UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 12, 1999
SEQUENT COMPUTER SYSTEMS, INC.
State of Oregon 000-15627 930826369
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(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File No.) Identification No.)
15450 SW Koll Parkway, Beaverton, Oregon 97006
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(Address of principal executive offices) (Zip Code)
(503) 626 - 5700
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(Registrant's telephone number, including area code)
No Change
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(Former name, former address and former fiscal year,
if changed since last report)
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Item 5. Other Events
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On July 12, 1999 the Company announced that it had entered into an
Agreement and Plan of Merger with International Business Machines Corporations
(IBM) that provides for the merger of a wholly-owned subsidiary of IBM into the
Company, with the Company surviving as a wholly-owned subsidiary of IBM. In the
merger shareholders of Sequent would receive $18 in cash per share of Sequent
common stock. A copy of the Agreement and Plan of Merger is attached as Exhibit
2.1, and a copy of the press release is attached as Exhibit 99.1. In connection
with the Agreement and Plan of Merger, the Company amended its shareholder
rights plan.
2
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Item 7. Financial Statement and Exhibits
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(c) Exhibits
2.1 Agreement and Plan of Merger dated as of July 11, 1999 among
International Business Machines Corporation, Pathfinder
Acquisition Corp. and Sequent Computer Systems, Inc.
4.1 Amendment No. 1 dated as of July 11, 1999 to Rights Agreement,
dated April 14, 1998, between Sequent Computer Systems, Inc.
and ChaseMellon Shareholder Services, L. L. C.
99.1 Press release dated July 12, 1999 of Sequent Computer Systems,
Inc.
3
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: July 12, 1999
SEQUENT COMPUTER SYSTEMS, INC.
By: ROBERT S. GREGG
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Name: Robert S. Gregg
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Title: Sr. Vice President, Finance &
Legal and Chief Financial Officer
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4
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EXHIBIT INDEX
Exhibit No. Description
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2.1 Agreement and Plan of Merger Among International Business
Machines Corporation, Pathfinder Acquisition Corp. and
Sequent Computer Systems, Inc., dated as of July 11, 1999
4.1 Amendment No. 1 dated July 12, 1999 to Rights Agreement,
dated as of April 14, 1998, between Sequent Computer Systems,
Inc. and ChaseMellon Shareholder Services, L.L.C.
99.1 Press release dated July 12, 1999 of Sequent Computer
Systems, Inc.
EXECUTION COPY
================================================================================
AGREEMENT AND PLAN OF MERGER
Among
INTERNATIONAL BUSINESS MACHINES CORPORATION,
PATHFINDER ACQUISITION CORP.
and
SEQUENT COMPUTER SYSTEMS, INC.
Dated as of July 11, 1999
================================================================================
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TABLE OF CONTENTS
Page
ARTICLE I
The Merger
SECTION 1.01. Effective Time of the Merger....................................1
SECTION 1.02. Closing.........................................................2
SECTION 1.03. Effect of the Merger............................................2
SECTION 1.04. Articles of Incorporation and By-laws...........................2
SECTION 1.05. Directors.......................................................2
SECTION 1.06. Officers........................................................3
ARTICLE II
Conversion of Securities
SECTION 2.01. Conversion of Capital Stock.....................................3
SECTION 2.02. Exchange of Certificates........................................4
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of
the Company...................................................5
SECTION 3.02. Representations and Warranties of
Parent and Sub...............................................28
ARTICLE IV
Covenants Relating to Conduct of Business
SECTION 4.01. Conduct of Business............................................30
SECTION 4.02. No Solicitation................................................36
SECTION 4.03. Conduct by Parent..............................................40
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of the Proxy Statement;
Shareholders Meeting.........................................40
SECTION 5.02. Access to Information; Confidentiality.........................41
SECTION 5.03. Reasonable Best Efforts; Notification..........................41
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Page
SECTION 5.04. Stock Options..................................................43
SECTION 5.05. Indemnification, Exculpation and
Insurance....................................................45
SECTION 5.06. Fees and Expenses..............................................46
SECTION 5.07. Benefits Matters...............................................47
SECTION 5.08. Public Announcements...........................................48
SECTION 5.09. Rights Agreement...............................................48
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's Obligation
to Effect the Merger.........................................49
SECTION 6.02. Conditions to Obligations of Parent
and Sub......................................................49
SECTION 6.03. Conditions to Obligation of the Company........................51
SECTION 6.04. Frustration of Closing Conditions..............................51
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01. Termination....................................................52
SECTION 7.02. Effect of Termination..........................................53
SECTION 7.03. Amendment......................................................53
SECTION 7.04. Extension; Waiver..............................................53
ARTICLE VIII
General Provisions
SECTION 8.01. Nonsurvival of Representations
and Warranties...............................................54
SECTION 8.02. Notices........................................................54
SECTION 8.03. Definitions....................................................55
SECTION 8.04. Interpretation.................................................56
SECTION 8.05. Counterparts...................................................56
SECTION 8.06. Entire Agreement; No Third-Party
Beneficiaries................................................56
SECTION 8.07. Governing Law..................................................56
SECTION 8.08. Assignment.....................................................57
SECTION 8.09. Enforcement....................................................57
<PAGE>
AGREEMENT AND PLAN OF MERGER dated as of
July 11, 1999, by and among INTERNATIONAL
BUSINESS MACHINES CORPORATION, a New York
corporation ("Parent"), PATHFINDER
ACQUISITION CORP., an Oregon corporation and
a wholly owned subsidiary of Parent ("Sub"),
and SEQUENT COMPUTER SYSTEMS, INC., an Oregon
corporation (the "Company").
WHEREAS the Board of Directors of each of the Company and Sub deems it
advisable and in the best interests of their respective shareholders to
consummate the merger (the "Merger"), on the terms and subject to the conditions
set forth in this Agreement, of Sub with and into the Company in which the
Company would become a wholly owned subsidiary of Parent and have adopted the
Plan of Merger (as defined in Section 1.01) in accordance with Oregon Revised
Statutes ("ORS") 60.481;
WHEREAS the Board of Directors of the Company (i) has determined that
the consideration to be paid to the shareholders of the Company in the Merger
for each share of Company Common Stock (as defined in Section 2.01) held by them
is fair to and in the best interests of such shareholders and recommends that
such shareholders approve the Plan of Merger in accordance with ORS 60.487 and
(ii) has approved the Merger;
WHEREAS Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
The Merger
SECTION 1.01. Effective Time of the Merger. Subject to the provisions
of this Agreement, articles of merger (the "Articles of Merger") prepared in
accordance with ORS 60.494, which shall include the plan of merger in the form
attached hereto as Exhibit A (the "Plan of Merger"), shall be delivered by the
Company to the office of the Secretary of State of the State of Oregon (or the
office
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2
of any other entity required by Chapter 60 of the ORS in order for the Merger to
become effective) for filing, as provided in ORS 60.494, as soon as practicable
on the Closing Date (as defined in Section 1.02). The Merger shall become
effective upon the filing of the Articles of Merger with the office of the
Secretary of State of the State of Oregon (or such other office) or at such time
thereafter as is agreed upon by Parent and the Company and provided in the
Articles of Merger (the "Effective Time").
SECTION 1.02. Closing. The closing of the Merger (the "Closing") will
take place at 11:00 a.m., New York time, on a date to be specified by the
parties, which shall be not later than the second business day after
satisfaction or waiver of the conditions set forth in Article VI that by their
terms are not to be satisfied or waived at the Closing (the "Closing Date"), at
the offices of Cravath, Swaine & Moore, 825 Eighth Avenue, New York, New York
10019, unless another time, date or place is agreed to in writing by Parent and
the Company.
SECTION 1.03. Effect of the Merger. At the Effective Time Sub shall be
merged with and into the Company, and the Company shall continue as the
surviving corporation (the "Surviving Corporation"). The Merger shall have the
effects set forth in ORS 60.497.
SECTION 1.04. Articles of Incorporation and By-laws. (a) The Articles
of Incorporation of Sub, as in effect immediately prior to the Effective Time,
shall be the Articles of Incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law, except
that Article I of the Articles of Incorporation of the Surviving Corporation
shall be amended to read in its entirety as follows: "The name of the
corporation is SEQUENT COMPUTER SYSTEMS, INC."
(b) The By-laws of Sub as in effect at the Effective Time shall be the
By-laws of the Surviving Corporation until thereafter changed or amended as
provided therein or by applicable law.
SECTION 1.05. Directors. The directors of Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
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SECTION 1.06. Officers. The officers of the Company immediately prior
to the Effective Time shall be the officers of the Surviving Corporation until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
ARTICLE II
Conversion of Securities
SECTION 2.01. 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 Common Stock, par value $0.01 per share, of the Company (together with
the associated Rights (as defined in Section 3.01(c)), the "Company Common
Stock"), or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of common
stock of Sub shall be converted into and become one fully paid and non-
assessable share of common stock of the Surviving Corporation.
(b) Cancelation of Treasury Stock and Parent-Owned Stock. All shares
of Company Common Stock that are owned by the Company, as treasury stock,
Parent or Sub immediately prior to the Effective Time shall automatically
be canceled and retired and shall cease to exist and no consideration shall
be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time (other
than shares to be canceled in accordance with Section 2.01(b)) shall be
converted into the right to receive $18.00 in cash, without interest (the
"Merger Consideration"). At the Effective Time all such shares shall no
longer be outstanding and shall automatically be canceled and shall cease
to exist, and each holder of a certificate that immediately prior to the
Effective Time represented any such shares (a "Certificate") shall cease
to have any rights with respect thereto, except the right to receive the
Merger Consideration. The right of any holder of any share of Company
Common Stock to receive the Merger Consideration shall be subject to and
reduced by the amount of any withholding that is required under applicable
tax law.
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4
SECTION 2.02. Exchange of Certificates. (a) Paying Agent. Prior to the
Effective Time Parent shall designate a bank or trust company reasonably
acceptable to the Company to act as agent for the payment of the Merger
Consideration upon surrender of Certificates (the "Paying Agent"), and, from
time to time after the Effective Time, Parent shall make available, or cause the
Surviving Corporation to make available, to the Paying Agent funds in amounts
and at the times necessary for the payment of the Merger Consideration pursuant
to Section 2.01(c) upon surrender of Certificates, it being understood that any
and all interest earned on funds made available to the Paying Agent pursuant to
this Agreement shall be turned over to Parent.
(b) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
Certificate (i) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates held
by such person shall pass, only upon proper delivery of the Certificates to the
Paying Agent and shall be in a form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancelation to the Paying Agent or to such other agent or agents
as may be appointed by Parent, together with such letter of transmittal, duly
completed and validly executed, and such other documents as may reasonably be
required by the Paying Agent, the holder of such Certificate shall be entitled
to receive from the Paying Agent, on the behalf of Parent, as promptly as
practicable in accordance with the customary procedures of the Paying Agent, in
exchange therefor the amount of cash into which the shares formerly represented
by such Certificate shall have been converted pursuant to Section 2.01(c), and
the Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of shares that is not registered in the stock transfer
books of the Company, payment may be made to a person other than the person in
whose name the Certificate so surrendered is registered if such Certificate
shall be properly endorsed or otherwise be in proper form for transfer and the
person requesting such payment shall pay any transfer or other taxes required by
reason of the payment to a person other than the registered holder of such
Certificate or establish to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable.
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5
(c) No Further Ownership Rights in Company Stock. All cash paid upon
the surrender of a Certificate in accordance with the terms of this Article II
shall be deemed to have been paid in full satisfaction of all rights pertaining
to the shares of Company Common Stock formerly represented by such Certificate.
At the close of business on the day on which the Effective Time occurs the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or the Paying Agent for transfer or any other reason, they
shall be canceled and exchanged as provided in this Article II.
(d) No Liability. None of Parent, Sub, the Company or the Paying Agent
shall be liable to any person in respect of any cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of the Company. Except as
set forth on the disclosure schedule (with specific reference to the section of
this Agreement to which the information stated in such disclosure relates)
delivered by the Company to Parent prior to the execution of this Agreement (the
"Company Disclosure Schedule"), the Company represents and warrants to Parent
and Sub as follows:
(a) Organization, Standing and Corporate Power. Each of the Company
and its subsidiaries (as defined in Section 8.03) (i) is a corporation duly
organized, validly existing and in good standing under the laws of the juris-
diction of its organization (except, in the case of good standing, for entities
organized under the laws of any jurisdiction that does not recognize such
concept), (ii) has all requisite corporate, company or partnership power and
authority to carry on its business as now being conducted and (iii) is duly
qualified or licensed to do business and is in good standing in each
jurisdiction (except, in the case of good standing, any jurisdiction that does
not recognize such concept) in which the nature of its business or the
ownership, leasing or operation of its properties makes such qualification or
licensing necessary, other than
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6
where the failure to be so organized, existing, qualified or licensed or in good
standing (except in the case of clause (i) above with respect to the Company)
individually or in the aggregate is not reasonably likely to have a material
adverse effect (as defined in Section 8.03) on the Company. The Company has
delivered to Parent complete and correct copies of its Articles of Incorporation
and By-laws and the articles of incorporation and by-laws (or similar
organizational documents) of each of its subsidiaries, in each case as amended
to the date hereof. The Company has made available to Parent and its
representatives true and complete copies of the minutes of all meetings of the
shareholders, the Board of Directors and each committee of the Board of
Directors of the Company and each of its subsidiaries held since January 1,
1997.
(b) Subsidiaries. Section 3.01(b) of the Company Disclosure Schedule
lists each subsidiary of the Company. All the outstanding shares of capital
stock or other equity or voting interests of each such subsidiary are owned by
the Company, by another wholly owned subsidiary of the Company or by the Company
and another wholly owned subsidiary of the Company, free and clear of all
pledges, claims, liens, charges, encumbrances and security interests of any kind
or nature whatsoever (collectively, "Liens"), and are duly authorized, validly
issued, fully paid and nonassessable. Except for the capital stock or other
equity or voting interests of its subsidiaries, the Company does not own,
directly or indirectly, any capital stock or other equity or voting interests in
any corporation, partnership, joint venture, association or other entity.
