<PAGE>
As Filed With the Commission on August 8, 1997
Registration No. 333-_______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________
Form S-8
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
_____________
GATEWAY 2000, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or Other Jurisdiction of 42-1249184
Incorporation or Organization) (I.R.S. Employer Identification No.)
610 Gateway Drive
North Sioux City, South Dakota 57049
(Address of principal executive offices) (zip code)
Advanced Logic Research, Inc. Flexible Stock Incentive Plan
Advanced Logic Research, Inc. 1996 Stock Option/Stock Issuance Plan
(Full title of the plans)
William M. Elliott, Esq.
Senior Vice President, General Counsel and Corporate Secretary
610 Gateway Drive
North Sioux City, South Dakota 57049
(Name and address of agent for service)
(605) 232-2000
(Telephone number, including area code, of agent for service)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------------------------
Proposed Maximum Proposed
Title of Securities to Amount to be Offering Price Per Maximum Amount of
be Registered Registered Share (1) Aggregate Registration
Offering Price Fee
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value 500,000 shares $38.59 $19,295,000 $5,846.97
$.01 per share
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated pursuant to Rule 457(c) under the Securities Act of 1933 solely
for the purpose of calculating the amount of the registration fee based
upon the average of the high and low sales prices reported per share of the
Common Stock on the New York Stock Exchange on August 1, 1997, which was
$38.59.
<PAGE>
PART I. INFORMATION REQUIRED IN SECTION 10(A) PROSPECTUS
The document(s) containing the information specified in Part I of Form
S-8 will be sent or given to participating employees as specified by Rule
428(b)(1) of the Securities Act of 1933, as amended (the "Securities Act").
These documents and the documents incorporated by reference into this
Registration Statement pursuant to Item 3 of Part II of this Registration
Statement, taken together, constitute a prospectus that meets the requirements
of Section 10(a) of the Securities Act. Copies of all documents incorporated by
reference in Item 3 of Part II of this Form S-8 (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference
herein), as well as other documents required to be delivered to employees
pursuant to Rule 428(b), will be provided without charge to each person,
including any beneficial owner, on the written on oral request of such person
made to Gateway 2000, Inc., 610 Gateway Drive, North Sioux City, South Dakota
57049, Attention: Secretary, Telephone (605) 232-2000.
PART II. INFORMATION REQUIRED IN THIS REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
Gateway 2000, Inc. (the "Company") hereby incorporates the following
documents herein by reference:
(a) The Company's Annual Report on Form 10-K for the year ended
December 31, 1996;
(b) The Company's Quarterly Reports on Form 10-Q for the quarter
ended March 31, 1997; and
(c) The description of the Company's Common Stock, par value $.01 per
share (the "Common Stock"), contained in the registration statement filed by the
Company on November 3, 1993, as amended on September 16, 1994, on Form 8-A under
Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), including any subsequent amendment or any report or other filing with the
Securities and Exchange Commission updating such description.
In addition, all documents subsequently filed by the Company pursuant
to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of
this Registration Statement, prior to the filing of a post-effective amendment
to this Registration Statement which indicates that all securities offered
hereby have been sold or which deregisters all such securities then remaining
unsold, shall be deemed to be incorporated herein by reference and to be a part
hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Registration
Statement.
2
<PAGE>
ITEM 4. DESCRIPTION OF SECURITIES.
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
None.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to Section 145 of the General Corporation Law of the
State of Delaware which provides for indemnification of directors and officers.
Under its Certificate of Incorporation and Bylaws, the Company will,
to the full extent permitted by the General Corporation Law of the State of
Delaware, indemnify each person made or threatened to be made a party to any
civil, criminal or investigative action, suit or proceeding by reason of the
fact that such person is or was a director, officer or employee or agent of the
Company or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise. The Company's Certificate of Incorporation and Bylaws
state that the indemnification provided therein is not exclusive. The Company
has also entered into an Indemnification Agreement with each director and
certain officers which provides that the Company will indemnify the director or
officer in connection with any such actions, suits or proceedings.
The Company has in force an insurance policy under which its directors
and officers are insured, within the limits and subject to the limitations in
the policy, against certain expenses in connection with the defense of such
actions, suits or proceedings to which they are parties by reason of being or
having been directors or officers.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
4.1 Advanced Logic Research, Inc. Flexible Stock Incentive Plan
4.2 Advanced Logic Research, Inc. 1996 Stock Option/Stock Issuance
Plan
4.3 Agreement and Plan of Merger, dated as of June 19, 1997, among
Advanced Logic Research, Inc., the Company and Deuce
Acquisition Corporation
4.4 Specimen Certificate for the Company's Common Stock (filed as
Exhibit 4.1 to Amendment No. 2 the Company's Registration
Statement on Form S-1 (No. 33-70618) and incorporated herein by
reference)
5.1 Opinion of William M. Elliott, Esq., Senior Vice President,
General Counsel and Corporate Secretary
3
<PAGE>
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of William M. Elliott, Esq., Senior Vice President,
General Counsel and Corporate Secretary (included in his
opinion filed as Exhibit 5.1)
24.1 Powers of Attorney
ITEM 9. UNDERTAKINGS.
(a) The Company hereby undertakes:
(1) To file, during any period in which offers or sales are
being made of the securities registered hereby, a post-effective
amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in this Registration
Statement; and
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such
information in this Registration Statement;
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(b) The Company hereby undertakes that, for purposes of determining
any liability under the Securities Act, each filing of the Company's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of the annual report of the employee benefit plans
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in this Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the
4
<PAGE>
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Company certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of North Sioux City, South Dakota as of the 8th day
of August, 1997.
GATEWAY 2000, INC.
By: /s/ David J. McKittrick
------------------------------------
David J. McKittrick
Senior Vice President, Chief
Financial Officer and Treasurer
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
* Chairman of the Board and Chief August 8, 1997
- ------------------------------ Executive Officer (Principal Executive
Theodore W. Waitt Officer and Director)
* President, Chief Operating Officer August 8, 1997
- ------------------------------ and Director
Richard D. Snyder
Senior Vice President, Chief Financial August 8, 1997
- ------------------------------ Officer and Treasurer (Principal
David J. McKittrick Financial Officer and Principal
Accounting Officer)
* Director August 8, 1997
- ------------------------------
Charles G. Carey
* Director August 8, 1997
- ------------------------------
James W. Cravens
* Director August 8, 1997
- ------------------------------
George H. Krauss
* Director August 8, 1997
- ------------------------------
Douglas L. Lacey
* Director August 8, 1997
- ------------------------------
James F. McCann
* By: /s/ William M. Elliott
-------------------------
William M. Elliott
Attorney-in-Fact
</TABLE>
6
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
4.1 Advanced Logic Research, Inc. Flexible Stock Incentive
Plan
4.2 Advanced Logic Research, Inc. 1996 Stock Option/Stock
Issuance Plan
4.3 Agreement and Plan of Merger, dated as of June 19,
1997, among Advanced Logic Research, Inc., the Company
and Deuce Acquisition Corporation
4.4 Specimen Certificate for the Company's Common Stock
(filed as Exhibit 4.1 to Amendment No. 2 the Company's
Registration Statement on Form S-1 (No. 33-70618) and
incorporated herein by reference)
5.1 Opinion of William M. Elliott, Esq., Senior Vice
President, General Counsel and Corporate Secretary
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of William M. Elliott, Esq., Senior Vice
President, General Counsel and Corporate Secretary
(included in his opinion filed as Exhibit 5.1)
24.1 Powers of Attorney
<PAGE>
EXHIBIT 4.1
ADVANCED LOGIC RESEARCH, INC.
FLEXIBLE STOCK INCENTIVE PLAN
-----------------------------
1. Establishment, Purpose, and Definitions.
---------------------------------------
(a) There is hereby adopted the Flexible Stock Incentive Plan (the
"Plan") of Advanced Logic Research, Inc. (the "Company"). The Plan shall have
three components: a stock option component, a stock bonus/stock purchase
component and a stock appreciation rights component.
(b) The purpose of this Plan is to provide incentives to selected
individuals ("Participants") for increased efforts and successful achievements
on behalf of or in the interests of the Company and its affiliates and to
maximize the rewards due them for such increased efforts and successful
achievements.
(c) The stock option component is intended to provide a means whereby
Participants may be given an opportunity to purchase shares of Stock (as defined
in Paragraph 3 of the Plan) of the Company (the "Stock") pursuant to (i) options
which may qualify as incentive stock options under Section 422A of the Internal
Revenue Code as amended from time to time (referred to as "incentive stock
options"), or (ii) options which may not so qualify (referred to as
"nonqualified stock options"). The stock bonus/stock purchase component is
intended to provide a means whereby Participants may receive bonuses of Stock or
the right to purchase Stock, including Stock subject to such restrictions, if
any, imposed by the committee of the Board of Directors of the Company charged
with administering the Plan (the "Committee"). The stock appreciation rights
component is intended to provide a means whereby Participants may receive
compensation based on appreciation in the value of the Stock. Stock
appreciation rights may be granted either separately or in tandem with stock
options, as determined by the Committee.
(d) The term "affiliates" as used in the Plan means parent or
subsidiary corporations, as defined in Section 425(e) and (f) of the Internal
Revenue Code (but substituting "the Company" for "employer corporation"),
including parents or subsidiaries which become such after adoption of the Plan.
2. Administration of the Plan.
--------------------------
(a) The Plan shall be administered by the Committee. The Committee
shall consist of at least three members of the Board of Directors of the Company
(the "Board") or such lesser number of members of the Board as permitted by Rule
16b-3 promulgated under the Securities Exchange Act of 1934. None of the
members of the Committee shall be, while serving on the Committee or for one
year thereafter, or shall have been for the year preceding appointment to the
Committee, eligible to receive a grant or award under the Plan or any other plan
of the Company or its affiliates under which the participants are entitled to
acquire Stock (including
<PAGE>
restricted Stock), stock options, stock bonuses, related rights or stock
appreciation rights of the Company or any of its affiliates. Members of the
Committee shall serve at the pleasure of the Board.
(b) The Committee may from time to time determine which employees of
the Company or its affiliates or other individuals shall be granted options,
Stock bonuses, stock appreciation rights or the right to purchase Stock under
the Plan, the terms thereof, and the number of shares for which an option or
options, bonuses of Stock, rights to purchase Stock and stock appreciation
rights may be granted. The Committee may, in its discretion, at the time of
granting bonuses of Stock or rights to purchase Stock impose such restrictions
on transfer of the shares of Stock covered thereby (such as, without limitation,
permitting transfer only in installments over a period of years or following
retirement, death or termination of employment) as it may deem to be in the best
interests of the Company and/or the Participant concerned, or the Participant's
successor-in-interest, and in so doing may subject such shares to a substantial
risk of forfeiture while so restricted.
(c) If restrictions on transfer of Stock are imposed, the Committee
may, in its sole discretion, accelerate, in whole or in part, the time for
lapsing of the restrictions on disposition of shares of such Stock in the event
that any financial hardship may arise with respect to a Participant who has been
issued restricted Stock hereunder, or any successor-in-interest of such
Participant (including, without limitation, any financial hardship to a
successor-in-interest of such Participant occasioned by death taxes becoming
payable as a result of such Participant's death), or in the event of any change
in existing tax or other applicable laws, regulations or rulings which would
have a substantial adverse effect on Participant's treatment of the additional
compensation provided for herein for tax purposes thereby resulting in financial
hardship to a Participant.
(d) If restrictions on transfer of Stock are imposed, the certificates
evidencing such shares of Stock awarded hereunder, although issued in the name
of the Participant concerned, shall be held by the Company or a third party
designated by the Committee in escrow subject to delivery to the Participant or
to the Company at such times and in such amounts as shall be directed by the
Board under the terms of this Plan.
(e) The Committee shall have the sole authority, in its absolute
discretion, to adopt, amend, and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan, to construe and
interpret the Plan, the rules and regulations, and the instruments evidencing
options, bonuses of Stock, rights to purchase Stock and stock appreciation
rights granted under the Plan and to make all other determinations deemed
necessary or advisable for the administration of the Plan. All decisions,
determinations, and interpretations of the Board shall be binding on all
Participants in the Plan.
3. Stock Subject to the Plan.
-------------------------
(a) Stock shall mean Common Stock, without par value, of the Company
or such stock as the Common Stock may be changed as contemplated by subparagraph
3(c) below.
2.
<PAGE>
(b) Options, bonuses of Stock or rights to purchase Stock may be
granted under the Plan from time to time to eligible persons to purchase an
aggregate of not more than the greater of 5% of authorized shares of Stock or
15% of shares outstanding as of the close of business on the last day of the
Company's prior fiscal year. Notwithstanding the foregoing, the number of
shares available for grants of incentive stock options shall be limited to 15%
of the authorized shares on the date this Plan is adopted. If any option is
surrendered for cash or for any other reason (except surrender for shares of
Stock) or ceases to be exercisable in whole or in part, the shares which were
subject to such option but as to which the option had not been exercised shall
continue to be available under the Plan. Any shares of Stock forfeited to the
Company pursuant to the Plan shall continue to be available under the Plan.
(c) If there shall be any change in the Stock subject to the Plan,
including Stock subject to any option granted hereunder, through merger,
consolidation, reorganization, reincorporation, or other similar change in the
corporate structure of the Company, appropriate adjustments may be made by the
Committee in order to preserve but not to increase the benefits to Participants,
including adjustments in the aggregate number of shares subject to the Plan and
the number of shares and the price per share subject to outstanding options and
outstanding rights to purchase Stock granted hereunder. Consistent with the
foregoing, in the event that the outstanding Common Stock of the Company is
changed into another class or series of capital stock of the Company,
outstanding options or rights to purchase Stock granted under the Plan shall
become options or rights to purchase such other class or series and the
provisions of this subparagraph 3(c) shall apply to such new class or series.
4. Eligibility. Persons who shall be eligible to have granted to
-----------
them options, Stock bonuses, rights to purchase Stock, or stock appreciative
rights provided for by the Plan shall be such individuals the service of the
Company or its affiliates as the Committee in its discretion determines, should
be awarded such incentives given the best interests of the Company; provided,
however, that (i) incentive stock options may only be granted to employees of
the Company or its affiliates, (ii) any person holding 10% or more of the
Company's outstanding Stock or any affiliate of any such 10% shareholder shall
not be eligible to receive options, Stock bonuses, rights to purchase Stock or
stock appreciation rights under the Plan; members of the Committee shall not be
eligible to receive options, Stock bonuses, rights to purchase Stock or stock
appreciation rights while serving on the Committee and for one year thereafter.
5. Exercise Price for Options Granted under the Plan; Stock Purchase
-----------------------------------------------------------------
Price. The exercise price of the Stock covered by each incentive stock option
- -----
shall not be less than the per-share fair market value of such Stock on the date
the option is granted. The price of an incentive stock option, of a
nonqualified stock option, or other right to purchase Stock granted under the
Plan shall be subject to adjustment to the extent provided in subparagraph 3(c)
above.
The exercise price of the Stock covered by a nonqualified stock option
or the purchase price for other rights to purchase stock (other than an
incentive stock option) granted under the Plan shall be the price determined by
the Committee on the date the option or right is granted, but in no event less
than 85% of the per-share fair market value of the Stock on the grant date.
Stock bonuses may be granted by the Committee under the Plan without the payment
of consideration, in any form by the Participant, or such consideration as is
necessary to comply with applicable law.
3.
<PAGE>
6. Terms and Conditions of Options; Stock Bonuses and Rights to
------------------------------------------------------------
Purchase Restricted Stock.
- -------------------------
(a) Each option granted pursuant to the Plan shall be evidenced by a
written stock option agreement executed by the Company and the person to whom
such option is granted. The option agreement shall designate whether the option
is an incentive stock option or a nonqualified stock option. If restrictions
are imposed on Stock bonuses or rights to purchase Stock, the Stock issued
thereunder shall be subject to a written agreement executed by the Company and
the Participant to whom the Stock bonus or right to purchase Stock is granted.
(b) The term of each stock option shall be for no more than ten years
and no stock option shall be granted more than ten years after the earlier of
(i) the date the Plan was adopted or (ii) the date the Plan was approved by the
shareholders. The Plan will in all events terminate on ____________.
(c) In the case of incentive stock options, the aggregate fair market
value (determined as of the time such option is granted) of the Stock with
respect to incentive stock options which are exercisable for the first time by
such individual during any calendar year (under this Plan and any other plans of
the Company, its parent or subsidiaries, if any) shall not exceed the amount
specified in Section 422A(d) of the Internal Revenue Code, as amended, or any
successor provision in effect at the time an incentive stock option becomes
exercisable.
(d) The stock option agreement or agreement covering Stock issued
under the Plan may contain such other terms, provisions, and conditions as may
be determined by the Committee and not inconsistent with this Plan. If an
option, or any part thereof, is intended to qualify as an incentive stock
option, the stock option agreement shall contain those terms and conditions
which are necessary to so qualify it. No option or stock appreciation right
granted under the Plan may be exercised prior to six months after the date of
grant nor may any Stock bonus or shares of Stock acquired pursuant to any other
right to purchase Stock under the Plan be sold prior to six months after the
date such Stock was acquired by a Participant.
7. Use of Proceeds. Cash proceeds realized from the sale of Stock
---------------
pursuant to Stock issued under the Plan shall constitute general funds of the
Company.
8. Amendment, Suspension or Termination of the Plan.
------------------------------------------------
(a) The Board may at any time suspend or terminate the Plan, and may
amend it from time to time in such respects as the Board may deem advisable
provided that such amendment, suspension or termination complies with all
applicable state and federal requirements and requirements of any stock exchange
on which the stock is then listed, including any applicable requirement that the
Plan or an amendment to the Plan be approved by the shareholders.
(b) No option, Stock bonus, right to purchase Stock or stock
appreciation right may be granted during any suspension or after the termination
of the Plan, and no amendment, suspension or termination of the Plan shall,
without the Participant's consent, alter or impair any rights or obligations
under any option, Stock bonus, right to purchase Stock or stock appreciation
4.
<PAGE>
right granted under the Plan; provided, however, that the Board shall have the
right to amend, suspend or terminate any option, Stock bonus, right to purchase
restricted stock or stock appreciation right to (a) convert outstanding
incentive stock options into nonqualified stock options, (b) provide for a
forfeiture of the Participant's rights in the event the Participant competes
with the Company or (c) if the Participant is an employee, in the event the
Participant is terminated for cause.
9. Assignability of Options. Each option or right to purchase Stock
------------------------
granted pursuant to this Plan shall, during the Participant's lifetime, be
exercisable only by him, and neither the option nor any right to purchase Stock
shall be transferable by the Participant by operation of law or otherwise other
than by will or the laws of descent and distribution.
10. Payment Upon Exercise. Payment of the purchase price upon exercise
---------------------
of any option or right to purchase Stock granted under this Plan shall be made
in whole or in part with (i) cash, (ii) stock or stock rights held by the
Participant, (iii) notes, or (iv) such other valuable consideration as the
Committee, in its discretion, determines and is consistent with the Plan's
purpose and applicable law. Any Stock used to exercise options to purchase Stock
shall be valued at its fair market value on the date of the exercise of the
option or the date the Stock is purchased. Any notes used to exercise options or
to purchase Stock shall be full recourse, interest-bearing obligations
containing such terms as the Committee shall determine.
11. Stock Appreciation Rights.
-------------------------
(a) The Committee may, under such terms and conditions as it deems
appropriate, authorize the issuance of stock appreciation rights evidenced by a
written stock appreciation right agreement (which, in cases of tandem options,
may be part of the stock option agreement to which the right relates) executed
by the Company and the person to whom such right is granted. The stock
appreciation right agreement may contain such terms, provisions and conditions
as may be determined by the Committee and not inconsistent with the Plan. In
addition, the Committee may authorize the surrender by an optionee of all or
part of an unexercised option and authorize a payment in consideration thereof
of an amount equal to the difference obtained by subtracting the option price of
the shares then subject to exercise under such option from the fair market value
of the Stock represented by such shares on the date of surrender, provided that
the Committee determines that such settlement is consistent with the purpose of
the Plan. Such payment may be made in shares of Stock valued at their fair
market value on the date of surrender of such option or in cash, or partly in
shares and partly in cash. Acceptance of such surrender and the manner of
payment shall be in the discretion of the Committee.
(b) The Committee shall have the authority in its discretion to grant
the holder of any option the right ("Cash-out Right") to surrender all or part
of his unexercised option ("Related Option") to the Company for cancellation
under the circumstances set forth below (whether or not such Related Option is
then exercisable) and to receive upon such surrender the cash payment described
in subparagraph (b)(i) below; provided that no Related Option shall be
surrendered pursuant to a Cash-out Right until the expiration of six months from
the date of grant of such Cash-out Right. A Cash-out Right may not be granted
except in connection with a Related Option. A Cash-out Right may be granted
either at the time of the grant of the Related Option or at any time thereafter
during its term. Upon the surrender of a Related Option pursuant to a Cash-out
5.
<PAGE>
Right, the Related Option shall cease to be exercisable to the extent of the
shares of Stock as to which the Related Option is surrendered and cancelled.
Upon the exercise or termination of a Related Option, a Cash-out Right shall
concurrently cease to be available to the optionee to the extent of the shares
of stock as to which the Related Option is exercised or terminated. Each Cash-
out Right grant shall be on such terms and conditions as the Committee may
prescribe that are not inconsistent with this Plan and shall be evidenced by the
stock option agreement contemplated by paragraph 6.
(i) The term "Offer" as used in this subparagraph 11(b) shall mean
any tender offer or exchange offer for shares of Stock, other than one made by
the Company. An Offer shall be deemed to have commenced for the purposes of this
Plan when all of the material terms of the tender offer or exchange offer shall
have been publicly disclosed or on such earlier date as shall be determined by
the Committee.
(ii) The term "Reorganization Agreement" as used in this subparagraph
11(b) shall mean a definitive agreement for the merger, consolidation or other
similar reorganization of the Company, involving a change in or an exchange of
the Stock, or a definitive agreement for the sale of all or substantially all of
the assets of the Company.
(iii) The term "Transaction Price per Share" as used in this
subparagraph 11(b) shall mean the highest price per share of Stock (i) paid in
the Offer or (ii) provided for in the Reorganization Agreement during the period
beginning on the 60th day prior to the date on which the Related Option is
surrendered pursuant to the Cash-out Right and ending on such date of surrender.
Any securities or property that are part or all of the consideration paid for
Stock in the Offer or provided for in exchange for Stock pursuant to the
Reorganization Agreement shall be valued in determining the Transaction Price
per Share at the valuation placed on such securities or property by the
Committee.
(iv) In the case of an Offer, an optionee may surrender his Related
Option pursuant to a Cash-out Right only during the period beginning on the
first day following the date of public disclosure of the first purchase of
shares of Stock pursuant to the Offer and ending on the 30th day following such
date. Under a Cash-out Right, an optionee may surrender his or her Related
Option in whole or in part; provided that, in its discretion, the Committee may
limit the percentage of shares as to which such Related Option is surrendered to
the lesser of (i) 50% or (ii) the percentage that the number of shares of Stock
purchased in the Offer bears to the total number of shares of Stock tendered or
exchanged in the Offer (including as "Stock" for such purposes any shares of
Stock represented by securities of the Company convertible into Stock that are
tendered or exchanged in the Offer).
