EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
VERITAS HOLDING CORPORATION,
A DELAWARE CORPORATION
VERITAS SOFTWARE CORPORATION,
A DELAWARE CORPORATION
SEAGATE TECHNOLOGY, INC.,
A DELAWARE CORPORATION
SEAGATE SOFTWARE, INC.
A DELAWARE CORPORATION
AND
SEAGATE SOFTWARE NETWORK & STORAGE MANAGEMENT GROUP, INC.
A DELAWARE CORPORATION
OCTOBER 5, 1998
TABLE OF CONTENTS
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1. PLAN OF REORGANIZATION............................................. 2
1.1 The Organization of Newco and Merger Sub..................... 2
1.2 The Merger................................................... 2
1.3 Seagate Transaction.......................................... 3
1.4 Contribution and Transfer of Contributed Stock and Assets.... 4
1.5 Dissenter's Rights........................................... 7
1.6 Newco Plans.................................................. 7
1.7 Registration................................................. 7
1.8 Effects of the VERITAS Merger................................ 7
1.9 Tax Free Reorganization...................................... 8
1.10 Tax-Free Section 351 Transaction............................. 8
1.11 Xxxx-Xxxxx-Xxxxxx Filings.................................... 8
1.12 Adoption of Stockholders Rights Plan......................... 9
1.13 Board of Directors and Officers of Newco..................... 9
1.14 Registration on Form S-4..................................... 9
2. REPRESENTATIONS AND WARRANTIES OF SSI AND STI...................... 10
2.1 Organization; Good Standing; Qualification and Power......... 10
2.2 Capital Structure Stock and Options.......................... 10
2.3 Authority.................................................... 11
2.4 SEC Documents................................................ 12
2.5 Disclosure; Information Supplied............................. 14
2.6 Compliance with Applicable Laws.............................. 14
2.7 Litigation................................................... 14
2.8 ERISA and Other Compliance................................... 15
2.9 Absence of Certain Changes or Events......................... 18
2.10 Full Force and Effect........................................ 19
2.11 Agreements................................................... 20
2.12 No Defaults.................................................. 21
2.13 Certain Agreements........................................... 21
2.14 Taxes........................................................ 21
2.15 Intellectual Property........................................ 22
2.16 Fees and Expenses............................................ 24
2.17 Insurance.................................................... 24
2.18 Ownership of Property........................................ 24
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2.19 Environmental Matters........................................ 24
2.20 Interested Party Transactions................................ 25
2.21 Fairness Opinion............................................. 25
2.22 Title to and Condition and Sufficiency of Group Assets....... 25
2.23 No Restrictive Agreements.................................... 26
2.24 Supplier and Customer Relationships.......................... 26
2.25 Product and Inventory Status................................. 26
3. REPRESENTATIONS AND WARRANTIES OF VERITAS AND NEWCO................ 27
3.1 Organization; Good Standing; Qualification and Power......... 27
3.2 Capital Structure............................................ 27
3.3 Authority.................................................... 28
3.4 SEC Documents................................................ 29
3.5 Disclosure; Information Supplied............................. 30
3.6 Compliance with Applicable Laws.............................. 30
3.7 Litigation................................................... 31
3.8 ERISA and Other Compliance................................... 32
3.9 Absence of Certain Changes or Events......................... 34
3.10 Full Force and Effect........................................ 35
3.11 Agreements................................................... 35
3.12 No Defaults.................................................. 37
3.13 Certain Agreements........................................... 37
3.14 Taxes........................................................ 37
3.15 Intellectual Property........................................ 38
3.16 Fees and Expenses............................................ 39
3.17 Insurance.................................................... 40
3.18 Ownership of Property........................................ 40
3.19 Environmental Matters........................................ 40
3.20 Interested Party Transactions................................ 40
3.21 Fairness Opinion............................................. 41
3.22 Title to and Condition and Sufficiency of VERITAS Assets..... 41
3.23 No Restrictive Agreements.................................... 41
3.24 Supplier and Customer Relationships.......................... 41
3.25 Product and Inventory Status................................. 42
3.26 Tax Representations.......................................... 42
4. STI AND SSI COVENANTS.............................................. 42
4.1 Advice of Changes............................................ 42
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4.2 Maintenance of Business...................................... 42
4.3 Conduct of Business.......................................... 43
4.4 SSI Corporate Approvals...................................... 44
4.5 Letter of SSI's Accountants................................. 44
4.6 Prospectus/Proxy Statement................................... 44
4.7 Regulatory Approvals......................................... 45
4.8 Necessary Consents........................................... 46
4.9 Access to Information........................................ 46
4.10 Satisfaction of Conditions Precedent......................... 46
4.11 No Other Negotiations........................................ 46
4.12 Books and Records............................................ 47
4.13 Transitional Support......................................... 48
4.14 Development Agreement and Cross-License Agreement............ 48
4.15 Settlement of Intercompany Accounts.......................... 48
4.16 Modification of Joint Contributed Agreements................. 48
4.17 Management Employment Contracts.............................. 48
4.18 Stockholder and Registration Rights Agreement................ 48
4.19 Seagate IP Rights............................................ 48
5. VERITAS AND NEWCO COVENANTS........................................ 49
5.1 Advice of Changes............................................ 49
5.2 Maintenance of Business...................................... 49
5.3 Conduct of Business.......................................... 49
5.4 Stockholder Approval......................................... 50
5.5 Letter of VERITAS' Accountants............................... 51
5.6 Prospectus/Proxy Statement................................... 51
5.7 State Securities Law Compliance.............................. 52
5.8 Regulatory Approvals......................................... 52
5.9 Necessary Consents........................................... 52
5.10 Access to Information........................................ 52
5.11 Books and Records............................................ 53
5.12 Transitional Support......................................... 53
5.13 Development Agreement and Cross License Agreement............ 53
5.14 Satisfaction of Conditions Precedent......................... 53
5.15 Voting Agreement............................................. 53
5.16 Group Employee Plans and Benefit Arrangements................ 53
5.17 Indemnification and Insurance-VERITAS........................ 54
5.18 Indemnification and Insurance-Employees...................... 56
5.19 Stockholder and Registration Rights Agreement................ 57
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5.20 No Other VERITAS Negotiations................................ 57
6. CLOSING MATTERS.................................................... 59
6.1 Closing...................................................... 59
6.2 Exchange of Certificates..................................... 59
6.3 Exchange of Exchanged SSI Options............................ 61
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SSI AND STI................. 61
7.1 Accuracy of Representations and Warranties................... 61
7.2 Covenants.................................................... 61
7.3 Compliance with Law.......................................... 61
7.4 Consents..................................................... 62
7.5 Form S-4..................................................... 62
7.6 Opinion of VERITAS and Newco's Counsel....................... 62
7.7 VERITAS Stockholder Approval................................. 62
7.8 No Legal Action.............................................. 62
7.9 Tax Opinion.................................................. 62
7.10 Election of The Contributing Companies Designees to the
Board of Directors of Newco.................................. 62
7.11 Nasdaq Listing............................................... 62
7.12 Incorporation of New Delaware Company........................ 62
7.13 HSR Act...................................................... 63
7.14 No Order..................................................... 63
7.15 Ancillary Agreements......................................... 63
7.16 Stockholder Approval......................................... 63
7.17 Delivery of Newco Shares..................................... 63
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF VERITAS AND NEWCO........... 63
8.1 Accuracy of Representations and Warranties................... 63
8.2 Covenants.................................................... 63
8.3 Compliance with Law.......................................... 64
8.4 Consents..................................................... 64
8.5 Form S-4..................................................... 64
8.6 Opinion of Counsel to STI and SSI............................ 64
8.7 VERITAS Stockholder Approval................................. 64
8.8 SSI Corporate Approvals...................................... 64
8.9 No Legal Action.............................................. 64
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8.10 Tax Opinion.................................................. 64
8.11 HSR Act...................................................... 64
8.12 No Order..................................................... 65
8.13 Ancillary Agreements......................................... 65
8.14 Sufficiency of Assets........................................ 65
8.15 Intellectual Property Assignments............................ 65
8.16 Modification of Joint Contributed Agreements................. 65
9. TERMINATION OF AGREEMENT........................................... 65
9.1 Termination.................................................. 65
9.2 Notice of Termination........................................ 67
9.3 No Liability................................................. 67
9.4 Breakup Fee.................................................. 67
10. SURVIVAL OF REPRESENTATIONS........................................ 68
10.1 No Survival of Representations............................... 68
11. INDEMNIFICATION.................................................... 68
11.1 Indemnification by SSI and STI............................... 68
11.2 Time Limitations on Indemnification.......................... 69
11.3 No Limitation on Other Rights................................ 70
12. EMPLOYEE MATTERS................................................... 70
12.1 Right to Offer Employment.................................... 70
12.2 Termination of Employment.................................... 71
12.3 Cooperation.................................................. 71
13. TAX MATTERS........................................................ 71
13.1 Transaction Taxes; Representation; Transaction Tax Indemnity. 71
13.2 No Limitation................................................ 72
13.3 Treatment of Indemnity Payments.............................. 72
13.4 Indemnity for Taxes.......................................... 72
13.5 Other Tax Matters............................................ 73
13.6 Seagate Transaction Items.................................... 77
14. MISCELLANEOUS...................................................... 78
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14.1 Governing Law................................................ 78
14.2 Assignment; Binding Upon Successors and Assigns.............. 78
14.3 Severability................................................. 78
14.4 Counterparts................................................. 78
14.5 Other Remedies............................................... 78
14.6 Amendment and Waivers........................................ 79
14.7 Expenses..................................................... 79
14.8 Attorneys' Fees.............................................. 79
14.9 Notices...................................................... 79
14.10 Construction of Agreement.................................... 80
14.11 No Joint Venture............................................. 80
14.12 Further Assurances........................................... 81
14.13 Absence of Third Party Beneficiary Rights.................... 81
14.14 Public Announcement.......................................... 81
14.15 Certain Defined Terms........................................ 81
14.16 Entire Agreement............................................. 91
Exhibit A - Certificate of Merger
Exhibit A-1 - Restated Certificate of Incorporation
Seagate Disclosure Letter
Veritas Disclosure Letter
Exhibit 4.13 - Term Sheet for Transition Services and Facilities Use Agreement
Exhibit 4.14A - Development Agreement
Exhibit 4.14B - Cross License and OEM Agreement
Exhibit 4.17 - Management Employment Contracts
Exhibit 4.18- Rights Agreement
Exhibit 4.18B - Stockholders Agreement
Exhibit 5.3(g) - Veritas Holding Corporation Certificate of Incorporation and
Bylaws
Exhibit 5.15A - Voting Agreement
Exhibit 5.15B - Veritas Affiliates who Executed Voting Agreements
Exhibit 5.16 - Management Employment Contracts
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Exhibit 14.15D - Group Products
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT") is entered
into as of October 5, 1998, by and among VERITAS Software Corporation, a
Delaware corporation including for all purposes VERITAS Surviving Corporation,
("VERITAS"), VERITAS Holding Corporation, a Delaware corporation ("NEWCO"),
Seagate Technology, Inc., a Delaware corporation ("STI"), Seagate Software,
Inc., a Delaware corporation and majority owned subsidiary of STI ("SSI") and
Seagate Software Network & Storage Management Group, Inc., a Delaware
corporation and wholly owned subsidiary of SSI ("NSMG"). The terms defined in
Section 14.15 of this Agreement shall have the meanings therein specified in
this Agreement.
RECITALS
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A. The parties intend that, subject to the terms and conditions of this
Agreement, (i) a new Delaware corporation referred to herein as Newco has been
formed by VERITAS solely for the purpose of the transactions contemplated
hereunder; (ii) a newly formed, wholly owned subsidiary of Newco ("MERGER SUB")
will be merged with and into VERITAS, with VERITAS being the surviving
corporation of such merger (the "MERGER"), and all outstanding VERITAS
securities will be converted, on a share for share basis, into Newco securities
having identical rights, preferences and privileges, with Newco assuming all
outstanding options, warrants, convertible debentures and other rights to
purchase shares of capital stock of VERITAS (with all such Newco securities
issued to former VERITAS security holders initially representing the VERITAS
Percentage Interest in Newco), all on the terms set out in this Agreement and in
the Certificate of Merger substantially in the form of Exhibit A hereto (the
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"CERTIFICATE OF MERGER") and the applicable provisions of the Delaware General
Corporation Law (the "DELAWARE LAW"); and (iii) the contribution by SSI, STI and
certain of their subsidiaries as herein specified to Newco, all on the terms
herein specified, of all Contributed Stock of the Contributed Companies (with
each of the Contributed Companies thereby becoming a wholly owned subsidiary of
Newco) and the Contributed Assets in consideration for the issuance by Newco to
SSI of shares of Common Stock of Newco, $0.001 par value ("NEWCO COMMON
STOCK"), and the offer by Newco to grant to Employees who are holders of options
in SSI at the Effective Time (herein "OPTIONEES") options to purchase Newco
Common Stock ("NEWCO OPTIONS") in exchange for cancellation of their respective
options to purchase Common Stock of SSI ("NEWCO EXCHANGE OFFER"), which Newco
Common Stock issued to SSI and Newco Options will represent in the aggregate a
fully diluted equity interest in Newco equal to the difference between 100% and
the VERITAS Percentage Interest. The transactions described in subpart (iii) of
the foregoing sentence are collectively the "SEAGATE TRANSACTION."
B. The Newco Common Stock issued in the Merger and in the Seagate
Transaction and the offered exchange of Newco Options for Exchanged SSI Options
in the Seagate Transaction will be registered under the Securities Act of 1933,
as amended (the "SECURITIES ACT"), pursuant to a Newco registration statement.
C. For federal income tax purposes, it is intended that (i) the Merger
qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code and/or as an
exchange under the provisions of Section 351(a) of the Internal Revenue Code,
and (ii) that the Seagate Transaction, when taken together with the Merger,
qualify as an exchange under the provisions of Section 351 of the Internal
Revenue Code.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. PLAN OF REORGANIZATION
1.1 The Organization of Newco and Merger Sub. VERITAS has formed
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Newco under the laws of the State of Delaware for the purposes of the
transactions contemplated by the Merger and in accordance with the terms of
this Agreement. Newco currently has no outstanding securities and has
conducted no business and, prior to the Effective Time, will not issue any
securities prior to the Effective Time, will conduct no business or
operations, will have no assets and will enter into no agreements nor incur
any obligations or Liabilities, except as required or contemplated by this
Agreement or necessary to perform its obligations hereunder. As soon as
practicable after the date of this Agreement, Newco shall form the Merger Sub
as a wholly-owned subsidiary, which will conduct no business prior to Closing
except as expressly contemplated hereunder.
1.2 The Merger. Subject to the terms and conditions of this Agreement,
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at the Effective Time, VERITAS will cause Merger Sub to execute and deliver,
and VERITAS will execute and deliver, a Certificate of Merger providing for
the Merger of Merger Sub with and into VERITAS, with VERITAS being the
surviving corporation upon the effectiveness of the Merger and thereby
becoming a wholly-owned subsidiary of Newco, pursuant to this Agreement, the
Certificate of Merger and in accordance with applicable provisions of the
Delaware Law as follows:
(a) Conversion of VERITAS Common Stock. Each share of the
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Common Stock of VERITAS ("VERITAS COMMON STOCK"), that is issued and
outstanding immediately prior to the Effective Time will by virtue of the
Merger and at the Effective Time, and without any further action on the part
of VERITAS, Newco or any holder of VERITAS Common Stock, be converted into one
share (the "VERITAS EXCHANGE RATIO") of validly issued, fully paid and
nonassessable Newco Common Stock.
(b) Conversion of VERITAS Options, Warrants and other
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Convertible Securities.
----------------------
(i) Conversion. At the Effective Time, each of the then
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outstanding options to purchase shares of VERITAS Common Stock (collectively,
the "VERITAS OPTIONS") (consisting of all outstanding options granted under
VERITAS' or VERITAS' predecessors' option plans, including but not limited to
its 1985 Stock Option Plan, 1991 Executive Stock Option Plan, 1992 Stock Plan,
1993 Equity Incentive Plan, 1993 Director Stock Option Plan and 1996 Director
Option Plan (collectively the "VERITAS PLANS")), and each of the then
outstanding warrants to purchase VERITAS Common Stock (the "VERITAS WARRANTS")
and any individual non-Plan options, and any convertible debenture or other
convertible debt instrument convertible into VERITAS Common Stock ("VERITAS
DEBENTURES"), will, by virtue of the Merger, and without any further action on
the part of any holder thereof, be assumed and converted into an option,
warrant, convertible debenture, or other convertible debt instrument, as the
case may be, to purchase
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an equivalent number of shares of Newco Common Stock, at an exercise price per
share equal to the per share exercise price of such VERITAS Option or VERITAS
Warrant, or at a conversion price per share equal to the conversion price per
share of such VERITAS Debenture, as the case may be in effect at the Effective
Time, but with VERITAS remaining the obligor on any such convertible debenture
or other convertible debt instrument. The term, exercisability, vesting
schedule, status as an "incentive stock option" under Section 422 of the
Internal Revenue Code, if applicable, and all other terms and conditions of
the VERITAS Options and VERITAS Warrants and VERITAS Debentures will be
unchanged and all references in any option or warrant or debenture agreement
governing such option or warrant or debenture to VERITAS shall be deemed to
refer to Newco, where appropriate. Continuous service as an employee or
consultant with VERITAS or any of the VERITAS Subsidiaries (as hereinafter
defined) or VERITAS predecessors will be credited to an optionee of VERITAS
for purposes of determining the number of shares of Newco Common Stock subject
to exercise under a converted VERITAS Option after the Closing.
(ii) Stock Rights. At the Effective Time, each of the then
------------
outstanding rights to purchase shares of VERITAS Common Stock (collectively,
the "VERITAS STOCK PURCHASE PLAN RIGHTS"), consisting of all outstanding
options to purchase shares under VERITAS' 1993 Employee Stock Purchase Plan
and 1996 Employee Stock Purchase Plan (the "VERITAS STOCK PURCHASE PLAN"),
will by virtue of the Merger, and without any further action on the part of
any holder thereof, be assumed and converted into a right to purchase the same
number of shares of Newco Common Stock on the next "Purchase Date" (as such
term is defined in the VERITAS Stock Purchase Plan) following the Effective
Time at a purchase price per share determined in accordance with the VERITAS
Stock Purchase Plan.
(c) Cancellation of VERITAS-Owned Shares. Each share of VERITAS
------------------------------------
Common Stock held in the treasury of VERITAS or any of which are owned by
Newco, VERITAS, or any direct or indirect wholly-owned subsidiary of Newco,
VERITAS immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
1.3 Seagate Transaction.
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(a) Issuance of Newco Common Stock. At the Effective Time and
------------------------------
subject to the terms and conditions of this Agreement, Newco will, in
consideration for the contribution and transfer of the Contributed Stock and
Assets to Newco as contemplated by this Agreement, perform the following:
(i) SSI Stock. Issue to SSI that number of validly issued,
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fully paid and nonassessable shares of Newco Common Stock which represents the
SSI Percentage Interest less the number of shares of Newco Common Stock
issuable upon exercise of the Newco Options issued in exchange for Exchanged
SSI Options under clause (ii) below.
(ii) Exchange of Newco Options for Exchanged SSI Options.
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Newco shall offer to issue Newco Options (each representing the right to
purchase validly issued, fully paid and nonassessable Newco Common Stock) to
the Optionees in exchange for cancellation of their Exchanged SSI Options at
the Effective Time, all on the terms specified in this Agreement. At the
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Effective Time, each of the options to purchase SSI Common Stock held by
any of the Optionees that elects to exchange for a Newco Option in response
to Newco's option exchange offer made pursuant hereto ("EXCHANGED SSI
OPTIONS"), will be exchanged for a Newco Option to purchase that number of
shares of Newco Common Stock determined by multiplying the number of shares
of SSI Common Stock subject to such Exchanged SSI Option at the Effective
Time by the "SSI Exchange Ratio" (as defined below) at an exercise price
per share of Newco Common Stock equal to the exercise price per share of
such Exchanged SSI Option immediately prior to the Effective Time divided
by the SSI Exchange Ratio, rounded up to the nearest cent. The "SSI
EXCHANGE RATIO" shall mean the quotient arrived at by dividing the SSI Per
Share Value by the Newco Per Share Value. The "SSI PER SHARE VALUE" shall
equal (A) the product obtained by multiplying (x) the number of validly
issued, fully paid and nonassessable shares of Newco Common Stock which
represents the SSI Percentage Interest by (y) the VERITAS Closing Price
plus (B) the value of IMG (as determined by the Board of Directors of SSI
upon advice of Xxxxxx Xxxxxxx & Co. ("Xxxxxx")) all divided by (C) the
total number of outstanding shares of common stock of SSI on a fully
diluted as converted basis immediately prior to the Effective Time. Newco
Per Share Value shall equal the VERITAS Closing Price. The "VERITAS
CLOSING PRICE" shall mean the average closing price of one share of VERITAS
Common Stock for the five (5) most recent days that VERITAS Common Stock
has traded ending on the trading day three (3) business days prior to the
Effective Time, as reported by the Nasdaq Stock Market. The SSI Exchange
Ratio, collectively with the VERITAS Exchange Ratio shall be referred to
herein as the "EXCHANGE RATIOS". If the foregoing calculation results in a
Newco Option issued in exchange for an Exchanged SSI Option being
exercisable for a fraction of a share of Newco Common Stock, then the
number of shares of Newco Common Stock subject to such option will be
rounded down to the nearest whole number of shares, with no cash being
payable for such resulting fractional share. The term, exercisability,
vesting schedule, status as an "incentive stock option" under Section 422
of the Internal Revenue Code, if applicable, and all other terms and
conditions of each Newco Option shall be the same as that of the Exchanged
SSI Option exchanged therefor. Continuous service as an employee or
consultant with SSI, STI or any of their direct or indirect subsidiaries
will be credited to each Optionee for purposes of determining the number of
shares of Newco Common Stock vested and exercisable under such exchanged
Newco Option after the Effective Time.
1.4 Contribution and Transfer of Contributed Stock and Assets.
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(a) Contribution and Transfer. Subject to the terms and
--------------------------
conditions of this Agreement and in consideration for the issuance by Newco of
Newco Common Stock as provided above, the Contributing Companies shall at the
Effective Time, for good and valuable consideration receipt and sufficiency of
which is hereby acknowledged on behalf of each of the Contributing Companies
other than SSI, contribute and transfer and deliver to Newco or cause to be
contributed, transferred and delivered to Newco, and at the Effective Time
Newco shall accept the contribution and transfer from the Contributing
Companies, all right, title and interest in and to the Contributed Stock and
Assets. Specifically, SSI will transfer and contribute to Newco the
Contributed Stock and the Contributing Companies will transfer and contribute
to Newco the Contributed Assets. All Contributed Assets of STI shall be deemed
first contributed by STI to SSI and only then by SSI to Newco. Notwithstanding
the preceding, the parties hereto agree to transfer the Contributed Assets
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which are located outside of the United States in a mutually agreeable manner.
For example, SSI contemplates the formation of a new entity in Australia
(which would become a Contributed Company) which would acquire the Australian
Contributed Assets from Seagate Software Pty. Ltd. Seagate Software Limited, a
company organized under the laws of the United Kingdom and Delaware, will
register branches in the countries of South Africa, Spain and Dubai.
Additionally, with respect to Contributed Assets located in France, Japan,
Sweden, and the Netherlands, such Assets may be purchased and sold by and
among the VERITAS and Seagate entities located in such countries in exchange
for the consideration contributed to Newco by SSI (for which SSI would receive
no additional Newco Common Stock beyond the amounts contemplated by this
Agreement). Furthermore, the parties shall cooperate to facilitate the
transfer, to the extent so desired, of employees related to Group Business in
the countries of Singapore and Malaysia.
(b) Assumption and Exclusion of Liabilities.
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(i) Assumed Liabilities. As a result of the transfer to
-------------------
Newco of the Contributed Stock as aforesaid, Newco will as a matter of law own
all of the outstanding equity capital of the Contributed Companies, which
Contributed Companies in turn shall remain liable for their respective
Liabilities. In addition, subject to the terms and conditions of this
Agreement, Newco (or a subsidiary of Newco designated by Newco and acceptable
to SSI) shall, at the Effective Time, assume, and thereafter pay, perform and
discharge when due those (and only those) Liabilities of the Contributing
Companies and/or their direct and indirect subsidiaries (excluding the
Liabilities of the Contributed Company Group which are governed by the first
sentence of this Section 1.4(b)) that are expressly listed in the following
subparagraphs of this Section 1.4(b)(i) (collectively, the "ASSUMED
LIABILITIES") and no other Liabilities of the Contributing Companies
whatsoever:
(A) all Liabilities of the Contributing Companies
under all Contributed Contracts;
(B) all Liabilities of the Contributing Companies that
are included in the 1998 Group Balance Sheet or that are listed on
Schedule 1.4(b) (i) (B);
-----------------------
(C) any and all Liabilities of STI, SSI, and of their
respective direct and indirect subsidiaries with respect to Employees who
accept an offer of employment by Newco excluding liabilities subject to
indemnity under Section 11.1(a); and
(D) those Tax liabilities for which Newco is
responsible pursuant to Section 13, below.
(ii) Excluded Liabilities Not Assumed. Except for the
--------------------------------
Liabilities of the Contributed Company Group (which will remain the sole
responsibility of the applicable member of the Contributed Company Group) and
except for the Assumed Liabilities expressly described above in Section
1.4(b), Newco shall not assume, pay, perform or discharge, or otherwise have
any obligation, responsibility or liability whatsoever for, any and all
Liabilities of SSI (including IMG), STI or their respective direct and
indirect subsidiaries (whether now existing or hereafter arising),
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and said companies shall retain, and shall be solely responsible and liable
for paying, performing and discharging when due, all such Liabilities
(collectively, the "EXCLUDED LIABILITIES").
(c) Asset Contribution. Seagate will take all actions and will
------------------
sign and deliver any and all instruments and documents (including the Xxxx of
Transfer) reasonably necessary or appropriate to fully effect and perfect the
transfer to Newco (or if Newco so elects, any applicable Newco Subsidiary) of
any and all of the Contributed Stock and Assets held by it and any Contributed
Contracts to which it is a Party. This Section 1.4(c) shall survive Closing
for two years.
(d) Unassignable Assets. Notwithstanding any other provision of
-------------------
this Agreement or any of the Ancillary Agreements, to the extent that any of
the Contributed Assets are not assignable or otherwise transferable by the
Contributing Companies to Newco without the consent, approval or waiver of
another party thereto or any third party (including any governmental agency),
or if such assignment or transfer would constitute a breach thereof or of any
other material contract binding upon the transferor or any of its affiliates,
or a violation of any applicable law, then neither this Agreement nor such
Ancillary Agreements shall constitute an assignment or transfer (or an
attempted assignment or transfer) thereof until such consent, approval or
waiver of such party or parties has been duly obtained. With respect to each
such Contributed Asset, whose assignment or transfer to Newco requires the
consent, approval or waiver of another party thereto or any third party, Newco
and SSI shall cooperate and use their mutual reasonable, commercial efforts to
obtain such consent, approval or waiver of such other party or parties or such
third party to such assignment or transfer as promptly as practicable prior to
the Effective Time; and each agrees to supply relevant information to such
party or parties or such third party in order to facilitate such objective.
Notwithstanding the foregoing, nothing contained herein shall obligate Newco
or any Contributing Company to expend or pay any amount to third parties to
obtain any consents, approvals or waivers, or to make alternative arrangements
available; provided that where the Contributing Companies are unable to
effectively assign to Newco any Contributed Contract without breaching same
due to such lack of third party consent, the Contributing Companies shall make
available to Newco the economic benefits (such as inbound royalty payments),
if any, received by the Contributing Companies from and after the Effective
Time with respect to any such Contributed Contract.
(e) No Fraudulent Conveyance. The Contributing Companies are not
------------------------
entering into this Agreement or any Ancillary Agreement with the intent to
defraud, delay or hinder their respective creditors and the consummation of
the transactions contemplated by this Agreement, and the Ancillary Agreements
referenced in this Agreement will not have any such effect. The transfer of
the Contributed Stock and Assets pursuant hereto will not give rise to any
right of any creditor of the Contributing Companies to assert any claim
whatsoever against Newco or any of the Contributed Stock and Assets in the
hands of Newco or any of Newco's respective successors and assigns following
the Effective Time which would have a Material Adverse Effect on Newco. SSI
and its consolidated subsidiaries, taken as a group are Solvent, and will
continue to be Solvent immediately following the transfer of the Contributed
Stock and Assets pursuant to this Agreement. Neither SSI nor any of its
consolidated subsidiaries nor any of the Contributed Stock and Assets is
subject to, or the subject of, any Insolvency Proceeding or Insolvency Action.
No writ of attachment, execution or similar process has been ordered, executed
or filed against any of the Contributed Stock and Assets.
