar grounds is then pending. Nothing
contained in this Section shall affect any rights to indemnification to which
corporate personnel other than directors or officers may be entitled by
contract or otherwise under law.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
2.1 Agreement and Plan of Merger dated as of August 6, 1999 by and among
EMC Corporation ("EMC"), Emerald Merger Corporation and Data General
Corporation (included as Annex A to the proxy statement/prospectus
forming a part of this Registration Statement and incorporated herein
by reference).
3.1 Articles of Organization of EMC Corporation.(1)
3.2 Articles of Amendment filed February 26, 1986.(1)
3.3 Articles of Amendment filed April 2, 1986.(1)
3.4 Articles of Amendment filed May 13, 1987.(2)
3.5 Articles of Amendment filed June 19, 1992.(3)
3.6 Articles of Amendment filed May 12, 1993.(4)
3.7 Articles of Amendment filed November 12, 1993.(5)
3.8 Articles of Amendment filed May 10, 1995.(6)
3.9 Articles of Amendment filed May 7, 1997.(7)
3.10 Articles of Amendment filed May 13, 1999.(8)
3.11 Amended and Restated By-laws of EMC Corporation.(9)
4.1 Form of Stock Certificate.(10)
4.2 Indenture, dated as of March 11, 1997 between EMC Corporation and
State Street Bank and Trust Company, Trustee.(11)
4.3 Form of 3 1/4% Convertible Subordinated Note due 2002.(11)
5.1 Opinion of Paul T. Dacier, Esq., Vice President and General Counsel of
EMC, regarding validity of securities being registered.
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding certain
tax aspects of the merger.(12)
8.2 Opinion of Wachtell, Lipton, Rosen & Katz regarding certain tax
aspects of the merger.(12)
10.1 EMC Corporation 1985 Stock Option Plan, as amended.(9)
10.2 EMC Corporation 1992 Stock Option Plan for Directors, as amended.(9)
10.3 EMC Corporation 1993 Stock Option Plan, as amended.(9)
21.1 Subsidiaries of Registrant.(9)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
23.1 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included as part
of its opinion filed as Exhibit 8.1 and incorporated herein by
reference).
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Wachtell, Lipton, Rosen & Katz (included as part of its
opinion filed as Exhibit 8.2 and incorporated herein by reference).
23.4 Consent of Morgan Stanley & Co. Incorporated (included as part of its
opinion filed as Exhibit 99.1 and incorporated herein by reference).
23.5 Consent of Paul T. Dacier, Esq., Vice President and General Counsel of
EMC (included as part of his opinion filed as Exhibit 5.1 and
incorporated herein by reference).
23.6 Consent of PricewaterhouseCoopers LLP.
24.1 Power of Attorney (included on the signature page of this Form S-4 and
incorporated herein by reference).
99.1 Opinion of Morgan Stanley & Co. Incorporated (included as Annex C to
the proxy statement/prospectus forming a part of this Registration
Statement and incorporated herein by reference).
99.2 Form of Proxy of Data General Corporation.
</TABLE>
- --------
/1/Incorporated by reference to the Company's Registration Statement on Form S-
1 (No. 33-3656).
/2/Incorporated by reference to the Company's Registration Statement on Form S-
1 (No. 33-17218).
/3/Incorporated by reference to the Company's Annual Report on Form 10-K filed
February 12, 1993.
/4/Incorporated by reference to the Company's Registration Statement on Form S-
1 (No. 33-67224).
/5/Incorporated by reference to the Company's Current Report on Form 8-K filed
November 19, 1993.
/6/Incorporated by reference to the Company's Current Report on Form 8-K filed
May 26, 1995.
/7/Incorporated by reference to the Company's Quarterly Report on Form 10-Q
filed May 14, 1997.
/8/Incorporated by reference to the Company's Quarterly Report on Form 10-Q
filed May 13, 1999.
/9/Incorporated by reference to the Company's Annual Report on Form 10-K filed
March 11, 1999.
/10/Incorporated by reference to the Company's Annual Report on Form 10-K filed
March 31, 1988.
/11/Incorporated by reference to the Company's Registration Statement on Form
S-3 (No. 333-24901).
/12/To be filed by post-effective amendment to this Registration Statement.
