AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
HEWLETT-PACKARD COMPANY,
HELOISE MERGER CORPORATION
AND
COMPAQ COMPUTER CORPORATION
Dated as of September 4, 2001
TABLE OF CONTENTS
Page
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Article I THE MERGER......................................2
1.1 The Merger..............................2
1.2 Effective Time; Closing.................2
1.3 Effect of the Merger....................3
1.4 Certificate of Incorporation and Bylaws.3
1.5 Directors and Officers..................3
1.6 Effect on Capital Stock.................3
1.7 Surrender of Certificates...............5
1.8 No Further Ownership Rights in Compaq Common Stock.8
1.9 Lost, Stolen or Destroyed Certificates..9
1.10 Tax Consequences........................9
1.11 Further Action..........................9
Article II REPRESENTATIONS AND WARRANTIES OF COMPAQ.10
2.1 Organization; Standing and Power; Charter Documents; Subsidiaries.10
2.2 Capital Structure........................11
2.3 Authority; Non-Contravention; Necessary Consents.14
2.4 SEC Filings; Financial Statements........16
2.5 Absence of Certain Changes or Events.....17
2.6 Taxes....................................17
2.7 Intellectual Property....................18
2.8 Compliance; Permits......................19
2.9 Litigation...............................20
2.10 Brokers' and Finders' Fees...............20
2.11 Transactions with Affiliates.............20
2.12 Employee Benefit Plans...................21
2.13 Environmental Matters....................25
2.14 Contracts................................26
2.15 Disclosure...............................27
2.16 Board Approval...........................28
2.17 Fairness Opinion.........................28
2.18 Rights Plan..............................28
2.19 Takeover Statutes........................28
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Article III REPRESENTATIONS AND WARRANTIES OF HP AND MERGER SUB.............29
3.1 Organization; Standing and Power; Charter Documents; Subsidiaries..29
3.2 Capital Structure..................................................30
3.3 Authority; Non-Contravention; Necessary Consents...................32
3.4 SEC Filings; Financial Statements..................................34
3.5 Absence of Certain Changes or Events...............................35
3.6 Taxes..............................................................35
3.7 Intellectual Property..............................................35
3.8 Compliance; Permits................................................36
3.9 Litigation.........................................................36
3.10 Brokers' and Finders' Fees.........................................37
3.11 Employee Benefit Plans.............................................37
3.12 Environmental Matters..............................................39
3.13 Contracts..........................................................40
3.14 Disclosure.........................................................40
3.15 Board Approval.....................................................41
3.16 Fairness Opinion...................................................41
3.17 Rights Plan........................................................41
Article IV CONDUCT PRIOR TO THE EFFECTIVE TIME..............................41
4.1 Conduct of Business................................................41
Article V ADDITIONAL AGREEMENTS.............................................50
5.1 Prospectus/Proxy Statement; Registration Statement.................50
5.2 Meetings of Stockholders; Board Recommendation.....................51
5.3 Acquisition Proposals..............................................52
5.4 Confidentiality; Access to Information; No Modification of
Representations, Warranties or Covenants..................57
5.5 Public Disclosure..................................................58
5.6 Regulatory Filings; Reasonable Efforts.............................58
5.7 Notification of Certain Matters....................................61
5.8 Third-Party Consents...............................................61
5.9 Equity Awards and Employee Benefits................................62
5.10 Form S-8...........................................................64
5.11 Indemnification....................................................65
5.12 Board of Directors and Executive Officers of HP....................66
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5.13 NYSE and PCX Listings..............................................66
5.14 Compaq Affiliates; Restrictive Legend..............................67
5.15 Treatment as Reorganization........................................67
5.16 Rights Plans.......................................................67
5.17 Section 16 Matters.................................................68
5.18 Merger Sub Compliance..............................................68
5.19 Conveyance Taxes...................................................68
Article VI CONDITIONS TO THE MERGER.........................................69
6.1 Conditions to the Obligations of Each Party to Effect the Merger...69
6.2 Additional Conditions to the Obligations of Compaq.................70
6.3 Additional Conditions to the Obligations of HP.....................71
Article VII TERMINATION, AMENDMENT AND WAIVER...............................72
7.1 Termination........................................................72
7.2 Notice of Termination; Effect of Termination.......................75
7.3 Fees and Expenses..................................................75
7.4 Amendment..........................................................77
7.5 Extension; Waiver..................................................78
Article VIII GENERAL PROVISIONS.............................................78
8.1 Non-Survival of Representations and Warranties.....................78
8.2 Notices............................................................78
8.3 Interpretation; Knowledge..........................................80
8.4 Counterparts.......................................................82
8.5 Entire Agreement; Third-Party Beneficiaries........................82
8.6 Severability.......................................................83
8.7 Other Remedies; Specific Performance...............................83
8.8 Governing Law......................................................83
8.9 Rules of Construction..............................................83
8.10 Assignment.........................................................84
8.11 Waiver of Jury Trial...............................................84
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT") is made and
entered into as of September 4, 2001, by and among Hewlett-Packard Company, a
Delaware corporation ("HP"), Heloise Merger Corporation, a Delaware corporation
and direct wholly-owned subsidiary of HP ("MERGER SUB"), and Compaq Computer
Corporation, a Delaware corporation ("COMPAQ").
RECITALS
A. The respective Boards of Directors of HP, Merger Sub and Compaq have
deemed it advisable and in the best interests of their respective corporations
and stockholders that HP and Compaq consummate the business combination and
other transactions provided for herein in order to advance their respective
long-term strategic business interests.
B. The respective Boards of Directors of HP, Merger Sub and Compaq have
approved, in accordance with applicable provisions of the laws of the state of
Delaware ("DELAWARE LAW"), this Agreement and the transactions contemplated
hereby, including the Merger (as defined in Section 1.1).
C. The Board of Directors of HP has resolved to recommend to its
stockholders approval of the issuance of shares of HP Common Stock (as defined
in Section 1.6(a)) in connection with the Merger (the "STOCK ISSUANCE").
D. The Board of Directors of Compaq has resolved to recommend to its
stockholders approval and adoption of this Agreement and approval of the Merger.
E. HP, as the sole stockholder of Merger Sub, has approved and adopted
this Agreement and approved the Merger.
F. HP, Merger Sub and Compaq desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
certain conditions to the Merger.
G. For United States federal income tax purposes, the parties intend that
the Merger qualify as a reorganization under the provisions of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "CODE"), and the parties
intend, by executing this Agreement, to adopt a plan of reorganization within
the meaning of Section 354(a) of the Code.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law, Merger Sub shall be merged with and into
Compaq (the "MERGER"), the separate corporate existence of Merger Sub shall
cease and Compaq shall continue as the surviving corporation. Compaq, as the
surviving corporation after the Merger, is hereinafter sometimes referred to as
the "SURVIVING CORPORATION."
1.2 EFFECTIVE TIME; CLOSING. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the relevant provisions of Delaware Law (the "CERTIFICATE OF
MERGER") (the time of such filing with the Secretary of State of the State of
Delaware (or such later time as may be agreed in writing by Compaq and HP and
specified in the Certificate of Merger) being the "EFFECTIVE TIME") as soon as
practicable on or after the Closing Date (as defined below). The closing of the
Merger (the "CLOSING") shall take place at the offices of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, located at 650 Page Mill Road, Palo
Alto, California, at a time and date to be specified by the parties, which shall
be no later than the second business day after the satisfaction or waiver of the
conditions set forth in Article VI, or at such other time, date and location as
the parties hereto agree in writing (the "CLOSING DATE").
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1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of Delaware
Law.
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS. At the Effective Time, the
Certificate of Incorporation of Compaq shall be amended and restated in its
entirety to be identical to the Certificate of Incorporation of Merger Sub, as
in effect immediately prior to the Effective Time, until thereafter amended in
accordance with Delaware Law and as provided in such Certificate of
Incorporation; PROVIDED, HOWEVER, that at the Effective Time, Article I of the
Certificate of Incorporation of the Surviving Corporation shall be amended and
restated in its entirety to read as follows: "The name of the corporation is
Compaq Computer Corporation." At the Effective Time, the Bylaws of Compaq shall
be amended and restated in their entirety to be identical to the Bylaws of
Merger Sub, as in effect immediately prior to the Effective Time, until
thereafter amended in accordance with Delaware Law and as provided in such
Bylaws.
1.5 DIRECTORS AND OFFICERS. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of Merger Sub immediately prior to the Effective Time, until their
respective successors are duly appointed.
1.6 EFFECT ON CAPITAL STOCK. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of HP, Merger Sub, Compaq or the holders of any shares of capital
stock of Compaq, the following shall occur:
(a) COMPAQ COMMON STOCK. Each share of the Common Stock, par
value $0.01 per share, of Compaq (together with the associated Compaq Right (as
defined in Section 2.2(a)) under the Compaq Rights Agreement (as defined in
Section 2.2(a)) ("COMPAQ COMMON STOCK") issued and outstanding immediately prior
to the Effective Time, other than any shares of Compaq Common Stock to be
canceled pursuant to Section 1.6(c), will be canceled and extinguished and
automatically converted (subject to Section 1.6(f)) into the right to receive
0.6325 of a validly issued, fully paid and nonassessable share (the "EXCHANGE
RATIO") of the Common Stock, par value $0.01 per share,
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of HP (together with any associated HP Right (as defined in Section 3.2(a))
under the HP Rights Agreement (as defined in Section 3.2(a)) ("HP COMMON STOCK")
upon surrender of the certificate representing such share of Compaq Common Stock
in the manner provided in Section 1.7 (or in the case of a lost, stolen or
destroyed certificate, upon delivery of an affidavit (and bond, if required) in
the manner provided in Section 1.9).
(b) REPURCHASE RIGHTS. If any shares of Compaq Common Stock
outstanding immediately prior to the Effective Time are unvested or are subject
to a repurchase option, risk of forfeiture or other condition under any
applicable restricted stock purchase agreement or other agreement with Compaq,
then the shares of HP Common Stock issued in exchange for such shares of Compaq
Common Stock will also be unvested and subject to the same repurchase option,
risk of forfeiture or other condition, and the certificates representing such
shares of HP Common Stock may accordingly be marked with appropriate legends.
Compaq shall take all action that may be necessary to ensure that, from and
after the Effective Time, the Surviving Corporation is entitled to exercise any
such repurchase option or other right set forth in any such restricted stock
purchase agreement or other agreement.
(c) CANCELLATION OF TREASURY AND HP OWNED STOCK. Each share of
Compaq Common Stock held by Compaq or HP or any direct or indirect wholly-owned
Subsidiary of Compaq or of HP immediately prior to the Effective Time shall be
canceled and extinguished without any conversion thereof.
(d) CAPITAL STOCK OF MERGER SUB. Each share of common stock, par
value $0.01, of Merger Sub (the "MERGER SUB COMMON STOCK") issued and
outstanding prior immediately to the Effective Time shall be converted into one
validly issued, fully paid and nonassessable shares of common stock, par value
$0.01 per share, of the Surviving Corporation.
(e) STOCK OPTIONS; EMPLOYEE STOCK PURCHASE PLANS. At the
Effective Time, all Compaq Options (as defined in Section 2.2(b)) outstanding
under each Compaq Stock Option Plan (as defined in Section 2.12(a) hereof) shall
be assumed by HP in accordance with Section 5.9. Rights outstanding under
Compaq's Employee Stock Purchase Plan and any other employee stock purchase plan
of Compaq (collectively, the "COMPAQ PURCHASE PLANS") shall be treated as set
forth in Section 5.9(c).
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(f) FRACTIONAL SHARES. No fraction of a share of HP Common Stock
will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Compaq Common Stock who would otherwise be entitled to a fraction of a
share of HP Common Stock (after aggregating all fractional shares of HP Common
Stock that otherwise would be received by such holder) shall, upon surrender of
such holder's Certificate(s) (as defined in Section 1.7(c)), receive from HP an
amount of cash (rounded to the nearest whole cent), without interest, equal to
the product of: (i) such fraction, multiplied by (ii) the average closing price
of one share of HP Common Stock for the ten (10) most recent trading days that
HP Common Stock has traded ending on the trading day one day prior to the
Effective Time, as reported on the New York Stock Exchange, Inc. ("NYSE")
Composite Transactions Tape.
(g) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be
adjusted to reflect fully the appropriate effect of any stock split, reverse
stock split, stock dividend (including any dividend or distribution of
securities convertible into HP Common Stock or Compaq Common Stock),
reorganization, recapitalization, reclassification or other like change with
respect to HP Common Stock or Compaq Common Stock having a record date on or
after the date hereof and prior to the Effective Time.
1.7 SURRENDER OF CERTIFICATES.
(a) EXCHANGE AGENT. HP shall select Computershare Investor
Services LLC or another institution reasonably satisfactory to Compaq to act as
the exchange agent (the "EXCHANGE AGENT") in the Merger.
(b) HP TO PROVIDE COMMON STOCK. Promptly after the Effective
Time, HP shall enter into an agreement with the Exchange Agent, reasonably
satisfactory to Compaq, which shall provide that HP shall make available to the
Exchange Agent for exchange in accordance with this Article I, the shares of HP
Common Stock issuable pursuant to Section 1.6(a) in exchange for outstanding
shares of Compaq Common Stock. In addition, HP shall make available as necessary
from time to time after the Effective Time as needed, cash in an amount
sufficient for payment in lieu of fractional shares pursuant to Section 1.6(f)
and any dividends or distributions which holders of shares of Compaq Common
Stock may be entitled pursuant to Section 1.7(d). Any cash
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and HP Common Stock deposited with the Exchange Agent shall hereinafter be
referred to as the "EXCHANGE FUND."
(c) EXCHANGE PROCEDURES. Promptly after the Effective Time, HP
shall cause the Exchange Agent to mail to each holder of record (as of the
Effective Time) of a certificate or certificates (the "CERTIFICATES") which
immediately prior to the Effective Time represented outstanding shares of Compaq
Common Stock whose shares were converted into the right to receive shares of HP
Common Stock pursuant to Section 1.6(a), cash in lieu of any fractional shares
pursuant to Section 1.6(f) and any dividends or other distributions pursuant to
Section 1.7(d): (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as HP may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing whole shares of HP Common Stock, cash in lieu of
any fractional shares pursuant to Section 1.6(f) and any dividends or other
distributions pursuant to Section 1.7(d). Upon surrender of Certificates for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by HP, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto and such other
documents as may reasonably be required by the Exchange Agent, the holder of
such Certificates shall be entitled to receive in exchange therefor the number
of whole shares of HP Common Stock (after taking into account all Certificates
surrendered by such holder) to which such holder is entitled pursuant to Section
1.6(a) (which shall be in uncertificated book entry form unless a physical
certificate is requested or is otherwise required by applicable law or
regulation), payment in lieu of fractional shares which such holder has the
right to receive pursuant to Section 1.6(f) and any dividends or distributions
payable pursuant to Section 1.7(d), and the Certificates so surrendered shall
forthwith be canceled. Until so surrendered, outstanding Certificates will be
deemed from and after the Effective Time, for all corporate purposes, to
evidence the ownership of the number of full shares of HP Common Stock into
which such shares of Compaq Common Stock shall have been so converted and the
right to receive an amount in cash in lieu of the issuance of any fractional
shares in accordance with Section 1.6(f) and any dividends or distributions
payable pursuant to Section 1.7(d).
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(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends or other distributions declared or made after the date hereof with
respect to HP Common Stock with a record date after the Effective Time and no
payment in lieu of fractional shares pursuant to Section 1.6(f) will be paid to
the holders of any unsurrendered Certificates with respect to the shares of HP
Common Stock represented thereby until the holders of record of such
Certificates shall surrender such Certificates. Subject to applicable law,
following surrender of any such Certificates, the Exchange Agent shall deliver
to the record holders thereof, without interest (i) promptly after such
surrender, the number of whole shares of HP Common Stock issued in exchange
therefor along with payment in lieu of fractional shares pursuant to Section
1.6(f) and the amount of any such dividends or other distributions with a record
date after the Effective Time and theretofore paid with respect to such whole
shares of HP Common Stock and (ii) at the appropriate payment date, the amount
of dividends or other distributions with a record date after the Effective Time
and a payment date subsequent to such surrender payable with respect to such
whole shares of HP Common Stock.
(e) TRANSFERS OF OWNERSHIP. If shares of HP Common Stock are to
be issued in a name other than that in which the Certificates surrendered in
exchange therefor are registered, it will be a condition of the issuance thereof
that the Certificates so surrendered will be properly endorsed and otherwise in
proper form for transfer and that the Persons (as defined in Section 8.3(d))
requesting such exchange will have paid to HP or any agent designated by it any
transfer or other Taxes (as defined in Section 2.6) required by reason of the
issuance of shares of HP Common Stock in any name other than that of the
registered holder of the Certificates surrendered, or established to the
satisfaction of HP or any agent designated by it that such Tax has been paid or
is not payable.
(f) REQUIRED WITHHOLDING. Each of the Exchange Agent and the
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to any
holder or former holder of Compaq Common Stock such amounts as may be required
to be deducted or withheld therefrom under the Code or under any provision of
state, local or foreign Tax law or under any other applicable Legal Requirement
(as defined in Section 2.2(d)). To the extent such amounts are so deducted or
withheld, the amount of such consideration shall be treated for all
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purposes under this Agreement as having been paid to the Person to whom such
consideration would otherwise have been paid.
(g) NO LIABILITY. Notwithstanding anything to the contrary in
this Section 1.7, neither the Exchange Agent, the Surviving Corporation nor any
party hereto shall be liable to a holder of shares of HP Common Stock or Compaq
Common Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(h) INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall invest
any cash included in the Exchange Fund as directed by HP on a daily basis;
PROVIDED that no such investment or loss thereon shall affect the amounts
payable to Compaq stockholders pursuant to this Article I. Any interest and
other income resulting from such investment shall become a part of the Exchange
Fund, and any amounts in excess of the amounts payable to Compaq stockholders
pursuant to this Article I shall promptly be paid to HP.
(i) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange
Fund which remains undistributed to the holders of Certificates six (6) months
after the Effective Time shall, at the request of the Surviving Corporation, be
delivered to the Surviving Corporation or otherwise on the instruction of the
Surviving Corporation, and any holders of the Certificates who have not
surrendered such Certificates in compliance with this Section 1.7 shall after
such delivery to Surviving Corporation look only to the Surviving Corporation
for the shares of HP Common Stock pursuant to Section 1.6(a), cash in lieu of
any fractional shares pursuant to Section 1.6(f) and any dividends or other
distributions pursuant to Section 1.7(d) with respect to the shares of Compaq
Common Stock formerly represented thereby. Any such portion of the Exchange Fund
remaining unclaimed by holders of shares of Compaq Common Stock immediately
prior to such time as such amounts would otherwise escheat to or become property
of any Governmental Entity (as defined in Section 2.3(c)) shall, to the extent
permitted by law, become the property of HP free and clear of any claims or
interest of any Person previously entitled thereto.
1.8 NO FURTHER OWNERSHIP RIGHTS IN COMPAQ COMMON STOCK. All shares of HP
Common Stock issued upon the surrender for exchange of shares of Compaq Common
Stock in accordance with the terms hereof (including any cash paid in respect
thereof pursuant to Section 1.6(f) and 1.7(d)) shall be deemed to
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have been issued in full satisfaction of all rights pertaining to such shares of
Compaq Common Stock, and there shall be no further registration of transfers on
the records of the Surviving Corporation of shares of Compaq Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article I.
1.9 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Certificates
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, such shares of HP Common Stock,
cash for fractional shares, if any, as may be required pursuant to Section
1.6(f) and any dividends or distributions payable pursuant to Section 1.7(d);
PROVIDED, HOWEVER, that HP may, in its discretion and as a condition precedent
to the issuance thereof, require the owner of such lost, stolen or destroyed
Certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against HP, Compaq or the Exchange
Agent with respect to the Certificates alleged to have been lost, stolen or
destroyed.
1.10 TAX CONSEQUENCES. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368(a) of
the Code. The parties hereto adopt this Agreement as a plan of reorganization
within the meaning of Treasury Regulations Sections 1.368-2(g) and 1.368-3(a).