-6-
To Seagate's Knowledge (i) there is not any reason to expect that any of the
aforementioned actions, or any similar action, will take place or be taken,
and (ii) there are no grounds for any of the aforementioned actions or like
action. The parties agree that the securities issued by Newco to SSI and the
Optionees and the other obligations on Newco's part to be performed under the
terms of this Agreement and the Ancillary Agreements constitute full and fair
equivalent consideration for the Contributed Stock and Assets exchanged
therefor and the covenants, agreements and performances of the Contributing
Companies under this Agreement and the Ancillary Agreements.
1.5 Dissenter's Rights. It shall be the sole responsibility of SSI
------------------
to disclose any dissenter's rights which SSI shareholders have with respect to
the Seagate Transaction.
1.6 Newco Plans. Newco shall assume, effective as of the Closing,
-----------
the VERITAS 1993 Equity Incentive Plan, 1993 Director Stock Option Plan and
1993 Employee Stock Purchase Plan and other VERITAS plans and non-plan grants
and awards. as amended through the Effective Time (collectively, the "NEWCO
PLANS"). Newco shall reserve a sufficient number of shares of Newco Common
Stock for issuance pursuant to the exchange of Newco Options for Exchanged SSI
Options, as provided for herein.
1.7 Registration. Newco will cause the Newco Common Stock issuable
------------
upon exercise of outstanding awards under the Newco Plans or upon exercise of
the Newco Options issued to the Optionees in exchange for their Exchanged SSI
Options (collectively, the "STOCK RIGHTS") and the shares reserved for
issuance pursuant to future awards under the Newco Plans to be registered on
Form S-8 (the "FORM S-8") promulgated by the Securities and Exchange
Commission (the "SEC") within 10 days after the Effective Time and Newco will
use its reasonable best efforts to maintain the effectiveness of such
registration statement or registration statements for so long as any such
Stock Rights shall remain outstanding. With respect to those individuals who
subsequent to the Merger will be subject to the reporting requirements of
Section 16(a) of the Exchange Act (as hereinafter defined), Newco shall
administer the Stock Rights (including the Newco Options issued in exchange
for any Exchanged SSI Option) in a manner that complies with Rule 16b-3
promulgated by the SEC under the Exchange Act.
1.8 Effects of the VERITAS Merger. At the Effective Time: (a) the
-----------------------------
separate existence of Merger Sub will cease and Merger Sub will be merged with
and into VERITAS, with VERITAS being the surviving corporation of the Merger
(the "VERITAS SURVIVING CORPORATION"), pursuant to the terms of this Agreement
and the Certificate of Merger; (b) the Certificate of Incorporation of the
VERITAS Surviving Corporation shall be in the form attached as Exhibit A-1 to
the Certificate of Merger; (c) the Bylaws of VERITAS immediately prior to the
Effective Time will be the Bylaws of the VERITAS Surviving Corporation; (d)
the directors and officers of VERITAS immediately prior to the Effective Time
will be the directors and officers of the VERITAS Surviving Corporation; (e)
each share of the Common Stock of Merger Sub outstanding immediately prior to
the Effective Time will be converted into one share of Common Stock of the
VERITAS Surviving Corporation; (f) each share of VERITAS Common Stock and each
VERITAS Option, VERITAS Warrant, VERITAS Debenture and VERITAS Stock Purchase
Plan Right outstanding immediately prior to the Effective Time will be
converted, and each Exchanged SSI Option elected to be exchanged shall
-7-
be exchanged, as provided above in this Section 1; and (g) the Merger will, from
and after the Effective Time, have all of the effects provided by applicable
law, including, without limitation, the Delaware Law.
1.9 Tax Free Reorganization. The parties adopt this Agreement (to
-----------------------
the extent it relates to the Merger) as a plan of reorganization and intend
the Merger to be a tax-free reorganization under Section 368(a)(1)(A) of the
Internal Revenue Code by virtue of the provisions of Section 368(a)(2)(E) of
the Internal Revenue Code. The Newco Common Stock issued in the Merger will be
issued solely in exchange for the VERITAS Common Stock, and no other
transaction other than the Merger represents, provides for or is intended to
be an adjustment to the consideration paid for the VERITAS Common Stock. No
consideration that could constitute "other property" within the meaning of
Section 356(b) of the Internal Revenue Code is being transferred by Newco for
the VERITAS Common Stock in the Merger. The parties shall not take a position
on any tax return inconsistent with this Section 1.9. In addition, Newco
hereby represents, and will represent as of the Effective Time, that it
intends to continue VERITAS' historic businesses or use a significant portion
of VERITAS' business assets in a trade or business.
1.10 Tax-Free Section 351 Transaction. The contribution and transfer
--------------------------------
of the Contributed Stock and Assets to Newco in exchange for Newco Common
Stock when taken together with the Merger as contemplated by this Agreement
are intended to constitute a tax-free exchange within the meaning of Section
351(a) of the Internal Revenue Code and the Newco Common Stock issued therein
will be issued solely in exchange for the Contributed Stock and Assets
transferred in the Seagate Transaction and no consideration that could
constitute other property within the meaning of Internal Revenue Code Section
351(b) is being transferred by Newco to SSI. The parties shall not take a
position on any tax return inconsistent with this Section 1.10.
1.11 Xxxx-Xxxxx-Xxxxxx Filings. VERITAS, STI, and Newco will, and
-------------------------
VERITAS shall use its reasonable best efforts to cause Warburg, Xxxxxx
Investors, L.P. ("WARBURG") and Xxxx Xxxxxx to, as promptly as practicable
prepare and file the applicable notices and forms (if any) required to be
filed by them under the HSR Act or comparable laws of non-U.S. governmental
entities, and comply promptly with any appropriate requests from the Federal
Trade Commission, the United States Department of Justice or any other
Governmental Antitrust Authority for additional information and documentary
material. The parties hereto will not take any action that will have the
effect of delaying, impairing or impeding the termination of any waiting
period or the receipt of any required approvals of a Government Antitrust
Authority. Without limiting the generality of the parties' undertakings
pursuant to this Section 1.11, the parties shall use their reasonable best
efforts to prevent the entry in a judicial or administrative proceeding
brought under any antitrust law by any Governmental Antitrust Authority or any
other party of any permanent or preliminary injunction or other order that
would make consummation of the Seagate Transaction or the Merger in accordance
with the terms of this Agreement unlawful under appropriate anti-trust laws or
that would prevent or delay such consummation as a consequence of such laws.
Each party hereto shall promptly inform the other of any material
communication between such party and the Federal Trade Commission, the
Department of Justice or any other Governmental Antitrust Authority regarding
any of the transactions contemplated hereby. If any party or any affiliate of
such party receives a request for
-8-
additional information or for documents or any material from any such
Governmental Antitrust Authority with respect to the transactions contemplated
hereby, then such party shall endeavor in good faith to make or cause to be
made, as soon as reasonably practicable and after consultation with the other
parties, an appropriate response in compliance with such request. Further, no
written materials shall be submitted by any party to the Federal Trade
Commission, the Department of Justice or any other Governmental Antitrust
Authority in connection with HSR Act compliance or the merger control
regulations of any other state or country, nor shall any oral communications
be initiated with such governmental entities by any party, without prior
disclosure to and coordination with the other parties and their counsel. Each
party hereto will cooperate in connection with reaching any understandings,
undertakings or agreements (oral or written) involving the Federal Trade
Commission, the Department of Justice or any other Governmental Antitrust
Authority in connection with the transactions contemplated hereby.
1.12 Adoption of Stockholders Rights Plan. Newco will prior to the
------------------------------------
Effective Time have adopted a mutually agreed Stockholders Right Agreement.
1.13 Board of Directors and Officers of Newco.
----------------------------------------
(a) At the Effective Time, Newco will have a staggered Board of
Directors, consisting of three classes, A, B and C, consisting of three, four
and three directors, respectively, with initial terms ending at the annual
meeting of Stockholders held in 1999, 2000 and 2001, respectively. At the
Effective Time, the directors of Newco shall consist of the current VERITAS
directors plus Xxxxxxx X. Xxxxx and Xxxxxxx X. Xxxxxxx, nominees of SSI. In
addition Xxxxxxx X. Xxxxxxxxxx as an employee of Newco shall also be appointed
to the Board. At the Effective Time, Xxxx Xxxxxx shall be the Chairman of the
Board of Newco. At the Effective Time, the Class A Directors shall consist of
Xxxxxxx X. Xxxxxxx, Xxxxxxxx Xxxxxx and Xxxx Xxxxxx, the Class B Directors
shall consist of Xxxx Xxxxxx, Xxxxxx Xxxxx, Xxxxxxx Xxxxxxx and Xxxxxxx X.
Xxxxxxxxxx and the Class C Directors shall consist of Xxxxxx Xxxxxx, Xxxx van
den Bosch and Xxxxxxx X. Xxxxx.
(b) Officers. At the Effective Time, Xxxx Xxxxxx shall be the
--------
CEO and Xxxxxxx Xxxxxxxxxx shall be the President and Chief Operating Officer
of Newco.
1.14 Registration on Form S-4. The Newco Common Stock to be issued
------------------------
in the Merger to VERITAS stockholders and the Newco Common Stock to be issued
in the Seagate Transaction to SSI and the exchange of Newco Options for
Exchanged SSI Options shall be registered under the Securities Act on Form S-4
(as hereinafter defined). As promptly as practicable after the date of this
Agreement, Newco, with the cooperation of VERITAS and SSI, shall prepare and
file with the SEC a Form S-4 registration statement (the "FORM S-4"), together
with the prospectus/joint proxy statement to be included therein (the
"PROSPECTUS/PROXY STATEMENT") and any other documents required by the
Securities Act or the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), in connection with the Merger and the Seagate Transaction.
The transactions described in the Form S-4 shall be closed as promptly as
practicable following the effective date of the Form S-4, subject to Sections
7 and 8 hereof.
-9-
2. REPRESENTATIONS AND WARRANTIES OF SSI AND STI
Except as set forth in the respectively referenced provisions of the SSI
Disclosure Letter delivered by SSI and STI on behalf of themselves and any other
Contributing Companies (collectively, "REPRESENTING SEAGATE ENTITIES") to
VERITAS concurrently herewith and certified by an officer of SSI and STI, on
behalf of all of the Representing Seagate Entities, respectively, to be true,
accurate and complete to the best of his/her knowledge (the "SSI DISCLOSURE
LETTER"), SSI and STI, on behalf of each and all of the Representing Seagate
Entities, hereby represent and warrant to VERITAS that:
2.1 Organization; Good Standing; Qualification and Power. The
----------------------------------------------------
Contributed Subsidiaries are all of the subsidiaries of the Contributed
Companies or any of their direct or indirect subsidiaries. Each of the
Contributed Companies and each of the Contributed Subsidiaries and each of the
Contributing Companies is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its formation, has all
requisite corporate power and authority to own, lease and operate any and all
of the Group Assets held by such company and for the Conduct of the Group
Business as now being conducted by such company, 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 so
to qualify would not have a Material Adverse Effect on the Group Business. SSI
has delivered to VERITAS or its counsel complete and correct copies of the
charter documents of the Contributed Companies and SSI will deliver to VERITAS
or its counsel prior to the Effective Time the equivalent charter documents of
the Contributed Subsidiaries, in each case as amended through Closing. Except
for the Contributed Subsidiaries, none of the Contributed Companies nor any of
the Contributed Subsidiaries owns, directly or indirectly, any capital stock
or other equity interest of any corporation or has any direct or indirect
equity or ownership interest in any other business, whether organized as a
corporation, partnership, joint venture or otherwise.
2.2 Capital Structure Stock and Options. The authorized, issued and
-----------------------------------
as of the date of September 9, 1998, the outstanding capital stock of SSI, the
Contributed Companies and the Contributed Subsidiaries is set forth in Section
2.2(a) of the SSI Disclosure Letter. Except as specified in Section 2.2(a) of
the SSI Disclosure Letter no shares of the capital stock of the Contributed
Companies or of any of the Contributed Subsidiaries are held by any of them in
their treasury or reserved for issuance upon the exercise of options or
warrants. Except as specified in Section 2.2(a) of the SSI Disclosure
Schedule, all outstanding shares of the capital stock of the Contributed
Companies on the date hereof are set forth in Section 2.2(a) of the SSI
Disclosure Letter and are validly issued, fully paid and nonassessable and
free and clear of any Encumbrances and not subject to preemptive rights under
any statute, pursuant to the Certificate of Incorporation or Bylaws of the
Contributed Companies, or pursuant to any agreement or document to which any
of them is a party or by which any of them is bound. All outstanding shares of
the capital stock of each of the Contributed Subsidiaries are validly issued,
fully paid and nonassessable and are owned by a Contributed Company, or one of
the Contributed Subsidiaries, free and clear of any Encumbrances. SSI has
provided VERITAS with a correct and complete list of each of the options to
purchase SSI Common Stock ("SSI OPTIONS") as of September 9, 1998, including
the name of the optionees, the
-10-
plan pursuant to which such SSI Options were issued (if applicable), the
number of shares covered by such SSI Options, the per share exercise price of
such SSI Options, and the vesting schedule applicable to such SSI Options,
including the number of shares vested as of such date. SSI will provide Newco
with an update to such optionee list ten (10) days prior to the Closing that
will reflect any option grants, exercises or cancellations occurring after the
date of signing this Agreement and as of such date.
(b) No Other Commitments. Except as set forth in Section 2.2(b)
--------------------
of the SSI Disclosure Letter there are no options, warrants, calls, rights,
commitments, conversion rights or agreements of any character to which the
Contributed Companies is a party or by which any of them is bound obligating
them to issue, deliver or sell, or cause to be issued, delivered or sold, any
shares of their capital stock, or securities convertible into or exchangeable
for shares of their capital stock, or obligating any of them to grant, extend
or enter into any such option, warrant, call, right, commitment, conversion
right or agreement. There is no voting trust, proxy or other agreement or
understanding to which STI, SSI, or any of their respective direct or indirect
subsidiaries is a party with respect to the voting of the capital stock of any
member of the Contributed Company Group. All shares of capital stock of any
member of the Contributed Company Group are held free and clear of any
Encumbrances.
(c) Registration Rights. Neither the Contributed Companies nor
-------------------
the Contributing Companies is under any obligation to register under the
Securities Act any of the presently outstanding securities of the Contributed
Companies, any securities of the Contributed Companies that may be
subsequently issued, which offering would have a Material Adverse Effect on
Newco, except as disclosed in the SSI Disclosure Letter.
(d) No VERITAS Ownership. None of STI, SSI or any of their
--------------------
direct or indirect subsidiaries owns, or will own immediately prior to the
Effective Time, any VERITAS Common Stock.
2.3 Authority.
---------
(a) Corporate Action. Subject to approval of this Agreement and
----------------
the Ancillary Agreements by SSI's stockholders, each of STI, SSI and NSMG have
all requisite corporate power and authority to enter into this Agreement and
the Ancillary Agreements, to perform their respective obligations hereunder
and thereunder, and to consummate the transactions contemplated by this
Agreement and the Ancillary Agreements. This Agreement and the Ancillary
Agreements have been duly approved by the Boards of Directors of each of them
Contributing Companies and have been duly executed and delivered by STI, SSI
and NSMG and are the valid and binding obligations of STI, SSI and NSMG
enforceable against STI, SSI and NSMG in accordance with their respective
terms, except as enforceability may be limited by bankruptcy and other similar
laws and general principles of equity.
(b) No Conflict. Neither the execution, delivery and performance
-----------
of this Agreement and the Ancillary Agreements nor the consummation of the
transactions contemplated hereby or thereby, nor compliance with the
provisions hereof, will (i) conflict with, or result in any
-11-
violations of, or cause a default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, amendment, cancellation
or acceleration of any obligation contained in, or the loss of any material
benefit under, or result in the creation of any Encumbrance upon any of the
Group Assets or Contributed Stock under, any term, condition or provision of
(x) the Certificate of Incorporation or Bylaws or equivalent organizational
documents of any of the Contributing Companies or the Contributed Companies or
any of the Contributed Subsidiaries or (y) any of the Contributed Contracts or
any other loan or credit agreement, note, bond, mortgage, indenture, lease or
other material agreement, judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to the Contributed Companies, the Contributed
Companies' Property, the Contributed Stock or the Contributed Assets, other
than any such conflicts, violations, defaults, rights or Encumbrances which,
individually or in the aggregate, would not have a Material Adverse Effect on
the Group Business; or (ii) require the affirmative vote of the holders of
greater than a majority of the issued and outstanding capital stock of any
member of the Contributing Companies or any member of the Contributed Company
Group.
(c) Consents. Except (i) as set forth in Section 2.3(c) of the
--------
SSI Disclosure Letter; (ii) such filings, authorizations, orders and approvals
as may be required under state takeover laws; (iii) such filings and
notifications as may be necessary under the HSR Act; (iv) the filings,
authorizations, orders, notifications, and approvals contemplated by this
Agreement or the Ancillary Agreements; and (v) such other governmental or
third party consents, filings, authorizations, orders and approvals which if
not obtained or made, would not have a Material Adverse Effect on Newco or
have a material adverse effect on the ability of the Contributing Companies to
consummate the transactions contemplated by this Agreement or the Ancillary
Agreements, no consent, approval, order or authorization of, or registration,
declaration or filing with, any governmental entity is required to be obtained
by the Contributing Companies or any member of the Contributed Company Group
in connection with the execution and delivery of this Agreement or the
Ancillary Agreements by SSI, STI and NSMG or the performance of the
Contributing Companies and the Contributed Companies of the respective
obligations herein pertaining to such company.
2.4 SEC Documents.
-------------
(a) SEC Reports. SSI and STI have delivered to VERITAS or its
-----------
counsel correct and complete copies of the final version of each report,
schedule, registration statement and definitive proxy statement filed by SSI
and/or STI with the SEC on or after June 27, 1997 with respect to the Group
Business or the Group Assets (the "SEAGATE SEC DOCUMENTS"), which are the
material documents (other than preliminary material) that SSI and STI were
required to file with the SEC on or after June 27, 1997 with respect to the
Group Business or the Group Assets. As of their respective dates or, in the
case of registration statements, their effective dates, and except as
disclosed in the Seagate SEC Documents, none of the Seagate SEC Documents
(including all exhibits and schedules thereto and documents incorporated by
reference therein) contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading as of such time of filing, and there is
no requirement under the Securities Act or the Exchange Act, as the case may
be, to have amended any such filing, except for such
-12-
requirements as were fulfilled by the filing of such Seagate SEC Documents,
the Seagate SEC Documents complied, when filed, in all material respects with
the then applicable requirements of the Securities Act or the Exchange Act, as
the case may be, and the rules and regulations promulgated by the SEC
thereunder, and SSI and STI have filed in all material respects all documents
and agreements that were required to be filed as exhibits to the Seagate SEC
Documents.
(b) SSI Financial Statements; Absence of Undisclosed Liabilities.
------------------------------------------------------------
The consolidated financial statements dated as of and for the period ending
July 3, 1998 of SSI and its consolidated subsidiaries (the "SSI CONSOLIDATED
FINANCIAL STATEMENTS") complied as to form in all material respects with the
then applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
GAAP applied on a consistent basis during the periods involved (except as may
have been indicated in the notes thereto) and fairly present (subject, in the
case of the unaudited statements, to normal year-end audit adjustments) the
consolidated financial position of SSI and its respective consolidated
subsidiaries as at the respective dates thereof and the consolidated results
of their operations and cash flows for the respective periods then ended. SSI
has no liabilities or obligations of any nature (matured or unmatured, fixed
or contingent) which are, individually or in the aggregate, of a nature
required to be disclosed on the face of a consolidated balance sheet for SSI
and its consolidated subsidiaries prepared in accordance with GAAP and which
would have a Material Adverse Effect on the Group Business, except for such
liabilities or obligations as (i) were accrued or provided for in the
consolidated balance sheet at July 3, 1998, included in the SSI Consolidated
Financial Statements as of the date thereof (the "SSI CONSOLIDATED FINANCIAL
STATEMENTS BALANCE SHEET DATE") or (ii) are of a normally recurring nature and
were incurred after the SSI Consolidated Financial Statements Balance Sheet
Date in the ordinary course of business consistent with past practice. All
liabilities and valuation accounts established and reflected in the STI/SSI
Consolidated Financial Statements are, to Seagate's Knowledge, reasonably
adequate. At the SSI Consolidated Financial Statements Balance Sheet Date,
there were no material loss contingencies (as such term is used in Statement
of Financial Accounting Standards No. 5 ("STATEMENT NO. 5") issued by the
Financial Accounting Standards Board in March 1975) arising from the conduct
of the business of SSI and its consolidated subsidiaries which are required to
be provided for or disclosed, but are not provided for or disclosed, in the
SSI Consolidated Financial Statements in accordance with Statement No. 5.
(c) Group Financial Statements; Absence of Undisclosed
--------------------------------------------------
Liabilities. Attached hereto as Schedule 2.4(c)(1) are the audited combined
----------- ------------------
financial statements of the Group Business dated as of July 3, 1998, including
a combined balance sheet as of July 3, 1998 (the "1998 GROUP BALANCE SHEET")
and a combined balance sheet for June 27, 1997, together with combined
statements of operations, cash flows, and Group Business equity for the three
years in the period ended July 3, 1998 (collectively the "GROUP FINANCIAL
STATEMENTS"). The Group Financial Statements comply in all material respects
with the then applicable accounting requirements and rules and regulations of
the Securities and Exchange Commission with respect thereto, and present
fairly, in all material respects, the combined financial position of the Group
Business as of July 3, 1998 and June 27, 1997, and the combined results of its
operations and its cash flows for each of the three years in the period ended
July 3, 1998, in conformity with GAAP. The Contributed Company Group and the
Contributing Companies (with respect to the Group Business) have no
Liabilities of
-13-
any nature (matured or unmatured, fixed or contingent) which (i) are related
to or arose in connection with the Group Business; (ii) individually or in the
aggregate, are of a nature required to be recorded on the face of or disclosed
in the notes to the Group Financial Statements; and (iii) are material to the
Group Business taken as a whole, except for such Liabilities as (A) were
accrued , provided for or disclosed in the Group Financial Statements or (B)
are of a normally recurring nature and were incurred after July 3, 1998, the
date of the 1998 Group Balance Sheet (the "GROUP FINANCIAL STATEMENTS BALANCE
SHEET DATE"), in the ordinary course of business consistent with past
practice. All liabilities and valuation accounts established and reflected in
the Group Financial Statements are, to Seagate's Knowledge, reasonably
adequate. At the Group Financial Statements Balance Sheet Date, there were no
material loss contingencies (as such term is defined in Statement No. 5) which
are not properly provided for or disclosed in the Group Financial Statements
as required by Statement No. 5.
2.5 Disclosure; Information Supplied. No representation or warranty
--------------------------------
made by SSI or STI in this Agreement, nor any financial statement, certificate
or exhibit prepared and furnished or to be prepared and furnished by them, or
their respective representatives pursuant hereto or in connection with the
transactions contemplated hereby, or in any Seagate SEC Document filed by
them, when taken together, contains any untrue statement of a material fact,
or omits to state a material fact necessary to make the statements or facts
contained herein or therein, taken as a whole, not misleading in light of the
circumstances under which they were furnished. None of the information
supplied or to be supplied by STI or SSI for inclusion or incorporation by
reference in the Form S-4 and Prospectus/Proxy Statement will, at the time the
information is supplied contain, after giving effect to any supplement or
amendment thereto, any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances under which they are made,
not materially misleading.
2.6 Compliance with Applicable Laws. Except as disclosed in the
-------------------------------
Seagate SEC Documents filed prior to the date of this Agreement, the Group
Business is not being conducted in violation of any law, ordinance,
regulation, rule or order of any governmental entity where such violation
would have a Material Adverse Effect on the Group Business. Except as
disclosed in the Seagate SEC Documents filed prior to the date of this
Agreement, neither SSI, STI, any Contributing NSMG Company, nor any member of
the Contributed Company Group has been notified in writing by any governmental
entity that any investigation or review with respect to the Contributed
Companies or any of the Contributed Subsidiaries, any of the Group Assets or
the Group Business is pending or threatened, nor has any governmental entity
notified any of them in writing of its intention to conduct the same, which
investigation or review could reasonably be expected to have a Material
Adverse Effect on the Group Business. The Group Assets include all permits,
licenses and franchises from governmental entities required for the Conduct of
the Group Business, except for those whose absence would not have a Material
Adverse Effect on the Group Business and then which would terminate as a
consequence of the Seagate Transaction.
2.7 Litigation. Except as would not reasonably be expected to have a
----------
Material Adverse Effect on the Group Business or as set forth in Section 2.7
of the SSI Disclosure Letter or as disclosed in the Seagate SEC Documents,
there is no suit, action, arbitration, demand, claim or
-14-
proceeding pending or, to Seagate's Knowledge, threatened against the
Contributed Company Group, the Contributing Companies or the Group Assets; nor
is there any judgment, decree, injunction, ruling or order of any governmental
entity or arbitrator or settlement agreement outstanding against the
Contributed Company Group or any of the Contributing Companies or the Group
Assets. SSI has delivered or made available to VERITAS or its counsel correct
and complete copies of all material correspondence prepared by its counsel for
SSI auditors in connection with the last two completed audits of SSI's
Financial Statements and the audit of the Group Financial Statements and any
such correspondence since the date of the last such audit. No member of the
Contributed Company Group and none of the Contributing Companies is a party to
any decree, order or arbitration award (or agreement entered into in any
administrative, judicial or arbitration proceeding with any governmental
authority) with respect to the Group Assets, Employees, or Group Business that
could reasonably be expected to have a Material Adverse Effect on the Group
Business. Except for violations as would not have a Material Adverse Effect on
the Group Business, none of the Contributing Companies nor any member of the
Contributed Company Group is in violation of any decree, order or arbitration
award that names such company, or any of such companies, as a party or that
otherwise, to Seagate's Knowledge, involves such company or any of the Group
Assets, or of any law, ordinance, statute, or governmental authority to which
the Group Assets or the Contributed Stock are subject, including, without
limitation, laws, rules and regulations relating to occupational health and
safety, equal employment opportunities, fair employment practices, and sex,
race, religious and age discrimination. To Seagate's Knowledge, there is no
claim, action, suit, arbitration, mediation, investigation or other proceeding
of any nature pending or, threatened, at law or in equity, by way of
arbitration or before any court, governmental department, commission, board or
agency that: (i) may adversely affect, contest or challenge any party's
authority, right or ability to perform its obligations under this Agreement or
any of the Ancillary Agreements; (ii) challenges or contests the Contributing
Companies' or the Contributed Companies' right, title or ownership of any of
the Group Assets or the Contributed Stock or seeks to impose an Encumbrance
(other than a Permitted Encumbrance) on, or a transfer of title or ownership
of, any of the Group Assets or the Contributed Stock; (iii) asserts that any
action taken by any employee, consultant or contractor of the Contributed
Companies or Contributing Companies in connection with the Group Business
infringes or misappropriates any Intellectual Property Rights of any third
party; (iv) seeks to enjoin, prevent or hinder operation of the Group
Business; (v) seeks to enjoin, prevent, or hinder the consummation of any of
the transactions contemplated by this Agreement or any of the Ancillary
Agreements; (vi) would impair or have an adverse affect on Newco's right or
ability to use or exploit any of the Group Assets; (vii) involves or relates
to any potentially material claim against Contributing Companies or the Group
Assets by any creditor thereof; or (viii) involves any claim of fraudulent
conveyance or any similar claim, except in cases (ii), (iii), (iv), (vi) and
(vii) where such proceeding could not reasonably be expected to have a
Material Adverse Effect on Newco.
2.8 ERISA and Other Compliance.
--------------------------
(a) Section 2.8 of the SSI Disclosure Letter lists each
employment, severance, compensation or other similar contract, arrangement or
policy and each plan or arrangement (written or oral) providing for insurance
coverage (including any self-insured arrangements), workers'
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benefits, vacation benefits, severance benefits, disability benefits, death
benefits, hospitalization benefits, retirement benefits, deferred
compensation, profit-sharing, bonuses, stock options, stock purchase, phantom
stock, stock appreciation or other forms of incentive compensation or post-
retirement insurance, compensation or benefits for employees, consultants or
directors (other than workers compensation, unemployment compensation and
other government mandated programs) which both (A) is entered into, maintained
or contributed to, as the case may be, by any member of the Contributed
Company Group or any of the Contributing Companies, and (B) covers any
Employee (collectively as the "GROUP BENEFIT ARRANGEMENTS"). Each Group
Benefit Arrangement maintained by any member of the Contributed Company Group
has been maintained in substantial compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations
which are applicable to such Group Benefit Arrangement except as would not
have a Material Adverse Effect on the Group Business. Section 2.8(a) of the
SSI Disclosure Letter also identifies each "employee benefit plan," as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("EMPLOYEE BENEFIT PLAN"), in which any of the Employees
participate (collectively, the "GROUP EMPLOYEE PLANS"). Copies of all Group
Benefit Arrangements have been made available to VERITAS or its counsel. All
contributions or premiums currently due and payable with respect to any of the
Group Employee Plans have been made as required under ERISA or have been
accrued on the 1998 Group Balance Sheet or will be made prior to the Effective
Time.