(c) Capital Structure. The authorized capital stock of the Company
consists of 100,000,000 shares of Company Common Stock and 5,000,000 shares of
preferred stock, par value $0.01 per share (the "Company Preferred Stock"), of
which 502,000 shares have been designated as Series A Preferred Shares (the
"Series A Preferred Stock"). At the close of business on July 9, 1999, (i)
42,104,004 shares of Company Common Stock (excluding treasury shares) were
issued and outstanding, (ii) no shares of Company Common Stock were held by the
Company in its treasury, (iii) 502,000 shares of Series A Preferred Stock were
reserved for issuance in connection with the rights (the "Rights") to purchase
shares of Series A Preferred Stock issued pursuant to the Rights Agreement dated
as of April 14, 1998 (the "Rights Agreement"), between the Company and
ChaseMellon Shareholder Services L.L.C., (iv) warrants to acquire 225,000 shares
of Company Common Stock from the Company pursuant to the warrant agreements set
forth on Schedule 3.01(c) of the Company Disclosure Schedule (the
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7
"Warrants") were outstanding; (v) options to acquire 9,500,682 shares of Company
Common Stock from the Company pursuant to the 1987 Employee Stock Option Plan,
the 1989 Stock Incentive Plan, the 1995 Stock Incentive Plan, the 1996 Stock
Option Plan and the 1997 Stock Option Plan (such plans and arrangements,
collectively, the "Company Stock Plans") were issued and outstanding; (vi)
2,947,357 shares of Company Common Stock were reserved and available for
issuance pursuant to the Employee Stock Purchase Plan (the "ESPP"); and (vii) no
shares of Company Preferred Stock were issued and outstanding or were held by
the Company in its treasury. No shares of Company Common Stock are owned by any
subsidiary of the Company. The Company has delivered to Parent a complete and
correct list, as of the close of business on June 28, 1999, of all outstanding
stock options or other rights to purchase or receive Company Common Stock
granted under the Company Stock Plans (collectively, the "Stock Options") and
the Warrants, the number of shares subject to each such Stock Option and
Warrant, the grant dates and exercise prices of each such Stock Option and
Warrant and the names of the holders thereof. As of the close of business on
July 9, 1999, there were outstanding Stock Options to purchase 8,697,327 shares
of Company Common Stock with exercise prices on a per share basis lower than the
Merger Consideration, and the weighted average exercise price of such Stock
Options was equal to $12.22. During the biweekly period ending June 11, 1999,
the aggregate amount credited to the accounts of the participants in the ESPP
was $571,000 and in each payroll period thereafter the aggregate amount credited
to such accounts did not exceed such amount. Except as set forth above, at the
close of business on July 9, 1999, no shares of capital stock or other voting
securities of the Company, or options, warrants or other rights to acquire any
such stock or securities were issued, reserved for issuance or outstanding.
Since July 9, 1999, until the date of this Agreement, (x) there have been no
issuances by the Company of shares of capital stock or other voting securities
of the Company other than issuances of shares of Company Common Stock pursuant
to the exercise of Stock Options and Warrants outstanding on such date as
required by their terms as in effect on the date of this Agreement and (y) there
have been no issuances by the Company of options, warrants or other rights to
acquire shares of capital stock or other voting securities from the Company,
other than for rights that may have arisen under the ESPP. There are no
outstanding stock appreciation rights or rights (other than the Stock Options,
the Warrants and rights that may have arisen under the ESPP) to receive shares
of Company Common Stock on a deferred basis granted under the Company Stock
Plans or otherwise. All outstanding shares of capital stock of the Company are,
and all shares
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8
that may be issued pursuant to the Company Stock Plans, the Warrants and the
ESPP will be, when issued in accordance with the terms thereof, duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. There are no bonds, debentures, notes or other indebtedness of the
Company or any of it subsidiaries, and no securities or other instruments or
obligations of the Company or any of its Subsidiaries the value of which is in
any way based upon or derived from any capital or voting stock of the Company,
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which shareholders of the Company
may vote. Except as set forth above and except as expressly permitted under
Section 4.01(a), there are no securities, options, warrants, calls, rights,
contracts, commitments, agreements, instruments, arrangements, understandings,
obligations or undertakings of any kind 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 its subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other voting securities of, or securities convertible into, or
exchangeable or exercisable for, shares of capital stock or other voting
securities of, the Company or any of its subsidiaries or obligating the Company
or any of its subsidiaries to issue, grant, extend or enter into any such
security, option, warrant, call, right, contract, commitment, agreement,
instrument, arrangement, understanding, obligation or undertaking. There are not
any outstanding contractual obligations of the Company or any of its
subsidiaries to (i) repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its subsidiaries or (ii) vote or dispose
of any shares of the capital stock of any of its subsidiaries. To the knowledge
of the Company, as of the date of hereof, there are no irrevocable proxies and
no voting agreements with respect to any shares of the capital stock or other
voting securities of the Company or any of its subsidiaries.
(d) Authority; Noncontravention. The Company has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated by this Agreement, subject, in the case
of the Merger, to obtaining the Shareholder Approval (as defined in Section
3.01(t)). The execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions contemplated by
this Agreement have been duly authorized by all necessary corporate action on
the part of the Company and no other corporate proceedings on the part of the
Company are necessary to authorize
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9
this Agreement or to consummate the transactions contemplated by this
Agreement, subject, in the case of the Merger, to obtaining the Shareholder
Approval. This Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms. The Board of Directors of the Company,
at a meeting duly called and held at which all directors of the Company were
present, duly and unanimously adopted resolutions (i) adopting this Agreement,
(ii) declaring that it is advisable and in the best interests of the Company's
shareholders to consummate the Merger on the terms and subject to the
conditions set forth in this Agreement, (iii) declaring that the consideration
to be paid to such shareholders in the Merger for each share of Company Common
Stock held by them is fair to and in the best interests of such shareholders,
(iv) directing that the Plan of Merger be submitted to a vote at a meeting of
such shareholders, (v) recommending that such shareholders approve the Plan of
Merger and (vi) approving the Merger upon the terms and subject to the
conditions set forth in this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement and compliance with the provisions of this Agreement do not and will
not conflict with, or result in any violation or breach of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of, or
result in, termination, cancelation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of any Lien in or
upon any of the properties or assets of the Company or any of its subsidiaries
under, or give rise to any increased, additional, accelerated or guaranteed
rights or entitlements under, any provision of (i) the Articles of Incorporation
or By-laws of the Company or the articles of incorporation or by-laws (or
similar organizational documents) of any of its subsidiaries, (ii) any loan or
credit agreement, bond, debenture, note, mortgage, indenture, lease or other
contract, commitment, agreement, instrument, arrangement, understanding,
obligation, undertaking, permit, concession, franchise or license (each, a
"Contract") to which the Company or any of its subsidiaries is a party or any of
their respective properties or assets is subject or (iii) subject to the
governmental filings and other matters referred to in the following sentence,
any (A) statute, law, ordinance, rule or regulation or (B) judgment, order or
decree, in each case, applicable to the Company or any of its subsidiaries or
their respective properties or assets, other than, in the case of clauses (ii)
and (iii), any such conflicts, violations, defaults, rights, losses or Liens
that individually or in the aggregate are not reasonably likely to (x) have a
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10
material adverse effect on the Company, (y) impair in any material respect the
ability of the Company to perform its obligations under this Agreement or (z)
prevent or materially impede, interfere with, hinder or delay the consummation
of any of the transactions contemplated by this Agreement. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
Federal, state or local, domestic or foreign, government or any court,
administrative agency or commission or other governmental or regulatory
authority or agency, domestic or foreign (a "Governmental Entity"), is required
by or with respect to the Company or any of its subsidiaries in connection with
the execution and delivery of this Agreement by the Company or the consummation
by the Company of the transactions contemplated by this Agreement, except for
(1) the filing of a premerger notification and report form by the Company under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act") or any other applicable competition, merger control, antitrust or similar
law, (2) the filing with the Securities and Exchange Commission (the "SEC") of a
proxy statement relating to the approval by the Company's shareholders of this
Agreement (as amended or supplemented from time to time, the "Proxy Statement")
and such reports under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as may be required in connection with this Agreement and the
transactions contemplated by this Agreement, (3) the filing of the Articles of
Merger with the office of the Secretary of State of the State of Oregon (or the
office of any other entity required by Chapter 60 of the ORS in order for the
Merger to become effective) and appropriate documents with the relevant
authorities of other states in which the Company or any of its subsidiaries is
qualified to do business, (4) any filings required under the rules and
regulations of the Nasdaq National Market and (5) such other consents,
approvals, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made individually or in the aggregate are not
reasonably likely to (x) have a material adverse effect on the Company, (y)
impair in any material respect the ability of the Company to perform its
obligations under this Agreement or (z) prevent or materially impede, interfere
with, hinder or delay the consummation of any of the transactions contemplated
by this Agreement.
(e) SEC Documents. The Company has filed with the SEC, and has
heretofore made available to Parent true and complete copies of, all reports,
schedules, forms, statements and other documents required to be filed with the
SEC by the Company since December 29, 1996 (together with all information
incorporated therein by reference, the "SEC
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11
Documents"). No subsidiary of the Company is required to file any form, report
or other document with the SEC. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Securities Act of
1933 (the "Securities Act") or the Exchange Act, as the case may be, and the
rules and regulations of the SEC promulgated thereunder applicable to such SEC
Documents, and none of the SEC Documents at the time they were filed contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not mis-
leading. Except to the extent that information contained in any SEC Document
filed and publicly available prior to the date hereof (a "Filed SEC Document")
has been revised or superseded by a later-filed Filed SEC Document, none of the
SEC Documents contains any untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements (including the related notes) of the
Company included in the SEC Documents comply as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles ("GAAP") (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and fairly present in all material respects the consolidated financial position
of the Company and its consolidated subsidiaries as of the dates thereof and
their consolidated results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal and recurring
year-end audit adjustments and the absence of footnotes). Except as set forth in
the Filed SEC Documents, the Company and its subsidiaries have no liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
that individually or in the aggregate are reasonably likely to have a material
adverse effect on the Company.
(f) Information Supplied. None of the information included or
incorporated by reference in the Proxy Statement will, at the date it is first
mailed to the Company's shareholders or at the time of the Shareholders Meeting
(as defined in Section 5.01) or at the time of any amendment or supplement
thereof, contain any untrue state ment of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under
<PAGE>
12
which they are made, not misleading, except that no representation is made by
the Company with respect to statements made or incorporated by reference therein
based on information supplied by Parent or Sub specifically for inclusion or
incorporation by reference in the Proxy Statement. The Proxy Statement will
comply as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations promulgated thereunder.
(g) Absence of Certain Changes or Events. Since the date of the most
recent audited financial statements included in the Filed SEC Documents, the
Company and its subsidiaries have conducted their respective businesses only in
the ordinary course consistent with past practice, and there has not been (i)
any material adverse effect or any state of facts, change, development, effect
or occurrence that is reasonably likely to result in a material adverse effect
on the Company, (ii) any declaration, setting aside or payment of any dividend
on, or other distribution (whether in cash, stock or property) in respect of,
any of the Company's or any of its subsidiaries' capital stock, except for
dividends by a wholly owned subsidiary of the Company to its parent, (iii) any
split, combination or reclassification of any of the Company's or any of its
subsidiaries' capital stock or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in substitution
for shares of capital stock or other securities of the Company or any of its
subsidiaries, (iv) (x) any granting by the Company or any of its subsidiaries of
any increase in compensation or fringe benefits, except for normal increases of
cash compensation in the ordinary course of business consistent with past
practice, or any payment by the Company or any of its subsidiaries of any bonus,
except for bonuses made in the ordinary course of business consistent with past
practice, in each case to any current or former director, officer, employee or
consultant, (y) any granting by the Company or any of its subsidiaries to any
current or former director, officer, or employee of any increase in severance or
termination pay or (z) any entry by the Company or any of its subsidiaries into,
or any amendment of, (A) any currently effective employment, severance,
termination or indemnification agreement or consulting agreement (other than in
the ordinary course of business consistent with past practice), with any current
or former director, officer, employee or consultant or (B) any agreement with
any current or former director, officer, employee or consultant the benefits of
which are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving the Company of the nature contemplated by
this Agreement, (v) any damage, destruction or loss, whether or
<PAGE>
13
not covered by insurance, that individually or in the aggregate is reasonably
likely to have a material adverse effect on the Company, (vi) any change in
financial or tax accounting methods, principles or practices by the Company,
except insofar as may have been required by a change in GAAP or applicable law,
(vii) any tax election that individually or in the aggregate is reasonably
likely to have a material adverse effect on the Company or any of its tax
attributes or any settlement or compromise of any material income tax liability,
(viii) any revaluation by the Company of any of its material assets or (ix) any
licensing agreement or any agreement with regard to the acquisition or
disposition of any material Intellectual Property (as defined in Section
3.01(q)) or rights thereto other than licenses by the Company or its
subsidiaries in the ordinary course of business consistent with past practice of
(A) software to end users or distributors solely for the use with the hardware
products of the Company or its subsidiaries or (B) technology that is included
in or with the products of the Company or its subsidiaries.
(h) Litigation. There is no suit, claim, action, investigation or
proceeding pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its subsidiaries that individually or in the
aggregate is reasonably likely to have a material adverse effect on the
Company, nor is there any statute, law, ordinance, rule, regulation, judgment,
order or decree, of any Governmental Entity or arbitrator outstanding against,
or, to the knowledge of the Company, investigation by any Governmental Entity
involving, the Company or any of its subsidiaries that individually or in the
aggregate is reasonably likely to have a material adverse effect on the Company.
(i) Contracts. Except for Contracts filed as exhibits to the Filed SEC
Documents, none of the Company or any of its subsidiaries is a party to or bound
by, and none of their properties or assets are bound by or subject to, any
written or oral:
(i) material Contract not made in the ordinary course of business
entered into prior to the date of this Agreement;
(ii) Contract pursuant to which the Company or any of its subsidiaries
has agreed not to compete with any person or to engage in any activity or
business, or pursuant to which any benefit is required to be given or lost
as a result of so competing or engaging;
<PAGE>
14
(iii) Contract pursuant to which the Company or any of its
subsidiaries is restricted in any material respect in the development,
marketing or distribution of their respective products or services (other
than (A) restrictions on the scope of a license granted to the Company, (B)
restrictions entered into in the ordinary course of business consistent
with past practice prior to the date of this Agreement and (C) restrictions
that would not (without any action by Parent or its subsidiaries to assume
such restriction) in any way apply to Parent or any of its subsidiaries
(other than the Company and its subsidiaries) following the Merger);
(iv) Contract with (A) any affiliate of the Company or any of its
subsidiaries or (B) any current or former director or officer of the
Company or any of its subsidiaries or of any affiliate of the Company or
any of its subsidiaries or any of the 25 most highly compensated employees
of the Company and its subsidiaries, taken as a whole, or (C) any affiliate
of any such person (other than (u) Contracts with DP Applications (as
defined in Section 3.01(x)), (v) contracts on arm's-length terms with
companies whose common stock is publicly traded, (w) employment agreements
referred to in Section 3.01(k), (x) offer letters providing solely for "at
will" employment, (y) invention assignment and confidentiality agreements
relating to the assignment of inventions to the Company or any of its
subsidiaries not involving the payment of money and (z) Benefit Plans
referred to in Section 3.01(n));
(v) license or franchise (other than exclusive distribution agreements
entered into in the ordinary course of business consistent with past
practice prior to the date of this Agreement) granted by the Company or
such subsidiary pursuant to which the Company or such subsidiary has agreed
to refrain from granting license or franchise rights to any other person;
(vi) Contract under which the Company or such subsidiary has (i)
incurred any indebtedness that is currently owing or (ii) given any
guarantee in respect of indebtedness, in each case having an aggregate
principal amount in excess of $5,000,000;
(vii) material Contract that requires consent, approval or waiver of
or notice to a third party in the event of or with respect to a transaction
such as the Merger, including in order to avoid termination of or a loss of
material benefit under any such Contract;
<PAGE>
15
(viii) material Contract providing for payments of royalties to third
parties;
(ix) Contract granting a third party any license to Intellectual
Property that is not limited to the internal use of such third party;
(x) Contract providing confidential treatment by the Company or such
subsidiary of third party information other than non-disclosure agreements
and provisions entered into by the Company in the ordinary course of
business consistent with past practice;
(xi) Contract granting the other party to such Contract or a third
party "most favored nation" status that, following the Merger, would in any
way apply to Parent or any of its subsidiaries (other than the Company and
its subsidiaries and their products or services (other than any similar
products or services produced or offered by Parent or its subsidiaries
(other than the Company and its subsidiaries)));
(xii) Contract that guarantees or warrants a result or that expressly
guarantees or warrants that the products and/or services of the Company
will be Year 2000 Ready (as defined in Section 3.01(m)), except insofar as
the Company's or its subsidiaries' sole obligation in respect of a breach
of such guarantee or Warranty is the repair or replacement of the Company's
or its subsidiaries' products; and
(xiii) Contract which (i) has aggregate future sums due from the
Company or such subsidiary in excess of $2,500,000 and is not terminable by
the Company or such subsidiary for a cost of less than $250,000 or (ii) is
entered into prior to the date of this Agreement and is otherwise material
to the business of the Company or such subsidiary or as presently conducted
or as proposed to be conducted.