1.11 FURTHER ACTION. At and after the Effective Time, the officers and
directors of HP and the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of Compaq and Merger Sub, any deeds, bills of
sale, assignments or assurances and to take and do, in the name and on behalf of
Compaq and Merger Sub, any other actions and things to vest, perfect or confirm
of record or otherwise in the Surviving Corporation any and all right, title and
interest in, to and under any of the rights, properties or assets acquired or to
be acquired by the Surviving Corporation as a result of, or in connection with,
the Merger.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPAQ
Compaq represents and warrants to HP and Merger Sub, subject to the
exceptions specifically disclosed in writing in the disclosure letter supplied
by Compaq to HP dated as of the date hereof and certified by a duly authorized
officer of Compaq (the "COMPAQ DISCLOSURE LETTER"), as follows:
2.1 ORGANIZATION; STANDING AND POWER; CHARTER DOCUMENTS; SUBSIDIARIES.
(a) ORGANIZATION; STANDING AND POWER. Compaq and each of its
Subsidiaries (as defined below) is a corporation or other organization duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, has the requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted, except where the failure to be so organized, existing
and in good standing would not reasonably be expected to have a Material Adverse
Effect (as defined in Section 8.3(c)) on Compaq, and is duly qualified and in
good standing to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary other than in such jurisdictions where the failure to so qualify or to
be good standing, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Compaq. For purposes of this
Agreement, "SUBSIDIARY," when used with respect to any party, shall mean any
corporation or other organization, whether incorporated or unincorporated, at
least a majority of the securities or other interests of which having by their
terms ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries.
(b) CHARTER DOCUMENTS. Compaq has delivered or made available to
HP: (i) a true and correct copy of the Certificate of Incorporation (including
any Certificate of Designations) and Bylaws of Compaq, each as amended to date
(collectively, the "COMPAQ CHARTER DOCUMENTS") and (ii) the certificate of
incorporation and bylaws, or like organizational documents (collectively,
"SUBSIDIARY CHARTER DOCUMENTS"), of each of its Significant
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Subsidiaries (as defined in Rule 1-02 of Regulation S-X of the Securities and
Exchange Commission (the "SEC")), and each such instrument is in full force and
effect. Compaq is not in violation of any of the provisions of the Compaq
Charter Documents and each Subsidiary is not in violation of its respective
Subsidiary Charter Documents, except in the case of a Subsidiary, as would not
reasonably be expected to have a Material Adverse Effect on Compaq.
(c) SUBSIDIARIES. Exhibit 21 to Compaq's Annual Report on Form
10-K for the fiscal year ended December 31, 2000 includes all the Subsidiaries
of Compaq which are Significant Subsidiaries. All the outstanding shares of
capital stock of, or other equity interests in, each such Significant Subsidiary
have been validly issued and are fully paid and nonassessable and are, except as
set forth in such Exhibit 21, owned directly or indirectly by Compaq, free and
clear of all pledges, claims, liens, charges, encumbrances, options and security
interests of any kind or nature whatsoever (collectively, "LIENS"), including
any restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests, except for restrictions imposed by
applicable securities laws.
2.2 CAPITAL STRUCTURE.
(a) CAPITAL STOCK. The authorized capital stock of Compaq
consists of: (i) 3,000,000,000 shares of Compaq Common Stock, par value $0.01
per share and (ii) 10,000,000 shares of preferred stock, par value $0.01 per
share (the "COMPAQ PREFERRED STOCK"), 3,000,000 of which shares have been
designated as Series A Junior Participating Preferred Stock, all of which will
be reserved for issuance upon exercise of preferred stock purchase rights (the
"COMPAQ RIGHTS") issuable pursuant to the rights agreement approved by the Board
of Directors of Compaq in connection with its approval of this Agreement
substantially in the form previously provided to HP (the "COMPAQ RIGHTS
AGREEMENT"). At the close of business on June 30, 2001: (i) 1,753,000,000 shares
of Compaq Common Stock were issued and outstanding, (ii) 59,000,000 shares of
Compaq Common Stock were issued and held by Compaq in its treasury, and (iii) no
shares of Compaq Preferred Stock were issued and outstanding. All of the
outstanding shares of capital stock of Compaq are, and all shares of capital
stock of Compaq which may be issued as contemplated or permitted by this
Agreement will be, when issued, duly authorized and validly issued, fully paid
and nonassessable and not subject to any preemptive rights.
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Upon consummation of the Merger, (A) the shares of HP Common Stock issued in
exchange for any shares of Compaq Common Stock that are subject to a Contract
(as defined below) pursuant to which Compaq has the right to repurchase, redeem
or otherwise reacquire any shares of Compaq Common Stock will, without any
further act of HP, Merger Sub, Compaq or any other Person, become subject to the
restrictions, conditions and other provisions contained in such Contract and (B)
HP will automatically succeed to and become entitled to exercise Compaq's rights
and remedies under any such Contract. For purposes of this Agreement, "CONTRACT"
shall mean any written, oral or other agreement, contract, subcontract,
settlement agreement, lease, binding understanding, instrument, note, option,
warranty, purchase order, license, sublicense, insurance policy, benefit plan or
legally binding commitment or undertaking of any nature, as in effect as of the
date hereof or as may hereinafter be in effect.
(b) STOCK OPTIONS. As of the close of business on August 14,
2001: (i) 279,538,000 shares of Compaq Common Stock are subject to issuance
pursuant to outstanding options to purchase Compaq Common Stock under the Compaq
Stock Option Plans that are Compaq Broad Plans (equity or other equity-based
awards, whether payable in cash, shares or otherwise granted under or pursuant
to the Compaq Stock Option Plans (whether Compaq Broad Plans (as defined in
Section 2.12(a)) or otherwise) are referred to in this Agreement as "COMPAQ
OPTIONS"), (ii) as of the date hereof, 17,400,000 shares of Compaq Common Stock
are reserved for future issuance under the Compaq Purchase Plans, and (iii)
600,000 shares of Compaq Common Stock are subject to issuance pursuant to
outstanding options to purchase Compaq Common Stock (A) which are issued other
than pursuant Compaq Broad Plans and (B) other than shares reserved for issuance
under the Compaq Purchase Plans. Section 2.2(b) of the Compaq Disclosure Letter
sets forth a list of each outstanding Compaq Stock Option (excluding Compaq
Rights) issued other than pursuant to (1) Compaq Broad Plans and (2) the Compaq
Purchase Plans, and (a) the name and location of the holder of the such Compaq
Option, (b) the number of shares of Compaq Common Stock subject to such Compaq
Option, (c) the exercise price of such Compaq Option, (4) the date on which such
Compaq Option was granted, (d) the applicable vesting schedule, and the extent
to which such Compaq Option is vested and exercisable as of June 30, 2001, and
(e) the date on which such Compaq Option expires. All shares of Compaq Common
Stock subject to issuance under the Compaq Stock Option Plans and the Compaq
Purchase Plan, upon issuance on the terms and conditions specified in the
instruments pursuant to
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which they are issuable, would be duly authorized, validly issued, fully paid
and nonassessable. There are no commitments or agreements of any character to
which Compaq is bound obligating Compaq to accelerate the vesting of any Compaq
Option as a result of the Merger (whether alone or upon the occurrence of any
additional or subsequent events). Except as set forth on Section 2.2(b) of the
Compaq Disclosure Letter, there are no outstanding or authorized stock
appreciation, phantom stock, profit participation or other similar rights with
respect to Compaq.
(c) VOTING DEBT. No bonds, debentures, notes or other
indebtedness having the right to vote on any maters on which stockholders may
vote ("VOTING DEBT") of Compaq is issued or outstanding as of the date hereof.
(d) OTHER SECURITIES. Except as otherwise set forth in this
Section 2.2, as of June 30, 2001, there are no securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of any kind
to which Compaq or any of its Subsidiaries is a party or by which any of them is
bound obligating Compaq or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock,
Voting Debt or other voting securities of Compaq or any of its Subsidiaries, or
obligating Compaq or any of its Subsidiaries to issue, grant, extend or enter
into any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. All outstanding shares of Compaq Common Stock, all
outstanding Compaq Options, and all outstanding shares of capital stock of each
Subsidiary of Compaq have been issued and granted in compliance in all material
respects with (i) all applicable securities laws and all other applicable Legal
Requirements (as defined below) and (ii) all requirements set forth in
applicable material Contracts. For purposes of this Agreement, "LEGAL
REQUIREMENTS" shall mean any federal, state, local, municipal, foreign or other
law, statute, constitution, principle of common law, resolution, ordinance,
code, order, edict, decree, rule, regulation, ruling or requirement issued,
enacted, adopted, promulgated, implemented or otherwise put into effect by or
under the authority of any Governmental Entity.
(e) NO CHANGES. Since June 30, 2001 and through the date hereof,
other than (i) pursuant to the exercise of Compaq Options outstanding as of June
30, 2001 issued pursuant to the Compaq Stock Option Plans, (ii) under the Compaq
Purchase Plan, (iii) pursuant to repurchases from Employees (as defined in
Section 2.12(a)) following their termination pursuant to the terms of their
pre-
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existing stock option or purchase agreements or (iv) pursuant to end of month
stock option grants in July 2001 and August 2001 in the ordinary course of
business consistent with past practice under Stock Options Plans of Compaq that
are Compaq Broad Plans, there has been no change in (A) the outstanding capital
stock of Compaq, (B) the number of Compaq Options outstanding, or (C) the number
of other options, warrants or other rights to purchase Compaq capital stock.
2.3 AUTHORITY; NON-CONTRAVENTION; NECESSARY CONSENTS.
(a) AUTHORITY. Compaq has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby has been duly authorized by
all necessary corporate action on the part of Compaq and no other corporate
proceedings on the part of Compaq are necessary to authorize the execution and
delivery of this Agreement or to consummate the Merger and the other
transactions contemplated hereby, subject only to the approval and adoption of
this Agreement and the approval of the Merger by Compaq's stockholders and the
filing of the Certificate of Merger pursuant to Delaware Law. The affirmative
vote of the holders of a majority of the outstanding shares of Compaq Common
Stock to approve and adopt this Agreement and approve the Merger is the only
vote of the holders of any class or series of Compaq capital stock necessary to
approve and adopt this Agreement, approve the Merger and consummate the Merger
and the other transactions contemplated hereby. This Agreement has been duly
executed and delivered by Compaq and, assuming due execution and delivery by HP
and Merger Sub, constitutes the valid and binding obligation of Compaq,
enforceable against Compaq in accordance with its terms.
(b) NON-CONTRAVENTION. The execution and delivery of this
Agreement by Compaq does not, and performance of this Agreement by Compaq will
not: (i) conflict with or violate the Compaq Charter Documents or any Subsidiary
Charter Documents of any Subsidiary of Compaq, (ii) subject to obtaining the
approval and adoption of this Agreement and the approval of the Merger by
Compaq's stockholders as contemplated in Section 5.2 and compliance with the
requirements set forth in Section 2.3(c), conflict with or violate any material
Legal Requirement applicable to Compaq or any of its Subsidiaries or by which
Compaq or any of its Subsidiaries or any of their respective properties is
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bound or affected, or (iii) result in any material breach of or constitute a
material default (or an event that with notice or lapse of time or both would
become a material default) under, or impair Compaq's rights or alter the rights
or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a material Lien on any of the material properties or assets of
Compaq or any of its Subsidiaries pursuant to, any Compaq Material Contract (as
defined in Section 2.14). Section 2.3(b) of the Compaq Disclosure Letter lists
all consents, waivers and approvals under any of Compaq's or any of its
Subsidiaries' Contracts required to be obtained in connection with the
consummation of the transactions contemplated hereby, which, if individually or
in the aggregate not obtained, would result in a Material Adverse Effect on
Compaq or the Surviving Corporation.
(c) NECESSARY CONSENTS. No consent, approval, order or
authorization of, or registration, declaration or filing with any supranational,
national, state, municipal, local or foreign government, any instrumentality,
subdivision, court, administrative agency or commission or other governmental
authority or instrumentality, or any quasi-governmental or private body
exercising any regulatory, taxing, importing or other governmental or
quasi-governmental authority (a "GOVERNMENTAL ENTITY") is required to be
obtained or made by Compaq in connection with the execution and delivery of this
Agreement or the consummation of the Merger and other transactions contemplated
hereby, except for: (i) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and appropriate documents with the
relevant authorities of other states in which Compaq and/or HP are qualified to
do business, (ii) the filing of the Prospectus/Proxy Statement (as defined in
Section 2.15) with the SEC in accordance with the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT") and the effectiveness of the Registration
Statement (as defined in Section 2.15), (iii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal, foreign and state securities (or related) laws and the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR ACT")
and Council Regulation No. 4064/89 of the European Community, as amended (the
"EC MERGER REGULATION"), (iv) the consents listed on Section 2.3(c) of the
Compaq Disclosure Letter; (v) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities or "blue sky" laws and the securities laws of any foreign
country, and (vi) such other
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consents, authorizations, filings, approvals and registrations which if not
obtained or made would not be material to Compaq or HP or materially adversely
affect the ability of the parties hereto to consummate the Merger within the
time frame in which the Merger would otherwise be consummated in the absence of
the need for such consent, approval, order, authorization, registration,
declaration or filings. The consents, approvals, orders, authorizations,
registrations, declarations and filings set forth in (i) through (v) are
referred to herein as the "NECESSARY CONSENTS."
2.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) SEC FILINGS. Compaq has filed all required registration
statements, prospectuses, reports, schedules, forms, statements and other
documents (including exhibits and all other information incorporated by
reference) required to be filed by it with the SEC since January 1, 1998. Compaq
has made available to HP all such registration statements, prospectuses,
reports, schedules, forms, statements and other documents in the form filed with
the SEC. All such required registration statements, prospectuses, reports,
schedules, forms, statements and other documents (including those that Compaq
may file subsequent to the date hereof), as amended, are referred to herein as
the "COMPAQ SEC REPORTS." As of their respective dates, the Compaq SEC Reports
(i) were prepared in accordance and complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the "SECURITIES ACT"),
or the Exchange Act, as the case may be, and the rules and regulations of the
SEC thereunder applicable to such Compaq SEC Reports and (ii) 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 necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, except to the extent corrected prior to the date
hereof by a subsequently filed Compaq SEC Report. None of Compaq's Subsidiaries
is required to file any forms, reports or other documents with the SEC.
(b) FINANCIAL STATEMENTS. Each of the consolidated financial
statements (including, in each case, any related notes thereto) contained in the
Compaq SEC Reports (the "COMPAQ FINANCIALS"), including each Compaq SEC Report
filed after the date hereof until the Closing: (i) complied as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, (ii) was prepared in accordance with United States generally
accepted
-16-
accounting principles ("GAAP") applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-Q, 8-K or any successor form under the Exchange Act), and (iii)
fairly presented in all material respects the consolidated financial position of
Compaq and its consolidated Subsidiaries as at the respective dates thereof and
the consolidated results of Compaq's operations and cash flows for the periods
indicated. The balance sheet of Compaq contained in the Compaq SEC Reports as of
December 31, 2000 is hereinafter referred to as the "COMPAQ BALANCE SHEET."
Except as disclosed in the Compaq Financials, since the date of the Compaq
Balance Sheet and through the date hereof, neither Compaq nor any of its
Subsidiaries has any liabilities required under GAAP to be set forth on a
consolidated balance sheet (absolute, accrued, contingent or otherwise) which,
individually or in the aggregate, would be reasonably expected to have a
Material Adverse Effect on Compaq, except for liabilities incurred since the
date of the Compaq Balance Sheet in the ordinary course of business consistent
with past practices and liabilities incurred pursuant to this Agreement.
2.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the Compaq
Balance Sheet and through the date hereof there has not been: (i) any Material
Adverse Effect on Compaq, (ii) any declaration, setting aside or payment of any
dividend on, or other distribution (whether in cash, stock or property) in
respect of, any of Compaq's or any of its Subsidiaries' capital stock, or any
purchase, redemption or other acquisition by Compaq or any of its Subsidiaries
of any of Compaq's capital stock or any other securities of Compaq or its
Subsidiaries or any options, warrants, calls or rights to acquire any such
shares or other securities except for (A) repurchases from Employees following
their termination pursuant to the terms of their pre-existing stock option or
purchase agreements, or (B) the Compaq Rights Dividend, or (iii) any split,
combination or reclassification of any of Compaq's or any of its Subsidiaries'
capital stock.
2.6 TAXES. For the purposes of this Agreement, the term "TAX" or,
collectively, "TAXES," shall mean any and all federal, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such
-17-
amounts, and any obligations with respect to such amounts arising as a result of
being a member of an affiliated, consolidated, combined or unitary group for any
period or under any agreements or arrangements with any other Person and
including any liability for taxes of a predecessor entity. Compaq and each of
its Subsidiaries have filed all material federal, state, local and foreign
returns, estimates, information statements and reports relating to Taxes ("TAX
RETURNS") required to be filed by any of them and have paid, or have adequately
reserved (in accordance with GAAP) for the payment of, all Taxes required to be
paid (whether or not shown on any Tax Returns), and the most recent financial
statements contained in the Compaq SEC Reports reflect an adequate reserve (in
accordance with GAAP) for all Taxes payable by Compaq and its Subsidiaries
through the date of such financial statements. No material deficiencies for any
Taxes have been asserted or assessed, or, to the Knowledge (as defined in
Section 8.3(b)) of Compaq, proposed, against Compaq or any of its Subsidiaries
that are not subject to adequate reserves (in accordance with GAAP). No audit or
other examination of any Tax Return of Compaq or any of its Subsidiaries is
presently in progress, nor has Compaq or any of its Subsidiaries been notified
of any request for such an audit or other examination. Neither Compaq nor any of
its Subsidiaries has taken any action or knows of any fact, agreement or plan or
other circumstance that is reasonably likely to prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
2.7 INTELLECTUAL PROPERTY.
(a) NO INFRINGEMENT. To the Knowledge as of the date hereof of
Compaq, the products, services and operations of Compaq do not infringe or
misappropriate the Intellectual Property (as defined below) of any third party
where such infringement or misappropriation, individually or in the aggregate,
would be reasonably expected to have a material adverse effect on any material
division or business unit or other material operating group of product or
service offerings of Compaq or otherwise have a Material Adverse Effect on
Compaq. "INTELLECTUAL PROPERTY" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States,
international and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof, (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical data and customer lists, and all documentation
relating to any of the foregoing, (iii) all
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copyrights, copyrights registrations and applications therefor, and all other
rights corresponding thereto throughout the world, (iv) all industrial designs
and any registrations and applications therefor throughout the world, (v) all
mask works and any registrations and applications therefor throughout the world,
(vi) all trade names, logos, URLs, common law trademarks and service marks,
trademark and service mark registrations and applications therefor throughout
the world, (vii) all databases and data collections and all rights therein
throughout the world, (viii) all moral and economic rights of authors and
inventors, however denominated, throughout the world, and (ix) any similar or
equivalent rights to any of the foregoing anywhere in the world.
(b) NO IMPAIRMENT. The Merger (including the assignment by
operation of law of any Contract to the Surviving Corporation) will not result
in: (i) HP or any Subsidiary of HP (other than Compaq and its Subsidiaries, but
only to the extent existing prior to the Merger) being bound by any material
non-compete or other material restriction on the operation of any business of HP
or its Subsidiaries, (ii) HP or any Subsidiary of HP (other than Compaq and its
Subsidiaries, but only to the extent existing prior to the Merger) granting any
rights or licenses to any material Intellectual Property of HP or any Subsidiary
of HP to any third party (including a covenant not to sue with respect to any
material Intellectual Property of HP or any Subsidiary of HP), or (iii) the
termination or breach of any Contract to which Compaq is a party, which
termination or breach would reasonably be expected to have a material adverse
effect on any material division or business unit or other material operating
group of product or service offerings of the Surviving Corporation or HP or
otherwise have a Material Adverse Effect on either of them.
2.8 COMPLIANCE; PERMITS.
(a) COMPLIANCE. Neither Compaq nor any of its Subsidiaries is,
in any material respect, in conflict with, or in default or in violation of any
Legal Requirement applicable to Compaq or any of its Subsidiaries or by which
Compaq or any of its Subsidiaries or any of their respective businesses or
properties is, or Compaq believes is reasonably likely to be, bound or affected,
except, in each case, or in the aggregate, for conflicts, violations and
defaults that would not have a Material Adverse Effect on Compaq. As of the date
hereof, no material investigation or review by any Governmental Entity is
pending or, to the Knowledge of Compaq, has been threatened in a writing
delivered to Compaq or
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any of its Subsidiaries, against Compaq or any of its Subsidiaries. There is no
material judgment, injunction, order or decree binding upon Compaq or any of its
Subsidiaries which has or would reasonably be expected to have the effect of
prohibiting or materially impairing any material business practice of Compaq or
any of its Subsidiaries, any acquisition of material property by Compaq or any
of its Subsidiaries or the conduct of business by Compaq and its Subsidiaries as
currently conducted.