(b) None of the Employee Benefit Plans maintained by any of the
Contributing Companies or any member of the Contributed Company Group (i) is a
multiemployer plan, within the meaning of Section 3(37) or 4001(a)(3) of ERISA
(a "MULTIEMPLOYER PLAN"), or a single employer pension plan, within the
meaning of Section 4001(a)(15) of ERISA, for which Newco could incur liability
und er Section 4063 or 4064 of ERISA (a "MULTIPLE EMPLOYER PLAN"), or (ii)
provides or promises to provide retiree medical or life insurance benefits
except in connection with (a) benefit coverage mandated by applicable law,
including without limitation, coverage provided pursuant to Section 4980B of
the Code; (b) death or disability benefits under any of the Group Benefit
Arrangements; (c) benefits arising in connection with a separation or
severance program, plan or arrangement; and (d) life insurance benefits for
any employee who dies while in service with any of the Contributing Companies
or any member of the Contributed Company Group. None of the Contributing
Companies or any member of the Contributed Company Group has incurred or will
incur prior to or as of the Effective Time any material liability under,
arising out of or by operation of Title IV of ERISA (other than liability for
premiums to the Pension Benefit Guaranty Corporation arising in the ordinary
course), including any liability in connection with (i) the termination or
reorganization of any employee pension benefit plan subject to Title IV of
ERISA or (ii) with withdrawal from any Multiemployer Plan or Multiple Employer
Plan.
(c) The appropriate Contributing Company or Contributed Company
has timely provided, or will have provided prior to the Effective Time, to
Employees entitled thereto all required notices and made coverage available
pursuant to Section 4980B of the Internal Revenue Code and the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), with respect
to any "qualifying event" (as defined in Section 4980B(f)(3) of the Internal
Revenue Code). The appropriate Contributing Company or Contributed Company
will timely provide to
-16-
Employees entitled thereto all required notices and make coverage available
pursuant to Internal Revenue Code Section 4980B and COBRA with respect to any
"qualifying event" (as defined in Section 4980B(f)(3) of the Internal Revenue
Code) occurring prior to and including the Effective Time. No material Tax
payable on account of Section 4980B of the Internal Revenue Code has been
incurred by the Contributing Companies or any of the Contributed Companies
with respect to any current Employees (or their beneficiaries).
(d) No benefit payable or which may become payable by any of the
Contributed Companies or by any of the Contributing Companies with respect to
any Employee shall constitute a "parachute payment" (as defined in Section
280G(b)(2) of the Internal Revenue Code).
(e) The Contributed Companies Group and the Contributing
Companies are in compliance with all applicable laws, agreements and contracts
relating to employment, employment practices, wages, hours, and terms and
conditions of employment (including, but not limited to, employee compensation
matters) with respect in all such cases to the Employees, except where the
failure to be in compliance would not have a Material Adverse Effect on Newco.
(f) The Contributed Company Group and the Contributing Companies
have, to Seagate's Knowledge, good labor relations and to Seagate's Knowledge
there are no facts indicating that the consummation of the transactions
contemplated hereby will have a Material Adverse Effect on labor relations
with Employees or that any of the Employees intends to leave its or their
employ, where the same would have a Material Adverse Effect on the Group
Business.
(g) To Seagate's Knowledge, no Employee who is a key developer
of a Group Product is subject to any agreement, obligation, order or other
legal hindrance that impedes or might impede such executive or key employee
from devoting his or her full business time to the affairs of Newco after the
Effective Time.
(h) The Contributed Companies Group and the Contributing
Companies have, to Seagate's Knowledge and with respect only to the Employees,
complied with all laws, rules and regulations relating to the employment of
labor, including provisions thereof relating to wages, hours, equal
opportunity, collective bargaining and the payment of social security and
other Taxes, except where non-compliance would not have a Material Adverse
Effect on the Group Business.
(i) The Contributed Companies are not indebted to any executive
officer or director of such Contributed Company, whether by loan, advance or
otherwise, other than for salaries accrued but not yet payable and
reimbursable out-of-pocket expenses incurred in the ordinary course of
business consistent with past practice and not yet payable, nor, except as
described on Schedule 2.8(i) to the SSI Disclosure Letter is any officer,
director, employee or shareholder so indebted to any of SSI or any of the
Contributed Companies, except as disclosed in the 1998 Group Balance Sheet or
the Seagate SEC Documents, nor does any Employee have any right to force SSI
or any Contributing Company to repurchase any stock.
-17-
2.9 Absence of Certain Changes or Events. Except as disclosed in the
------------------------------------
Seagate SEC Documents filed prior to the date of this Agreement, since the
Group Balance Sheet Date (i.e., July 3, 1998) there has not occurred:
(a) any change or event which could reasonably be expected to
have a Material Adverse Effect on the Group Business;
(b) any amendments or changes in the Certificate of
Incorporation or Bylaws of any member of the Contributed Company Group;
(c) any damage, destruction or loss to or of the Group Assets
not covered by insurance, which would have a Material Adverse Effect on the
Group Business;
(d) any redemption, repurchase or other acquisition of shares
of any member of the Contributed Company Group, or any declaration, setting
aside or payment of any dividend or other distribution by any Contributing
Company or any member of the Contributed Company Group to any entity other
than a member of the Contributed Company Group (whether in cash, stock or
property) of the Group Assets or any proceeds generated by the conduct of the
Group Business;
(e) any material increase in or modification of the
compensation or benefits payable, or to become payable, by the Contributed
Companies to the Employees, except in the ordinary course of the business,
consistent with past practice and except as necessary to respond to third
party solicitation of Employees;
(f) other than as required by applicable statute or
governmental regulation, any material increase in or modification of any Group
Benefit Arrangement (including, but not limited to, the granting of stock
options, restricted stock awards or stock appreciation rights) that will
become binding upon Newco upon consummation of the transactions contemplated
herein, for or with respect to any of the Employees, other than (i) in the
ordinary course of the business, consistent with past practice, or to respond
to third party solicitation of Employees and (ii) if after the date of this
Agreement, which is authorized, if required, pursuant to Section 4.3 below;
(g) any sale of a material amount of the Group Assets, or any
acquisition by any member of the Contributed Company Group of a material
amount of assets, other than in the ordinary course of the business,
consistent with past practice;
(h) any alteration in any term of any outstanding capital
stock or rights to acquire capital stock of SSI or any member of the
Contributed Company Group, including, but not limited to, acceleration of the
vesting or any change in the terms of any outstanding stock options;
(i) other than in the ordinary course of business, consistent
with past practice, (A) any incurrence, assumption or guarantee by any member
of the Contributed Company Group of any debt of any person, other than any
member of the Contributed Company Group, for borrowed money in an amount
exceeding $2,500,000 in the aggregate; (B) issuance or sale by any member of
the Contributed Company Group of any securities convertible into or
exchangeable for their
-18-
respective debt securities; or (C) issuance or sale of options or other rights
to acquire from SSI, STI, or the Contributed Company Group, directly or
indirectly, debt securities of any member of the Contributed Company Group, or
any securities convertible into or exchangeable for any such debt securities;
(j) any creation or assumption by a Contributing Company or a
member of the Contributed Company Group of any Encumbrance (other than
Permitted Encumbrances) on any Group Asset in excess of $2,500,000
individually or in the aggregate, other than to refinance a liability
reflected in the SSI Financial Statements or the Group Financial Statements in
the ordinary course of business;
(k) any making by any member of the Contributed Company Group
of any loan, advance or capital contribution to or investment in any person
other than to refinance a liability reflected in the SSI Financial Statements
or the Group Financial Statements and other than (i) loans, advances or
capital contributions made in the ordinary course of the business, and (ii)
other loans and advances, where the aggregate amount of any such items
outstanding at any time does not exceed $2,500,000;
(l) any amendment of, relinquishment, termination or non-
renewal by the Contributing Companies or the Contributed Company Group of any
Contributed Contract, other than in the ordinary course of business consistent
with past practice;
(m) any transfer or grant of a right under Intellectual
Property Rights included in the Group Assets, other than those transferred or
granted in the ordinary course of business, consistent with past practice,
except for any grant of a right to source code or grant of any exclusive
rights to any Intellectual Property Rights included in the Group Assets, each
of which shall be set forth in Section 2.09(m) of the SSI Disclosure Letter;
(n) any labor dispute with, or charge of unfair labor
practice by, SSI (relating to Employees) or any member of the Contributed
Company Group (other than routine individual grievances), any activity or
proceeding by a labor union or representative thereof to organize any
Employees or, to Seagate's Knowledge, any campaign being conducted to solicit
authorization from Employees to be represented by such labor union, where such
dispute, practice, activity, proceeding, or campaign would have a Material
Adverse Effect on the Group Business; or
(o) any agreement by any member of the Contributed Company
Group to take any of the actions described in the preceding clauses (a)
through (n) (other than the transactions contemplated by this Agreement or the
Ancillary Agreements); or any change to accounting methods.
2.10 Full Force and Effect. Each of the Contributed Contracts and
---------------------
Group Governmental Permits is in full force and effect and is not subject to
any breach or default thereunder by any Contributing Company or any member of
the Contributed Company Group or, to Seagate's Knowledge, any other party
thereto, except for those Contributed Contracts and Group
-19-
Governmental Permits, the absence of which would not have a Material Adverse
Effect on the Group Business.
2.11 Agreements. Section 2.11 of the SSI Disclosure Letter lists all
----------
the contracts as of the date of this Agreement of the type described below to
which any member of the Contributed Company Group is a party and which is
material to the Group Business (herein, the "MATERIAL CONTRIBUTED CONTRACTS")
(and copies of all such Material Contributed Contracts have been identified to
and made available for review by VERITAS or its counsel):
(a) contract with or commitment to any labor union which
would have a Material Adverse Effect on the Group Business;
(b) continuing contract for the future purchase, sale or
manufacture of products, material, supplies, equipment or services requiring
payment to or from any member of the Contributed Company Group or any
Contributing Company, the non-continuance of which would have a Material
Adverse Effect on the Group Business, or in which any member of the
Contributed Company Group or any Contributing Company has granted or received
manufacturing rights, most favored nations pricing provisions or exclusive
marketing rights relating to the Group Products, other than purchase contracts
with vendors who are not the top ten (10) vendors of any member of the
Contributed Company Group or of any Contributing Companies (as measured by
purchases from them in the most recently ended fiscal year);
(c) contract providing for the development of technology used
or incorporated in any Group Products currently distributed in connection with
the Group Business or which requires any member of the Contributed Company
Group to perform specified development work for a third party, the non-
continuance of which would have a Material Adverse Effect on the Group
Business;
(d) joint venture contract or agreement or other agreement
which is reasonably expected to involve a sharing of profits or losses in any
one year in excess of $2,500,000 individually or in the aggregate from any
joint enterprise with any party (other than any member of the Contributed
Company Group);
(e) indenture, mortgage, promissory note, loan agreement,
guarantee or other agreement or commitment for the borrowing of money, for a
line of credit or for a leasing transaction of a type required to be
capitalized in accordance with Statement of Financial Accounting Standards No.
13 of the Financial Accounting Standards Board (other than those reflected in
the SSI Financial Statements or the Group Financial Statements, or those
pursuant to which payments by any member of the Contributed Company Group will
not exceed $2,500,000 in the aggregate);
(f) agreement or arrangement for the sale of any Group Assets
having a value individually or in the aggregate exceeding $2,500,000 (other
than those entered into in the ordinary course of business consistent with
past practice);
-20-
(g) agreement which would restrict Newco from engaging in any
material aspect of the Group Business or from selling any of the material
Group Products in any material geographic area (including any agreement
pursuant to which any of them has granted exclusive rights in the Group
Products to a third party);
(h) Seagate IP Rights Agreement (as defined in Section 2.15
below), other than agreements entered into with customers in the ordinary
course of business, and, in any event, any agreement that grants rights or
access to any source code for the Seagate IP Rights required for the Conduct
of the Group Business, the unavailability of which would have a Material
Adverse Effect on the Group Business, excluding commercially available, non-
customized software sold at retail or sold at less than $5,000 per license or
per seat; or
(i) agreement between or among STI, SSI and any member of the
Contributed Company Group regarding inter-company loans, revenue or cost or
Tax sharing, ownership or license of Seagate IP Rights for Group Products, or
intercompany royalties or dividends.
2.12 No Defaults. Except as disclosed in the Seagate SEC Documents
-----------
filed prior to the date of this Agreement, to Seagate's Knowledge, there
exists no event (including closing of the transactions contemplated by this
Agreement), condition or occurrence which, after notice or lapse of time, or
both, would constitute a default by under any Contributed Contract in an
manner which would have a Material Adverse Effect on the Group Business.
2.13 Certain Agreements. Neither the execution and delivery of this
------------------
Agreement or the Ancillary Agreements, nor the consummation of the
transactions contemplated hereby and thereby, will, (i) result in any payment
in an amount exceeding $250,000 individually or $2,500,000 in the aggregate
(including, without limitation, severance, unemployment compensation, golden
parachute, bonus or otherwise) becoming due by any member of the Contributed
Company Group (or by any Contributing Company, with respect to the Group
Business) or to any Employee(s) under any Group Benefit Arrangement or
otherwise, (ii) increase any benefits otherwise payable by Newco under any
Group Benefit Arrangement by more than $250,000 individually or $2,500,000 in
the aggregate, or (iii) result in the acceleration of the time of payment or
vesting of any such benefits.
2.14 Taxes. The Contributed Companies and, with respect to the Group
-----
Businesses, the Contributing Companies, have filed, or caused to be filed, all
Tax returns required to be filed by them and have paid, or caused to be paid,
all Taxes that are shown on such Tax returns as due and payable, other than
such Taxes as are being contested in good faith and for which adequate
liabilities have been established on the 1998 Group Balance Sheet, other than
where the failure to so file, pay or withhold would not have a Material
Adverse Effect on the Group Business. All Taxes required to have been paid or
accrued by the Contributed Companies and, with respect to the Group
Businesses, the Contributing Companies for all periods prior to the 1998 Group
Balance Sheet have been fully paid (except for Taxes that are adequately
provided for or reflected in the 1998 Group Balance Sheet) except where a
failure to do so would not have a Material Adverse Effect on the Group
Business. Since the date of the 1998 Group Balance Sheet, no material Tax
liability relating to the Group Business has been assessed, or is, to
Seagate's Knowledge, proposed to be assessed, incurred or accrued (other than
liabilities for Taxes arising in the ordinary course of business). To
Seagate's
-21-
Knowledge, Seagate has not received any notification that any material issues
have been raised (or are currently pending) by the Internal Revenue Service or
any other taxing authority, including, without limitation, any sales tax
authority, in connection with any of the Tax returns referred to in the first
sentence of this Section 2.14, and no waivers of statutes of limitations have
been given or requested with respect to Tax returns or Taxes related to the
Group Business or SSI and its consolidated subsidiaries. No taxing authority
is currently conducting an audit of any of the aforesaid Tax returns or to
Seagate's Knowledge is about to conduct such an audit with respect to the
Group Business. Any deficiencies asserted or assessments (including interest
and penalties) made as a result of any examination by the Internal Revenue
Service or by appropriate national, state or departmental authorities of the
Tax returns with respect to the Group Business or the Contributed Companies
have been fully paid or are adequately provided for in the 1998 Group Balance
Sheet, except where a failure to do so would not have a Material Adverse
Effect on the Group Business, and, to Seagate's Knowledge, no material
proposed (but unassessed) additional Taxes have been asserted and no Tax liens
have been filed with respect to the Group Business or the Contributed
Companies or against any of the Group Assets other than for Taxes not yet due
and payable. None of the members of the Contributed Company Group (i) has made
an election to be treated as a "consenting corporation" under Section 341(f)
of the Internal Revenue Code or (ii) is a "personal holding company" within
the meaning of Section 542 of the Internal Revenue Code. This representation
does not apply to Taxes or Tax matters relating to Taxes for which Newco and
its affiliates are entitled to indemnification under Section 13 hereof.
2.15 Intellectual Property.
---------------------
(a) The Contributed Companies and, insofar as it relates to
the Group Business, the Contributing Companies own, or have the right to use,
sell or license such Intellectual Property Rights as are necessary or required
for the Conduct of the Group Business (such Intellectual Property Rights being
hereinafter collectively referred to as the "SEAGATE IP RIGHTS") and such
ownership or rights to use, sell or license are reasonably sufficient for such
conduct of the Group Business, except for any failure to own or have the right
to use, sell or license that would not have a Material Adverse Effect on the
Group Business.
(b) All Seagate IP Rights are owned free and clear of any
Encumbrances (other than Permitted Encumbrances).
(c) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not
constitute a material breach of any material instrument or material agreement
in respect of any Seagate IP Rights licensed by or to any Contributing Company
or Contributed Company (the "SEAGATE IP RIGHTS AGREEMENTS"), will not cause
the forfeiture or termination or give rise to a right of forfeiture or
termination of any Seagate IP Right or materially impair the right of Newco to
use, sell or license any Seagate IP Right or portion thereof (except where
such breach, forfeiture, termination or impairment would not have a Material
Adverse Effect on the Group Business);
(d) There are no royalties, honoraria, fees or other payments
payable by any member of the Contributed Company Group or any Contributing
Company to any person by reason
-22-
of the ownership, use, license, purchase, sale or disposition or acquisition
of any of the Seagate IP Rights in an amount exceeding $100,000 in any one
year;
(e) To Seagate's Knowledge, no third party is infringing or
misappropriating any of the Seagate IP Rights.
(f) To Seagate's Knowledge, (i) neither the manufacture,
marketing, license, sale or intended use of any Group Product violates any
license or agreement relating thereto or infringes any Intellectual Property
Right of any other party, (ii) there is no pending or threatened claim or
litigation contesting the validity, ownership or right to use, sell, license
or dispose of any Seagate IP Right, and (iii) no third party has notified the
Contributing Companies or the Contributed Company Group that any Seagate IP
Right, or the proposed use, sale, license or disposition thereof, conflicts or
will conflict with the rights of any other party, nor is there any basis
therefor, except for any violations, infringements, claims or litigation that
would not have a Material Adverse Effect on the Group Business.
(g) The Contributing Companies and the Contributed Company
Group have taken reasonable and practicable steps designed to safeguard and
maintain the secrecy and confidentiality of, and its proprietary rights in,
all material trade secrets or other confidential information constituting
Seagate IP Rights. To Seagate's Knowledge, no current or prior officers,
employees or consultants of the Contributing Companies or the Contributed
Company Group claim an ownership interest in any Seagate IP Rights as a result
of having been involved in the development of such property while so employed,
or retained, or otherwise. To Seagate's Knowledge, all development employees
of the Seagate IP Rights, and all other officers, employees and consultants of
the Contributed Company Group have executed and delivered an agreement
regarding the protection of proprietary information and the assignment to
his/her employer or principal of the Seagate IP Rights arising from the
services performed by such persons, except where this absence of such
agreement would not have a Material Adverse Effect on the Group Business.
(h) Section 2.15(h) of the SSI Disclosure Letter sets forth
and summarizes each of the Seagate IP Rights as of the date of this Agreement
the absence of which would have a Material Adverse Effect on the Group
Business that a third party owns and that SSI or the Contributed Business
Group uses pursuant to a license, sublicense, agreement or other permission,
and describes and identifies such license, sublicense, agreement or other
permission (excluding shrink wrap licenses to commercially available software
sold at retail). Such license, sublicense, agreement or permission covering
the item is legal, valid, binding, enforceable and in full force and effect
and will continue to be legal, valid, binding, enforceable and in full force
and effect on identical terms to Newco's benefit immediately following the
Effective Time, except where it would not have a Material Adverse Effect on
Newco, and such license, sublicense, agreement or permission does not restrict
the ability to market any material Group Product in any material jurisdiction
or with respect to any material market or industry, and neither SSI nor the
Contributed Company Group is in breach or default of any such license,
sublicense, agreement or permission in a manner which would have a Material
Adverse Effect on the Group Business. No person other than the Contributing
Companies holds any license or other right to manufacture, modify, or create
derivative works of any of the
-23-
Group Products, other than OEM agreements that would not have a Material
Adverse Effect on the Group Business. No person (other than Newco) will be or
become entitled to receive a copy of source code of any software included
among the Group Assets as a result of this Agreement, any Ancillary Agreement
or any other agreement or transaction contemplated by this Agreement. To
Seagate's Knowledge, no person holds or has been granted access to any copy of
source code of any software included among the Group Assets unless such person
has agreed in writing (i) to hold such source code in confidence and take
reasonable steps to preserve the secrecy of such source code, and (ii) not to
use such source code for any purpose except (A) to support such person's
internal use of such source code or (B) to modify such source code solely for
the purpose of internally using such modifications. None of SSI or the
Contributed Companies have knowingly taken or knowingly failed to take any
action that, directly or indirectly, has caused any Intellectual Property
Rights in source code of material Group Products to enter the public domain,
such as would have a Material Adverse Effect on the Group Business.
2.16 Fees and Expenses. Except for the fees and expenses set forth
-----------------
in SSI's engagement letter with Xxxxxx, a copy of which has been provided to
VERITAS (the "XXXXXX XXXXXXX ENGAGEMENT LETTER), no member of the Contributed
Company Group and none of the Contributing Companies has paid or become
obligated to pay any fee or commission to any broker, finder or intermediary
in connection with the transactions contemplated by this Agreement and the
Ancillary Agreements.
2.17 Insurance. The members of the Contributed Company Group
---------
maintain fire and casualty, general liability, business interruption,
directors and officers, product liability and sprinkler and water damage
insurance that they believe to be reasonably prudent for their respective
businesses.
2.18 Ownership of Property. Except for Permitted Encumbrances, the
---------------------
Contributed Company Group and the Contributing Companies own, or at the
Effective Time will own, the Contributed Company Assets, free and clear of all
Encumbrances. All real and personal property included in the Group Assets is
operational and suitable for its intended use, subject to ordinary wear and
tear. To Seagate's Knowledge, no member of the Contributed Company Group is in
violation in any material respect with any zoning, building or safety
ordinance, regulation or requirement or other law or regulation applicable to
the operation of its respective owned or leased properties (the violation of
which would have a Material Adverse Effect on the Group Business ).
2.19 Environmental Matters.
---------------------
(a) During the period that the Contributed Companies and the
Contributing Companies (with respect to the Group Assets or any real estate
leased thereunder) have leased or owned their respective properties or owned
or operated their respective facilities, there have been, to Seagate's
Knowledge, no disposals, releases or threatened releases of Hazardous
Materials on, from, under or about such properties or facilities which would
cause a Material Adverse Effect on Newco. To Seagate's Knowledge there is no
presence, disposals, releases or threatened releases of Hazardous Materials
on, from, under or about any of such properties or facilities, which may have
occurred prior to said Member of the Contributed Company Group or the
Contributing Companies
-24-
(with respect to the Group Assets or any real estate leased thereunder) having
taken possession of any of such properties or facilities, where such Hazardous
Materials would cause a Material Adverse Effect on the Newco.
(b) None of the properties or facilities which are Group
Assets is or has been the subject of an Environmental Violation, which would
cause a Material Adverse Effect on Newco. During the time that a Member of the
Contributed Company Group or the Contributing Companies (with respect to the
Group Assets or any real estate leased thereunder) owned or leased its
respective properties and facilities, none of said companies and, to Seagate's
Knowledge, no third party, used, generated, manufactured or stored on, under
or about such properties or facilities or transported to or from such
properties or facilities any Hazardous Materials (except those Hazardous
Materials associated with general office use or janitorial supplies) in a
manner which would result in a Material Adverse Effect on Newco.
(c) During the time that any member of the Contributed
Company Group and the Contributing Companies (with respect to the Group Assets
or any real estate leased thereunder) owned or leased its respective
properties and facilities, to Seagate's Knowledge, there has been no
litigation brought or threatened against any such Company, or any settlement
reached by any such Company with, any party or parties concerning the
presence, disposal, release or threatened release of any Hazardous Materials
on, from or under any of such properties or facilities or relating to any
alleged Environmental Violation, except for litigation or settlement which
would not have a Material Adverse Effect on Newco.
2.20 Interested Party Transactions. Except as disclosed in the
-----------------------------
Seagate SEC Documents filed prior to the date of this Agreement, no officer or
director of a Contributing Company, or any "affiliate" or "associate" (as
those terms are defined in Rule 405 promulgated under the Securities Act) of a
Contributing Company has, either directly or indirectly, a material interest
in: (i) any person or entity which purchases from or sells, licenses or
furnishes to the Contributed Company Group in connection with the Group
Business, any goods, property, technology or intellectual or other property
rights or services; or (ii) any Contributed Contract; which, in the case of
either subpart (i) or (ii) would have a Material Adverse Effect on the Group
Business.
2.21 Fairness Opinion. SSI's Board of Directors has received an
----------------
opinion dated as of the date hereof from Xxxxxx to the effect that, as of the
date hereof, the terms of the transactions contemplated by this Agreement and
the Ancillary Agreements are fair to SSI's stockholders from a financial point
of view.
2.22 Title to and Condition and Sufficiency of Group Assets. A
------------------------------------------------------
Member of the Contributed Company Group and/or a Contributing Company owns or
at the Closing will own the Group Assets and have good and marketable title
thereto, free and clear of all Encumbrances whatsoever, other than the
Permitted Encumbrances. The Group Assets transferred to Newco constitute all
assets, properties, rights, contracts and Intellectual Property Rights that
are necessary or required for the Conduct of the Group Business, without (i)
the need to purchase, license or acquire any other material asset or property;
(ii) violating any contractual rights of any third party; or (iii) infringing,
misappropriating or misusing any software or Intellectual Property Rights of
any
-25-
third party, except for such assets, properties, rights, contracts, software
and Intellectual Property Rights, the absence of which would not have a
Material Adverse Effect on the Group Business. Title to all Group Assets is
freely transferable to, and will be transferred to, Newco free and clear of
all Encumbrances, other than Permitted Encumbrances. Such transfer can occur
without obtaining the consent or approval of any person, except where the
failure to transfer the Group Asset would not have a Material Adverse Effect
on Newco. To the extent that VERITAS is assuming obligations that have an
associated deferred revenue on the 1998 Group Balance Sheet, the cash
associated with such deferred revenue shall be transferred to Newco. At the
Closing, the Contributing Companies will contribute, transfer and deliver to
Newco all right, title and interest in and to all Group Assets, free and clear
of all Encumbrances, other than Permitted Encumbrances. The Group Products
includes all software under development by the Group Business.
2.23 No Restrictive Agreements. Other than this Agreement and the
-------------------------
Ancillary Agreements, neither any Member of the Contributed Company Group nor
SSI nor any of the Group Assets is bound, or materially and adversely affected
by, any judgment, injunction, order, decree, contract, covenant or agreement
(noncompete or otherwise) that restricts or prohibits (or purports to restrict
or prohibit) the Conduct of the Group Business or from competing for the sale
of the Group Products anywhere in the world (including without limitation any
contracts, covenants or agreements restricting the geographic area in which
the Group Business may sell, license, market, distribute or support any Group
Products or restricting the markets, customers or industries that Newco may
address after the Closing in the Conduct of the Group Business (collectively,
"RESTRICTIVE AGREEMENTS"), in a manner, in any of the foregoing cases, which
will have a Material Adverse Effect upon Newco.
2.24 Supplier and Customer Relationships. To Seagate's Knowledge,
-----------------------------------
(i) the Contributed Company Group has good commercial working relationships
with the customers for the Group Business, and (ii) since January 1, 1998, no
customer of, or supplier to the Group Business has canceled or otherwise
terminated any material relationship concerning the Group Business with the
Contributed Company Group or SSI (with respect to the Group), or materially
decreased or limited its purchases or provision of materials supplied to the
Group Business or under any Material Contributed Contract from the
corresponding period in 1997, where any of the foregoing actions would cause a
Material Adverse Effect on the Group Business, and to Seagate's Knowledge, no
customer or supplier has threatened to take any such action.
2.25 Product and Inventory Status.
----------------------------
(a) Product Quality, Warranty Claims. All Group Products
--------------------------------
manufactured, sold, licensed, leased or delivered in connection with the Group
Business conform in all material respects to applicable contractual
commitments, express and implied warranties, and, to Seagate's Knowledge,
there is no material Liability (nor any basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim or
demand giving rise to any material Liability) for replacement or repair
thereof or other damages in connection therewith, except for such conformance
as would not have a Material Adverse Effect on Newco.
-26-
(b) Inventory. To Seagate's Knowledge, its inventories
---------
recorded on the 1998 Group Balance Sheet consist primarily of materials used
in software products, related supplies and packaging materials, all of which
are merchantable, fit for the purpose for which they were procured or
manufactured, and are in a condition and quantity usable in the ordinary
course of business and to Seagate's Knowledge, none of these inventories are
obsolete, damaged or defective, except in each case where the failure of these
inventories to be so would not have a Material Adverse Effect on Newco or
where a sufficient provision with respect to the possibility of such failure
is included in the 1998 Group Balance Sheet.