(v) In the case of a Reorganization Agreement, an optionee may
surrender his Related Option pursuant to a Cash-out Right only during the period
(i) beginning with the later of the execution of the Reorganization Agreement or
approval, if required, of the Reorganization Agreement by the Company's
shareholders and appropriate regulatory agencies, and (ii) ending with the
earlier of the consummation of the transactions contemplated by the
Reorganization Agreement or the termination of such Reorganization Agreement.
6.
<PAGE>
(vi) Upon a proper surrender by an optionee of his Related Option for
cancellation pursuant to a Cash-out Right, the optionee shall receive a cash
payment with respect to each share of Stock covered by the Cash-out Right equal
to the difference between (i) the Transaction Price per Share and (ii) the per-
share exercise price of the surrendered Related Option.
12. Withholding Taxes.
-----------------
(a) Shares of Stock issued hereunder shall be delivered to a
Participant only upon payment by such person to the Company of the amount of any
withholding tax which may be imposed thereon under the provisions of the
Internal Revenue Code as then in effect or any law of any other taxing
jurisdiction requiring such withholding tax.
(b) The Committee may, under such terms and conditions as it deems
appropriate, authorize a Participant to satisfy withholding tax obligations
under this paragraph 12 by electing to have the Company withhold from the Stock
to be issued to the Participant shares of Stock having a fair market value equal
to the amount of the withholding tax required to be withheld.
7.
<PAGE>
EXHIBIT "A"
Amendments to
-------------
Flexible Stock Incentive Plan
-----------------------------
The following sections to the Advanced Logic Research, Inc. Flexible Stock
Incentive Plan are hereby amended to read in their entirety as follows:
2. Administration of the Plan.
--------------------------
(a) The Plan shall be administered by the Committee. The Committee
shall consist of two or more members of the Board of Directors of the Company
(the "Board") or such lesser number of members of the Board as permitted by Rule
16b-3 promulgated under the Securities Exchange Act of 1934, as amended ("Rule
16b-3"). None of the members of the Committee shall receive, while serving on
the Committee, or during the year preceding appointment to the Committee, a
grant or award of equity securities under (i) the Plan or (ii) any other plan of
the Company or its affiliates under which the participants are entitled to
acquire Stock (including restricted Stock), stock options, stock bonuses,
related rights or stock appreciation rights of the Company or any of its
affiliates, other than pursuant to transactions in any such other plan which do
not disqualify a director from being a disinterested person under Rule 16b-3.
Members of the Committee shall serve at the pleasure of the Board.
3. Stock Subject to the Plan.
-------------------------
(b) Options, bonuses of Stock or rights to purchase Stock may be
granted under the Plan from time to time to eligible persons to purchase an
aggregate of not more than the greater of 5% of authorized shares of Stock or
15% of shares outstanding as of the close of business on the last day of the
Company's prior fiscal year. Notwithstanding the foregoing, the number of shares
available for grants of incentive stock options shall be limited to 15% of the
authorized shares on the date this Plan is adopted. Should one or more
outstanding options under this Plan expire or terminate for any reason prior to
exercise in full, then the shares subject to the portion of each option not so
exercised shall be available for subsequent option grant or share issuance under
the Plan. Shares subject to any option or portion thereof surrendered or
cancelled in accordance with Paragraph 10 or 12, repurchased by the Company
pursuant to its repurchase rights under the Plan or otherwise surrendered for
cancellation under Paragraph 12 shall not be available for subsequent option
grant or stock issuance under the Plan.
6. Terms and Conditions of Options; Stock Bonuses and Rights to
------------------------------------------------------------
Purchase Restricted Stock.
-------------------------
(d) The stock option agreement or agreement covering Stock issued
under the Plan may contain such other terms, provisions, and conditions as may
be determined by the Committee and not inconsistent with this Plan. If an
option, or any part thereof, is intended to qualify as an incentive stock
option, the stock option agreement shall contain those terms and
<PAGE>
conditions which are necessary to so qualify it. No option or stock
appreciation right granted under the Plan may be exercised prior to six months
after the date of grant nor may any Stock bonus or shares of Stock acquired
pursuant to any other right to purchase Stock under the Plan be sold prior to
six months after the date such Stock was acquired by a Participant who is at the
time of such grant or issuance required to file reports under Section 16(a) of
the Securities Exchange Act of 1934, as amended.
9. Assignability of Options. Each option or right to purchase Stock
------------------------
granted pursuant to this Plan shall, during the Participant's lifetime, be
exercisable only by him, and neither the option nor any right to purchase Stock
shall be transferable by the Participant by operation of law or otherwise other
than by will, the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Internal Revenue Code, or Title I of
the Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder, or otherwise as permitted by Rule 16b-3.
10. Payment Upon Exercise. Payment of the purchase price upon exercise of
---------------------
any option or right to purchase Stock granted under this Plan shall be made in
whole or in part with (i) cash or; (ii) such other consideration as the
Committee, in its discretion, determines (including, without limitation, Stock
or Stock rights held by the Participant, withholding of shares otherwise
delivered upon exercise of an option and/or notes) and is consistent with the
Plan's purpose and applicable law. Any Stock used to exercise options to
purchase Stock (including Stock withheld upon the exercise of an option to pay
the purchase price of the shares of Stock as to which the option is exercised)
shall be valued at its fair market value on the date of the exercise of the
option. Any notes used to exercise options or to purchase Stock shall be full
recourse, interest-bearing obligations containing such terms as the Committee
shall determine. If accepted by the Committee in its discretion, such
consideration also may be paid through a broker-dealer sale and remittance
procedure pursuant to which the Participant (I) shall provide irrevocable
written instructions to a designated brokerage firm to effect the immediate sale
of the purchased shares and remit to the Company, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate option
price payable for the purchased shares plus all applicable Federal and State
income and employment taxes required to be withheld by the Company in connection
with such purchase and (II) shall provide written directives to the Company to
deliver the certificates for the purchased shares directly to such brokerage
firm in order to complete the sale transaction.
12. Withholding Taxes.
-----------------
(b) The Committee may, under such terms and conditions as it deems
appropriate, authorize a Participant to satisfy withholding tax obligations
under this Paragraph 12 by delivering shares of Stock or by electing to have the
Company withhold from the Stock to be issued to the Participant shares of Stock,
in each case having a fair market value equal to the amount of the withholding
tax required to be withheld.
2.
<PAGE>
EXHIBIT "B"
Amendment #2 to
---------------
Advanced Logic Research, Inc.
-----------------------------
Flexible Stock Incentive Plan
-----------------------------
The Advanced Logic Research, Inc. Flexible Stock Incentive Plan (the
"Plan") is hereby amended, effective January 4, 1995 as follows:
1. Section V.C. of Article One is hereby amended in its entirety to
read as follows:
C. Should any change be made to the Common Stock issuable under
the Plan by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, then appropriate adjustments shall be made to (i) the maximum
number and/or class of securities issuable under the Plan, (ii) the maximum
number and/or class of securities for which any one individual participating in
the Plan may be granted stock options, separately exercisable stock appreciation
rights and direct stock issuances in the aggregate over the term of the Plan,
(iii) the number and/or class of securities for which automatic option grants
are to be subsequently made per non-employee Board member under the Automatic
Option Grant Program, (iv) the number and/or class of securities and price per
share in effect under each option outstanding under either the Discretionary
Option Grant or Automatic Option Grant Program and (v) the number and/or class
of securities and price per share in effect under each outstanding option
incorporated into this Plan from the 1990 Plan. Such adjustments to the
outstanding options are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
2. There is hereby added a new subsection D to Section V of Article
One of the Plan to read as follows:
D. From and after March 31, 1994, in no event may any one
individual participating in the Plan be granted stock options, separately
exercisable stock appreciation rights and receive direct stock issuances
exceeding 500,000 shares in the aggregate over the term of the Plan, subject to
periodic adjustment for certain changes in the Company's capital structure in
accordance with the provisions of this Section V.C.
3. Except as modified by this plan amendment, the terms and
provisions of the Advanced Logic Research, Inc. Flexible Stock Incentive Plan as
in effect on the date hereof shall continue in full force and effect.
IN WITNESS WHEREOF, Advanced Logic Research, Inc. has caused this plan
amendment to be executed on its behalf by its duly-authorized officer effective
as of January 4, 1995.
<PAGE>
ADVANCED LOGIC RESEARCH, INC.
By: _____________________________
Title: _____________________________
2.
<PAGE>
EXHIBIT 4.2
ADVANCED LOGIC RESEARCH, INC.
1996 STOCK OPTION/STOCK ISSUANCE PLAN
-------------------------------------
ARTICLE ONE
GENERAL PROVISIONS
------------------
I. PURPOSE OF THE PLAN
This 1996 Stock Option/Stock Issuance Plan is intended to promote the
interests of Advanced Logic Research, Inc., a Delaware corporation, by providing
eligible persons with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two separate equity programs:
(i) the Option Grant Program under which eligible persons
may, at the discretion of the Plan Administrator, be granted options to
purchase shares of Common Stock, and
(ii) the Stock Issuance Program under which eligible persons
may, at the discretion of the Plan Administrator, be issued shares of
Common Stock directly, either through the immediate purchase of such shares
or as a bonus for services rendered the Corporation (or any Parent or
Subsidiary).
B. The provisions of Articles One and Four shall apply to both
equity programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority to
administer the Plan with respect to Section 16 Insiders. Administration of the
Plan with respect to all other persons eligible to participate may, at the
Board's discretion, be vested in the Primary Committee or a Secondary Committee,
or the Board may retain the power to administer the Plan with respect to all
such persons.
<PAGE>
B. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions of
any Secondary Committee and reassume all powers and authority previously
delegated to such committee.
C. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority to
establish such rules and regulations as it may deem appropriate for proper
administration of the Option Grant and Stock Issuance Programs and to make such
determinations under, and issue such interpretations of, the provisions of such
programs and any outstanding options or stock issuances thereunder as it may
deem necessary or advisable. Decisions of the Plan Administrator within the
scope of its administrative functions under the Plan shall be final and binding
on all parties who have an interest in the Option Grant or Stock Issuance
Program under its jurisdiction or any option or stock issuance thereunder.
D. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
IV. ELIGIBILITY
A. The persons eligible to participate in the Option Grant and Stock
Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board of
directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who
provide services to the Corporation (or any Parent or Subsidiary).
B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority (subject to the
provisions of the Plan) to determine, (i) with respect to the option grants
under the Option Grant Program, which eligible persons are to receive option
grants, the time or times when such option grants are to be made, the number of
shares to be covered by each such grant, the status of the granted option as
either an Incentive Option or a Non-Statutory Option, the time or times at which
each option is to become exercisable, the vesting schedule (if any) applicable
to the option shares and the maximum term for which the option is to remain
outstanding and (ii) with respect to stock issuances under the Stock Issuance
Program, which eligible persons are to receive stock issuances, the time or
times when such issuances are to be made, the number of shares to be issued to
each Participant, the vesting schedule (if any) applicable to the issued shares
and the consideration to be paid by the Participant for such shares.
2.
<PAGE>
C. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Option Grant Program or to effect stock
issuances in accordance with the Stock Issuance Program.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
which may be issued over the term of the Plan shall initially not exceed
1,746,580 shares. Such authorized share reserve is comprised of (i) the number
of shares which remain available for issuance, as of the Plan Effective Date,
under the Predecessor Plan as last approved by the Corporation's stockholders,
including the shares subject to the outstanding options incorporated into the
Plan, plus (ii) an additional increase of 1,500,000 shares authorized by the
Board, subject to stockholder approval.
B. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 250,000 shares of Common Stock per calendar year.
C. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the options
(including any options incorporated from the Predecessor Plan) expire or
terminate for any reason prior to exercise in full or (ii) the options are
cancelled in accordance with the cancellation-regrant provisions of Article Two.
Unvested shares issued under the Plan and subsequently repurchased by the
Corporation, at the original issue price paid per share, pursuant to the
Corporation's repurchase rights under the Plan shall be added back to the number
of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants or direct stock issuances under the Plan. However, should the exercise
price of an option under the Plan be paid with shares of Common Stock or should
shares of Common Stock otherwise issuable under the Plan be withheld by the
Corporation in satisfaction of the withholding taxes incurred in connection with
the exercise of an option or the vesting of a stock issuance under the Plan,
then the number of shares of Common Stock available for issuance under the Plan
shall be reduced by the gross number of shares for which the option is exercised
or which vest under the stock issuance, and not by the net number of shares of
Common Stock issued to the holder of such option or stock issuance.
D. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and/or class of securities issuable
under the Plan, (ii) the number and/or class of securities for which any one
person may be granted options, separately exercisable stock appreciation rights
and direct stock issuances per calendar year and (iii) the number and/or class
of securities and the exercise price per share in effect under each outstanding
option (including any option incorporated from the Predecessor Plan) in order to
prevent the dilution or enlargement of benefits thereunder. The adjustments
determined by the Plan Administrator shall be final, binding and conclusive.
3.
<PAGE>
ARTICLE TWO
OPTION GRANT PROGRAM
--------------------
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
--------
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. Exercise Price.
--------------
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Four and the documents evidencing the option, be payable in one or more
of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(iii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant to which
the Optionee shall concurrently provide irrevocable written instructions to
(a) a Corporation-designated brokerage firm to effect the immediate sale of
the purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to be
withheld by the Corporation by reason of such exercise and (b) the
Corporation to deliver the certificates for the purchased shares directly
to such brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. Exercise and Term of Options. Each option shall be exercisable
----------------------------
at such time or times, during such period and for such number of shares as shall
be determined by the Plan Administrator and set forth in the documents
evidencing the option. However, no option shall have a term in excess of ten
(10) years measured from the option grant date.
4.
<PAGE>
C. Effect of Termination of Service.
--------------------------------
1. The following provisions shall govern the exercise of
any options held by the Optionee at the time of cessation of Service or death:
(i) Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain exercisable for
such period of time thereafter as shall be determined by the Plan
Administrator and set forth in the documents evidencing the option, but no
such option shall be exercisable after the expiration of the option term.
(ii) Any option exercisable in whole or in part by
the Optionee at the time of death may be exercised subsequently by the
personal representative of the Optionee's estate or by the person or
persons to whom the option is transferred pursuant to the Optionee's will
or in accordance with the laws of descent and distribution.
(iii) During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more than the
number of vested shares for which the option is exercisable on the date of
the Optionee's cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be outstanding for any vested shares
for which the option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Service, terminate and cease
to be outstanding to the extent the option is not otherwise at that time
exercisable for vested shares.
(iv) Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to be outstanding.
(v) In the event of an Involuntary Termination
following a Corporate Transaction,the provisions of Section III of this
Article Two shall govern the period for which the outstanding options are
to remain exercisable following the Optionee's cessation of Service and
shall supersede any provisions to the contrary in this section.
2. The Plan Administrator shall have the discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
(i) extend the period of time for which the option
is to remain exercisable following the Optionee's cessation of Service from
the period otherwise in effect for that option to such greater period of
time as the Plan Administrator shall deem appropriate, but in no event
beyond the expiration of the option term, and/or
5.
<PAGE>
(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of vested shares of Common Stock for which such option is
exercisable at the time of the Optionee's cessation of Service but also
with respect to one or more additional installments in which the Optionee
would have vested under the option had the Optionee continued in Service.
D. Stockholder Rights. The holder of an option shall have no
------------------
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. Repurchase Rights. The Plan Administrator shall have the
-----------------
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares,
the Corporation shall have the right to repurchase, at the exercise price paid
per share, any or all of those unvested shares. The terms upon which such
repurchase right shall be exercisable (including the period and procedure for
exercise and the appropriate vesting schedule for the purchased shares) shall be
established by the Plan Administrator and set forth in the document evidencing
such repurchase right.
F. Limited Transferability of Options. During the lifetime of the
----------------------------------
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. However, a Non-Statutory
Option may, in connection with the Optionee's estate plan, be assigned in whole
or in part during the Optionee's lifetime to one or more members of the
Optionee's immediate family or to a trust established exclusively for one or
more such family members. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the option pursuant to
the assignment. The terms applicable to the assigned portion shall be the same
as those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Four shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options
when issued under the Plan shall not be subject to the terms of this Section II.
---
A. Eligibility. Incentive Options may only be granted to Employees.
-----------
B. Exercise Price. The exercise price per share shall not be less
--------------
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.
C. Dollar Limitation. The aggregate Fair Market Value of the shares
-----------------
of Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one (1)
6.
<PAGE>
calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two (2) or more such options which
become exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.
D. 10% Stockholder. If any Employee to whom an Incentive Option is
---------------
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. However, an outstanding option shall NOT so accelerate
if and to the extent: (i) such option is, in connection with the Corporate
Transaction, either to be assumed by the successor corporation (or parent
thereof) or to be replaced with a comparable option to purchase shares of the
capital stock of the successor corporation (or parent thereof), (ii) such option
is to be replaced with a cash incentive program of the successor corporation
which preserves the spread existing on the unvested option shares at the time of
the Corporate Transaction and provides for subsequent payout in accordance with
the same vesting schedule applicable to such option or (iii) the acceleration of
such option is subject to other limitations imposed by the Plan Administrator at
the time of the option grant. The determination of option comparability under
clause (i) above shall be made by the Plan Administrator, and its determination
shall be final, binding and conclusive.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are to be assigned to the
successor corporation (or parent thereof) in connection with such Corporate
Transaction or (ii) such accelerated vesting is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan following the consummation of
such Corporate Transaction, (ii) the exercise price payable per share under each
outstanding option, provided the aggregate exercise price payable for such
--------
securities shall remain the same and (iii) the maximum number of
7.
<PAGE>
securities and/or class of securities for which any one person may be granted
stock options, separately exercisable stock appreciation rights and direct stock
issuances under the Plan.
E. Notwithstanding Section III.A. of this Article Two, the Plan
Administrator shall have the discretionary authority, exercisable either at the
time the option is granted or at any time while the option remains outstanding,
to provide for the automatic acceleration of one or more outstanding options
under the Option Grant Program upon the occurrence of a Corporate Transaction,
whether or not those options are to be assumed or replaced in the Corporate
Transaction. In addition, notwithstanding Section III.B. of this Article Two,
the Plan Administrator may provide that one or more of the Corporation's
outstanding repurchase rights with respect to shares held by the Optionee at the
time of such Corporate Transaction shall immediately terminate, and the shares
subject to those terminated repurchase rights shall accordingly vest in full,
even in the event the options are to be assumed.
F. The Plan Administrator shall have full power and authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to provide for the automatic acceleration of one or
more outstanding options under the Option Grant Program in the event the
Optionee's Service subsequently terminates by reason of an Involuntary
Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of any Corporate Transaction in which those options
are assumed or replaced and do not otherwise accelerate. Any options so
accelerated shall remain exercisable for fully-vested shares until the earlier
-------
of (i) the expiration of the option term or (ii) the expiration of the one (1)-
year period measured from the effective date of the Involuntary Termination. In
addition, the Plan Administrator may provide that one or more of the
Corporation's outstanding repurchase rights with respect to shares held by the
Optionee at the time of such Involuntary Termination shall immediately
terminate, and the shares subject to those terminated repurchase rights shall
accordingly vest in full.
G. The Plan Administrator shall have full power and authority
exercisable, either at the time the option is granted or at any time while the
option remains outstanding, to provide for the automatic acceleration of one ore
more outstanding options under the Discretionary Option Grant Program upon (i) a
Change in Control or (ii) the subsequently termination of the Optionee's Service
by reason of an Involuntary Termination within a designated period (not to
exceed eighteen (18) months) following the effective date of such Change in
Control. Each option so accelerated shall remain exercisable for fully-vested
shares until the earlier of (i) the expiration of the option term or (ii) the
-------
expiration of the one (1)-year period measured from the effective date of the
Optionee's cessation of Service. In addition, the Plan Administrator may
provide that one or more of the Corporation's outstanding repurchase rights with
respect to shares held by the Optionee at the time of such Change in Control or
Involuntary Termination shall immediately terminate, and the shares subject to
those terminated repurchase rights shall accordingly vest in full.
H. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a Non-
Statutory Option under the Federal tax laws.
8.
<PAGE>
I. The grant of options under the Option Grant Program shall in no
way affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Option Grant Program
(including outstanding options incorporated from the Predecessor Plan) and to
grant in substitution new options covering the same or different number of
shares of Common Stock but with an exercise price per share based on the Fair
Market Value per share of Common Stock on the new option grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.
B. The following terms shall govern the grant and exercise of tandem
stock appreciation rights:
(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may establish, to
elect between the exercise of the underlying option for shares of Common
Stock and the surrender of that option in exchange for a distribution from
the Corporation in an amount equal to the excess of (a) the Fair Market
Value (on the option surrender date) of the number of shares in which the
Optionee is at the time vested under the surrendered option (or surrendered
portion thereof) over (b) the aggregate exercise price payable for such
shares.
(ii) No such option surrender shall be effective unless it is
approved by the Plan Administrator, either at the time of the actual option
surrender or at any earlier time. If the surrender is so approved, then
the distribution to which the Optionee shall be entitled may be made in
shares of Common Stock valued at Fair Market Value on the option surrender
date, in cash, or partly in shares and partly in cash, as the Plan
Administrator shall in its sole discretion deem appropriate.
(iii) If the surrender of an option is not approved by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee
had under the surrendered option (or surrendered portion thereof) on the
option surrender date and may exercise such rights at any time prior to the
later of (a) five (5) business days after the receipt of the rejection
-----
notice or (b) the last day on which the option is otherwise exercisable in
accordance with the terms of the documents evidencing such option, but in
no event may such rights be exercised more than ten (10) years after the
option grant date.
9.
<PAGE>
C. The following terms shall govern the grant and exercise of
limited stock appreciation rights:
(i) One or more Section 16 Insiders may be granted limited
stock appreciation rights with respect to their outstanding options.
(ii) Upon the occurrence of a Hostile Take-Over, each such
individual holding one or more options with such a limited stock
appreciation right shall have the unconditional right (exercisable for a
thirty (30)-day period following such Hostile Take-Over) to surrender each
such option to the Corporation, to the extent the option is at the time
exercisable for vested shares of Common Stock. In return for the
surrendered option, the Optionee shall receive a cash distribution from the
Corporation in an amount equal to the excess of (a) the Take-Over Price of
the shares of Common Stock which are at the time vested under each
surrendered option (or surrendered portion thereof) over (b) the aggregate
exercise price payable for such shares. Such cash distribution shall be
paid within five (5) days following the option surrender date.
(iii) Neither the approval of the Plan Administrator nor the
consent of the Board shall be required in connection with such option
surrender and cash distribution.