(b) PERMITS. Compaq and its Subsidiaries hold, to the extent
legally required, all permits, licenses, variances, exemptions, orders and
approvals from Governmental Entities ("PERMITS") that are required for the
operation of the business of Compaq, as currently conducted, the failure to hold
which would reasonably be expected to have a Material Adverse Effect on Compaq
(collectively, "COMPAQ PERMITS"). As of the date hereof, no suspension or
cancellation of any of the Compaq Permits is pending or, to the Knowledge of
Compaq, threatened. Compaq and its Subsidiaries are in compliance in all
material respects with the terms of the Compaq Permits.
2.9 LITIGATION. As of the date hereof, there are no claims, suits, actions
or proceedings pending or, to the Knowledge of Compaq, overtly threatened
against Compaq or any of its Subsidiaries, before any court, governmental
department, commission, agency, instrumentality or authority, or any arbitrator
that seeks to restrain or enjoin the consummation of the transactions
contemplated hereby or which would reasonably be expected, either singularly or
in the aggregate with all such claims, actions or proceedings, to be material to
the Compaq.
2.10 BROKERS' AND FINDERS' FEES. Except for fees payable to Salomon Smith
Barney pursuant to an engagement letter dated July 19, 2001, a copy of which has
been provided to HP, Compaq has not incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
2.11 TRANSACTIONS WITH AFFILIATES. Except as set forth in the Compaq SEC
Reports, since the date of the Compaq's last proxy statement filed with the SEC,
no event has occurred as of the date hereof that would be required to be
reported by Compaq pursuant to Item 404 of Regulation S-K promulgated by the
-20-
SEC (substituting, for the purposes of this representation and warranty, each
appearance of $60,000 in Item 404 with $500,000). Section 2.11 of the Compaq
Disclosure Letter identifies each Person who is an "affiliate" (as that term is
used in Rule 145 promulgated under the Securities Act) of Compaq as of the date
hereof.
2.12 EMPLOYEE BENEFIT PLANS.
(a) DOCUMENTS. Section 2.12(a) of the Compaq Disclosure Letter
sets forth a list of the following: (i) all severance and employment agreements
of Compaq with directors or executive officers, (ii) all material severance
programs and policies of each of Compaq or its Subsidiaries, (iii) all plans or
agreement of Compaq or its Subsidiaries relating to any of its current or former
employees, consultants or directors (each, an "EMPLOYEE") pursuant to which
benefits would vest or an amount would become payable or the terms of which
would otherwise be altered, in any case by virtue of the transactions
contemplated hereby (whether alone or upon the occurrence of any additional or
subsequent events), (iv) each document embodying each Retirement Plan (as
defined in Section 2.12(c)) of Compaq (a "COMPAQ RETIREMENT PLAN"), (v) each
Compaq Purchase Plan, and (vi) each stock option plan, stock award plan, stock
appreciation right plan, phantom stock plan, stock option, other equity or
equity-based compensation plan, equity or other equity based award to any Person
(whether payable in cash, shares or otherwise) (to the extent not issued
pursuant to any of the foregoing plans) or other plan or Contract of any nature
with any Person (whether or not an Employee) pursuant to which any stock,
option, warrant or other right to purchase or acquire capital stock of Compaq or
right to payment based on the value of Compaq capital stock has been granted or
otherwise issued, but, in any case excluding the Compaq Purchase Plans
(collectively, "COMPAQ STOCK OPTION PLANS"). Compaq has delivered or made
available to HP for review each of the items listed on Section 2.12(a) of the
Compaq Disclosure Letter and a current actuarial valuation and/or audited
statement of assets and liabilities for each Compaq Retirement Plan. Section
2.12(a) of the Compaq Disclosure Letter also identifies whether each Compaq
Stock Option Plan (A) is a "broadly-based" plan, as defined in Section 312.04(h)
of the NYSE Listed Company Manual or (B) has been approved by Compaq's
stockholders (plans which are either "broadly-based" plans or approved by
Compaq's stockholders (as identified on Section 2.12(a) of the Compaq Disclosure
Letter) are referred to herein as "COMPAQ BROAD PLANS").
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(b) BENEFIT PLAN COMPLIANCE.
(i) With respect to each material collective bargaining
agreement, bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
stock-related or performance award, retirement, vacation, severance, disability,
death benefit, hospitalization, medical, loan (other than travel allowances and
relocation packages), fringe benefit, disability, sabbatical and other plan,
arrangement or understanding providing benefits to any Employee, employment
agreement, consulting agreement or severance agreement with any current or
former officer or director of Compaq or its Subsidiaries, or any material
employment agreement, consulting agreement or severance agreement for any
Employee (collectively, "BENEFIT PLANS") of Compaq or any of its Subsidiaries
("COMPAQ BENEFIT PLANS"), no material event has occurred and there exists no
material condition or set of circumstances, in connection with which Compaq or
any of its Subsidiaries would be subject to any material liability under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the Code
or any other applicable Legal Requirement.
(ii) Each Compaq Benefit Plan has been, in all material
respects, administered and operated in accordance with its terms, with the
applicable provisions of ERISA, the Code and all other applicable material Legal
Requirements and the terms of all applicable collective bargaining agreements.
Each Compaq Benefit Plan, including any material amendments thereto, that is
capable of approval by, and/or registration for and/or qualification for special
tax status with, the appropriate taxation, social security and/or supervisory
authorities in the relevant country, state, territory or the like (each, an
"APPROVAL") has received such Approval or there remains a period of time in
which to obtain such Approval retroactive to the date of any material amendment
that has not previously received such Approval.
(iii) To the Knowledge of Compaq, no material oral or
written representation or commitment with respect to any material aspect of any
Compaq Benefit Plan has been made to an Employee of Compaq or any of its
Subsidiaries by an authorized Compaq Employee that is not materially in
accordance with the written or otherwise preexisting terms and provisions of
such Compaq Benefit Plans. To the Knowledge of Compaq, neither Compaq nor any of
its Subsidiaries has entered into any agreement, arrangement or understanding,
-22-
whether written or oral, with any trade union, works council or other Employee
representative body or any material number or category of its Employees which
would prevent, restrict or materially impede the implementation of any lay-off,
redundancy, severance or similar program within its or their respective
workforces (or any part of them).
(iv) There are no material unresolved claims or disputes
under the terms of, or in connection with, any Compaq Benefit Plan (other than
routine undisputed claims for benefits), and no action, legal or otherwise, has
been commenced with respect to any material claim.
(c) RETIREMENT PLAN FUNDING. The latest actuarial valuation of
each Funded Retirement Plan (as defined below) of Compaq or its Subsidiaries
discloses that, as of the effective date of the valuation, the aggregate value
of the assets of such Funded Retirement Plan is equal to or greater than the
aggregate value of its liabilities assessed on an ongoing and terminated basis
and calculated in accordance with the actuarial methods and assumptions used in
such valuation pursuant to such Funded Retirement Plan and applicable Legal
Requirements and GAAP. In respect of each Retirement Plan of Compaq or its
Subsidiaries that is not a Funded Retirement Plan, Compaq or its Subsidiaries
have made adequate provision for accrued liabilities in accordance with
applicable Legal Requirements. For purposes of this Agreement, "RETIREMENT PLAN"
shall mean a material arrangement for the provision of Retirement Benefit Rights
(as defined below) to Employees (and, if applicable, beneficiaries thereof). For
purposes of this Agreement, "RETIREMENT BENEFIT RIGHTS" shall mean, with respect
to an entity, any pension, lump sum, gratuity, or a like benefit provided or
generally intended to be provided on retirement or on death in respect of an
Employee's relationship as a service provider to an entity or its Subsidiaries.
Material post-retirement health benefits and any other self-insured health
benefit arrangements are deemed to be "Retirement Benefit Rights." Material
deferred compensation payments required to be made to an Employee in respect of
the termination of employment are also deemed to be "Retirement Benefit Rights."
"FUNDED RETIREMENT PLAN" means, with respect to party, a Retirement Plan under
which the assets to satisfy the benefit obligations are legally segregated from
the general assets of such party or its Subsidiaries and are not subject to the
creditors of such party or its Subsidiaries.
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(d) MULTIPLE EMPLOYER AND MULTIEMPLOYER PLANS. At no time has
Compaq or any other person or entity under common control within the meaning of
Section 414(b), (c), (m) or (o) of the Code (a "CONTROLLED GROUP AFFILIATE")
with Compaq participated in and/or been obligated to contribute to any Compaq
Benefit Plan in which any persons which are not or were not at the relevant
time, Controlled Group Affiliates of Compaq and/or their Employees, have
participated. No Compaq Benefit Plan is a "multiemployer plan" within the
meaning of Section 3(37) of ERISA.
(e) CONTINUATION COVERAGE. No Compaq Benefit Plan provides
health benefits (whether or not insured), with respect to Employees after
retirement or other termination of service (other than coverage mandated by
applicable Legal Requirements or benefits, the full cost of which is borne by
the Employee) other than individual arrangements the amounts of which are not
material.
(f) EFFECT OF TRANSACTION. The execution of this Agreement and
the consummation of the transactions contemplated hereby will not (either alone
or upon the occurrence of any additional or subsequent events) constitute an
event under any Compaq Benefit Plan that will or may result in any material
payment (whether of severance pay or otherwise), acceleration of payment,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee. There is no contract,
agreement, plan or arrangement with an Employee to which Compaq or any of its
Subsidiaries is a party as of the date of this Agreement, that, individually or
collectively and as a result of the transaction contemplated hereby (whether
alone or upon the occurrence of any additional or subsequent events), would
reasonably be expected to give rise to the payment of any amount that would not
be deductible pursuant to Section 280G of the Code.
(g) LABOR. No collective bargaining agreement is being
negotiated or renegotiated in any material respect by Compaq or any of its
Subsidiaries. As of the date of this Agreement, there is no material labor
dispute, strike or work stoppage against Compaq or any of its Subsidiaries
pending or, to the Knowledge of Compaq, threatened which may materially
interfere with the respective business activities of Compaq or any of its
Subsidiaries. As of the date of this Agreement, to the Knowledge of Compaq, none
of Compaq, any of its Subsidiaries or any of their respective representatives or
Employees has
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committed any material unfair labor practice in connection with the operation of
the respective businesses of Compaq or any of its Subsidiaries, and there is no
material charge or complaint against Compaq or any of its Subsidiaries by the
National Labor Relations Board or any comparable governmental agency pending or
threatened in writing.
2.13 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIAL. Except as would not result in a Material
Adverse Effect on Compaq, no underground storage tanks and no amount of any
substance that has been designated by any Governmental Entity or by applicable
federal, state or local law to be radioactive, toxic, hazardous or otherwise a
danger to health or the environment, including PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, but excluding office and janitorial supplies,
(a "HAZARDOUS MATERIAL") are present, as a result of the actions of Compaq or
any of its Subsidiaries or any affiliate of Compaq, or, to the Knowledge of
Compaq, as a result of any actions of any third party or otherwise, in, on or
under any property, including the land and the improvements, ground water and
surface water thereof, that Compaq or any of its Subsidiaries has at any time
owned, operated, occupied or leased.
(b) HAZARDOUS MATERIALS ACTIVITIES. Except as would not result
in a Material Adverse Effect on Compaq: (i) neither Compaq nor any of its
Subsidiaries has transported, stored, used, manufactured, disposed of, released
or exposed its Employees or others to Hazardous Materials in violation of any
law in effect on or before the Closing Date and (ii) neither Compaq nor any of
its Subsidiaries has disposed of, transported, sold, used, released, exposed its
Employees or others to or manufactured any product containing a Hazardous
Material (collectively, "HAZARDOUS MATERIALS ACTIVITIES") in violation of any
rule, regulation, treaty or statute promulgated by any Governmental Entity in
effect prior to or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.
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2.14 CONTRACTS.
(a) MATERIAL CONTRACTS. For purposes of this Agreement, "COMPAQ
MATERIAL CONTRACT" shall mean:
(i) any "material contracts" (as such term is defined in
Item 601(b)(10) of Regulation S-K of the SEC) with respect to Compaq and its
Subsidiaries;
(ii) any Contract containing any covenant: (A) limiting
the right of Compaq or its Subsidiaries to engage in any material line of
business, make use of any material Intellectual Property or compete with any
Person in any material line of business, (B) granting any exclusive distribution
or supply rights, or (C) otherwise having an adverse effect on the right of
Compaq and its Subsidiaries to sell, distribute or manufacture any material
products or services or to purchase or otherwise obtain any material software,
components, parts or subassemblies;
(iii) any Contract, or group of Contracts with a Person
(or group of affiliated Persons), the termination or breach of which would be
reasonably expected to have a material adverse effect on any material division
or business unit or other material operating group of product or service
offerings of Compaq or otherwise have a Material Adverse Effect on Compaq; and
(iv) (A) all Contracts with the top two (2) providers
(as measured by fees paid under such Contracts) pursuant to which Compaq
licenses operating system software for use in its end-user products, (B) all
Contracts with the top two (2) providers (as measured by fees paid under such
Contracts) pursuant to which Compaq purchases microprocessors, (C) all Contracts
with the top five (5) distributors of Compaq's end-user products (as measured by
revenues received under such Contracts) pursuant to which Compaq distributes its
end-user products, and (D) all Contracts with the top five (5) third-party
manufacturers (as measured by fees paid under such Contracts) pursuant to which
such Compaq products (or subassemblies thereof) are manufactured.
(b) SCHEDULE. Section 2.14(b) of the Compaq Disclosure Letter
sets forth a list of all Compaq Material Contracts to which is a party or is
bound by as of the date hereof which are described in Sections 2.14(a)(i) and
2.14(a)(iv) hereof.
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(c) NO BREACH. All Compaq Material Contracts are valid and in
full force and effect except to the extent they have previously expired in
accordance with their terms or if the failure to be in full force and effect,
individually or in the aggregate, would not reasonably be expected to be
material to Compaq. Neither Compaq nor any of its Subsidiaries has violated any
provision of, or committed or failed to perform any act which, with or without
notice, lapse of time or both would constitute a default under the provisions
of, any Compaq Material Contract, except in each case for those violations and
defaults which, individually or in the aggregate, would not reasonably be
expected to be material to Compaq.
2.15 DISCLOSURE. None of the information supplied or to be supplied by or
on behalf of Compaq for inclusion or incorporation by reference in the
registration statement on Form S-4 (or similar successor form) to be filed with
the SEC by HP in connection with the issuance of HP Common Stock in the Merger
(including amendments or supplements thereto) (the "REGISTRATION STATEMENT")
will, at the time the Registration Statement becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they are
made, not misleading. None of the information supplied or to be supplied by or
on behalf of Compaq for inclusion or incorporation by reference in the
Prospectus/Proxy Statement to be filed with the SEC as part of the Registration
Statement (the "PROSPECTUS/PROXY STATEMENT"), will, at the time the
Prospectus/Proxy Statement is mailed to the stockholders of Compaq or HP, at the
time of the HP Stockholders' Meeting or Compaq Stockholders' Meeting or as of
the Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
are made, not misleading. The Prospectus/Proxy Statement will comply as to form
in all material respects with the provisions of the Exchange Act and the rules
and regulations promulgated by the SEC thereunder. Notwithstanding the
foregoing, no representation or warranty is made by Compaq with respect to
statements made or incorporated by reference therein about HP supplied by HP for
inclusion or incorporation by reference in the Registration Statement or the
Prospectus/Proxy Statement.
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2.16 BOARD APPROVAL. The Board of Directors of Compaq has, by resolutions
duly adopted by unanimous vote at a meeting of all Directors duly called and
held and not subsequently rescinded or modified in any way (the "COMPAQ BOARD
APPROVAL") has duly (i) determined that the Merger is fair to, and in the best
interests of, Compaq and its stockholders and declared the Merger to be
advisable, (ii) approved this Agreement, and (iii) recommended that the
stockholders of Compaq approve and adopt this Agreement and approve the Merger
and directed that such matter be submitted to Compaq's stockholders at the
Compaq Stockholders' Meeting.
2.17 FAIRNESS OPINION. Compaq's Board of Directors has received a written
opinion from Salomon Smith Barney, dated as of September 3, 2001, to the effect
that, as of such date, the Exchange Ratio is fair, from a financial point of
view, to Compaq stockholders and has delivered to HP a copy of such opinion.
2.18 RIGHTS PLAN. The Board of Directors of Compaq has approved the Compaq
Rights Agreement and has declared a dividend of one Compaq Right per share of
Compaq Common Stock to each holder of Compaq Common Stock (the "COMPAQ RIGHTS
DIVIDEND"). Compaq has (a) delivered to HP an accurate copy of the Compaq Rights
Agreement approved by the Board of Directors of Compaq and proposed to be
entered into with the Rights Agents named thereunder, (b) declared the Compaq
Rights Dividend, and (c) fixed the record date for the Compaq Rights Dividend as
September 17, 2001 and the payment date for the Compaq Rights Dividend no later
than September 27, 2001. Compaq has taken all action so that (i) HP shall not be
an "Acquiring Person" thereunder and (ii) the entering into of this Agreement
and the Merger and the other transactions contemplated hereby will not result in
the grant of any rights to any Person under the Compaq Rights Agreement or
enable or require the Compaq Rights to be exercised, distributed or triggered.
2.19 TAKEOVER STATUTES. The Board of Directors of Compaq has taken all
actions so that the restrictions contained in Section 203 of the Delaware
General Corporation Law applicable to a "business combination" (as defined in
such Section 203), and any other similar Legal Requirement, will not apply to HP
during the pendency of this Agreement, including the execution, delivery or
performance of this Agreement and the consummation of the Merger and the other
transactions contemplated hereby.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HP
AND MERGER SUB
HP and Merger Sub represent and warrant to Compaq, subject to the
exceptions specifically disclosed in writing in the disclosure letter supplied
by HP and Merger Sub to Compaq dated as of the date hereof and certified by a
duly authorized officer of each of HP and Merger Sub (the "HP DISCLOSURE
LETTER"), as follows:
3.1 ORGANIZATION; STANDING AND POWER; CHARTER DOCUMENTS; SUBSIDIARIES.
(a) ORGANIZATION; STANDING AND POWER. HP and each of its
Subsidiaries is a corporation or other organization duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, has the requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted, except where the failure to be so organized, existing and in good
standing would not reasonably be expected to have a Material Adverse Effect on
HP, and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary other than in such
jurisdictions where the failure to so qualify or to be good standing,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on HP.
(b) CHARTER DOCUMENTS. HP has delivered or made available to
Compaq (i) a true and correct copy of the Certificate of Incorporation
(including any Certificate of Designations) and Bylaws of HP, each as amended to
date (collectively, the "HP CHARTER DOCUMENTS") and (ii) the Subsidiary Charter
Documents of each of its Significant Subsidiaries, and each such instrument is
in full force and effect. HP is not in violation of any of the provisions of the
HP Charter Documents and each Subsidiary is not in violation of its respective
Subsidiary Charter Documents, except in the case of a Subsidiary, as would not
reasonably be expected to have a Material Adverse Effect on HP.
(c) SUBSIDIARIES. Exhibit 21 to HP's Annual Report on Form 10-K
for the fiscal year ended October 31, 2000 includes all the Subsidiaries of HP
which are Significant Subsidiaries. All the outstanding shares of capital stock
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of, or other equity interests in, each such Significant Subsidiary have been
validly issued and are fully paid and nonassessable and are, except as set forth
in such Exhibit 21, owned directly or indirectly by HP, free and clear of all
Liens, including any restriction on the right to vote, sell or otherwise dispose
of such capital stock or other ownership interests, except for restrictions
imposed by applicable securities laws, except in the case of a Subsidiary, as
would not reasonably be expected to have a Material Adverse Effect on HP or a
material adverse effect on such Subsidiary.
3.2 CAPITAL STRUCTURE.
(a) CAPITAL STOCK. The authorized capital stock of HP consists
of: (i) 4,800,000,000 shares of HP Common Stock, par value $0.01 per share and
(ii) 300,000,000 shares of preferred stock, par value $0.01 per share the "HP
PREFERRED STOCK"), of which 4,500,000 shares have been designated as Series A
Participating Preferred Stock, all of which will be reserved for issuance upon
exercise of preferred stock purchase rights (the "HP RIGHTS") issuable pursuant
to the rights agreement approved by the Board of Directors of HP in connection
with its approval of this Agreement substantially in the form previously
provided to Compaq (the "HP RIGHTS AGREEMENT"). At the close of business of July
31, 2001: (i) 1,939,159,231 shares of HP Common Stock were issued and
outstanding, (ii) no shares of HP Common Stock were issued and held by HP in its
treasury, and (iii) no shares of HP Preferred Stock were issued and outstanding.
All of the outstanding shares of capital stock of HP are, and all shares of
capital stock of HP which may be issued as contemplated or permitted by this
Agreement will be, when issued, duly authorized and validly issued, fully paid
and nonassessable and not subject to any preemptive rights.