Each Contract of the Company and its subsidiaries is in full force and effect
and is a legal, valid and binding agreement of the Company or such subsidiary
and, to the knowledge of the Company or such subsidiary, of each other party
thereto, enforceable against the Company or any of its subsidiaries, as the case
may be, and, to the knowledge of the Company, against the other party or parties
thereto, in each case, in accordance with its terms, except for such failures to
be in full force and effect or enforceable that individually or in the aggregate
are not reasonably likely to have a material adverse effect on the Company. Each
of the Company and its
<PAGE>
16
subsidiaries has performed or is performing all material obligations required to
be performed by it under its Contracts and is not (with or without notice or
lapse of time or both) in breach or default in any material respect thereunder,
and, to the knowledge of the Company or such subsidiary, no other party to any
of its Contracts is (with or without notice or lapse of time or both) in breach
or default in any material respect thereunder except, in each case, for such
breaches that individually or in the aggregate are not reasonably likely to have
a material adverse effect on the Company. Neither the Company nor any of its
subsidiaries knows of any circumstances that are reasonably likely to occur that
could reasonably be expected to materially adversely affect its ability to
perform its obligations under any material Contract.
(j) Compliance with Laws. The Company and its subsidiaries are, and
since December 29, 1996 have been, in compliance with all statutes, laws,
ordinances, rules, regulations, judgments, orders and decrees of any Govern-
mental Entity applicable to their businesses or operations, except for instances
of possible noncompliance that individually or in the aggregate are not
reasonably likely to have a material adverse effect on the Company, impair in
any material respect the ability of the Company to perform its obligations under
this Agreement or prevent or materially impede, interfere with, hinder or delay
the consummation of any of the transactions contemplated by this Agreement. None
of the Company or any of its subsidiaries has received, since December 29, 1996,
a notice or other written communication alleging a possible violation of any
statute, law, ordinance, rule, regulation, judgment, order or decree of any
Governmental Entity applicable to its businesses or operations, except for such
violations that individually or in the aggregate are not reasonably likely to
have a material adverse effect on the Company. The Company and its subsidiaries
have in effect all Federal, state and local, domestic and foreign, governmental
consents, approvals, orders, authorizations, certificates, filings, notices,
permits, concessions, franchises, licenses and rights (collectively "Permits")
necessary for them to own, lease or operate their properties and assets and to
carry on their businesses as now conducted and there has occurred no violation
of, or default under, any such Permit, except for the lack of Permits and for
violations of, or defaults under, Permits, which lack of Permits, violations or
defaults individually or in the aggregate are not reasonably likely to have a
material adverse effect on the Company. The Merger, in and of itself, could not
reasonably be expected to cause the revocation or cancelation of any
<PAGE>
17
such Permit, which revocation or cancelation is reasonably likely to have a
material adverse effect on the Company.
(k) Absence of Changes in Benefit Plans; Employment Agreements; Labor
Relations. Except as disclosed in the Filed SEC Documents, since the date of the
most recent audited financial statements included in the Filed SEC Documents,
none of the Company or any of its subsidiaries has terminated, adopted, amended
or agreed to amend in any material respect any collective bargaining agreement
or any bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock appreciation, restricted
stock, stock option, phantom stock, performance, retirement, vacation,
severance, disability, death benefit, hospitalization, medical or other material
plan, arrangement or understanding providing benefits to any of its current or
former directors, officers or employees (collectively, "Benefit Plans"). Except
as disclosed in the Filed SEC Documents, there exist no (i) employment,
severance, termination or indemnification agreements or material consulting
agreements between the Company or any of its subsidiaries, on the one hand, and
any current or former director, officer, employee or consultant of the Company
or any of its subsidiaries, on the other hand, or (ii) agreements between the
Company or any of its subsidiaries, on the one hand, and any current or former
director, officer, employee or consultant of the Company or any of its
subsidiaries, on the other hand, the benefits of which are contingent, or the
terms of which are materially altered, upon the occurrence of a transaction
involving the Company of the nature contemplated by this Agreement. There are no
collective bargaining or other labor union agreements to which the Company or
any of its subsidiaries is a party or by which it is bound. Since December 29,
1996, neither the Company nor any of its subsidiaries has encountered any labor
union organizing activity, or had any actual or threatened employee strikes,
work stoppages, slowdowns or lockouts that individually or in the aggregate are
reasonably likely to have a material adverse effect on the Company.
(l) Environmental Matters. Except to the extent that the inaccuracy of
any of the following (or the circumstances giving rise to such inaccuracy) is
not reasonably likely to have a material adverse effect on the Company: (i) the
Company and each of its subsidiaries are in compliance with all applicable
Environmental Laws (as defined below); (ii) the Company and each of its subsi-
diaries have all Permits required under Environmental Laws and are in compliance
with their respective requirements; (iii) there are no pending, or to the
knowledge of the
<PAGE>
18
Company or any of its subsidiaries, threatened claims, proceedings or
investigations against the Company or any of its subsidiaries alleging any
noncompliance with, or liability under, Environmental Law; (iv) neither the
Company nor any of its subsidiaries have received notice that the Company or any
of its subsidiaries is subject to potential liability under any Environmental
Law, including potential liability for the costs of investigating or remediating
contaminated property pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act, or analogous state law; (v) there have been no
Releases (as defined below) or threatened Releases of Hazardous Substances (as
defined below) on, at, under or about any properties currently or formerly
owned, leased or operated by the Company or any of its subsidiaries, or any of
their respective predecessors, and neither the Company nor any of its
subsidiaries has Released, disposed of or arranged for the disposal of Hazardous
Substances at any on-site or off-site location; and (vi) there are no facts,
circumstances or conditions that are reasonably likely to give rise to any
liability of, or form the basis of a claim against, the Company or any of its
Subsidiaries in connection with any Environmental Law. For purposes of this
Agreement, the term "Environmental Laws" shall mean any applicable Federal,
state or local, domestic or foreign, statutes, laws, regulations, ordinances,
rules, codes, enforceable requirements, agreements, orders, decrees, judgments
or injunctions issued, promulgated or entered into by any Governmental Entity
relating to protection of the environment, natural resources or human health and
safety, or to the use, management, disposal, Release or threatened Release of
Hazardous Substances. For purposes of this Agreement, the term "Hazardous
Substances" shall mean any explosive or radioactive substances or materials, any
toxic or hazardous substances or materials, including asbestos or
asbestos-containing materials, polychlorinated biphenyls, petroleum and
petroleum products, and any other substances or materials defined as, or
included in the definition of, "hazardous substances", "hazardous wastes",
"hazardous materials" or "toxic substances", or is otherwise regulated, under
any Environmental Law. For purposes of this Agreement, the term "Release" shall
mean any spilling, leaking, pumping, pouring, discharging, emitting, emptying,
leaching, injecting, dumping, disposing or migrating into or through the
environment.
(m) Year 2000 Compliance. All computer and other systems, software,
hardware and other products (A) licensed or sold, or offered for licensing or
sale (including products under development), by the Company or any of its
subsidiaries under any trademark, service mark, brand name,
<PAGE>
19
certification mark, assumed name or trade name owned or licensed for use by the
Company or any of its subsidiaries, whether produced by the Company or any of
its subsidiaries or supplied thereto by any third party, (B) produced by any
third party that are licensed to the customers of the Company or any of its
subsidiaries by the Company or any of its subsidiaries under a license that does
not explicitly disclaim liability with respect to failures of such products to
be Year 2000 Ready and (C) produced by the Company or any of its subsidiaries,
in each case have been written, manufactured and tested to be Year 2000 Ready,
except for such failures to be Year 2000 Ready that individually or in the
aggregate are not reasonably likely to have a material adverse effect on the
Company. All internal data processing systems, equipment and facilities used by
the Company and its subsidiaries, including all information technology
applications running in the Company or any of its subsidiaries and all tools
used to develop the Company's or any of its subsidiaries' products, are Year
2000 Ready, except for such failures to be Year 2000 Ready that individually or
in the aggregate are not reasonably likely to have a material adverse effect on
the Company. No failure on the part of the customers of or the suppliers to the
Company and its subsidiaries to be Year 2000 Ready is reasonably likely to have
a material adverse effect on the Company. For purposes of this Agreement, "Year
2000 Ready" shall mean, with respect to any system, product, equipment or
facility, that such system, product, equipment or facility, when used with
software and equipment that is Year 2000 Ready, is capable of correctly
processing, providing, receiving and manipulating date data within and between
the twentieth and twenty-first centuries, and its operation and functionality
has not been adversely affected and will not be adversely affected by the advent
of the Year 2000.
(n) ERISA Compliance. (i) Section 3.01(n)(i) of the Company Disclosure
Schedule contains a list of all "employee welfare benefit plans" (as defined in
Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended
"ERISA")), "employee pension benefit plans" (as defined in Section 3(2) of
ERISA) and all other Benefit Plans maintained or contributed to by the Company
or any of its subsidiaries or any person or entity that, together with the
Company or any of its subsidiaries, is treated as a single employer (a "Commonly
Controlled Entity") under Section 414(b), (c), (m) or (o) of the Internal
Revenue Code of 1986, as amended (the "Code") for the benefit of any current or
former directors, officers or employees of the Company or any of its
subsidiaries. The Company has provided to Parent true, complete and correct
copies of
<PAGE>
20
(1) each Benefit Plan (or, in the case of any unwritten Benefit Plans,
descriptions thereof), (2) the most recent annual report on Form 5500 required
to be filed with the Internal Revenue Service (the "IRS") with respect to each
Benefit Plan (if any such report was required), (3) the most recent summary plan
description for each Benefit Plan for which such summary plan description is
required and (4) each trust agreement and group annuity contract relating to any
Benefit Plan. Each Benefit Plan has been administered in accordance with its
terms, except where the failure so to be administered individually or in the
aggregate is not reasonably likely to have a material adverse effect on the
Company. The Company and its subsidiaries and all the Benefit Plans are in
compliance with all applicable provisions of ERISA and the Code, except for
instances of possible noncompliance that individually or in the aggregate are
not reasonably likely to have a material adverse effect on the Company.
(ii) Neither the Company nor any Commonly Controlled Entity has
maintained, contributed to or been obligated to contribute to any Benefit Plan
that is subject to Title IV of ERISA.
(iii) With respect to any Benefit Plan that is an employee welfare
benefit plan, there are no understandings, agreements or undertakings, written
or oral, that would prevent any such plan (including any such plan covering
retirees or other former employees) from being amended or terminated without
material liability to the Company or any of its subsidiaries on or at any time
after the Effective Time.
(iv) No current or former director, officer or employee of the Company
or any of its subsidiaries will be entitled to any additional compensation or
benefits or any acceleration of the time of payment or vesting of any
compensation or benefits under any Benefit Plan as a result of the transactions
contemplated by this Agreement or any benefits under any Benefits Plan the value
of which will be calculated on the basis of any of the transactions contem-
plated by this Agreement.
(v) The deduction of any amount payable pursuant to the terms of the
Benefit Plans or any other employment contracts or arrangements will not be
subject to disallowance under Section 162(m) of the Code.
(o) Taxes. (i) Each of the Company and its subsidiaries and each
Company Affiliated Group has timely filed all Federal, state and local, domestic
and foreign,
<PAGE>
21
income and franchise tax returns and reports and all other tax returns and
reports required to be filed by it and all such returns and reports are complete
and correct, except for such failures to file or to be complete and correct that
individually or in the aggregate are not reasonably likely to result in a
material liability for the Company. Each of the Company and its subsidiaries and
each Company Affiliated Group has timely paid all taxes due with respect to the
taxable periods covered by such returns and reports and all other material
taxes, and the most recent financial statements contained in the Filed SEC
Documents reflect an adequate reserve for all taxes payable by the Company and
its subsidiaries for all taxable periods and portions thereof through the date
of such financial statements.
(ii) No Federal, state or local, domestic or foreign, income or
franchise tax return or report or any other material tax return or report of the
Company or any of its subsidiaries or any Company Affiliated Group is currently
under audit or examination by any taxing authority, and no written or unwritten
notice of such an audit or examination has been received by the Company or any
of its subsidiaries (except for audits or examinations commenced after the date
of this Agreement that individually or in the aggregate are not reasonably
likely to result in a material liability for the Company). There is no
deficiency, refund litigation, proposed adjustment or matter in controversy with
respect to any taxes due and owing by the Company, any of its subsidiaries or
any Company Affiliated Group (except for those arising after the date of this
Agreement that individually or in the aggregate are not reasonably likely to
result in a material liability for the Company). Each deficiency resulting from
any completed audit or examination relating to taxes by any taxing authority has
been timely paid. No issues relating to taxes were raised by the relevant taxing
authority during any presently pending audit or examination, and no issues
relating to taxes were raised by the relevant taxing authority in any completed
audit or examination that could reasonably be expected to recur in a later
taxable period, except for issues first raised after the date of this Agreement
that individually or in the aggregate are not reasonably likely to result in a
material liability for the Company. All assessments for taxes due and owing by
the Company, any of its subsidiaries or any Company Affiliated Group with
respect to completed and settled examinations or concluded litigation have been
paid. As of the date of this Agreement, no Federal, state or local, domestic or
foreign, tax return or report of the Company or any of its subsidiaries or any
Company Affiliated Group has ever been under audit or examination by the IRS or
other relevant
<PAGE>
22
taxing authority. The relevant statute of limitations is closed with respect to
the United States Federal tax returns of the Company and its subsidiaries for
all years through 1990 and with respect to taxable year 1994.
(iii) There is no currently effective agreement or other document
extending, or having the effect of extending, the period of assessment or
collection of any taxes and no power of attorney (other than powers of attorney
authorizing employees of the Company to act on behalf of the Company) with
respect to any taxes has been executed or filed with any taxing authority.
(iv) No Liens for taxes exist with respect to any assets or properties
of the Company or any of its subsi diaries, except for statutory Liens for taxes
not yet due and Liens for taxes that the Company or any of its subsidiaries is
contesting in good faith through appropriate proceedings and for which adequate
reserves have been established.
(v) None of the Company or any of its subsi diaries is a party to or
bound by any tax sharing agreement, tax indemnity obligation or similar
agreement, arrangement or practice with respect to taxes (including any advance
pricing agreement, closing agreement or other agreement relating to taxes with
any taxing authority).
(vi) None of the Company or any of its subsi diaries will be required
to include in a taxable period ending after the Effective Time taxable income
attributable to income that accrued (for purposes of the financial statements of
the Company included in the Filed SEC Docu ments) in a prior taxable period but
was not recognized for tax purposes in any prior taxable period as a result of
the installment method of accounting, the completed contract method of
accounting, the long-term contract method of accounting, the cash method of
accounting or Section 481 of the Code or comparable provisions of state or local
tax law, domestic or foreign, or for any other reason.