3. REPRESENTATIONS AND WARRANTIES OF VERITAS AND NEWCO
Except as set forth in the respectively referenced provisions of the
VERITAS Disclosure Letter, delivered by VERITAS on behalf of VERITAS and each
VERITAS Subsidiary (collectively, the "VERITAS GROUP"), to SSI and STI
concurrently herewith and certified by an officer of VERITAS, on behalf of the
VERITAS Group, respectively, to be true, accurate and complete to the best of
his knowledge (the "VERITAS DISCLOSURE LETTER"), VERITAS, on behalf of the
VERITAS Group, hereby represents and warrants to SSI and STI that:
3.1 Organization; Good Standing; Qualification and Power. The
----------------------------------------------------
VERITAS Subsidiaries are all of the subsidiaries of VERITAS or any of its
direct or indirect subsidiaries. VERITAS and each of the VERITAS Subsidiaries
is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its formation, has all requisite corporate
power and authority to own, lease and operate the VERITAS Assets and for the
Conduct of the VERITAS Business as now being conducted, 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 so
to qualify would not have a Material Adverse Effect on VERITAS. VERITAS has
delivered to SSI or its counsel complete and correct copies of the Certificate
of Incorporation and Bylaws of VERITAS and will deliver to SSI or its counsel
prior to the Effective Time the equivalent charter documents of each VERITAS
Subsidiary, in each case as amended to the date of this Agreement. Except for
the VERITAS Subsidiaries, none of VERITAS nor any of the VERITAS Subsidiaries
owns, directly or indirectly, any capital stock or other equity interest of
any corporation or has any direct or indirect equity or ownership interest in
any other business, whether organized as a corporation, partnership, joint
venture or otherwise.
3.2 Capital Structure.
-----------------
(a) Stock and Options. The authorized and issued and
-----------------
outstanding capital stock of VERITAS, the VERITAS Subsidiaries and Newco is
set forth in Section 3.2(a) of the VERITAS Disclosure Letter. Except as
specified in Section 3.2(a) of the VERITAS Disclosure Letter, no shares of the
capital stock of VERITAS or of any of the VERITAS Subsidiaries was held by any
of them in their treasury or reserved for issuance upon the exercise of
options or warrants. All outstanding shares of the capital stock of VERITAS
are set forth in Section 3.2(a) of the VERITAS Disclosure Letter and are
validly issued, fully paid and nonassessable and not subject to preemptive
rights pursuant to any statute, pursuant to the Certificate of Incorporation
or Bylaws of VERITAS, or
-27-
pursuant to any agreement or document to which any of them is a party or by
which any of them is bound. All outstanding shares of the capital stock of
each of the VERITAS Subsidiaries are validly issued, fully paid and
nonassessable and are owned by VERITAS, or one of the VERITAS Subsidiaries,
free and clear of any Encumbrances. Section 3.2(a) of the VERITAS Disclosure
Letter contains a correct and complete list of each of the VERITAS Options,
VERITAS Warrants and VERITAS Debentures, including the name of the holders of
such VERITAS Options and VERITAS Warrants, the plan pursuant to which such
VERITAS Options were issued (if applicable), the number of shares covered by
such VERITAS Options, VERITAS Warrants and VERITAS Debentures (or into which
it is convertible), the per share exercise price of such VERITAS Options,
VERITAS Warrants and VERITAS Debentures, and the vesting schedule applicable
to such VERITAS Options, including the number of shares vested as of the date
of this Agreement.
(b) No Other Commitments. Except as set forth in Section
--------------------
3.3(a) of the VERITAS Disclosure Letter, there are no options, warrants,
calls, rights, commitments, conversion rights or agreements of any character
to which VERITAS or any of its respective direct and indirect subsidiaries, is
a party or by which any of them is bound obligating them to issue, deliver or
sell, or cause to be issued, delivered or sold, any shares of their capital
stock, or securities convertible into or exchangeable for shares of their
capital stock, or obligating any of them to grant, extend or enter into any
such option, warrant, call, right, commitment, conversion right or agreement.
There is no voting trust, proxy or other agreement or understanding to which
VERITAS or any of its respective direct or indirect subsidiaries is a party
with respect to the voting of the capital stock of any member of the VERITAS
Group. All shares of capital stock of any member of the VERITAS Group are held
free and clear of any Encumbrances.
(c) Registration Rights. Neither VERITAS nor any of their
--------------------
respective subsidiaries is under any obligation to register under the
Securities Act any of its presently outstanding securities or any securities
that may be subsequently issued which offering would have a Material Adverse
Effect on Newco, except as disclosed in the VERITAS Disclosure Letter.
3.3 Authority.
---------
(a) Corporate Action. Subject to approval of this Agreement
----------------
and the Ancillary Agreements by the stockholders of VERITAS, VERITAS has all
requisite corporate power and authority to enter into this Agreement and the
Ancillary Agreements, to perform its obligations hereunder and thereunder, and
to consummate the transactions contemplated by this Agreement and the
Ancillary Agreements. This Agreement and the Ancillary Agreements have been
duly executed and delivered by VERITAS and are the valid and binding
obligation of VERITAS enforceable against VERITAS in accordance with their
terms, except as enforceability may be limited by bankruptcy and other similar
laws and general principles of equity.
(b) No Conflict. Neither the execution, delivery and
-----------
performance of this Agreement and the Ancillary Agreements nor the
consummation of the transactions contemplated hereby or thereby nor compliance
with the provisions hereof will (i) conflict with, or result in any violations
of, or cause a default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, amendment, cancellation or
acceleration of any obligation contained in, or
-28-
the loss of any material benefit under, or result in the creation of any
Encumbrance upon the any of the VERITAS Assets under, any term, condition or
provision of (x) the Certificate of Incorporation or Bylaws of VERITAS or the
equivalent organizational documents of any of the VERITAS Subsidiaries or (y)
any loan or credit agreement, note, bond, mortgage, indenture, lease or other
material agreement, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to VERITAS, VERITAS' property or the VERITAS Assets,
other than any such conflicts, violations, defaults, rights or Encumbrances
which, individually or in the aggregate, would not have a Material Adverse
Effect on VERITAS; or (ii) require the affirmative vote of the holders of
greater than a majority of the issued and outstanding capital stock of
VERITAS.
(c) Governmental Consents. Except (i) as set forth in
---------------------
Section 3.3(c) of the VERITAS Disclosure Letter; (ii) such filings,
authorizations, orders and approvals as may be required under State Takeover
Laws; (iii) such filings and notifications as may be necessary under the HSR
Act; (iv) the filings, authorizations, orders, notifications, and approvals
contemplated by this Agreement or the Ancillary Agreements; and (v) such other
filings, authorizations, orders and approvals which if not obtained or made,
would not have a Material Adverse Effect on Newco or have a material adverse
effect on the ability of VERITAS to consummate the transactions contemplated
by this Agreement or the Ancillary Agreements, no consent, approval, order or
authorization of, or registration, declaration or filing with, any
governmental entity is required to be obtained by the VERITAS Group in
connection with the execution and delivery of this Agreement or the Ancillary
Agreements by VERITAS, Newco, and the Merger Sub or the performance by them of
their respective obligations hereunder or thereunder.
3.4 SEC Documents.
-------------
(a) SEC Reports. VERITAS has delivered to SSI or its counsel
-----------
correct and complete copies of the final version of each report, schedule,
registration statement and definitive proxy statement filed by VERITAS with
the SEC on or after June 27, 1997 (the "VERITAS SEC DOCUMENTS"), which are the
material documents (other than preliminary material) that VERITAS was required
to file with the SEC on or after June 27, 1997 with respect, in whole or in
part, to VERITAS or the VERITAS Assets. As of their respective dates or, in
the case of registration statements, their effective dates and except as
disclosed in the VERITAS SEC Documents, none of the VERITAS SEC Documents
(including all exhibits and schedules thereto and documents incorporated by
reference therein) contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading, and there is no requirement under the
Securities Act or the Exchange Act, as the case may be, to have amended any
such filing. The VERITAS SEC Documents complied, when filed, in all material
respects with the then applicable requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations promulgated by
the SEC thereunder. VERITAS has filed all documents and agreements that were
required to be filed as exhibits to the VERITAS SEC Documents.
(b) VERITAS Financial Statements; Absence of Undisclosed
----------------------------------------------------
Liabilities. The audited consolidated financial statements, dated as of and
-----------
for the period ended, December 31, 1997,
-29-
and the unaudited consolidated financial statements, dated as of and for the
period ending June 30, 1998, of VERITAS and its consolidated subsidiaries
("VERITAS FINANCIAL STATEMENTS") complied as to form in all material respects
with the then applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
GAAP applied on a consistent basis during the periods involved (except as may
have been indicated in the notes thereto) and fairly present in all material
respects (subject, in the case of the unaudited statements, to normal year-end
audit adjustments) the consolidated financial position of the VERITAS Group as
at the respective dates thereof and the consolidated results of their operations
and cash flows for the respective periods then ended. VERITAS has no liabilities
or obligations of any nature (matured or unmatured, fixed or contingent) which
are, individually or in the aggregate, of a nature required to be disclosed on
the face of a consolidated balance sheet for VERITAS and its consolidated
subsidiaries prepared in accordance with GAAP and which are material to the
VERITAS Business, except for such liabilities or obligations as (i) were accrued
or were provided for in the consolidated balance sheet dated June 30, 1998,
included in the VERITAS Financial Statements as of the date thereof (the
"VERITAS FINANCIAL STATEMENTS BALANCE SHEET DATE") or (ii) are of a normally
recurring nature and were incurred after the VERITAS Financial Statements
Balance Sheet Date in the ordinary course of business consistent with past
practice. All liabilities and valuation accounts established and reflected in
the VERITAS Financial Statements are to VERITAS' Knowledge adequate. At the
VERITAS Financial Statements Balance Sheet Date, there were no material loss
contingencies (as such term is used in Statement No. 5) which are not adequately
provided for in the VERITAS Financial Statements as required by Statement No. 5.
3.5 Disclosure; Information Supplied. No representation or warranty
--------------------------------
made by VERITAS in this Agreement, nor any financial statement, certificate or
exhibit prepared and furnished or to be prepared and furnished by VERITAS or
their respective representatives pursuant hereto or in connection with the
transactions contemplated hereby, or in any VERITAS SEC Document filed by it,
when taken together, contains any untrue statement of a material fact, or omits
to state a material fact necessary to make the statements or facts contained
herein or therein, taken as a whole not misleading in light of the circumstances
under which they were furnished. None of the information supplied or to be
supplied by VERITAS for inclusion or incorporation by reference in the Form S-4
and Prospectus/Proxy Statement will, at the time the information is supplied
contain, after giving effect to any supplement or amendment thereto, no untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not materially misleading. The
Prospectus/Proxy Statement will in all material respects comply as to form with
the provisions of the Exchange Act and the rules and regulations promulgated by
the SEC thereunder.
3.6 Compliance with Applicable Laws. Except as disclosed in the
-------------------------------
VERITAS SEC Documents filed prior to the date of this Agreement, the VERITAS
Business is not being conducted in violation of any law, ordinance, regulation,
rule or order of any governmental entity where such violation would have a
Material Adverse Effect on VERITAS. Except as disclosed in the VERITAS SEC
Documents filed prior to the date of this Agreement, VERITAS has not been
notified in writing by any governmental entity that any investigation or review
with respect to VERITAS or any of the VERITAS Subsidiaries or any of the VERITAS
Assets is pending or threatened, nor has any
-30-
governmental entity notified any of them in writing of its intention to conduct
the same, which investigation or review could reasonably be expected to have a
Material Adverse Effect on VERITAS. The members of the VERITAS Group have all
material permits, licenses and franchises from governmental entities required
for the Conduct of the VERITAS Business, except for those whose absence would
not have a Material Adverse Effect on VERITAS.
3.7 Litigation. Except as disclosed in the VERITAS SEC Documents filed
----------
prior to the date of this Agreement, or as would not reasonably be expected to
have a Material Adverse Effect on VERITAS, there is no suit, action,
arbitration, demand, claim or proceeding pending or, to VERITAS' Knowledge,
threatened against VERITAS or the VERITAS Assets; nor is there any judgment,
decree, injunction, ruling or order of any governmental entity or arbitrator or
settlement agreement outstanding against VERITAS or any of the VERITAS Assets.
VERITAS has delivered or made available to SSI or its counsel correct and
complete copies of all correspondence prepared by its counsel for VERITAS'
auditors in connection with the last two completed audits of VERITAS' financial
statements and any such correspondence since the date of the last such audit. No
member of the VERITAS Group is a party to any decree, order or arbitration award
(or agreement entered into in any administrative, judicial or arbitration
proceeding with any governmental authority) with respect to the VERITAS Assets,
VERITAS Employees, or the VERITAS Business that could reasonably be expected to
have a Material Adverse Effect on VERITAS. Except for violations as would not
have a Material Adverse Effect on VERITAS, none of the members of the VERITAS
Group is in violation of any decree, order or arbitration award that names such
company, or any of such companies, as a party or that otherwise, to VERITAS'
Knowledge, involves such company or any of such companies, or of any law,
ordinance, statute, or governmental authority to which the VERITAS Assets are
subject, including, without limitation, laws, rules and regulations relating to
occupational health and safety, equal employment opportunities, fair employment
practices, and sex, race, religious and age discrimination. There is no claim,
action, suit, arbitration, mediation, investigation or other proceeding of any
nature pending or, to VERITAS' Knowledge, threatened, at law or in equity, by
way of arbitration or before any court, governmental department, commission,
board or agency that: (i) may adversely affect, contest or challenge any party's
authority, right or ability to perform its obligations under this Agreement or
any of the Ancillary Agreements; (ii) challenges or contests VERITAS' right,
title or ownership of any of the VERITAS Assets or seeks to impose an
Encumbrance (other than a Permitted Encumbrance) on, or a transfer of title or
ownership of, any of the VERITAS Assets; (iii) asserts that any action taken by
any employee, consultant or contractor of VERITAS in connection with the Group
Business infringes or misappropriates any Intellectual Property Rights of any
third party; (iv) seeks to enjoin, prevent or hinder operation of the VERITAS
Business or the consummation of any of the transactions contemplated by this
Agreement or any of the Ancillary Agreements; (v) would impair or have an
adverse affect on Newco's right or ability to use or exploit any of the VERITAS
Assets; or (vi) involves or relates to any potentially material claim against
VERITAS by any creditor of VERITAS or involves any claim of fraudulent
conveyance or any similar claim, except in cases (ii), (iii) and (v) where such
proceeding could not reasonably be expected to have a Material Adverse Effect on
Newco.
-31-
3.8 ERISA and Other Compliance.
--------------------------
(a) Section 3.8(a) of the VERITAS Disclosure Letter lists each
employment, severance, compensation or other similar contract, arrangement or
policy and each plan or arrangement (written or oral) providing for insurance
coverage (including any self-insured arrangements), workers' benefits, vacation
benefits, severance benefits, disability benefits, death benefits,
hospitalization benefits, retirement benefits, deferred compensation, profit-
sharing, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits for employees, consultants or directors
(other than workers compensation, unemployment compensation and other government
mandated programs) which both (A) is entered into, maintained or contributed to,
as the case may be, by any member of the VERITAS, and (B) covers any Employee or
former employee of the VERITAS Business (collectively as the "VERITAS BENEFIT
ARRANGEMENTS.") Each VERITAS Benefit Arrangement maintained by any member of the
VERITAS Group has been maintained in substantial compliance with its terms and
with the requirements prescribed by any and all statutes, orders, rules and
regulations which are applicable to such VERITAS Group Benefit Arrangement
except as would not have a Material Adverse Effect on VERITAS. Section 3.8(a) of
the VERITAS Disclosure Letter also identifies each "employee benefit plan," as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") ("EMPLOYEE BENEFIT PLAN"), in which any of the Employees
participate (collectively, the " VERITAS GROUP EMPLOYEE PLANS"). Copies of all
VERITAS Group Benefit Arrangements have been made available to SSI or its
counsel. All contributions or premiums currently due and payable with respect to
any of the VERITAS Group Employee Plans have been made as required under ERISA
or have been accrued on the VERITAS Financial Statements as of the VERITAS
Financial Statements Balance Sheet Date, or will be made prior to the Effective
Time.
(b) None of the VERITAS Employee Benefit Plans maintained by
any member of the VERITAS Group (i) is a multiemployer plan, within the meaning
of Section 3(37) or 4001(a)(3) of ERISA (a "MULTIEMPLOYER PLAN"), or a single
employer pension plan, within the meaning of Section 4001(a)(15) of ERISA, for
which Newco could incur liability under Section 4063 or 4064 of ERISA (a
"MULTIPLE EMPLOYER PLAN"), or (ii) provides or promises to provide retiree
medical or life insurance benefits except in connection with (a) benefit
coverage mandated by applicable law, including without limitation, coverage
provided pursuant to Section 4980B of the Code; (b) death or disability benefits
under any of the VERITAS Group Benefit Arrangements; (c) benefits arising in
connection with a separation or severance program, plan or arrangement; and (d)
life insurance benefits for any employee who dies while in service with VERITAS.
No member of the VERITAS Group has incurred or will incur prior to or as of the
Effective Time any material liability under, arising out of or by operation of
Title IV of ERISA (other than liability for premiums to the Pension Benefit
Guaranty Corporation arising in the ordinary course), including any liability in
connection with (i) the termination or reorganization of any employee pension
benefit plan subject to Title IV of ERISA or (ii) with withdrawal from any
Multiemployer Plan or Multiple Employer Plan.
(c) The appropriate VERITAS entity has timely provided, or will
have provided prior to the Effective Time, to VERITAS Employees entitled thereto
all required notices and made
-32-
coverage available pursuant to Section 4980B of the Internal Revenue Code and
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), with respect to any "qualifying event" (as defined in Section
4980B(f)(3) of the Internal Revenue Code). The appropriate VERITAS entity will
timely provide to VERITAS Employees entitled thereto all required notices and
make coverage available pursuant to Internal Revenue Code Section 4980B and
COBRA with respect to any "qualifying event" (as defined in Section 4980B(f)(3)
of the Internal Revenue Code) occurring prior to and including the Effective
Time. No material Tax payable on account of Section 4980B of the Internal
Revenue Code has been incurred by any member of the VERITAS Group with respect
to any current or former employees (or their beneficiaries).
(d) No benefit payable or which may become payable by any
member of the VERITAS Group with respect to any VERITAS Employee shall
constitute a "parachute payment" (as defined in Section 280G(b)(2) of the
Internal Revenue Code).
(e) The VERITAS Group is in compliance with all applicable
laws, agreements and contracts relating to employment, employment practices,
wages, hours, and terms and conditions of employment, including, but not limited
to, employee compensation matters, relating to VERITAS Employees, except where
the failure to be in compliance would not have a Material Adverse Effect on
Newco.
(f) The VERITAS Group has, to VERITAS' Knowledge, good labor
relations and to VERITAS' Knowledge there are no facts indicating that the
consummation of the transactions contemplated hereby will have a material
adverse effect on labor relations with VERITAS Employees or that any of the
VERITAS Employees intends to leave its or their employ, where the same would
have a Material Adverse Effect on VERITAS.
(g) To VERITAS' Knowledge, no VERITAS employee who is a key
developer of a VERITAS product is subject to any agreement, obligation, order or
other legal hindrance that impedes or might impede such executive or key
employee from devoting his or her full business time to the affairs of Newco
after the Effective Time.
(h) The VERITAS Group has, to VERITAS' Knowledge and with
respect to the VERITAS Employees, complied with all laws, rules and regulations
relating to the employment of labor, including provisions thereof relating to
wages, hours, equal opportunity, collective bargaining and the payment of social
security and other Taxes, except where non-compliance would not have a Material
Adverse Effect on VERITAS.
(i) VERITAS is not indebted to any executive, officer or
director, whether by loan, advance or otherwise, other than for salaries accrued
but not yet payable and reimbursable out-of-pocket expenses incurred in the
ordinary course of business consistent with past practice and not yet payable,
nor is any officer, director, employee or shareholder so indebted to VERITAS,
except as disclosed in the VERITAS Balance Sheet or the VERITAS SEC Documents.
-33-
3.9 Absence of Certain Changes or Events. Except as disclosed in the
------------------------------------
VERITAS SEC Documents filed prior to the date of this Agreement, since the
VERITAS Financial Statements Balance Sheet Date there has not occurred:
(a) any change or event which could reasonably be expected to
have a Material Adverse Effect on VERITAS; provided, however, that in no event
will a change in the trading price of VERITAS Common Stock be deemed a Material
Adverse Effect on VERITAS;
(b) any amendments or changes in the Certificate of
Incorporation or Bylaws of any member of the VERITAS Group;
(c) any damage, destruction to or loss of VERITAS assets not
covered by insurance, which would have a Material Adverse Effect on VERITAS;
(d) any redemption, repurchase or other acquisition of shares
of any member of the VERITAS Group (other than pursuant to arrangements with
employees or consultants), or any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to the capital stock of any member of the VERITAS Group or, with respect to
dividends or other distributions of cash or property arising from the VERITAS
Business ;
(e) any material increase in or modification of the compensation
or benefits payable by VERITAS or to become payable to the VERITAS Employees,
except in the ordinary course of the business, consistent with past practice
and necessary to respond to third party solicitation of VERITAS Employees;
(f) other than as required by applicable statute or governmental
regulation, any material increase in or modification of any VERITAS Group
Benefit Arrangement (including, but not limited to, the granting of stock
options, restricted stock awards or stock appreciation rights) that will
become binding upon Newco upon consummation of the transactions contemplated
herein, for or with respect to any of the VERITAS Employees, other than (i) in
the ordinary course of the business, consistent with past practice, or to
respond to third party solicitation of VERITAS Employees, and (ii) if after
the date of this Agreement, which is authorized, if required, pursuant to
Section 5.3 below;
(g) any sale of a material amount of the VERITAS Assets, or any
acquisition by any member of the VERITAS Group of a material amount of assets,
other than in the ordinary course of the business, consistent with past
practice;
(h) any alteration in any term of any outstanding capital stock
or rights to acquire capital stock of any member of the VERITAS Group,
including, but not limited to, acceleration of the vesting or any change in the
terms of any outstanding stock options;
(i) other than in the ordinary course of business, consistent
with past practice, (A) any incurrence, assumption or guarantee by any member of
the VERITAS Group of any debt of any person, other than any member of the
VERITAS Group, for borrowed money in an amount
-34-
exceeding $2,500,000; (B) issuance or sale by any member of the VERITAS Group of
any securities convertible into or exchangeable for their respective debt
securities; or (C) issuance or sale of options or other rights to acquire from
the VERITAS Group, directly or indirectly, debt securities of any member of the
VERITAS Group, or any securities convertible into or exchangeable for any such
debt securities;
(j) any creation or assumption by any member of the VERITAS
Group of any Encumbrance (other than VERITAS Permitted Encumbrances) on any
VERITAS Asset in excess of $2,500,000 in the aggregate, other than to refinance
a liability reflected in the VERITAS Financial Statements in the ordinary course
of business;
(k) any making by any member of the VERITAS Group of any loan,
advance or capital contribution to or investment in any person other than to
refinance a liability reflected in the VERITAS Financial Statements and other
than (i) loans, advances or capital contributions made in the ordinary course of
the business, and (ii) other loans and advances, where the aggregate amount of
all such items outstanding at any time does not exceed $1,000,000;
(l) any amendment of, relinquishment, termination or non-
renewal by VERITAS of any of the VERITAS Contracts, other than in the ordinary
course of business consistent with past practice;
(m) any transfer or grant of a right under the VERITAS IP
Rights, other than those transferred or granted in the ordinary course of
business, consistent with past practice, except for any grant of a right to
source code or grant of any exclusive rights to any VERITAS IP Rights, each of
which shall be set forth in Section 3.09(m) of the VERITAS Disclosure Letter;
(n) any labor dispute with, or charge of unfair labor practice
by, any member of the VERITAS Group (other than routine individual grievances),
any activity or proceeding by a labor union or representative thereof to
organize any VERITAS Employees or, to VERITAS' Knowledge, any campaign being
conducted to solicit authorization from VERITAS Employees to be represented by
such labor union, where such dispute, practice, activity, proceeding, or c
ampaign would have a Material Adverse Effect on VERITAS; or
(o) any agreement by any member of the VERITAS Group to take
any of the actions described in the preceding clauses (a) through (n) (other
than the transactions contemplated by this Agreement or the Ancillary
Agreements).
3.10 Full Force and Effect. Each of the VERITAS Contracts and
---------------------
Governmental Permits of VERITAS is in full force and effect and is not subject
to any breach or default thereunder by any member of the VERITAS Group or, to
VERITAS' Knowledge, any other party thereto, except for those VERITAS Contracts
and Governmental Permits of VERITAS, the absence of which would not have a
Material Adverse Effect on VERITAS.
3.11 Agreements. Section 3.11 of the VERITAS Disclosure Letter lists
----------
all VERITAS contracts as of the date of this Agreement of the type described
below to which any member of the
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VERITAS Group is a party and which are material to the VERITAS Business (the
"MATERIAL VERITAS CONTRACTS") (and copies of all such VERITAS Contracts have
been identified to and made available for review by SSI or its counsel):
(a) contract with or commitment to any labor union which would
have a Material Adverse Effect on VERITAS;
(b) continuing contract for the future purchase, sale or
manufacture of products, material, supplies, equipment or services requiring
payment to or from any member of the VERITAS Group, the non-continuance of which
would have a Material Adverse Effect on VERITAS, or in which any member of the
VERITAS Group has granted or received manufacturing rights, most favored nations
pricing provisions or exclusive marketing rights relating to the Group Products,
other than purchase contracts with vendors who are not the top ten (10) vendors
of any member of the VERITAS Group (as measured by purchases from them in the
most recently ended fiscal year);
(c) contract providing for the development of technology used
or incorporated in any VERITAS Products currently distributed in connection with
the VERITAS Business or which requires any member of the VERITAS Group to
perform specified development work for a third party, the non-continuance of
which would have a Material Adverse Effect on VERITAS;
(d) joint venture contract or agreement or other agreement
which is reasonably expected to involve a sharing of profits or losses in any
one year in excess of $2,500,000 individually or in the aggregate from any joint
enterprise with any party other than any member of the VERITAS Group;
(e) indenture, mortgage, promissory note, loan agreement,
guarantee or other agreement or commitment for the borrowing of money, for a
line of credit or for a leasing transaction of a type required to be capitalized
in accordance with Statement of Financial Accounting Standards No. 13 of the
Financial Accounting Standards Board (other than those reflected in the VERITAS
Financial Statements or those pursuant to which payments by any member of the
VERITAS Group do not exceed $2,500,000 in the aggregate);
(f) agreement or arrangement for the sale of any VERITAS Assets
having a value individually or in the aggregate of in excess of $2,500,000
(other than in the ordinary course of business consistent with past practice);
(g) agreement which would restrict Newco from engaging in any
material aspect of the VERITAS Business or from selling any material Group
Products in any material geographic area; including any agreement pursuant to
which any of them has granted exclusive rights to a third party;
(h) VERITAS IP Rights Agreement (as defined in Section 3.15
below), other than agreements entered into with VERITAS customers in the
ordinary course of business, and, in any event, any agreement that grants rights
or access to any source code for the VERITAS IP Rights, the unavailability of
which would have a Material Adverse Effect on VERITAS; or
-36-
(i) agreement between or among VERITAS and any member of the
VERITAS Group regarding inter company loans, revenue or cost or Tax sharing,
ownership or license of VERITAS IP Rights for VERITAS Products, or intercompany
royalties or dividends.
3.12 No Defaults. Except as disclosed in the VERITAS SEC Documents
-----------
filed prior to the date of this Agreement, to VERITAS' Knowledge, there exists
no event (including closing of the transactions contemplated by this Agreement),
condition or occurrence which, after notice or lapse of time, or both, would
constitute a default by VERITAS under any VERITAS Contract in an manner which
would have a Material Adverse Effect on VERITAS.
3.13 Certain Agreements. Neither the execution and delivery of this
------------------
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby, will: (i) result in any payment in an amount
exceeding $250,000 individually or $2,500,000 in the aggregate (including,
without limitation, severance, unemployment compensation, golden parachute,
bonus or otherwise) becoming due by any member of the VERITAS Group or to any
VERITAS Employee(s) under any VERITAS Group Benefit Arrangement or otherwise,
(ii) increase any benefits otherwise payable under any VERITAS Group Benefit
Arrangement by more than $250,000 individually or $2,500,000 in the aggregate,
or (iii) result in the acceleration of the time of payment or vesting of any
such benefits.