(b) STOCK OPTIONS. As of the close of business on July 31, 2001:
(i) 212,000,000 shares of HP Common Stock are subject to issuance pursuant to
outstanding options to purchase HP Common Stock under the stock option, stock
award, stock appreciation or phantom stock plans of HP (the "HP STOCK OPTION
PLANS") (stock options, stock awards, stock appreciation rights, phantom stock
awards, stock-related awards and performance awards granted by HP pursuant to
the HP Stock Option Plans are referred to in this Agreement as "HP OPTIONS"),
(ii) ) 98,700,000 shares of HP Common Stock are reserved for future issuance
under the employee stock purchase plans of HP, and (iii) 80,000 shares of HP
Common Stock are subject to issuance pursuant to outstanding
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options, rights or warrants to purchase HP Common Stock issued other than
pursuant to the HP Stock Option Plans and the HP employee stock purchase plans.
All shares of HP Common Stock subject to issuance as aforesaid, upon issuance on
the terms and conditions specified in the instruments pursuant to which they are
issuable, would be duly authorized, validly issued, fully paid and
nonassessable. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation or other similar rights with respect to HP.
(c) VOTING DEBT. No Voting Debt of HP is issued or outstanding
as of the date hereof.
(d) OTHER SECURITIES. Except as otherwise set forth in this
Section 3.2, as of July 31, 2001, there are no securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of any kind
to which HP or any of its Subsidiaries is a party or by which any of them is
bound obligating HP or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock,
Voting Debt or other voting securities of HP or any of its Subsidiaries, or
obligating HP or any of its Subsidiaries to issue, grant, extend or enter into
any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. All outstanding shares of HP Common Stock, all
outstanding HP Options, and all outstanding shares of capital stock of each
Subsidiary of HP have been issued and granted in compliance in all material
respects with (i) all applicable securities laws and all other applicable Legal
Requirements and (ii) all requirements set forth in applicable material
Contracts.
(e) NO CHANGES. Since July 31, 2001 and through the date hereof,
other than (i) pursuant to the exercise of HP Options outstanding as of July 31,
2001 issued pursuant to the HP Option Plans, (ii) under the HP employee stock
purchase plans, (iii) repurchases of securities pursuant to HP's publicly
announced repurchase programs existing as of July 31, 2001, or (iv) repurchases
from Employees following their termination pursuant to the terms of their
pre-existing stock option or purchase agreements, there has been no change in
(A) the outstanding capital stock of HP, (B) the number of HP Options
outstanding, or (C) the number of other options, warrants or other rights to
purchase HP capital stock, which, individually or in the aggregate, would
constitute a material change in the capitalization of HP.
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(f) MERGER SUB CAPITAL STOCK. The authorized capital stock of
Merger Sub consists of 1,000 shares of common stock, par value $0.01 per share,
of which 1,000 shares issued and outstanding. HP is the sole stockholder of
Merger Sub and is the legal and beneficial owner of all 1,000 issued and
outstanding shares. Merger Sub was formed by counsel to HP at the direction of
HP on August 30, 2001, solely for purposes of effecting the Merger and the other
transactions contemplated hereby. Except as contemplated by this Agreement,
Merger Sub does not hold, nor has it held, any material assets or incurred any
material liabilities nor has Merger Sub carried on any business activities other
than in connection with the Merger and the transactions contemplated by this
Agreement. All of the outstanding shares of capital stock of Merger Sub have
been duly authorized and validly issued, and are fully paid and nonassessable
and not subject to any preemptive rights.
3.3 AUTHORITY; NON-CONTRAVENTION; NECESSARY CONSENTS.
(a) AUTHORITY. Each of HP and Merger Sub has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby has been duly
authorized by all necessary corporate action on the part of HP and Merger Sub
and no other corporate proceedings on the part of HP or Merger Sub are necessary
to authorize the execution and delivery of this Agreement or to consummate the
Merger and the other transactions contemplated hereby, subject only to the
approval of the Stock Issuance by HP's stockholders, the approval and adoption
of this Agreement and the approval of the Merger by HP as Merger Sub's sole
stockholder and the and the filing of the Certificate of Merger pursuant to
Delaware Law. The affirmative vote of the holders of a majority of the
outstanding shares of HP Common Stock present in person or by proxy in favor of
the Stock Issuance at a meeting duly called and held for approval of the Stock
Issuance is the only vote of the holders of any class or series of HP capital
stock necessary to approve the Stock Issuance, and no other vote of the holders
of any class or series of HP Capital Stock is necessary to approve and adopt
this Agreement, approve the Merger and consummate the Merger and the other
transactions contemplated hereby. This Agreement has been duly executed and
delivered by HP and Merger Sub and, assuming due execution and delivery by
Compaq, constitutes the valid and binding obligation of HP, enforceable against
HP and Merger Sub in accordance with its terms.
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(b) NON-CONTRAVENTION. The execution and delivery of this
Agreement by HP and Merger Sub does not, and performance of this Agreement by HP
will not: (i) conflict with or violate the HP Charter Documents, the certificate
of incorporation or bylaws of Merger Sub or any other Subsidiary Charter
Documents of any Subsidiary of HP, (ii) subject to obtaining the approval and
adoption of this Agreement and the approval of the Stock Issuance by HP's
stockholders as contemplated in Section 5.2 and compliance with the requirements
set forth in Section 3.3(c), conflict with or violate any material Legal
Requirement applicable to HP, Merger Sub or any of HP's other Subsidiaries or by
which HP, Merger Sub or any of HP's other Subsidiaries or any of their
respective properties is bound or affected, or (iii) result in any material
breach of or constitute a material default (or an event that with notice or
lapse of time or both would become a material default) under, or impair HP's
rights or alter the rights or obligations of any third party under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a material Lien on any of the material properties or
assets of HP or any of its Subsidiaries pursuant to, any HP Material Contract
(as defined in Section 3.13). Section 3.3(b) of the HP Disclosure Letter lists
all consents, waivers and approvals under any of HP's or any of its
Subsidiaries' Contracts required to be obtained in connection with the
consummation of the transactions contemplated hereby, which, if individually or
in the aggregate not obtained, would result in a Material Adverse Effect on HP
or the Surviving Corporation.
(c) NECESSARY CONSENTS. No consent, approval, order or
authorization of, or registration, declaration or filing with any Governmental
Entity is required to be obtained or made by HP in connection with the execution
and delivery of this Agreement or the consummation of the Merger and other
transactions contemplated hereby, except for (i) the Necessary Consents and (ii)
such other consents, authorizations, filings, approvals and registrations which
if not obtained or made would not be material to HP, Merger Sub or Compaq or
materially adversely affect the ability of the parties hereto to consummate the
Merger within the time frame in which the Merger would otherwise be consummated
in the absence of the need for such consent, approval, order, authorization,
registration, declaration or filings.
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3.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) SEC FILINGS. HP has filed all required registration
statements, prospectuses, reports, schedules, forms, statements and other
documents (including exhibits and all other information incorporated by
reference) required to be filed by it with the SEC since January 1, 1998. HP has
made available to Compaq all such registration statements, prospectuses,
reports, schedules, forms, statements and other documents in the form filed with
the SEC. All such required registration statements, prospectuses, reports,
schedules, forms, statements and other documents (including those that HP may
file subsequent to the date hereof), as amended, are referred to herein as the
"HP SEC REPORTS." As of their respective dates, the HP SEC Reports (i) were
prepared in accordance and complied in all material respects with the
requirements of the Securities Act, or the Exchange Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable to such HP SEC
Reports and (ii) 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 necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, except to
the extent corrected prior to the date hereof by a subsequently filed HP SEC
Report. None of HP's Subsidiaries is required to file any forms, reports or
other documents with the SEC.
(b) FINANCIAL STATEMENTS. Each of the consolidated financial
statements (including, in each case, any related notes thereto) contained in the
HP SEC Reports (the "HP FINANCIALS"), including each HP SEC Report filed after
the date hereof until the Closing: (i) complied as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, (ii) was prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes thereto
or, in the case of unaudited interim financial statements, as may be permitted
by the SEC on Form 10-Q, 8-K or any successor form under the Exchange Act), and
(iii) fairly presented in all material respects the consolidated financial
position of HP and its consolidated Subsidiaries as at the respective dates
thereof and the consolidated results of HP's operations and cash flows for the
periods indicated. The balance sheet of HP contained in the HP SEC Reports as of
October 31, 2000 is hereinafter referred to as the "HP BALANCE SHEET." Except as
disclosed in the HP Financials, since the date of the HP Balance Sheet and
through the date hereof, neither HP nor any of its Subsidiaries has any
liabilities required under GAAP to be set forth on a consolidated balance sheet
(absolute, accrued, contingent or otherwise) which, individually or in the
aggregate, would be reasonably expected
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to have a Material Adverse Effect on HP, except for liabilities incurred since
the date of the HP Balance Sheet in the ordinary course of business consistent
with past practices and liabilities incurred pursuant to this Agreement.
3.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the HP Balance
Sheet and through the date hereof there has not been: (i) any Material Adverse
Effect on HP, (ii) any declaration, setting aside or payment of any dividend on,
or other distribution (whether in cash, stock or property) in respect of, any of
HP's or any of its Subsidiaries' capital stock, or any purchase, redemption or
other acquisition by HP or any of its Subsidiaries of any of HP's capital stock
or any other securities of HP or its Subsidiaries or any options, warrants,
calls or rights to acquire any such shares or other securities except for (A)
repurchases from Employees following their termination pursuant to the terms of
their pre-existing stock option or purchase agreements or (B) repurchases
pursuant to HP's public stock repurchase programs existing as of July 31, 2001,
or (C) the HP Rights Dividend, or (iii) any split, combination or
reclassification of any of HP's or any of its Subsidiaries' capital stock.
3.6 TAXES. HP and each of its Subsidiaries have filed all material Tax
Returns required to be filed by any of them and have paid, or have adequately
reserved (in accordance with GAAP) for the payment of, all Taxes required to be
paid (whether or not shown on any Tax Returns), and the most recent financial
statements contained in the HP SEC Reports reflect an adequate reserve (in
accordance with GAAP) for all Taxes payable by HP and its Subsidiaries through
the date of such financial statements. No material deficiencies for any Taxes
have been asserted or assessed, or to the Knowledge of HP, proposed, against HP
or any of its Subsidiaries that are not subject to adequate reserves (in
accordance with GAAP). Neither the HP nor any of its Subsidiaries has taken any
action or knows of any fact, agreement or plan or other circumstance that is
reasonably likely to prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
3.7 INTELLECTUAL PROPERTY.
(a) NO INFRINGEMENT. To the Knowledge as of the date hereof of
HP, the products, services and operations of HP do not infringe or
misappropriate the Intellectual Property of any third party where such
infringement or misappropriation, individually or in the aggregate, would be
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reasonably expected to have a material adverse effect on any material division
or business unit or other material operating group of product or service
offerings of HP or otherwise have a Material Adverse Effect on HP.
(b) NO IMPAIRMENT. The Merger will not result in the termination
or breach of any Contract to which HP is a party, which termination or breach
would reasonably be expected to have a material adverse effect on any material
division or business unit or other material operating group of product or
service offerings of HP or otherwise have a Material Adverse Effect on HP.
3.8 COMPLIANCE; PERMITS.
(a) COMPLIANCE. Neither HP nor any of its Subsidiaries is, in
any material respect, in conflict with, or in default or in violation of any
Legal Requirement applicable to HP or any of its Subsidiaries or by which HP or
any of its Subsidiaries or any of their respective businesses or properties is,
or HP believes is reasonably likely to be, bound or affected, except, in each
case, or in the aggregate, for conflicts, violations and defaults that would not
have a Material Adverse Effect on HP. As of the date hereof, no material
investigation or review by any Governmental Entity is pending or, to the
Knowledge of HP, has been threatened in a writing delivered to HP or any of its
Subsidiaries, against HP or any of its Subsidiaries. There is no material
judgment, injunction, order or decree binding upon HP or any of its Subsidiaries
which has or would reasonably be expected to have the effect of prohibiting or
materially impairing any material business practice of HP or any of its
Subsidiaries, any acquisition of material property by HP or any of its
Subsidiaries or the conduct of business by HP and its Subsidiaries as currently
conducted.
(b) PERMITS. HP and its Subsidiaries hold, to the extent legally
required, all Permits that required for the operation of the business of HP, as
currently conducted, the failure to hold which would reasonably be expected to
have a Material Adverse Effect on HP (collectively, "HP PERMITS"). As of the
date hereof, no suspension or cancellation of any of the HP Permits is pending
or, to the Knowledge of HP, threatened. HP and its Subsidiaries are in
compliance in all material respects with the terms of the HP Permits.
3.9 LITIGATION. As of the date hereof, there are no claims,
suits, actions or proceedings pending or, to the Knowledge of HP, overtly
threatened against HP or any of its Subsidiaries, before any court, governmental
department,
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commission, agency, instrumentality or authority, or any arbitrator that seeks
to restrain or enjoin the consummation of the transactions contemplated hereby
or which would reasonably be expected, either singularly or in the aggregate
with all such claims, actions or proceedings, to be material to HP.
3.10 BROKERS' AND FINDERS' FEES. Except for fees payable to Goldman, Sachs
& Co. pursuant to an engagement letter dated July 25, 2001, a copy of which has
been provided to Compaq, HP has not incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
3.11 EMPLOYEE BENEFIT PLANS.
(a) BENEFIT PLAN COMPLIANCE.
(i) With respect to the Benefit Plan of HP or any of its
Subsidiaries ("HP BENEFIT PLAN"), no material event has occurred and there
exists no material condition or set of circumstances, in connection with which
HP or any of its Subsidiaries would be subject to any material liability under
the ERISA, the Code or any other applicable Legal Requirement.
(ii) Each HP Benefit Plan has been, in all material
respects, administered and operated in accordance with its terms, with the
applicable provisions of ERISA, the Code and all other applicable material Legal
Requirements and the terms of all applicable collective bargaining agreements.
Each HP Benefit Plan, including any material amendments thereto, that is capable
of Approval has received such Approval or there remains a period of time in
which to obtain such Approval retroactive to the date of any material amendment
that has not previously received such Approval.
(iii) To the Knowledge of HP, no material oral or
written representation or commitment with respect to any material aspect of any
HP Benefit Plan has been made to an Employee of HP or any of its Subsidiaries by
an authorized HP Employee that is not materially in accordance with the written
or otherwise preexisting terms and provisions of such HP Benefit Plans. To the
Knowledge of HP, neither HP nor any of its Subsidiaries has entered into any
agreement, arrangement or understanding, whether written or oral, with any trade
union, works council or other Employee representative body or any material
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number or category of its Employees which would prevent, restrict or materially
impede the implementation of any lay-off, redundancy, severance or similar
program within its or their respective workforces (or any part of them).
(iv) There are no material unresolved claims or disputes
under the terms of, or in connection with, any HP Benefit Plan (other than
routine undisputed claims for benefits), and no action, legal or otherwise, has
been commenced with respect to any material claim.
(b) RETIREMENT PLAN FUNDING. The latest actuarial valuation of
each Funded Retirement Plan of HP or its Subsidiaries discloses that, as of the
effective date of the valuation, the aggregate value of the assets of such
Funded Retirement Plan is equal to or greater than the aggregate value of its
liabilities assessed on an ongoing and terminated basis and calculated in
accordance with the actuarial methods and assumptions used in such valuation
pursuant to such Funded Retirement Plan and applicable Legal Requirements and
GAAP. In respect of each Retirement Plan of HP or its Subsidiaries that is not a
Funded Retirement Plan, HP or its Subsidiaries have made adequate provision for
accrued liabilities in accordance with applicable Legal Requirements.
(c) MULTIPLE EMPLOYER AND MULTIEMPLOYER PLANS. At no time has HP
or Controlled Group Affiliate with HP participated in and/or been obligated to
contribute to any HP Benefit Plan in which any persons which are not or were not
at the relevant time, Controlled Group Affiliates of HP and/or their Employees,
have participated. No HP Benefit Plan is a "multiemployer plan" within the
meaning of Section 3(37) of ERISA.
(d) CONTINUATION COVERAGE. No HP Benefit Plan provides health
benefits (whether or not insured), with respect to Employees after retirement or
other termination of service (other than coverage mandated by applicable Legal
Requirements or benefits, the full cost of which is borne by the Employee) other
than individual arrangements the amounts of which are not material.
(e) EFFECT OF TRANSACTION. The execution of this Agreement and
the consummation of the transactions contemplated hereby will not (either alone
or upon the occurrence of any additional or subsequent events) constitute an
event under any HP Benefit Plan that will or may result in any material payment
(whether of severance pay or otherwise), acceleration of payment, forgiveness of
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indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee. There is no contract, agreement, plan or
arrangement with an Employee to which HP or any of its Subsidiaries is a party
as of the date of this Agreement, that, individually or collectively and as a
result of the transaction contemplated hereby (whether alone or upon the
occurrence of any additional or subsequent events), would reasonably be expected
to give rise to the payment of any amount that would not be deductible pursuant
to Section 280G of the Code.
(f) LABOR. No collective bargaining agreement is being
negotiated or renegotiated in any material respect by HP or any of its
Subsidiaries. As of the date of this Agreement, there is no material labor
dispute, strike or work stoppage against HP or any of its Subsidiaries pending
or, to the Knowledge of HP, threatened which may materially interfere with the
respective business activities of HP or any of its Subsidiaries. As of the date
of this Agreement, to the Knowledge of HP, none of HP, any of its Subsidiaries
or any of their respective representatives or Employees has committed any
material unfair labor practice in connection with the operation of the
respective businesses of HP or any of its Subsidiaries, and there is no material
charge or complaint against HP or any of its Subsidiaries by the National Labor
Relations Board or any comparable governmental agency pending or threatened in
writing.
3.12 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIAL. Except as would not result in a Material
Adverse Effect on HP, no underground storage tanks and no amount of any
Hazardous Material are present, as a result of the actions of HP or any of its
Subsidiaries or any affiliate of HP, or, to the Knowledge of HP, as a result of
any actions of any third party or otherwise, in, on or under any property,
including the land and the improvements, ground water and surface water thereof,
that HP or any of its Subsidiaries has at any time owned, operated, occupied or
leased.
(b) HAZARDOUS MATERIALS ACTIVITIES. Except as would not result
in a Material Adverse Effect on HP (i) neither HP nor any of its Subsidiaries
has transported, stored, used, manufactured, disposed of, released or exposed
its Employees or others to Hazardous Materials in violation of any law in effect
on or before the Closing Date and (ii) neither HP nor any of its Subsidiaries
has engaged in any Hazardous Materials Activities in violation of any rule,
regulation,
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treaty or statute promulgated by any Governmental Entity in effect prior to or
as of the date hereof to prohibit, regulate or control Hazardous Materials or
any Hazardous Material Activity.
3.13 CONTRACTS. All HP Material Contracts (as defined below) are valid and
in full force and effect except to the extent they have previously expired in
accordance with their terms or if the failure to be in full force and effect,
individually or in the aggregate, would not reasonably be expected to be
material to HP. Neither HP nor any of its Subsidiaries has violated any
provision of, or committed or failed to perform any act which, with or without
notice, lapse of time or both would constitute a default under the provisions
of, any HP Material Contract, except in each case for those violations and
defaults which, individually or in the aggregate, would not reasonably be
expected to be material to HP. For purposes of this Agreement, "HP MATERIAL
CONTRACT" shall mean any Contract, or group of Contracts, with a Person (or
group of affiliated Persons) the termination or breach of which would be
reasonably expected to have a material adverse effect on any material division
or business unit or other material operating group of product or service
offerings of HP or otherwise have a Material Adverse Effect on HP.
3.14 DISCLOSURE. None of the information supplied or to be supplied by or
on behalf of HP or Merger Sub for inclusion or incorporation by reference in the
Registration Statement will, at the time the Registration Statement becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. None of the information
supplied or to be supplied by or on behalf of HP and Merger Sub for inclusion or
incorporation by reference in the Prospectus/Proxy Statement, will, at the time
the Prospectus/Proxy Statement is mailed to the stockholders of HP or Compaq, at
the time of the HP Stockholders' Meeting or Compaq Stockholders' Meeting or as
of the Effective Time, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under which
they are made, not misleading. The Prospectus/Proxy Statement will comply as to
form in all material respects with the provisions of the Exchange Act and the
rules and regulations promulgated by the SEC thereunder. Notwithstanding the
foregoing, no representation or warranty is made by HP with respect to
statements made or
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incorporated by reference therein about Compaq supplied by Compaq for inclusion
or incorporation by reference in the Registration Statement or the
Prospectus/Proxy Statement.