Item 22. Undertakings
The undersigned Registrant hereby undertakes:
(1) that, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in this registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof;
(2) that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form;
(3) that every prospectus (i) that is filed pursuant to paragraph (2)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and
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<PAGE>
will not be used until such amendment is effective, and that, for purposes
of determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof;
(4) to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this
Form S-4 under the Securities Act of 1933, within one business day of
receipt of any such request, and to send the incorporated documents by
first class mail or other equally prompt means, including information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to such request; and
(5) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
Insofar as indemnification for liabilities under the Securities Act of 1933
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 20 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable. In the event that a claim
of indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in a successful defense of any action, suit or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Hopkinton, Commonwealth
of Massachusetts, on September 7, 1999.
EMC CORPORATION
By: /s/ Michael C. Ruettgers
-----------------------------------
Michael C. Ruettgers
President and Chief Executive
Officer
II-5
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints William J. Teuber, Jr. and Paul T. Dacier, and
each of them, his or her true and lawful attorneys-in-fact and agents with full
power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this registration statement
and to file the same with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof. This power of attorney may be executed in counterparts.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Richard J. Chairman of the Board September 7, 1999
Egan
__________________
Richard J. Egan
/s/ Michael C. President, Chief Executive Officer and September 7, 1999
Ruettgers Director
__________________ (Principal Executive Officer)
Michael C.
Ruettgers
/s/ Colin G. Senior Vice President, Chief September 7, 1999
Patteson Administrative Officer and Treasurer
__________________ (Principal Financial Officer)
Colin G. Patteson
/s/ William J. Vice President and Chief Financial Officer September 7, 1999
Teuber, Jr. (Principal Accounting Officer)
__________________
William J. Teuber,
Jr.
/s/ Michael J. Director September 7, 1999
Cronin
__________________
Michael J. Cronin
/s/ John R. Egan Director September 7, 1999
__________________
John R. Egan
/s/ Maureen E. Director September 7, 1999
Egan
__________________
Maureen E. Egan
/s/ W. Paul Director September 7, 1999
Fitzgerald
__________________
W. Paul Fitzgerald
/s/ Joseph F. Director September 7, 1999
Oliveri
__________________
Joseph F. Oliveri
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
2.1 Agreement and Plan of Merger dated as of August 6, 1999 by and among
EMC Corporation ("EMC"), Emerald Merger Corporation and Data General
Corporation (included as Annex A to the proxy statement/prospectus
forming a part of this Registration Statement and incorporated herein
by reference).
3.1 Articles of Organization of EMC Corporation.(1)
3.2 Articles of Amendment filed February 26, 1986.(1)
3.3 Articles of Amendment filed April 2, 1986.(1)
3.4 Articles of Amendment filed May 13, 1987.(2)
3.5 Articles of Amendment filed June 19, 1992.(3)
3.6 Articles of Amendment filed May 12, 1993.(4)
3.7 Articles of Amendment filed November 12, 1993.(5)
3.8 Articles of Amendment filed May 10, 1995.(6)
3.9 Articles of Amendment filed May 7, 1997.(7)
3.10 Articles of Amendment filed May 13, 1999.(8)
3.11 Amended and Restated By-laws of EMC Corporation.(9)
4.1 Form of Stock Certificate.(10)
4.2 Indenture, dated as of March 11, 1997 between EMC Corporation and
State Street Bank and Trust Company, Trustee.(11)
4.3 Form of 3 1/4% Convertible Subordinated Note due 2002.(11)
5.1 Opinion of Paul T. Dacier, Esq., Vice President and General Counsel of
EMC, regarding validity of securities being registered.
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding certain
tax aspects of the merger.(12)
8.2 Opinion of Wachtell, Lipton, Rosen & Katz regarding certain tax
aspects of the merger.(12)
10.1 EMC Corporation 1985 Stock Option Plan, as amended.(9)
10.2 EMC Corporation 1992 Stock Option Plan for Directors, as amended.(9)
10.3 EMC Corporation 1993 Stock Option Plan, as amended.(9)
21.1 Subsidiaries of Registrant.(9)
23.1 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included as part
of its opinion filed as Exhibit 8.1 and incorporated herein by
reference).
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Wachtell, Lipton, Rosen & Katz (included as part of its
opinion filed as Exhibit 8.2 and incorporated herein by reference).