3.14 Taxes. The VERITAS Group has filed, or caused to be filed, all Tax
-----
returns required to be filed by the VERITAS Group and has paid, or caused to be
paid, all Taxes that are shown on such Tax returns as due and payable, other
than such Taxes as are being contested in good faith and for which adequate
liabilities have been established on the most recent balance sheet included in
the VERITAS Financial Statements ("VERITAS BALANCE SHEET"), other than where the
failure to so file, pay or withhold would not have a Material Adverse Effect on
VERITAS. All Taxes required to have been paid or accrued by VERITAS for all
periods prior to the VERITAS Balance Sheet Date have been fully paid (except for
Taxes on VERITAS that are adequately provided for or reflected in the VERITAS
Balance Sheet, as applicable) except where a failure to do so would not have a
Material Adverse Effect on VERITAS. Since the date of the VERITAS Balance Sheet,
no material Tax liability has been assessed to VERITAS, incurred or accrued
(other than liabilities for Taxes arising in the ordinary course of business).
To VERITAS' Knowledge, (i) no material issues have been raised (or are currently
pending) by the Internal Revenue Service or any other taxing authority,
including, without limitation, any sales tax authority, in connection with any
of the Tax returns referred to in the first sentence of this Section 3.14, and
no waivers of statutes of limitations have been given or requested with respect
to Tax returns or Taxes related to the VERITAS Business, (ii) no taxing
authority is currently conducting an audit of any of the aforesaid Tax returns
of VERITAS or is about to conduct such an audit with respect to the VERITAS
Business. Any deficiencies asserted or assessments (including interest and
penalties) made as a result of any examination by the Internal Revenue Service
or by appropriate national, state or departmental authorities of the Tax returns
of or with respect to VERITAS have been fully paid or are adequately provided
for in the VERITAS Balance Sheet except where a failure to do so would not have
a Material Adverse Effect on VERITAS and to VERITAS' Knowledge no material
proposed to VERITAS (but unassessed) additional Taxes have been asserted and no
material Tax liens have been
-37-
filed against VERITAS or any of the VERITAS Assets other than for Taxes not yet
due and payable. None of the members of the VERITAS Group (i) has made an
election to be treated as a "consenting corporation" under Section 341(f) of the
Internal Revenue Code or (ii) is a "personal holding company" within the meaning
of Section 542 of the Internal Revenue Code. This representation does not apply
to Taxes or Tax Matters relating to Taxes for which STI or SSI or any member of
the Contributed Company Group is entitled to indemnification under Section 13
hereto.
3.15 Intellectual Property.
---------------------
(a) VERITAS owns, or has the right to use, sell or license such
Intellectual Property Rights (as defined below) as are necessary or required for
the Conduct of the VERITAS Business (such Intellectual Property Rights being
hereinafter collectively referred to as the "VERITAS IP RIGHTS") and such
ownership or rights to use, sell or license are reasonably sufficient for the
Conduct of the VERITAS Business, except for any failure to own or have the right
to use, sell or license that would not have a Material Adverse Effect on
VERITAS.
(b) All VERITAS IP Rights are owned free and clear of any
Encumbrances.
(c) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not constitute
a material breach of any material instrument or material agreement in respect of
any VERITAS IP Rights (the "VERITAS IP RIGHTS AGREEMENTS"), will not cause the
forfeiture or termination or give rise to a right of forfeiture or termination
of any VERITAS IP Right or materially impair the right of Newco to use, sell or
license any VERITAS IP Right or portion thereof (except where such breach,
forfeiture, termination or impairment would not have a Material Adverse Effect
on VERITAS).
(d) There are no royalties, honoraria, fees or other payments
payable by any member of the VERITAS Group to any person by reason of the
ownership, use, license, purchase, sale or disposition or acquisition of any of
the VERITAS IP Rights in an amount exceeding $100,000 in any one year.
(e) To VERITAS' Knowledge, no third party is infringing or
misappropriating any of the VERITAS IP Rights.
(f) To VERITAS' Knowledge, (i) neither the manufacture,
marketing, license, sale or intended use of any product currently licensed or
sold by VERITAS or any of the VERITAS Subsidiaries or currently under
development by VERITAS or any of the VERITAS Subsidiaries violates any license
or agreement relating thereto between VERITAS or any of the VERITAS Subsidiaries
and any third party or infringes any Intellectual Property Right of any other
party, (ii) there is no pending or threatened claim or litigation contesting the
validity, ownership or right to use, sell, license or dispose of any VERITAS IP
Right and (iii) no third party has notified VERITAS that any VERITAS IP Right or
the proposed use, sale, license or disposition thereof, conflicts or will
conflict with the rights of any other party, nor is there any basis therefor
except for any violations, infringements, claims or litigation that would not
have a Material Adverse Effect on VERITAS.
-38-
(g) VERITAS has taken reasonable and practicable steps designed
to safeguard and maintain the secrecy and confidentiality of, and its
proprietary rights in, all material trade secrets or other confidential
information constituting VERITAS IP Rights. To VERITAS' Knowledge, no current
or prior officers, employees or consultants of VERITAS claim an ownership
interest in any VERITAS IP Rights as a result of having been involved in the
development of such property while so employed, or retained, or otherwise. To
VERITAS' Knowledge, all development employees of the VERITAS IP Rights, and
all other officers, employees and consultants of VERITAS have executed and
delivered to VERITAS or the VERITAS Subsidiary an agreement regarding the
protection of proprietary information and the assignment to VERITAS or the
VERITAS Subsidiary of all Intellectual Property Rights arising from the
services performed for VERITAS or the VERITAS Subsidiary by such persons,
except where the absence of such an agreement would not have a Material
Adverse Effect on VERITAS.
(h) Section 3.15(h) of the VERITAS Disclosure Letter sets forth
and summarizes each of the VERITAS IP Rights, the absence of which would have
a Material Adverse Effect on VERITAS, that a third party owns and that VERITAS
uses pursuant to a license, sublicense, agreement or other permission and
describes and identifies such license, sublicense, agreement or other
permission (excluding shrink wrap licenses to commercially available software
sold at retail). Such license, sublicense, agreement or permission covering
the item is legal, valid, binding, enforceable and in full force and effect
and will continue to be legal, valid, binding, enforceable and in full force
and effect on identical terms to Newco's benefit immediately following the
Effective Time, except where it would not have a Material Adverse Effect on
Newco, and such license, sublicense, agreement or permission does not restrict
VERITAS' ability to market any material VERITAS Product in any material
jurisdiction or with respect to any market or industry, and VERITAS is not in
breach or default of any such license, sublicense, agreement or permission. No
person other than VERITAS holds any license or other right to manufacture,
modify, or create derivative works based on any of the VERITAS Products, other
than OEM agreements that would not have a Material Adverse Effect on VERITAS.
No person (other than Newco) will be or become entitled to receive a copy of
source code of any software included among the VERITAS Assets as a result of
this Agreement, any Ancillary Agreement or any other agreement or transaction
contemplated by this Agreement. To VERITAS' Knowledge, no person holds or has
been granted access to any copy of source code of any software included among
the VERITAS Assets unless such person has agreed in writing (i) to hold such
source code in confidence and take reasonable steps to preserve the secrecy of
such source code; and (ii) not to use such source code for any purpose except
to support such person's internal use of such source code or to modify such
source code solely for the purpose of internally using such modifications.
VERITAS has not knowingly taken or knowingly failed to take any action that,
directly or indirectly, has caused any Intellectual Property Rights in source
code of material VERITAS Products to enter the public domain such as would
have a Material Adverse Effect on VERITAS.
3.16 Fees and Expenses. Except for the fees and expenses set forth in
-----------------
VERITAS' engagement letter with Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities
Corporation ("DLJ"), a copy of which has been provided to STI and SSI, neither
VERITAS, Newco nor any of the VERITAS Subsidiaries has paid or become obligated
to pay any fee or commission to any broker, finder or
-39-
intermediary in connection with the transactions contemplated by this Agreement
and the Ancillary Agreements.
3.17 Insurance. The members of the VERITAS Group maintain fire and
---------
casualty, general liability, business interruption, directors and officers,
product liability and sprinkler and water damage insurance that they believe to
be reasonably prudent for their respective businesses.
3.18 Ownership of Property. Except for VERITAS Permitted Encumbrances,
---------------------
the VERITAS Group owns, or at the Effective Time will own, the VERITAS Assets,
free and clear of all Encumbrances. All real and personal property included in
the VERITAS Assets is operational and suitable for its intended use, subject to
ordinary wear and tear. To VERITAS' Knowledge, no member of the VERITAS Group is
in violation in any material respect with any zoning, building or safety
ordinance, regulation or requirement or other law or regulation applicable to
the operation of its respective owned or leased properties (the violation of
which would have a Material Adverse Effect on VERITAS).
3.19 Environmental Matters.
---------------------
(a) During the period that VERITAS has leased or owned its
respective properties or owned or operated their respective facilities, there
have been, to VERITAS' Knowledge, no disposals, releases or threatened releases
of Hazardous Materials on, from, under or about such properties or facilities
which would cause a Material Adverse Effect on Newco. To VERITAS' Knowledge
there is no presence, disposals, releases or threatened releases of Hazardous
Materials on, from, under or about any of such properties or facilities, which
may have occurred prior to VERITAS having taken possession of any of such
properties or facilities which would cause a Material Adverse Effect on the
Newco.
(b) None of the properties or facilities of VERITAS is or has
been the subject of an Environmental Violation, which would cause a Material
Adverse Effect on Newco. During the time that VERITAS has owned or leased its
respective properties and facilities, none of VERITAS nor, to VERITAS'
Knowledge, any third party, has used, generated, manufactured or stored on,
under or about such properties or facilities or transported to or from such
properties or facilities any Hazardous Materials (except those Hazardous
Materials associated with general office use or janitorial supplies) in a manner
which would result in a Material Adverse Effect on Newco.
(c) During the time that any members of the VERITAS Group have
owned or leased their respective properties and facilities, there has been no
litigation brought or, to VERITAS' Knowledge, threatened against any of them by,
or any settlement reached by any of them with, any party or parties concerning
the presence, disposal, release or threatened release of any Hazardous Materials
on, from or under any of such properties or facilities or relating to any
alleged Environmental Violation, except for litigation or settlement which would
not have a Material Adverse Effect on Newco.
3.20 Interested Party Transactions. Except as disclosed in the VERITAS
-----------------------------
SEC Documents filed prior to the date of this Agreement, no officer or director
of VERITAS, or any "affiliate" or
-40-
"associate" (as those terms are defined in Rule 405 promulgated under the
Securities Act) of VERITAS has, either directly or indirectly, a material
interest in: (i) any person or entity which purchases from or sells, licenses or
furnishes to the VERITAS Group in connection with the VERITAS Business, any
goods, property, technology or intellectual or other property rights or
services; or (ii) any VERITAS Contract, which in the case of either subpart (i)
or (ii) would have a Material Adverse Effect on VERITAS.
3.21 Fairness Opinion. VERITAS' Board of Directors has received an
----------------
opinion dated as of the date hereof from DLJ to the effect that, as of the date
hereof, the VERITAS Exchange Ratio is fair to VERITAS from a financial point of
view.
3.22 Title to and Condition and Sufficiency of VERITAS Assets. The
--------------------------------------------------------
VERITAS Group owns, or at the Effective Time will own, all of the VERITAS Assets
and has good and marketable title in and to all of the VERITAS Assets, free and
clear of all Encumbrances whatsoever, other than the VERITAS Permitted
Encumbrances. The VERITAS Assets constitute all assets, properties, rights,
VERITAS Contracts and Intellectual Property Rights that are necessary or
required for the Conduct of the VERITAS Business without (i) the need to
purchase, license or acquire any other material asset or property; (ii)
violating any contractual rights of any third party; or (iii) infringing,
misappropriating or misusing any software or Intellectual Property Rights of any
third party in a manner, except for such assets, properties, rights, contracts,
software and Intellectual Property Rights, the absence of which would not have a
Material Adverse Effect on VERITAS. Except for the consents and approvals
identified on Section 3.22 of the VERITAS Disclosure Letter, title to all
VERITAS Assets is freely transferable to VERITAS free and clear of all
Encumbrances, other than VERITAS Permitted Encumbrances, and without obtaining
the consent or approval of any person, except where the failure to transfer the
VERITAS Asset would not have a Material Adverse Effect on Newco.
3.23 No Restrictive Agreements. Other than this Agreement and the
-------------------------
Ancillary Agreements Neither VERITAS nor any of the VERITAS Assets is bound or
materially and adversely affected by, any judgment, injunction, order, decree,
contract, covenant or agreement (noncompete or otherwise) that restricts or
prohibits (or purports to restrict or prohibit) the Conduct of the VERITAS
Business or from competing for the sale of VERITAS Products anywhere in the
world (including without limitation any contracts, covenants or agreements
restricting the geographic area in which the VERITAS Business may sell, license,
market, distribute or support any VERITAS Products or restricting the markets,
customers or industries that Newco may address after the Effective Time in the
Conduct of the VERITAS Business) (collectively, "RESTRICTIVE AGREEMENTS"), in a
manner which will have a Material Adverse Effect upon Newco.
3.24 Supplier and Customer Relationships. To VERITAS' Knowledge,
-----------------------------------
VERITAS has good commercial working relationships with the customers for the
VERITAS Business, and since January 1, 1998, no customer or supplier has
canceled or otherwise terminated any material relationship with VERITAS, or
materially decreased or limited its purchases or provision of materials supplied
to VERITAS from the corresponding period in 1997, where any of the foregoing
-41-
actions would cause a Material Adverse Effect on VERITAS, and to VERITAS'
Knowledge, no customer or supplier has threatened to take any such action.
3.25 Product and Inventory Status.
----------------------------
(a) Product Quality, Warranty Claims. All VERITAS Products
--------------------------------
manufactured, sold, licensed, leased or delivered in connection with the VERITAS
Business conform in all material respects to applicable contractual commitments,
express and implied warranties, and to VERITAS' Knowledge, there is no material
Liability (nor any basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand giving rise to any
material Liability) for replacement or repair thereof or other damages in
connection therewith, except for such conformance as would not have a Material
Adverse Effect on Newco.
(b) Inventory. To VERITAS' Knowledge, its inventories recorded
---------
on the VERITAS Financial Statements consist primarily of materials used in
software products, related supplies and packaging materials, all of which are
merchantable, fit for the purpose for which they were procured or manufactured,
and are in a condition of quantity usable in the ordinary course of business and
to VERITAS' Knowledge, none of these inventories are obsolete, damaged or
defective, except in each case where the failure of these inventories to be so
would not have a Material Adverse Effect on Newco or where a sufficient
provision with respect to the possibility of such failure is included in the
VERITAS Financial Statements.
3.26 Tax Representations. VERITAS and Newco are aware of no plan or
-------------------
intention by VERITAS or Newco or any corporation related to VERITAS immediately
after the Effective Time to repurchase any Newco capital stock issued pursuant
to this Agreement from any person or entity that is or will become a Newco
stockholder by reason of the transactions contemplated by this Agreement.
VERITAS has not redeemed any shares of its capital stock or paid any
extraordinary dividend in contemplation of the Merger.
4. STI AND SSI COVENANTS
4.1 Advice of Changes. During the period from the date of this
-----------------
Agreement until the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms, SSI will promptly advise VERITAS in
writing, (a) of any event occurring subsequent to the date of this Agreement
that would reasonably be likely to render any representation or warranty
contained in Section 2 of this Agreement, if made on or as of the date of such
event or the Effective Time, untrue or inaccurate in any material respect, (b)
of any event that would reasonably be likely to have a Material Adverse Effect
on the Group Business, and (c) of any material breach by STI or SSI of any
covenant or agreement contained in this Agreement; provided, however, that the
delivery of, or failure to deliver, any notice pursuant to this Section 4.1
shall not limit or otherwise affect the remedies available hereunder.
4.2 Maintenance of Business. During the period from the date of this
-----------------------
Agreement until the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms, the Contributed Company Group and the
Contributing Companies will use reasonable efforts to
-42-
carry on and preserve the Group Business and relationships with customers,
suppliers, employees and others related to Group Business in substantially the
same manner as it has prior to the date hereof.
4.3 Conduct of Business. During the period from the date of this
-------------------
Agreement until the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms, the Contributed Company Group and SSI
will continue to conduct the Group Business and maintain business relationships
related to the Group Business in the ordinary and usual course consistent with
past practice and, except as otherwise disclosed herein or in the SSI Disclosure
Letter, they will not, without the prior written consent of VERITAS, which
consent shall not be unreasonably withheld or delayed, take any of the following
actions where it would cause a Material Adverse Effect on the Group Business:
(a) cause any of the Contributed Companies to borrow any money
except for (A) working capital (including for Taxes) obtained from SSI or STI
pursuant to the Intercompany Revolving Loan Agreement or (B) amounts that are
not in the aggregate material to the financial condition of the Group Business,
taken as a whole or (C) pursuant to existing credit facilities;
(b) cause any of the Group Assets to become subject to any
Encumbrance, except for Permitted Encumbrances and except for Encumbrances
arising under existing credit facilities;
(c) dispose of any of Group Assets except in the ordinary
course of business, consistent with past practice;
(d) grant any exclusive license to any of the Seagate IP Rights
or grant any other license to Seagate IP Rights except in the ordinary course
of business, consistent with past practice;
(e) materially amend or terminate any of the Material
Contributed Contracts except those amended or terminated in the ordinary
course of its business, consistent with past practice.
(f) cause any of the Contributed Companies to declare, set aside
or pay any cash or stock dividend or other distribution in respect of capital
stock, or redeem or otherwise acquire any of its capital stock (other than
repurchases of unvested shares of SSI Common Stock pursuant to arrangements
with terminated employees or consultants in the ordinary course of business,
consistent with past practice).
(g) cause any of the Contributed Companies to make any loans or
grant any guarantees, except (A) loans in the ordinary course of business,
consistent with past practice, (B) advances that are not material in amount or
(C) loans pursuant to any Section 401(a) Plan;
(h) waive or release any of the material Claim Assets;
(i) cause any member of the Contributed Companies Group to
merge, consolidate or reorganize with or acquire any entity that is not a
member of the Contributed Companies Group,
-43-
except as set forth in the SSI Disclosure Letter, except for transactions that
are not material and except for any divestiture, spin off or other merger
involving SSI's IMG group and as otherwise set forth in the last sentence of
Section 4.11(a);
(j) amend the Certificate of Incorporation or Bylaws of any of
the Contributed Companies;
(k) implement any layoffs or reductions in force involving a
material number of Employees such as will trigger WARN Act responsibilities or
liabilities;
(l) fail to pay or withhold any material Tax related to the
Group Business when due to be paid or withheld;
(m) change accounting methods; or
(n) agree to take, or permit any of their subsidiaries to take
or agree to take, or enter into negotiations with respect to, any of the actions
described in the preceding clauses in this Section 4.3.
Notwithstanding the foregoing, nothing in this Section 4.3 hereof
shall restrict or limit the conduct of any business of SSI, STI or their direct
or indirect subsidiaries other than the Group Business and other than with
respect to the Group Assets and nothing herein shall restrict or limit the
conduct of any business of the Contributed Company Group or with respect to the
Group Assets other than as set forth in this Section 4.3.
4.4 SSI Corporate Approvals. STI agrees to vote in favor of the
-----------------------
Seagate Transaction at the meeting of SSI stockholders held to approve the
Seagate Transaction. STI and SSI agree to vote in favor of the contribution to
Newco of the Contributed Stock and Assets at each meeting of stockholders of the
Contributing Companies. Without limiting the foregoing, STI and SSI shall vote
in favor of the Seagate Transaction at each and every stockholders meeting, or
with respect to any written consent in lieu thereof, at which any proposal
regarding any such transactions, including the contribution and transfer of the
Contributed Stock and Assets, is considered. The respective Boards of Directors
of each of STI, SSI, the Contributing Companies and the Contributed Company
Group have approved the Seagate Transaction and this Agreement.
4.5 Letter of SSI's Accountants. SSI shall use its reasonable best
----------------------------
efforts to cause to be delivered to VERITAS a letter of Ernst & Young LLP dated
a date within two business days before the date on which the Form S-4 shall
become effective and addressed to VERITAS, in form and substance reasonably
satisfactory to VERITAS and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Form S-4 ("COMFORT LETTER").
4.6 Prospectus/Proxy Statement. SSI will mail to its stockholders and
--------------------------
option holders in a timely manner, for the purpose of evaluating the Seagate
Transaction, the Prospectus/Proxy Statement in the Form S-4. SSI, VERITAS and
Newco will prepare and file the Proxy Statement/Prospectus with the SEC as
promptly as practicable, and each will use its respective best
-44-
reasonable efforts to cause the Form S-4 to become effective as soon after such
filing as practicable. In this regard, SSI, VERITAS and Newco will advise each
other promptly as to the time at which the Form S-4 becomes effective and of the
issuance by the SEC of any stop order suspending the effectiveness of the
Form S-4 or the initiation of any proceedings for such purpose and each will use
its respective reasonable best efforts to prevent the issuance of any stop order
and to obtain as soon as possible the lifting thereof, if issued. Until the
Effective Time, SSI will advise VERITAS and Newco promptly of any requirement of
the SEC for any amendment or supplement of the Form S-4 or for additional
information, and will not at any time file any amendment of or supplement to the
prospectus contained therein (or to the prospectus filed pursuant to Rule 424(b)
of the SEC) which shall not have been previously submitted to SSI in reasonable
time prior to the proposed filing thereof or to which SSI shall reasonably
object or which is not in compliance in all material respects with the
Securities Act and the rules and regulations issued by the SEC thereunder. None
of the information relating to SSI (or, to Seagate's Knowledge, any other
person, contained in any document, certificate or other writing furnished or to
be furnished by SSI) included in (i) the Prospectus/Proxy Statement at the time
the Prospectus/Proxy Statement is mailed or at the Effective Time, as then
amended or supplemented, or (ii) the Form S-4 at the time the Form S-4 becomes
effective or at the Effective Time, as then amended or supplemented, will
contain any untrue statement of a material fact or will omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading
or necessary to correct any statement which has become false or misleading in
any earlier communication. From and after the date the Form S-4 becomes
effective and until the Effective Time, if any event known to SSI occurs as a
result of which the Prospectus would include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, or if it is necessary at any time
to amend the Form S-4 or the Prospectus/Proxy Statement to comply with the
Securities Act, SSI will promptly notify VERITAS and Newco and an amended or
supplemented Form S-4 or Prospectus/Proxy Statement will be prepared by VERITAS
and Newco which will correct such statement or omission and will use its
reasonable best efforts to cause any such amendment to become effective as
promptly as possible. The Prospectus/Proxy Statement, as it relates to SSI and
information relating to the Group Business, will comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations thereunder in effect at the time the Prospectus/Proxy Statement is
mailed.
4.7 Regulatory Approvals. As promptly as reasonably practicable, STI
--------------------
and SSI will themselves, and will cause each member of the Contributed Company
Group, to execute and file, or join in the execution and filing, of any
application or other document that may be necessary in order to obtain the
authorization, approval or consent of any governmental body, federal, state,
local or foreign, which may be reasonably required, or which VERITAS or Newco
may reasonably request, in connection with the consummation of the transactions
contemplated by this Agreement. STI and SSI will themselves, and will cause each
member of the Contributed Company Group, to use its reasonable efforts to
promptly obtain all such authorizations, approvals and consents and will
cooperate fully with the other parties in promptly seeking to obtain the same.
-45-
4.8 Necessary Consents. SSI will itself, and will cause each
------------------
Contributing Company and each member of the Contributed Company Group to, use
its reasonable efforts to obtain those consents required in connection with the
Material Contributed Contracts, and to take such other actions as may be
necessary or appropriate for the consummation of the transactions contemplated
hereby and to allow Newco to Conduct the Group Business after the Effective
Time.
4.9 Access to Information. From the date of this Agreement until the
---------------------
Effective Time, each of STI and SSI will themselves, and will cause the
Contributed Company Group, to allow VERITAS and its agents reasonable access to
the files, books, records, technology and offices of SSI and the Contributed
Company Group reasonably requested by VERITAS, but only to the extent necessary
and relating to the Group Business, including, without limitation, any and all
information relating to Contributed Company Group's Taxes, commitments,
contracts, leases, licenses and real, personal, intellectual and intangible
property and financial condition. Each of STI and SSI shall use its reasonable
efforts to cause its accountants to cooperate with VERITAS and its agents in
making available to VERITAS all financial information reasonably requested,
including, without limitation, the right to examine all working papers
pertaining to all Tax returns and financial statements prepared or audited by
such accountants. No information or knowledge obtained by any party hereto in
any investigation pursuant to this Section 4.9 will affect or be deemed to
modify any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger. All information obtained by
VERITAS and its agents pursuant to this Section 4.9 shall be kept confidential
in accordance with the confidentiality agreement, between VERITAS, STI, and SSI
(the "NONDISCLOSURE AGREEMENT").
4.10 Satisfaction of Conditions Precedent. STI and SSI will
------------------------------------
themselves, and will cause the Contributing Companies and the Contributed
Company Group, to use reasonable efforts to satisfy or cause to be satisfied all
the conditions precedent that are set forth in Section 8 and to cause the
Merger, the Seagate Transaction and the other transactions contemplated by this
Agreement to be consummated. Without limiting the foregoing, in connection with
the agreements to be reached by the parties subsequent to the date of this
Agreement and prior to the Effective Time, the parties agree to negotiate in
good faith to reach agreement on all matters to be included in such agreements
promptly after the signing of this Agreement.
4.11 No Other Negotiations.
---------------------
(a) STI and SSI shall, and shall cause each Contributing
Company and each member of the Contributed Company Group and their respective
officers, directors or employees or any investment bankers, attorneys or other
advisors or representatives retained by any of them, to cease any and all
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any Contributed Group Alternative Proposal (as
defined below). From and after the date of this Agreement until the earlier of
the Effective Time or the termination of this Agreement in accordance with its
terms, STI and SSI shall not authorize or permit any Contributing Company or any
member of the Contributed Company Group (or any of their respective officers,
directors or employees or any investment bankers, attorneys or other advisors or
representatives retained by any of them), directly or indirectly, (i) to
solicit, initiate or encourage the submission of
-46-
any Contributed Group Alternative Proposal, (ii) to engage in discussions or
negotiations regarding, provide non-public information with respect to, or to
take any other action intended, designed or reasonably likely to facilitate any
inquiries or the making of any proposal that constitutes, or would reasonably be
expected to lead to, any Contributed Group Alternative Proposal, (iii) to enter
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement with any person with respect to any Contributed Group
Alternative Proposal, or (iv) to make or authorize any statement, recommendation
or solicitation in support of any Contributed Group Alternative Proposal. For
purposes of this Agreement, "CONTRIBUTED GROUP ALTERNATIVE PROPOSAL" means any
inquiry, proposal or offer from any person or "group" (as defined under Section
13(d) of the Exchange Act and the rules and regulations thereunder) relating to
any direct or indirect (a) acquisition, purchase, sale or other disposition of
any of the Group Assets (other than in the ordinary course and disposal of worn
or obsolete items consistent with past practice), (b) acquisition, purchase,
sale or other disposition of any of the outstanding voting securities of any
member of the Contributed Company Group, or (c) merger, consolidation, business
combination, sale of any of the assets, recapitalization, liquidation,
dissolution or similar transaction involving any member of the Contributed
Company Group, other than the transactions contemplated by this Agreement.
Notwithstanding the foregoing or any other provision of this Agreement, other
than actions directly relating to the Contributed Company Group, the Group
Assets or the Group Business, neither STI nor SSI shall be restricted or limited
in any way from entering into discussions, negotiations or agreements of any
kind or from taking any other actions of any kind, including, without
limitation, transactions relating to the sale of any of its or its direct or
indirect subsidiaries (other than any member(s) of the Contributed Company
Group), equity securities (other than the Contributed Stock), or assets (other
than Group Assets), or the merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving STI,
SSI or any of their respective direct or indirect subsidiaries (other than the
Contributed Company Group).
(b) In addition to the obligations set forth in Section
4.11(a), SSI and STI, as promptly as practicable, shall advise VERITAS orally
and in writing of any Contributed Group Alternative Proposal or of any request
for non-public information which SSI reasonably believes would lead to a
Contributed Group Alternative Proposal, or of any Contributed Group Alternative
Proposal, the material terms and conditions of such request or Contributed Group
Alternative Proposal, and the identity of the person making any such request,
Contributed Group Alternative Proposal or inquiry. SSI will keep VERITAS
informed in all material respects of the status and details (including material
amendments) of any such request or Contributed Group Alternative Proposal.
4.12 Books and Records. If, in order properly to prepare documents
-----------------
required to be filed with governmental authorities (including taxing
authorities) or its financial statements, it is necessary that any party hereto
be furnished with additional information relating to the Group Assets or any
member of the Contributed Company Group, and such information is in the
possession of a Contributing Company, then STI and SSI, for themselves and the
other Contributing Companies, agree to use their good faith efforts to promptly
furnish such information to the party needing such information, at SSI's cost
and expense. This Section 4.12 shall survive Closing for two years.