3.15 BOARD APPROVAL. The Board of Directors of HP has, by resolutions duly
adopted by unanimous vote at a meeting of all Directors duly called and held and
not subsequently rescinded or modified in any way (the "HP BOARD APPROVAL") has
duly (i) determined that the Merger is fair to, and in the best interests of, HP
and its stockholders and declared the Merger to be advisable, (ii) approved this
Agreement, and (iii) recommended that the stockholders of HP approve the Stock
Issuance and directed that such matter be submitted to HP's stockholders at the
HP Stockholders' Meeting.
3.16 FAIRNESS OPINION. HP's Board of Directors has received a written
opinion from Goldman, Sachs & Co., dated as of September 3, 2001, to the effect
that, as of such date, the Exchange Ratio is fair, from a financial point of
view, to HP and has delivered to Compaq a copy of such opinion.
3.17 RIGHTS PLAN. The Board of Directors of HP has approved the HP Rights
Agreement and has declared a dividend of one HP Right per share of HP Common
Stock to each holder of HP Common Stock (the "HP RIGHTS DIVIDEND"). HP has (a)
delivered to Compaq an accurate copy of the HP Rights Agreement approved by the
Board of Directors of HP and proposed to be entered into with the Rights Agents
named thereunder, (b) declared the HP Rights Dividend, and (c) fixed the record
date for the HP Rights Dividend as September 17, 2001 and the payment date for
the HP Rights Dividend no later than September 27, 2001. HP has taken all action
so that (i) Compaq shall not be an "Acquiring Person" thereunder and (ii) the
entering into of this Agreement and the Merger and the other transactions
contemplated hereby will not result in the grant of any rights to any Person
under the HP Rights Agreement or enable or require the HP Rights to be
exercised, distributed or triggered.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS.
(a) ORDINARY COURSE. During the period from the date hereof and
continuing until the earlier of the termination of this Agreement pursuant to
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its terms or the Effective Time, each of HP and Compaq, and each of its
respective Subsidiaries shall, except as otherwise expressly contemplated by
this Agreement or to the extent that the other party hereto shall otherwise
consent in writing, carry on its business, in all material respects, in the
usual, regular and ordinary course, in substantially the same manner as
heretofore conducted, and use all reasonable efforts consistent with past
practices and policies to (i) preserve intact its present business organization,
(ii) keep available the services of its present executive officers and key
Employees, and (iii) preserve its relationships with customers, suppliers,
licensors, licensees, and others with which it has business dealings.
(b) REQUIRED CONSENT. In addition, without limiting the
generality of Section 4.1(a), except as permitted by the terms of this
Agreement, and except as provided in Article IV of the Compaq Disclosure Letter
or Article IV of the HP Disclosure Letter (as the case may be), without the
prior written consent of the other party hereto, during the period from the date
hereof and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, each of HP and Compaq shall not do
any of the following, and shall not permit their respective Subsidiaries to do
any of the following:
(i) Enter into any new line of business material to it
and its Subsidiaries taken as a whole;
(ii) Declare, set aside or pay any dividends on or make
any other distributions (whether in cash, stock, equity securities or property)
in respect of any capital stock or split, combine or reclassify any capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for any capital stock, other than (A) declaration
and payment of regular quarterly cash dividends on its Common Stock at a rate
not in excess of the regular quarterly cash dividend most recently declared
prior to the date hereof with the usual record and payment dates for such
dividends in accordance with its past practice, (B) any such transaction by a
Subsidiary of it that remains a Subsidiary of it after consummation of such
transaction, in the ordinary course of business consistent with past practice,
and (C) in the case of Compaq, the Compaq Rights Dividend and other securities
pursuant to the Compaq Rights Plan and in the case of HP, the HP Rights Dividend
and other securities pursuant to the HP Rights Plan, in each case as
contemplated hereby and thereby;
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(iii) Purchase, redeem or otherwise acquire, directly or
indirectly, any shares of its capital stock or the capital stock of its
Subsidiaries, except (A) repurchases of unvested shares at cost in connection
with the termination of the employment relationship with any employee pursuant
to stock option or purchase agreements in effect on the date hereof or entered
into the ordinary course of business consistent with past practice after the
date hereof and (B) repurchases by HP pursuant to HP's publicly announced
repurchase programs existing as of July 31, 2001, and (C) as set forth in
Section 4.1(b)(iii) of the HP Disclosure Letter or Section 4.1(b)(iii) of the
Compaq Disclosure Letter (as the case may be);
(iv) Issue, deliver, sell, authorize, pledge or
otherwise encumber any shares of capital stock, Voting Debt or any securities
convertible into shares of capital stock or Voting Debt, or subscriptions,
rights, warrants or options to acquire any shares of capital stock or Voting
Debt or any securities convertible into shares of capital stock or Voting Debt,
or enter into other agreements or commitments of any character obligating it to
issue any such securities or rights, other than: (A) issuances of HP Common
Stock or Compaq Common Stock upon the exercise of HP Options or Compaq Options,
respectively, existing on the date hereof in accordance with their present terms
(including cashless exercises) or granted pursuant to clause (F) hereof, (B)
issuance of shares of Compaq Common Stock to participants in the Compaq Purchase
Plan pursuant to the terms thereof and issuance of shares of HP Common Stock to
participants in the HP employee stock purchase plans pursuant to the terms
thereof, (C) issuances of HP Common Stock or Compaq Common Stock upon the
exercise of other options, warrants or other rights of HP or Compaq,
respectively, in each case outstanding on the date hereof in accordance with
their present terms (including cashless exercises), (D) in the case of Compaq,
the Compaq Rights Dividend and other securities pursuant to the Compaq Rights
Plan and in the case of HP, the HP Rights Dividend and other securities pursuant
to the HP Rights Plan, in each case as contemplated hereby and thereby, (E)
issuances of shares of Compaq Common Stock in connection with Compaq Permitted
Acquisitions (as defined below) and issuance of shares of HP Common Stock in
connection with HP Permitted Acquisitions (as defined below), (F) grants of
stock options or other stock based awards of or to acquire, in the case of
Compaq, Compaq Common Stock granted under the Compaq Stock Option Plans that are
Compaq Broad Plans outstanding on the date hereof, and in the case of HP, HP
Common Stock granted under the HP Stock Option Plans
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outstanding on the date hereof, in each case in the ordinary course of business
consistent with past practices in connection with annual compensation reviews or
ordinary course promotions or to new hires and which options or stock based
awards have a vesting schedule no more favorable than ratable monthly
installments that vest over not less than three years and do not accelerate, or
become subject to acceleration, directly or indirectly, as a result of the
approval or consummation of the Merger and/or termination of employment
following the Merger (other than, following the Merger, upon retirement, death
or total and permanent disability or in connection with a reduction in force in
accordance with HP's policies relating to formal reductions in force or similar
workforce management programs in effect from time to time following the Merger
or as otherwise set forth in Section 4.1(b)(xiii) of the Compaq Disclosure
Schedule with respect to Compaq's Chief Executive Officer and Tiers I, II and
III employees), but in no event shall the period for exercisability under such
option following termination of employment be extended beyond one year following
a termination of employment for any reason other than retirement, death or total
and permanent disability, and (G) as set forth in Section 4.1(b)(iv) of the HP
Disclosure Letter or Section 4.1(b)(iv) of the Compaq Disclosure Letter (as the
case may be);
(v) Cause, permit or propose any amendments to its
Charter Documents or any of the Subsidiary Charter Documents of its
Subsidiaries, except to the extent necessary to implement the HP Rights Plan or
Compaq Rights Plan, and, in the case of HP, to the extent necessary to comply
with its obligations under Section 5.12;
(vi) Acquire or agree to acquire by merging or
consolidating with, or by purchasing any equity interest in or a portion of the
assets of, or by any other manner, any business or any Person or division
thereof, or otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to its business, other than: (A) in the case
of Compaq, Compaq Permitted Acquisitions (it being agreed that prior to entering
into any binding agreement, agreement in principle, letter of intent, memorandum
of understanding or similar agreement with respect to any Compaq Permitted
Acquisition, Compaq shall first consult with HP's Chief Executive Officer or
Chief Financial Officer or a designee thereof with respect to any such Compaq
Permitted Acquisition with consideration in excess of fifty million dollars
($50,000,000.00) individually and shall in good faith consider the advice of HP
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with respect to such acquisition) and (B) in the case of HP, HP Permitted
Acquisitions (it being agreed that prior to it being agreed that prior to
entering into any binding agreement, agreement in principle, letter of intent,
memorandum of understanding or similar agreement with respect to any HP
Permitted Acquisition, HP shall first consult with Compaq's Chief Executive
Officer or Chief Financial Officer or a designee thereof with respect to any
such HP Permitted Acquisition with consideration in excess of fifty million
dollars ($50,000,000.00) individually and shall in good faith consider the
advice of Compaq with respect to such acquisition);
For purposes of this Agreement, "COMPAQ PERMITTED
ACQUISITIONS" shall mean any of transactions described in this subparagraph (vi)
above (1) (a) which are in the existing line of business, or a related line of
business, of Compaq and its Subsidiaries, (b) in which the fair market value of
the total consideration (including the value of indebtedness acquired or
assumed) issued in exchange therefor shall not exceed one billion dollars
($1,000,000,000.00) in the aggregate, (c) which do not present a material risk
of delaying the Merger or making it more difficult to obtain any Necessary
Consent, and (d) in which one or more of such transactions do not require
approval of Compaq stockholders, (2) which are internal reorganizations solely
involving existing wholly-owned (except for DE MINIMIS local ownership as
required under applicable foreign Legal Requirements) Subsidiaries of Compaq, or
(3) which are set forth in Section 4.1(b)(vi) of the Compaq Disclosure Letter
(it being understood that items set forth on Section 4.1(b)(vi) of the Compaq
Disclosure Letter shall not apply against the dollar limitation set forth in
clause (b) of this sentence);
For purposes of this Agreement, "HP PERMITTED
ACQUISITIONS" shall mean any of transactions described in this subparagraph (vi)
above (1) (a) which are in the existing line of business, or a related line of
business, of HP and its Subsidiaries, (b) in which the fair market value of the
total consideration (including the value of indebtedness acquired or assumed)
issued in exchange therefor shall not exceed one billion five hundred million
dollars ($1,500,000,000.00) in the aggregate, (c) which do not present a
material risk of delaying the Merger or making it more difficult to obtain any
Necessary Consent, and (d) in which one or more of such transactions do not
require approval of HP stockholders, (2) which are internal reorganizations
solely involving existing wholly-owned (except for DE MINIMIS local ownership as
required under
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applicable foreign Legal Requirements) Subsidiaries of HP, or (3) which are set
forth in Section 4.1(b)(vi) of the HP Disclosure Letter (it being understood
that items set forth on Section 4.1(b)(vi) of the HP Disclosure Letter shall not
apply against the dollar limitation set forth in clause (b) of this sentence);
(vii) Enter into any joint ventures, strategic
partnerships or alliances that are material to any of its divisions or business
units if such entry would (A) present a material risk of delaying the Merger or
make it more difficult to obtain any Necessary Consent or (B) require a consent
of the other party thereto to consummate the Merger;
(viii) Except as previously disclosed in the HP SEC
Reports, in the case of HP, or the Compaq SEC Reports, in the case of Compaq, in
each case prior to the date hereof, sell, lease, license, mortgage or otherwise
encumber or dispose of any properties or assets which are material, individually
or in the aggregate, to its business, except in the ordinary course of business
consistent with past practice;
(ix) Make any loans, advances or capital contributions
to, or investments in, any other Person, other than: (A) to finance, in the case
of Compaq, Compaq Permitted Acquisitions or, in the case of HP, HP Permitted
Acquisitions (it being understood in each case that any such loans, advances,
contributions or investments shall be considered consideration provided in
exchange therefor), (B) loans or investments by it or a Subsidiary of it to or
in it or any Subsidiary of it, (C) employee loans or advances made in the
ordinary course of business or (D) in the ordinary course of business consistent
with past practice which are not, individually or in the aggregate, material to
it and its Subsidiaries taken as a whole (provided that none of such
transactions referred to in this clause (D) presents a material risk of delaying
the Merger or making it more difficult to obtain any Necessary Consent);
(x) Except as required by GAAP or the SEC as concurred
in by its independent auditors, make any material change in its methods or
principles of accounting since the date of, in the case of Compaq, the Compaq
Balance Sheet, and, in the case of HP, the HP Balance Sheet;
(xi) In the case of Compaq, make or change any material
Tax election;
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(xii) Settle any material claim (including any Tax
claim), action or proceeding involving money damages, except (A) in the ordinary
course of business consistent with past practice or (B) to the extent subject to
reserves existing as of the date hereof in accordance with GAAP;
(xiii) Except as required by Legal Requirements or
Contracts currently binding on Compaq or its Subsidiaries, (1) increase in any
manner the amount of compensation or fringe benefits of, pay any bonus to or
grant severance or termination pay to any executive officer or director of
Compaq or key employee of Compaq or any material Subsidiary, division or
business unit of Compaq (collectively, "COMPAQ KEY EMPLOYEES") or materially
increase the foregoing with respect to Employees of Compaq and its Subsidiaries
generally, (2) make any increase in or commitment to increase any Compaq Benefit
Plan (including any severance plan), adopt or amend or make any commitment to
adopt or amend any Compaq Benefit Plan or make any contribution, other than
regularly scheduled contributions, to any Compaq Benefit Plan, (3) waive any
stock repurchase rights, accelerate, amend or change the period of
exercisability of Compaq Options or restricted stock, or reprice any Compaq
Options or authorize cash payments in exchange for any Compaq Options, (4) enter
into any employment, severance, termination or indemnification agreement with
any Compaq Employee, (5) make any material oral or written representation or
commitment with respect to any material aspect of any Compaq Benefit Plan that
is not materially in accordance with the existing written terms and provision of
such Compaq Benefit Plan, (6) grant any stock appreciation right, phantom stock
award, stock-related award or performance award (whether payable in cash, shares
or otherwise) (each, a "SAR") to any Person (including any Compaq Employee), or
(7) enter into any agreement with any Compaq Employee the benefits of which are
(in whole or in part) contingent or the terms of which are materially altered
upon the occurrence of a transaction involving Compaq of the nature contemplated
hereby; PROVIDED, HOWEVER, that nothing herein shall be construed as prohibiting
Compaq from (a) granting Compaq Options (including SARs) under the Compaq Stock
Option Plans that are Compaq Broad Plans outstanding on the date hereof (or
under any deferred compensation plan existing as of the date hereof) in the
ordinary course of business consistent with past practices in connection with
annual compensation reviews or ordinary course promotions or to new hires (or,
in the case of SARs not granted under Compaq Broad Plans, in accordance with the
terms of the applicable deferred compensation plans) and which options have a
vesting schedule no more
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favorable than ratable monthly installments that vest over not less than three
years and do not accelerate, or become subject to acceleration, directly or
indirectly, as a result of the approval or consummation of the Merger and/or
termination of employment following the Merger (other than, following the
Merger, upon retirement, death or total and permanent disability or in
connection with a reduction in force in accordance with HP's policies relating
to formal reductions in force or similar workforce management programs in effect
from time to time following the Merger or as otherwise set forth in Section
4.1(b)(xiii) of the Compaq Disclosure Schedule with respect to Compaq's Chief
Executive Officer and Tiers I, II and III employees), but in no event shall the
period for exercisability under such option following termination of employment
be extended beyond one year following a termination of employment for any reason
other than retirement, death or total and permanent disability, (b) increasing
compensation or fringe benefits and payment of bonuses to Employees of Compaq in
the ordinary course of business consistent with past practices in connection
with annual compensation reviews or ordinary course promotions, (c) granting
severance or termination pay to any Employee (other than any executive officer
or director) of Compaq in the ordinary course of business consistent with past
practices in connection with the termination of an Employee's employment in such
reasonable amounts as Compaq deems advisable, in its good faith judgment, to
avoid a material risk of litigation, or (d) taking any action set forth in
Section 4.1(b)(xiii) of the Compaq Disclosure Schedule; or (e) entering into any
employment, severance, termination or indemnification agreement with any Compaq
Employee in the ordinary course of business consistent with past practice and
(i) solely with respect to Employees other than any Compaq Key Employee and (ii)
with respect to any Compaq Key Employee, if such employment is "at-will" and
does not contain severance or termination payments (it being understood that at
the time of, and in connection with, the termination of any Compaq Key
Employee's employment, Compaq may enter into severance and/or termination under
the circumstances set forth in clause (c) of this Section 4.1(b)(xiii));
(xiv) Subject HP or the Surviving Corporation or any of
their respective Subsidiaries to any non-compete or other material restriction
on any of their respective businesses following the Closing;
(xv) In the case of Compaq, enter into any agreement or
commitment the effect of which would be to grant to a third party following the
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Merger any actual or potential right of license to any material Intellectual
Property owned by HP or any of its Subsidiaries; or
(xvi) Agree in writing or otherwise to take any of the
actions described in (i) through (xiv) above.
(c) CONSULTATION. In addition, without limiting the generality
of Section 4.1(a) or Section 4.1(b), prior to taking any of the following
actions, the party seeking to do so shall first consult with the other party's
Chief Executive Officer or Chief Financial Officer or a designee thereof and
shall in good faith consider the advice of such party with respect to such
action:
(i) Enter into any binding agreement, agreement in
principle, letter of intent, memorandum of understanding or similar agreement
with respect to any material joint venture, strategic partnership or alliance;
(ii) Enter into, modify or amend in a manner adverse in
any material respect to such party, or terminate any Compaq Material Contract,
in the case of Compaq, or HP Material Contract, in the case of HP, or waive,
release or assign any material rights or claims thereunder, in each case, in a
manner adverse in any material respect to such party, other than any
modification, amendment or termination of any such Compaq Material Contract or
HP Material Contract, as the case may be, in the ordinary course of business,
consistent with past practice;
(iii) Grant any exclusive rights with respect to any
material Intellectual Property of such party; or
(iv) Incur any indebtedness for borrowed money or
guarantee any such indebtedness of another Person, issue or sell any debt
securities or options, warrants, calls or other rights to acquire any debt
securities of it, guarantee any debt securities of another Person, enter into
any "keep well" or other agreement to maintain any financial statement condition
of any other Person (other than any wholly-owned Subsidiary of it) or enter into
any arrangement having the economic effect of any of the foregoing
(collectively, "INDEBTEDNESS") other than, in the case of Compaq, Permitted
Compaq Indebtedness, and in the case of HP, Permitted HP Indebtedness (as
defined below);
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For purposes of this Agreement, "PERMITTED COMPAQ
INDEBTEDNESS" shall mean the following Indebtedness: up to one billion dollars
($1,000,000,000.00) additional Indebtedness under existing debt facilities or
like replacement debt facilities in excess of Indebtedness of Compaq outstanding
as of the date hereof;
For purposes of this Agreement, "PERMITTED HP
INDEBTEDNESS" shall mean the following Indebtedness: shall mean the following
Indebtedness: up to one billion five hundred million dollars ($1,500,000,000.00)
additional Indebtedness under existing debt facilities or like replacement debt
facilities in excess of Indebtedness of Compaq outstanding as of the date
hereof;
(v) Agree in writing or otherwise to take any of the
actions described in (i) through (iv) above.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 PROSPECTUS/PROXY STATEMENT; REGISTRATION STATEMENT. As promptly as
practicable after the execution of this Agreement, HP and Compaq will prepare
and file with the SEC the Prospectus/Proxy Statement, and HP will prepare and
file with the SEC the Registration Statement in which the Prospectus/Proxy
Statement is to be included as a prospectus. HP and Compaq will provide each
other with any information which may be required in order to effectuate the
preparation and filing of the Prospectus/Proxy Statement and the Registration
Statement pursuant to this Section 5.1. Each of HP and Compaq will respond to
any comments from the SEC, will use all reasonable efforts to cause the
Registration Statement to be declared effective under the Securities Act as
promptly as practicable after such filing and to keep the Registration Statement
effective as long as is necessary to consummate the Merger and the transactions
contemplated hereby. Each of HP and Compaq will notify the other promptly upon
the receipt of any comments from the SEC or its staff in connection with the
filing of, or amendments or supplements to, the Registration Statement and/or
the Prospectus/Proxy Statement. Whenever any event occurs which is required to
be set forth in an amendment or supplement to the Prospectus/Proxy Statement,
the Registration Statement, HP or Compaq, as the case may be, will promptly
inform the other of such occurrence and cooperate in filing with the SEC or its
staff, and/or mailing to stockholders of HP and/or Compaq, such amendment or
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supplement. Each of HP and Compaq shall cooperate and provide the other (and its
counsel) with a reasonable opportunity to review and comment on any amendment or
supplement to the Registration Statement and Prospect/Proxy Statement prior to
filing such with the SEC, and will provide each other with a copy of all such
filings made with the SEC. Each of HP and Compaq will cause the Prospectus/Proxy
Statement to be mailed to its respective stockholders at the earliest
practicable time after the Registration Statement is declared effective by the
SEC. HP shall also use all reasonable efforts to take any action required to be
taken by it under any applicable state securities laws in connection with the
issuance of HP Common Stock in the Merger and the conversion of Compaq Options
into options to acquire HP Common Stock, and Compaq shall furnish any
information concerning Compaq and the holders of Compaq Common Stock and Compaq
Options as may be reasonably requested in connection with any such action.