(iv) The balance of the option (if any) shall continue in full
force and effect in accordance with the documents evidencing such option.
ARTICLE THREE
STOCK ISSUANCE PROGRAM
----------------------
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.
A. Purchase Price
--------------
1. The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the issuance date.
2. Subject to the provisions of Section I of Article Four,
shares of Common Stock may be issued under the Stock Issuance Program for any of
the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:
10.
<PAGE>
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any
Parent or Subsidiary).
B. Vesting Provisions
------------------
1. Shares of Common Stock issued under the Stock Issuance
Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives.
2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to the surrendered shares.
5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock (or
other assets attributable thereto) which would otherwise occur upon the
cessation of the Participant's Service or the non-attainment of the performance
objectives applicable to those shares. Such waiver shall result in the immediate
vesting of the Participant's interest in the shares of Common Stock as to which
the waiver applies. Such waiver may be effected at any time, whether before or
after the Participant's cessation of Service or the attainment or non-attainment
of the applicable performance objectives.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
11.
<PAGE>
A. All outstanding repurchase rights under the Stock Issuance
Program shall terminate automatically, and all the shares of Common Stock
subject to those terminated rights shall immediately vest in full, in the event
of any Corporate Transaction, except to the extent (i) those repurchase rights
are assigned to the successor corporation (or parent thereof) in connection with
such Corporate Transaction or (ii) such accelerated vesting is precluded by
other limitations imposed in the Stock Issuance Agreement.
B. Notwithstanding Section II.A. of this Article Four, the Plan
Administrator shall have the discretionary authority, exercisable either at the
time the unvested shares are issued or any time while the Corporation's
repurchase rights remain outstanding under the Stock Issuance Program, to
provide that those rights shall automatically terminate in whole or in part, and
the shares of Common Stock subject to those terminated rights shall immediately
vest, in the event of a Corporate Transaction, whether or not those repurchase
rights are to be assigned to the successor corporation (or its parent) in
connection with such Corporate Transaction.
C. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase rights remain outstanding under the Stock Issuance
Program, to provide that those rights shall automatically terminate in whole or
in part, and the shares of Common Stock subject to those terminated rights shall
immediately vest, in the event the Participant's Service should subsequently
terminate by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any
Corporate Transaction in which those repurchase rights are assigned to the
successor corporation (or parent thereof).
D. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase rights remain outstanding under the Stock Issuance
Program, to provide that those rights shall automatically terminate in whole or
in part, and the shares of Common Stock subject to those terminated rights shall
immediately vest upon (i) a Change in Control or (ii) the subsequent termination
of the Participant's Service by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of such Change in Control or Involuntary Termination.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.
12.
<PAGE>
ARTICLE FOUR
MISCELLANEOUS
-------------
I. FINANCING
A. The Plan Administrator may permit any Optionee or Participant to
pay the option exercise price under the Option Grant Program or the purchase
price for shares issued under the Stock Issuance Program by delivering a
promissory note payable in one or more installments. The terms of any such
promissory note (including the interest rate and the terms of repayment) shall
be established by the Plan Administrator in its sole discretion. Promissory
notes may be authorized with or without security or collateral. In all events,
the maximum credit available to the Optionee or Participant may not exceed the
sum of (i) the aggregate option exercise price or purchase price payable for the
purchased shares plus (ii) any Federal, state and local income and employment
tax liability incurred by the Optionee or the Participant in connection with the
option exercise or share purchase.
B. The Plan Administrator may, in its discretion, determine that one
or more such promissory notes shall be subject to forgiveness by the Corporation
in whole or in part upon such terms as the Plan Administrator may deem
appropriate.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options or stock appreciation rights under the Plan shall
be subject to the satisfaction of all applicable Federal, state and local income
and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan with the right to use shares of Common Stock in satisfaction of all or part
of the Taxes incurred by such holders in connection with the exercise of their
options or the vesting of their shares. Such right may be provided to any such
holder in either or both of the following formats:
(i) Stock Withholding: The election to have the Corporation
-----------------
withhold, from the shares of Common Stock otherwise issuable upon the
exercise of such Non-Statutory Option or the vesting of such shares, a
portion of those shares with an aggregate Fair Market Value equal to the
percentage of the Taxes (not to exceed one hundred percent (100%))
designated by the holder.
(ii) Stock Delivery: The election to deliver to the
--------------
Corporation, at the time the Non-Statutory Option is exercised or the
shares vest, one or more shares of Common Stock previously acquired by such
holder (other than in connection with the option exercise or share vesting
triggering the Taxes) with an aggregate Fair Market Value equal to the
percentage of the Taxes (not to exceed one hundred percent (100%))
designated by the holder.
13.
<PAGE>
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective on the Plan Effective Date, and
options may be granted under the Option Grant Program at any time on or after
the Plan Effective Date. However, no options granted under the Plan may be
exercised, and no shares shall be issued under the Plan, until the Plan is
approved by the Corporation's stockholders. If such stockholder approval is not
obtained within twelve (12) months after the Plan Effective Date, then all
options previously granted under this Plan shall terminate and cease to be
outstanding, and no further options shall be granted and no shares shall be
issued under the Plan.
B. The Plan shall serve as the successor to the Predecessor Plan,
and no further option grants or direct stock issuances shall be made under the
Predecessor Plan after approval of the Plan by the Corporation's stockholders.
All options outstanding under the Predecessor Plan on the date of such approval
shall be incorporated into the Plan at that time and shall be treated as
outstanding options under the Plan. However, each outstanding option so
incorporated shall continue to be governed solely by the terms of the documents
evidencing such option, and no provision of the Plan shall be deemed to affect
or otherwise modify the rights or obligations of the holders of such
incorporated options with respect to their acquisition of shares of Common
Stock.
C. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Corporate Transactions and Changes in Control, may, in the Plan
Administrator's discretion, be extended to one or more options incorporated from
the Predecessor Plan which do not otherwise contain such provisions.
D. The Plan shall terminate upon the earliest of (i) November 7,
--------
2006, (ii) the date on which all shares available for issuance under the Plan
shall have been issued as fully-vested shares or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. Upon such Plan
termination, all outstanding options and unvested stock issuances shall continue
to have force and effect in accordance with the provisions of the documents
evidencing such options or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects. However, no such amendment
or modification shall adversely affect the rights and obligations with respect
to stock options or unvested stock issuances at the time outstanding under the
Plan unless the Optionee or the Participant consents to such amend ment or
modification. In addition, certain amendments may require stockholder approval
pursuant to applicable laws or regulations.
B. Options to purchase shares of Common Stock may be granted under
the Option Grant Program and shares of Common Stock may be issued under the
Stock Issuance Program that are in excess of the number of shares then available
for issuance under the Plan, provided any excess shares actually issued under
those programs shall be held in escrow until there is obtained stockholder
approval of an amendment sufficiently increasing the number of shares of Common
Stock available for issuance under the Plan. If such stockholder approval is
not obtained
14.
<PAGE>
within twelve (12) months after the date the first such excess issuances are
made, then (i) any unexercised options granted on the basis of such excess
shares shall terminate and cease to be outstanding and (ii) the Corporation
shall promptly refund to the Optionees and the Participants the exercise or
purchase price paid for any excess shares issued under the Plan and held in
escrow, together with interest (at the applicable Short Term Federal Rate) for
the period the shares were held in escrow, and such shares shall thereupon be
automatically cancelled and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option or
stock appreciation right under the Plan and the issuance of any shares of Common
Stock (i) upon the exercise of any option or stock appreciation right or (ii)
under the Stock Issuance Program shall be subject to the Corporation's
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the options and stock appreciation rights
granted under it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
the Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
15.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
-----
B. CHANGE IN CONTROL shall mean a change in ownership or control of the
-----------------
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation), of beneficial ownership (within the meaning
of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly
to the Corporation's stockholders which the Board does not recommend such
stockholders to accept, or
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B) have
been elected or nominated for election as Board members during such period
by at least a majority of the Board members described in clause (A) who
were still in office at the time such election or nomination was approved
by the Board.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
----
D. COMMON STOCK shall mean the Corporation's common stock.
------------
E. CORPORATE TRANSACTION shall mean either of the following stockholder-
---------------------
approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
F. CORPORATION shall mean Advanced Logic Research, Inc., a Delaware
-----------
corporation, and its successors.
A-1.
<PAGE>
G. EMPLOYEE shall mean an individual who is in the employ of the
--------
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
H. EXERCISE DATE shall mean the date on which the Corporation shall have
-------------
received written notice of the option exercise.
I. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
-----------------
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market or any successor system. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
J. HOSTILE TAKE-OVER shall mean the acquisition, directly or indirectly,
-----------------
by any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.
K. INCENTIVE OPTION shall mean an option which satisfies the requirements
----------------
of Code Section 422.
L. INVOLUNTARY TERMINATION shall mean the termination of the Service of
-----------------------
any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a
change in his or her position with the Corporation which materially reduces
his or her level
A-2.
<PAGE>
of responsibility, (B) a reduction in his or her level of compensation
(including base salary, fringe benefits and participation in corporate-
performance based bonus or incentive programs) by more than fifteen percent
(15%) or (C) a relocation of such individual's place of employment by more
than fifty (50) miles, provided and only if such change, reduction or
relocation is effected by the Corporation without the individual's consent.
M. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
----------
or dishonesty by the Optionee or Participant, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of the Corporation (or any
Parent or Subsidiary) in a material manner. The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or discharge
of any Optionee, Participant or other person in the Service of the Corporation
(or any Parent or Subsidiary).
N. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
--------
O. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
--------------------
requirements of Code Section 422.
P. OPTION GRANT PROGRAM shall mean the option grant program in effect
--------------------
under the Plan.
Q. OPTIONEE shall mean any person to whom an option is granted under the
--------
Option Grant Program.
R. PARENT shall mean any corporation (other than the Corporation) in an
------
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
S. PARTICIPANT shall mean any person who is issued shares of Common Stock
-----------
under the Stock Issuance Program.
T. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability
--------------------------------------------
of the Optionee or the Participant to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more.
U. PLAN shall mean the Corporation's 1996 Stock Option/Stock Issuance
----
Plan, as set forth in this document.
V. PLAN ADMINISTRATOR shall mean the particular entity, whether the
------------------
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Option Grant and Stock Issuance Programs with respect to one or
more classes of eligible persons, to the
A-3.
<PAGE>
extent such entity is carrying out its administrative functions under those
programs with respect to the persons under its jurisdiction.
W. PLAN EFFECTIVE DATE shall mean November 8, 1996, the date on which the
-------------------
Plan was adopted by the Board.
X. PREDECESSOR PLAN shall mean the Corporation's pre-existing Flexible
----------------
Incentive Plan in effect immediately prior to the Plan Effective Date hereunder.
Y. PRIMARY COMMITTEE shall mean the committee of two (2) or more non-
-----------------
employee Board members appointed by the Board to administer the Plan with
respect to Section 16 Insiders.
Z. SECONDARY COMMITTEE shall mean a committee of one (1) or more Board
-------------------
members appointed by the Board to administer the Plan with respect to eligible
persons other than Section 16 Insiders.
AA. SECTION 16 INSIDER shall mean an officer or director of the
------------------
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
BB. SERVICE shall mean the performance of services for the Corporation (or
-------
any Parent or Subsidiary) by a person in the capacity of an Employee, a non-
employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant.
CC. STOCK EXCHANGE shall mean either the American Stock Exchange or the
--------------
New York Stock Exchange.
DD. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by the
------------------------
Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
EE. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in effect
----------------------
under the Plan.
FF. SUBSIDIARY shall mean any corporation (other than the Corporation) in
----------
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
GG. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market Value
--------------- -------
per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.
A-4.
<PAGE>
HH. TAXES shall mean the Federal, state and local income and employment
-----
tax liabilities incurred by the holder of Non-Statutory Options or unvested
shares of Common Stock in connection with the exercise of those options or the
vesting of those shares.
II. 10% STOCKHOLDER shall mean the owner of stock (as determined under
---------------
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
A-5.
<PAGE>
EXHIBIT 4.3
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ADVANCED LOGIC RESEARCH, INC.,
GATEWAY 2000, INC.
AND
DEUCE ACQUISITION CORPORATION
DATED AS OF JUNE 19, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I THE MERGER; CLOSING; EFFECTIVE TIME.............................. 2
SECTION 1.1 The Merger............................................... 2
----------
SECTION 1.2 Closing.................................................. 2
-------
SECTION 1.3 Effective Time........................................... 2
--------------
SECTION 1.4 Subsequent Actions....................................... 3
------------------
SECTION 1.5 Certificate of Incorporation............................. 3
----------------------------
SECTION 1.6 The By-Laws.............................................. 3
-----------
SECTION 1.7 Officers and Directors................................... 3
----------------------
ARTICLE II CONVERSION AND CANCELLATION OF SHARES
IN THE MERGER................................................... 3
SECTION 2.1 Conversion or Cancellation of Shares..................... 3
------------------------------------
SECTION 2.2 Payment for Shares in the Merger......................... 4
--------------------------------
SECTION 2.3 Company Stock Options and Related Matters................ 5
-----------------------------------------
SECTION 2.4 Transfer of Shares After the Effective Time.............. 7
-------------------------------------------
SECTION 2.5 No Further Rights in Company Common Stock................ 7
-----------------------------------------
SECTION 2.6 No Liability............................................. 7
------------
SECTION 2.7 Withholding Rights....................................... 7
------------------
SECTION 2.8 Lost Certificates........................................ 7
-----------------
SECTION 2.9 Dissenting Shares........................................ 8
-----------------
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 8
SECTION 3.1 Organization and Qualification........................... 8
------------------------------
SECTION 3.2 Certificate of Incorporation and By-Laws................. 9
----------------------------------------
SECTION 3.3 Subsidiaries............................................. 9
------------
SECTION 3.4 Capitalization........................................... 10
--------------
SECTION 3.5 Authority Relative to this Agreement..................... 11
------------------------------------
SECTION 3.6 No Conflict; Required Filings and Consents............... 11
------------------------------------------
SECTION 3.7 SEC Filings; Financial Statements........................ 12
---------------------------------
SECTION 3.8 Absence of Certain Changes or Events..................... 13
------------------------------------
SECTION 3.9 Intellectual Property.................................... 14
---------------------
SECTION 3.10 Material Contracts....................................... 17
------------------
SECTION 3.11 Environmental Matters.................................... 18
---------------------
SECTION 3.12 Employee Benefits........................................ 18
------------------
SECTION 3.13 Opinion of Financial Advisor............................. 21
----------------------------
SECTION 3.14 Brokers.................................................. 21
-------
SECTION 3.15 Litigation............................................... 21
-----------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 3.16 Labor Relations.......................................... 21
----------------
SECTION 3.17 Application of California Statute........................ 22
---------------------------------
SECTION 3.18 Tax Returns and Audits................................... 22
----------------------
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER AND
MERGER SUB...................................................... 22
SECTION 4.1 Organization and Qualification; Subsidiaries............. 22
--------------------------------------------
SECTION 4.2 Certificate of Incorporation and By-Laws................. 23
----------------------------------------
SECTION 4.3 Authority Relative to this Agreement..................... 23
------------------------------------
SECTION 4.4 No Conflict; Required Filings and Consents............... 24
------------------------------------------
SECTION 4.5 Brokers.................................................. 24
-------
SECTION 4.6 Financing................................................ 24
---------
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER........................... 25
SECTION 5.1 Conduct of Business by the Company Pending the Merger..... 25
-----------------------------------------------------
ARTICLE VI ADDITIONAL AGREEMENTS........................................... 27
SECTION 6.1 Meeting of the Stockholders............................... 27
---------------------------
SECTION 6.2 Access to Information; Confidentiality.................... 28
--------------------------------------
SECTION 6.3 No Solicitation of Transactions........................... 29
-------------------------------
SECTION 6.4 Indemnification........................................... 30
---------------
SECTION 6.5 Obligations of Merger Sub................................. 32
--------------------------
SECTION 6.6 Further Action; Consents; Filings......................... 33
---------------------------------
SECTION 6.7 Public Announcements...................................... 34
--------------------
SECTION 6.8 Company SEC Reports....................................... 34
-------------------
SECTION 6.9 Notification of Certain Matters........................... 34
-------------------------------
SECTION 6.10 Accountants............................................... 35
-----------
SECTION 6.11 Directors................................................. 35
---------
SECTION 6.12 Employees................................................. 36
----------
ARTICLE VII CONDITIONS TO THE MERGER....................................... 36
SECTION 7.1 Conditions to the Obligations of Each Party............... 36
-------------------------------------------
SECTION 7.2 Conditions to the Obligations of Purchaser and Merger Sub. 37
---------------------------------------------------------
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER............................. 38
SECTION 8.1 Termination............................................... 38
-----------
SECTION 8.2 Effect of Termination..................................... 39
---------------------
SECTION 8.3 Amendment................................................. 39
---------
SECTION 8.4 Waiver.................................................... 39
------
SECTION 8.5 Expenses.................................................. 39
--------
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE IX THE OFFER....................................................... 41
SECTION 9.1 Tender Offer.............................................. 41
------------
ARTICLE X GENERAL PROVISIONS............................................... 42
SECTION 10.1 Nonsurvival of Representations, Warranties and Agreements 42
---------------------------------------------------------
SECTION 10.2 Notices.................................................. 42
-------
SECTION 10.3 Certain Definitions...................................... 43
-------------------
SECTION 10.4 Severability............................................. 44
------------
SECTION 10.5 Assignment; Binding Effect; Benefit...................... 44
-----------------------------------
SECTION 10.6 Specific Performance..................................... 45
--------------------
SECTION 10.7 Governing Law............................................ 45
-------------
SECTION 10.8 Headings................................................. 45
--------
SECTION 10.9 Counterparts............................................. 45
------------
SECTION 10.10 Waiver of Jury Trial..................................... 45
--------------------
SECTION 10.11 Entire Agreement; Modification........................... 46
------------------------------
SECTION 10.12 Mutual Drafting.......................................... 46
---------------
SECTION 10.13 No Waivers............................................... 46
----------
</TABLE>
iii
<PAGE>
GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERM POSITION OF DEFINITION
- ------------ ----------------------
<S> <C>
Accountant's Letter (S) 6.10
affiliate (S) 10.3(a)
Agreement Preamble
beneficial owner (S) 10.3(b)
Blue Sky Laws (S) 3.6(b)
Break-up Fee (S) 8.5(b)
business day (S) 10.3(c)
Certificate of Merger (S) 1.3
Certificate of Ownership (S) 1.3
Certificates (S) 2.2(b)
Claim (S) 6.4(b)
Closing (S) 1.2
Code (S) 2.3(a)
Company Preamble
Company Benefit Plans (S) 5.1(g)
Company Common Stock Recitals
Company Disclosure Schedule Article III Preamble
Company Intellectual Property Rights (S) 3.9(a)
Company Material Adverse Effect (S) 3.1
Company Option (S) 2.3(a)
Company SEC Reports (S) 3.7(a)
Company Stock Option Plans (S) 2.3(a)
Competing Transaction (S) 6.3(a)
Confidentiality Agreement (S) 6.2(b)
Constituent Corporations Preamble
control (S) 10.3(d)
controlled by (S) 10.3(d)
Copyrights (S) 3.9(f)(i)
DGCL (S) 1.1
Dissenting Shares (S) 2.9(a)
Effective Time (S) 1.3
Environmental Laws (S) 3.11(a)
Encumbrances (S) 3.3
Environmental Permits (S) 3.11(b)
ERISA (S) 3.12(b)
ERISA Affiliates (S) 3.12(c)
Exchange Act (S) 3.6(b)
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM POSITION OF DEFINITION
- ------------ ----------------------
<S> <C>
Exchange Agent (S) 2.2(a)
Exchange Fund (S) 2.2(a)
Exchange Ratio (S) 2.3(a)
Expenses (S) 8.5(a)
Governmental Authority (S) 3.6(b)
Hazardous Substances (S) 3.11(a)
HSR Act (S) 3.6(b)
Indemnified Parties (S) 6.4(b)
Independent Directors (S) 6.11(a)
Initial Break-up Fee (S) 8.5(b)
knowledge (S) 10.3(e)
known (S) 10.3(e)
Law (S) 3.6(a)
Marks (S) 3.9(e)(i)
Meeting (S) 6.1(a)
Merger (S) 1.1
Merger Consideration (S) 2.1(a)
Merger Sub Preamble
NASDAQ/NMS (S) 3.6(b)
NYSE (S) 2.3(a)
Offer Recitals
Offer Documents (S) 9.1(b)
Order (S) 6.6(b)
Patents (S) 3.9(d)(i)
person (S) 10.3(f)
Plans (S) 3.12(b)
Proxy Statement (S) 6.1(c)
Purchaser Common Stock (S) 2.3(a)
Purchaser Companies (S) 2.1(a)
Purchaser Material Adverse Effect (S) 4.1
Purchaser Preamble
Representatives (S) 6.2(a)
Schedule 14D-9 (S) 9.1(b)
SEC (S) 3.7(a)
SEC Reports (S) 3.7(a)
Securities Act (S) 3.6(b)
Shares (S) 2.1(a)
Stockholders Recitals
Stockholder Agreements Recitals
Subsidiary (S) 3.3
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM POSITION OF DEFINITION
- ------------ ----------------------
<S> <C>
Superior Proposal (S) 6.1(b)
Surviving Corporation (S) 1.1
Terminating Company Breach (S) 8.1(d)
Terminating Purchaser Breach (S) 8.1(e)
Third Party Provisions (S) 10.5
Trade Secrets (S) 3.9(g)(ii)
Transactions Recitals
</TABLE>
vi
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"), dated
as of June 19, 1997, among Advanced Logic Research, Inc., a Delaware corporation
(the "Company"), Gateway 2000, Inc., a Delaware corporation ("Purchaser"), and
Deuce Acquisition Corporation, a Delaware corporation ("Merger Sub"), the
Company and Merger Sub sometimes being hereinafter collectively referred to as
the "Constituent Corporations."