-47-
4.13 Transitional Support. As soon as feasible after the date hereof,
--------------------
SSI and Newco shall use good faith, commercially reasonable efforts to negotiate
a Transition Services and Facilities Use Agreement the principal terms of which
are as summarized on Exhibit 4.13 attached hereto (the "TRANSITION SERVICES AND
------------
FACILITIES USE AGREEMENT").
4.14 Development Agreement and Cross-License Agreement. The parties
-------------------------------------------------
on the date of this Agreement shall have signed the Development and License
Agreement among Newco, VERITAS and STI attached hereto as Exhibit 4.14A (the
-------------
"DEVELOPMENT AGREEMENT") and the Cross-License and OEM Agreement between SSI,
Newco, and VERITAS (the "CROSS-LICENSE AGREEMENT") attached hereto as Exhibit
-------
4.14B.
-----
4.15 Settlement of Intercompany Accounts. At the Closing, STI and SSI
-----------------------------------
and their subsidiaries (other than the Contributed Company Group) shall pay to
the Contributed Company Group, or the Contributed Company Group shall pay to STI
and SSI or their subsidiaries (other than the Contributed Company Group), as
appropriate, the balance owing on the Intercompany Accounts.
4.16 Modification of Joint Contributed Agreements. As soon as feasible
--------------------------------------------
after the date hereof, SSI and Newco will negotiate to agree upon a mutually
acceptable arrangement between SSI and Newco and, if required, other parties
with respect to the treatment of Contributed Contracts on Schedule 4.16, for
example, with distributors who distribute both Group Products and the products
of any business retained by the Contributing Companies or their subsidiaries
("JOINT CONTRIBUTED AGREEMENTS"), such that Newco and SSI and its subsidiaries,
including IMG, shall each receive an equitable share of the payments and the
Liabilities with respect to Group Products and each of the other products
pursuant to the Joint Contributed Agreements, respectively, as the case may be
(including, without limitation, price protection, accumulated rebate credits,
product returns, warranty support and similar Liabilities).
4.17 Management Employment Contracts. STI and SSI will informally
-------------------------------
encourage (without having to incur any cost) each of the Seagate employees
listed on Exhibit 4.17 to execute their respective Management Employment
Contracts.
4.18 Stockholder and Registration Rights Agreement. The Newco Common
---------------------------------------------
Stock to be issued in the Seagate Transaction to SSI shall be entitled to
registration rights on Form S-3 as provided in the Registration Rights
Agreement, in the form attached hereto as Exhibit 4.18A (the "RIGHTS AGREEMENT")
-------------
and shall be subject to the other rights and restrictions contained in the
Stockholders Agreement in the form attached hereto as Exhibit 4.18B (the
-------------
"STOCKHOLDERS AGREEMENT"); which Rights Agreement and Stockholders Agreement
shall be executed by Newco and VERITAS as of the Effective Time.
4.19 Seagate IP Rights. As soon as feasible after the date hereof SSI
-----------------
and VERITAS shall confirm whether the Intellectual Property Rights and
Intangible Assets required for the production, development, marketing and
support of the Group Products are included in the Intellectual Property Rights
included in the Group Assets duly transferred to Newco pursuant hereto. If such
items are discovered then the Group Assets shall be expanded to include, and
there shall be duly assigned to Newco by the appropriate Contributing Company
all such Intellectual Property Rights and Intangible
-48-
Assets required for the production of the Group Products which were acquired or
developed with funds charged to the Group Financial Statements, or if not so
charged to the Group Financial Statements, then Newco shall be provided a non-
exclusive, fully paid, perpetual license for use of such Intellectual Property
Rights and Intangible Assets for the purpose of producing, developing, marketing
and supporting the Group Products. If the Intellectual Property Rights and
Intangible Assets included or added to the Group Assets are also required for
the production of the products produced by SSI and its subsidiaries (other than
the Group Products) then Newco (or its subsidiary, which receives said
Intellectual Property Rights and Intangible Assets constituting Group Assets)
shall provide SSI, or its designated subsidiary, with a fully paid, non-
exclusive, perpetual license for use of such Intellectual Property Rights and
Intangible Assets for the purpose of producing such other products. This Section
4.19 shall survive Closing for two years.
5. VERITAS AND NEWCO COVENANTS
5.1 Advice of Changes. During the period from the date of this
-----------------
Agreement until the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms, VERITAS will promptly advise STI and SSI
in writing (a) of any event occurring subsequent to the date of this Agreement
that would reasonably be likely to render any representation or warranty of
VERITAS or Newco contained in this Agreement, if made on or as of the date of
such event or the Effective Time, untrue or inaccurate, (b) of any event that
would reasonably be likely to have a Material Adverse Effect on VERITAS, and (c)
of any material breach by VERITAS or Newco of any covenant or agreement
contained in this Agreement; provided, however, that the delivery of, or failure
to deliver, any notice pursuant to this Section 5.1 shall not limit or otherwise
affect the remedies available hereunder.
5.2 Maintenance of Business. During the period from the date of this
-----------------------
Agreement until the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms, VERITAS will use its best efforts to
carry on and preserve its business and its relationships with customers,
suppliers, employees and others in substantially the same manner as it has prior
to the date hereof.
5.3 Conduct of Business. During the period from the date of this
-------------------
Agreement until the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms, VERITAS will continue to conduct its
business and maintain its business relationships in the ordinary and usual
course and consistent with past practice and, except as otherwise disclosed
herein or in the VERITAS Disclosure Letter, it will not, without the prior
written consent of SSI, which consent shall not be unreasonably withheld or
delayed, take any of the following actions where it would cause a Material
Adverse Effect on VERITAS:
(a) borrow any money except for (A) amounts that are not in the
aggregate material to the financial condition of VERITAS and its subsidiaries,
taken as a whole or (B) pursuant to existing credit facilities;
-49-
(b) cause any of the VERITAS Assets to become subject to any
Encumbrance, except for VERITAS Permitted Encumbrances and except for VERITAS
Encumbrances arising under existing credit facilities;
(c) dispose of any of VERITAS Assets except in the ordinary
course of business, consistent with past practice;
(d) declare, set aside or pay any cash or stock dividend or
other distribution in respect of capital stock, or redeem or otherwise acquire
any of its capital stock (other than pursuant to arrangements with terminated
employees or consultants in the ordinary course of business, consistent with
past practice) or issue capital stock representing more than a 35% interest in
the total outstanding securities of VERITAS;
(e) waive or release any material claims against a third party;
(f) merge, consolidate or reorganize with, or acquire any
entity, except as set forth in the VERITAS Disclosure Letter and except for
transactions in which the aggregate consideration is below $100 million;
(g) amend the Certificate of Incorporation or Bylaws of VERITAS
or any of its subsidiaries (except as set forth in Exhibit 5.3(g) or as
otherwise expressly contemplated by this Agreement);
(h) implement any layoffs or reductions in force involving a
number of VERITAS employees such as will trigger WARN Act responsibilities or
liabilities;
(i) fail to pay or withhold any material Tax when due to be
paid or withheld; or
(j) agree to take, or permit any VERITAS entity to take or
agree to take, or enter into negotiations with respect to, any of the actions
described in the preceding clauses in this Section 5.3.
Notwithstanding the foregoing, nothing in this Section 5.3 shall
restrict or limit the conduct of any business of VERITAS or its direct or
indirect subsidiaries or the use or disposition of the VERITAS Assets, other
than as set forth in this Section 5.3.
5.4 Stockholder Approval. VERITAS will call the VERITAS Stockholders
--------------------
Meeting, to be held within 45 days after the Form S-4 shall have been declared
effective by the SEC, to submit the Merger, the Seagate Transaction and any
related matters for the consideration and approval of the VERITAS stockholders.
Subject to Section 9.1(i) and (j), the Prospectus/Proxy Statement will include a
statement to the effect that VERITAS' Board of Directors is recommending that
VERITAS stockholders vote in favor of the Merger and the Seagate Transaction.
Such meeting will be called, held and conducted, and any proxies will be
solicited, in compliance with applicable law.
-50-
5.5 Letter of VERITAS' Accountants. VERITAS shall use its reasonable
------------------------------
best efforts to cause to be delivered to STI and SSI a letter of Ernst & Young
LLP, dated a date within two business days before the date on which the Form S-4
shall become effective and addressed to each of the Contributing Companies, in
form and substance reasonably satisfactory to STI and SSI and customary in scope
and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
5.6 Prospectus/Proxy Statement. VERITAS will mail to its stockholders
--------------------------
in a timely manner, for the purpose of considering and voting upon the Merger
and the Seagate Transaction at the VERITAS Stockholders Meeting, the
Prospectus/Proxy Statement in the Form S-4. VERITAS and Newco will prepare and
file the Prospectus/Proxy Statement with the SEC as promptly as practicable, and
each will use its respective best reasonable efforts to cause the Form S-4 to
become effective as soon after such filing as practicable. In this regard,
VERITAS and Newco will advise STI and SSI promptly as to the time at which the
Form S-4 becomes effective and of the issuance by the SEC of any stop order
suspending the effectiveness of the Form S-4 or the initiation of any
proceedings for such purpose and each will use its respective reasonable best
efforts to prevent the issuance of any stop order and to obtain as soon as
possible the lifting thereof, if issued. Until the Effective Time, VERITAS and
Newco will advise STI and SSI promptly of any requirement of the SEC for any
amendment or supplement of the Form S-4 or for additional information, and will
not at any time file any amendment of or supplement to the prospectus contained
therein (or to the prospectus filled pursuant to Rule 424(b) of the SEC) (the
"PROSPECTUS") which shall not have been previously submitted to STI and SSI in
reasonable time prior to the proposed filing thereof or to which STI or SSI
shall reasonably object or which is not in compliance in all material respects
with the Securities Act and the rules and regulations issued by the SEC
thereunder. None of the information relating to VERITAS or Newco (or, to
VERITAS' or Newco's knowledge, any other person, contained in any document,
certificate or other writing furnished or to be furnished by VERITAS) included
in (i) the Prospectus/Proxy Statement by Newco and/or VERITAS at the time the
Prospectus/Proxy Statement is mailed or at the time of the meeting of VERITAS
stockholders to vote on the Merger and the Seagate Transaction or at the
Effective Time, as then amended or supplemented, or (ii) the Form S-4 at the
time the Form S-4 becomes effective, as then amended or supplemented, will
contain any untrue statement of a material fact or will omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading
or necessary to correct any statement which has become false or misleading in
any earlier communication with respect to the solicitation of proxies for the
VERITAS Stockholder Meeting. From and after the date the Form S-4 becomes
effective and until the Effective Time, if any event known to VERITAS or Newco
occurs as a result of which the Prospectus/Proxy Statement would include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading, or
if it is necessary at any time to amend the Form S-4 or the Prospectus/Proxy
Statement to comply with the Securities Act, VERITAS and Newco will promptly
notify STI and SSI and will prepare an amended or supplemented Form S-4 or
Prospectus/Proxy Statement which will correct such statement or omission and
will use its reasonable best efforts to cause any such amendment to become
effective as promptly as possible. The Prospectus/Proxy Statement, as it relates
to VERITAS and Newco, will comply as to form in all material respects with the
-51-
requirements of the Exchange Act and the rules and regulations thereunder in
effect at the time the Prospectus/Proxy Statement is mailed.
5.7 State Securities Law Compliance. VERITAS and Newco shall use their
-------------------------------
respective reasonable best efforts to (i) qualify the Newco Common Stock to be
issued pursuant to the Merger and the Seagate Transaction under the state
securities or "blue sky" laws of every jurisdiction of the United States in
which (a) any registered stockholder of VERITAS has an address on the records of
VERITAS' transfer agent on the record date for determining the VERITAS
stockholders entitled to notice of and to vote on the Merger and the Seagate
Transaction or any other party receiving Newco securities hereunder resides and
(b) a Nasdaq Stock Market or other exemption from the qualification requirements
under such laws is unavailable, and (ii) qualify the Newco Options to be granted
in exchange for Exchanged SSI Options to be assumed by VERITAS pursuant hereto
under the state securities or "blue sky" laws of every jurisdiction of the
United States in which (a) the records of VERITAS, STI, or SSI, as of the
Effective Time, indicate that a holder of such options resides and (b) a Nasdaq
Stock Market or other exemption from the qualification requirements under such
laws is unavailable.
5.8 Regulatory Approvals. As promptly as reasonably practicable,
--------------------
VERITAS and Newco will execute and file, or join in the execution and filing, of
any application or other document that may be necessary in order to obtain the
authorization, approval or consent of any governmental body, federal, state,
local or foreign which may be reasonably required, or which they may reasonably
request, in connection with the consummation of the transactions contemplated by
this Agreement. VERITAS and Newco will each use its respective reasonable
efforts to promptly obtain all such authorizations, approvals and consents and
will cooperate fully with the other parties in promptly seeking to obtain all
such authorizations, approvals, and consents.
5.9 Necessary Consents. VERITAS and Newco will each use its respective
------------------
reasonable efforts to obtain such written consents under the Material VERITAS
Contracts and to take such other actions as may be necessary or appropriate to
allow the consummation of the transactions contemplated hereby and to allow
VERITAS and Newco to carry on VERITAS' business and the Group Business after the
Effective Time.
5.10 Access to Information. From the date of this Agreement until the
---------------------
Effective Time, VERITAS and Newco will allow the Contributing Companies and
their agents reasonable access to the files, books, records, technology and
offices of VERITAS or Newco reasonably requested by the Contributing Companies
including, without limitation, any and all information relating to Taxes,
commitments, contracts, leases, licenses and real, personal, intellectual and
intangible property and financial condition. VERITAS will use its reasonable
efforts to cause its accountants to cooperate with the Contributing Companies
and their agents in making available to such parties all financial information
reasonably requested, including, without limitation, the right to examine all
working papers pertaining to all Tax returns and financial statements prepared
or audited by such accountants. No information or knowledge obtained by any
party hereto in any investigation pursuant to this Section will affect or be
deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the Merger and the
Seagate
-52-
Transaction. All information obtained by the Contributing Companies or their
agents pursuant to this Section shall be kept confidential in accordance with
the Nondisclosure Agreement.
5.11 Books and Records. If, in order properly to prepare documents
-----------------
required to be filed with governmental authorities (including taxing
authorities) or its financial statements, it is necessary that any party hereto
be furnished with additional information relating to the Group Assets, and such
information is in the possession of Newco or VERITAS, then VERITAS and Newco on
behalf of themselves and each member of the VERITAS Group agree to use their
good faith efforts to promptly furnish such information to the party needing
such information, at VERITAS' cost and expense. This Section 5.11 shall survive
Closing for two years.
5.12 Transitional Support. As soon as feasible after the date hereof,
--------------------
VERITAS and Newco shall use good faith, commercially reasonable efforts to
negotiate the Transition Services and Facilities Use Agreement.
5.13 Development Agreement and Cross License Agreement. The Parties
-------------------------------------------------
shall have signed the Development Agreement and Cross License Agreement as of
the date of this Agreement.
5.14 Satisfaction of Conditions Precedent. VERITAS and Newco will each
------------------------------------
use its respective reasonable best efforts to satisfy or cause to be satisfied
all the conditions precedent that are set forth in Section 7 and to cause the
Merger and the Seagate Transaction and the other transactions contemplated by
this Agreement to be consummated. Without limiting the foregoing, in connection
with the agreements to be reached by the parties after the date hereof and prior
to the Effective Time, the parties agree to negotiate in good faith to reach
agreement on all matters to be included in such agreements promptly after the
signing of this Agreement.
5.15 Voting Agreement. VERITAS will use its reasonable efforts to
----------------
obtain Voting Agreements in the form attached as Exhibit 5.15A (the "VOTING
-------------
AGREEMENT"), executed by the VERITAS affiliates listed on Exhibit 5.15B.
-------------
5.16 Group Employee Plans and Benefit Arrangements.
---------------------------------------------
(a) Newco will adopt the VERITAS Benefit Arrangements and
VERITAS Employee Plans and will use reasonable efforts to provide the VERITAS
Benefit Arrangements and VERITAS Employee Plans to the transferring Employees as
is provided to VERITAS' employees who are similarly situated as soon as
practicable. To the extent that Newco does not have VERITAS Benefit Arrangements
and VERITAS Employee Plans in effect in a jurisdiction where there are
transferring Employees, Newco shall adopt plans providing comparable benefits to
the Group Employee plans for said transferring Employees. From and after the
Effective Time Newco shall provide all transferring Employees with the
opportunity to participate in any employee stock option or other incentive
compensation plan of Newco and its affiliates on substantially the same terms
and subject to substantially the same conditions as are available to similarly
situated employees of VERITAS or Newco including beginning a new offering period
as soon as possible following the Effective Time if necessary to permit
transferring Employees to participate in Newco's employee stock purchase plan.
Prior to the Effective Time, VERITAS, Newco and SSI shall mutually agree
-53-
upon an integration plan relating to the Merger and the Seagate Transaction
which shall include, among other things, provisions relating to compensation and
other equity incentives for Employees. In addition, at the Effective Time, Newco
shall enter into Management Employment Contracts (the form of which is attached
hereto as Exhibit 5.16) with the Key Employees who are the Employees and with
key employees of VERITAS listed on Schedule 14.15E-2 hereof.
-----------------
(b) Waiting Periods, Premiums and Deductibles. Newco shall take
-----------------------------------------
all steps necessary to cause each VERITAS Benefit Arrangement and each VERITAS
Employee Plan to waive any "waiting period" or other requirement with respect to
duration of employment with Newco which would prevent a transferring Employee or
beneficiary thereof who is otherwise eligible to participate in such VERITAS
Employee Plan and VERITAS Benefit Arrangement from participating in such VERITAS
Employee Plan and VERITAS Benefit Arrangement immediately following the
Effective Time. Newco shall pro rate any portion of a premium or deductible with
respect to a VERITAS Employee Plan and VERITAS Benefit Arrangement for any
transferring Employee or beneficiary thereof for any plan year that commenced
prior to the Effective Time.
(c) Recognition of Prior Service. Newco shall take all steps
----------------------------
necessary to cause each VERITAS Employee Plan and VERITAS Benefit Arrangement
to recognize each transferring Employee's length of service under comparable
employee benefit plans maintained by Seagate for purposes of eligibility,
participation, vesting and benefit accrual in such VERITAS Employee Plan and
VERITAS Benefit Arrangement as if such transferring Employee had been employed
by Newco for such period.
(d) Waiver of Restrictions. Newco shall take all steps
----------------------
necessary to cause each VERITAS Employee Plan which is an "employee welfare
benefit plan" under Section 3(1) of ERISA to waive any restrictions or
limitations with respect to "pre-existing conditions" or prior medical history
which would apply to transferring Employee or beneficiary thereof who is
otherwise eligible to participate in such VERITAS Employee Plan and VERITAS
Benefit Arrangement from participating in such plan or arrangement without
restriction or limitation.
5.17 Indemnification and Insurance-VERITAS.
-------------------------------------
(a) The Certificate of Incorporation and Bylaws of Newco and
VERITAS shall contain the provisions with respect to indemnification and
limitation of liability for monetary damages set forth in the Certificate of
Incorporation and Bylaws of VERITAS on the date of this Agreement, which
provisions shall not be amended, repealed or otherwise modified for a period of
ten years from the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who at the Effective Time were directors,
officers, employees or agents of VERITAS, unless such modification is required
by law.
(b) From and after the Effective Time, Newco and VERITAS shall
honor, in all respects, all of the indemnity agreements entered into prior to
the date hereof by VERITAS, with its respective officers and directors, whether
or not such persons continue in their positions with Newco or VERITAS following
the Effective Time. Following the Effective Time, VERITAS' form of
indemnification agreement shall be adopted as the form of indemnification
agreement for Newco
-54-
and the VERITAS Surviving Corporation shall be afforded the opportunity to enter
into such indemnification agreement, and shall be covered by such directors' and
officers' liability insurance policies as Newco shall have in effect from time
to time.
(c) After the Effective Time, Newco and VERITAS will, jointly
and severally, to the fullest extent permitted under applicable law, indemnify
and hold harmless, each present and former director or officer of VERITAS or any
of its subsidiaries (collectively, for purposes of this Section 5.17(c), the
"INDEMNIFIED PARTIES") against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in settlement in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal administrative or investigative, to the
extent arising out of or pertaining to any action or omission in his or her
capacity as a director or officer of VERITAS arising out of or pertaining to the
transactions contemplated by this Agreement or the transactions contemplated
hereby for a period of six years after the date hereof. In the event of any such
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), (a) any counsel retained for the defense of the
Indemnified Parties for any period after the Effective Time will be reasonably
satisfactory to the Indemnified Parties, (b) after the Effective Time, VERITAS
will pay the reasonable fees and expenses of such counsel, promptly after
statements therefor are received, and (c) VERITAS will cooperate in the defense
of any such matter; provided, however, that VERITAS will not be liable for any
settlement effected without its written consent (which consent will not be
unreasonably withheld); and provided, further, that, in the event that any claim
or claims for indemnification are asserted or made within such six-year period,
all rights to indemnification in respect of any such claim or claims will
continue until the disposition of any and all such claims. The Indemnified
Parties as a group may be defended by only one law firm (in addition to local
counsel) with respect to any single action, unless there is, under applicable
standards of professional conduct, a conflict on any significant issue between
the positions of any two or more Indemnified Parties.
(d) For the entire period from and after the Effective Time
until at least six years after the Effective Time, Newco will cause VERITAS to
use its commercially reasonable efforts to maintain in effect directors' and
officers' liability insurance covering those persons who are currently covered
by VERITAS' directors' and officers' liability insurance policy (a copy of which
has been heretofore delivered or made available to Seagate) of at least the same
coverage and amounts, containing terms that are no less advantageous with
respect to claims arising at or before the Effective Time than VERITAS' policies
in effect immediately prior to the Effective Time to those applicable to the
then current directors and officers of Newco and VERITAS; provided, however,
that in no event shall Newco or VERITAS be required to expend in excess of 150%
of the annual premium currently paid by VERITAS for such coverage in which event
Newco shall purchase such coverage as is available for such 150% of such annual
premium.
(e) Newco and VERITAS shall pay all expenses, including
attorneys' fees, that may be incurred by any Indemnified Parties in enforcing
the indemnity and other obligations provided for in this Section 5.17(e).
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(f) In the event Newco or VERITAS or any of their respective
successors or assigns (a) consolidates with or merges into any other person or
entity and shall not be the continuing or surviving corporation or entity of
such consolidation or merger, or (b) transfers or conveys all or a substantial
portion of its properties or assets to any person or entity, then, and in each
such case, to the extent necessary to effectuate the purposes of this Section
5.17(f), proper provision shall be made so that the successors and the assigns
of Newco and VERITAS assume the obligations set forth in this Section 5.17.
(g) The provisions of this Section 5.17 shall survive the
Effective Time and are intended to be for the benefit of, and shall be
enforceable by, each officer and director of VERITAS STI, SSI and the
Contributed Company Group described in Sections 5.17 and his or her heirs and
representatives.
5.18 Indemnification and Insurance-Employees.
---------------------------------------
(a) The Certificate of Incorporation and Bylaws of Newco shall
contain the provisions with respect to indemnification and limitation of
liability for monetary damages set forth in the Certificate of Incorporation and
Bylaws of VERITAS on the date of this Agreement, which provisions shall not be
amended, repealed or otherwise modified for a period of ten years from the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who at the Effective Time were directors, officers, employees or
agents of (i) the Contributed Companies or (ii) of SSI (A) to the extent
involved in the Group Business and (B) provided they become Employees, officers
or directors ("GROUP PERSONS"), unless such modification is required by law.
(b) From and after the Effective Time, Newco shall honor, in
all respects, all of the indemnity agreements entered into prior to the date
hereof by SSI or any member of the Contributed Company Group with any Group
Persons, whether or not such persons continue in their positions with Newco
following the Effective Time. Following the Effective Time, VERITAS' form of
indemnification agreement shall be adopted as the form of indemnification
agreement for Newco and all continuing officers and directors of Newco shall be
afforded the opportunity to enter into such indemnification agreement, and shall
be covered by such directors' and officers' liability insurance policies as
Newco shall have in effect from time to time.
(c) After the Effective Time, Newco will, jointly and
severally, to the fullest extent permitted under applicable law, indemnify and
hold harmless, subject to Section 5.18(g), each of the Group Persons against any
costs or expenses (including attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal
administrative or investigative, to the extent arising out of or pertaining to
any action or omission in his or her capacity as a director or officer of SSI or
any of the Contributed Companies arising out of or pertaining to the
transactions contemplated by this Agreement for a period of six years after the
date hereof. Notwithstanding the foregoing, the parties agree that claims
against the Group Persons shall first be made against any directors' and
officers' liability insurance, if any, then maintained by SSI or any of the
Contributed Companies that provides converge for such Group Persons. In the
event of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), (a) any counsel
-56-
retained for the defense of the Group Persons for any period after the Effective
Time will be reasonably satisfactory to the Group Persons, (b) after the
Effective Time, Newco will, subject to Section 5.18(g), pay the reasonable fees
and expenses of such counsel, promptly after statements therefor are received,
and (c) Newco will cooperate in the defense of any such matter; provided,
however, that Newco will not be liable for any settlement effected without its
written consent (which consent will not be unreasonably withheld); and provided,
further, that, in the event that any claim or claims for indemnification are
asserted or made within such six-year period, all rights to indemnification in
respect of any such claim or claims will continue until the disposition of any
and all such claims. The Group Persons as a group may be defended by only one
law firm (in addition to local counsel) with respect to any single action unless
there is, under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more Group Persons.
(d) Newco shall pay all expenses, including attorneys' fees,
that may be incurred by any Group Persons in enforcing the indemnity and other
obligations provided for their benefit in this Section 5.18.
(e) In the event Newco or any of its respective successors or
assigns (i) consolidates with or merges into any other person or entity and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers or conveys all or a substantial
portion of its properties or assets to any person or entity, then, and in each
such case, to the extent necessary to effectuate the purposes of this Section
5.18, proper provision shall be made so that the successors and the assigns of
Newco assume the obligations set forth in this Section 5.18.
(f) The provisions of this Section 5.18 shall survive the
Effective Time and are intended to be for the benefit of, and shall be
enforceable by, each of the Group Persons and his or her heirs and
representatives.
(g) Notwithstanding any provision of this Section 5.18 to the
contrary, Newco shall not assume and shall have no Liability relating to claims
made by Minority Holders or SSI optionees arising out of the repurchase, sale or
exchange of SSI capital stock or options in connection with the Seagate
Transaction (other than the transactions contemplated by Section 1.3(a)(ii)) or
specifically relating to matters arising out of the IMG business.
5.19 Stockholder and Registration Rights Agreement. The Newco Common
---------------------------------------------
Stock to be issued in the Seagate Transaction to SSI shall be entitled to
registration rights on Form S-3 as provided in the Registration Rights
Agreement, which Rights Agreement and Stockholders Agreement shall be executed
by Newco and VERITAS as of the Effective Time.
5.20 No Other VERITAS Negotiations.
-----------------------------
(a) VERITAS shall, and shall cause its subsidiaries and its and
their subsidiaries' officers, directors or employees or any investment bankers,
attorneys or other advisors or representatives retained by any of them, to cease
any and all existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any VERITAS Alternative
-57-
Proposal (as defined below). From and after the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement in accordance
with its terms, VERITAS shall not, nor will it authorize or permit any of its
subsidiaries or any of its or its subsidiaries' officers, directors or employees
or any investment banker, attorney or other advisor or representative retained
by any of them to, directly or indirectly, (i) solicit, initiate or encourage
the submission of any VERITAS Alternative Proposal, (ii) engage in discussions
or negotiations regarding, provide non-public information with respect to, or
take any other action intended, designed or reasonably likely to facilitate any
inquiries or the making of any proposal that constitutes or would reasonably be
expected to lead to, any VERITAS Alternative Proposal, (iii) enter into any
letter of intent, agreement in principle, acquisition agreement or other similar
agreement with any person with respect to any VERITAS Alternative Proposal, or
(iv) make or authorize any statement, recommendation or solicitation in support
of any VERITAS Alternative Proposal. For purposes of this Agreement, "VERITAS
ALTERNATIVE PROPOSAL" means any inquiry, proposal or offer from any person or
"GROUP" (as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) relating to any direct or indirect acquisition, sale or
other disposition purchase of more than 20% of the assets of VERITAS and its
subsidiaries or more than a 35% interest in the total outstanding voting
securities of VERITAS or any tender offer or exchange offer that if consummated
would result in any person or "GROUP" (as defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) beneficially owning 35%
more of the total outstanding voting securities of VERITAS or any merger,
consolidation, business combination, sale of substantially all the assets,
recapitalization, liquidation, dissolution or similar transaction involving
VERITAS, other than the transactions contemplated by this Agreement, provided,
however, that no pending acquisition described in the VERITAS Disclosure Letter
and no issuance of VERITAS Common Stock in connection therewith shall be
considered a VERITAS Alternative Proposal.