(vii) No amount or other entitlement that could be received (whether
in cash or property or the vesting of property) as a result of any of the
transactions contemplated by this Agreement by any director, officer or employee
of the Company or any of its affiliates who is a "disqualified individual" under
any Benefit Plan or other compensation arrangement currently in effect would be
characterized as an "excess parachute payment" (as such terms are defined in
Section 280G of the Code and in proposed Treasury Regulation Section 1.280G-1).
<PAGE>
23
(viii) The Company and its subsidiaries have complied with all
applicable statutes, laws, ordinances, rules and regulations relating to the
payment and withholding of taxes (including withholding of taxes pursuant to
Sections 1441, 1442, 3121 and 3402 of the Code or similar provisions under any
foreign Federal laws or any state or local laws, domestic and foreign) and have,
within the time and the manner prescribed by law, withheld from and paid over to
the proper governmental authorities all amounts required to be so withheld and
paid over under applicable laws.
(ix) As used in this Agreement, "taxes" shall include all Federal,
state and local, domestic and foreign, income, franchise, property, sales,
excise, employment, payroll, social security, value-added, ad valorem, transfer,
withholding and other taxes, including taxes based on or measured by gross
receipts, profits, sales, use or occupation, tariffs, levies, impositions,
assessments or governmental charges of any nature whatsoever, including any
interest penalties or additions with respect thereto. As used in this Agreement,
"Company Affiliated Group" shall mean each group of which the Company or any of
its subsidiaries is or has been a member during a period for which the group
filed a tax return or report on an affiliated, combined, consolidated or unitary
basis.
(p) Title to Properties. (i) The Company and each of its subsidiaries
has good and marketable title to, or valid leasehold interests in, all of its
material properties and assets except for such as are no longer used or useful
in the conduct of its businesses or as have been disposed of in the ordinary
course of business and except for defects in title, easements, restrictive
covenants and similar encumbrances that individually or in the aggregate are not
reasonably likely to have a material adverse effect on the Company. All such
material assets and properties, other than assets and properties in which the
Company or any of its subsidiaries has a leasehold interest, are free and clear
of all Liens, except for Liens that individually or in the aggregate are not
reasonably likely to have a material adverse effect on the Company.
(ii) Each of the Company and its subsidiaries has complied in all
material respects with the terms of all material leases to which it is a party
and under which it is in occupancy, and all such leases are in full force and
effect, except for such noncompliance or failures to be in full force and effect
that individually or in the aggregate are not reasonably likely to have a
material adverse effect on the Company. The Company and its subsidiaries enjoy
<PAGE>
24
peaceful and undisturbed possession under all such material leases, except for
failures to do so that individually or in the aggregate are not reasonably
likely to have a material adverse effect on the Company.
(q) Intellectual Property. (i) Section 3.01(q) of the Company
Disclosure Schedule lists all patents, trademarks, tradenames, service marks and
registered copyrights and applications therefor, if any, owned by or licensed to
the Company or any of its subsidiaries as of the date of this Agreement. The
Company has made available to Parent true and correct copies of all material
license agreements relating to Intellectual Property to which the Company or any
of its subsidiaries is a party as of the date of this Agreement.
(ii) Except to the extent that the inaccuracy of any of the following
(or the circumstances giving rise to such inaccuracy) is not reasonably likely
to have a material adverse effect on the Company:
(A) the Company and each of its subsidiaries owns, or is licensed or
otherwise has the right to use (in each case, free and clear of any Liens),
all Intellectual Property used in or necessary for the conduct of its
business as currently conducted;
(B) none of the Company or any of its subsidiaries is infringing on or
otherwise violating the rights of any person with regard to any copyright
owned by, licensed to or otherwise used by the Company or any of its
subsidiaries;
(C) there is no suit, claim, action, investigation or proceeding
pending or, to the knowledge of the Company, threatened with respect to,
and the Company has not been notified of, any possible infringement by the
Company or any of its subsidiaries on or other violation of the rights of
any person with regard to any Intellectual Property owned by, licensed to
or otherwise used by the Company or any of its subsidiaries;
(D) to the knowledge of the Company, no person is infringing on or
otherwise violating any right of the Company or any of its subsidiaries
with respect to any Intellectual Property owned by, licensed to and/or
otherwise used by the Company or any of its subsidiaries;
<PAGE>
25
(E) to the knowledge of the Company, none of the former or current
members of management or key personnel of the Company or any of its
subsidiaries, including all former and current employees, agents,
consultants and contractors who have contributed to or participated in the
conception and development of Intellectual Property of the Company or any
of its subsidiaries, have a valid claim against the Company or any of its
subsidiaries in connection with the involvement of such persons in the
conception and development of any computer software or other Intellectual
Property of the Company or any of its subsidiaries, and no such claim has
been asserted or threatened;
(F) the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict with,
or result in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to any right, license or encumbrance
relating to, Intellectual Property owned by the Company or any of its
subsidiaries or with respect to which the Company or any of its
subsidiaries now has or has had any agreement with any third party, or any
right of termination, cancelation or acceleration of any material
Intellectual Property right or obligation set forth in any agreement to
which the Company or any of its subsidiaries is a party, or the loss or
encumbrance of any Intellectual Property or benefit related thereto, or
result in the creation of any Lien in or upon any Intellectual Property or
right, other than under certain contracts and agreements, the material ones
of which are set forth on Section 3.01(p) of the Company Disclosure
Schedule, that provide for their termination upon a change of control of
the Company;
(G) except in the ordinary course of business consistent with past
practice, no licenses or rights have been granted to distribute the source
code of, or to use the source code to create Derivative Works (as defined
below) of, any product currently marketed by, commercially available from
or under development by the Company or any of its subsidiaries for which
the Company possesses the source code; and
(H) the Company and each of its subsidiaries has taken all reasonable
and necessary steps to protect their Intellectual Property and their rights
thereunder, and to the knowledge of the Company no such rights to
Intellectual Property have been lost or are
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26
in jeopardy of being lost through failure to act by the Company or any of
its subsidiaries.
As used herein, "Derivative Work" shall mean a work that is based upon
one or more preexisting works, such as a revision, enhancement, modification,
abridgement, condensation, expansion or any other form in which such preexisting
works may be recast, transformed or adapted, and which, if prepared without
authorization of the owner of the copyright in such preexisting work, would
constitute a copyright infringement. For purposes hereof, a Derivative Work
shall also include any compilation that incorporates such a preexisting work as
well as translation from one human language to another and from one type of code
to another.
(iii) For purposes of this Agreement, "Intellectual Property" shall
mean trademarks (registered or unregistered), service marks, brand names,
certification marks, trade dress, assumed names, trade names and other
indications of origin, the goodwill associated with the foregoing and
registrations in any jurisdiction of, and applications in any jurisdiction to
register, the foregoing, including any extension, modification or renewal of any
such registration or application; inventions, discoveries and ideas, whether
patented, patentable or not in any jurisdiction; computer programs and software
(including source code, object code and data), know-how and any other
technology; trade secrets and confidential information and rights in any
jurisdiction to limit the use or disclosure thereof by any person; writings and
other works, whether copyrighted, copyrightable or not in any jurisdiction;
registration or applications for registration of copyrights in any jurisdic-
tion, and any renewals or extensions thereof; any similar intellectual property
or proprietary rights similar to any of the foregoing; licenses, immunities,
covenants not to sue and the like relating to any of the foregoing; and any
claims or causes of action arising out of or related to any infringement, misuse
or misappropriation of any of the foregoing.
(r) Business Combination Charter Provision. The approval of the Merger
by the Board of Directors of the Company referred to in Section 3.01(d)
constitutes approval of the Merger by the Continuing Directors (as defined in
the Company's Articles of Incorporation) for purposes of Section 11.2 of such
Articles of Incorporation and represents the only action necessary to ensure
that such Section 11.2 does not and will not apply to the execution or delivery
of this Agreement or the consummation of the Merger.
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27
(s) State Takeover Statutes. The approval of the Merger by the Board
of Directors of the Company referred to in Section 3.01(d) constitutes approval
of the Merger for purposes of ORS 60.835 and represents the only action neces-
sary to ensure that ORS 60.835 does not and will not apply to the execution or
delivery of this Agreement or the consummation of the Merger. The consummation
of the Merger will not constitute a "control share acquisition" for purposes of
ORS 60.801 to ORS 60.816. No other state takeover or similar statute or
regulation is applicable to this Agreement, the Merger or the other transactions
contemplated by this Agreement.
(t) Voting Requirements. The affirmative vote at the Shareholders
Meeting or any adjournment or postponement thereof of the holders of a majority
of the outstanding shares of Company Common Stock in favor of approving the Plan
of Merger (the "Shareholder Approval") is the only vote of the holders of any
class or series of the Company's capital stock necessary to approve or adopt
this Agreement or the consummation of the transactions contemplated by this
Agreement.
(u) Brokers; Schedule of Fees and Expenses. No broker, investment
banker, financial advisor or other person, other than Morgan Stanley, Dean
Witter, Discover & Co., the fees and expenses of which will be paid by the
Company, is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission, or the reimbursement of expenses, in connection with
the transactions contemplated by this Agreement based upon arrange ments made
by or on behalf of the Company. The Company has delivered to Parent true and
complete copies of all agreements under which any such fees or expenses are
payable and all indemnification and other agreements related to the engagement
of the persons to whom such fees are payable. The fees and expenses of any
accountant, broker, financial advisor, consultant, legal counsel or other person
retained by the Company in connection with this Agreement or the transactions
contemplated hereby incurred or to be incurred by the Company in connection with
this Agreement and the transactions contemplated by this Agreement will not
exceed the fees and expenses set forth in Section 3.01(u) of the Company
Disclosure Schedule.
(v) Opinion of Financial Advisor. The Company has received the written
opinion of Morgan Stanley, Dean Witter, Discover & Co., in customary form to the
effect that, as of the date hereof, the consideration to be received in the
Merger by the Company's shareholders is fair
<PAGE>
28
to the Company's shareholders from a financial point of view, a copy of which
opinion has been delivered to Parent.
(w) Rights Agreement. The Company has taken all actions necessary to
ensure that (i) the Rights Agreement and the Rights are and will be inapplicable
to Parent and its subsidiaries; (ii) neither Parent nor any of its subsidiaries
will be deemed to be an Acquiring Person (as defined in the Rights Agreement);
(iii) neither a Distribution Date nor a Stock Acquisition Date (each as defined
in the Rights Agreement) has occurred or will occur and the Rights have not and
will not become separable, distributable, unredeemable or exercisable as a
result of entering into this Agreement or consummating the Merger or the other
transactions contemplated by this Agreement; and (iv) the Rights Agreement will
terminate upon the earlier of the Final Expiration Date (as defined in the
Rights Plan) and the Effective Time.
(x) DP Applications, Inc. (i) Organizational Documents; Stock
Ownership. The Company has delivered to Parent complete and correct copies of
the articles of incorporation and by-laws of DP Applications, Inc., an Oregon
corporation ("DP Applications"), as amended to the date hereof. The Company has
delivered to Parent a complete and correct list, as of the close of business on
July 6, 1999, of all the shareholders of DP Applications and the number of
shares (categorized by class and series) of each class of capital stock of DP
Applications owned by each shareholder.
(ii) Contracts with the Company; Obligations of the Company. As of the
date of this Agreement, Section 3.01(x)(ii) of the Company Disclosure Schedule
sets forth all Contracts between DP Applications or its subsidiaries, on the
one hand, and the Company or its subsi diaries, on the other hand. Neither the
Company nor any of its subsidiaries has any material liability or obligation
(whether fixed, contingent or otherwise) in respect of any liability or
obligation of, or in any way arising out of or in connection with its ownership
interest in or any act or omission of, DP Applications or any of its
subsidiaries.
SECTION 3.02. Representations and Warranties of Parent and Sub. Parent
and Sub represent and warrant to the Company as follows:
(a) Organization. Each of Parent and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated (except, in the case of good standing,
for
<PAGE>
29
entities organized under the laws of any jurisdiction that does not recognize
such concept) and has all requisite corporate power and authority to carry on
its business as now being conducted.
(b) Authority; Noncontravention. Parent and Sub have the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated by this Agreement. The execution,
delivery and performance of this Agreement by Parent and Sub and the
consummation by Parent and Sub of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on the
part of Parent and Sub and no other corporate proceedings on the part of Parent
or Sub are necessary to authorize this Agreement or to consummate the
transactions contemplated by this Agreement. This Agreement has been duly
executed and delivered by Parent and Sub, as applicable, and constitutes a valid
and binding obligation of Parent and Sub, as applicable, enforceable against
Parent and Sub, as applicable, in accordance with its terms. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement and compliance with the provisions of this Agreement do not
and will not conflict with, or result in any violation or breach of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of, or result in, termination, cancelation or acceleration of any
obligation or to loss of a material benefit under, or result in the creation of
any Lien upon any of the properties or assets of Parent under, or give rise to
any increased, additional, accelerated or guaranteed rights or entitlements
under, any provision of (i) the certificate of incorporation or by-laws of
Parent or similar organizational documents of any subsidiary of Parent
(including Sub), (ii) any Contract applicable to Parent or Sub or their
respective properties or assets or (iii) subject to the governmental filings and
other matters referred to in the following sentence, any (A) statute, law,
ordinance, rule or regulation or (B) judgment, order or decree, in each case,
applicable to Parent or Sub or their respective properties or assets, other
than, in the case of clauses (ii) and (iii), any such conflicts, violations,
defaults, rights, losses or Liens that individually or in the aggregate would
not impair in any material respect the ability of each of Parent and Sub to
perform its obligations under this Agreement or prevent or materially impede,
interfere with, hinder or delay the consummation of any of the transactions
contemplated by this Agreement. No consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity is required
by or with respect to Parent or Sub in connection with the execution and
<PAGE>
30
delivery of this Agreement by Parent and Sub or the consummation by Parent and
Sub of the transactions contemplated by this Agreement, except for (1) the
filing of a premerger notification and report form under the HSR Act or any
other applicable competition, merger control, antitrust or similar law, (2) the
filing of the Articles of Merger with the Oregon Secretary of State and
appropriate documents with the relevant authorities of other states in which the
Company is qualified to do business and (3) such other consents, approvals,
orders, authorizations, registrations, declarations and filings the failure of
which to be obtained or made individually or in the aggregate would not impair
in any material respect the ability of Parent or Sub to perform its obligations
under this Agreement or prevent or materially delay the consummation of any of
the transactions contemplated by this Agreement.
(c) Information Supplied. None of the information supplied or to be
supplied by Parent or Sub specifi cally for inclusion or incorporation by
reference in the Proxy Statement will (except to the extent revised or
superseded by amendments or supplements contemplated hereby), at the date the
Proxy Statement is first mailed to the Company's shareholders or at the time of
Shareholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
(d) Interim Operations of Sub. Sub was formed solely for the purpose
of engaging in the transactions contemplated hereby and has engaged in no
business other than in connection with the transactions contemplated by this
Agreement.
(e) Capital Resources. Parent has sufficient cash or access to cash to
pay the aggregate Merger Consideration.