5.2 MEETINGS OF STOCKHOLDERS; BOARD RECOMMENDATION.
(a) MEETING OF STOCKHOLDERS. Promptly after the Registration
Statement is declared effective under the Securities Act, each of HP and Compaq
will take all action necessary in accordance with Delaware Law and its
respective Certificate of Incorporation and Bylaws to call, hold and convene a
meeting of its respective stockholders to consider, in the case of HP, the Stock
Issuance, and, in the case of Compaq, adoption and approval of this Agreement
and approval of the Merger (each, a "STOCKHOLDERS' MEETING") to be held as
promptly as practicable (without limitation, within 60 days, if practicable)
after the declaration of effectiveness of the Registration Statement. Each of HP
and Compaq will use all reasonable efforts to hold their respective
Stockholders' Meetings on the same date. Subject to Section 5.3(d), each of HP
and Compaq will use all reasonable efforts to solicit from its respective
stockholders proxies in favor of, in the case of HP, the Stock Issuance, and, in
the case of Compaq, the adoption and approval of this Agreement and the approval
of the Merger, and will take all other action necessary or advisable to secure
the vote or consent of their respective stockholders required by the rules of
NYSE or the Pacific Stock Exchange ("PCX") or Delaware Law to obtain such
approvals. Notwithstanding anything to the contrary contained in this Agreement,
HP or Compaq, as the case may be, may adjourn or postpone its Stockholders'
Meeting to the extent necessary to ensure that any necessary supplement or
amendment to the Prospectus/Proxy Statement is provided to its respective
stockholders in advance of a vote on the
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Merger and this Agreement or, if as of the time for which the Stockholders'
Meeting is originally scheduled (as set forth in the Prospectus/Proxy Statement)
there are insufficient shares of Common Stock of HP or Compaq, as the case may
be, represented (either in person or by proxy) to constitute a quorum necessary
to conduct the business of such Stockholders' Meeting. Each of HP and Compaq
shall ensure that its respective Stockholders' Meeting is called, noticed,
convened, held and conducted, and that all proxies solicited by its in
connection with the Stockholders' Meeting are solicited in compliance with
Delaware Law, its Certificate of Incorporation and Bylaws, the rules of the NYSE
and PCX and all other applicable Legal Requirements.
(b) BOARD RECOMMENDATION. Except to the extent expressly
permitted by Section 5.3(d): (i) the Board of Directors of each of HP and Compaq
shall recommend that the respective stockholders of HP and Compaq vote in favor
of, in the case of HP, the Stock Issuance, and, in the case of Compaq, adoption
and approval of this Agreement and approval of the Merger, at their respective
Stockholders' Meetings, (ii) the Prospectus/Proxy Statement shall include a
statement to the effect that the Board of Directors of HP has recommended that
HP's stockholders vote in favor of the Stock Issuance at the HP Stockholders'
Meeting and the Board of Directors of Compaq has recommended that Compaq's
stockholders vote in favor of adoption and approval of this Agreement and
approval of the Merger at the Compaq Stockholders' Meeting, and (iii) neither
the Board of Directors of HP or Compaq nor any committee thereof shall withdraw,
amend or modify, or propose or resolve to withdraw, amend or modify in a manner
adverse to the other party, the recommendation of its respective Board of
Directors that the respective stockholders of HP and Compaq vote in favor of, in
the case of HP, the Stock Issuance, and, in the case of Compaq, adoption and
approval of this Agreement and the Merger.
5.3 ACQUISITION PROPOSALS.
(a) NO SOLICITATION. Each of HP and Compaq agrees that neither
it nor any of its Subsidiaries nor any of the officers and directors of it or
its Subsidiaries shall, and that it shall use all reasonable efforts to cause
its and its Subsidiaries' Employees, agents and representatives (including any
investment banker, attorney or accountant retained by it or any of its
Subsidiaries) not to (and shall not authorize any of them to) directly or
indirectly: (i) solicit, initiate,
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encourage, knowingly facilitate or induce any inquiry with respect to, or the
making, submission or announcement of, any Acquisition Proposal (as defined in
Section 5.3(g)) with respect to itself, (ii) participate in any discussions or
negotiations regarding, or furnish to any Person any nonpublic information with
respect to, 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
Acquisition Proposal with respect to itself, (iii) engage in discussions with
any Person with respect to any Acquisition Proposal with respect to itself,
except as to the existence of these provisions, (iv) approve, endorse or
recommend any Acquisition Proposal with respect to itself (except to the extent
specifically permitted pursuant to Section 5.3(d)), or (v) enter into any letter
of intent or similar document or any contract agreement or commitment
contemplating or otherwise relating to any Acquisition Proposal or transaction
contemplated thereby with respect to itself. HP and Compaq, as the case may be,
and their respective Subsidiaries will each immediately cease any and all
existing activities, discussions or negotiations with any third parties
conducted heretofore with respect to any Acquisition Proposal with respect to
itself.
(b) NOTIFICATION OF UNSOLICITED ACQUISITION PROPOSALS.
(i) As promptly as practicable after receipt of any
Acquisition Proposal or any request for nonpublic information or inquiry which
it reasonably believes would lead to an Acquisition Proposal, HP or Compaq, as
the case may be, shall provide the other party hereto with oral and written
notice of the material terms and conditions of such Acquisition Proposal,
request or inquiry, and the identity of the Person or group making any such
Acquisition Proposal, request or inquiry and a copy of all written materials
provided in connection with such Acquisition Proposal, request or inquiry. The
recipient of the Acquisition Proposal, request or inquiry shall provide the
other party hereto as promptly as practicable oral and written notice setting
forth all such information as is reasonably necessary to keep the other party
informed in all material respects of the status and details (including material
amendments or proposed material amendments) of any such Acquisition Proposal,
request or inquiry and shall promptly provide to the other party hereto a copy
of all written materials subsequently provided in connection with such
Acquisition Proposal, request or inquiry.
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(ii) HP or Compaq, as the case may be, shall provide the
other party hereto with forty-eight (48) hours prior notice (or such lesser
prior notice as is provided to the members of its Board of Directors) of any
meeting of the its Board of Directors at which its Board of Directors is
reasonably expected to consider any Acquisition Proposal.
(c) SUPERIOR OFFERS. Notwithstanding anything to the contrary
contained in Section 5.3(a), in the event that HP or Compaq, as the case may be,
receives an unsolicited, bona fide written Acquisition Proposal with respect to
itself from a third party that its Board of Directors has in good faith
concluded (following the receipt of the advice of its outside legal counsel and
its financial advisor), is, or is reasonably likely to result in, a Superior
Offer (as defined in Section 5.3(g)), it may then take the following actions
(but only if and to the extent that its Board of Directors concludes in good
faith, following the receipt of advice of its outside legal counsel, that the
failure to do so is reasonably likely to result in a breach of its fiduciary
obligations under applicable law):
(i) Furnish nonpublic information to the third party
making such Acquisition Proposal, PROVIDED that (A) (1) concurrently with
furnishing any such nonpublic information to such party, its gives the other
party hereto written notice of its intention to furnish nonpublic information
and (2) it receives from the third party an executed confidentiality agreement
containing customary limitations on the use and disclosure of all nonpublic
written and oral information furnished to such third party on its behalf, the
terms of which are at least as restrictive as the terms contained in the
Confidentiality Agreement (as defined in Section 5.4) and (B) contemporaneously
with furnishing any such nonpublic information to such third party, it furnishes
such nonpublic information to the other party hereto (to the extent such
nonpublic information has not been previously so furnished); and
(ii) Engage in negotiations with the third party with
respect to the Acquisition Proposal, PROVIDED that concurrently with entering
into negotiations with such third party, it gives the other party hereto written
notice of the its intention to enter into negotiations with such third party.
(d) CHANGES OF RECOMMENDATION. In response to the receipt of a
Superior Offer, the Board of Directors of HP or Compaq, as the case may be, may
withhold, withdraw, amend or modify its recommendation in favor of the
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Merger, and, in the case of a Superior Offer that is a tender or exchange offer
made directly to its stockholders, may recommend that its stockholders accept
the tender or exchange offer (any of the foregoing actions, whether by a Board
of Directors or a committee thereof, a "CHANGE OF RECOMMENDATION"), if all of
the following conditions in clauses (i) through (v) are met:
(i) A Superior Offer with respect to it has been made
and has not been withdrawn;
(ii) Its Stockholders' Meeting has not occurred;
(iii) It shall have (A) provided to the other party
hereto written notice which shall state expressly (1) that it has received a
Superior Offer, (2) the material terms and conditions of the Superior Offer and
the identity of the Person or group making the Superior Offer, and (3) that it
intends to effect a Change of Recommendation and the manner in which it intends
to do so, (B) provided to the other party hereto a copy of all written materials
delivered to the Person or group making the Superior Offer in connection with
such Superior Offer, and (C) made available to the other party hereto all
materials and information made available to the Person or group making the
Superior Offer in connection with such Superior Offer;
(iv) Its Board of Directors has concluded in good faith,
after receipt of advice of its outside legal counsel, that, in light of such
Superior Offer, the failure of the Board of Directors to effect a Change of
Recommendation is reasonably likely to result in a breach of its fiduciary
obligations to its stockholders under applicable law; and
(v) It shall not have breached in any material respect
any of the provisions set forth in Section 5.2 or this Section 5.3.
(e) CONTINUING OBLIGATION TO CALL, HOLD AND CONVENE
STOCKHOLDERS' MEETING; NO OTHER VOTE. Notwithstanding anything to the contrary
contained in this Agreement, the obligation of HP or Compaq, as the case may be,
to call, give notice of, convene and hold its Stockholders' Meeting shall not be
limited or otherwise affected by the commencement, disclosure, announcement or
submission to it of any Acquisition Proposal with respect to it, or by any
Change of Recommendation. Neither HP nor Compaq shall submit to the vote of its
respective stockholders any Acquisition Proposal, or propose to do so.
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(f) COMPLIANCE WITH TENDER OFFER RULES. Nothing contained in
this Agreement shall prohibit either party or its respective Board of Directors
from taking and disclosing to its stockholders a position contemplated by Rules
14d-9 and 14e-2(a) promulgated under the Exchange Act; PROVIDED that the content
of any such disclosure thereunder shall be governed by the terms of this
Agreement. Without limiting the foregoing proviso, neither party shall effect a
Change of Recommendation unless specifically permitted pursuant to the terms of
Section 5.3(d).
(g) CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the following meanings:
(i) "ACQUISITION PROPOSAL," with respect to a party,
shall mean any offer or proposal, relating to any transaction or series of
related transactions involving: (A) any purchase from such party or acquisition
by any Person or "group" (as defined under Section 13(d) of the Exchange Act and
the rules and regulations thereunder) of more than a ten percent (10%) interest
in the total outstanding voting securities of such party or any of its
Subsidiaries or any tender offer or exchange offer that if consummated would
result in any Person or group beneficially owning ten percent (10%) or more of
the total outstanding voting securities of such party or any of its Subsidiaries
or any merger, consolidation, business combination or similar transaction
involving such party or any of its Subsidiaries, (B) any sale, lease (other than
in the ordinary course of business), exchange, transfer, license (other than in
the ordinary course of business), acquisition or disposition of more than ten
percent (10%) of the assets of such party (including its Subsidiaries taken as a
whole), or (C) any liquidation or dissolution of such party (PROVIDED, HOWEVER,
a HP Permitted Acquisition shall not be deemed an Acquisition Proposal with
respect to HP and a Compaq Permitted Acquisition shall not be deemed an
Acquisition Proposal with respect to Compaq and the transactions contemplated
hereby shall not be deemed an Acquisition Proposal in any case); and
(ii) "SUPERIOR OFFER," with respect to party, shall mean
an unsolicited, bona fide written offer made by a third party to acquire,
directly or indirectly, pursuant to a tender offer, exchange offer, merger,
consolidation or other business combination, all or substantially all of the
assets of such party or a majority of the total outstanding voting securities of
such party and as a result of which the stockholders of such party immediately
preceding such transaction
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would hold less than fifty percent (50%) of the equity interests in the
surviving or resulting entity of such transaction or any direct or indirect
parent or subsidiary thereof, on terms that the Board of Directors of such party
has in good faith concluded (following the receipt of advice of its outside
legal counsel and its financial adviser), taking into account, among other
things, all legal, financial, regulatory and other aspects of the offer and the
Person making the offer, to be more favorable, from a financial point of view,
to such party's stockholders (in their capacities as stockholders) than the
terms of the Merger and is reasonably capable of being consummated.
5.4 CONFIDENTIALITY; ACCESS TO INFORMATION; NO MODIFICATION OF
REPRESENTATIONS, WARRANTIES OR COVENANTS.
(a) CONFIDENTIALITY. The parties acknowledge that Compaq and HP
have previously executed a Confidentiality Agreement dated June 29, 2001 (the
"CONFIDENTIALITY AGREEMENT"), which Confidentiality Agreement will continue in
full force and effect in accordance with its terms and each of HP and Compaq
will hold, and will cause its respective directors, officers, Employees, agents
and advisors (including attorneys, accountants, consultants, bankers and
financial advisors) to hold, any Evaluation Material (as defined in the
Confidentiality Agreement) confidential in accordance with the terms of the
Confidentiality Agreement.
(b) ACCESS TO INFORMATION. Each of Compaq, Merger Sub and HP
will afford the other and the other's accountants, counsel and other
representatives reasonable access during normal business hours to its
properties, books, records and personnel during the period prior to the
Effective Time to obtain all information concerning its business, including the
status of product development efforts, properties, results of operations and
personnel, as such other party may reasonably request, and, during such period,
upon request by the other party hereto, each of HP and Merger Sub, on the one
hand, and Compaq, on the other hand, shall, and shall cause each of their
respective Subsidiaries to, furnish promptly to the other party a copy of any
report, schedule, registration statement and other document filed by it during
such period pursuant to the requirements of federal or state securities laws;
PROVIDED, HOWEVER, that any party may restrict the foregoing access to the
extent that any law, treaty, rule or regulation of any Governmental Entity
applicable to such party requires such party or its Subsidiaries to restrict or
prohibit access to any such properties or information.
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(c) NO MODIFICATION OF REPRESENTATIONS AND WARRANTIES OR
COVENANTS. No information or knowledge obtained in any investigation or
notification pursuant to this Section 5.4, Section 5.6 or Section 5.7 shall
affect or be deemed to modify any representation or warranty contained
herein, the covenants or agreements of the parties hereto or the conditions
to the obligations of the parties hereto under this Agreement.
5.5 PUBLIC DISCLOSURE. Without limiting any other provision of this
Agreement, HP and Compaq will consult with each other before issuing, and
provide each other the opportunity to review, comment upon and concur with, and
use all reasonable efforts to agree on any press release or public statement
with respect to this Agreement and the transactions contemplated hereby,
including the Merger, and any Acquisition Proposal and will not issue any such
press release or make any such public statement prior to such consultation and
(to the extent practicable) agreement, except as may be required by law or any
listing agreement with the NYSE, PCX or any other applicable national or
regional securities exchange. The parties have agreed to the text of the joint
press release announcing the signing of this Agreement.
5.6 REGULATORY FILINGS; REASONABLE EFFORTS.
(a) REGULATORY FILINGS. Each of HP, Merger Sub and Compaq shall
coordinate and cooperate with one another and shall each use all reasonable
efforts to comply with, and shall each refrain from taking any action that would
impede compliance with, all Legal Requirements, and as promptly as practicable
after the date hereof, each of HP, Merger Sub and Compaq shall make all filings,
notices, petitions, statements, registrations, submissions of information,
application or submission of other documents required by any Governmental Entity
in connection with the Merger and the transactions contemplated hereby,
including, without limitation: (i) Notification and Report Forms with the United
States Federal Trade Commission (the "FTC") and the Antitrust Division of the
United States Department of Justice ("DOJ") as required by the HSR Act, (ii) a
Form CO with the European Commission as required by the EC Merger Regulation,
(iii) any other filing necessary to obtain any Necessary Consent, (iv) filings
under any other comparable pre-merger notification forms required by the merger
notification or control laws of any applicable jurisdiction, as agreed by the
parties hereto, and (v) any filings required under the Securities Act, the
Exchange Act, any applicable state or securities or "blue sky" laws and the
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securities laws of any foreign country, or any other Legal Requirement relating
to the Merger. Each of HP and Compaq will cause all documents that it is
responsible for filing with any Governmental Entity under this Section 5.6(a) to
comply in all material respects with all applicable Legal Requirements.
(b) EXCHANGE OF INFORMATION. HP, Merger Sub and Compaq each
shall promptly supply the other with any information which may be required in
order to effectuate any filings or application pursuant to Section 5.6(a).
Except where prohibited by applicable Legal Requirements, and subject to the
Confidentiality Agreement, each of Compaq and HP shall consult with the other
prior to taking a position with respect to any such filing, shall permit the
other to review and discuss in advance, and consider in good faith the views of
the other in connection with any analyses, appearances, presentations,
memoranda, briefs, white papers, arguments, opinions and proposals before making
or submitting any of the foregoing to any Governmental Entity by or on behalf of
any party hereto in connection with any investigations or proceedings in
connection with this Agreement or the transactions contemplated hereby
(including under any antitrust or fair trade Legal Requirement), coordinate with
the other in preparing and exchanging such information and promptly provide the
other (and its counsel) with copies of all filings, presentations or submissions
(and a summary of any oral presentations) made by such party with any
Governmental Entity in connection with this Agreement or the transactions
contemplated hereby, PROVIDED that with respect to any such filing, presentation
or submission, each of HP and Compaq need not supply the other (or its counsel)
with copies (or in case of oral presentations, a summary) to the extent that any
law, treaty, rule or regulation of any Governmental Entity applicable to such
party requires such party or its Subsidiaries to restrict or prohibit access to
any such properties or information.
(c) NOTIFICATION. Each of HP, Merger Sub and Compaq will notify
the other promptly upon the receipt of: (i) any comments from any officials of
any Governmental Entity in connection with any filings made pursuant hereto and
(ii) any request by any officials of any Governmental Entity for amendments or
supplements to any filings made pursuant to, or information provided to comply
in all material respects with, any Legal Requirements. Whenever any event occurs
that is required to be set forth in an amendment or supplement to any filing
made pursuant to Section 5.6(a), HP, Merger Sub or Compaq, as the case may be,
will promptly inform the other of such occurrence
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and cooperate in filing with the applicable Governmental Entity such amendment
or supplement.
(d) REASONABLE EFFORTS. Subject to the express provisions of
Section 5.2 and Section 5.3 hereof and upon the terms and subject to the
conditions set forth herein, each of the parties agrees to use all reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including using all reasonable efforts to
accomplish the following: (i) the taking of all reasonable acts necessary to
cause the conditions precedent set forth in Article VI to be satisfied, (ii) the
obtaining of all necessary actions or nonactions, waivers, consents, approvals,
orders and authorizations from Governmental Entities and the making of all
necessary registrations, declarations and filings (including registrations,
declarations and filings with Governmental Entities, if any) and the taking of
all reasonable steps as may be necessary to avoid any suit, claim, action,
investigation or proceeding by any Governmental Entity, (iii) the obtaining of
all necessary consents, approvals or waivers from third parties, including all
Necessary Consents, (iv) the defending of any suits, claims, actions,
investigations or proceedings, whether judicial or administrative, challenging
this Agreement or the consummation of the transactions contemplated hereby,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed, and (v) the execution or
delivery of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement. In
connection with and without limiting the foregoing, Compaq and its Board of
Directors shall, if any takeover statute or similar Legal Requirement is or
becomes applicable to the Merger, this Agreement or any of the transactions
contemplated by this Agreement, use all reasonable efforts to ensure that the
Merger and the other transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such Legal Requirement on the
Merger, this Agreement and the transactions contemplated hereby.