RECITALS
WHEREAS, the Company desires to merge with Merger Sub and Merger Sub
desires to merge with the Company, all upon the terms and subject to the
conditions of this Agreement;
WHEREAS, the Board of Directors of the Company (a) has determined that the
Merger (as such term is hereinafter defined) is in the best interests of the
Company and its stockholders and approved and adopted this Agreement and the
transactions contemplated hereby, including without limitation, the Merger (the
"Transactions"), and (b) has recommended approval and adoption of this
Agreement, and the transactions contemplated hereby by the stockholders of the
Company;
WHEREAS, the Board of Directors of Purchaser has determined that the Merger
is in the best interests of Purchaser and its stockholders and has approved and
adopted this Agreement and the Transactions;
WHEREAS, the Company, Purchaser and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger; and
WHEREAS, in furtherance of the Merger it is proposed that Merger Sub
commence a tender offer for all of the outstanding shares of the Company's
common stock, par value $.01 (the "Company Common Stock"), at a price of $15.50
per share (the "Offer") which price is not less than the fair market value per
share; and
WHEREAS, as a condition and inducement to Purchaser's and Merger Sub's
entering into this Agreement and incurring the obligations set forth herein,
concurrently with the execution and delivery of this Agreement, Purchaser and
Merger Sub are entering into one or more stockholder agreements with the
individuals and entities (the "Stockholders") listed on Schedule I hereto
(collectively, the "Stockholder Agreements"), pursuant to which, among other
things, each Stockholder has agreed to vote the Shares (as such term is
hereinafter defined) then owned by such Stockholder in favor of the Merger, to
grant Purchaser an irrevocable proxy to vote such Shares, to tender all Shares
then owned by such Stockholder to Purchaser or Merger
1
<PAGE>
Sub, as applicable, in accordance with the Offer and to grant an option to
purchase such Shares to Purchaser.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions herein
contained, the parties hereto agree as follows:
ARTICLE I
THE MERGER; CLOSING; EFFECTIVE TIME
SECTION 1.1 The Merger. Subject to the terms and conditions of this
----------
Agreement, at the Effective Time (as defined in Section 1.3), at the election of
Purchaser, either Merger Sub shall be merged with and into the Company and the
separate corporate existence of Merger Sub shall thereupon cease or the Company
shall be merged with and into Merger Sub and the separate corporate existence of
the Company shall thereupon cease (the "Merger"). The surviving corporation in
the Merger (sometimes hereinafter referred to as the "Surviving Corporation"),
shall continue to be governed by the laws of the State of Delaware, the separate
corporate existence of the Surviving Corporation with all its rights,
privileges, powers, immunities and franchises shall continue unaffected by the
Merger and all debts, liabilities, obligations, resolutions and duties of each
of the Company and Merger Sub shall become the debts, liabilities, obligations
restrictions and duties of the Surviving Corporation. The Merger shall have the
effects specified in the General Corporation Law of the State of Delaware (the
"DGCL").
SECTION 1.2 Closing. The closing of the Merger (the "Closing") shall
-------
take place (i) at the offices of Kaye, Scholer, Fierman, Hays & Handler, LLP,
1999 Avenue of the Stars, Los Angeles, California 90067 as promptly as
practicable and in no event later than the third business day following the
satisfaction or waiver of the conditions set forth in Article VII hereof in
accordance with this Agreement, at such time as the Company and Purchaser may
agree, or (ii) at such other place and time and/or on such other date as the
Company and Purchaser may agree.
SECTION 1.3 Effective Time. Immediately following the Closing, the
--------------
Company and Purchaser shall cause a Certificate of Merger (the "Certificate of
Merger") or Purchaser shall cause a Certificate of Ownership and Merger (the
"Certificate of Ownership") to be executed and filed with the Secretary of State
of the State of Delaware as provided in the DGCL. The Merger shall become
effective at such time as the Certificate of Merger or the Certificate of
Ownership has been duly filed with the Secretary of State of the State of
Delaware, and such time, or such later time as may, with the consent of the
Independent Directors (as defined below), be specified in the Certificate of
Merger or the Certificate of Ownership, is hereinafter referred to as the
"Effective Time."
2
<PAGE>
SECTION 1.4 Subsequent Actions. If, at any time after the Effective
------------------
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Constituent Corporations acquired
or to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger or otherwise to carry out this Agreement, the officers and
directors of the Surviving Corporation are hereby authorized to execute and
deliver, in the name and on behalf of each of the Constituent Corporations or
otherwise, all such deeds, bills of sale, assignments and assurances and to take
and do, in the name and on behalf of each of the Constituent Corporations or
otherwise, all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation or otherwise to
carry out this Agreement.
SECTION 1.5 Certificate of Incorporation. The Certificate of
----------------------------
Incorporation of Merger Sub in effect at the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation, until duly amended in
accordance with the terms thereof and the DGCL, provided that Article First of
the Certificate of Incorporation of the Surviving Corporation shall be amended
to read in its entirety as follows:
"FIRST: The name of the Corporation is Advanced Logic Research, Inc."
SECTION 1.6 The By-Laws. The By-Laws of Merger Sub in effect at the
-----------
Effective Time shall be the By-Laws of the Surviving Corporation, until duly
amended in accordance with the terms thereof and the DGCL.
SECTION 1.7 Officers and Directors. The directors of Merger Sub and the
----------------------
officers of the Company at the Effective Time shall, from and after the
Effective Time, be the directors and officers, respectively, of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and By-Laws.
ARTICLE II
CONVERSION AND CANCELLATION OF SHARES IN THE MERGER
SECTION 2.1 Conversion or Cancellation of Shares. At the Effective
------------------------------------
Time, by virtue of the Merger and without any action on the part of the Merger
Sub, the Company or the holders of any of the following securities:
(a) each share of Company Common Stock (all issued and outstanding
shares of Company Common Stock hereinafter collectively referred to as the
"Shares") issued
3
<PAGE>
and outstanding immediately prior to the Effective Time, other than (i) Shares
owned by Purchaser, Merger Sub or any other direct or indirect wholly-owned
subsidiary of Purchaser (collectively, the "Purchaser Companies"), or by the
Company or any direct or indirect wholly owned subsidiary of the Company, and
(ii) Dissenting Shares (as hereinafter defined), shall be converted into the
right to receive, in cash, without interest thereon, the higher of (x) $15.50 or
(y) such greater amount which may be paid pursuant to the Offer (the "Merger
Consideration"); provided, nothing herein shall be deemed an agreement by
Purchaser to increase the Merger Consideration. All such Shares shall no longer
be outstanding and shall be canceled and retired and shall cease to exist, and
each holder of a certificate representing any such Shares shall thereafter cease
to have any rights with respect to such Shares, except the right to receive the
Merger Consideration for such Shares upon the surrender of such certificate in
accordance with Section 2.2;
(b) each Share issued and outstanding immediately prior to the
Effective Time and owned by any of the Purchaser Companies, and each Share
issued and held in the Company's treasury immediately prior to the Effective
Time, shall cease to be outstanding, be canceled and be retired without payment
of any consideration therefor and cease to exist; and
(c) each share of common stock, $.01 par value, of Merger Sub issued
and outstanding immediately prior to the Effective Time shall be converted into
one validly issued, fully paid and non-assessable share of common stock of the
Surviving Corporation.
SECTION 2.2 Payment for Shares in the Merger. The manner of making
--------------------------------
payment for Shares in the Merger shall be as follows:
(a) At the Effective Time, Purchaser or Merger Sub, as applicable,
shall deposit in trust, or enter such other agreement or arrangement as may be
reasonably satisfactory to the Company, with a bank or trust company designated
by Purchaser and reasonably acceptable to the Company (the "Exchange Agent"),
cash in an aggregate amount equal to the product of (i) the number of Shares
issued and outstanding at the Effective Time (other than Shares owned by the
Purchaser Companies, the Company or any direct or indirect wholly-owned
subsidiary of the Company) and (ii) the Merger Consideration (such amount being
hereinafter referred to as the "Exchange Fund"). The Exchange Agent shall,
pursuant to irrevocable instructions, make the payments provided for in Section
2.1 of this Agreement out of the Exchange Fund. The Exchange Fund shall not be
used for any other purpose, except as provided in this Agreement or as otherwise
agreed to by Purchaser and Merger Sub.
(b) Promptly after the Effective Time, the Exchange Agent shall mail
or cause to be mailed to each holder (other than the Purchaser Companies, the
Company or any direct or indirect wholly-owned subsidiary of the Company), as of
the Effective Time, of an outstanding certificate or certificates which
immediately prior to the Effective Time represented Shares (collectively, the
"Certificates") a form letter of transmittal (which shall specify that
4
<PAGE>
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent) and
instructions for use in effecting the surrender of the Certificates for payments
therefor. Upon surrender to the Exchange Agent of a Certificate representing
Shares that have been converted into, or representing, in accordance with the
terms of this Agreement, the right to receive the Merger Consideration, together
with such letter of transmittal duly executed, the holder of such Certificate
shall be entitled to receive in exchange therefor cash in an amount equal to the
product of (i) the number of Shares represented by such Certificate and (ii) the
Merger Consideration, and such Certificate shall forthwith be canceled. No
interest will be paid or accrued on the cash payable upon the surrender of the
Certificates. If payment is to be made to a person other than the person in
whose name the Certificate surrendered is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that 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 the Certificate surrendered, or
such person shall establish to the satisfaction of the Surviving Corporation
that such tax has been paid or is not applicable. Until surrendered in
accordance with the provisions of this Section 2.2, each Certificate (other than
Certificates representing Shares owned by the Purchaser Companies, Shares owned
by the Company or any direct or indirect wholly owned subsidiary of the Company
or Dissenting Shares) shall solely represent, for all purposes, the right to
receive the Merger Consideration in cash multiplied by the number of Shares
evidenced by such Certificate, without any interest thereon.
(c) Any portion of the Exchange Fund that remains undistributed to the
holders of Company Common Stock for six months after the Effective Time shall be
delivered to Purchaser, upon demand, and any holders of Company Common Stock who
have not theretofore complied with Section 2.2 shall thereafter look only to
Purchaser for the payment of their claim for the Merger Consideration for
Shares, without any interest thereon. Any portion of the Exchange Fund
remaining unclaimed by holders of Shares as of a date which is immediately prior
to such time as such amounts would otherwise escheat to or become property of
any government entity shall, to the extent permitted by applicable law, become
the property of Purchaser free and clear of any claims or interest of any person
previously entitled thereto. The Exchange Agent shall retain the right to
invest and reinvest the Exchange Fund on behalf of the Purchaser in securities
issued or guaranteed by the United States government or certificates of deposit
of commercial banks that have, or are members of a group of commercial banks
that has, consolidated total assets of not less than $500,000,000 and Purchaser
shall receive the interest earned thereon.
SECTION 2.3 Company Stock Options and Related Matters.
-----------------------------------------
(a) At the Effective Time, each option to purchase shares of Company Common
Stock (each a "Company Option") issued pursuant to the Company's Flexible Stock
Incentive Plan, Director's Nonqualified Stock Option Plan and 1996 Stock
Option/Stock Issuance Plan
5
<PAGE>
(collectively, the "Company Stock Option Plans") or granted by the Company to
any person outside of any Company Stock Option Plan that is outstanding and
unexercised immediately prior to the Effective Time shall be converted, at the
Effective Time, into an option to acquire, on the same terms and conditions as
were applicable under the Company Stock Option Plans and the underlying option
agreements (as modified by this Section 2.3), that number of shares of common
stock $.01 par value, of the Purchaser (the "Purchaser Common Stock") determined
by multiplying the number of shares of Company Common Stock subject to such
option by the Exchange Ratio (rounded up to the nearest whole share) at a price
per share of Purchaser Common Stock equal to the exercise price per share of
Company Common Stock under such Company Option divided by the Exchange Ratio
(rounded up to the nearest whole cent); provided, however, that in the case of
-------- -------
any option to which Section 421 of the United States Internal Revenue Code 1986,
as amended (the "Code"), applies by reason of its qualification under section
422 of the Code, the option price, the number of shares purchasable pursuant to
such option and the terms and conditions of exercise of such option shall be
determined in order to comply with Section 424(a) of the Code. The term
"Exchange Ratio" means that amount equal to the Merger Consideration divided by
the average of the closing prices of Purchaser Common Stock on the New York
Stock Exchange, Inc. ("NYSE") for the twenty consecutive trading days
immediately preceding the date of the Effective Time.
(b) As soon as practicable after the Effective Time, Purchaser shall
deliver to the holders of Company Options appropriate notices setting forth such
holders' rights pursuant to the applicable Company Stock Option Plan and the
agreements pursuant to which such Company Options were issued and the agreements
evidencing the grants of such Company Options shall continue in effect on the
same terms and conditions as specified with respect to such Company Options as
of the Effective Time in the applicable Company Stock Option Plan governing such
Company Option (subject to the adjustments and amendments required by this
Section 2.3, and after giving effect to the Merger and the conversion set forth
above). It is the intention of the parties that, subject to applicable law,
each Company Option that qualified as an incentive stock option under section
422 of the Code prior to the Effective Time shall continue to qualify as an
incentive stock option of Purchaser after the Effective Time. The Company
agrees that it shall take all necessary action to effectuate the provisions of
this Section 2.3 and, except to the extent set forth in Section 2.3(b) to the
Company Disclosure Schedule (as hereinafter defined) with respect to options
currently outstanding under the Directors' Non-Qualified Stock Option Plan, to
preclude the acceleration of any vesting or other provisions of any Company
Option, including pursuant to a Company Stock Option Plan or any agreement
evidencing the grant of a Company Option, as a result of the Transactions.
Immediately following the Effective Time, each employee stock option, stock
bonus, stock award or similar plan of the Company or any of its Subsidiaries
will be terminated and, except as otherwise specifically permitted herein, no
further stock awards, stock options or stock appreciation or similar rights will
be granted thereunder subsequent to the date hereof.
6
<PAGE>
(c) Purchaser shall take all corporate action necessary to reserve for
issuance and have available for delivery a sufficient number of shares of
Purchaser Common Stock to be delivered upon exercise, vesting or payment, as
applicable, of the Company Options converted in accordance with this Section
2.3. As soon as practicable after the Effective Time, Purchaser shall file a
registration statement on Form S-8 (or any successor or other appropriate form)
with respect to the delivery of such shares of Purchaser Common Stock, to the
extent such registration statement is required under applicable law so as to
permit public resale of such shares, and Purchaser shall use its reasonable best
efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such benefits and grants remain
payable and such options remain outstanding. With respect to those individuals,
if any, who subsequent to the Merger will be subject to the reporting
requirements under Section 16(a) of the Exchange Act (as hereinafter defined),
the Board of Directors (or a committee thereof) of Purchaser shall approve the
Company Options held by such individuals and assumed pursuant to this Section
2.3 in a manner that complies with Rule 16b-3 promulgated under the Exchange
Act.
SECTION 2.4 Transfer of Shares After the Effective Time. At the
-------------------------------------------
Effective Time, the stock transfer books of the Company shall be closed and no
transfers of Shares shall be made on such stock transfer books of the Surviving
Corporation at or after the Effective Time.
SECTION 2.5 No Further Rights in Company Common Stock. All Merger
-----------------------------------------
Consideration paid upon the acceptance of tendered and not withdrawn Shares in
accordance with the terms of the Offer shall be deemed to have been paid in full
satisfaction of all rights pertaining to such Shares.
SECTION 2.6 No Liability. Neither Purchaser nor the Surviving
------------
Corporation shall be liable to any holder of Shares of Company Common Stock for
any cash delivered to a public official pursuant to any abandoned property,
escheat or similar Law.
SECTION 2.7 Withholding Rights. Each of the Surviving Corporation and
------------------
Purchaser shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any person such amounts as it is
required to deduct and withhold with respect to the making of such payment under
the Code, or any provision of state, local or foreign tax law. To the extent
that amounts are so withheld by the Surviving Corporation or Purchaser, as the
case may be, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to a person in respect of which such deduction and
withholding was made by the Surviving Corporation or Purchaser, as the case may
be.
SECTION 2.8 Lost Certificates. If any Certificate shall have been lost,
-----------------
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as
7
<PAGE>
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will pay the Merger Consideration in accordance
with the terms of the Offer to the registered owner of such Shares.
SECTION 2.9 Dissenting Shares. (a) Notwithstanding any provision of
-----------------
this Agreement to the contrary, Shares that are outstanding immediately prior to
the Effective Time and which are held by stockholders who shall have not voted
in favor of the Merger or consented thereto in writing and who shall have
demanded properly in writing appraisal for such Shares in accordance with
Section 262 of the DGCL (collectively, the "Dissenting Shares") shall not be
-----------------
converted into or represent the right to receive the Merger Consideration. Such
stockholders shall be entitled to receive payment of the appraised value of such
Shares held by them in accordance with the provisions of Section 262, except
that all Dissenting Shares held by stockholders who shall have failed to perfect
or who effectively shall have withdrawn or lost their rights to appraisal of
such Shares under such Section 262 shall thereupon be deemed to have been
converted into and to have become exchangeable for, as of the Effective Time,
the right to receive the Merger Consideration, without any interest thereon,
upon surrender, in the manner provided in Section 2.2 hereof, of the certificate
or certificates that formerly evidenced such Shares.
(b) The Company shall give Purchaser (i) prompt notice of any demands
for appraisal received by the Company, withdrawals of such demands, and any
other instruments served pursuant to the DGCL and received by the Company and
(ii) the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the DGCL. The Company shall not, except with the
prior written consent of Purchaser, make any payment with respect to any demands
for appraisal or offer to settle or settle any such demands.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule delivered by the Company to
Purchaser and Merger Sub concurrently with the execution of this Agreement (the
"Company Disclosure Schedule"), as referenced below, the Company hereby
represents and warrants to Purchaser and Merger Sub that:
SECTION 3.1 Organization and Qualification. The Company is a
------------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has the requisite power and
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted, except
where the failure to be so incorporated, existing or in good standing or to have
such power, authority and governmental approvals would not prevent or materially
delay consummation of the Merger or the other Transactions, or otherwise prevent
the Company from performing its material obligations under the Agreement, and
would not, individually or in the
8
<PAGE>
aggregate, have a Company Material Adverse Effect (as defined below). The
Company is duly qualified or licensed as a foreign corporation to do business,
and is in good standing, in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its business makes
such qualification or licensing necessary, except for such failures to be so
qualified or licensed or in good standing that would not prevent or materially
delay consummation of the Merger or the other Transactions, or otherwise prevent
the Company from performing its material obligations under this Agreement and
would not, individually or in the aggregate, have a Company Material Adverse
Effect. The term "Company Material Adverse Effect" means any circumstance,
change in or effect on the Company or any of its Subsidiaries (as defined below)
that is materially adverse to the business, operations, properties, financial
condition or results of operations of the Company and its Subsidiaries, taken as
a whole, except for cancelations or delays in (affecting not more than 10%, in
the aggregate, of) the Company's reseller channel sales that the Company bears
the burden of demonstrating are directly and primarily attributable to the
announcement of the execution of this Agreement.
SECTION 3.2 Certificate of Incorporation and By-Laws. The Company has
----------------------------------------
heretofore furnished to Purchaser a complete and correct copy of the Certificate
of Incorporation and the By-Laws of the Company. The Certificate of
Incorporation and By-Laws of the Company are in full force and effect. As of
the date of this Agreement, the Company is not in violation of any of the
provisions of its Certificate of Incorporation or By-Laws.
SECTION 3.3 Subsidiaries. Section 3.3 of the Company Disclosure
------------
Schedule contains a complete and accurate list of all corporations,
partnerships, joint ventures or other legal entities of which the Company owns,
directly or indirectly, any voting stock or other equity or beneficial interest,
together with the jurisdiction of organization of such entity and the percentage
of each entity's outstanding capital stock or other equity or beneficial
interests owned directly or indirectly by the Company. Each Subsidiary is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has the requisite power and
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted, except
where the failure to be so incorporated, existing or in good standing or to have
such power, authority and governmental approvals would not prevent or materially
delay consummation of the Merger or the other Transactions, or otherwise prevent
the Company from performing its material obligations under this Agreement, and
would not, individually or in the aggregate, have a Company Material Adverse
Effect. Each Subsidiary is duly qualified or licensed as a foreign corporation
to do business and is in good standing, in each jurisdiction where the character
of the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed or in good standing that would not prevent or
materially delay consummation of the Merger or the other Transactions, or
otherwise prevent the Company from performing its material obligations under
this Agreement and would not, individually or in the aggregate, have a Company
Material Adverse Effect. All of the outstanding capital stock of each
Subsidiary have been validly issued,
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<PAGE>
and are fully paid and nonassessable. All of the capital stock of each of such
Subsidiaries are owned, directly or indirectly, by the Company free and clear of
all Encumbrances. For purposes of this Agreement, the term (i) "Subsidiary" of
any person means any corporation, partnership, joint venture or other legal
entity of which such person (either alone or through or together with another
subsidiary), owns, directly or indirectly, more than 50% of the stock or other
equity or beneficial interests, the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of such
corporation or other legal entity and (ii) "Encumbrances" shall mean any pledge,
security interest, lien, claim, encumbrance, mortgage, charge, hypothecation,
option, right of first refusal or offer, preemptive right, voting agreement,
voting trust, proxy, power of attorney, escrow, option, forfeiture, penalty,
action at law or in equity, security agreement, stockholder agreement or other
agreement, arrangement, contract, commitment, understanding or obligation, or
any other restriction, qualification or limitation on the use, transfer, right
to vote, right to dissent and seek appraisal, receipt of income or other
exercise of any attribute of ownership.
SECTION 3.4 Capitalization. The authorized capital stock of the Company
--------------
consists of (a) 25,000,000 Shares (b) and 2,500,000 shares of preferred stock,
$.01 par value. As of the date hereof (i) 12,552,951 Shares are issued and
outstanding, all of which are validly issued, fully paid and nonassessable, (ii)
no Shares are held in the treasury of the Company, (iii) no Shares are held by
the Company or any of its Subsidiaries (as defined below), (iv) 1,232,939 Shares
are reserved for future issuance pursuant to outstanding Company Options and (v)
no shares of Preferred Stock are issued and outstanding. Except as provided in,
or contemplated by, this Agreement and except for Company Options granted
pursuant to the Company Stock Option Plans, there are no options, warrants or
other rights, agreements, arrangements or commitments of any character relating
to the issued or unissued capital stock of the Company or any of its
Subsidiaries or obligating the Company or any of its Subsidiaries to issue or
sell any shares of capital stock of, or other equity or beneficial interests in,
the Company or any of its Subsidiaries. No Company Options shall be accelerated
or in any other way altered or changed, whether in connection with the
acceleration of any vesting period or otherwise, by the execution, delivery or
performance of this Agreement by the Company or the consummation of any of the
Transactions except pursuant to and in accordance with Section 2.3 hereof. All
Shares subject to issuance, upon issuance on the terms and conditions specified
in the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. There are no outstanding
contractual obligations of the Company or any Subsidiary to repurchase, redeem
or otherwise acquire any Shares. Other than the Stockholder Agreements, there
are no stockholder agreements, voting trusts or other agreements or
understandings to which the Company is a party, or of which the Company is
aware, relating to voting, registration or disposition of any shares of capital
stock of the Company or granting to any person or group of persons the right to
elect, or to designate or nominate for election, a director to the board of
directors of the Company.
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SECTION 3.5 Authority Relative to this Agreement.
------------------------------------
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the Transactions. The execution and delivery of this Agreement by
the Company and the consummation by the Company of the Transactions have been
duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the Transactions (other than, with respect to the
Merger, the approval and adoption of this Agreement by the holders of a majority
of the then outstanding Shares and the filing and recordation of appropriate
merger documents as required by the DGCL). This Agreement has been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Purchaser and Merger Sub, constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.