ARTICLE IV
Covenants Relating to Conduct of Business
SECTION 4.01. Conduct of Business. (a) Conduct of Business by the
Company. During the period from the date of this Agreement to the Effective
Time, except as consented to in writing by Parent or as specifically
contemplated by this Agreement, the Company shall, and shall cause its
subsidiaries to, carry on their respective businesses in the
<PAGE>
31
ordinary course consistent with past practice and use commercially reasonable
efforts to comply with all applicable laws, rules and regulations and, to the
extent consistent therewith, use commercially reasonable efforts to preserve
their assets and technology and preserve their relationships with customers,
suppliers, licensors, licensees, distributors and others having business
dealings with them. Without limiting the generality of the foregoing, during
the period from the date of this Agreement to the Effective Time, except as
consented to in writing by Parent or as specifically contemplated by this
Agreement, the Company shall not, and shall not permit any of its subsidiaries
to:
(i) (x) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property) in respect of, any of
its capital stock except for dividends by a direct or indirect wholly owned
subsidiary of the Company to its parent, (y) split, combine or reclassify
any of its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock or (z) purchase, redeem or otherwise acquire any shares of
capital stock or any other securities of the Company or its subsidiaries or
any options, warrants, calls or rights to acquire any such shares or other
securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities
convertible into, or exchangeable for, or any options, warrants, calls or
rights to acquire, any such shares, voting securities or convertible
securities (other than (x) the issuance of Stock Options representing in
the aggregate up to 250,000 shares of Company Common Stock during any
calendar quarter, and in the aggregate up to 750,000 shares of Company
Common Stock during the term of this Agreement, in the ordinary course of
business consistent with past practice and with an exercise price per share
at least equal to the market value of the Company Common Stock on the date
of issuance (and with other material terms no more favorable to such
employee than the terms of the Stock Options outstanding on the date of
this Agreement that were issued under similar circumstances), to any
employee of the Company (other than directors and officers of the Company)
in connection with the hiring of such employee, the promotion of such
employee or a compensation package granted to such employee in an effort
to counter what the Company reasonably believes to have
<PAGE>
32
been a bona fide offer of employment made to such employee by a third
party, (y) the granting of rights that may arise under the ESPP, as the
ESPP is in effect on the date of this Agreement or (z) the issuance of
shares of Company Common Stock upon the exercise of Stock Options and
Warrants in accordance with their terms and pursuant to the ESPP, as the
ESPP is in effect on the date of this Agreement);
(iii) amend its articles of incorporation or by-laws (or similar
organizational documents) or take any action to cause or permit DP
Applications to amend its articles of incorporation or by-laws;
(iv) acquire or agree to acquire (x) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by purchasing
all of or a substantial equity interest in, or by any other manner, any
business or any corporation, partnership, joint venture, association or
other entity or division thereof or (y) any assets other than inventory,
components, raw materials and other immaterial assets in the ordinary
course of business consistent with past practice;
(v) sell, lease, license, mortgage or otherwise encumber or subject to
any Lien or otherwise dispose of any of its properties or assets, except
sales of inventory or used equipment in the ordinary course of business
consistent with past practice;
(vi) (x) repurchase, prepay or incur any indebtedness or guarantee
any indebtedness of another person or issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of
the Company or any of its subsidiaries, guarantee any debt securities of
another person, enter into any "keep well" or other agreement to maintain
any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, except for
short-term borrowings incurred in the ordinary course of business
consistent with past practice or (y) make any loans, advances or capital
contributions to, or investments in, any other person, other than the
Company or any direct or indirect wholly owned subsidiary of the Company;
(vii) incur or commit to any capital expenditures, or any obligations
or liabilities in connection therewith, in any manner materially
inconsistent with the Company's current capital budget, a true and complete
<PAGE>
33
copy of which (including all back-up materials) has been provided to Parent
prior to the date hereof;
(viii) pay, discharge, settle or satisfy any claims (including claims
of shareholders), liabilities or obligations (whether absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction in the ordinary course of business consistent
with past practice or as required by their terms as in effect on the date
hereof, of claims, liabilities or obligations reflected or reserved against
in the most recent audited financial statements (or the notes thereto) of
the Company included in the Filed SEC Documents (for amounts not in excess
of such reserves) or incurred since the date of such financial statements
in the ordinary course of business consistent with past practice, waive,
release, grant or transfer any right of material value other than in the
ordinary course of business consistent with past practice, or waive any
material benefits of, or agree to modify in any adverse respect, or fail to
enforce, any confidentiality, standstill or similar agreement to which the
Company or any of its subsidiaries is a party;
(ix) modify, amend or terminate any Contract to which the Company or
such subsidiary is a party or waive, release or assign any rights or claims
thereunder, in each case in a manner materially adverse to the Company and
its subsidiaries, taken as a whole, and, in particular, modify or amend the
Aircraft Lease Agreement dated as of October 1, 1996, between the Company
and CP Transportation, Inc. to cause the expiration date of such Contract
to be later than the expiration date set forth in such Contract on the date
of this Agreement (which expiration date is hereby represented and
warranted to be October 1, 1999) or, if later, the Effective Time;
(x) enter into any Contract with the persons listed on Schedule
4.01(x) of the Company Disclosure Schedule;
(xi) enter into any Contract with DP Applications or any of its
subsidiaries, except any Contract relating to joint installation,
maintenance and/or service programs with respect to bundled systems and
software produced by the Company and DP Applications (provided that the
revenue per product unit of DP Applications sold pursuant to any such
Contract shall not be greater than the amount DP Applications would be
<PAGE>
34
expected to receive if such DP Applications product units were sold
separately from any products or services of the Company);
(xii) enter into any material Contract not otherwise prohibited by any
other provision of this Agreement, including any arrangements involving
material Intellectual Property; provided, however, that for purposes of
this clause (xii), the following shall be deemed not to be material if
entered into in the ordinary course of business consistent with past
practice: (A) Contracts with users of the Company's or any of its
subsidiaries' products or services relating to the sale or license of such
products or services, (B) Contracts with distributors or resellers of the
Company's or any of its subsidiaries' products or services, (C) licenses by
the Company or any of its subsidiaries of technology that is included in or
with the products of the Company or any of its subsidiaries, (D) Contracts
that have aggregate future sums due from the Company or any of its
subsidiaries in an amount not to exceed $2,500,000 and that are terminable
by the Company or such subsidiary for a cost of less than $250,000, (E)
Contracts with third party service providers to provide services to the
customers of the Company or any of its subsidiaries, (F) real property
leases, real property maintenance Contracts and similar Contracts related
to real property leases (provided that each such contract shall be for a
period no longer than one year), (G) consulting services Contracts and (H)
currency exchange swap agreements, currency exchange cap agreements or
currency exchange collar agreements (other than those entered into for
speculative purposes);
(xiii) except as otherwise specifically contemplated by this Agreement
or as required to comply with applicable law or any Contract or Benefit
Plan existing on the date hereof, (A) pay to any current or former
director, officer or employee of the Company any benefit not provided for
under any Benefit Plan, other than the payment of cash compensation in the
ordinary course of business consistent with past practice, (B) except to
the extent expressly permitted under Section 4.01(a)(ii), grant any awards
under any Benefit Plan (including the grant of stock options, stock
appreciation rights, stock based or stock related awards, performance units
or restricted stock or the removal of existing restrictions in any Contract
or Benefit Plan or awards made thereunder), (C) take any action to fund or
in any other way secure the payment
<PAGE>
35
of compensation or benefits under any Contract or Benefit Plan or (D) take
any action to accelerate the vesting or payment of any compensation or
benefit under any Benefit Plan;
(xiv) except as otherwise specifically contemplated by this Agreement,
take any action that would or is reasonably likely to result in (A) any
representation and warranty of the Company set forth in this Agreement that
is qualified as to materiality or material adverse effect becoming untrue
(as so qualified), (B) any such representation and warranty that is not so
qualified becoming untrue in any material respect or (C) any condition to
the Merger set forth in Article VI not being satisfied; or
(xv) authorize any of, or commit, resolve or agree to take any of, the
foregoing actions.
(b) Certain Tax Matters. During the period from the date of this
Agreement to the Effective Time, (i) the Company and each of its subsidiaries
shall timely file all Federal, state and local, domestic and foreign, income and
franchise tax returns and reports and all other material tax returns and reports
("Post-Signing Returns") required to be filed by each such entity (after taking
into account any extensions); (ii) the Company and each of its subsidiaries will
timely pay all taxes due and payable in respect of such Post-Signing Returns
that are so filed; (iii) the Company will accrue a reserve in its books and
records and financial statements in accordance with past practice for all taxes
payable by the Company or any of its subsidiaries for which no Post-Signing
Return is due prior to the Effective Time; (iv) the Company and each of its
subsidiaries will promptly notify Parent of any suit, claim, action,
investigation, proceeding or audit (collectively, "Actions") pending against or
with respect to the Company or any of its subsidiaries in respect of any tax
where there is a reasonable possibility of a determination or decision that is
reasonably likely to have a material adverse effect on the Company's or any of
its subsidiaries' tax liabilities or tax attributes and will not settle or
compromise any such Action without Parent's consent; and (v) none of the Company
or any of its subsidiaries will make or change any material tax election without
Parent's consent, which consent shall not be unreasonably withheld.
(c) Advice of Changes; Filings. The Company shall confer with Parent
at the times that Parent shall reasonably request (which is expected to be on a
regular and frequent basis) to report on operational matters and other
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36
matters requested by Parent, other than patent applications. The Company and
Parent shall each promptly provide the other copies of all filings made by such
party with any Governmental Entity in connection with this Agreement and the
transactions contemplated hereby, other than the portions of such filings that
include confidential information not directly related to the transactions
contemplated by this Agreement.
SECTION 4.02. No Solicitation. (a) The Company shall not, nor shall it
permit any of its subsidiaries to, or authorize or permit any director, officer
or employee of the Company or any of its subsidiaries or any investment banker,
attorney, accountant or other advisor or representative of the Company or any
of its subsidiaries to, directly or indirectly, (i) solicit, initiate or
encourage, or take any other action knowingly to facilitate, any Takeover
Proposal (as defined below) or (ii) enter into, continue or otherwise
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, any Takeover Proposal; provided,
however, that if, at any time prior to obtaining the Shareholder Approval, 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 shareholders under applicable law, the Company
and its representatives may, in response to a Superior Proposal (as defined in
Section 4.02(b)) that was unsolicited and that did not otherwise result from a
breach of this Section 4.02(a), and subject to compliance with Section 4.02(c),
(x) furnish information with respect to the Company and its subsidiaries to any
person making such Superior Proposal (and its representatives) pursuant to a
customary confidentiality agreement (which confidentiality agreement contains
terms that are equivalent to, and in no respect less favorable to the Company
than, the terms of the Confidentiality Agreement dated June 25, 1999, between
Parent and the Company (as it may be amended from time to time, the
"Confidentiality Agreement")) and (y) participate in discussions or negotiations
with the person making such Superior Proposal (and its representatives)
regarding such Superior Proposal; and provided further that if the Company has
received an unsolicited Takeover Proposal which (i) specifies consideration with
a higher value than the consideration payable in the Merger, (ii) does not
contain any term or condition that would result in such Takeover Proposal
failing any of the criteria for a Superior Proposal set forth in the definition
thereof and (iii) the Board of Directors of the Company determines in good faith
that such Takeover Proposal might constitute a Superior Proposal but cannot
definitively make such determination without
<PAGE>
37
obtaining certain additional information relating to such Takeover Proposal or
the person making such Takeover Proposal, then such Board of Directors may send
a written communication to such person requesting such additional information
(and only such additional information) as is necessary for such Board of
Directors to make such determination. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding
sentence by any director, officer or employee of the Company or any of its
subsidiaries or any investment banker, attorney, accountant or other advisor or
representative of the Company or any of its subsidiaries shall be deemed to be
a breach of this Section 4.02(a) by the Company.
For purposes of this Agreement, "Takeover Proposal" means any inquiry,
proposal or offer from any person relating to, or that is reasonably likely to
lead to, (i) any direct or indirect acquisition or purchase of a business that
constitutes 20% or more of the total revenue, operating income or assets of the
Company and its subsidiaries, taken as a whole, or 20% or more of the
outstanding shares of Company Common Stock or of any class of capital stock or
other equity or voting interests in any of its subsidiaries, (ii) any tender
offer or exchange offer that if consummated would result in any person
beneficially owning 20% or more of the voting power of Company Common Stock or
(iii) any merger, consolidation, share exchange (as defined in ORS 60.484),
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) 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 or Sub, the adoption, approval or recommendation
by such Board of Directors or any such committee of this Agreement or the
Merger, (ii) adopt, approve or recommend, or publicly propose to adopt, approve
or recommend, any Takeover Proposal or (iii) cause or agree to cause the Company
to enter into any letter of intent, memorandum of understanding, agreement in
principle, acquisition agreement, merger agreement or other agreement (each, an
"Acquisition Agreement") constituting or related to, or which is intended to or
is reasonably likely to lead to, any Takeover Proposal (other than a
confidentiality agreement referred to in Section 4.02(a) entered into under the
circumstances referred to in such Section 4.02(a)). Notwithstanding the
foregoing, if, at any time prior to obtaining the Shareholder Approval, the
Board of Directors
<PAGE>
38
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 shareholders under applicable law, the Board of
Directors of the Company may, in response to a Superior Proposal that was
unsolicited and that did not otherwise result from a breach of Section 4.02(a),
cause the Company to terminate this Agreement if, and only if, the Company shall
concurrently with such termination enter into a definitive Acquisition Agreement
containing the terms of a Superior Proposal; provided, however, that the Company
shall not terminate this Agreement pursuant to this Section 4.02(b), and any
pur- ported termination pursuant to this Section 4.02(b) shall be void and of no
force or effect, unless the Company shall have complied with all the provisions
of this Section 4.02, including the notification provisions in this Section
4.02, and with all applicable requirements of Section 5.06(b), including the
payment of the Termination Fee (as defined in Section 5.06(b)) prior to such
termination; and provided further, however, that the Company shall not exercise
its right to terminate this Agreement pursuant to Section 4.02(b) until after
the fifth business day (the "Match Period Expiration Date") following Parent's
receipt of written notice (a "Notice of Superior Proposal") advising Parent that
the Board of Directors of the Company has received a Superior Proposal and that
such Board of Directors will, subject to any action taken by Parent pursuant to
this sentence, cause the Company to accept such Superior Proposal, specifying
the material terms and conditions of the Superior Proposal and identifying the
person making such Superior Proposal (it being understood and agreed that any
amendment to the price or any other material term of a Superior Proposal shall
require an additional Notice of Superior Proposal and, if the Match Period
Expiration Date would otherwise occur less than two business days from the date
of such Notice of Superior Proposal relating to such amendment, the Match Period
Expiration Date shall be extended until two business days after the receipt of
such Notice of Superior Proposal).