(e) LIMITATION ON DIVESTITURE. Notwithstanding anything in this
Agreement to the contrary, nothing contained in this Agreement shall be deemed
to require HP or Compaq or any Subsidiary or affiliate thereof to take or
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agree to take any Action of Divestiture (as defined below) which would be
reasonably likely materially adversely impact the benefits expected to be
derived by HP and its Subsidiaries (on a combined basis with Compaq and its
Subsidiaries) as a result of the transactions contemplated hereby or would be
reasonably likely to materially adversely affect HP and its Subsidiaries (on a
combined basis with Compaq and its Subsidiaries) following the Merger (a
"RESTRICTED DIVESTITURE"). For purposes of this Agreement, an "ACTION OF
DIVESTITURE" shall mean (i) making proposals, executing or carrying out
agreements or submitting to Legal Requirements providing for the license, sale
or other disposition or holding separate (through the establishment of a trust
or otherwise) of any assets or categories of assets that are material to HP,
Compaq or any of their respective Subsidiaries or the holding separate of Compaq
capital stock or imposing or seeking to impose any limitation on the ability of
HP, Compaq or any of their respective Subsidiaries, to conduct their respective
businesses or own such assets or to acquire, hold or exercise full rights of
ownership of Compaq's business or (ii) otherwise taking any step to avoid or
eliminate any impediment which may be asserted under any Legal Requirement
governing competition, monopolies or restrictive trade practices.
5.7 NOTIFICATION OF CERTAIN MATTERS.
(a) BY COMPAQ. Compaq shall give prompt notice to HP and Merger
Sub of any representation or warranty made by it contained in this Agreement
becoming untrue or inaccurate, or any failure of Compaq 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, in each case, such that
the conditions set forth in Section 6.3(a) or 6.3(b) would not be satisfied.
(b) BY HP. HP and Merger Sub shall give prompt notice to Compaq
of any representation or warranty made by it contained in this Agreement
becoming untrue or inaccurate, or any failure of HP 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, in each case, such that the conditions set
forth in Section 6.2(a) or 6.2(b) would not be satisfied.
5.8 THIRD-PARTY CONSENTS. As soon as practicable following the date
hereof, HP and Compaq will each use all reasonable efforts to obtain any
material consents, waivers and approvals under any of its or its Subsidiaries'
respective
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Contracts required to be obtained in connection with the consummation
of the transactions contemplated hereby.
5.9 EQUITY AWARDS AND EMPLOYEE BENEFITS.
(a) ASSUMPTION OF STOCK OPTIONS. At the Effective Time, each
then outstanding Compaq Option (including each Compaq SAR), whether or not
exercisable at the Effective Time and regardless of the respective exercise (or
base) prices thereof, will be assumed by HP. Each Compaq Option so assumed by HP
under this Agreement will continue to have, and be subject to, the same terms
and conditions set forth in the applicable Compaq Option (including any
applicable stock option agreement or other document evidencing such Compaq
Option) immediately prior to the Effective Time (including any repurchase rights
or vesting provisions), except that (i) each Compaq Option will be exercisable
(or will become exercisable in accordance with its terms) for (or will relate
to, in the case of a Compaq SAR)) that number of whole shares of HP Common Stock
equal to the product of the number of shares of Compaq Common Stock that were
issuable upon exercise of such Compaq Option (or, in the case of Compaq SARs,
the number of shares of Compaq Common Stock subject to such Compaq SAR)
immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole number of shares of HP Common Stock and (ii)
the per share exercise price for the shares of HP Common Stock issuable upon
exercise of such assumed Compaq Option (or the base price to which the assumed
Compaq SAR relates) will be equal to the quotient determined by dividing the
exercise price per share of Compaq Common Stock at which such Compaq Option was
exercisable (or the base price subject to the Compaq SAR) immediately prior to
the Effective Time by the Exchange Ratio, rounded up to the nearest whole cent.
Each assumed Compaq Option (including each Compaq SAR) shall be vested
immediately following the Effective Time as to the same percentage of the total
number of shares subject thereto as it was vested as to immediately prior to the
Effective Time, except to the extent such Compaq Option (or Compaq SAR) by its
terms in effect prior to the date hereof provides for acceleration of vesting.
As soon as reasonably practicable, HP will issue to each Person who holds an
assumed Compaq Option (including each Compaq SAR) a document evidencing the
foregoing assumption of such Compaq Option (including each Compaq SAR) by HP.
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(b) INCENTIVE STOCK OPTIONS. The conversion of Compaq Options
provided for in Section 5.9(a), with respect to any options which are intended
to be "incentive stock options" (as defined in Section 422 of the Code) shall be
effected in a manner consistent with Section 424(a) of the Code.
(c) TERMINATION OF COMPAQ EMPLOYEE STOCK PURCHASE PLANS. Prior
to the Effective Time, each of the Compaq Purchase Plans shall be terminated.
The rights of participants in each Compaq Purchase Plan with respect to any
offering period then underway under such Compaq Purchase Plan shall be
determined by treating the last business day prior to, or if more
administratively advisable, the last payroll date of Compaq immediately prior
to, the Effective Time, as the last day of such offering period and by making
such other pro-rata adjustments as may be necessary to reflect the shortened
offering period but otherwise treating such shortened offering period as a fully
effective and completed offering period for all purposes under such Compaq
Purchase Plan. Prior to the Effective Time, Compaq shall take all actions
(including, if appropriate, amending the terms of such Compaq Purchase Plan that
are necessary to give effect to the transactions contemplated by this Section
5.9(c).
(d) EMPLOYEE COMPENSATION. For a twelve (12) month period
following the Effective Time, HP will use all reasonable efforts to provide
generally to those of its employees and employees of the Surviving Corporation
who shall have been employees of Compaq immediately prior to the Effective Time
("CONTINUING EMPLOYEES"), a total compensation (including benefits) package
that, in the aggregate, is generally comparable to the total compensation
(including benefits) package provided to those employees prior to the execution
of this Agreement.
(e) SERVICE CREDIT. Following the Effective Time, HP will use
all reasonable efforts to give each Continuing Employee full credit for prior
service with Compaq or its Subsidiaries for purposes of (i) eligibility and
vesting under any HP Benefit Plan, (ii) determination of benefits levels under
any vacation or severance HP Benefit Plan and (iii) determination of "retiree"
status under any equity compensation HP Benefit Plan, for which the Continuing
Employee is otherwise eligible and in which the Continuing Employee is offered
participation, in each case except where such crediting would (A) result in a
duplication of benefits or (B) otherwise cause HP or its Subsidiaries or any HP
Benefit Plan or trust relating thereto to accrue or pay for benefits that relate
to any
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time period prior to the Continuing Employee's participation in the HP Benefit
Plan.
(f) EMPLOYEE COMMUNICATIONS. With respect to matters described
in Section 5.9, Compaq will use all reasonable efforts to consult with HP (and
consider in good faith the advice of HP) prior to sending any notices or other
communication materials to its Employees.
(g) PLAN DOCUMENTS. Without limiting the generality of Section
5.4(b), as promptly as practicable following the date hereof (if practicable,
with thirty (30) days from the date hereof), Compaq shall provide access to HP
to copies of: (i) all documents embodying all Compaq Benefit Plans, (ii) the
most recent annual actuarial valuations and/or audited statement of assets and
liabilities for each Compaq Retirement Plan, if any, for each Compaq Benefit
Plan, (iii) the three (3) most recent annual reports, returns, securities
registration statements or other filings, if any, required to be filed with any
Governmental Entity under applicable Legal Requirement in connection with each
Compaq Benefit Plan, (iv) the most recent Approval for each Compaq Benefit Plan,
as applicable, (v) all material correspondence to or from any Governmental
Entity relating to any Compaq Benefit Plan, (vi) all material communications to
Employees regarding in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any material liability
under any Compaq Benefit Plan or proposed Compaq Benefit Plan, and (vii) a
summary with respect to each Compaq Option outstanding as of the date of this
Agreement of: (a) the particular Compaq Stock Option Plan (if any) pursuant to
which such Compaq Option was granted, (b) the name and location of the holder or
receipt of such Compaq Option, (c) the number of shares of Compaq Common Stock
subject to such Compaq Option or value covered thereby, (d) the exercise or base
price of such Compaq Option, (e) the date on which such Compaq Option was
granted, (f) the applicable vesting schedule and the extent to which such Compaq
Option is vested and exercisable as of the date of this Agreement, and (g) the
date on which such Compaq Option expires.
5.10 FORM S-8. HP agrees to file a registration statement on Form S-8 for
the shares of HP Common Stock issuable with respect to assumed Compaq Options to
the extent Form S-8 is available as soon as is reasonably practicable
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after the Effective Time and shall maintain the effectiveness of such
registration statement thereafter for so long as any of such options or other
rights remain outstanding.
5.11 INDEMNIFICATION.
(a) INDEMNITY. From and after the Effective Time, HP will, and
will cause the Surviving Corporation to, fulfill and honor in all respects the
obligations of Compaq pursuant to any indemnification agreements between Compaq
and its directors and officers immediately prior to the Effective Time (the
"INDEMNIFIED PARTIES"), subject to applicable law. The Certificate of
Incorporation and Bylaws of the Surviving Corporation will contain provisions
with respect to exculpation and indemnification that are at least as favorable
to the Indemnified Parties as those contained in the Certificate of
Incorporation and Bylaws of the Company as in effect on the date hereof, which
provisions will not be amended, repealed or otherwise modified for a period of
six years from the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who, immediately prior to the Effective Time,
were directors, officers, employees or agents of Compaq, unless such
modification is required by law.
(b) INSURANCE. For a period of six years after the Effective
Time, HP will cause the Surviving Corporation to use all reasonable efforts to
cause to be maintained in directors' and officers' liability insurance
maintained by Compaq covering those persons who are covered by Compaq's
directors' and officers' liability insurance policy as of the date hereof on
terms comparable to those applicable to the current directors and officers of
Compaq for a period of six (6) years; PROVIDED, HOWEVER, that in no event will
the Surviving Corporation be required to expend in excess of one hundred fifty
percent (150%) of the annual premium currently paid by Compaq for such coverage
(and to the extent annual premium would exceed one hundred fifty percent (150%)
of the annual premium currently paid by Compaq for such coverage, the Surviving
Corporation shall use all reasonable efforts to cause to be maintained the
maximum amount of coverage as is available for such one hundred fifty percent
(150%) of such annual premium).
(c) THIRD-PARTY BENEFICIARIES. This Section 5.11 is intended to
be for the benefit of, and shall be enforceable by the Indemnified Parties and
their heirs and personal representatives and shall be binding on HP and the
Surviving
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Corporation and its successors and assigns. In the event HP or the Surviving
Corporation or its successor or assign (i) consolidates with or merges into any
other Person and shall not be the continuing or surviving corporation or entity
in such consolidation or merger or (ii) transfers all or substantially all of
its properties and assets to any Person, then, and in each case, proper
provision shall be made so that the successor and assign of HP or the Surviving
Corporation, as the case may be, honor the obligations set forth with respect to
HP or the Surviving Corporation, as the case may be, in this Section 5.11.
5.12 BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF HP.
(a) COMPAQ DESIGNATED DIRECTORS. The Board of Directors of HP
will take all actions necessary such that effective as of immediately following
the Effective Time, five (5) directors of Compaq reasonably acceptable to HP,
including Michael D. Capellas, shall become members of the Board of Directors of
HP (the "COMPAQ DESIGNATED DIRECTORS") and the Board of Directors of HP will
have no more than two directors who are employees of HP immediately following
the Effective Time (it being understood that in the event that at the Effective
Time Michael D. Capellas is unable or unavailable to serve as a director of HP,
Compaq shall be entitled to designate an alternative person reasonably
acceptable to HP serve as a member of the HP Board of Directors in lieu of
Michael D. Capellas.
(b) BOARD COMMITTEES. It is the intention of the Board of
Directors of HP that (i) there will be at least one Compaq Designated Director
on each committee of the Board of Directors of HP and (ii) the chairman of at
least one of the following committees of the Board of Directors of HP will be a
Compaq Designated Director: (A) Audit, (B) Compensation, (C) Finance and
Investment, and (D) Nominating and Governance.
(c) EXECUTIVE OFFICERS. HP will negotiate in good faith with
certain persons who are current senior executives of HP and Compaq who are
expected to become (or continue to be) senior executives of HP following the
Merger for such persons to accept the positions and the terms of employment
previously discussed between Compaq and HP.
5.13 NYSE AND PCX LISTINGS. Prior to the Effective Time, HP agrees to use
all reasonable efforts to authorize for listing on NYSE and PCX the shares
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of HP Common Stock issuable, and those required to be reserved for issuance, in
connection with the Merger, subject to official notice of issuance.
5.14 COMPAQ AFFILIATES; RESTRICTIVE LEGEND. Compaq will use all reasonable
efforts to deliver or cause to be delivered to HP, as promptly as practicable on
or following the date hereof, from each person who may reasonably be deemed to
be an affiliate of Compaq for purposes of Rule 145 promulgated under the
Securities Act an executed affiliate agreement pursuant to which such affiliate
shall agree to be bound by the provision of Rule 145 promulgated under the
Securities Act in a form provided by HP and reasonably acceptable to Compaq. HP
will give stop transfer instructions to its transfer agent with respect to any
HP Common Stock received pursuant to the Merger by any stockholder of Compaq who
may reasonably be deemed to be an affiliate of Compaq for purposes of Rule 145
promulgated under the Securities Act and there will be placed on the
certificates representing such HP Common Stock, or any substitutions therefor, a
legend stating in substance that the shares were issued in a transaction to
which Rule 145 promulgated under the Securities Act applies and may only be
transferred (i) in conformity with Rule 145 or (ii) in accordance with a written
opinion of counsel, reasonably acceptable to HP, in form and substance that such
transfer is exempt from registration under the Securities Act.
5.15 TREATMENT AS REORGANIZATION. None of HP, Merger Sub or Compaq shall,
and they shall not permit any of their respective Subsidiaries to, take any
action prior to or following the Closing that would reasonably be expected to
cause the Merger to fail to qualify as a reorganization with the meaning of
Section 368(a) of the Code.
5.16 RIGHTS PLANS.
(a) COMPAQ RIGHTS PLAN. Compaq shall, and shall cause its
transfer agent, as rights agent, to, enter into the Compaq Rights Agreement as
promptly as practicable after the date hereof (but in no event later than three
(3) business days following the date hereof). Compaq shall set the record date
for the Compaq Rights Dividend as September 17, 2001 and shall pay the Compaq
Rights Dividend not later than September 27, 2001. Compaq shall not redeem the
Compaq Rights or amend or modify (including by delay of the "Distribution Date"
thereunder) or terminate the Compaq Rights Plan prior to the Effective Time
unless, and only to the extent that: (i) it is required to do so by order of a
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court of competent jurisdiction or (ii) its Board of Directors has concluded in
good faith, after receipt of advice of its outside legal counsel, that, in light
of a Superior Offer with respect to it, the failure to effect such amendment,
modification or termination is reasonably likely to result in a breach of its
Board of Directors' fiduciary obligations to its stockholders under applicable
law.
(b) HP RIGHTS PLAN. HP shall, and shall cause its transfer
agent, as rights agent, to, enter into the HP Rights Agreement as promptly as
practicable after the date hereof (but in no event later than three (3) business
days following the date hereof). HP shall set the record date for the HP Rights
Dividend as September 17, 2001 and shall pay the HP Rights Dividend not later
than September 27, 2001. HP shall not redeem the HP Rights or amend or modify
(including by delay of the "Distribution Date" thereunder) or terminate the HP
Rights Plan prior to the Effective Time unless, and only to the extent that: (i)
it is required to do so by order of a court of competent jurisdiction or (ii)
its Board of Directors has concluded in good faith, after receipt of advice of
its outside legal counsel, that, in light of a Superior Offer with respect to
it, the failure to effect such amendment, modification or termination is
reasonably likely to result in a breach of its Board of Directors' fiduciary
obligations to its stockholders under applicable law.
5.17 SECTION 16 MATTERS. Prior to the Effective Time, HP and Compaq shall
take all such steps as may be required (to the extent permitted under applicable
law) to cause any dispositions of Compaq Common Stock (including derivative
securities with respect to Compaq Common Stock) or acquisitions of HP Common
Stock (including derivative securities with respect to HP Common Stock)
resulting from the transactions contemplated by Article I of this Agreement by
each individual who is subject to the reporting requirements of Section 16(a) of
the Exchange Act with respect to Compaq to be exempt under Rule 16b-3
promulgated under the Exchange Act.
5.18 MERGER SUB COMPLIANCE. HP shall cause Merger Sub to comply with all
of Merger Sub's obligations under or relating to this Agreement. Merger Sub
shall not engage in any business which is not in connection with the merger with
and into Compaq pursuant to this Agreement.
5.19 CONVEYANCE TAXES. HP, Merger Sub and Compaq shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
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or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer or stamp taxes, any transfer, recording,
registration or other fees or any similar taxes which become payable in
connection with the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the Effective Time. All such
taxes will be paid by the party bearing the legal responsibility for such
payment; PROVIDED, HOWEVER, that, as between HP and Compaq, Compaq shall pay on
behalf of those Persons holding Compaq Common Stock immediately prior to the
Effective Time any real estate transfer or similar Taxes payable by such Person
in connection with Merger.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement shall have been
approved and adopted, and the Merger shall have been duly approved, by the
requisite vote under applicable law, by the stockholders of Compaq and the Stock
Issuance shall have been approved by the stockholders of HP.
(b) NO ORDER. No Governmental Entity of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which (i) is in effect and (ii) has the
effect of making the Merger illegal or otherwise prohibiting consummation of the
Merger (which illegality or prohibition would have a material impact on HP and
its Subsidiaries, on a combined basis with Compaq and its Subsidiaries, if the
Merger were consummated notwithstanding such statute, rule, regulation,
executive order, decree, injunction or other order).
(c) REGISTRATION STATEMENT EFFECTIVE; PROSPECTUS/PROXY
STATEMENT. The SEC shall have declared the Registration Statement effective. No
stop order suspending the effectiveness of the Registration Statement or any
part thereof shall have been issued and no proceeding for that purpose, and no
similar
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proceeding in respect of the Prospectus/Proxy Statement, shall have been
initiated or threatened in writing by the SEC.
(d) HSR ACT; EC MERGER REGULATION. All waiting periods (and any
extension thereof) under the HSR Act relating to the transactions contemplated
hereby will have expired or terminated early. Any required approval of the
Merger of the European Commission shall have been obtained pursuant to the EC
Merger Regulation, respectively. All other material foreign antitrust approvals
required to be obtained prior to the Merger in connection with the transactions
contemplated hereby shall have been obtained.
(e) NO GOVERNMENTAL RESTRICTION. There shall not be any pending
or overtly threatened suit, action or proceeding asserted by any Governmental
Authority (i) challenging or seeking to restrain or prohibit the consummation of
the Merger or any of the other transactions contemplated by this Agreement, the
effect of which restraint or prohibition if obtained would cause the condition
set forth in Section 6.1(b) to not be satisfied or (ii) seeking to require HP or
Compaq or any Subsidiary or affiliate to effect a Restricted Divestiture.
(f) TAX OPINIONS. HP and Compaq shall each have received written
opinions from Wilson Sonsini Goodrich & Rosati, Professional Corporation and
Skadden, Arps, Slate, Meagher & Flom, LLP, respectively, in form and substance
reasonably satisfactory to them, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code and such
opinions shall not have been withdrawn.
(g) NYSE AND PCX LISTING. The shares of HP Common Stock to be
issued in the Merger and the transactions contemplated hereby shall have been
authorized for listing on each of the NYSE and PCX, subject to official notice
of issuance.
6.2 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF COMPAQ. The obligation of
Compaq to consummate and effect the Merger shall be subject to the satisfaction
at or prior to the Closing Date of each of the following conditions, any of
which may be waived, in writing, exclusively by Compaq:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of HP and Merger Sub contained in this Agreement shall be true and
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correct on the date hereof and as of the Closing Date with the same force and
effect as if made on the Closing Date (except that those representations and
warranties which address matters only as of a particular date shall have been
true and correct only on such date), except, in each case, or in the aggregate,
as does not constitute a Material Adverse Effect on HP at the Closing Date (it
being understood that, for purposes of determining the accuracy of such
representations and warranties, any update of or modification to the HP
Disclosure Letter made or purported to have been made after the execution of
this Agreement shall be disregarded). Compaq shall have received a certificate
with respect to the foregoing signed on behalf of HP, with respect to the
representations and warranties of HP, by an authorized senior executive officer
of HP and a certificate with respect to the foregoing signed on behalf of Merger
Sub, with respect to the representations and warranties of Merger Sub, by an
authorized officer of Merger Sub.
(b) AGREEMENTS AND COVENANTS. HP and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or prior to
the Closing Date, and Compaq shall have received a certificate with respect to
the foregoing signed on behalf of HP, with respect to the covenants of HP, by an
authorized senior executive officer of HP and a certificate with respect to the
foregoing signed on behalf of Merger Sub, with respect to the covenants of
Merger Sub, by an authorized officer of Merger Sub.