(b) The Board of Directors of the Company has, on June 19, 1997,
unanimously (i) approved and adopted this Agreement and the Transactions, (ii)
determined that this Agreement and the Transactions, including each of the Offer
and the Merger, are in the best interests of the Company and its stockholders
and that the terms of this Agreement are fair to the Company and its
stockholders and (iii) determined to recommend that the stockholders of the
Company approve and adopt this Agreement. The Company has been advised by each
of its directors and officers that they intend to tender all Shares beneficially
owned by them pursuant to the Offer.
(c) The Board of Directors of the Company has approved Purchaser as an
"interested stockholder" within the meaning of Section 203 of the DGCL with
respect to the Merger, any acquisition of Shares pursuant to the Offer or any of
the other Transactions.
SECTION 3.6 No Conflict; Required Filings and Consents.
------------------------------------------
(a) The execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement by the Company and the consummation
of the Transactions will not, (i) conflict with or violate the Certificate of
Incorporation or By-Laws or equivalent organizational documents of the Company
or conflict with or violate the certificate of incorporation or by-laws or
equivalent organizational documents of any Subsidiary, (ii) assuming that all
consents, approvals, authorizations and other actions described in subsection
3.6(b) have been obtained and all filings and obligations described in
subsection 3.6(b) have been made or complied with, conflict with or violate any
foreign or domestic (federal, state or local) law, statute, ordinance, rule,
regulation, interpretation, permit, injunction, writ, judgment, decree or order
("Law") applicable to the Company or any Subsidiary or by which any asset of the
Company or any Subsidiary is bound or affected, or (iii) conflict with, result
in any breach of or constitute a default (or an event that with notice or lapse
of time or both would become a default)
11
<PAGE>
under, or give to others any right of termination, amendment, acceleration or
cancellation of, or require any payment under, or result in the creation of a
lien, claim, security interest or other charge or Encumbrance on any asset of
the Company or any Subsidiary pursuant to, any contract or other instrument or
obligation to which the Company or any Subsidiary is a party or by which any
asset of the Company or any Subsidiary is bound or affected, except with respect
to the foregoing clauses (ii) and (iii), for any such conflicts, violations,
breaches, defaults or other occurrences that would not, individually or in the
aggregate, have a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company and the consummation
of the Transactions will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any United States (federal, state
or local) or foreign government or governmental, regulatory or administrative
authority, agency, commission, board, bureau, court or instrumentality or
arbitrator of any kind ("Governmental Authority"), except (i) for applicable
requirements, if any, of the Securities Act of 1933, as amended, and the rules
and regulations thereunder (collectively the "Securities Act"), the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder
(collectively the "Exchange Act"), state securities or "blue sky" laws ("Blue
Sky Laws"), National Association of Securities Dealers, Inc. Automated
Quotation/National Market System ("NASDAQ/NMS") and state takeover laws, the
pre-merger notification requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder
(the "HSR Act"), any pre-merger notification filing with the German Federal
Cartel Office and filing and recordation of appropriate merger documents as
required by the DGCL and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay consummation of the Offer or the Merger or otherwise prevent
the Company from performing its obligations under this Agreement or consummating
any of the Transactions, and would not, individually or in the aggregate, have a
Company Material Adverse Effect.
SECTION 3.7 SEC Filings; Financial Statements.
---------------------------------
(a) Since January 1, 1994, the Company has filed all forms, reports,
statements and other documents required to be filed with the Securities and
Exchange Commission (the "SEC") through the date of this Agreement
(collectively, the "Company SEC Reports") including, without limitation, (i) all
Annual Reports on Form 10-K, (ii) all Quarterly Reports on Form 10-Q, (iii) all
proxy statements relating to meetings of stockholders (whether annual or
special), (iv) all Reports on Form 8-K, (v) all other reports or registration
statements and (vi) all amendments and supplements to all such reports and
registration statements (collectively, the "SEC Reports"). The Company SEC
Reports (A) were prepared in all material respects in accordance with the
requirements Securities Act and the Exchange Act applicable to such Company SEC
Reports and (B) did not at the time they were filed contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or
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<PAGE>
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) Since September 30, 1996, there has not been any Company Material
Adverse Effect.
(c) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the Company SEC Reports has been prepared
in accordance with the published rules and regulations of the SEC and generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated (except as may be indicated in the notes thereto) and each
fairly presents, in all material respects, the consolidated financial position,
results of operations and cash flows of the Company and its consolidated
Subsidiaries as at the respective dates thereof and for the respective periods
indicated therein, except as otherwise indicated in the notes thereto (subject,
in the case of unaudited statements, to normal and recurring year-end
adjustments which were not and are not expected, individually or in the
aggregate, to have a Company Material Adverse Effect).
(d) Except as and to the extent set forth on, or reserved against on,
the consolidated balance sheet of the Company and its consolidated Subsidiaries
as of March 31, 1997, including the notes thereto, or incurred since March 31,
1997 in the ordinary course of business consistent with past practice, none of
the Company or any Subsidiary has any liability or obligation of any nature
(whether accrued, absolute, contingent, fixed, liquidated, unliquidated or
otherwise) that would be required to be reflected on, or reserved against in, a
balance sheet of the Company, or in the notes thereto, prepared in accordance
with the published rules and regulations of the SEC and generally accepted
accounting principles, which are, individually or in the aggregate, material to
the business, operations, properties, financial condition, results of operations
of the Company and its Subsidiaries, taken as a whole.
(e) Except as disclosed in the Company SEC Reports, none of the
Company or any of its Subsidiaries is indebted to any director, officer,
employee or agent of the Company or any of its Subsidiaries (except for amounts
due as normal salaries and bonuses and in reimbursement of ordinary expenses)
and no such person is indebted to the Company or any of its Subsidiaries, and
there have been no other transactions of the type required to be disclosed
pursuant to Items 402 and 404 of Regulation S-K under the Exchange Act.
SECTION 3.8 Absence of Certain Changes or Events. Since September 30,
------------------------------------
1996 except as contemplated by this Agreement or as disclosed in any Company SEC
Report filed since September 30, 1996, the Company and its Subsidiaries have
conducted their businesses only in the ordinary course and in a manner
consistent with past practice and, since such date, there has not been (a) any
change by the Company in its accounting methods, principles or practices, (b)
any revaluation by the Company of any material asset (including, without
limitation, any writing down of the value of inventory or writing off of notes
or accounts
13
<PAGE>
receivable), other than in the ordinary course of business consistent with past
practice, (c) any entry by the Company or any Subsidiary into any commitment or
transaction material to the Company and its Subsidiaries taken as a whole,
except in the ordinary course of business and consistent with past practice, (d)
any declaration, setting aside or payment of any dividend or distribution in
respect of the Shares or any redemption, purchase or other acquisition of any of
its securities, (e) any increase in the benefits under, or the establishment or
amendment of, any bonus, insurance, severance, deferred compensation, pension,
retirement, profit sharing, stock option (including, without limitation, the
granting of stock options, stock appreciation rights, performance awards, or
restricted stock awards), stock purchase or other employee benefit plan, or any
other increase in the compensation payable or to become payable to any officers
or key employees of the Company or any Subsidiary except as set forth in Section
3.8 of the Company Disclosure Schedule, (f) any entry by the Company or any
Subsidiary into any employment, consulting, termination or indemnification
agreement with any officer or key employee of the Company or any Subsidiary or
entry into any such agreement with any other person outside the ordinary course
of business except as set forth in Section 3.8 of the Company Disclosure
Schedule, or (g) any agreement by the Company or any Subsidiary to take any of
the actions described in this Section 3.8 except as expressly contemplated by
this Agreement. Between September 30, 1996, and the execution and delivery of
this Agreement, neither the Company nor any Subsidiary has taken, or agreed to
take, any action that would constitute a breach of Section 5.1 if taken after
the date of this Agreement.
SECTION 3.9 Intellectual Property.
---------------------
(a) "Company Intellectual Property Rights" means all trademarks,
trademark rights, trade names, trade name rights, patents, patent rights,
industrial models, copyrights, servicemarks, trade secrets, computer software
programs or applications (in both source code and object code form), maskworks,
net lists, schematics, technology, ideas, algorithms, processes, know-how,
inventions and applications for patents, trademarks, copyrights and servicemarks
and all other tangible and intangible proprietary rights and information owned
by or licensed to the Company or any Subsidiary or which the Company or any
Subsidiary otherwise possesses legally enforceable rights to use.
(b) Section 3.9(b) of the Company Disclosure Schedule contains a
complete and accurate list and summary description, including any royalties paid
or received by the Company or any of its Subsidiaries, of all contracts,
agreements, understandings or arrangements relating to the Company Intellectual
Property Rights to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound, except for any license
implied by the sale of a product and perpetual, paid-up licenses for
commercially available software programs with a value of less than $1,000 under
which the Company or any of its Subsidiaries is the licensee. There are no
outstanding and, to the Company's knowledge, no threatened disputes or
disagreements with respect to any such contracts, agreements, understandings or
arrangements.
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(c) Know-How Necessary for the Business.
-----------------------------------
(i) The Company Intellectual Property rights are all those used or
proposed to be used by the Company for the operation of the businesses of the
Company and its Subsidiaries as they are currently conducted or currently
proposed to be conducted, respectively. Either the Company, or one of its direct
or indirect wholly owned subsidiaries, is the owner of all right, title, and
interest in and to each of the Company Intellectual Property Rights, free and
clear of all liens, security interests, charges, encumbrances, equities and
other adverse claims, and has the right to use without payment to a third party
such Company Intellectual Property Rights.
(ii) All former and current employees of each the Company and
each of its Subsidiaries have executed written agreements with one or more of
the Company and its direct or indirect wholly owned subsidiaries that assign to
one or more of such entities all rights to any inventions, improvements,
discoveries or information relating to the business of the Company or one of its
Subsidiaries. No employee of the Company or one of its Subsidiaries has entered
into any contract, agreement, understanding or arrangement that restricts or
limits in any way the scope or type of work in which the employee may be engaged
or requires the employee to transfer, assign, or disclose information concerning
his work to anyone other than one or more of the Company and its direct or
indirect wholly owned subsidiaries.
(d) Patents.
-------
(i) Section 3.9(d) of the Company Disclosure Schedule contains a
complete and accurate list and summary description of all inventions, patents,
patent applications and patent rights used or proposed to be used by the Company
or any of its Subsidiaries (collectively, "Patents").
(ii) All of the issued Patents are currently in compliance with
formal legal requirements (including payment of filing, examination, and
maintenance fees and proofs of working or use), are valid and enforceable, and
are not subject to any maintenance fees or taxes or actions falling due within
ninety days after the Effective Time.
(iii) No Patent has been or is now involved in any interference,
reissue, reexamination, or opposition proceeding. To the Company's knowledge,
there is no potentially interfering patent or patent application of any third
party.
(iv) To the Company's knowledge, no Patent is infringed or, to
Company's knowledge, has been challenged or threatened in any way. To the
Company's knowledge, none of the products manufactured and sold, nor any process
or know-how used, by the Company or any of its Subsidiaries infringes or is
alleged to infringe any patent or other proprietary right of any other person.
15
<PAGE>
(v) All products made, used, or sold under the Patents have been
marked with a proper patent notice.
(e) Trademarks.
----------
(i) Section 3.9(e) of the Company Disclosure Schedule contains a
complete and accurate list and summary description of all trademarks, trademark
rights, trade names, trade name rights and servicemarks used or proposed to be
used by the Company or any of its Subsidiaries (collectively, the "Marks").
(ii) All applications for registration of the Marks that have
been registered with the United States Patents and Trademark Office are
currently in compliance with all formal legal requirements (including the timely
post-registration filing of affidavits of use and incontestability and renewal
applications), are valid and enforceable, and the registered Marks and pending
applications are not subject to any maintenance fees or taxes or actions falling
due within ninety days after the Effective Time.
(iii) No Mark has been or is now involved in any opposition,
invalidation, or cancellation and, to the Company's knowledge, no such action is
threatened with the respect to any of the Marks.
(iv) To the Company's knowledge, there is no potentially
interfering trademark or trademark application of any third party.
(v) To the Company's knowledge, no Mark is infringed or has been
challenged or threatened in any way. To the Company's knowledge, none of the
Marks infringes or is alleged to infringe any trade name, trademark, or service
mark of any third party.
(vi) All products and materials containing a Mark bear a proper
federal registration notice where permitted by law.
(f) Copyrights.
----------
(i) Section 3.9(f) of the Company Disclosure Schedule contains a
complete and accurate list and summary description of all copyrights for works
of authorship used or proposed to be used by the Company or any of its
Subsidiaries and registered with the United States Copyright Office
("Copyrights").
(ii) All the Copyrights have been registered and are currently in
compliance with formal legal requirements, are valid and enforceable, and the
Copyrights are not subject to any maintenance fees or taxes or actions falling
due within ninety days after the Effective Time.
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<PAGE>
(iii) To the Company's knowledge, no Copyright is infringed or has
been challenged or threatened in any way. To the Company's knowledge, none of
the subject matter of any of the Copyrights infringes or is alleged to infringe
any copyright of any third party or is a derivative work based on the work of a
third party.
(iv) All works encompassed by the Copyrights have been marked
with a proper copyright notice.
(v) To the Company's knowledge, all works subject to Copyright are
original works of authorship of regular employees of the Company or independent
contractors who have assigned their rights in such works to the Company and no
part of any such work has been copied from any other source.
(g) Trade Secrets.
-------------
(i) Each of the Company and each of its Subsidiaries has taken
reasonable and necessary precautions to protect the secrecy, confidentiality,
and value of their trade secrets.
(ii) To the Company's knowledge, either the Company or one or
more of its direct or indirect wholly owned subsidiaries has good title and an
absolute (but not necessarily exclusive) right to use the trade secrets used or
proposed to be used by the Company or any of its Subsidiaries ("Trade Secrets").
To the Company's knowledge, the Trade Secrets are not part of the public
knowledge or literature, and have not been used, divulged, or appropriated
either for the benefit of any person (other than the Company or its
Subsidiaries) or to the detriment of the Company or its Subsidiaries. To the
Company's knowledge, no Trade Secret is subject to any adverse claim or has been
challenged or threatened in any way.
(h) Since September 30, 1996, (i) none of the Company Intellectual
Property Rights has been sold, transferred, assigned or otherwise disposed of
and (ii) there has been no change in the Company Intellectual Property Rights.
SECTION 3.10 Material Contracts. Section 3.10 of the Company Disclosure
------------------
Schedule sets forth a list of all agreements of the Company with any stockholder
who beneficially owns 5% or more of the outstanding Shares, executive officer of
the Company or director of the Company. Except as set forth in Section 3.10 of
the Company Disclosure Schedule, no officer or director of the Company, or any
"associate" (as such term is defined in Rule 14a-1 under the Exchange Act) of
any such officer or director, has any material interest in any material contract
or property (real or personal, tangible or intangible), used in, or pertaining
to the business of the Company or any of its Subsidiaries.
17
<PAGE>
SECTION 3.11 Environmental Matters.
---------------------
(a) For purposes of this Agreement, the following terms shall have the
following meanings: (i) "Hazardous Substances" means (A) those substances
defined in or regulated under the following federal statutes and their state
counterparts, as each may be amended from time to time, and all regulations
thereunder: the Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water
Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and Rodenticide
Act and the Clean Air Act; (B) petroleum and petroleum products including crude
oil and any fractions thereof; (C) natural gas, synthetic gas, and mixtures
thereof; (D) radon; (E) asbestos; (F) any other contaminant; and (G) any
substance with respect to which a federal, state or local agency requires
environmental investigation, monitoring, reporting or remediation; and (ii)
"Environmental Laws" means any federal, state or local law relating to (A)
releases or threatened releases of Hazardous Substances or materials containing
Hazardous Substances; (B) the manufacture, handling, transport, use, treatment,
storage or disposal of Hazardous Substances or material containing Hazardous
Substances; or (C) otherwise relating to pollution of the environment.
(b) Except as could not reasonably be expected to have a Company
Material Adverse Effect, (i) the Company is not in violation of any
Environmental Law; (ii) none of the properties owned or leased by the Company
are contaminated with any Hazardous Substance; (iii) the Company is not liable
for any off-site contamination; (iv) the Company is not liable under any
Environmental Law; (v) the Company has all permits, licenses and other
authorizations required under any Environmental Law ("Environmental Permits");
(vi) the Company is in compliance with its Environmental Permits; and (vii)
there are no pending, or, to the knowledge of the Company, threatened claims
against the Company or any Subsidiary relating to any Environmental Law or
Hazardous Substance.
SECTION 3.12 Employee Benefits.
-----------------
(a) Section 3.12(a) of the Company Disclosure Schedule contains a true
and complete summary or list of or otherwise describes all material employment
contracts or other employee benefit arrangements with "change of control" or
similar provisions, all severance agreements with directors or executive
officers and all bonus, deferred compensation, pension, retirement, profit
sharing, stock option, stock purchase and other employee benefit plans (other
than medical and other similar welfare plans made generally available to all
employees) to which the Company or any of its Subsidiaries is a party. True and
complete copies of all such plans and agreements have been made available to
Purchaser.
(b) The Company has heretofore delivered or otherwise made available
to Purchaser true, correct and complete copies of (i) each "employee benefit
plan" as defined in
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<PAGE>
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), it maintains or to which it contributes and any bonus, deferred
compensation, severance pay, insurance, stock purchase, stock option or other
fringe benefit plan, program or arrangement, whether formal or informal (the
"Plans"), (ii) the three most recent Annual Reports (Form 5500 Series) and
accompanying schedules for each of the Plans for which such a report is
required, (iii) the most current summary plan description (and any summary of
material modifications) for each Plan, (iv) the three most recent certified
financial statements for each of the Plans for which such a statement is
required or was prepared, (v) the Forms PBGC-1 filed in each of the three most
recent plan years for each of the Plans for which such form was required to be
filed, and (vi) for each Plan intended to be "qualified" within the meaning of
Section 401(a) of the Code, the most recent Internal Revenue Service
determination letter issued with respect to such Plan.
(c) The Company and each Subsidiary and ERISA Affiliate (as defined
below) has performed and complied in all material respects with all of its
obligations under and with respect to the Plans and each of the Plans has, at
all times, in form and operation complied in all material respects with its
terms, and, where applicable, the requirements of the Code, ERISA and all other
applicable laws. Each Plan which is intended to be "qualified" within the
meaning of Section 401(a) of the Code has been determined by the Internal
Revenue Service to be so qualified and, to the knowledge of the Company, nothing
has occurred which reasonably could be expected to adversely affect such
qualified status. For purposes of this Agreement, the term "ERISA Affiliates"
as applied to any person, shall mean (a) any corporation which is a member of a
controlled group of corporations, within the meaning of Section 414(b) of the
Code of which that person is a member, (b) any trade or business (whether or not
incorporated) which is a member of a group of trades or businesses under common
control, within the meaning of Section 414(c) of the Code, of which that person
is a member, and (c) any member of any affiliate service group, within the
meaning of Section 414(m) and (o) of the Code, of which that person or any
entity descried in clause (a) or (b) is a member.
(d) There are no unpaid contributions due prior to the date hereof
with respect to any Plan, and with respect to each Plan that is subject to
Section 412 of the Code, there has occurred no failure to meet the minimum
funding standards of such Section, or failure to make a required installment
under Section 412(m) of the Code by its due date.
(e) Neither the Company, any Subsidiary nor any ERISA Affiliate has
withdrawn from any Plan during a plan year in which it was a "substantial
employer," as defined in Section 4001(a)(2) of ERISA, where such withdrawal
could result in liability of such substantial employer pursuant to Section
4062(e) or 4063 of ERISA, and neither the Company, nor any Subsidiary nor any
ERISA Affiliate has filed a notice of intent to terminate any such plan or
adopted any amendment to treat any such plan as terminated. The Pension
Benefit Guaranty Corporation has not instituted proceedings to terminate any
Plan, and no other event or condition has occurred which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any such plan. No reportable
19
<PAGE>
event, as described in Section 4043 of ERISA (whether or not waived), has
occurred with respect to any Plan, and there has been no event which could
subject the Company, any Subsidiary or ERISA Affiliate to liability under
Section 4064 or 4069 of ERISA for any Plan.
(f) With respect to each Plan that is subject to the provisions of
Title I, Sub title B, Part 3 of ERISA, the actuarial present value (based on the
actuarial assumptions used in the most recent actuarial valuation) of vested and
nonvested "benefit liabilities," as defined in Section 4001(a)(16) of ERISA
(calculated on a termination basis and taking into account all contingent and
subsidized benefits) of each such Plan, determined as of the most recent
valuation date for each such plan, did not exceed the fair market value of the
assets of such Plan as of such date.
(g) Except as described in Section 3.12(g) of the Company Disclosure
Schedule, neither the Company nor any Subsidiary or ERISA Affiliate has any
obligation to provide health benefits or other non-pension benefits to retired
or other former employees, except as specifically required by Section 4980B of
the Code or Part 6 of Title I of ERISA, and the Company and any Subsidiary or
ERISA Affiliate has complied in all material respects with the requirements of
Code Section 4980B and such Part 6.
(h) To the knowledge of the Company, neither the Company, any
Subsidiary or any ERISA Affiliate, nor any other "disqualified person" or "party
in interest," as defined in Section 4975 of the Code and Section 3(14) of ERISA,
respectively, has engaged in any "prohibited transaction," as defined in Section
4975 of the Code or Section 406 of ERISA, with respect to any Plan which could
subject the Company or any ERISA Affiliate to any material penalty or tax under
Section 502(i) of ERISA or Sections 4971 and 4975 of the Code. Except as set
forth in Section 3.12(h) of the Company Disclosure Schedule, with respect to any
Plan, no action, suit or claim is pending with respect to any Plan, other than
routine claims for benefits.
(i) To the knowledge of the Company, neither the Company nor any
Subsidiary or ERISA Affiliate has incurred any liability or taken any action and
none of them has any knowledge of any action or event that could cause any one
of them to incur any liability (i) under Section 412 of the Code or Title IV of
ERISA, or (ii) on account of a partial or complete withdrawal (as defined in
Sections 4203 and 4205 of ERISA, respectively) with respect to any Multiemployer
Plan.
(j) Except as set forth in Section 3.12(j) of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of any or all of the contemplated transactions will: (i) entitle
any current or former employee of the Company nor any Subsidiary or ERISA
Affiliate to severance pay, unemployment compensation or any similar payment, or
(ii) result in the payment of any "excess parachute payment" to any person under
Section 280G of the Code.
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SECTION 3.13 Opinion of Financial Advisor. The Company has received the
----------------------------
opinion of PaineWebber Incorporated on the date of this Agreement to the effect
that, as of the date of this Agreement, the Merger Consideration is fair to the
Company's stockholders from a financial point of view and the Company will
promptly, after the receipt thereof, deliver a copy of such opinion to
Purchaser.
SECTION 3.14 Brokers. No broker, finder or investment banker (other
-------
than PaineWebber Incorporated) is entitled to any brokerage, finder's or other
fee or commission in connection with the Transactions based upon arrangements
made by or on behalf of the Company. The Company has heretofore made available
to Purchaser a complete and correct copy of all agreements between the Company
and PaineWebber Incorporated pursuant to which such firm would be entitled to
any payment relating to the Transactions.