For purposes of this Agreement, a "Superior Proposal" means any bona
fide proposal made by a third party which would result in such third party (or
in the case of a direct merger between such third party and the Company, the
shareholders of such third party) acquiring, directly or indirectly, including
pursuant to a tender offer, exchange offer, merger, consolidation, share
exchange (as defined in ORS 60.484), business combination, share purchase, asset
purchase, recapitalization, liquidation, dissolution or similar transaction,
more than 50% of the voting power of the Company Common Stock or all or
substantially all the
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39
assets of the Company and its subsidiaries, taken as a whole, for consideration
consisting of cash and/or securities that the Board of Directors of the Company
determines in its good faith judgment (after consultation with a financial
advisor of nationally recognized reputation) to have a higher value than the
consideration payable in the Merger and which proposal is determined in good
faith by the Board of Directors of the Company to be more favorable to the
Company's shareholders than the Merger, in each case taking into account any
changes to the terms of this Agreement proposed by Parent in response to such
Superior Proposal or otherwise.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 4.02, the Company promptly shall advise
Parent orally and in writing of any request for information that the Company
reasonably believes could lead to a Takeover Proposal or of any Takeover
Proposal, or any inquiry the Company reasonably believes could lead to any
Takeover Proposal, the terms and conditions of such request, Takeover Proposal
or inquiry, including any subsequent amendment or other modification to such
terms and conditions, and the identity of the person making any such request,
Takeover Proposal or inquiry. On a daily basis, the Company will confer with
Parent regarding (i) the progress of negotiations concerning any Takeover
Proposal, the material resolved and unresolved issues related thereto and any
other matters identified with reasonable specificity by Parent and (ii) the
material details (including material amendments or proposed amendments as to
price and other material terms) of any such request, Takeover Proposal or
inquiry.
(d) Nothing contained in this Section 4.02 or elsewhere in this
Agreement shall prohibit the Company from (i) taking and disclosing to its
shareholders a position contemplated by Rule 14e-2(a) promulgated under the
Exchange Act or (ii) making any disclosure to the Company's shareholders if, in
the good faith judgment of a majority of the members of the Board of Directors
of the Company, after consultation with outside counsel, failure so to disclose
would be inconsistent with applicable laws; provided that none of the Company
nor its Board of Directors nor any committee thereof shall withdraw or modify,
or publicly propose to withdraw or modify, its position with respect to this
Agreement or the Merger or approve or recommend, or propose to approve or
recommend, a Takeover Proposal (it being understood that disclosure of the
delivery of a Notice of Superior Proposal (as contemplated by Section 4.02(b))
shall not violate this Section 4.02(d) or any other provision of this
Agreement).
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40
SECTION 4.03. Conduct by Parent. During the period from the date of
this Agreement to the Effective Time, except as consented to in writing by the
Company or as specifically contemplated by this Agreement, Parent shall not, and
shall not permit any of its subsidiaries to, take any action that would or is
reasonably likely to result in (i) any representation and warranty of Parent set
forth in this Agreement that is qualified as to materiality becoming untrue,
(ii) any such representation and warranty that is not so qualified becoming
untrue in any material respect or (iii) any condition to the Merger set forth in
Article VI not being satisfied.
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of the Proxy Statement; Shareholders
Meeting. (a) As promptly as practicable following the date of this Agreement,
the Company shall prepare and file with the SEC the Proxy Statement and the
Company shall use its reasonable best efforts to respond as promptly as
practicable to any comments of the SEC with respect thereto and to cause the
Proxy Statement to be mailed to the Company's shareholders as promptly as
practicable following the date of this Agreement. Parent shall furnish to the
Company all information concerning itself as may be reasonably requested in
connection with the preparation, filing and distribution of the Proxy Statement.
The Company shall promptly notify Parent upon the receipt of any comments from
the SEC or its staff or any request from the SEC or its staff for amendments or
supplements to the Proxy Statement and shall provide Parent with copies of all
correspondence between the Company and its representatives, on the one hand, and
the SEC and its staff, on the other hand. Notwithstanding anything to the
contrary stated above, prior to filing or mailing the Proxy Statement (or any
amendment or supplement thereto) or responding to any comments of the SEC with
respect thereto, the Company (i) shall provide Parent an opportunity to review,
comment on and approve such document or response, (ii) shall include in such
document or response all comments reasonably proposed by Parent and (iii) and
shall not file or mail such document or respond to the SEC prior to receiving
Parent's approval, which approval shall not be unreasonably withheld or delayed.
(b) The Company shall, as promptly as practicable following the date
of this Agreement, establish a record date (which will be as promptly as
practicable following the
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41
date of this Agreement) for, duly call, give notice of, convene and hold a
meeting of its shareholders (the "Shareholders Meeting") for the purpose of
obtaining the Shareholder Approval. The Company shall, through its Board of
Directors, recommend to its shareholders that they approve this Agreement, and
shall include such recommendation in the Proxy Statement. Without limiting the
generality of the foregoing, the Company agrees that its obligations pursuant to
this Section 5.01(b) shall not be affected by the commencement, public proposal,
public disclosure or communication to the Company or any other person of any
Takeover Proposal.
SECTION 5.02. Access to Information; Confidentiality. The Company
shall, and shall cause each of its subsidiaries to, afford to Parent, and to
Parent's officers, employees, investment bankers, attorneys, accountants and
other advisors and representatives, reasonable access during normal business
hours during the period prior to the Effective Time or the termination of this
Agreement to all their respective properties, books, contracts, commitments,
directors, officers, attorneys, accountants, auditors (and, to the extent within
the Company's control, former auditors), other advisors and representatives and
records and, during such period, the Company shall, and shall cause each of its
subsidiaries to, make available to Parent (a) a copy of each report, schedule,
form, statement and other document filed or received by it during such period
pursuant to the requirements of Federal, state, local or foreign laws and (b)
all other information concerning its business, properties and personnel as
Parent may reasonably request (including the work papers of Deloitte & Touche
LLP and PriceWaterhouseCoopers LLP); provided, however, that the foregoing shall
not entitle Parent or its officers, employees, investment bankers, attorneys,
accountants or other advisors and representatives to have access to any patent
application of the Company or any of its subsidiaries. Except as required by
law, Parent will hold, and will direct its officers, employees, investment
bankers, attorneys, accountants and other advisors and representatives to hold,
any and all information received from the Company, directly or indirectly, in
confidence in accordance with the Confidentiality Agreement.
SECTION 5.03. Reasonable Best Efforts; Notification. (a) Upon the
terms and subject to the conditions set forth in this Agreement, each of the
parties agrees to use its reasonable best efforts to take, or cause to be taken,
all actions, that are necessary, proper or advisable to consummate and make
effective the Merger and the other transactions contemplated by this Agreement,
including using
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42
its reasonable best efforts to accomplish the following: (i) the taking of all
reasonable acts necessary to cause the conditions precedent set forth in Article
VI to be satisfied, (ii) the obtaining of all necessary actions or nonactions,
waivers, consents, approvals, orders and authorizations from Governmental
Entities and the making of all necessary registrations, declarations and filings
(including registrations, declarations and filings with Governmental Entities,
if any), (iii) the taking of all reasonable steps as may be necessary to avoid
any suit, claim, action, investigation or proceeding by any Governmental Entity
and (iv) the obtaining of all necessary consents, approvals or waivers from
third parties. In connection with and without limiting the foregoing, the
Company and its Board of Directors shall, if any state takeover statute or
similar statute or regulation is or becomes applicable to this Agreement, the
Merger or any of the other transactions contemplated by this Agreement, use its
reasonable best efforts to ensure that the Merger and the other transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated by this Agreement and otherwise to minimize the effect of
such statute or regulation on the Merger, this Agreement and the other
transactions contemplated by this Agreement. Notwithstanding the foregoing or
any other provision of this Agreement to the contrary, in no event shall any
party hereto be obligated to (A) agree to, or proffer to, divest or hold
separate, or enter into any licensing or similar arrangement with respect to,
any assets (whether tangible or intangible) or any portion of any business of
Parent, the Company or any of their respective subsidiaries or (B) litigate any
suit, claim, action, investigation or proceeding, whether judicial or
administra- tive, (1) challenging or seeking to restrain or prohibit the
consummation of the Merger; (2) seeking to prohibit or limit in any material
respect the ownership or operation by the Company, Parent or any of their
respective affiliates of a material portion of the business or assets of the
Company and its subsidiaries, taken as a whole, or Parent and its subsidiaries,
taken as a whole, or to require any such person to dispose of or hold separate
any material portion of the business or assets of the Company and its subsi-
diaries, taken as a whole, or Parent and its subsidiaries, taken as a whole, as
a result of the Merger; or (3) seeking to prohibit Parent or any of its
affiliates from effectively controlling in any material respect a substantial
portion of the business or operations of the Company or its subsidiaries. The
Company and Parent will provide such assistance, information and cooperation to
each other as is reasonably required to obtain any such nonactions, waivers,
consents, approvals, orders and authorizations and, in
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43
connection therewith, will notify the other person promptly following the
receipt of any comments from any Governmental Entity and of any request by any
Governmental Entity for amendments, supplements or additional information in
respect of any registration, declaration or filing with such Governmental Entity
and will supply the other person with copies of all correspondence between such
person or any of its representatives, on the one hand, and any Governmental
Entity, on the other hand.
(b) The Company shall give prompt notice to Parent of any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate such that the condition set forth in Section 6.02(a) would
not be satisfied; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
(c) Parent shall give prompt notice to the Company of any
representation or warranty made by it or Sub contained in this Agreement
becoming untrue or inaccurate such that the condition set forth in Section
6.03(a) would not be satisfied; provided, however, that no such notification
shall affect the representations, warranties, covenants or agreements of the
parties or the conditions to the obligations of the parties under this
Agreement.
(d) Without limiting the generality of the foregoing, the Company
shall give Parent the opportunity to participate in the defense of any
litigation against the Company and/or its directors relating to the transactions
contemplated by this Agreement, it being understood and agreed that this Section
5.03(d) shall not give Parent the right to direct such defense.
SECTION 5.04. Stock Options. (a) As soon as practicable following the
date of this Agreement, the Board of Directors of the Company (or, if
appropriate, any committee administering the Company Stock Plans) shall adopt
such resolutions or take such other actions (if any) as may be required to
effect the following:
(i) each Stock Option outstanding immediately prior to the Effective
Time shall be converted into an option to acquire, on the same terms and
conditions as were applicable under the Stock Option, the number of shares
of Parent common stock, par value $0.50 per share ("Parent Common Stock")
(rounded down to the nearest whole share) determined by multiplying the
number of shares of Company Common Stock subject to
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44
such Stock Option by a fraction (the "Option Exchange Ratio"), the
numerator of which is the Merger Consideration and the denominator of which
is the average closing price of Parent Common Stock on the New York Stock
Exchange Composite Transactions Tape on the ten trading days immediately
preceding the date on which the Effective Time occurs at an exercise price
per share of Parent Common Stock equal to (1) the per share exercise price
for the shares of Company Common Stock otherwise purchasable pursuant to
such Stock Option divided by (2) the Option Exchange Ratio (each, as so
adjusted, an "Adjusted Option"), provided that such exercise price shall be
rounded up to the nearest whole cent; provided, however, that (x) each
holder of a Stock Option issued under the 1989 Stock Incentive Plan or the
1995 Stock Incentive Plan may, for a period of 30 days following the
receipt of Shareholder Approval, elect to receive a cash payment in
cancellation of such Stock Option in accordance with the terms of such
Company Stock Plan and (y) each holder of a Stock Option issued under the
1987 Employee Stock Option Plan, the 1996 Stock Option Plan or the 1997
Stock Option Plan may elect to have any Stock Option owned by such holder
converted immediately following the Effect Time into the right to receive
an amount of cash equal to (1) the product of (x) the number of shares of
Company Common Stock subject to such Stock Option and (y) the Merger
Consideration, minus (2) the product of (x) the number of shares of Company
Common Stock subject to such Stock Option and (y) the per share exercise
price of such Stock Option; and
(ii) make such other changes to the Company Stock Plans as Parent and
the Company may agree are appropriate to give effect to the Merger.
(b) The adjustments provided herein with respect to any Stock Options
that are "incentive stock options" as defined in Section 422 of the Code shall
be and are intended to be effected in a manner which is consistent with Section
424(a) of the Code.
(c) At the Effective Time, by virtue of the Merger and without the
need of any further corporate action, Parent shall assume the Company Stock
Plans, with the result that all obligations of the Company under the Company
Stock Plans, including with respect to Stock Options outstanding at the
Effective Time, shall be obligations of Parent following the Effective Time.
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45
(d) Prior to the Effective Time, Parent shall prepare and file with
the SEC a registration statement on Form S-8 (or another appropriate form)
registering a number of shares of Parent Common Stock equal to the number of
shares subject to the Adjusted Options. Such registration statement shall be
kept effective (and the current status of the prospectus or prospectuses
required thereby shall be maintained) as long as any Adjusted Options may remain
outstanding.
(e) As soon as practicable after the Effective Time, Parent shall
deliver to the holders of Stock Options appropriate notices setting forth such
holders' rights pursuant to the respective Company Stock Plans and the
agreements evidencing the grants of such Stock Options and that such Stock
Options and agreements shall be assumed by Parent and shall continue in effect
on the same terms and conditions (subject to the adjustments and vesting
acceleration required by this Section 5.04 after giving effect to the Merger).
(f) A holder of an Adjusted Option may exercise such Adjusted Option
in whole or in part in accordance with its terms by delivering a properly
executed notice of exercise to Parent, together with the consideration therefor
and the Federal withholding tax information, if any, required in accordance with
the related Company Stock Plan.
SECTION 5.05. Indemnification, Exculpation and Insurance. (a) Parent
and Sub agree that all rights to indemnification and exculpation from
liabilities for acts or omissions occurring at or prior to the Effective Time
(and rights for advancement of expenses) now existing in favor of the current or
former directors or officers of the Company and its subsidiaries as provided in
their respective articles of incorporation or by-laws (or comparable
organizational documents) and any indemnification or other agreements of the
Company as in effect on the date hereof shall be assumed by the Surviving
Corporation in the Merger, without further action, at the Effective Time and
shall survive the Merger and shall continue in full force and effect in
accordance with their terms.
(b) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers or conveys all or substantially all its properties
and assets to any person, then, and in each such case, Parent shall cause proper
provision to be made so
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46
that the successors and assigns of the Surviving Corporation assume the
obligations set forth in this Section 5.05.
(c) For six years after the Effective Time, Parent shall maintain in
effect the Company's current directors' and officers' liability insurance
covering each person currently covered by the Company's directors' and officers'
liability insurance policy for acts or omissions occurring prior to the
Effective Time on terms with respect to such coverage and amounts no less
favorable than those of such policy in effect on the date hereof; provided that
Parent may substitute therefor policies of a reputable insurance company the
material terms of which, including coverage and amount, are no less favorable to
such directors and officers than the insurance coverage otherwise required under
this Section 5.05(c); provided however, that in no event shall Parent be
required to pay aggregate premiums for insurance under this Section 5.05(c) in
excess of 150% of the amount of the aggregate premiums paid by the Company in
1998 on an annualized basis for such purpose (which 1998 annualized premiums are
hereby represented and warranted by the Company to be $192,000), provided that
Parent shall nevertheless be obligated to provide such coverage as may be
obtained for such 150% amount.
(d) The provisions of this Section 5.05 (i) are intended to be for the
benefit of, and will be enforceable by, each indemnified party, his or her heirs
and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
SECTION 5.06. Fees and Expenses. (a) All fees and expenses incurred in
connection with the Merger, this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring such fees or expenses,
whether or not the Merger is consummated.