23.4 Consent of Morgan Stanley & Co. Incorporated (included as part of its
opinion filed as Exhibit 99.1 and incorporated herein by reference).
23.5 Consent of Paul T. Dacier, Esq., Vice President and General Counsel of
EMC (included as part of his opinion filed as Exhibit 5.1 and
incorporated herein by reference).
23.6 Consent of PricewaterhouseCoopers LLP.
24.1 Power of Attorney (included on the signature page of this Form S-4 and
incorporated herein by reference).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
99.1 Opinion of Morgan Stanley & Co. Incorporated (included as Annex C to
the proxy statement/prospectus forming a part of this Registration
Statement and incorporated herein by reference).
99.2 Form of Proxy of Data General Corporation.
</TABLE>
- --------
/1/Incorporated by reference to the Company's Registration Statement on Form
S-1 (No. 33-3656).
/2/Incorporated by reference to the Company's Registration Statement on Form
S-1 (No. 33-17218).
/3/Incorporated by reference to the Company's Annual Report on Form 10-K filed
February 12, 1993.
/4/Incorporated by reference to the Company's Registration Statement on Form
S-1 (No. 33-67224).
/5/Incorporated by reference to the Company's Current Report on Form 8-K filed
November 19, 1993.
/6/Incorporated by reference to the Company's Current Report on Form 8-K filed
May 26, 1995.
/7/Incorporated by reference to the Company's Quarterly Report on Form 10-Q
filed May 14, 1997.
/8/Incorporated by reference to the Company's Quarterly Report on Form 10-Q
filed May 13, 1999.
/9/Incorporated by reference to the Company's Annual Report on Form 10-K filed
March 11, 1999.
/10/Incorporated by reference to the Company's Annual Report on Form 10-K filed
March 31, 1988.
/11/Incorporated by reference to the Company's Registration Statement on Form
S-3 (No. 333-24901).
/12/To be filed by post-effective amendment to this Registration Statement.
<PAGE>
Exhibit 5.1
EMC Corporation
35 Parkwood Drive
Hopkinton, MA 01748
September 7, 1999
EMC Corporation
35 Parkwood Drive
Hopkinton, Massachusetts 01748
Ladies and Gentlemen:
I am Vice President and General Counsel of EMC Corporation, a Massachusetts
corporation (the "Company"), and am issuing this opinion in connection with the
registration statement on Form S-4 (the "Registration Statement") being filed
by the Company with the Securities and Exchange Commission (the "SEC") on the
date hereof for the purpose of registering under the Securities Act of 1933, as
amended, shares (the "Shares") of common stock, par value $.01 per
share, of the Company ("Common Stock") which may be issued pursuant to the
Agreement and Plan of Merger dated as of August 6, 1999 by and among the
Company, Emerald Merger Corporation and Data General Corporation (the
"Agreement").
In this connection, I have examined and am familiar with originals or
copies, certified or otherwise identified to my satisfaction, of (i) the
Registration Statement; (ii) the Agreement; (iii) the Company's Articles of
Organization, as amended to date; (iv) the Company's Amended and Restated By-
Laws, as currently in effect; and (v) such records of the corporate proceedings
of the Company as I have deemed necessary or appropriate as a basis for the
opinions set forth herein; and such certificates of officers of the Company and
others and such other records and documents as I have deemed necessary or
appropriate as a basis for the opinions set forth herein.
In my examination, I have assumed the legal capacity of all natural persons,
the genuineness of all signatures, the authenticity of all documents submitted
to me as originals, the conformity to original documents of all documents
submitted to me as certified, conformed or photostatic copies and the
authenticity of the originals of such copies. As to any facts material to the
opinion expressed herein which I have not independently established or
verified, I have relied upon statements and representations of other officers
and representatives of the Company and others.
I am admitted to the Bars of the State of Wisconsin and the Commonwealth of
Massachusetts and do not purport to be an expert on, or express any opinion
concerning, any law other than the substantive law of the Commonwealth of
Massachusetts.
Based upon and subject to the foregoing, I am of the opinion that the Shares
have been duly authorized for issuance in connection with the Merger (as
defined in the Agreement) and, when issued and delivered by the Company upon
consummation of the Merger, will be validly issued, fully paid and
nonassessable.