SECTION 3.15 Litigation. Except as set forth in Section 3.15 of the
----------
Company Disclosure Schedule, (a) there is no action, suit, proceeding or, to the
Company's knowledge, investigation pending against or affecting the Company or
any of its Subsidiaries or any of their respective properties and, to the
Company's knowledge, there is no action, suit, proceeding or investigation
threatened against or affecting the Company or any of its Subsidiaries or any of
their respective properties before any Governmental Authority and (b) neither
the Company nor any of its Subsidiaries is subject to any judgment, decree,
injunction, rule or order of any Governmental Authority or arbitrator.
SECTION 3.16 Labor Relations. The Company and its Subsidiaries are in
---------------
material compliance with all federal, state and local laws, rules, regulations
and orders respecting employment and employment practices, including, without
limitation, immigration and terms and conditions of employment, wages and hours.
To the Company's knowledge, there are no pending investigations involving the
Company or any of its Subsidiaries by any Governmental Authority for the
enforcement of such federal, state or local laws, rules regulations and orders.
There is no unfair labor practice charge or complaint pending, or, to the
Company's knowledge, threatened or contemplated, against the Company or any of
its Subsidiaries before any Governmental Authority or any strike, picketing,
boycott, dispute, slowdown or stoppage pending, or, to the Company's knowledge,
threatened or contemplated, against or involving the Company or any of its
Subsidiaries. There are no existing collective bargaining agreements with the
Company or any of its Subsidiaries. No representation question exists
respecting the employees of the Company or any of its Subsidiaries and no
collective bargaining agreement or modification thereof is currently being
negotiated by or on behalf of the Company or any of its Subsidiaries. No
grievance or arbitration proceeding is pending, or, to the Company's knowledge,
threatened or contemplated, under any expired collective bargaining agreements
of the Company or its Subsidiaries. No labor dispute with the employees of the
Company or any of its Subsidiaries is pending, or, to the Company's knowledge,
threatened or contemplated.
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SECTION 3.17 Application of California Statute. The Company is not a
---------------------------------
foreign corporation subject to Section 2115 of the California General
Corporation Law.
SECTION 3.18 Tax Returns and Audits. Each of the Company and its
----------------------
Subsidiaries has duly filed all federal income tax returns to be filed by it and
has duly filed all other federal, state, local and foreign tax returns and
reports required to be filed by it and has duly paid or made adequate provision
on its books in accordance with generally accepted accounting principles for the
payment of all taxes which have been incurred or are due and payable. Except as
set forth in Section 3.18 of the Company Disclosure Schedule (a) there are no
pending audits, examinations or proposed audits or examinations of any tax
returns filed by the Company or any of its Subsidiaries and (b) neither the
Company nor any of its Subsidiaries have given or been requested to give waivers
or extensions of any statute of limitations relating to the payment of taxes for
which the Company or any of its Subsidiaries may be liable. As of the date of
this Agreement, the consolidated federal income tax returns of the Company and
its Subsidiaries have been audited by the Internal Revenue Service (or the
appropriate statute of limitations has expired) for all fiscal years through and
including September 30, 1992. All deficiencies asserted or proposed as a result
of any examinations or audits of any tax returns have been paid or adequately
provided for on the books of the Company or one of its Subsidiaries in
accordance with generally accepted accounting principles. Except as set forth
in Section 3.18 of the Company Disclosure Schedule, neither the Company nor any
of its Subsidiaries (i) is a party to any agreement providing for the
allocation, payment or sharing of taxes among the Company, its Subsidiaries or
any third parties, (ii) has any net operating loss carryovers, net capital loss
carryovers or any other items the use of which, by deduction or credit or
otherwise, would or may be limited by Section 382 of the Code (except as a
result of the transactions contemplated hereby), (iii) has filed any consent to
the application of Section 341(f) of the Code with respect to any of its
property, (iv) has an application pending with respect to any tax requesting
permission for a change in accounting method, (v) is required to make any
adjustments to income pursuant to Section 481 of the Code or (vi) owns or leases
any real property or otherwise holds any interest in real property that would or
may subject the parties hereto or the Surviving Corporation to a transfer or
gains tax as a result of the Merger (unless Purchaser elects to merge the
Company into Merger Sub and except for transactions after the Merger).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB
Purchaser and Merger Sub hereby jointly and severally represent and warrant
to the Company that:
SECTION 4.1 Organization and Qualification; Subsidiaries. Purchaser is
--------------------------------------------
a corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has the requisite power and
authority and all necessary governmental
22
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approvals to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where the failure to be so incorporated,
existing or in good standing or to have such power, authority and governmental
approvals would not prevent or materially delay consummation of the Merger or
the other Transactions or otherwise prevent Purchaser or Merger Sub from
performing their material obligations under this Agreement or, individually or
in the aggregate, have a Purchaser Material Adverse Effect (as defined below).
Purchaser is duly qualified or licensed as a foreign corporation to do business,
and is in good standing, and in good standing in each jurisdiction where the
character of the properties owned, lease or operated by it or the nature of its
business makes such qualification or licensing necessary, except for such
failures to be so qualified or licensed or in good standing that would not
prevent or materially delay consummation of the Merger or the other
Transactions, or otherwise prevent Purchaser or Merger Sub from performing their
material obligations under this Agreement and would not, individually or in the
aggregate, have a Purchaser Material Adverse Effect. The term "Purchaser
Material Adverse Effect" means any circumstance, change in or effect on
Purchaser or any of its Subsidiaries that is materially adverse to the business,
operations, properties, financial condition or results of operations of
Purchaser and its Subsidiaries, taken as a whole.
SECTION 4.2 Certificate of Incorporation and By-Laws. Purchaser
----------------------------------------
heretofore has made available to the Company a complete and correct copy of the
Certificate of Incorporation and the By-Laws of each of Purchaser and Merger
Sub. The Certificate of Incorporation and By-Laws of each of Purchaser and
Merger Sub are in full force and effect. Neither Purchaser nor Merger Sub is in
violation of any of the provisions of its Certificate of Incorporation or By-
Laws.
SECTION 4.3 Authority Relative to this Agreement.
------------------------------------
(a) Each of Purchaser and Merger Sub has all necessary corporate power
and authority to execute and deliver this Agreement, to perform their respective
obligations hereunder and to consummate the Transactions. The execution and
delivery of this Agreement by each of Purchaser and Merger Sub and the
consummation by each of Purchaser and Merger Sub of the Transactions have been
duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of Purchaser or Merger Sub are necessary to
authorize this Agreement or to consummate the Transactions (other than the
filing and recordation of appropriate merger documents as required by the DGCL).
This Agreement has been duly and validly executed and delivered by each of
Purchaser and Merger Sub and, assuming the due authorization, execution and
delivery by the Company, constitutes a legal, valid and binding obligations of
each Purchaser and Merger Sub, enforceable against each of Purchaser and Merger
Sub in accordance with its terms.
(b) The Board of Directors of Purchaser has, on June 18, 1997,
approved and adopted this Agreement and the Transactions and Purchaser has
approved this Agreement and the Transactions as the sole stockholder of Merger
Sub.
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SECTION 4.4 No Conflict; Required Filings and Consents.
------------------------------------------
(a) The execution and delivery of this Agreement by each of Purchaser
and Merger Sub does not, and the performance of this Agreement by each of
Purchaser and Merger Sub and the consummation of the Transactions will not, (i)
conflict with or violate the Certificate of Incorporation or By-Laws or
equivalent organizational documents of Purchaser or Merger Sub, (ii) assuming
that all consents, approvals, authorizations and other actions described in
subsection 4.4(b) have been obtained and all filings and obligations described
in subsection 4.4(b) have been made or complied with, conflict with or violate
any Law applicable to Purchaser or by which any asset of Purchaser is bound or
affected, or (iii) conflict with, result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or require any payment under or result in the
creation of a lien, claim, security interest or other charge or Encumbrance on
any asset of Purchaser pursuant to, any contract or other instrument or
obligation to which Purchaser or Merger Sub is a party or by which any asset of
Purchaser or Merger Sub is bound or affected, except, with respect to clauses
(ii) and (iii), for any such conflicts, violations, breaches, defaults, or other
occurrences which would not, individually or in the aggregate, have a Purchaser
Material Adverse Effect.
(b) The execution and delivery of this Agreement by each of Purchaser
and Merger Sub does not, and the performance of this Agreement by each of
Purchaser and Merger Sub and the consummation of the Transactions will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, except (i) for applicable
requirements, if any, of the Securities Act, the Exchange Act, Blue Sky Laws,
the NYSE and state takeover laws, the pre-merger notification requirements of
the HSR Act, any pre-merger notification filing with the German Federal Cartel
Office and recordation of appropriate merger documents as required by the DGCL
and (ii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notification would not prevent or delay
consummation of the Offer or the Merger, or otherwise prevent either Purchaser
or Merger Sub from performing their respective obligations under this Agreement
or consummating any of the Transactions, and would not, individually or in the
aggregate, have a Purchaser Material Adverse Effect.
SECTION 4.5 Brokers. No broker, finder or investment banker (other than
-------
Deutsche Morgan Grenfell) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of Purchaser.
SECTION 4.6 Financing. Purchaser shall provide or cause to be provided
---------
to Merger Sub the funds necessary to satisfy all of Purchaser's and Merger Sub's
obligations under this Agreement to consummate the Offer and the Merger in
accordance with their respective terms and the terms of this Agreement, each as
may be amended from time to time.
24
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ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 Conduct of Business by the Company Pending the Merger.
-----------------------------------------------------
Prior to the Effective Time, except to the extent that Purchaser shall otherwise
consent (including by virtue of action by the Board of Directors of the Company
approved by all of Purchaser's or Merger Sub's designees, as applicable, at such
time as they shall constitute a majority of such Board), the Company shall, and
shall cause its Subsidiaries to, except as expressly permitted by this
Agreement, conduct their respective businesses in, and shall not take any action
except in, the ordinary course of business in a manner consistent with past
practice; and the Company shall, and shall cause its Subsidiaries to, use their
respective reasonable best efforts to preserve intact the business organization
of the Company and its Subsidiaries, to keep available the services of the
current officers, employees and consultants of the Company and its Subsidiaries
and to preserve the current business relationships of the Company and its
Subsidiaries, including, without limitation, with customers, licensors,
suppliers, distributors and others with which the Company or any Subsidiary has
business relations. Without limiting the generality of the foregoing, and
except as expressly permitted or specifically contemplated by this Agreement,
the Company shall not, and shall not permit any Subsidiary to, between the date
of this Agreement and the Effective Time, directly or indirectly do, or propose
to do, any of the following without the prior written consent of Purchaser
(except as otherwise expressly permitted by this Agreement):
(a) (i) declare, set aside or pay any dividends on or other
distributions in respect of any of its capital stock (other than dividends and
distributions by any direct or indirect wholly owned subsidiary of the Company
to its parent), (ii) split, combine or reclassify any of its capital stock or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock or (iii)
repurchase, redeem or otherwise acquire, or permit any Subsidiary to repurchase,
redeem or otherwise acquire, any shares of capital stock;
(b) issue, deliver, sell, pledge, dispose or encumber, or authorize or
propose the issuance, delivery, sale, pledge, disposal or encumbrance of, any
shares of its capital stock of any class or any securities convertible into, or
any rights, warrants, calls, subscriptions or options to acquire, any such
shares or convertible securities, or any other ownership interest other than (i)
the issuance of shares of Company Common Stock upon the exercise of stock
options granted under the Company Stock Option Plans outstanding on the date of
this Agreement and in accordance with the current terms of such options, (ii)
issuances by a Subsidiary of its capital stock to the Company or a Subsidiary so
long as the Company will, after such issuance, directly or indirectly own all
the outstanding capital stock of the issuing Subsidiary and (iii) the grant of
stock options to new hires in the ordinary course of business consistent with
past practice and with the written consent of Purchaser;
25
<PAGE>
(c) amend or propose to amend its Certificate of Incorporation or By-
Laws;
(d) acquire or agree to acquire, including, without limitation, by
merging or consolidating with, or by purchasing a substantial equity interest in
or substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof;
(e) sell, lease, license, grant a security interest in, encumber or
otherwise dispose of, or agree to sell, lease, grant a security interest in,
encumber or otherwise dispose of, any of its material assets other than (i)
sales or licenses of its products in the ordinary course of business consistent
with past practice, (ii) equipment and property no longer used in the operation
of the Company and its Subsidiaries' respective businesses and (iii) assets
related to any discontinued operations of the Company and its Subsidiaries which
operations were discontinued prior to the date hereof;
(f) incur (which shall not be deemed to include entering into credit
agreements, lines of credit or similar arrangements until borrowings are made
under such arrangements) any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Company or any Subsidiary or guarantee any
debt securities of others, except in the ordinary course of business consistent
with past practice;
(g) (i) grant any increase in the compensation of any of its
directors, officers or employees, except for increases for employees in the
ordinary course of business consistent with past practices, (ii) grant, pay or
agree to pay any pension, retirement allowance or other employee benefit not
required or contemplated by any existing employee benefit plan, program,
arrangement, agreement or contract (including, without limitation, any "employee
benefit plan", as defined in Section 3(3) of ERISA), maintained or contributed
to by the Company or any Subsidiary, or with respect to which the Company or any
Subsidiary could incur liability under Sections 4069, 4212(c) or 4204 of ERISA
(the "Company Benefit Plans") as in effect on the date hereof to any director,
officer or employee, (iii) enter into any new employment, severance or
termination plan, program, arrangement, agreement or contract with any such
director, officer or employee or (iv) except as may be required to comply with
applicable law, become obligated under any Company Benefit Plan that was not in
existence on the date hereof or amend any such plan in existence on the date
hereof to enhance the benefits thereunder;
(h) make any capital expenditure or expenditures which exceed $250,000
in the aggregate; or
(i) authorize any of, or commit or agree to take any of, the actions
described in paragraphs (a) through (h) of this Section 5.1.
26
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ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Meeting of the Stockholders.
---------------------------
(a) The Company will take all action necessary in accordance with
applicable law and its Certificate of Incorporation and By-Laws to convene a
meeting of its stockholders to consider and vote upon the approval of this
Agreement and the Merger and such other matters as may be necessary to
effectuate the Transactions (the "Meeting"), if necessary to comply with
applicable law, as promptly as practicable after the expiration of the Offer.
The Purchaser Companies will vote all Shares over which they exercise voting
control in favor of this Agreement and the Merger.
(b) The Board of Directors of the Company shall recommend such
approval and take all lawful action to solicit such approval; provided, however,
-------- -------
that the Board of Directors of the Company at any time prior to the time of
acceptance for payment of at least a majority of Shares pursuant to the Offer
may withdraw, modify or change any such recommendations to the extent that the
Board of Directors of the Company (i) determines in good faith after
consultation with and based upon the advice of independent legal counsel that
the failure to so withdraw, modify or change its recommendation would cause the
Board of Directors of the Company to breach its fiduciary duties to the
Company's stockholders under applicable law and (ii) the Company has received in
writing a Superior Proposal (as defined below), which is then pending, which the
Board of Directors of the Company has determined to recommend to the
stockholders of the Company. For purposes of this Agreement, a "Superior
Proposal" means any bona fide proposal relating to a Competing Transaction (as
hereinafter defined) made by a third party on terms which the Board of Directors
of the Company determines in its good faith judgment (based upon the advice of a
financial advisor of nationally recognized reputation) to be more financially
favorable to the Company's stockholders than the Offer and the Merger and for
which financing, to the extent required, is then committed or which, in the good
faith judgment (based upon the advice of a financial advisor of nationally
recognized reputation) of the Board of Directors of the Company, is reasonably
capable of being financed by such third party. The Company agrees that it shall
notify Purchaser at least forty-eight hours prior to taking any action with
respect to such Superior Proposal or taking any action with respect to the
withdrawal, modification or change of its recommendation for approval of this
Agreement, the Merger or the Transactions. Notwithstanding anything to the
contrary contained in this Agreement, any such withdrawal, modification or
change of recommendation in accordance with the provisions of this Section
6.1(b) shall not constitute a breach of this Agreement by the Company.
(c) Notwithstanding the foregoing, in the event that Purchaser shall
acquire at least 90 percent of the then outstanding Shares, the parties hereto
agree, subject to Article VII, to take all necessary and appropriate action to
cause the Merger to become effective, in
27
<PAGE>
accordance with Section 253 of the DGCL, as soon as reasonably practicable after
such acquisition, without a meeting of the stockholders of the Company.
(d) If required by applicable law, as soon as practicable after the
expiration of the Offer, the Company shall file with the SEC a proxy statement
(the "Proxy Statement") and form of proxy relating to the Merger, which shall
comply as to form with all applicable laws. The Company shall obtain and furnish
the information required to be included in the Proxy Statement and shall respond
promptly to any comments made by the SEC with respect to the Proxy Statement and
cause the Proxy Statement and form of proxy to be mailed to the Company's
stockholders at the earliest practicable date. Purchaser and Merger Sub shall
cooperate in the preparation of the Proxy Statement and shall furnish the
Company with all information with respect to itself, and its directors,
officers, stockholders and Subsidiaries, as may be required for inclusion in the
Proxy Statement. The Company agrees, as to information with respect to the
Company, its officers, directors, stockholders and Subsidiaries contained in the
Proxy Statement, and Purchaser agrees, as to information with respect to
Purchaser, its officers, directors, stockholders and Subsidiaries contained in
the Proxy Statement, that such information, at the date the Proxy Statement is
mailed and (as then amended or supplemented) at the time of the Meeting, will
not be false or misleading with respect to any material fact, or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading. Purchaser and its counsel shall be given an
opportunity to review the Proxy Statement, and all amendments or supplements
thereof, prior to their being filed with the SEC and the Company shall not make
any such filing without the approval of Purchaser (which shall not be
unreasonably withheld). The Company will advise Purchaser, promptly after it
receives notice thereof, of the time when the Proxy Statement has been cleared
by the SEC or any request by the SEC for amendment of the Proxy Statement or
comments thereon and proposed responses thereto or requests by the SEC for
additional information.
SECTION 6.2 Access to Information; Confidentiality.
--------------------------------------
(a) Except as required pursuant to any confidentiality agreement or
similar agreement or arrangement to which the Company or any of its Subsidiaries
is a party (as to which it will use its reasonable best efforts to obtain any
necessary consents) or pursuant to applicable Law, from the date of this
Agreement to the Effective Time, the Company shall (and shall cause its
Subsidiaries to): (i) provide to Purchaser and its officers, directors,
employees, accountants, legal counsel, agents, investment bankers and other
authorized representatives (collectively, "Representatives") access at
reasonable times upon prior notice to the officers, employees, agents,
properties, offices and other facilities of the Company and its Subsidiaries and
to the books and records thereof and (ii) furnish promptly to Purchaser and its
Representatives such information concerning the business, properties, contracts,
assets, liabilities, personnel and other aspects with respect to the Company and
its Subsidiaries as Purchaser may reasonably request.
28
<PAGE>
(b) The parties shall comply with, and shall cause their respective
Representatives to comply with, all their respective obligations under the
Confidential Disclosure Agreement dated February 21, 1997 (the "Confidentiality
Agreement"), between the Company and Purchaser.
(c) No investigation pursuant to this Section 6.2 shall affect any
representation or warranty in this agreement of any party hereto or any
condition to the obligations of the parties hereto.
SECTION 6.3 No Solicitation of Transactions.
-------------------------------
The Company shall immediately cease and cause to be terminated all
existing discussions or negotiations relating to a Competing Transaction (as
defined below), other than with respect to the Transactions, with any parties
conducted heretofore. The Company will not, directly or indirectly, and will
instruct its Representatives not to, directly or indirectly, initiate, solicit
or encourage (including by way of furnishing information or assistance), or take
any other action to facilitate, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Competing
Transaction, or enter into or maintain discussions or negotiate with any person
in furtherance of or relating to such inquiries or to obtain a Competing
Transaction, or agree to or endorse any Competing Transaction, or authorize or
permit any Representative of the Company or any of its Subsidiaries to take any
such action, the Company shall use its best efforts to cause the Representatives
of the Company and its Subsidiaries not to take any such action, the Company
shall promptly notify Purchaser if any such inquiries or proposals are made
regarding a Competing Transaction, and the Company shall promptly inform
Purchaser as to the material details of any such inquiry or proposal and, if in
writing, promptly deliver or cause to be delivered to Purchaser a copy of such
inquiry or proposal. The Company shall keep Purchaser informed, on a current
basis, of the details of any such inquiries and the status and terms of any such
proposals; provided, however, that prior to the time of acceptance for payment
-------- -------
of at least a majority of Shares pursuant to the Offer, nothing contained in
this Section 6.3 shall prohibit the Board of Directors of the Company from (i)
furnishing information to, or entering into discussions or negotiations with,
any person that after the date hereof makes an unsolicited bona fide proposal
regarding a Competing Transaction or agreeing to or endorsing any Competing
Transaction, if, and only to the extent that, (A) the Board of Directors of the
Company, after consultation with and based upon the advice of independent legal
counsel, determines in good faith that such action is required for the Board of
Directors of the Company to comply with its fiduciary duties to stockholders
imposed by the DGCL, (B) prior to furnishing such information to, or entering
into discussions or negotiations with such person or agreeing to or endorsing
any Competing Transaction, the Board of Directors of the Company determines in
good faith, after consultation with and based upon the advice of a financial
advisor of a nationally recognized reputation, that such Competing Transaction
is a Superior Proposal, (C) prior to furnishing such information to, or entering
into discussions or negotiations with, such person, the Company provides written
notice to Purchaser to the effect
29
<PAGE>
that it is furnishing information to, or entering into discussions or
negotiations with, such person, (D) prior to furnishing such information to such
person, the Company receives from such person an executed confidentiality
agreement with terms no less favorable to the Company than those contained in
the Confidentiality Agreement, and (E) such information to be so furnished has
been previously delivered to Purchaser; or (ii) complying with Rule 14e-2
promulgated under the Exchange Act with regard to a Competing Transaction.
For purposes of this Agreement, "Competing Transaction" shall mean any
of the following involving the Company or any of its Subsidiaries (other than
the entering into or consummation of the Transactions): (a) any merger,
consolidation, share exchange, business combination, or other similar
transaction; (b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of substantial assets (other than assets held in inventory for
resale in the ordinary course of business) of the Company and its Subsidiaries,
taken as a whole, in a single transaction or series of transactions; (c) any
tender offer or exchange offer that if consummated would result in any person
beneficially owning 20% or more of the outstanding shares of capital stock of
the Company or the filing of a registration statement under the Securities Act
in connection therewith; (d) any solicitation of proxies in opposition to
approval by the Company's stockholders of the Merger; (e) the acquisition by any
person, after the date hereof, of beneficial ownership or the right to acquire
beneficial ownership of, or the formation of any "group" (as such term is
defined under Section 13(d) of the Exchange Act), that beneficially owns or has
the right to acquire beneficial ownership of 20% or more of the then outstanding
shares of capital stock of the Company, or the acquisition by any person or
"group" that, as of the date hereof, beneficially owns 20% or more of the
outstanding shares of capital stock of the Company (other than any passive
institutional investor) of beneficial ownership or the right to acquire
beneficial ownership of any additional shares of capital stock of the Company;
(f) the adoption by the Company of a plan of liquidation, the declaration or
payment by the Company of an extraordinary dividend on any of its shares of
capital stock or the effectuation by the Company of a recapitalization or other
type of transaction that would involve either a change in the Company's
outstanding capital stock or a distribution of assets of any kind to the holders
of such capital stock; (g) the repurchase by the Company or any of its
Subsidiaries of shares of Company Common Stock; or (h) any agreement to, or
public announcement by the Company or any other person, entity or group of a
proposal, plan or intention to, do any of the foregoing.