(b) Notwithstanding Section 5.20(a), prior to obtaining the
approval of the stockholders of VERITAS of this Agreement and the Merger by the
requisite vote under applicable law (the "VERITAS STOCKHOLDER APPROVAL"),
VERITAS may in response to an unsolicited bona fide VERITAS Alternative
Proposal, participate in discussions or negotiations with, furnish information
to a third party making such proposal, make or authorize a statement or
recommendation in support of solicitation of such proposal, or accept such
proposal, if all of the following events shall have occurred: (w) such third
party has made a bona fide written proposal to the Board of Directors of VERITAS
to consummate a VERITAS Alternative Proposal which proposal identifies a price
or range of values to be paid for the outstanding securities or assets of
VERITAS and its subsidiaries, (x) if consummated, after consultation with
investment bankers of nationally recognized reputation, such Board of Directors
has determined is reasonably likely to be financially more favorable to the
stockholders of VERITAS than the terms of the transactions contemplated by this
Agreement, (y) such Board of Directors has determined, after consultation with
investment bankers of nationally recognized reputation, that such third party is
financially capable of consummating such VERITAS Alternative Proposal; and (z)
STI and SSI shall have been notified by VERITAS in writing of such VERITAS
Alternative Proposal, including its principal financial and other material terms
and conditions, including the identity of the person (and, if relevant, its
Affiliates) making such proposal (it being understood that any amendment to the
price, identity or material terms shall require an additional notice).
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(c) In addition to the obligations of VERITAS set forth in Section
5.20(a) and (b), VERITAS as promptly as practicable shall advise STI and SSI
orally and in writing of any request for non-public information which VERITAS
reasonably believes would lead to an VERITAS Alternative Proposal or of any
VERITAS Alternative Proposal, the material terms and conditions of such request
or VERITAS Alternative Proposal, and the identity of the person making any such
request, VERITAS Alternative Proposal or inquiry. VERITAS will keep STI and SSI
informed in all material respects of the status and details (including material
amendments) of any such request or VERITAS Alternative Proposal.
6. CLOSING MATTERS
6.1 Closing. Subject to the termination of this Agreement as provided in
-------
Section 9 below, the closing of the transactions contemplated by this Agreement
(the "CLOSING") will take place at the offices of Fenwick & West LLP, Two Palo
Alto Square, Palo Alto, California 94306 on a date and at a time to be mutually
agreed upon by the parties, which date shall be as soon as practicable after the
VERITAS Stockholders Meeting and, in any event, no later than the third business
day after all conditions to Closing set forth herein shall have been satisfied
or waived, unless another place, time and date is mutually selected by SSI and
VERITAS. Concurrently with the Effective Time, the Certificate of Merger will be
filed in the offices of the Secretary of the State of Delaware.
6.2 Exchange of Certificates.
------------------------
(a) Exchange Agent. ChaseMellon Stockholder Services LLC shall
--------------
act as exchange agent (the "EXCHANGE AGENT") in the Merger. Promptly after the
Effective Time, Newco shall deposit with the Exchange Agent, for the benefit
of the holders of shares of VERITAS Common Stock being exchanged for Newco
Common Stock pursuant hereto (collectively "NEWCO STOCK RECIPIENTS"), for
exchange in accordance with this Agreement, the Certificate of Merger,
certificates representing the shares of Newco Common Stock (such shares of
Newco Common Stock, together with any dividends or distributions with respect
thereto, being hereinafter referred to as the "EXCHANGE FUND") issuable
pursuant to this Agreement and the Certificate of Merger, in exchange for
fractional outstanding shares of VERITAS Common Stock.
(b) Exchange Procedures. As soon as practicable after the
-------------------
Effective Time, Newco shall cause the Exchange Agent to mail to each of the
Newco Stock Recipients that holds any certificates representing VERITAS Common
Stock being exchanged or converted into Newco Common Stock pursuant hereto
(collectively, the "CERTIFICATES"): (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
VERITAS and SSI may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing Newco Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with a duly executed letter of
transmittal and such other documents as may be reasonably required by the
Exchange Agent, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole shares of
Newco Common Stock and cash in lieu of
-59-
fractional shares which such holder has the right to receive pursuant to the
provisions of this Agreement and the Certificate of Merger, and the Certificate
so surrendered shall forthwith be canceled. Certificates which immediately prior
to the Effective Time represented issued and outstanding shares of VERITAS
Common Stock do not need to be delivered to the Exchange Agent and, from and
after the Effective Time, such certificates shall be deemed to evidence the
ownership of an equal number of full shares of Newco Common Stock. In the event
of a transfer of ownership of shares of VERITAS Common Stock which is not
registered on the transfer records of VERITAS, a certificate representing the
proper number of shares of Newco Common Stock may be issued to a transferee, if
the Certificate representing such VERITAS Common Stock is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 6.2 and the Certificate
of Merger, each Certificate shall be deemed, on and after the Effective Time, to
evidence the ownership of the number of full shares of Newco Common Stock into
which such shares of VERITAS Common Stock shall have been so converted.
(c) Distributions with Respect to Unsurrendered Certificates. No
--------------------------------------------------------
dividends or other distributions declared or made after the Effective Time with
respect to Newco Common Stock with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Certificate for VERITAS Common Stock
with respect to any shares of Newco Common Stock represented thereby, until the
holder of record of such Certificate shall surrender such Certificate or
affidavit of lost certificate. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be paid to the record
holder of the certificates representing whole shares of Newco Common Stock
issued in exchange therefor, without interest, (i) the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Newco Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole shares of Newco
Common Stock.
(d) No Further Ownership Rights. All shares of Newco Common Stock issued
---------------------------
upon the surrender for exchange of shares of VERITAS Common Stock in accordance
with the terms of this Agreement and the Certificate of Merger (including any
cash paid pursuant to Section 6.2(c)) shall be deemed to have been issued in
full satisfaction of all rights pertaining to such shares of VERITAS Common
Stock. After the Effective Time there shall be no further registration of
transfers on the stock transfer books of VERITAS of the shares of VERITAS Common
Stock, which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to VERITAS for any reason, they
shall be canceled and exchanged as provided in this Section 6.2 and the
Certificate of Merger.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund which
----------------------------
remains undistributed six months after performance by Newco of all of its
obligations hereunder shall be delivered to Newco, upon demand, and any former
stockholders of VERITAS who have not theretofore complied with this Section 6.2
and the Certificate of Merger shall thereafter look only to
-60-
Newco for payment of their claim for Newco Common Stock, any cash in lieu of
fractional shares of Newco Common Stock and any dividends or distributions with
respect to Newco Common Stock.
(f) No Liability. Neither the Exchange Agent, Newco, VERITAS or SSI
------------
shall be liable to SSI or any holder of shares of VERITAS Common Stock, or Newco
Common Stock, as the case may be, for any amount delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(g) 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 and the posting of a
reasonable bond therefor, such shares of Newco Common Stock, and any dividends
or distributions payable pursuant to Section 6.2(c).
6.3 Exchange of Exchanged SSI Options. Prior to Closing, Newco shall
---------------------------------
offer to each Employee, contingent upon the consummation of the Transaction and
such Employee's acceptance of Newco's offer of employment, to exchange their
Exchanged SSI Option for a Newco Option pursuant to the terms of Section
1.3(a)(ii).
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SSI AND STI
The obligations of STI, SSI and the other Contributing Companies
hereunder are subject to the fulfillment or satisfaction on or before the
Closing of each of the following conditions (any one or more of which may be
waived by SSI on behalf of all said entities, but only in a writing signed by
SSI):
7.1 Accuracy of Representations and Warranties. The representations and
------------------------------------------
warranties of VERITAS and Newco set forth in Section 3 (as qualified by the
VERITAS Disclosure Letter) shall be true and accurate on the date of this
Agreement and on and as of the Effective Time with the same force and effect as
if they had been made at the Effective Time, except for those representations
and warranties that address matters only as of a particular date (which shall
remain true and correct as of such particular date), except, in all such cases,
where such breaches of such representations and warranties, individually or in
the aggregate, would not have resulted in, nor reasonably would be expected to
result in, a Material Adverse Effect on VERITAS, and STI and SSI shall receive a
certificate to such effect executed on behalf of Newco by a duly authorized
officer of VERITAS and of Newco at the Effective Time.
7.2 Covenants. VERITAS and Newco shall have performed and complied in
---------
all material respects with all of their respective covenants in this Agreement
required to be complied with prior to the Effective Time; and STI and SSI shall
receive a certificate to such effect executed by a duly authorized officer of
VERITAS and of Newco at the Effective Time.
7.3 Compliance with Law. There shall be no order, decree or ruling by
-------------------
any governmental agency which would prohibit or render illegal the transactions
contemplated by this Agreement.
-61-
7.4 Consents. There shall have been obtained on or before the Effective
--------
Time all permits, consents and authorizations, where the failure to obtain same
would have resulted, or reasonably would be expected to result, in a Material
Adverse Effect on VERITAS.
7.5 Form S-4. The Form S-4 shall have become effective under the
--------
Securities Act and shall not be the subject of any stop-order and the
Prospectus/Proxy Statement shall on the Effective Time not be subject to any
proceedings commenced or overtly threatened by the SEC.
7.6 Opinion of VERITAS and Newco's Counsel. SSI shall have received from
--------------------------------------
Fenwick & West LLP, counsel to VERITAS and Newco, an opinion in a form
reasonably acceptable to SSI and its counsel, with such assumptions and
qualifications as are customary for such opinions.
7.7 VERITAS Stockholder Approval. The principal terms of this Agreement,
----------------------------
the Merger and the Seagate Transaction shall have been approved and adopted by
the VERITAS stockholders in accordance with the Delaware Law and VERITAS'
Certificate of Incorporation and Bylaws.
7.8 No Legal Action. No temporary restraining order, preliminary
---------------
injunction or permanent injunction or other order preventing the consummation of
the Merger or the Seagate Transaction shall have been issued by any federal or
state court and remain in effect.
7.9 Tax Opinion. STI and SSI shall have received an opinion in form and
-----------
substance satisfactory to them, from their respective counsel, to the effect
that the Seagate Transaction, when taken together with the Merger, will be
treated as a transfer of property to Newco by them governed by Section 351 of
the Internal Revenue Code, provided that if their counsel does not render such
opinion, this condition shall nonetheless be deemed satisfied, if counsel to
VERITAS and Newco renders such opinion in form and substance reasonably
acceptable to them. The parties shall make representations reasonably requested
by counsel related to said tax opinion, which representations may be relied upon
by the counsel providing the opinion, and the opinion may contain such
assumptions and qualifications as are customary for such opinions.
7.10 Election of The Contributing Companies Designees to the Board of
----------------------------------------------------------------
Directors of Newco. The Board of Directors of Newco shall have taken appropriate
------------------
action to elect Xxxxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxx and Xxxxxxx X. Xxxxxxxxxx
to the initial Board of Directors of Newco, effective upon the Effective Time.
7.11 Nasdaq Listing. The Newco Common Stock to be issued in the Merger
--------------
and in the Seagate Transaction shall have been approved for quotation on the
Nasdaq Stock Market, subject to notice of issuance.
7.12 Incorporation of New Delaware Company. Newco shall have formed
-------------------------------------
Merger Sub prior to the Effective Time, and Newco and Merger Sub shall be duly
organized, validly existing and in good standing under the laws of Delaware and
such corporations shall not have engaged in any business activities during the
period from incorporation to the Effective Time. SSI, at the Effective Time,
shall receive a certificate to such effect signed by Newco incorporator on
behalf of Newco.
-62-
7.13 HSR Act. Any waiting period (and any extension thereof) under the
-------
HSR Act applicable to transactions contemplated hereby shall have expired or
shall have been terminated.
7.14 No Order. No non-U.S., United States or state governmental
--------
authority or other agency or commission or United States or state, federal or
international court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, injunction,
decree, executive order, or other order (whether temporary, preliminary or
permanent) which is in effect and has the effect of making the transactions
contemplated by this Agreement illegal or otherwise restraining or prohibiting
consummation of such transactions; provided, however, that the parties hereto
-------- -------
shall use their reasonable best efforts to have any such order or injunction
vacated as soon as practicable.
7.15 Ancillary Agreements. VERITAS and Newco shall have executed and
--------------------
delivered counterparts of each of the following Ancillary Agreements to which
they are a party: (i) the Stockholder Agreement; (ii) the Registration Rights
Agreement; and (iii) the Transition Services Agreement.
7.16 Stockholder Approval. The Seagate Transaction shall have been
--------------------
approved by the requisite vote under applicable law by the stockholders of SSI.
7.17 Delivery of Newco Shares. Newco shall have delivered to SSI a
------------------------
certificate representing that number of whole shares of Newco Common Stock that
equals the SSI Percentage Interest.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF VERITAS AND NEWCO
The obligations of VERITAS, Merger Sub and Newco hereunder are subject
to the fulfillment or satisfaction on or before the Closing of each of the
following conditions (any one or more of which may be waived by VERITAS on
behalf of all such parties, but only in a writing signed by VERITAS):
8.1 Accuracy of Representations and Warranties. The representations and
------------------------------------------
warranties of SSI and STI set forth in Section 2 (as qualified by the SSI
Disclosure Letter) shall be true and accurate on the date of this Agreement and
on and as of the Effective Time, with the same force and effect as if they has
been made at the Effective Time, except for those representations and warranties
that address matters only as of a particular date (which shall remain true and
correct as of such particular date), except, in all such cases, where such
breaches of such representations and warranties, individually or in the
aggregate, would not have resulted in, nor reasonably would be expected to
result in, a Material Adverse Effect on Newco, and VERITAS shall receive a
certificate to such effect executed on behalf of SSI by a duly authorized
officer of SSI.
8.2 Covenants. The Contributing Companies and the Contributed Companies
---------
shall have performed and complied in all material respects with all of their
respective covenants in this Agreement required to be complied with prior to the
Effective Time; and VERITAS shall receive a certificate to such effect signed on
behalf of SSI by a duly authorized officer of SSI.
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8.3 Compliance with Law. There shall be no order, decree or ruling by
-------------------
any court or governmental agency which would prohibit or render illegal the
transactions contemplated by this Agreement.
8.4 Consents. There shall have been obtained on or before the Effective
--------
Time all permits, consents and authorizations, where the failure to obtain same
would have resulted, or reasonably would be expected to result, in a Material
Adverse Effect on the Group Business.
8.5 Form S-4. The Form S-4 shall have become effective under the
--------
Securities Act and shall not be the subject of any stop-order or proceedings
seeking a stop-order and the Prospectus/Proxy Statement shall at the Effective
Time not be subject to any proceedings commenced or overtly threatened by the
SEC.
8.6 Opinion of Counsel to STI and SSI. VERITAS shall have received from
---------------------------------
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, counsel to the
Contributing Companies, an opinion in form reasonably acceptable to VERITAS,
with such assumptions and qualifications as are customary for such opinions.
8.7 VERITAS Stockholder Approval. The principal terms of this Agreement,
----------------------------
the Merger and the Seagate Transaction shall have been approved and adopted by
the VERITAS stockholders in accordance with applicable law and VERITAS'
Certificate of Incorporation and Bylaws.
8.8 SSI Corporate Approvals. The principal terms of this Agreement and
-----------------------
the Seagate Transaction (including the contribution and transfer of the
Contributed Assets) shall have been approved and adopted by the SSI Stockholders
in accordance with applicable law and its Certificate of Incorporation and
Bylaws.
8.9 No Legal Action. No temporary restraining order, preliminary
---------------
injunction or permanent injunction or other order preventing the consummation of
the Merger shall have been issued by any federal or state court and remain in
effect.
8.10 Tax Opinion. VERITAS and Newco shall have received an opinion in
-----------
form and substance satisfactory to them from their counsel, to the effect that
the Merger will be treated for federal income tax purposes as a tax-free
reorganization within the meaning of Section 368 of the Internal Revenue Code,
provided that if the counsel to VERITAS and Newco does not render such opinion,
this condition shall nonetheless be deemed satisfied if counsel to SSI and STI
renders such opinion to such parties in form and substance reasonably acceptable
to them. The parties shall make representations reasonably requested by counsel
related to said tax opinion, which representations may be relied upon by the
counsel providing said opinion, with such qualifications as are customary for
such opinions.
8.11 HSR Act. Any waiting period (and any extension thereof) under the
-------
HSR Act applicable to the transactions contemplated hereby shall have expired or
shall have been terminated.
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8.12 No Order. No non-U.S., United States or state governmental
--------
authority or other agency or commission or United States or state or federal or
international court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, injunction,
decree, executive order, or other order (whether temporary, preliminary or
permanent) which is in effect and has the effect of making the transactions
contemplated by this Agreement illegal or otherwise restraining or prohibiting
consummation of such transactions; provided, however, that the parties hereto
-------- -------
shall use their reasonable best efforts to have any such order or injunction
vacated, as soon as practicable.
8.13 Ancillary Agreements. The Contributing Companies shall have
--------------------
executed and delivered counterparts of each of the following Ancillary
Agreements to which they are a party: (i) the Stockholder Agreement; (ii) the
Registration Rights Agreement; and (iii) the Transition Services Agreement.
8.14 Sufficiency of Assets. VERITAS and Newco shall be reasonably
---------------------
satisfied that there has been no breach of the representation set forth in the
second sentence of Section 2.22 and that the Contributed Stock and Assets shall
have been duly transferred and delivered to Newco as required by this Agreement.
8.15 Intellectual Property Assignments. Newco shall have received from
---------------------------------
the Contributing Companies assignments of the Contributing Companies' right,
title and interest in the following Intellectual Property Rights included in the
Contributed Assets: (i) patents on disc operating system backup and recovery
system and on data back-up restore for a computer network; (ii) the "Backup
Exec" registered trademark; and (iii) the copyright on Back-up Exec (the "CORE
IP"), each duly executed on behalf of said company and notarized, and in a form
reasonably acceptable to VERITAS and acceptable for recording with the United
States Copyright Office or the United States Patent and Trademark Office, as
applicable. In addition, the Contributing Companies shall have taken such steps
in causing the registration of copyrights in the Core IP and the recordation of
any previous assignments in the chain of title for the Core IP which are
necessary to enable Newco to record the Core IP assignments.
8.16 Modification of Joint Contributed Agreements. A mutually acceptable
--------------------------------------------
arrangement between SSI and Newco and, if required, the other parties thereto
shall have been reached with respect to the treatment of the Joint Contributed
Agreements, for example with distributors who distribute both Group Products and
the products of any other business claimed of the Contributing Companies or
their subsidiaries, such that Newco, SSI and its subsidiaries including IMG
shall receive payments with respect to Group Products and other products,
respectively, as the case may be, and the appropriate party shall be responsible
for price protection, accumulated rebate credits, product returns, warranty
support and similar Liabilities.
9. TERMINATION OF AGREEMENT
9.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Effective Time, whether before or after approval of the Merger by the
stockholders of VERITAS or SSI:
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(a) by mutual written agreement of SSI, STI and VERITAS;
(b) by SSI or STI, if there has been a breach by VERITAS or
Newco of any representation or warranty set forth in this Agreement on the part
of VERITAS or Newco, and, as a result of such breach, the conditions set forth
in Section 7.1 would not then be satisfied and such breach is not cured within
thirty (30) days after notice thereof from SSI to VERITAS (except that no cure
period shall be provided for a breach by VERITAS or Newco which by its nature
cannot be cured);
(c) by SSI or STI, if there has been a breach by VERITAS or
Newco of any covenant or agreement set forth in this Agreement on their part to
be performed and as a result of such breach, the conditions set forth in Section
7.2 would not then be satisfied and such breach is not cured, within thirty (30)
days after written notice thereof from SSI to VERITAS (except that no cure
period shall be provided for a breach by VERITAS or Newco which by its nature
cannot be cured);
(d) by VERITAS, if there has been a breach by STI or SSI of any
representation or warranty set forth in this Agreement on their part, and as a
result of such breach, the conditions set forth in Section 8.1 would not then be
satisfied and such breach is not cured within thirty (30) days after written
notice thereof from VERITAS to SSI (except that no cure period shall be provided
for a breach by STI or SSI which by its nature cannot be cured);
(e) by VERITAS, if there has been a breach by STI or SSI of any
covenant or agreement set forth in this Agreement on their part to be performed,
and as a result of such breach, the conditions set forth in Section 8.2 would
not then be satisfied and such breach is not cured within thirty (30) days after
written notice thereof from VERITAS to SSI (except that no cure period shall be
provided for a breach by STI or SSI which by its nature cannot be cured);
(f) by VERITAS or STI or SSI, if the Merger and the Seagate
Transaction shall not have been consummated on or before the Final Date for any
reason, other than any wrongful action or failure to act or as a result of a
breach of this Agreement or any Ancillary Document by the terminating party;
(g) by VERITAS or STI or SSI, if a permanent injunction or other
order by any federal or state court would make illegal or otherwise restrain or
prohibit the consummation of the Merger and/or the Seagate Transaction shall
have been issued and shall have become final and nonappealable;
(h) by VERITAS or STI or SSI, if the stockholders of VERITAS do
not approve the Merger and/or the Seagate Transaction at a duly convened VERITAS
stockholders meeting or any adjournment thereof by reason of the failure to
obtain the required vote (a "VERITAS STOCKHOLDER REJECTION"); provided, that the
right to terminate this Agreement under this Subsection (h) shall not be
available to VERITAS where the failure to obtain VERITAS stockholder approval
shall have been caused by any breach of this Agreement or any Ancillary Document
by VERITAS;
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(i) by STI or SSI, if (a) the Board of Directors of VERITAS
shall have withdrawn (or modified in a manner adverse to the VERITAS Stockholder
Approval or the consummation of the Merger and/or the Seagate Transaction) its
approval or recommendation of the Merger, the Seagate Transaction or this
Agreement, (b) VERITAS shall have failed to include in the Proxy
Statement/Prospectus the recommendation of the Board of Directors of VERITAS in
favor of approval of the Merger, the Seagate Transaction, or this Agreement, (c)
the Board of Directors of VERITAS shall have recommended or shall have approved
any VERITAS Alternative Proposal, or (d) the Board of Directors of VERITAS shall
have resolved to do any of the foregoing (collectively a "CHANGE IN VERITAS
BOARD RECOMMENDATION").
(j) by VERITAS, STI or SSI at any time prior to the VERITAS
Stockholder Approval, if the Board of Directors of VERITAS shall have
recommended or accepted a VERITAS Alternative Proposal provided that VERITAS is
not in breach of Section 5.20.
As used herein, the "FINAL DATE" shall be February 28, 1999, except that if
------
the FTC or the DOJ issues a "second request" under the HSR Act, then the Final
Date shall be extended to May 31, 1999; and except that if a temporary,
------
preliminary or permanent injunction or other order by any Federal or state court
which would prohibit or otherwise restrain consummation of the Merger and/or the
Seagate Transaction shall have been issued and shall remain in effect on May 31,
1999, and such injunction shall not have become final and non-appealable, either
party, by giving the other written notice thereof on or prior to May 31, 1999,
may extend the time for consummation of the Merger and/or the Seagate
Transaction up to and including the earlier of the date such injunction shall
become final and non-appealable or June 30, 1999, so long as such party shall,
at its own expense, use its reasonable best efforts to have such injunction
dissolved.
9.2 Notice of Termination. Any termination of this Agreement under
---------------------
Section 9.1 above will be effected by the delivery of notice of the terminating
party to the other party hereto of such termination, specifying the grounds
therefore.
9.3 No Liability. Except as provided in Section 9.4 below, any
------------
termination of this Agreement in accordance with this Section 9 will be without
further obligation or liability upon any party in favor of the other parties
hereto other than the obligations contained in the Nondisclosure Agreement,
which will survive termination of this Agreement; provided, however, that
-------- -------
nothing herein will relieve any party from liability for any willful breach,
misrepresentation or misconduct in connection with this Agreement.
9.4 Breakup Fee.
-----------
(a) If this Agreement is terminated by SSI or STI or VERITAS
pursuant to Section 9.1(h) as a result of a VERITAS Stockholder Rejection and
prior to such rejection (i) an Alternative Proposal has not been publicly
announced or otherwise publicly disclosed and not withdrawn, and (ii) no Change
in Board Recommendation has occurred, then VERITAS shall promptly pay SSI and
STI (by wire transfer or cashier's check) a nonrefundable fee equal to the
actual reasonable legal, accounting and printing expenses incurred by STI, SSI,
the Contributing
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Companies and/or the Contributed Company Group, but not exceeding $5 million,
within three (3) business days following the delivery of an itemized list of
such expenses by SSI and STI.
(b) If this Agreement is terminated by SSI or STI or VERITAS (i)
pursuant to Section 9.1(h) as a result of a VERITAS Stockholder Rejection after
an Alternative Proposal has been publicly announced or otherwise publicly
disclosed and not withdrawn, (ii) pursuant to Sections 9.1(i) or 9.1(j), then
VERITAS shall promptly pay to SSI (by wire transfer or cashier's check) a
nonrefundable fee equal to $50 million within ten (10) days following delivery
of the notice of termination to or by SSI and STI pursuant to Section 9.2.
(c) VERITAS acknowledges that the agreements contained in this
Section 9.4 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, none of STI, SSI or NSMG would
enter into this Agreement; accordingly, if VERITAS fails to timely pay the
amounts due pursuant to this Section 9.4, and, in order to obtain such payment,
STI or SSI commences a suit which results in a judgment against VERITAS for the
amounts set forth in this Section 9.4 and such judgment is not set aside or
reversed, VERITAS shall pay to STI or SSI their reasonable costs and expenses
(including attorneys' fees and expenses) in connection with such suit, together
with interest on the amounts set forth in this Section 9.4 at the prime rate of
CitiBank in effect on the date such payment was required to be made.
10. SURVIVAL OF REPRESENTATIONS
10.1 No Survival of Representations. Except as otherwise expressly
------------------------------
provided herein, all representations, warranties and covenants other parties
contained in this Agreement will remain operative and in full force and effect,
regardless of any investigation made by or on behalf of the parties to this
Agreement, only until the Effective Time or any earlier termination of this
Agreement in accordance with Section 9 above, whereupon such representations,
warranties and covenants will expire (except for covenants and other provisions
hereof that by their express terms survive for a longer period).
11. INDEMNIFICATION
11.1 Indemnification by SSI and STI. SSI and STI agree, notwithstanding
------------------------------
any provision of Section 1.4 hereof to the contrary, to indemnify Newco and
VERITAS against, and to hold Newco and VERITAS harmless from, all Loss arising
out of any of the following (even if included in the Assumed Liabilities as
otherwise being or allegedly being a Liability of one of the Contributed
Companies or of the Contributed Subsidiaries):
(a) all Liabilities to Minority Holders or Optionees arising out of
the repurchase, sale or exchange of SSI capital stock or options in connection
with the Seagate Transaction (other than the transactions contemplated by
Section 1.3(a)(ii)) or that arise from rights granted by SSI or STI to any
Employees to require SSI or STI to repurchase shares of SSI capital stock upon
termination of employment.
(b) any of the Excluded Liabilities, except as may be provided in
Section 13;
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(c) any demand, claim, debt, suit, cause of action, arbitration,
investigation or other proceeding made or asserted by any Contributing Company
or any stockholder, creditor, or affiliate of any Contributing Company or by any
receiver or trustee in bankruptcy of any Contributing Company of the property or
assets of any Contributing Company, asserting that the transfer of the
Contributed Stock and Assets to Newco hereunder constitutes a fraudulent
conveyance, fraudulent transfer or a preference under any applicable state or
federal law, including but not limited to the United States Bankruptcy Code, or
any breach by any Contributing Company of its representations and covenants in
Section 1.4(e) hereof (the Heading of which is "NO FRAUDULENT CONVEYANCES") or
any Liabilities related to non-compliance with bulk transfer laws in connection
with the Seagate Transaction;
(d) IMG; or
(e) any material Liability omitted from the Group Financial
Statements that was required by GAAP to be included or reflected therein
(collectively, the "OMITTED BALANCE SHEET LIABILITIES"), or any Tax Liability
associated with the Contributed Company Group or the Group Business that STI or
SSI is otherwise responsible for or required to indemnify for under Section 13
and which (i) are not reflected on any line item in the 1998 Group Balance
Sheet; (ii) are not disclosed on Schedule 1.4(b)(i)(B); or (iii) are not
incurred in the Conduct of the Group Business in the ordinary course after the
Group Financial Statements Balance Sheet Date (collectively, the "UNFORESEEN TAX
LIABILITIES"), to the extent the aggregate of such Omitted Balance Sheet
Liabilities and Unforeseen Tax Liabilities exceed $5,000,000 (the "THRESHOLD
AMOUNT"); and, notwithstanding anything in Section 13.4(a)(ii), neither STI nor
SSI shall have any obligation to indemnify Newco under Section 13.4(a)(ii) until
the Threshold Amount is so exceeded; and Newco shall pay any and all of the
Omitted Balance Sheet Liabilities and Unforeseen Tax Liabilities until the
aggregate of such payments of Omitted Balance Sheet Liabilities and Unforeseen
Tax Liabilities equals the Threshold Amount; or
(f) any breach of the representation in the second sentence of
Section 2.22 hereof (the Heading of which is "Title to and Condition and
--------------------------
Sufficiency of Group Assets").