(b) In the event that (i) (A) a Takeover Proposal shall have been made
known to the Company or has been made directly to its shareholders or any person
has announced an intention (whether or not conditional) to make a Takeover
Proposal, (B) thereafter this Agreement is terminated by either Parent or the
Company pursuant to Section 7.01(b)(i) (but only if the Shareholders Meeting has
not been held by the date that is five business days prior to the date of such
termination) or 7.01(b)(iii) and (C) within 12 months after such termination,
the Company or any of its subsidiaries enters into any Acquisition Agreement
with respect to, or consummates, any Takeover Proposal (solely for pur-
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47
poses of this Section 5.06(b)(i)(C), the term "Takeover Proposal" shall have the
meaning set forth in clauses (i), (ii) and (iii) of such definition in Section
4.02(a) except that (I) all references to 20% shall be deemed references to 40%,
(II) the reference in such definition to capital stock or other voting or equity
interests of the subsidiaries of the Company shall be disregarded and (III) the
reference to subsidiaries in clause (iii) of such definition shall be
disregarded except with respect to transactions including subsidiaries which
would have any of the effects set forth in clause (i) of such definition), (ii)
this Agreement is terminated by the Company pursuant to Section 4.02(b) or (iii)
this Agreement is terminated by Parent pursuant to Section 7.01(c), then the
Company shall pay Parent a fee equal to $25 million (the "Termination Fee") by
wire transfer of same day funds (1) in the case of a termination pursuant to
Section 4.02(b), prior to such termination, (2) in the case of a termination
pursuant to Section 7.01(c), within two days after such termination and (3) in
the case of a payment as a result of any event referred to in Section
5.06(b)(i)(C), upon the first to occur of such events. The Company acknowledges
that the agreements contained in this Section 5.06(b) 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 amounts due pursuant to this Section 5.06(b),
and, in order to obtain such payment, Parent commences a suit that results in a
judgment against the Company for the amounts set forth in this Section 5.06(b),
the Company shall pay to Parent its reasonable costs and expenses (including
attorneys' fees and expenses) in connection with such suit and any appeal
relating thereto, together with interest on the amounts set forth in this
Section 5.06(b) at the prime rate of Citibank, N.A. in effect on the date such
payment was required to be made.
SECTION 5.07. Benefits Matters. (a) The Company shall take all
necessary actions so that as of the Effective Time, no former or current
director, officer or employee of DP Applications, in his or her capacity as
such, shall be entitled actively to participate in any employee welfare benefit
plan, employee pension benefit plan or other Benefit Plan of the Company.
(b) Following the Effective Time, the Surviving Corporation shall
honor, or cause to be honored, all obligations under employment agreements and
Benefit Plans of the Company in accordance with the terms thereof. Nothing
herein shall be construed to prohibit the Surviving Corporation from amending
or terminating such agreements and
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48
Benefit Plans in accordance with the terms thereof and with
applicable law.
(c) The Company shall amend the ESPP on the date of this Agreement to
provide that (i) participation in the ESPP shall be limited to those employees
who were participants on June 9, 1999, (ii) such participants may not increase
their payroll deductions or purchase elections from those in effect on June 9,
1999, (iii) no offering periods shall be commenced after the date of this
Agreement, (iv) an additional Purchase Date (as defined in the ESPP) shall be
set by the Board of Directors of the Company, which additional Purchase Date
shall be the trading day immediately prior to the day on which the Effective
Time shall occur (the "Final Purchase Date") and (v) immediately following the
purchase of Company Common Stock on the Final Purchase Date, the ESPP shall
terminate.
SECTION 5.08. Public Announcements. Parent and Sub, on the one hand,
and the Company, on the other hand, will, to the extent reasonably practicable,
consult with each other before issuing, and give each other a reasonable
opportunity to review and comment upon, any press release or other public
statements with respect to this Agreement, the Merger and the other transactions
contemplated by this Agreement, and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by applicable law, court process or by obligations pursuant to any
listing agreement with any national securities exchange or national securities
quotation system. The parties agree that the initial press release to be issued
with respect to the transactions contemplated by this Agreement shall be in the
form heretofore agreed to by the parties.
SECTION 5.09. Rights Agreement. The Board of Directors of the Company
shall take all further action (in addition to that referred to in Section
3.01(w)) reasonably requested in writing by Parent in order to render the Rights
inapplicable to the Merger and the other transactions contemplated by this
Agreement to the extent provided herein. Except as provided above with respect
to the Merger and the other transactions contemplated hereby, the Board of
Directors of the Company shall not, without the written consent of Parent (a)
amend the Rights Agreement or (b) take any action with respect to, or make any
determination under, the Rights Agreement, including a redemption of the rights
or any action to facilitate a Takeover Proposal.
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49
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Shareholder Approval. The Shareholder Approval shall have been
obtained.
(b) Antitrust. Any waiting period (and any extension thereof)
applicable to the Merger under the HSR Act or any other applicable
competition, merger control, antitrust or similar law shall have been
terminated or shall have expired.
(c) No Injunctions or Legal Restraints. No temporary restraining
order, preliminary or permanent injunction or other order or decree issued
by any court of competent jurisdiction or other legal restraint or
prohibition (collectively, "Legal Restraints") which has the effect of
preventing the consummation of the Merger shall be in effect.
SECTION 6.02. Conditions to Obligations of Parent and Sub. The
obligations of Parent and Sub to effect the Merger are further subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained herein that are qualified as to
materiality shall be true and correct (as so qualified), and the
representations and warranties of the Company contained herein that are not
so qualified shall be true and correct in all material respects, in each
case as of the date of this Agreement and as of the Closing Date with the
same effect as though made as of the Closing Date except that the accuracy
of representations and warranties that by their terms speak as of a
specified date will be determined as of such date. Parent 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) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it
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under this Agreement at or prior to the Closing Date, and Parent shall have
received a certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company to such
effect.
(c) No Litigation. There shall not be pending any suit, action or
proceeding brought by any Governmental Entity, or any suit, action or
proceeding with a reasonable possibility of success brought by any other
third party (in the case of any such other third party, excluding suits,
actions and proceedings based upon state law fiduciary duty claims related
to the transactions contemplated by this Agreement), (i) challenging or
seeking to restrain or prohibit the consummation of the Merger; or (ii)
seeking to prohibit or limit in any material respect the ownership or
operation by the Company, Parent or any of their respective affiliates of a
material portion of the business or assets of the Company and its
subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a
whole, or to require any such person to dispose of or hold separate any
material portion of the business or assets of the Company and its
subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a
whole, as a result of the Merger; or (iii) seeking to prohibit Parent or
any of its affiliates from effectively controlling in any material respect
a substantial portion of the business or operations of the Company or its
subsidiaries.
(d) Legal Restraint. No Legal Restraint that could reasonably be
expected to result, directly or indirectly, in any of the effects referred
to in clauses (i) through (iii) of paragraph (c) of this Section 6.02 shall
be in effect.
(e) Consents. Parent shall have received evidence, in form and
substance reasonably satisfactory to it, that Parent or the Company shall
have obtained (i) all material consents, approvals, authorizations,
qualifications and orders of all Governmental Entities legally required to
effect the Merger, (ii) all other consents, approvals, authorizations,
qualifications and orders of Governmental Entities or third parties
required in connection with this Agreement and the transactions
contemplated by this Agreement, except, in the case of this clause (ii),
for those the failure of which to be obtained individually or in the
aggregate are not reasonably likely to have a material adverse effect on
the Company, and (iii) the consents,
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approvals and waivers referred to on Schedule 6.02(e) of the Company
Disclosure Schedule.
(f) Warrants. The Company shall have no Warrants outstanding.
SECTION 6.03. Conditions to Obligation of the Company. The obligation
of the Company to effect the Merger is further subject to the satisfaction or
waiver on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Sub contained herein that are qualified as to
materiality shall be true and correct (as so qualified), and the
representations and warranties of Parent contained herein that are not so
qualified shall be true and correct in all material respects, in each case
as of the date of this Agreement and as of the Closing Date with the same
effect as though made as of the Closing Date except that the accuracy of
representations and warranties that by their terms speak as of a specified
date will be determined as of such date. The Company shall have received a
certificate signed on behalf of Parent by an authorized signatory of Parent
to such effect.
(b) Performance of Obligations of Parent and Sub. Parent and Sub shall
have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date, and
the Company shall have received a certificate signed on behalf of Parent by
an authorized signatory of Parent to such effect.
SECTION 6.04. Frustration of Closing Conditions. None of the Company,
Parent or Sub may rely on the failure of any condition set forth in Section
6.01, 6.02 or 6.03, as the case may be, to be satisfied if such failure was
caused by such party's failure to use reasonable best efforts to consummate the
Merger and the other transactions contemplated by this Agreement, as required
by and subject to Section 5.03.
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ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01. Termination. This Agreement may be terminated, and the
Merger contemplated hereby may be abandoned, at any time prior to the Effective
Time, whether before or after the Shareholder Approval has been obtained:
(a) by mutual written consent of Parent, Sub and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated by April 30,
2000 for any reason; provided, however, that the right to terminate
this Agreement under this Section 7.01(b)(i) shall not be available to
any party whose action or failure to act has been a principal cause of
or resulted in the failure of the Merger to occur on or before such
date and such action or failure to act constitutes a breach of this
Agreement;
(ii) if any Legal Restraint having the effect set forth in
Section 6.01(c) shall be in effect and shall have become final and
nonappealable; or
(iii) if the Shareholder Approval shall not have been obtained at
the Shareholders Meeting duly convened therefor or at any adjournment
or postponement thereof; or
(c) by Parent if the Board of Directors of the Company or any
committee thereof shall have failed to reconfirm its recommendation
referred to in Section 5.01(b) within ten business days (a "Reconfirmation
Period") after a written request to do so, provided that such request is
made following the making of a Takeover Proposal; and provided, further,
that if during such Reconfirmation Period the Company delivers to Parent a
Notice of Superior Proposal, then such Reconfirmation Period shall not
expire prior to the Match Period Expiration Date (including any extension
thereof) related to such Notice of Superior Proposal.
(d) by Parent (i) if the Company shall have breached in any material
respect any of its representa-
<PAGE>
53
tions, warranties, covenants or other agreements contained in this
Agreement, which breach or failure to perform (A) would give rise to the
failure of a condition set forth in Section 6.02(a) or 6.02(b), and (B) has
not been or is incapable of being cured by the Company within 30 business
days after its receipt of written notice thereof from Parent; or (ii) if
any Legal Restraint having any of the effects referred to in clauses (i)
through (iv) of Section 6.02(c) shall be in effect and shall have become
final and nonapplicable;
(e) by the Company, if Parent shall have breached in any material
respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to perform
(i) would give rise to the failure of a condition set forth in Section
6.03(a) or 6.03(b), and (ii) has not been or is incapable of being cured by
Parent within 30 business days after its receipt of written notice thereof
from the Company;
(f) by the Company, in accordance with, and subject to the terms and
conditions of, Section 4.02(b);
SECTION 7.02. Effect of Termination. In the event of termination of
this Agreement by either the Company or Parent as provided in Section 7.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company, other than the
provisions of Section 3.01(u), the last sentence of Section 5.02, Section 5.06,
this Section 7.02 and Article VIII and except to the extent that such
termination results from a willful and material breach by a party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
SECTION 7.03. Amendment. This Agreement may be amended by the parties
hereto at any time, whether before or after the Shareholder Approval has been
obtained; provided, however, that after the Shareholder Approval has been
obtained, there shall be made no amendment that by law requires further approval
by shareholders of the parties without the further approval of such
shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
SECTION 7.04. Extension; Waiver. At any time prior to the Effective
Time, the parties may (a) extend the time for the performance of any of the
obligations or other
<PAGE>
54
acts of the other parties, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto or (c)
waive compliance with any of the agreements or conditions contained herein;
provided, however, that after the Shareholder Approval has been obtained, there
shall be made no waiver that by law requires further approval by shareholders of
the parties without the further approval of such shareholders. Any agreement on
the part of a party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. The failure or
delay by any party to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of such rights nor shall
any single or partial exercise by any party to this Agreement of any of its
rights under this Agreement preclude any other or further exercise of such
rights or any other rights under this Agreement.
ARTICLE VIII
General Provisions
SECTION 8.01. Nonsurvival of Representations and Warranties. None of
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time. This
Section 8.01 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
SECTION 8.02. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed given if
delivered personally or sent by overnight courier (providing proof of delivery)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
if to Parent or Sub, to:
International Business Machines Corporation
New Orchard Road
Armonk, NY 10504
Attention: Mr. Lee A. Dayton
<PAGE>
55
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: Allen Finkelson, Esq.
Scott A. Barshay, Esq.
if to the Company, to:
Sequent Computer Systems, Inc.
15450 S.W. Koll Parkway
Beaverton, OR 97006
Attention: Mr. Robert S. Gregg
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Attention: Larry Sonsini, Esq.
SECTION 8.03. Definitions. For purposes of this
Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person;
(b) as it relates to the Company, "knowledge" means, with respect to
any matter in question, that any of the chief executive officer, chief
financial officer or any other executive officer of the Company has actual
knowledge of such matter.
(c) "material adverse effect" means any state of facts, change,
development, effect or occurrence that is materially adverse to the
business, properties, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole, other than any state of
facts, change, effect or occurrence principally attributable to (i) the
economy in general or the Company's industry in general and not specifi-
cally relating to the Company or any of its Subsidiaries (ii) any
securities class action litigation against the Company arising out of the
transactions
<PAGE>
56
contemplated hereby or (iii) a shortfall in the revenues of the Company and
its subsidiaries, taken as a whole, that results from delays of customer
orders attributable to the announcement of the Merger;
(d) "person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity;
and
(e) a "subsidiary" of any person means another person of which more
than 50% of any class of capital stock, voting securities or other equity
interests are owned or controlled, directly or indirectly, by such first
person; provided, however, that, for purposes of this Agreement, DP
Applications shall not be a subsidiary of Parent.
SECTION 8.04. Interpretation. When a reference is made in this
Agreement to a Section, Exhibit or Schedule, such reference shall be to a
Section of, or an Exhibit or Schedule to, 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 8.05. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 8.06. Entire Agreement; No Third-Party Beneficiaries. This
Agreement (a) constitutes the entire agreement, and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter of this Agreement and (b) except for the
provisions of Section 5.05, are not intended to confer upon any person other
than the parties hereto any rights or remedies.
SECTION 8.07. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof, except to the extent the laws of the State of Oregon are
mandatorily applicable to the Merger.
<PAGE>
57
SECTION 8.08. Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any of or all its rights, interests and obligations under this
Agreement to Parent or to any direct or indirect wholly owned subsidiary of
Parent, but no such assignment shall relieve Sub of any of its obligations here-
under. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by, the parties and their respective
successors and assigns.
SECTION 8.09. Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the partes shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of New York or the State of Oregon or in any New York state
court or any Oregon state court, this being in addition to any other remedy to
which they are entitled at law or in equity. In addition, each of the parties
hereto (a) consents to submit itself to the personal jurisdiction of any court
of the United States located in the State of New York or the State of Oregon or
of any New York state court or any Oregon state court in the event any dispute
arises out of this Agreement or the transactions contemplated by this
Agreement, (b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court and (c)
agrees that it will not bring any action relating to this Agreement or the
transactions contemplated
<PAGE>
58
by this Agreement in any court other than a court of the United States located
in the State of New York or the State of Oregon or a New York state court or an
Oregon state court.