SECTION 6.4 Indemnification.
---------------
(a) The Certificate of Incorporation and By-Laws of the Surviving
Corporation shall contain the same provisions with respect to indemnification,
advancement and director exculpation set forth in the Certificate of
Incorporation and By-Laws of the Company on the date of this Agreement, which
provisions shall not be amended, repealed or otherwise modified for a period of
six years after the Effective Time in any manner that would adversely affect the
rights thereunder of persons who at any time prior to the Effective Time were
entitled
30
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to indemnification, advancement or exculpation under the Certificate of
Incorporation or By-Laws of the Company in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation, the
Transactions), unless such modification is required by Law.
Purchaser will not permit the provisions with respect to
indemnification, advancement or director exculpation set forth in the
Certificate of Incorporation and By-Laws of any of the Company's Subsidiaries on
the date of this Agreement to be amended, repealed or otherwise modified for a
period of six years after the Effective Time in any manner that would adversely
affect the rights thereunder of persons who at any time prior to the Effective
Time were entitled to indemnification, advancement or exculpation under any such
Certificate of Incorporation or By-Laws in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation, the
Transactions), unless such modification is required by Law.
(b) From and after the Effective Time, the Surviving Corporation shall
indemnify, defend and hold harmless the present and former officers, directors
and employees of the Company (collectively, the "Indemnified Parties") against
all losses, expenses, claims, damages, liabilities or amounts that are paid in
settlement of (with approval of Purchaser and the Surviving Corporation), or
otherwise in connection with, any claim, action, suit, proceeding or
investigation (a "Claim"), based in whole or in part on the fact that such
person is or was such a director, officer or employee and arising out of actions
or omissions occurring at or prior to the Effective Time (including, without
limitation, the Transactions), in each case to the fullest extent permitted
under the DGCL (and shall pay expenses in advance of the final disposition of
any such action or proceeding to each Indemnified Party to the fullest extent
permitted under the DGCL, upon receipt from the Indemnified Party to whom
expenses are advance of the undertaking to repay such advances contemplated by
Section 145(e) of the DGCL).
(c) Any Indemnified Party wishing to claim indemnification under this
Section 6.4, upon learning of any such Claim, shall notify Purchaser and the
Surviving Corporation (although the failure so to notify Purchaser and the
Surviving Corporation shall not relieve the Surviving Corporation from any
liability that it may have under this Section 6.4, except to the extent such
failure materially prejudices such party), and shall deliver to the Surviving
Corporation the undertaking contemplated by Section 145(e) of the DGCL.
Purchaser and the Surviving Corporation shall have the right to assume the
defense thereof and the Surviving Corporation, including its affiliates, shall
not be liable to such Indemnified Parties for any legal expenses of other
counsel or any other expenses subsequently incurred by such Indemnified Parties
in connection with the defense thereof, except that if Purchaser and the
Surviving Corporation elect not to assume such defense or there is a conflict of
interest between, or different defenses exist for Purchaser and the Surviving
Corporation and the Indemnified Parties, the Indemnified Parties may retain
counsel satisfactory to them (and reasonably satisfactory to Purchaser) and the
Surviving Corporation shall pay all reasonable fees and
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expenses of such counsel for the Indemnified Parties promptly as statements
therefor are received; provided, however, that (i) the Surviving Corporation,
-------- -------
including its affiliates, shall not, in connection with any one such action or
proceeding or separate but substantially similar actions or proceedings arising
out of the same general allegations, be liable for the fees and expenses of more
than one separate firm of attorneys at any time for all Indemnified Parties
except to the extent that local counsel, in addition to such parties' regular
counsel, is necessary or desirable in order to effectively defend against such
action or proceeding, (ii) Purchaser, the Surviving Corporation and the
Indemnified Parties will cooperate in the defense of any such matter, and (iii)
the Surviving Corporation, including its affiliates, shall not be liable for any
settlement effected without Purchaser's prior written consent, which consent
will not be unreasonably withheld or delayed, and provided, further, however,
that the Surviving Corporation, including its affiliates, shall not have any
obligation hereunder to any Indemnified Party when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final and not subject to further appeal, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law. No Indemnified Party shall consent to entry of any judgment or enter into
any settlement that does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release, in form and
substance reasonably satisfactory to such Indemnified Party, from all liability
in respect of such claim or litigation for which such Indemnified Party would be
entitled to indemnification hereunder.
(d) Purchaser shall cause to be maintained in effect for not less than
six years after the Effective Time (except to the extent not generally available
in the market) directors' and officers' liability insurance that is
substantially equivalent in coverage to the Company's current insurance, with an
amount of coverage of not less than the amount of coverage maintained by the
Company as of the date of this Agreement with respect to matters occurring prior
to the Effective Time; provided, however, that Purchaser shall not be required
-------- -------
to pay an annual premium for such insurance in excess of 150% of the last annual
premium paid prior to the date of this Agreement (which the Company represents
and warrants to have been $250,000 plus applicable taxes), but in such case
shall purchase as much coverage as possible for such amount.
(e) This Section 6.4 is intended to be for the benefit of, and shall
be enforceable by, the Indemnified Parties referred to herein, their heirs and
personal representatives and shall be binding on Purchaser and Merger Sub and
the Surviving Corporation and their respective successors and assigns.
SECTION 6.5 Obligations of Merger Sub. Purchaser shall take all actions
-------------------------
necessary to cause Merger Sub to perform its obligations under this Agreement
and to consummate the Merger on the terms and subject to conditions set forth in
this Agreement.
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SECTION 6.6 Further Action; Consents; Filings.
---------------------------------
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use all reasonable efforts to (i) take, or cause to be
taken, all appropriate action, and to do, or cause to be done, and to assist and
cooperate with the other party in doing, all things necessary, proper or
advisable under applicable law or otherwise to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other Transactions,
(ii) obtain from Governmental Authorities any consents, licenses, permits,
waivers, approvals, authorizations or orders required to be obtained or made by
Purchaser or the Company or any of their respective Subsidiaries in connection
with the authorization, execution and delivery of this Agreement and the
consummation of the Merger and the other Transactions, (iii) make all necessary
filings, and thereafter make any other required submissions, with respect to
this Agreement, the Merger and the other Transactions required under (A) the
Exchange Act, the Securities Act and any other applicable federal or state
securities laws, (B) the HSR Act and any pre-merger notification filing with the
German Federal Cartel Office and (C) any other applicable Law. The parties
hereto shall cooperate with each other in connection with the making of all such
filings, including by providing copies of all such documents to the nonfiling
party and its advisors prior to filing and, if requested, by accepting all
reasonable additions, deletions or changes suggested in connection therewith.
(b) The Company and Purchaser each agree to use all reasonable efforts
vigorously to contest and resist any action, including legislative,
administrative or judicial action, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction, ruling or other order, whether
temporary, preliminary or permanent (an "Order"), that is in effect and that
restricts, prevents or prohibits the consummation of any of the Transactions,
including, without limitation, by vigorously pursuing all available avenues of
administrative and judicial appeal and all available legislative action.
(c) Each of Purchaser, Merger Sub and the Company shall not, and shall
not permit any of its respective Subsidiaries to, take any action that would, or
that would reasonably be expected to, result in (i) any of its respective
representations and warranties set forth in this Agreement that are qualified as
to materiality becoming untrue, (ii) any of such respective representations and
warranties that are not so qualified becoming untrue in any material respect or
(iii) except as otherwise permitted by Section 6.1(b) or Section 6.3, any of the
conditions to the Merger set forth in Article VII not being satisfied.
(d) Each of the Company and Purchaser shall give prompt notice to the
other of (i) any representation or warranty made by it contained in this
Agreement that is qualified as to materiality becoming untrue or inaccurate in
any respect or any such representation or warranty that is not so qualified
becoming untrue or inaccurate in any material respect or (ii) the failure by it
to comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement; provided,
--------
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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.
SECTION 6.7 Public Announcements. Without the prior written consent of
--------------------
the other party, neither party will issue any press release or otherwise make
any public statements with respect to this Agreement or any Transaction except
(a) to such party's directors, employees, agents, advisors and affiliates, in
each case on a confidential and need-to-know basis, or (b) as is required, in
the opinion of its outside counsel, by applicable Law (including, without
limitation, Federal securities laws) or pursuant to applicable requirements of
any listing agreement with or the rules of the NYSE or the NASDAQ/NMS, as
applicable, provided that if any party hereto proposes to make any disclosure
based upon the opinion of its counsel such party will advise and consult with
the other party reasonably prior to such disclosure concerning the information
such party proposes to disclose.
SECTION 6.8 Company SEC Reports.
-------------------
(a) The Company shall timely file all required SEC Reports, each of
which (i) shall be prepared in all material respects in accordance with the
requirements of the Securities Act and the Exchange Act applicable to such SEC
Reports and (ii) shall not at the time they are filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the SEC Reports filed after the date of
this Agreement and prior to the Effective Time shall be prepared in accordance
with the published rules and regulations of the SEC and generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated and each shall present fairly, in all material respects, the
consolidated financial position, results of operations and cash flows of the
Company and its consolidated Subsidiaries as at the respective dates thereof and
for the respective periods indicated therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments which are not expected,
individually or in the aggregate, to have a Company Material Adverse Effect).
SECTION 6.9 Notification of Certain Matters. The Company shall give
-------------------------------
prompt notice to Purchaser of (a) any notice of, or other communication relating
to, a default or event which, with notice or lapse of time or both, would become
a default, received by the Company or any of its Subsidiaries subsequent to the
date of this Agreement and prior to the Effective Time, under any contract
material to the business, operations, properties, financial condition or results
of operations of the Company and its Subsidiaries, taken as a whole, to which
the Company or any of its Subsidiaries is a party or is subject or (b) any
material adverse change in its business, operations, properties, financial
condition or results of operations or the occurrence of any event
34
<PAGE>
which, so far as reasonably can be foreseen at the time of its occurrence, is
reasonably likely to result in any such change. Each of the Company and
Purchaser shall give prompt notice to the other party of any notice or other
communication from any third party alleging that the consent of such third party
is or may be required in connection with the Transactions.
SECTION 6.10 Accountants. The Company shall cause KPMG Peat Marwick
-----------
LLP, the Company's independent auditors, to deliver to Purchaser and Merger Sub
on or prior to the Effective Date a letter (the "Accountant's Letter"), dated
the Effective Time, in form and substance reasonably satisfactory to the
Purchaser to the effect that they have performed certain agreed upon procedures
and that based upon such procedures, nothing has come to their attention which
would cause them to believe that any financial statements contained in any
Company SEC Reports filed by the Company with respect to the periods ending on
or after September 30, 1996 do not comply in all material respects with all
applicable accounting requirements of the Exchange Act or that such financial
statements are not fairly presented in all material respects in conformity with
generally accepted accounting principles.
SECTION 6.11 Directors.
---------
(a) Promptly upon the acceptance for payment of, and payment for,
Shares constituting a majority of the then outstanding Shares by Purchaser or
Merger Sub, as applicable, pursuant to the Offer, Purchaser from time to time
shall be entitled to designate such number of directors (rounded up to the next
whole number) on the Board of Directors of the Company as will give Purchaser or
Merger Sub, as applicable, subject to compliance with Section 14(f) of the
Exchange Act, that percentage of the total number of directors on the Board of
Directors of the Company (giving effect to the election of any additional
directors pursuant to this Section) equal to the percentage of then outstanding
Shares owned by Purchaser or Merger Sub (provided that such percentage of the
total number of directors shall not be less than a majority of the Board of
Directors of the Company), and the Company shall, at such time, cause
Purchaser's or Merger Sub's designees, as applicable, to be so elected by its
existing Board of Directors; provided, however, that in the event that such
-------- -------
designees are elected to the Board of Directors of the Company, until the
Effective Time such Board of Directors shall have at least two directors who are
directors on the date of this Agreement and who are neither officers of the
Company nor affiliates of Purchaser or Merger Sub (the "Independent Directors");
and provided further that if the number of Independent Directors shall be
reduced below two for any reasons whatsoever, the remaining Independent Director
shall designate a person to fill such vacancy who shall be deemed to be an
Independent Director for purposes of this Agreement or, if no Independent
Directors then remain, the other directors shall designate two persons to fill
such vacancies who shall not be officers or affiliates of the Company or
officers or affiliates of Purchaser or any of its Subsidiaries, and such persons
shall be deemed to be Independent Directors for purposes of this Agreement.
35
<PAGE>
(b) Subject to applicable law, the Company shall take all actions
requested by Purchaser necessary to effect any such election, including mailing
to its stockholders the Information Statement containing the information
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder by the SEC, and the Company agrees to make such mailing with the
mailing of the Schedule 14D-9 (as defined below). In connection with the
foregoing, the Company will promptly, at the option of Purchaser, either
increase the size of the Company's Board of Directors and/or obtain the
resignation of such number of its current directors as is necessary to enable
Purchaser's or Merger Sub's designees, as applicable, to be elected or appointed
to, and to constitute (rounded up to the next whole number) that percentage of
the total number of directors on the Board of Directors of the Company (giving
effect to the election of any additional directors pursuant to this Section)
equal to the percentage of then outstanding Shares owned by Purchaser or Merger
Sub (provided that such percentage of the total number of directors shall not be
less than a majority of the Board of Directors of the Company).
(c) Following the election of Purchaser's or Merger Sub's designees,
as applicable, pursuant to this Section 6.11, prior to the Effective Time, any
amendment or termination of this Agreement or waiver of any of the Company's
rights hereunder shall require the concurrence of a majority of the Independent
Directors.
SECTION 6.12 Employees. (a) Following the Effective Time, the Surviving
---------
Corporation shall honor in accordance with their terms all Plans and all accrued
benefits vested thereunder. Purchaser agrees to provide, after the Effective
Time, or cause the Surviving Corporation to provide employees of the Company and
its Subsidiaries retained and who continue to be employed by Purchaser with
employee benefits (other than stock options) in the aggregate substantially no
less favorable than those benefits provided to Purchaser's similarly situated
employees for a period ending on the first anniversary of the Effective Time.
(b) Each of Purchaser and the Company shall use reasonable efforts to
cause the execution and delivery of mutually satisfactory retention and non-
competition agreements between Purchaser, the Company and the management
employees of the Company set forth on Exhibit B hereto in addition to those
agreements entered into on the date hereof.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.1 Conditions to the Obligations of Each Party. The
-------------------------------------------
obligations of the Company, Purchaser and Merger Sub to consummate the Merger
are subject to the satisfaction of the following conditions:
36
<PAGE>
(a) Company Stockholder Approval. If required by the DGCL, this
----------------------------
Agreement shall have been approved and adopted by the stockholders of the
Company in accordance with the DGCL, the Company's Certificate of Incorporation
and its By-Laws.
(b) HSR; German Federal Cartel Office. Any waiting period (and any
---------------------------------
extension thereof) applicable to the consummation of the Merger under the HSR
Act and any waiting period (and any extension thereof) under the HSR Act
applicable to the Merger shall have expired or been terminated and any required
approvals in connection with any pre-merger notification filing with the German
Federal Cartel Office shall have been obtained and shall have remained in full
force and effect.
(c) No Order. No Governmental Authority shall have enacted, issued,
--------
promulgated, enforced or entered any law, rule, regulation, executive order or
Order that is then in effect and has the effect of prohibiting the consummation
of the Merger.
(d) The Offer. The Offer shall not have been terminated in accordance
---------
with its terms prior to the purchase of any Shares.
SECTION 7.2 Conditions to the Obligations of Purchaser and Merger Sub.
---------------------------------------------------------
The obligations of Purchaser and Merger Sub to consummate the Merger are subject
to the satisfaction by Purchaser and Merger Sub of the following further
conditions:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties of the Company contained in this Agreement (i) was when made as of
the date of this Agreement true and correct, and was as of the expiration of the
Offer true and correct as if made on and as of the expiration of the Offer, and
(ii) in the case of the representations and warranties contained in Section 3.9,
are true and correct as of the Effective Time as though made on and as of the
Effective Time, except that those representations and warranties that address
matters only as of a particular date shall remain true and correct as of such
date and in each case except where failure to be so true and correct would not
have a Company Material Adverse Effect (other than representations and
warranties that are already so qualified or that are qualified as to the
prevention or delay of the consummation of any of the Transactions or as to the
performance by the Company of its obligations under this Agreement, which in
each such case shall be true and correct as written).
(b) Compliance. The Company shall have performed or complied with, in
----------
all material respects, all agreements and covenants required by this Agreement
to be performed or complied with by it on or prior to the Effective Time and
Purchaser shall have received a certificate of the Chairman, President or Chief
Financial Officer of the Company to that effect.
(c) Accountants. Purchaser and Merger Sub shall have received the
-----------
Accountant's Letter from KPMG Peat Marwick LLP, the Company's independent
auditors.
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<PAGE>
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination. This Agreement may be terminated and the
-----------
Merger and the other Transactions may be abandoned at any time prior to the
Effective Time, notwithstanding any requisite approval and adoption of this
Agreement and the Transactions as follows:
(a) by mutual written consent duly authorized by the Boards of
Directors of each of Purchaser and the Company;
(b) by either Purchaser or the Company, if either (i) the Effective
Time shall not have occurred on or before November 15, 1997; provided, however,
-------- -------
that the right to terminate this Agreement under this Section 8.1(b) shall not
be available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date; (ii) there shall be any Law that makes
consummation of the Merger illegal or otherwise prohibited or any Order that is
final and nonappealable preventing the consummation of the Merger, except if the
party relying on such Order has not complied with its obligations under Section
6.6(b) or (iii) Merger Sub or Purchaser shall have terminated the Offer in
accordance with its terms and conditions without purchasing any Shares pursuant
thereto.
(c) by Purchaser, if the Board of Directors of the Company (i)
withdraws, modifies or changes its recommendation of this Agreement or the
Merger in a manner adverse to Purchaser or Merger Sub, (ii) shall have
recommended to the stockholders of the Company any Competing Transaction or
(iii) shall have resolved to do any of the foregoing;
(d) by Purchaser, if there has been a breach of any material
representation, warranty, covenant or agreement on the part of the Company set
forth in this Agreement, or if any representation or warranty of the Company
shall have become untrue, in either case such that any of the conditions set
forth in Section 7.2(a) would not be satisfied (a "Terminating Company Breach");
provided, however, that, if such Terminating Company Breach is curable by the
- -------- -------
Company through the exercise of its reasonable best efforts and for so long as
the Company continues to exercise such reasonable best efforts (but in no event
longer than thirty days after Purchaser's notification of the Company of the
occurrence of such Terminating Company Breach), Purchaser may not terminate this
Agreement under this Section 8.1(d);
(e) by the Company, if there has been a breach of any material
representation, warranty, covenant or agreement on the part of Purchaser and
Merger Sub set forth in this Agreement, or if any representation or warranty of
Purchaser and Merger Sub shall have become untrue in any material respect
("Terminating Purchaser Breach"); provided,
--------
38
<PAGE>
however, that, if such Terminating Purchaser Breach is curable by Purchaser and
- -------
Merger Sub through the exercise of its reasonable best efforts and for so long
as Purchaser and Merger Sub continue to exercise such reasonable best efforts
(but in no event longer than thirty days after the Company's notification of
Purchaser of the occurrence of such Terminating Purchaser Breach), the Company
may not terminate this Agreement under this Section 8.1(e); or
(f) by the Company, if, prior to such time as Purchaser's designees
constitute a majority of the members of the Board of Directors of the Company,
the Board of Directors of the Company shall have recommended to the stockholders
of the Company any Superior Proposal, which is then pending, or resolved to do
so; provided that any termination of this Agreement by the Company pursuant to
--------
this Section 8.1(f) shall not be effective until the close of business on the
second full business day after notice of such termination to Purchaser; or
(g) by the Company, if Purchaser or Merger Sub or another Purchaser
Company shall have failed to commence the Offer within the time required in
Section 9.1.
SECTION 8.2 Effect of Termination. Except as provided in Section
---------------------
6.2(b), Section 8.5 and Section 10.1, in the event of termination of this
Agreement pursuant to Section 8.1, this Agreement shall forthwith become void,
there shall be no liability, except as a result of any prior breach thereof,
under this Agreement on the part of Purchaser, Merger Sub or the Company or any
of their respective officers or directors and all rights and obligations, except
as a result of any prior breach thereof, of each party hereto shall cease.
SECTION 8.3 Amendment. This Agreement may be amended by the parties
---------
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; provided, however, that, after the
-------- -------
approval and adoption of this Agreement and the Merger by the stockholders of
the Company, no amendment may be made that would reduce the amount or change the
type of consideration into which each Share shall be converted upon consummation
of the Merger without the approval of the stockholders of the Company. This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
SECTION 8.4 Waiver. At any time prior to the Effective Time, any party
------
hereto may (a) extend the time for the performance of any obligation or other
act of any other party hereto, (b) waive any inaccuracy in the representations
and warranties contained herein or in any document delivered pursuant hereto and
(c) waive compliance with any agreement or condition contained herein. Any such
extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
SECTION 8.5 Expenses.
--------
(a) Except as otherwise set forth in this Section 8.5, all Expenses
(as defined below) incurred in connection with this Agreement and the
Transactions shall be paid by the
39
<PAGE>
party incurring such expenses, whether or not any Transaction is consummated.
"Expenses" as used in this Agreement shall include all reasonable out-of-pocket
expenses (including, without limitation, all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a party hereto and
its affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement, the preparation, printing, filing and mailing of
the Proxy Statement, the solicitation of stockholder approvals and all other
matters relating to the closing of the Transactions, it being understood that
the Company shall not pay or be liable for any of the separate Expenses of its
affiliates in connection herewith (including, without limitation, the
Stockholders party to the Stockholder Agreements but excluding reasonable
expenses for services provided by the Company's principal outside counsel to
management ancillary to the services provided by such counsel to the Company in
connection with the Transactions, which Expenses may be paid by the Company).