(c) MATERIAL ADVERSE EFFECT. No Material Adverse Effect on HP
shall have occurred since the date hereof and be continuing.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF HP. The obligations of HP
and Merger Sub to consummate and effect the Merger shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by HP and Merger
Sub:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Compaq contained in this Agreement shall be true and correct on
the date hereof and as of the Closing Date with the same force and effect as if
made on the Closing Date (except that those representations and warranties which
address matters only as of a particular date shall have been true and correct
only on such date), except, in each case, or in the aggregate, as does not
constitute a
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Material Adverse Effect on Compaq at the Closing Date (it being understood that,
for purposes of determining the accuracy of such representations and warranties,
any update of or modification to the Compaq Disclosure Letter made or purported
to have been made after the execution of this Agreement shall be disregarded).
HP and Merger Sub shall have received a certificate with respect to the
foregoing signed on behalf of Compaq by an authorized senior executive officer
of Compaq.
(b) AGREEMENTS AND COVENANTS. Compaq shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it at or prior to the Closing
Date, and HP and Merger Sub shall have received a certificate to such effect
signed on behalf of Compaq by an authorized senior executive officer of Compaq.
(c) MATERIAL ADVERSE EFFECT. No Material Adverse Effect on
Compaq shall have occurred since the date hereof and be continuing.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, by action taken or authorized by the Board of Directors of the
terminating party or parties, and except as provided below, whether before or
after the requisite approvals of the stockholders of Compaq or HP:
(a) by mutual written consent duly authorized by the Boards of
Directors of HP and Compaq;
(b) by either Compaq or HP if the Merger shall not have been
consummated by May 31, 2002 (which date shall be extended to August 30, 2002, if
the Merger shall not have been consummated as of the result of a failure to
satisfy the conditions set forth in Section 6.1(b), Section 6.1(d) or Section
6.1(e)) (as appropriate, the "END DATE"); PROVIDED, HOWEVER, that the right to
terminate this Agreement under this Section 7.1(b) shall not be available to any
party whose action or failure to act has been a principal cause of or resulted
in the failure of the Merger to occur on or before such date and such action or
failure to act constitutes a material breach of this Agreement;
(c) by either Compaq or HP if a Governmental Entity shall have
issued an order, decree or ruling or taken any other action (including
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the failure to have taken an action), in any case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger, which
order, decree, ruling or other action is final and nonappealable;
(d) by either Compaq or HP if the required approval of the
stockholders of HP contemplated by this Agreement shall not have been obtained
by reason of the failure to obtain the required vote at a meeting of HP
stockholders duly convened therefor or at any adjournment thereof; PROVIDED,
HOWEVER, that the right to terminate this Agreement under this Section 7.1(d)
shall not be available to HP where the failure to obtain HP stockholder approval
shall have been caused by the action or failure to act of HP and such action or
failure to act constitutes a material breach by HP of this Agreement;
(e) by either Compaq or HP if the required approval of the
stockholders of Compaq contemplated by this Agreement shall not have been
obtained by reason of the failure to obtain the required vote at a meeting of
the Compaq stockholders duly convened therefore or at any adjournment thereof;
PROVIDED, HOWEVER, that the right to terminate this Agreement under this Section
7.1(e) shall not be available to Compaq where the failure to obtain Compaq
stockholder approval shall have been caused by the action or failure to act of
Compaq and such action or failure to act constitutes a material breach by Compaq
of this Agreement;
(f) by HP (at any time prior to the adoption and approval of
this Agreement and the Merger by the required vote of the stockholders of
Compaq) if a Triggering Event (as defined below in this Section 7.1) with
respect to Compaq shall have occurred;
(g) by Compaq (at any time prior to the adoption and approval of
this Agreement and the Merger by the required vote of the stockholders of HP) if
a Triggering Event with respect to HP shall have occurred;
(h) by Compaq, upon a breach of any representation, warranty,
covenant or agreement on the part of HP set forth in this Agreement, or if any
representation or warranty of HP shall have become untrue, in either case such
that the conditions set forth in Section 6.2(a) or Section 6.2(b) would not be
satisfied as of the time of such breach or as of the time such representation or
warranty shall have become untrue, PROVIDED that if such inaccuracy in HP's
representations and warranties or breach by HP is curable by HP prior to the End
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Date through the exercise of reasonable efforts, then Compaq may not terminate
this Agreement under this Section 7.1(h) prior to sixty (60) days following the
receipt of written notice from Compaq to HP of such breach, PROVIDED that HP
continues to exercise all reasonable efforts to cure such breach through such
sixty (60) day period (it being understood that Compaq may not terminate this
Agreement pursuant to this paragraph (h) if it shall have materially breached
this Agreement or if such breach by HP is cured within such sixty (60) day
period);
(i) by HP, upon a breach of any representation, warranty,
covenant or agreement on the part of Compaq set forth in this Agreement, or if
any representation or warranty of Compaq shall have become untrue, in either
case such that the conditions set forth in Section 6.3(a) or Section 6.3(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, PROVIDED, that if such
inaccuracy in Compaq's representations and warranties or breach by Compaq is
curable by Compaq prior to the End Date through the exercise of reasonable
efforts, then HP may not terminate this Agreement under this Section 7.1(i)
prior to the End Date sixty (60) days following the receipt of written notice
from HP to Compaq of such breach, PROVIDED that Compaq continues to exercise all
reasonable efforts to cure such breach through such sixty (60) day period (it
being understood that HP may not terminate this Agreement pursuant to this
paragraph (i) if it shall have materially breached this Agreement or if such
breach by Compaq is cured within such sixty (60) day period);
(j) by HP, if a Material Adverse Effect on Compaq shall have
occurred since the date hereof; and
(k) by Compaq, if a Material Adverse Effect on HP shall have
occurred since the date hereof.
For the purposes of this Agreement, a "TRIGGERING EVENT," with respect to
a party hereto, shall be deemed to have occurred if: (i) its Board of Directors
or any committee thereof shall for any reason have withdrawn or shall have
amended or modified in a manner adverse to the other party hereto its
recommendation in favor of, the adoption and approval of the Agreement or the
approval of the Merger, (ii) it shall have failed to include in the
Prospectus/Proxy Statement the recommendation of its Board of Directors in favor
of the adoption and approval of the Agreement and the approval of the Merger,
(iii) its Board of Directors fails to
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reaffirm (publicly, if so requested) its recommendation in favor of the adoption
and approval of the Agreement and the approval of the Merger within ten (10)
calendar days after the other party hereto requests in writing that such
recommendation be reaffirmed, (iv) its Board of Directors or any committee
thereof shall have approved or recommended any Acquisition Proposal, or (v) a
tender or exchange offer relating to its securities shall have been commenced by
a Person unaffiliated with the other party hereto and it shall not have sent to
its securityholders pursuant to Rule 14e-2 promulgated under the Securities Act,
within ten (10) business days after such tender or exchange offer is first
published, sent or given, a statement disclosing that the Board of Directors of
such party recommends rejection of such tender or exchange offer.
7.2 NOTICE OF TERMINATION; EFFECT OF TERMINATION. Any termination of this
Agreement under Section 7.1 above will be effective immediately upon the
delivery of a valid written notice of the terminating party to the other party
hereto. In the event of the termination of this Agreement as provided in Section
7.1, this Agreement shall be of no further force or effect, except (i) as set
forth in Section 5.4(a), this Section 7.2, Section 7.3 and Article VIII, each of
which shall survive the termination of this Agreement and (ii) nothing herein
shall relieve any party from liability for any willful breach of this Agreement.
No termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their terms.
7.3 FEES AND EXPENSES.
(a) GENERAL. Except as set forth in this Section 7.3, all fees
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated; PROVIDED, HOWEVER, that HP and Compaq shall
share equally (i) all fees and expenses, other than attorneys' and accountants'
fees and expenses which fees shall be paid for by the party incurring such
expense, incurred in relation to the printing and filing (with the SEC) of the
Prospectus/Proxy Statement (including any preliminary materials related thereto)
and the Registration Statement (including financial statements and exhibits) and
any amendments or supplements thereto and (ii) the filing fee for the
Notification and Report Forms filed with the FTC and DOJ under the HSR Act, the
Form CO filed with the European Commission under the EC Merger Regulation and
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premerger notification and reports forms under similar applicable laws of other
jurisdictions, in each case pursuant to Section 5.6(a).
(b) PAYMENTS.
(i) PAYMENT BY COMPAQ. In the event that this Agreement
is terminated by HP or Compaq, as applicable, pursuant to Sections 7.1(b), (e),
or (f), Compaq shall promptly, but in no event later than two (2) business days
after the date of such termination, pay HP a fee equal to six hundred seventy
five million dollars ($675,000,000.00) in immediately available funds (the
"COMPAQ TERMINATION FEE"); PROVIDED, that in the case of termination under
Section 7.1(b) or 7.1(e): (A) such payment shall be made only if following the
date hereof and prior to the termination of this Agreement, there has been
public disclosure of an Acquisition Proposal with respect to Compaq and (1)
within twelve (12) months following the termination of this Agreement an
Acquisition (as defined in Section 7.3(b)(iv)) of Compaq is consummated or (2)
within twelve (12) months following the termination of this Agreement Compaq
enters into an agreement providing for an Acquisition of Compaq and an
Acquisition of Compaq is consummated within twenty-four (24) months of the
termination of this Agreement and (B) such payment shall be made promptly, but
in no event later than two (2) business days after the consummation of such
Acquisition of Compaq.
(ii) PAYMENT BY HP. In the event that this Agreement is
terminated by HP or Compaq, as applicable, pursuant to Sections 7.1(b), (d), or
(g), HP shall promptly, but in no event later than two (2) business days after
the date of such termination, pay Compaq a fee equal to six hundred seventy five
million dollars ($675,000,000.00) in immediately available funds (the "HP
TERMINATION FEE"); PROVIDED, that in the case of termination under Section
7.1(b) or 7.1(d): (A) such payment shall be made only if following the date
hereof and prior to the termination of this Agreement, there has been public
disclosure of an Acquisition Proposal with respect to HP and (1) within twelve
(12) months following the termination of this Agreement an Acquisition of HP is
consummated or (2) within twelve (12) months following the termination of this
Agreement HP enters into an agreement providing for an Acquisition of HP and an
Acquisition of HP is consummated within twenty-four (24) months following the
termination of this Agreement; and (B) such payment shall be made promptly,
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but in no event later than two (2) business days after the consummation of such
Acquisition of HP.
(iii) INTEREST AND COSTS; OTHER REMEDIES. Each of HP and
Compaq acknowledges that the agreements contained in this Section 7.3(b) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, the other party hereto would not enter into this
Agreement; accordingly, if HP or Compaq, as the case may be, fails to pay in a
timely manner the amounts due pursuant to this Section 7.3(b), and, in order to
obtain such payment, the other party hereto makes a claim that results in a
judgment against the party failing to pay for the amounts set forth in this
Section 7.3(b), the party so failing to pay shall pay to the other party its
reasonable costs and expenses (including reasonable attorneys' fees and
expenses) in connection with such suit, together with interest on the amounts
set forth in this Section 7.3(b) at the prime rate of Citibank, N.A. in effect
on the date such payment was required to be made. Payment of the fees described
in this Section 7.3(b) shall not be in lieu of damages incurred in the event of
breach of this Agreement.
(iv) CERTAIN DEFINITIONS. For the purposes of this
Section 7.3(b) only, "ACQUISITION," with respect to a party hereto, shall mean
any of the following transactions (other than the transactions contemplated by
this Agreement): (i) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
party pursuant to which the stockholders of the party immediately preceding such
transaction hold less than sixty percent (60%) of the aggregate equity interests
in the surviving or resulting entity of such transaction or any direct or
indirect parent thereof, (ii) a sale or other disposition by the party of assets
representing in excess of forty percent (40%) of the aggregate fair market value
of the party's business immediately prior to such sale, or (iii) the acquisition
by any Person or group (including by way of a tender offer or an exchange offer
or issuance by the party or such Person or group), directly or indirectly, of
beneficial ownership or a right to acquire beneficial ownership of shares
representing in excess of forty percent (40%) of the voting power of the then
outstanding shares of capital stock of the party.
7.4 AMENDMENT. Subject to applicable law, this Agreement may be amended by
the parties hereto, by action taken or authorized by their respective
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Boards of Directors, at any time before or after approval of the matters
presented in connection with the Merger by the stockholders of HP and Compaq,
PROVIDED, after any such approval, no amendment shall be made which by law or in
accordance with the rules of any relevant stock exchange requires further
approval by such stockholders without such further stockholder approval. This
Agreement may not be amended except by execution of an instrument in writing
signed on behalf of each of HP, Merger Sub and Compaq.
7.5 EXTENSION; WAIVER. At any time prior to the Effective Time either
party hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed: (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto, and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Compaq, HP and Merger Sub contained in this Agreement, or any
instrument delivered pursuant to this Agreement, shall terminate at the
Effective Time, and only the covenants that by their terms survive the Effective
Time and this Article VIII shall survive the Effective Time.
8.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (i) on the date of delivery if delivered
personally, (ii) on the date of confirmation of receipt (or, the first business
day following such receipt if the date is not a business day) of transmission by
telecopy or telefacsimile, or (iii) on the date of confirmation of receipt (or,
the first business day following such receipt if the date is not a business day)
if delivered by a nationally recognized courier service. All notices hereunder
shall be delivered as set forth below, or pursuant to such other instructions as
may be designated in writing by the party to receive such notice:
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(a) if to HP or Merger Sub, to:
Hewlett-Packard Company
3000 Hanover Street
Palo Alto, California 94304
Attention: Chief Executive Officer
Telephone No.: (650) 857-1501
Telecopy No.: (650) 852-2977
with copies to:
Hewlett-Packard Company
3000 Hanover Street
Palo Alto, California 94304
Attention: General Counsel
Telephone No.: (650) 857-1501
Telecopy No.: (650) 857-4837
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Larry W. Sonsini
Martin W. Korman
Bradley L. Finkelstein
Telephone No.: (650) 493-9300
Telecopy No.: (650) 493-6811
Wilson Sonsini Goodrich & Rosati
Professional Corporation
Lancaster Building WestPark
7927 Jones Branch Drive #400
McLean, Virgnia 22102-3322
Attention: Robert D. Sanchez
Telephone No.: (703) 734-3100
Telecopy No.: (703) 734-3199
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(b) if to Compaq, to:
Compaq Computer Corporation
20555 SH 249
Houston, Texas 77070
Attention: Chief Executive Officer
Telephone No.: (281) 514-8705
Telecopy No.: (281) 518-6807
with copies to:
Compaq Computer Corporation
20555 SH 249
Houston, Texas 77070
Attention: General Counsel
Telephone No.: (281) 518-4422
Telecopy No.: (281) 518-6807
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Attention: Roger S. Aaron
Telephone No.: (212) 735-3000
Telecopy No.: (212) 735-2000
Skadden, Arps, Slate, Meagher & Flom LLP
525 University Avenue, Suite 1100
Palo Alto, California 94301
Attention: Kenton J. King
Celeste E. Greene
Telephone No.: (650) 470-4500
Telecopy No.: (650) 470-4570
8.3 INTERPRETATION; KNOWLEDGE.
(a) When a reference is made in this Agreement to Exhibits,
such reference shall be to an Exhibit to this Agreement unless otherwise
indicated. When a reference is made in this Agreement to Sections, such
reference shall be to a section of this Agreement unless otherwise indicated.
For
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purposes of this Agreement, the words "INCLUDE," "INCLUDES" and
"INCLUDING," when used herein, shall be deemed in each case to be followed by
the words "without limitation." The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. When reference is made herein
to "THE BUSINESS OF" an entity, such reference shall be deemed to include the
business of all such entity and its Subsidiaries, taken as a whole. An exception
or disclosure made in Compaq Disclosure Letter with regard to a representation
of Compaq, or in the HP Disclosure Letter with regard to a representation of HP
or Merger Sub, shall be deemed made with respect to any other representation by
such party to which such exception or disclosure is clearly relevant.
(b) For purposes of this Agreement, the term "KNOWLEDGE"
means, with respect to a party hereto, with respect to any matter in
question, that any of the Chief Executive Officer, Chief Financial Officer or
General Counsel of such party, has actual knowledge of such matter, after
inquiry of their respective direct reports.
(c) For purposes of this Agreement, the term "MATERIAL
ADVERSE EFFECT," when used in connection with an entity, means any change,
event, violation, inaccuracy, circumstance or effect (any such item, an
"EFFECT"), individually or when taken together with all other Effects that
have occurred prior to the date of determination of the occurrence of the
Material Adverse Effect, that is or is reasonably likely to (i) be materially
adverse to the business, assets (including intangible assets),
capitalization, financial condition or results of operations of such entity
taken as a whole with its Subsidiaries (or, if such entity is Compaq, Compaq
taken as a whole with its Subsidiaries or HP taken as a whole with its
Subsidiaries) or (ii) materially impede the authority of such entity, or, in
any case, HP, to consummate the transactions contemplated by this Agreement
in accordance with the terms hereof and applicable Legal Requirements;
PROVIDED, HOWEVER, that, for purposes of clause (i) above, in no event shall
any of the following, alone or in combination, be deemed to constitute, nor
shall any of the following be taken into account in determining whether there
has been or will be, a Material Adverse Effect on any entity: (A) any Effect
resulting from compliance with the terms and conditions of this Agreement,
(B) any Effect resulting from the announcement or pendency of the Merger
(provided that the exception in this clause (B) shall not apply to the use of
the term "Material Adverse Effect" in Sections 6.2(a) and 6.3(a) with respect
to the representations
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and warranties contained in Section 2.3, Section 2.7(b), Section 2.14, Section
3.3 and Section 3.13), (C) any change in such entity's stock price or trading
volume, in and of itself, (D) any failure by such entity to meet published
revenue or earnings projections, in and of itself, (E) any Effect that results
from changes affecting any of the industries in which such entity operates
generally or the United States economy generally (which changes in each case do
not disproportionately affect such entity in any material respect), (F) any
Effect that results from changes affecting general worldwide economic or capital
market conditions (which changes in each case do not disproportionately affect
such entity in any material respect), or (G) stockholder class action litigation
arising from allegations of a breach of fiduciary duty relating to this
Agreement.
(d) For purposes of this Agreement, the term "PERSON" shall
mean any individual, corporation (including any non-profit corporation),
general partnership, limited partnership, limited liability partnership,
joint venture, estate, trust, company (including any limited liability
company or joint stock company), firm or other enterprise, association,
organization, entity or Governmental Entity.
8.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 ENTIRE AGREEMENT; THIRD-PARTY BENEFICIARIES. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Compaq Disclosure Letter
and the HP Disclosure Letter (i) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, it being understood that the
Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement and (ii) are not
intended to confer upon any other Person any rights or remedies hereunder,
except as specifically provided, following the Effective Time, in Section 5.11.
Without limiting the foregoing, it is expressly understood and agreed that the
provisions of Sections 5.9(d), 5.9(e), 5.12(b) and 5.12(c) are statements of
intent and no Continuing Employee or other Person (including any party hereto)
shall have any rights or remedies, including
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rights of enforcement, with respect thereto and no Continuing Employee or other
Person is or is intended to be a third-party beneficiary thereof.
8.6 SEVERABILITY. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
Persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the greatest extent possible, the economic, business and
other purposes of such void or unenforceable provision.
8.7 OTHER REMEDIES; SPECIFIC PERFORMANCE.
(a) OTHER REMEDIES. Except as otherwise provided herein, any and
all remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby, or by law or equity
upon such party, and the exercise by a party of any one remedy will not preclude
the exercise of any other remedy. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached.
(b) SPECIFIC PERFORMANCE. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
8.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
8.9 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or
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rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
8.10 ASSIGNMENT. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties. Any purported assignment in violation of this Section 8.10
shall be void. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
8.11 WAIVER OF JURY TRIAL. EACH OF HP, MERGER SUB AND COMPAQ 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 AGREEMENT OR THE ACTIONS OF HP, MERGER SUB OR COMPAQ IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
*****
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
HEWLETT-PACKARD COMPANY
By: /s/ Carleton S. Fiorina
---------------------------------------
Carleton S. Fiorina
Chairman and Chief Executive Officer
HELOISE MERGER CORPORATION
By: /s/ Robert P. Wayman
---------------------------------------
Robert P. Wayman
President
COMPAQ COMPUTER CORPORATION
By: /s/ Michael D. Capellas
---------------------------------------
Michael D. Capellas
Chairman and Chief Executive Officer
****AGREEMENT AND PLAN OF REORGANIZATION****
Agreement and Plan of Reorganization - Hewlett-Packard Co. and Compaq Computer Co.
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