<PAGE>
59
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
INTERNATIONAL BUSINESS
MACHINES CORPORATION,
by LEE A. DAYTON
------------------------------------
Name: Lee A. Dayton
Title: Vice President,
Corporate Development
and Real Estate
PATHFINDER ACQUISITION CORP.,
by LEE A. DAYTON
------------------------------------
Name: Lee A. Dayton
Title: Vice President,
Corporate Development
and Real Estate
SEQUENT COMPUTER SYSTEMS,
INC.,
by KARL C. POWELL, JR.
------------------------------------
Name: Karl C. Powell, Jr.
Title: Chairman and Chief
Executive Officer
<PAGE>
EXHIBIT A
PLAN OF MERGER
OF
PATHFINDER ACQUISITION CORP.
WITH AND INTO SEQUENT COMPUTER SYSTEMS, INC.
1. Parties.
(a) The name of the surviving corporation is Sequent Computer Systems,
Inc., an Oregon corporation ("Sequent").
(b) The name of the corporation merging with and into the surviving
corporation is Pathfinder Acquisition Corp., an Oregon corporation ("PAC").
2. The Merger. The Merger (as defined below) shall become effective when
this Plan of Merger and Articles of Merger are filed with the Secretary of State
of the State of Oregon (the "Effective Time"). In accordance with the provisions
of this Plan of Merger and the applicable provisions of the Oregon Business
Corporation Act, PAC shall be merged with and into Sequent (the "Merger"), and
Sequent shall continue as the surviving corporation (the "Surviving
Corporation"). Thereupon the separate corporate existence of PAC shall cease,
and the Surviving Corporation shall continue in existence under the laws of the
State of Oregon. The Merger shall have the effects set forth in ORS 60.497.
3. Conversion of Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the holders of any shares of Common
Stock, par value $0.01 per share, of Sequent (together with the associated
rights to purchase shares of Series A Preferred Stock issued pursuant to the
Rights Agreement dated as of April 14, 1998 between Sequent and ChaseMellon
Shareholder Services L.L.C., the "Sequent Common Stock"), or any shares of
capital stock of PAC:
(a) Capital Stock of PAC. Each issued and outstanding share of common
stock of PAC shall be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Other Stock. All shares of
Sequent Common Stock that are owned by Sequent, as treasury stock,
International
<PAGE>
2
Business Machines Corporation or PAC immediately prior to the Effective
Time shall automatically be canceled and retired and shall cease to exist
and no consideration shall be delivered in exchange therefor.
(c) Conversion of Sequent Common Stock. Each share of Sequent Common
Stock issued and outstanding immediately prior to the Effective Time (other
than shares to be canceled in accordance with Section 3(b) of this Plan of
Merger shall be converted into the right to receive $18.00 in cash, without
interest (the "Merger Consideration"). At the Effective Time all such
shares shall no longer be outstanding and shall automatically be canceled
and shall cease to exist, and each holder of a certificate that immediately
prior to the Effective Time represented any such shares shall cease to have
any rights with respect thereto, except the right to receive the Merger
Consideration. The right of any holder of any share of Sequent Common Stock
to receive the Merger Consideration shall be subject to and reduced by the
amount of any withholding that is required under applicable tax law.
4. Articles of Incorporation and Bylaws of Surviving Company. (a) The
Articles of Incorporation of PAC, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law, except that Article I of the Articles of Incorporation of the
Surviving Corporation shall be amended to read in its entirety as follows: "The
name of the corporation (hereinafter called the "Corporation") is Sequent
Computer Corporation." A copy of the Articles of Incorporation, as amended, of
the Surviving Corporation is attached as Exhibit 1.
(b) The Bylaws of PAC as in effect at the Effective Time shall be the
Bylaws of the Surviving Corporation until thereafter changed or amended as
provided therein or by applicable law.
5. Directors. The directors of PAC immediately prior to the Effective Time
shall be the directors of the Surviving Corporation until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
<PAGE>
3
6. Officers. The officers of the PAC immediately prior to the Effective
Time shall be the officers of the Surviving Corporation until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
<PAGE>
EXHIBIT 1
ARTICLES OF INCORPORATION OF
SEQUENT COMPUTER SYSTEMS, INC., AS AMENDED FOLLOWING
MERGER OF PATHFINDER ACQUISITION CORP. INTO SEQUENT COMPUTER SYSTEMS, INC.
ARTICLE I
NAME
The name of the corporation (hereinafter called the "corporation") is
Sequent Computer Systems, Inc..
ARTICLE II
SHARES
The total number of shares of stock which the corporation shall have
authority to issue is 1,000, with a par value of $.01 per share. All such shares
are of one class, Common Stock, and shall have identical rights and privileges
in every respect.
ARTICLE III
REGISTERED OFFICE AND AGENT
The address including street and number of the initial registered office of
the corporation in the State of Oregon is: 3500 U.S. Bancorp Tower, 111 SW Fifth
Avenue, Portland, Oregon 97204-3699; and the name of the initial registered
agent of the corporation at such address is MN Service Corporation (Oregon).
ARTICLE IV
INCORPORATOR
The name and the mailing address of the incorporator are as follows:
<PAGE>
2
NAME MAILING ADDRESS
Michael E. Arthur 3500 U.S. Bancorp Tower
111 SW Fifth Avenue
Portland, Oregon 97204-3699
ARTICLE V
NOTICES
The address to which notices, as required by the Oregon Business
Corporation Act, may be mailed until the principal office of the corporation has
been designated by the corporation in its annual report is:
3500 U.S. Bancorp Tower
111 SW Fifth Avenue
Portland, Oregon 97204-3699
ARTICLE VI
PURPOSES AND POWERS
The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the Oregon Business Corporation
Act.
ARTICLE VII
ELIMINATION OF LIABILITY
Directors of the Corporation shall not be liable to the Corporation or its
shareholders for monetary damages for conduct as directors except to the extent
that the Oregon Business Corporation Act, as it now exists or may hereafter be
amended, prohibits elimination or limitation of director liability. No repeal or
amendment of this article or of the Oregon Business Corporation Act shall
adversely affect any right or protection of a director for actions or omissions
prior to the repeal or amendment.
<PAGE>
3
ARTICLE VIII
INDEMNIFICATION
The corporation shall indemnify each of its directors to the fullest extent
permissible under the Oregon Business Corporation Act, as the same exists or may
hereafter be amended, against all expense, liability, and loss (including,
without limitation, attorneys' fees) incurred or suffered by such person by
reason of or arising from the fact that such person is or was a director of the
corporation, or is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust, employee benefit plan,
or other enterprise, and such indemnification shall continue as to a person who
has ceased to be a director, officer, partner, trustee, employee, or agent and
shall inure to the benefit of his or her heirs, executors, and administrators.
The corporation may, by action of the board of directors, provide
indemnification to officers, employees, and agents of the corporation who are
not directors with the same scope and effect as the indemnification provided in
this Article to directors. The indemnification provided in this Article shall
not be exclusive of any other rights to which any person may be entitled under
any statute, bylaw, agreement, resolution of shareholders or directors, contract
or otherwise.
ARTICLE IX
AMENDMENT
From time to time any of the provisions of these Articles of Incorporation
may be amended, altered, or repealed, and other provisions authorized by the
laws of the State of Oregon at the time in force may be added or inserted in the
manner and at the time prescribed by said laws, and all rights at any time
conferred upon the shareholders of the corporation by these Articles of
Incorporation are granted subject to the provisions of this Article NINTH.
FIRST AMENDMENT TO RIGHTS AGREEMENT
Amendment dated July 11, 1999 ("Amendment") to the Rights Agreement
("Agreement"), dated as of April 14, 1998 between Sequent Computer Systems,
Inc., an Oregon corporation (the "Company"), and ChaseMellon Shareholder
Services, L.L.C. (the "Rights Agent").
Pursuant to Section 26 of the Agreement, this Amendment is being executed
by the Company and the Rights Agent for the purpose of amending the Agreement as
set forth below:
The Agreement is hereby amended as follows:
1. Section 1(a) shall be amended by inserting the following at the end of
Section 1(a):
"Notwithstanding the foregoing or any provision to the
contrary in this Agreement, none of International Business
Machines Corporation ("Parent"), its subsidiaries,
Affiliates or Associates, including Pathfinder Acquisition
Corp. ("Sub"), is or shall be an Acquiring Person pursuant
to this Agreement solely by virtue of their acquisition, or
their right to acquire, beneficial ownership of shares of
the Company as a result of their execution of the Agreement
and Plan of Merger dated July 11, 1999 among Parent, Sub and
the Company (the "Merger Agreement"), the consummation of
the Merger (as defined in the Merger Agreement) (the
"Merger"), or any other transaction contemplated by the
Merger Agreement.
2. Section 1(m) shall be amended by inserting the following at the end of
Section 1(m):
"Notwithstanding the foregoing or any provision to the
contrary in this Agreement, a Distribution Date shall not
occur solely by reason of the execution of the Merger
Agreement, the consummation of the Merger, or any other
transaction contemplated by the Merger Agreement.
3. Section 1(ac) shall be amended by inserting the following at the end of
Section 1(ac):
"Notwithstanding the foregoing or any provision to the
contrary in this Agreement, a Stock Acquisition Date shall
not occur solely by reason of the execution of the Merger
Agreement, the consummation of the Merger, or any other
transaction contemplated by the Merger Agreement.
<PAGE>
4. Section 7(a)(i) (including the definition of "Final Expiration Date"
therein) shall be amended to read in its entirety as follows:
"the earlier of the Effective Time (as defined in the Merger
Agreement) or the close of business on October 28, 2008 (the
"Final Expiration Date")".
5. The Rights Agreement shall terminate and be of no further force and
effect upon the Final Expiration Date.
6. This Amendment shall be deemed to be entered into under the laws of the
State of Oregon and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.
7. This Amendment may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
8. As amended hereby, the Agreement shall remain in full force and effect.
* * *
-2-
<PAGE>
Entered into as of the date first written above,
SEQUENT COMPUTER SYSTEMS, INC.
By: DAVID CUNNINGHAM
-------------------------------------
David Cunningham
Its: Secretary/Corporate Counsel
------------------------------------
CHASEMELLON SHAREHOLDER SERVICES,
L.L.C., as Rights Agent
By: ASA DREW
-------------------------------------
Authorized Signature
Asa Drew
Assistant Vice President
-3-
Contacts: IBM - Scott Brooks - 914-766-4495
Sequent - Mike Fay - 212-317-5710
IBM and Sequent Announce Merger Agreement
Beaverton, Ore., July 12, 1999... IBM and Sequent Computer Systems today
announced they have entered into a merger agreement. The merger brings together
unique hardware and software technologies with global presence and partnerships,
advancing IBM's thrust in UNIX and NT servers.
IBM will pay $18.00 in cash for each outstanding share of Sequent common stock.
The transaction, when completed, is expected to have a total equity value of
approximately $810 million.
IBM plans to begin selling Sequent's product line worldwide immediately
following completion of the merger. IBM will integrate Sequent technologies into
IBM products. Similarly, Sequent will benefit from IBM's technological,
manufacturing and global sales prowess. These actions support IBM's strategy to
deliver leadership solutions for e-businesses, emerging "NetGen" companies, and
UNIX and NT customers, large and small.
Sequent is an acknowledged leader in systems based on NUMA (non-uniform memory
access) architecture with a worldwide customer installed base. NUMA is advanced
hardware and software that allows large numbers of processors to operate as a
single system while maintaining the ease of programming and manageability of a
small system. Sequent's systems use up to 64 Intel microprocessors (with plans
to use 256) for a wide variety of e-business related applications, including
data warehousing and business intelligence. Many of the world's largest Oracle
databases and application environments run on Sequent's servers.
<PAGE>
"NUMA will be a defining technology for early 21st century UNIX and NT servers,"
said Robert M. Stephenson, IBM senior vice president and group executive, IBM
Server Group. "Increasingly, customers want servers that can scale quickly to
manage unpredictable workloads or spikes in online traffic. NUMA is an elegant
solution combining industry leading scalability and excellent manageability.
We're impressed by the people and technology at Sequent and look forward to
working with them, their customers and their partners."
Today, many enterprises use both UNIX and NT servers, and this trend will
increase over time. Sequent has innovative technology that helps UNIX and NT
interoperate on a single system. Customers can choose to run UNIX applications
on some processors within a system while running NT applications on other
processors at the same time. The system can be managed from a single point, and
data can be shared between the UNIX and NT applications.
In October of 1998, Sequent was a founding member of Project Monterey, an
IBM-led initiative to create a high-volume, enterprise-ready, commercial UNIX
operating system supporting both IBM and Intel architectures. SCO and Intel also
were original members, and Project Monterey has since expanded to include many
leading software vendors and systems manufacturers. This merger will enhance the
development efforts of Project Monterey, which is poised to become the
industry's leading commercial UNIX, providing economies-of-scale to customers,
software vendors and systems manufacturers.
"Sequent will be able to extend its customer base by taking advantage of IBM's
global presence and partnerships," said Casey Powell, chairman and CEO of
Sequent. "With IBM, Sequent becomes part of the worldwide leader in server sales
and enterprise computing and a major force in filling the fast-growing demand
for commercial UNIX systems. Our progress with IBM on Project Monterey has been
extraordinarily productive so we're confident we'll work well together. We look
forward to joining IBM."
Sequent's systems complement IBM's scalable RS/6000 line of servers. IBM's
<PAGE>
RS/6000 UNIX systems range from scientific and commercial workstations to the
world's most powerful supercomputers. In fact, the new RS/6000 S80 server (which
will begin shipping in the third quarter) has set records for Internet, Java and
clustering performance. Add to this Sequent's leading performance in online
transaction processing and data warehousing, and the new, dual lineup is the
runaway winner in competitive performance.
As a result of the merger:
1. IBM will market and sell Sequent's NUMA-Q 1000 and 2000 using IBM's
worldwide sales force.
2. IBM will enable its business partner network to market and sell Sequent's
current products.
3. The IBM and Sequent development teams will accelerate their work on Project
Monterey.
4. IBM's servers will incorporate Sequent's NUMA technology.
5. IBM will provide middleware support for Sequent's current product line.
Sequent, headquartered in Beaverton, Oregon, has more than 2500 employees
worldwide with 56 sales offices in North America, Europe and Asia and is the
leader in Intel-based data center solutions. Founded in 1983, Sequent pioneered
symmetric multiprocessor (SMP) and NUMA systems for commercial environments. In
March of 1998, Sequent introduced the industry leading path to Windows NT in the
data center with the introduction of the NUMACenter mixed UNIX and Windows NT
environment. This solution allows customers to build their IT infrastructures
leveraging the respective strengths of UNIX and Windows NT.
The completion of the merger is subject to Sequent stockholder and regulatory
approvals.
# # #
All trademarks are the property of their respective owners.
Information contained in this release with respect to the expected benefits of
the proposed transaction is forward-looking. These statements represent our
reasonable judgment with respect to future events are subject to risks and
uncertainties that could cause actual events to differ materially. Such factors
include, but are not limited to, material adverse changes in economic and
competitive conditions in the markets served by the companies, material adverse
changes in the financial condition of either or both companies and their
respective customers, uncertainties concerning technological changes and future
product performance, and substantial delay in the closing of the transaction.