(b) The Company agrees that, if (i) Purchaser shall terminate this
Agreement pursuant to Section 8.1(c) or (d); (ii) the Company shall terminate
this Agreement pursuant to Section 8.1(f); (iii) the Purchaser shall terminate
the Offer because the Minimum Condition (as defined in Exhibit A hereof) is not
satisfied and at or prior to such time the Company has received one or more
proposals for a Competing Transaction which at the time of such occurrence has
not been absolutely and unconditionally withdrawn or abandoned or (iv) within
six months after the date of termination (other than a termination solely
pursuant to Section 8.1(a), (e) or (g) of this Agreement at which time this
Agreement is not terminable pursuant to any other provision of Section 8.1) a
Competing Transaction is entered into by the Company, then promptly after such
termination (or, with respect to item (iv), upon the entering into of such
Competing Transaction) by Purchaser or the Company, the Company shall pay to
Purchaser an amount equal to $7,500,000 (the "Break-up Fee") and shall reimburse
Purchaser for all of its Expenses up to an amount equal to $1,500,000; provided
that with respect to item (iii), the Company shall pay to Purchaser an amount
equal to $2,500,000 (the "Initial Break-up Fee") plus all of Purchaser's
Expenses up to an amount equal to $1,500,000 promptly following such termination
and the balance of the Break-up Fee only shall be payable subject to the terms
of item (iv) above.
(c) Any payment required to be made pursuant to Section 8.5(b) shall
be made to Purchaser not later than three business days after delivery to the
Company of notice of demand for payment and shall be made by wire transfer of
immediately available funds to an account designated by the Purchaser in the
notice of demand for payment delivered pursuant to this Section 8.5(c).
(d) The payouts, if any, made pursuant to Section 8.5(b) shall not be
deemed to be liquidated damages, and the right to the payment of such amount
shall be in addition to (and not a maximum payment in respect of) any other
damages or remedies at law or in equity to
40
<PAGE>
which Purchaser or Merger Sub may be entitled as a result of the Company's
violation or breach of any term of provision of this Agreement.
ARTICLE IX
THE OFFER
SECTION 9.1 Tender Offer.
------------
(a) As promptly as reasonably practicable after the date hereof, but
in no event later than five business days after the public announcement of the
execution of this Agreement, Purchaser or Merger Sub will commence the Offer for
all of the outstanding Shares at a price of not less than $15.50 per Share in
cash, net to the seller, subject to the conditions set forth in Exhibit A, and,
subject only to the terms and conditions of the Offer, will pay, as promptly as
reasonably practicable after expiration of the Offer, for all Shares duly
tendered and not withdrawn. Purchaser expressly reserves the right to waive any
such condition, to increase the price per Share payable in the Offer, and to
make any other changes in the terms and conditions of the Offer; provided,
--------
however, that no change may be made which decreases the price per Share payable
- -------
in the Offer, which reduces the maximum number of Shares to be purchased in the
Offer, which imposes conditions to the Offer other than those set forth in
Exhibit A hereto or which extends the Offer (except as set forth in the
following sentence). Notwithstanding the foregoing, Purchaser may, without the
consent of the Company, (i) extend the Offer beyond the scheduled expiration
date (the initial scheduled expiration date being 20 business days following the
commencement of the Offer) if, at the scheduled expiration date of the Offer,
any of the conditions to Purchaser's obligation to accept for payment, and to
pay for, the Shares, shall not be satisfied or waived, (ii) extend the Offer for
any period required by any rule, regulation or interpretation of the SEC or the
staff thereof applicable to the Offer, or (iii) extend the Offer for an
aggregate period of not more than 10 business days beyond the latest applicable
date that would otherwise be permitted under clause (i) or (ii) of this
sentence, if as of such date, all of the conditions to Purchaser's obligations
to accept for payment, and to pay for, the Shares are satisfied or waived, but
the number of Shares validly tendered and not withdrawn pursuant to the Offer is
less than 90 percent, of the outstanding Shares on a fully diluted basis.
(b) The Company hereby consents to the Offer and represents that the
Board of Directors of the Company has unanimously determined that the Offer is
fair to the holders of the Shares and the Merger is in the best interests of the
Company and the stockholders of the Company, approved the making of the Offer
and resolved to recommend acceptance of the Offer by the holders of the Shares
and approval of the Merger by the Company's stockholders. The Company's Board
of Directors shall recommend, in accordance with the provisions of Section
6.1(b) hereof, to its stockholders in a Solicitation/Recommendation Statement on
Schedule 14D-9 (the "Schedule 14D-9") to be filed with the SEC as soon as
practicable on the day the Offer is commenced. Purchaser agrees, as to the
Offer to Purchase and related Letter of
41
<PAGE>
Transmittal (which together constitute the "Offer Documents") and the Company
agrees, as to the Schedule 14D-9, that such documents shall, in all material
respects, comply with the requirements of the Exchange Act and other applicable
laws. The Company and its counsel, as to the Offer Documents, and the Purchaser
and its counsel, as to the Schedule 14D- 9, shall be given an opportunity to
review such documents prior to their being filed with the SEC. Neither Purchaser
nor the Company shall file any of such documents with the SEC without the
approval of the other party (which shall not be unreasonably withheld).
(c) In connection with the Offer, the Company will cause the transfer
agent for the Company Common Stock to furnish promptly to Merger Sub a list, as
of a recent date, of the record holders of shares and their addresses, as well
as mailing labels containing the names and addresses of all record holders of
Shares and lists of security positions of Shares held in stock depositories.
The Company will furnish Merger Sub with such additional information (including,
without limitation, updated lists of holders of Shares and their addresses,
mailing labels and lists of security positions) and such other assistance as
Purchaser or Merger Sub or their agents may reasonably request in communicating
the Offer to the record and beneficial holders of Shares.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 Nonsurvival of Representations, Warranties and Agreements.
---------------------------------------------------------
The representations, warranties and agreements in this Agreement and in any
certificate delivered pursuant hereto shall terminate at the Effective Time or
upon the termination of this Agreement pursuant to Section 8.1, as the case may
be, except that the agreements set forth in Articles I (but only to the extent
that such expressly relates to actions to be taken after the Effective Time) and
II (but only to the extent that such expressly relates to actions to be taken
after the Effective Time) and Section 6.4 and Article X shall survive the
Effective Time and those set forth in Section 6.2(b), Section 8.2, Section 8.5
and Article X shall survive termination.
SECTION 10.2 Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by delivery in person, by
facsimile transmission, by registered or certified mail (postage prepaid, return
receipt requested) or courier service providing proof of delivery to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
10.2):
42
<PAGE>
If to Purchaser or Merger Sub: Gateway 2000, Inc.
610 Gateway Drive
North Sioux City, South Dakota 57049
Attention: William M. Elliott, Esq.
Facsimile No.: (605) 232-2612
with a copy to: Kaye, Scholer, Fierman, Hays & Handler, LLP
1999 Avenue of the Stars, Suite 1600
Los Angeles, California 90067
Attention: Barry L. Dastin, Esq.
Facsimile No.: (310) 788-1200
If to the Company: Advanced Logic Research, Inc.
9401 Jeronimo Road
Irvine, California 92718
Attention: Gene Lu
Facsimile No.: (714) 581-9240
with copies to: Brobeck, Phleger & Harrison LLP
4675 MacArthur Court, Suite 1000
Newport Beach, California 92600-1846
Attention: Bruce R. Hallett, Esq.
Facsimile No.: (714) 752-7522
and
Brobeck, Phleger & Harrison LLP
Spear Street Tower
One Market
San Francisco, California 94105
Attention: Steve L. Camahort, Esq.
Facsimile No.: (415) 442-1010
SECTION 10.3 Certain Definitions. For purposes of this Agreement, the
-------------------
term:
(a) "affiliate" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by, or is
under common control with, such specified person;
(b) "beneficial owner" with respect to any shares means a person who
shall be deemed to be the beneficial owner of such shares (i) which such person
or any of its affiliates or associates (as such term is defined in Rule 12b-2
promulgated under the Exchange Act) beneficially owns, directly or indirectly,
(ii) which such person or any of its affiliates or
43
<PAGE>
associates has, directly or indirectly, (A) the right to acquire (whether such
right is exercisable immediately or within sixty days of the date of such
determination), pursuant to any agreement, arrangement or understanding or upon
the exercise of consideration rights, exchange rights, warrants or options or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement or
understanding or (iii) which are beneficially owned, directly or indirectly, by
any other persons with whom such person or any of its affiliates or associates
or person with whom such person or any of its affiliates or associates has any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of any Shares;
(c) "business day" means any day on which the principal offices of the
SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
authorized or obligated to be closed in the City of New York;
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, as
trustee or executor, by contract or credit arrangement or otherwise;
(e) "knowledge" or "known" means, with respect to any matter in
question, if any of the officers of the Company or Purchaser, as the case may
be, has actual knowledge of such matter; and
(f) "person" means an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including, without
limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act),
trust, association or entity or government, political subdivision, agency or
instrumentality of a government.
SECTION 10.4 Severability. If any term or other provision of this
------------
Agreement is or is deemed invalid, illegal or incapable of being enforced by any
rule of Law, or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the Transactions is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the Transactions be consummated as originally contemplated
to the fullest extent possible.
SECTION 10.5 Assignment; Binding Effect; Benefit. Neither this Agreement
-----------------------------------
nor any of the rights or interests hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to
44
<PAGE>
the preceding sentence, this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and assigns.
Notwithstanding anything contained in this Agreement to the contrary, except for
the provisions of Section 6.4 (the "Third Party Provisions"), nothing in this
Agreement, expressed or implied, including, without limitation, the provisions
of Section 6.12, is intended to confer on any person other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement. The Third Party
Provisions in Section 6.4 may be enforced by any of the beneficiaries thereof.
SECTION 10.6 Specific Performance. The parties hereto agree that
--------------------
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 10.7 Governing Law.
-------------
(a) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware, without giving effect to the principles
of conflicts of law thereof.
(b) Each party hereby irrevocably submits to the exclusive
jurisdiction of the Court of Chancery in the State of Delaware in any action,
suit or proceeding arising in connection with this Agreement, and agrees that
any such action, suit or proceeding shall be brought only in such court (and
waives any objection based on forum non conveniens or any other objection to
----- --- ----------
venue therein); provided, however, that such consent to jurisdiction is solely
-------- -------
for the purpose referred to in this subsection (b) and shall not be deemed to be
a general submission to the jurisdiction of such court or in the State of
Delaware other than for such purposes.
SECTION 10.8 Headings. The descriptive headings contained in this
--------
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 10.9 Counterparts. This Agreement may be executed and delivered
------------
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same instrument.
SECTION 10.10 Waiver of Jury Trial. EACH OF PURCHASER, THE COMPANY AND
--------------------
MERGER SUB HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS
45
<PAGE>
AGREEMENT OR THE ACTIONS OF PURCHASER, THE COMPANY OR MERGER SUB IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.
SECTION 10.11 Entire Agreement; Modification. This Agreement and the
------------------------------
Confidentiality Agreement constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto. No addition to or
modification of any provision of this Agreement shall be binding upon any party
hereto unless made in writing and signed by all parties hereto.
SECTION 10.12 Mutual Drafting. Each party hereto has participated in the
---------------
drafting of this Agreement, which each party acknowledges is the result of
extensive negotiations between the parties.
SECTION 10.13 No Waivers. The failure of any party hereto to exercise any
----------
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon strict compliance by any
other party hereto with its obligations hereunder, and any custom or practice of
the parties at variance with the terms hereof, shall not constitute a wavier by
such party of its rights to exercise any such or other right, power or remedy or
to demand such compliance.
46
<PAGE>
IN WITNESS WHEREOF, Purchaser, Merger Sub and the Company have caused this
Agreement to be executed as of the date first above written by their respective
officers thereunto.
GATEWAY 2000, INC.
By: /s/ William M. Elliott
-------------------------------
Name: William M. Elliott
Title: Senior Vice President,
General Counsel and
Corporate Secretary
DEUCE ACQUISITION CORPORATION
By: /s/ Stephen P. Johns
-------------------------------
Name: Stephen P. Johns
Title: President
ADVANCED LOGIC RESEARCH, INC.
By: /s/ Eugene Lu
-------------------------------
Name: Eugene Lu
Title: Chairman, President and
Chief Executive Officer
47
<PAGE>
SCHEDULE I
STOCKHOLDERS
<TABLE>
<CAPTION>
Name Number of Shares Vested Options
- ---- ---------------- --------------
<S> <C> <C>
Wearnes Technology 4,780,549 -0-
(Private) Limited
Eugene Lu 410,000 45,316
Chun Win Wong 30,000 17,500
Philip A. Harding 25,704 17,500
</TABLE>
I-i
<PAGE>
EXHIBIT A
CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, Purchaser or the Merger
Sub, as applicable, shall not be required to accept for payment or pay for any
Shares tendered, and may terminate or amend the Offer (subject to the provisions
of the Merger Agreement) and may postpone the acceptance of, and payment for,
subject to Rule 14e-1(c) of the Exchange Act, any Shares tendered, if:
(i) the Minimum Condition (as defined below) shall not have been
satisfied,
(ii) any applicable waiting period under the HSR Act shall not have
expired or been terminated prior to the expiration of the Offer, or
(iii) at any time on or after the date of this Agreement, and prior to the
acceptance for payment of Shares, any of the following conditions shall exist:
(a) there shall have been instituted by any government or Governmental
Authority, any action or proceeding before any Governmental Authority (including
such Governmental Authority instituting or initiating such action or
proceeding), (i) challenging or seeking to make illegal, materially delay or
otherwise directly or indirectly restrain or prohibit the making of the Offer,
the acceptance for payment of, or payment for, any Shares by Purchaser, Merger
Sub or any other affiliate of Purchaser, or the consummation of any other
Transaction, or seeking to obtain material damages in connection with any
Transaction; (ii) seeking to prohibit or limit materially the ownership or
operation by the Company, Purchaser or any of their respective Subsidiaries of
all or any material portion of the business or assets of the Company, Purchaser
or any of their respective Subsidiaries, or to compel the Company, Purchaser or
any of their respective Subsidiaries to dispose of or to hold separate all or
any material portion of the business or assets of the Company, Purchaser or any
of their respective Subsidiaries, as a result of the Transactions; (iii) seeking
to impose or confirm limitations on the ability of Purchaser, Merger Sub or any
other affiliate of Purchaser to exercise effectively full rights of ownership of
any Shares, including, without limitation, the right to vote any Shares acquired
by Merger Sub pursuant to the Offer or otherwise on all matters properly
presented to the Company's stockholders, including, without limitation, the
approval and adoption of this Agreement and the Transactions; (iv) seeking to
require divestiture by Purchaser, Merger Sub or any other affiliate of Purchaser
of any Shares; or (v) which otherwise has a Company Material Adverse Effect or
which relates to the Transactions and has a Purchaser Material Adverse Effect;
(b) there shall have been any action taken, or any Law enacted,
entered, enforced, promulgated, amended, issued or deemed applicable to (i)
Purchaser, the Company or any Subsidiary or affiliate of Purchaser or the
Company or (ii) any Transaction, by any
A-1
<PAGE>
government or Governmental Authority other than the routine application of the
waiting period provisions of the HSR Act to the Offer or the Merger, which is
reasonably likely to result, directly or indirectly, in any of the consequences
referred to in clauses (i) through (v) of paragraph (a) above;
(c) there shall have occurred any change, condition, event or
development that has a Company Material Adverse Effect;
(d) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the NYSE or the NASDAQ/NMS
(excluding any coordinated trading halt triggered solely as a result of a
specified decrease in a market index), (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (iii) any limitation (whether or not mandatory) by any government or
Governmental Authority of the United States on the extension of credit by banks
or other lending institutions or (iv) a commencement of a war or material armed
hostilities or other national or international calamity involving the United
States;
(e) the Company or any of its Subsidiaries shall have sustained a loss
or interference with its business by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act which constitutes
a Company Material Adverse Effect, whether or not said loss shall have been
insured, which will, in the reasonable opinion of Purchaser, make it inadvisable
or impractical to proceed with the Offer.
(f) (i) it shall have been publicly disclosed or Purchaser or Merger
Sub shall have otherwise learned that beneficial ownership of 20% or more of the
then outstanding Shares has been acquired by any person, other than Purchaser or
any of its affiliates or any other person not required to file a Schedule 13D
under the rules promulgated under the Exchange Act or (ii) (A) the Board of
Directors of the Company or any committee thereof shall have withdrawn, modified
or changed in a manner adverse to Purchaser or Merger Sub the approval or
recommendation of the Offer, the Merger or the Agreement, or approved or
recommended any Competing Transaction or any other acquisition of Shares other
than the Offer or the Merger or (B) the Board of Directors of the Company or any
committee thereof shall have resolved to do any of the foregoing;
(g) the representations and warranties of the Company shall not be
true and correct as of the date of this Agreement or as of the expiration of the
Offer except for (i) changes specifically contemplated by this Agreement and
(ii) those representations and warranties that address matters only as of a
particular date (which shall remain true and correct as of such date) and in
each case except in where failure to be so true and correct would not have a
Company Material Adverse Effect (other than representations and warranties that
are already so qualified or that are qualified as to the prevention or delay of
the consummation of any of the Transactions or as to the performance by the
Company of its obligations under this Agreement, which in each such case shall
be true and correct as written);
A-2
<PAGE>
(h) the Company shall have failed to perform any obligation or to
comply with any agreement or covenant of the Company to be performed or complied
with by it under the Agreement unless all such failures together in their
entirety, would not, individually or in the aggregate, have a Company Material
Adverse Effect;
(i) the Agreement shall have been terminated in accordance with its
terms; or
(j) Purchaser and the Company shall have agreed that Purchaser or
Merger Sub, as applicable, shall terminate the Offer or postpone the acceptance
for payment of or payment for Shares thereunder.
For purposes hereof, the term "Minimum Condition" shall mean a majority of
the Shares outstanding on a fully diluted basis (including for purposes of such
calculation all Shares issuable upon exercise of all vested and unvested stock
options, and conversion of convertible securities or other rights to purchase or
acquire Shares) being validly tendered and not withdrawn prior to the expiration
of the Offer.
The foregoing conditions are for the sole benefit of Purchaser and Merger
Sub and may be asserted by Purchaser or Merger Sub regardless of the
circumstances giving rise to any such condition or may be waived by Purchaser or
Merger Sub in whole or in part at any time and from time to time in their sole
discretion, subject in each case to the terms of the Agreement. The failure by
Purchaser or Merger Sub at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right; the waiver of any such right
with respect to particular facts and other circumstances shall not be deemed a
waiver with respect to any other facts and circumstances; and each such right
shall be deemed an ongoing right that may be asserted at any time and from time
to time.
A-3
<PAGE>
EXHIBIT B
KEY EMPLOYEES
Gene Y. Lu
David L. Kelly
Donald E. Kullgren
Visish Sangveraphunsir
Ronald J. Sipkovich
Toan Q. Luu
Benedict R. Marchak
Genevieve Ortegon
Vikram S. Sial
B-1
<PAGE>
EXHIBIT 5.1
[GATEWAY 2000, INC. LETTERHEAD]
August 6, 1997
Gateway 2000, Inc.
610 Gateway Drive
P. O. Box 2000
North Sioux City, South Dakota 57049
Ladies and Gentlemen:
I am the Senior Vice President, General Counsel and Secretary of Gateway 2000,
Inc., a Delaware corporation (the "Company") and have acted as counsel in
connection with the filing of this Registration Statement on Form S-8 (the
"Registration Statement"), relating to the registration under the Securities Act
of 1933, as amended (the "Act"), of up to 500,000 shares (the "Shares") of the
Company's Common Stock, $.01 par value per share (the "Common Stock"), which are
to be issued pursuant to the Flexible Stock Incentive Plan and the 1996 Stock
Option/Stock Issuance Plan (collectively, the "Plan") of Advanced Logic
Research, Inc., a wholly-owned subsidiary of The Company.
In arriving at this opinion, I or members of my staff, have examined and relied
upon originals or copies, certified or otherwise identified to my satisfaction,
of the following:
1. The Registration Statement;
2. The Plans;
3. The Restated Certificate of Incorporation of the Company;
4. The Bylaws of the Company;
5. Copies of certain corporate records of the Company;
6. Certificates of public officials, officers, representatives and agents
of the Company and resolutions of the Board of Directors (the "Board") and
Committees of the Board; and
7. Such other instruments, documents, statements and records of the
Company and others as I deemed relevant and necessary to examine and rely upon
for the purpose of this opinion.
I have assumed the genuineness of all signatures and the authenticity of all
documents submitted to me as originals, the conformity to original documents of
all the documents submitted to me as
<PAGE>
certified or photostatic copies, and the authenticity of all such documents.
I assume that, prior to the sale of any Shares to which this Registration
Statement relates, appropriate action will be taken to register and qualify such
Shares for sale, to the extent necessary, under any applicable state or foreign
securities or other laws.
Based upon the foregoing and in reliance thereon, I am of the opinion that the
up to 500,000 Shares of Common Stock which are to be issued pursuant to the
Plans, when issued and paid for in accordance with the terms of the Plans, will
be validly issued, fully paid and nonassessable by the Company.
The opinion contained in the preceding paragraph is based on the assumption
that, at the time such Shares of stock are issued, this Registration Statement
will then be effective.
This opinion is limited in all respects to the laws of the State of South Dakota
the General Corporation Law of the State of Delaware and the federal laws of the
United States of America and I express no opinion as to the law of any other
jurisdiction or the effect thereof.
I hereby consent to the inclusion of this opinion as Exhibit 5.1 to the
Registration Statement.
Very truly yours,
/s/ William M. Elliott
- ----------------------
William M. Elliott
Senior Vice President, General Counsel & Secretary
2
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement of
Gateway 2000, Inc. on Form S-8, relating to the 1996 Stock Option Plan, of our
report dated January 30, 1997, on our audits of the consolidated financial
statements of Gateway 2000, Inc. as of December 31, 1996 and 1995 and for the
three years ended December 31, 1996, which report is included in its Annual
Report on Form 10-K.
Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Omaha, Nebraska
August 8, 1997
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints William
M. Elliott, Stephanie G. Heim and David J. McKittrick and each of them (with
full power to each of them to act alone), his true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign a Registration
Statement on Form S-8 together with any or all amendments thereto (including
post-effective amendments), and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all said attorneys-in-fact and agents, or any of them, or their
substitutes, may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ THEODORE W. WAITT Chairman of the Board and Chief July 23, 1997
- ----------------------
Theodore W. Waitt Executive Officer (Principal
Executive Officer and Director)
/s/ RICHARD D. SNYDER President, Chief Operating Officer July 23, 1997
- ----------------------
Richard D. Snyder and Director
/s/ CHARLES G. CAREY Director July 23, 1997
- ----------------------
Charles G. Carey
/s/ JAMES W. CRAVENS Director July 23, 1997
- ----------------------
James W. Cravens
/s/ GEORGE H. KRAUSS Director July 23, 1997
- ----------------------
George H. Krauss
/s/ DOUGLAS L. LACEY Director July 23, 1997
- ----------------------
Douglas L. Lacey
/s/ JAMES F. MCCANN Director July 23, 1997
- ----------------------
James F. McCann
</TABLE>