I hereby consent to the filing of this opinion with the SEC as an exhibit to
the Registration Statement. In giving this consent, I do not thereby admit that
I am in the category of persons whose consent is required under Section 7 of
the Securities Act or the rules and regulations of the SEC promulgated
thereunder.
This opinion is furnished by me, as Vice President and General Counsel to
the Company, in connection with the requirements of Item 601(b)(5) of
Regulation S-K under the Securities Act and, except as provided in the
immediately preceding paragraph, is not to be used, circulated or quoted for
any other purpose or otherwise referred to or relied upon by any other person
without the prior express written permission of the Company.
Very truly yours,
/s/ Paul T. Dacier
Paul T. Dacier
Vice President and General Counsel
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of EMC Corporation of our report dated January 22, 1999
relating to the financial statements and financial statement schedule appearing
in EMC Corporation's Annual Report on Form 10-K for the year ended December 31,
1998. We also consent to the reference to us under the heading "Experts" in
such Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 7, 1999
<PAGE>
Exhibit 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of EMC Corporation of our report dated October 28, 1998
relating to the financial statements, which appears in Data General
Corporation's 1998 Annual Report, which is incorporated by reference in its
Annual Report on Form 10-K for the year ended September 26, 1998. We also
consent to the incorporation by reference of our report dated October 28, 1998
relating to the financial statement schedule, which appears in such Annual
Report on Form 10-K. We also consent to the references to us under the heading
"Experts" in such registration statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 7, 1999
<PAGE>
Exhibit 99.2
- --------------------------------------------------------------------------------
DATA GENERAL CORPORATION
P R O X Y
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD OCTOBER 7, 1999
Ronald L. Skates and Frederick R. Adler, and each of them, as the true and
lawful attorneys, agents and proxies of the undersigned, with full power of
substitution, are hereby authorized to represent and to vote, as designated
below, all shares of Common Stock of Data General Corporation held of record by
the undersigned on September 6, 1999, at the Special Meeting of Stockholders to
be held at 9:00 A.M. on October 7, 1999, at the Enterprise Room, Fifth Floor,
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts,
and at any adjournments thereof. Any and all proxies heretofore given are
hereby revoked.
PLEASE MARK, DATE AND SIGN THE REVERSE SIDE AND MAIL PROMPTLY IN THE ENCLOSED
ENVELOPE.
(SEE REVERSE SIDE)
DATA GENERAL CORPORATION
P.O. BOX 11235
NEW YORK, N.Y. 19203-0235
<PAGE>
DATA GENERAL CORPORATION
4400 Computer Drive, Westboro, MA 01580
Telephone (508) 898-5000
Dear Stockholder:
Attached below is your proxy card for the October 7, 1999 Special Meeting of
Stockholders of Data General Corporation. Also enclosed please find the Notice
of Special Meeting and Proxy Statement.
YOUR VOTE IS IMPORTANT. IF YOU DO NOT VOTE BY PROXY OR IN PERSON AT THE SPECIAL
MEETING, IT WILL COUNT AS A VOTE AGAINST THE MERGER AGREEMENT.
Whether or not you plan to attend the Stockholder's Meeting, please immediately
complete and sign the proxy card, and return it in the envelope provided.
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU MAY OWN.
Thank you.
PLEASE DETACH PROXY CARD HERE
------------------------------------------------------------
PROPOSAL NO. 1: To approve and adopt the merger agreement among EMC
Corporation, a wholly owned subsidiary of EMC, and Data
General. In the merger, each outstanding share of Data General
common stock will be converted into the right to receive .3262
of a share of EMC common stock, subject to certain adjustments
described in the joint Proxy Statement / Prospectus.
FOR / / AGAINST / / ABSTAIN / /
Change of Address
or Comments Mark Here / /
The Board of Directors
Recommends a Vote FOR Proposal No. 1
Discretionary authority is hereby granted with respect to such
other matters as may properly come before the meeting. The
signer acknowledges receipt of the Notice of Special Meeting of
Stockholders and the Proxy Statement / Prospectus furnished
therewith.
IMPORTANT: Please sign exactly as name appears hereon. Each
joint owner shall sign. Executors, administrators, trustees,
etc. should give full title.
Dated: ______________________________________, 1999
___________________________________________________
Signature
___________________________________________________
Signature
Please Sign, Date and Return the Proxy Card Promptly.
Votes MUST be indicated (X) in Black or Blue ink.