---------------------------
11.2 Time Limitations on Indemnification. Notwithstanding anything
-----------------------------------
herein to the contrary, claims for indemnification under this Section 11 may be
brought after the Closing and at any time prior to the expiration of the legal
statute of limitations applicable to the subject matter of the claim underlying
the claim for indemnification; provided that any claims under Section 11.1(e) or
under Section 11.1(f) must be noticed within 60 days after conclusion of the
first audit of Newco financial results following the Closing that includes the
combined financial results of the Group Business and VERITAS (and in any event
within twelve (12) months after the closing). To preserve a claim for
indemnification under this Section 11, an Indemnified Party need only provide
written notice in reasonable detail of such claim to SSI prior to the expiration
of the applicable time limit (if any) described in the preceding sentence; and
if an Indemnified Party provides such notice prior to the expiration of such
time limit, such Indemnified Party may pursue such claim for indemnification
after the expiration of such time limit.
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11.3 No Limitation on Other Rights. The foregoing indemnification
-----------------------------
provisions are in addition to, and not in derogation of, any statutory,
equitable or common law remedies that Newco or any other Indemnified Party may
have.
12. EMPLOYEE MATTERS
12.1 Right to Offer Employment.
-------------------------
(a) Employees. Schedule 12.1 of the SSI Disclosure Letter contains
--------- -------------
a preliminary list (the "PRELIMINARY LIST") of each Contributed Company employee
or consultant and each other employee or consultant of SSI, STI or the Group
Business who works in, or provides services in connection with, the Group
Business or any of the Group Assets (each an "EMPLOYEE"). Within twenty (20)
days prior to the Effective Time, SSI shall deliver to Newco a final list of the
Employees (the "FINAL LIST"), which list shall identify those Employees who are
active Employees of the Group Business as of that date, including those on
vacation, sick leave, disability leave, family leave or personal leave of
absence or who work full or part time, and which shall separately identify those
Employees who are on a workers' compensation-related or disability leave. The
Final List shall contain, with respect to each Employee, a true and accurate
list of all locations at which Employees are working as of the date hereof,
together with the date of hire, location of employment, years of employment or
service, current annual base salary or base wage, and of all other compensation
arrangements for such Employees, including bonuses or other compensation
arrangements. For purposes of this Agreement, "EMPLOYEES" means only those
individuals (whether employees or consultants) included on such final list.
(b) Offers of Employment. Effective at the Effective Time, Newco
--------------------
shall offer to employ Employees on an "at-will" basis and subject to Newco's
standard terms, conditions and policies of employment and the terms of this
Agreement, and shall offer Employees (i) salary consistent with the salary
earned by such Employees prior to the Effective Time but only to the extent such
salary is not in excess of industry norms (ii) participation in incentive
compensation arrangements, subject to Section 5.16 and consistent with the
incentive compensation arrangements of employees of VERITAS in comparable
positions. This Section 12.1(b) shall not be construed to create any third party
Beneficiary rights or any other rights of any kind in any Employee and no
Employee shall have any cause of action as a third party beneficiary. Such
offers of employment that will be extended by Newco to Employees will be on the
same basis of time commitment (full or part time) as such Employee was employed
by immediately prior to the Effective Time. Unless the parties otherwise agree,
on the Closing Date, SSI and STI shall notify each Employee who accepts an offer
of employment extended by Newco as of the Effective Time, in a writing
reasonably satisfactory to Newco, that such Employee's employment with STI or
any of its direct or indirect subsidiaries is then terminated. Neither SSI or
STI may make offer of employment to any Employees. Notwithstanding the foregoing
sentence, SSI or STI may make offers of employment to Employees at the Scotts
Valley location other than the Oracle Developers; provided, however, that SSI or
STI may make offers of employment to the Oracle Developers if Newco changes
their place of employment from Scotts Valley, California.
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(c) Non-U.S. Employees. Subject to Section 11.1(a), Newco shall be
------------------
responsible for any severance, any Liability arising out of failure to give
requisite notice to any non-U.S. Employee or non-U.S. governmental agencies
regarding possible employment transitions to Newco of certain employees or any
other Liability arising out of the employment by Newco of, or the failure of
Newco to employ any non-U.S. Employee.
12.2 Termination of Employment.
-------------------------
(a) SSI and STI agree to comply with the provisions of the WARN
Act and any other federal, state or local statute or regulation regarding
termination of employment, plant closing or layoffs and to perform all
obligations required by SSI and/or STI with respect to the cessation of any
operations of the Group Business or any other business of SSI and/or STI or
their subsidiaries, or the termination, re-assignment, re-location or change in
position of any Employee (or other employee of them) who does not accept Newco's
offer of employment.
(b) SSI and/or STI shall (i) provide continuation health care
coverage to all Employees and their qualified beneficiaries who incur a
qualifying event or prior to the Effective Time or who do not accept Newco's
offer of employment pursuant to Section 12.1(b) or in accordance with the
continuation health care coverage requirements of COBRA and (ii) provide COBRA
continuation coverage to any former employee of Contributed Company Group who
was previously employed in the Group Business (collectively, the "FORMER
EMPLOYEES") and their qualified beneficiaries to whom, at the Effective Time,
such continuation coverage was provided or to whom SSI and STI are under an
obligation to provide such continuation coverage at the election of such Former
Employee or qualified beneficiary.
12.3 Cooperation. SSI and STI, VERITAS and Newco agree, for themselves
-----------
and their affected subsidiaries, to cooperate fully with respect to the actions
which are necessary or reasonably desirable to accomplish the transactions
contemplated hereunder, including, without limitation, the provision of records
and information as each may reasonably request and the making of all appropriate
filings under ERISA and the Internal Revenue Code.
13. TAX MATTERS
13.1 Transaction Taxes; Representation; Transaction Tax Indemnity.
------------------------------------------------------------
Seagate and Newco shall each bear half of the first $1,000,000 of Transaction
Taxes (as defined below). Thereafter, Seagate shall be solely responsible for
any and all sales, use, excise, value added, registration, stamp, property,
documentary, transfer, withholding and similar taxes and levies, (including all
real estate transfer taxes, but not any real estate transfer taxes that would be
triggered as a result of a change in control of a corporation) incurred, or that
may be payable to any taxing authority, with respect to the sale, transfer, or
delivery of the Contributed Stock and Assets and the assumption of the Assumed
Liabilities, including any sales or use tax imposed on Newco pursuant to Section
6812 of the California Revenue and Taxation Code (collectively, "TRANSACTION
TAXES"). Newco and Seagate agree to cooperate in minimizing the amount of any
such Taxes and in the filing of all necessary documentation and all Tax returns,
reports and forms ("RETURNS") with respect to all such Taxes, including any
available pre-sale filing procedures.
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13.2 No Limitation. Except as provided in Section 11, there shall be no
-------------
limitation on the amount of a party's liability with respect to its
indemnification obligations under Section 13, and an indemnified party may
assert any such indemnity claim at any time prior to expiration of the
applicable Tax statutes of limitations applicable to the subject matter of the
claim underlying the claim for indemnification under applicable law (including
extensions).
13.3 Treatment of Indemnity Payments. All payments made by Seagate or
-------------------------------
Newco, as the case may be, to or for the benefit of the other party pursuant to
any indemnification obligations under this Agreement shall be treated for Tax
purposes as adjustments to the value of the Contributed Stock and Contributed
Assets, as capital contributions, or as appropriate, the satisfaction of a
preexisting obligation and such treatment shall govern for purposes of this
Agreement, unless there is a final determination as defined in Section 1313(a)
of the Code to the contrary.
13.4 Indemnity for Taxes.
-------------------
(a) Except as otherwise provided in this Section 13 or Section 11,
from and after the Closing, SSI and STI shall timely pay and indemnify and save
Newco and its Affiliates harmless from any liability for, or arising out of or
based upon, or relating to any Tax (including, without limitation, any
obligation to contribute to the payment of a Tax determined on a consolidated
basis with respect to a group of corporations that includes or included STI or
SSI) (i) of STI or SSI or any member of the affiliated group of corporations (as
defined in section 1504 of the Code) of which STI or SSI is a member (other than
any member of the Contributed Company Group or with respect to any Tax relating
to the income, business, assets, property or operations of the Group Business)
for any taxable period or (ii) relating to the income, business, assets,
property or operations of the Group Business or of the Contributed Company Group
to the extent that such liability for Tax is not reflected in the SSI Disclosure
Letter or the Group Financial Statements (irrespective of where it is reflected
on the Group Financial Statements Balance Sheet), and is either (A) in respect
of any taxable period that ends prior to the Group Financial Statements Balance
Sheet Date or in respect of any taxable period that includes, but does not end
on, the Group Financial Statements Balance Sheet Date, the portion of such
period ending on the Group Financial Statements Balance Sheet Date or (B) with
respect to an excess loss account in the stock of any Contributed Company or
from a deferred intercompany transaction (other than among members of the
Contributed Company Group) entered into prior to the Group Financial Statements
Balance Sheet Date and is triggered as a result of the Contributed Company Group
ceasing to be affiliated with STI or SSI. The indemnity provisions of this
Section 13.4(a) shall not apply to Taxes attributable to a breach of, or
inaccuracy in, Section 13.6(a).
(b) Notwithstanding anything contained in this Section 13, STI and SSI
shall not be obligated to indemnify Newco for any Tax (including, without
limitation, any obligation to contribute to the payment of a Tax determined on a
consolidated basis with respect to a group of corporations that includes or
included STI or SSI) by reason of an election or deemed election (including any
protective election) with respect to transactions described in this Agreement
made or filed post-Closing by Newco or any member of the Contributed Companies
under Section 338 of the
-00-
Xxxxxxxx Xxxxxxx Code. Further, no such election shall be made with respect to
any of the transactions described in this Agreement.
(c) Except to the extent otherwise provided in this Section 13, Newco
shall timely pay and indemnify and save STI and its Affiliates harmless from any
liability for, or arising out of or based upon or relating to any Tax
(including, without limitation, any obligation to contribute to the payment of a
Tax determined on a consolidated basis with respect to a group of corporations
that includes or included STI or SSI) (i) relating to the income, business,
assets, property or operations of the Group Business by Newco and its Affiliate
in respect of all taxable periods beginning after the Group Financial Statements
Balance Sheet Date, or, in the case of any taxable period that includes but does
not end on the Group Financial Statements Balance Sheet Date, the portion of
such period commencing on the day following the Group Financial Statements
Balance Sheet Date; and (ii) to the extent such liability for Tax is reflected
in the Group Financial Statements (irrespective of where it is reflected on the
Group Financial Statements Balance Sheet) or the SSI Disclosure Letter and such
liability is for Tax relating to the income, business, assets, property or
operations of the Group Business or of any member of the Contributed Company.
13.5 Other Tax Matters.
-----------------
(a) Seagate and Newco will cooperate fully with each other in
connection with the preparation of all returns and reports of Taxes, information
returns, and all audit examinations of, or claims or assertions against, any
member of the Contributed Company Group, in each case including but not limited
to the furnishing or making available of records, books of account or other
materials and appropriate personnel necessary or helpful to the defense against
the assertions of any taxing authority. Seagate shall, within a reasonable time
after the Closing Date but no later than 60 days prior to the deadline
(including extensions) of any Tax return of Newco or its Affiliates that
includes the operations of the Group Business or the Contributed Company Group,
use its best efforts to deliver to Newco a schedule listing the tax basis of
each of the Group Assets and the Contributed Stock.
(b) Except as provided in Section 13.5(c), in the event and to the
extent that STI or any member of an affiliated group of corporations (as defined
in Section 1504 of the Internal Revenue Code) of which STI is a member (other
than any member of the Contributed Company Group) receives a refund or credit of
Taxes for any taxable period that ends prior to the Closing Date or in respect
of any period that includes, but does not end on, the Effective Time, the
portion of such period ending on the Effective Time (the "PRE-CLOSING PERIOD")
which is attributable to the carry back of losses, credits or similar items from
any Tax return of any member of the Contributed Company Group, and in any case,
in respect of any taxable period that begins after the Effective Time or in
respect of any period that includes, but does not end on the Effective Time, the
portion of such period commencing on the day following the Effective Time (the
"Post-Closing Period"), STI shall pay to Newco, net of any additional Tax
payable by STI or its Affiliates by reason of such carryback, the amount of such
refund or credit (including any interest received thereon) or Tax reduction. In
the event that any refund or credit of Taxes or Tax reductions for which a
payment has been made pursuant to this Section 13.5 subsequently is reduced or
disallowed, the Contributed
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Companies and Newco shall indemnify and hold harmless STI and its Affiliates for
any Tax liability, including interest and penalties, assessed by reason of such
reduction or disallowance.
(c) In the event that an indemnified party receives a refund or
credit of Taxes for which it has been indemnified pursuant to Section 13.4 of
this Agreement, such indemnified party agrees to pay to the indemnifying party
the amount of such refund or credit (including any interest received thereon).
In the event that any refund or credit of Taxes for which a payment has been
made pursuant to this Section 13.5(c) subsequently is reduced or disallowed, the
indemnifying party shall indemnify and hold harmless the indemnified party for
any Tax liability, including interest and penalties, assessed by reason of such
reduction or disallowance.
(d) If any claim for Tax relating to the Group Business or the
Contributed Company Group is asserted against STI or SSI or any Affiliate for
any Pre-Closing Period, STI shall promptly notify Newco in writing of such fact.
STI, SSI and their duly appointed representatives shall have the sole right to
negotiate, resolve, settle or contest any such claim for Tax; provided, however,
that they shall deal fairly and in good faith with respect to any claim for Tax
which would require a payment by Newco to STI or its affiliates under Section
13.4(c) and provided further, that with respect to any claim which would require
a payment by Newco or have a Material Adverse Effect on the Group Business, no
settlement will be agreed to without Newco's prior written consent. Such consent
shall not be unreasonably withheld. If Newco fails to provide STI with written
consent within 30 days of a written request from STI, and submits a written
objection the procedures in Section 7(c) of the Tax Allocation Agreement dated
as of April 4, 1996 (the "TAX ALLOCATION AGREEMENT") shall be applied. Newco
shall bear the legal and accounting costs and expenses incurred in contesting a
matter for which it has withheld its consent. If any claim for Tax relating to
the Contributed Company Group for any Post-Closing Period comes to the attention
of STI, STI will notify Newco promptly of such claims and will cooperate fully
with Newco and the Contributed Company Group in the resolution of such claim. A
failure to promptly notify pursuant to this Section 13.6(d) shall not preclude
another party's indemnification obligation.
(e) STI shall prepare any Tax returns (including any amendments
thereto) of the members of the Contributed Company Group for all taxable periods
that end, with respect to the Contributed Company Group, on or before the
Effective Time (including any short period ending on the Closing Date) and which
are due either before or after the Effective Time and shall deliver to Newco for
signing by the appropriate party and filing, any Tax returns of the members of
the Contributed Company Group (including any amendments thereto) with respect to
any such period that have not been filed prior to the Effective Time. STI shall
deliver any such tax return or the portion thereof relating to the Group
Business to Newco at least fifteen days prior to the date such tax return is due
to be filed (taking into account any applicable extensions). STI shall report
for federal income tax purposes the operations of the Group Business and the
Contributed Company Group for any short period ending on the Effective Time, and
shall be responsible for the filing of, the consolidated tax returns of STI's
consolidated group which will include the income of the Group Business and the
Contributed Company Group through the Effective Time and Newco will pay to STI
any amounts relating to such tax returns required by Section 13.4(c) prior to
the filing of such tax returns. In order appropriately to apportion any taxes
relating to a period that includes (but that
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would not, but for this Section 13.5(e) end on the Effective Time), the parties
hereto will, to the extent permitted by applicable law, elect with the relevant
taxing authority to treat for all purposes the Effective Time as the last day of
a taxable period of any member of the Contributed Company Group. STI shall, in
respect of such returns, and Newco and the Contributed Company Group for returns
with respect to the Post-Closing Period shall determine the income, gain,
expenses, losses, deductions and credits of the Group Business and the
Contributed Company Group in a manner (i) consistent with prior practice and
actual operations in a manner that apportions such income, gain, expenses, loss,
deductions and credits equitably from period to period and (ii) consistent with
prior years. STI and SSI shall not pay a "FSC" commission with respect to the
Group Business without the prior written consent of Newco.
(f) The tax returns described in Section 13.5(e) shall be prepared
in accordance with the Tax Allocation Agreement except to the extent it is
inconsistent with Section 13.5(e). In addition, the parties agree that for the
taxable periods the Contributed Companies are included in a consolidated return
with STI or SSI, the parties will compensate each other for the use of losses
and credits in the amounts determined in accordance with the Tax Allocation
Agreement. The provisions of this Section 13 with respect to the consolidated
groups or consolidated returns that include STI or SSI or their affiliates other
than a Contributed Company shall apply mutatis mutandis with respect to combined
----------------
or unitary groups or returns thereof.
(g) Newco, STI and SSI shall make payments of estimated taxes
(including amounts due with extensions) for which they are responsible under
this agreement in accordance with the Tax Allocation Agreement. Any Tax which is
due (including estimated Taxes) on or prior to the Effective Time and which is
the responsibility of Newco, shall, in lieu of requiring a payment by Newco
prior to the Effective Time, be satisfied by a payment out of the Group Assets
or the Group Business or after payment of such Tax by STI or SSI through an
increase in the account balances owed by the Group Business or the Contributed
Companies to STI or SSI, which increase in the obligation will be satisfied by
Newco subsequent to the Closing. A payment or indemnity obligation under this
section 13 which is not made or satisfied when due shall accrue interest at the
rate of 6% compounded daily. Notwithstanding anything in this Section 13 to the
contrary, a party shall not have to bear the cost of a Tax liability more than
once (e.g. a payment of an estimated tax shall be credited against any payment
due when the return is filed).
(h) Except as provided in paragraph 13.5(e), for purposes of
allocating a Tax for which a party is otherwise responsible under Section 13.4,
the portion of those Taxes that are attributable to the operations of the Group
Business or of any member of the Contributed Company Group for a relevant period
(the "INTERIM PERIOD") shall be (i) in the case of a Tax that is not based on a
net income, the total amount of such Tax for the Interim Period in question
multiplied by a fraction, the numerator of which is the number of days in the
Interim Period and the denominator of which is the total number of days in such
period, and (ii) in the case of a Tax that is based on net income, the Tax that
is due shall be an amount as equitably determined by the parties based upon a
hypothetical closing of the books.
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(i) If Newco, a Contributed Company or any Affiliate receives any
notice of the assertion of any Tax liability relating to a member of the
Contributed Company Group for which STI or SSI may be liable under this
Agreement, Newco shall give prompt written notice thereof to STI or SSI. A
failure to promptly notify pursuant to this paragraph shall not preclude another
party's indemnification obligation.
(j) After the Closing, Newco and the Contributed Companies will
provide reasonable access to all relevant Newco and the Contributed Company
Group relevant books, records, agreements and memoranda, and provide such
assistance to STI and SSI as STI, SSI and their Affiliates shall reasonably
request, with respect to any federal, foreign, state or local Tax matters
pertaining to the members of the Contributed Company Group for taxable periods
or transactions on or prior to the Effective Time. Newco will notify STI prior
to disposition of such Tax records, if such disposition will take place within
ten years after the Effective Time.
(k) Notwithstanding anything in this Agreement to the contrary,
STI and Newco covenant and agree, (unless there has been a final determination
as defined in Section 1313(a) of the Code or any other event which conclusively
establishes a contrary position) for all Tax purposes including all Tax Returns
and any Tax examinations, proceedings or controversies, to (and to cause any
affiliate or successor to their assets or businesses to) take each of the
positions set forth below (and not to take any position inconsistent therewith)
and to use good faith and reasonable best efforts to defend such positions:
(i) The Merger (i) will qualify as a tax-free reorganization
described in Section 368(a) of the Code and (ii) when taken together with the
Seagate Transaction, will qualify as a tax-free transfer of the stock of VERITAS
to Newco governed by Section 351(a) of the Code.
(ii) The Seagate Transaction, when taken together with Merger,
will qualify as a transfer of the Contributed Stock and Contributed Assets to
Newco governed by Section 351(a) of the Code.
(iii) None of the consideration issued in connection with the
Seagate Transaction will be paid or issued for services or as a covenant not to
compete.
(l) STI and Newco agree to report to the other any communication
from or with the Internal Revenue Service or any other Taxing Authority which
relates in any way to the characterization of the transactions governed by this
Agreement. Each of STI and Newco will file with its Federal income tax return
for the taxable year in which the Merger and Seagate Transaction occurs (which
tax return shall be timely filed) the information required by Treas. Reg. (S)
1.351-3 and 1.368-3 and to provide each other upon request with a statement to
the effect that such party has complied with this requirement after filing. STI,
the Contributed Companies, and Newco also will maintain such permanent records
as are required by Treas. Reg. (S)(S) 1.351-3(c) and 1.368-3.
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13.6 Seagate Transaction Items.
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(a) Newco AND VERITAS covenant and represent that:
(i) Newco and VERITAS have no plan or intention to permit or to
cause VERITAS or any Contributed Company to be liquidated or to be merged with
any other entity.
(ii) Newco and VERITAS have no plan or intention to terminate the
existence of Newco, VERITAS or any Contributed Company (including without
limitation by Merger).
(iii) Newco and VERITAS have no plan or intention to cause or
permit Newco to dispose of all or any portion of the stock of VERITAS or of any
Contributed Company (including, without limitation, by merger) or the
Contributed Assets, except in the ordinary course of business.
(iv) After taking into account (and thus deeming shares to be
issued as of the end on the Closing Date) any planned or intended (as of the
date hereof and the Effective Time) issuances of Newco stock and the exercise of
any Newco stock rights (including warrants, options, convertible instruments),
the shareholders of VERITAS immediately prior to the transactions contemplated
by this Agreement and Seagate (collectively, the "transferees") shall hold on
the day after the Effective Time at least 80% of the voting stock of Newco and
at least 80% of each class of non-voting stock of Newco. This representation
shall be deemed made twice, assuming in the alternative that the VERITAS shares
held by Seagate are (A) voting stock and (B) non-voting stock.
(v) Other than the possible repurchase of employee shares as a
result of an obligation of SSI that may be assumed by Newco, VERITAS and Newco
have no plan or intention to redeem or otherwise reacquire any stock to be
issued in the transactions contemplated in this Agreement.
(vi) VERITAS and Newco are not aware of any plan or intent on the
part of the officers, directors and 5% or greater shareholders of VERITAS to
dispose of any Newco shares issued in the merger in a transaction undertaken in
connection with this transaction.
(vii) VERITAS and Newco are not "investment companies" within the
meaning of 351(e) of the Code and section 1.351-1(c)(1)(ii) of the regulations
promulgated thereunder.
(viii) With respect to matters not covered by Section 13.6(a)(i)
through 13.6(a)(vii), Newco shall not take, or permit its affiliates to take,
any action within two years of the Effective Time which it (or its advisors
actually participating or advising in the action) actually know (at the time of
such action) will preclude the ability of the Seagate transaction to qualify as
a tax-free exchange under section 351(a) of the Code.
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(ix) VERITAS and Newco shall make such additional representations
and covenants as SSI or its counsel shall reasonably request prior to the
closing for purposes of establishing the qualification under Section 351 of the
Seagate Transaction, provided such representations and covenants are in a form
and substance reasonably satisfactory to VERITAS and Newco. Any such
representations shall be considered to be part of this section 13.6(a).
(b) The representations and covenants of this Section 13.6(a) shall
survive the Closing of the Seagate Transaction through the expiration of the
applicable Tax statutes of limitations (including extensions).
14. MISCELLANEOUS
14.1 Governing Law. The internal laws of the State of California
-------------
(irrespective of its choice of law principles) will govern the validity of this
Agreement, the construction of its terms and the interpretation and enforcement
of the rights and duties of the parties hereto, except that the fiduciary duties
of the directors and managers of parties hereto and their affiliates shall be
governed by the law of the jurisdiction of such company's formation.
14.2 Assignment; Binding Upon Successors and Assigns. None of the
-----------------------------------------------
parties hereto may assign any of its rights or obligations hereunder without the
prior written consent of the other parties hereto; provided, however, that the
sale or other transfer of the stock of any Contributing Company shall not be
deemed an assignment provided that this Agreement remains enforceable against
the Contributing Company after such stock sale or transfer. Subject to the
preceding sentence, this Agreement will be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
14.3 Severability. If any provision of this Agreement, or the
------------
application thereof, will for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and 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 the void or unenforceable provision.
14.4 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and the
same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
all the parties reflected hereon as signatories.
14.5 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 on such party,
and the exercise of any one remedy will not preclude the exercise of any other.
The parties agree that specific performance is an appropriate remedy for a
breach of their respective obligations under this Agreement.
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14.6 Amendment and Waivers. Any term or provision of this Agreement may
---------------------
be amended by the parties hereto at anytime by execution of an instrument in
writing signed on behalf of each of STI, SSI and VERITAS. At any time prior to
the Closing, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party or parties to be bound
thereby. The waiver by a party of any breach hereof or default in the
performance hereof will not be deemed to constitute a waiver of any other
default or any succeeding breach or default. Delay in exercising any right under
this Agreement shall not constitute a waiver of such right. The Agreement may be
amended by the parties hereto at any time before or after approval of such
party's stockholders, but, after such approval, no amendment will be made which
by applicable law requires the further approval of a party's stockholders
without obtaining such further approval.
14.7 Expenses. Except as herein expressly provided to the contrary in
--------
this Agreement or the Ancillary Agreements, each party will bear its respective
fees and expenses incurred with respect to the negotiation, preparation and
performance of this Agreement and the transactions contemplated hereby;
provided, however, that SSI and VERITAS shall share equally all fees and
expenses, other than incurred in connection with the printing and filing of the
Form S-4 (including financial statements and exhibits) and any amendment or
supplements thereto; provided, further that upon Closing of the Merger and the
Seagate Transaction, Newco shall pay 20% of the reasonable attorneys',
accountants' and financial advisors' fees, incurred by SSI and STI in connection
with the Agreement.
14.8 Attorneys' Fees. Should suit be brought to enforce or interpret any
---------------
part of this Agreement, the prevailing party will be entitled to recover, as an
element of the costs of suit and not as damages, reasonable attorneys' fees to
be fixed by the court (including, without limitation, costs, expenses and fees
on any appeal). The prevailing party will be entitled to recover its costs of
suit, regardless of whether such suit proceeds to final judgment.
14.9 Notices. All notices and other communications pursuant to this
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Agreement shall be in writing and deemed to be sufficient if contained in a
written instrument and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following address (or at such other address for a party as shall
be specified by like notice):
If to SSI/STI to: Seagate Technology, Inc.
and Seagate Software, Inc.
000 Xxxx Xxxxx
Xxxxxx Xxxxxx, XX 00000
Attention: Xxx Xxxxxxxx
Telecopier: (000) 000-0000
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With a copy to: Wilson, Sonsini, Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxx, Esq.
Telecopier: (000) 000-0000
And if to VERITAS or
VERITAS Software
Corporation
or Newco to: VERITAS Software Corporation
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
Attention: Chief Executive Officer
Telecopier: (000) 000-0000
With a copy to: Fenwick & West LLP
Xxx Xxxx Xxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telecopier: (000) 000-0000
All such notices and other communications shall be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery, (b)
in the case of a telecopy, when the party receiving such copy shall have
confirmed receipt of the communication, (c) in the case of delivery by
nationally-recognized overnight courier, on the business day following dispatch,
and (d) in the case of mailing, on the third business day following such
mailing.
14.10 Construction of Agreement. This Agreement has been negotiated by
-------------------------
the respective parties hereto and their attorneys and the language hereof will
not be construed for or against either party. A reference to a Section or an
exhibit will mean a Section in, or exhibit to, this Agreement unless otherwise
explicitly set forth. The titles and headings herein are for reference purposes
only and will not in any manner limit the construction of this Agreement which
will be considered as a whole.
14.11 No Joint Venture. Nothing contained in this Agreement will be
----------------
deemed or construed as creating a joint venture or partnership between any of
the parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party will have
the power to control the activities and operations of any other and their status
is, and at all times, will continue to be, that of independent contractors with
respect to each other. No party will have any power or authority to bind or
commit any other. No party will hold itself out as having any authority or
relationship in contravention of this Section.
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14.12 Further Assurances. Each party agrees to cooperate fully with the
------------------
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances as may be reasonably requested by
any other party to evidence and reflect the transactions described herein and
contemplated hereby and to carry into effect the intents and purposes of this
Agreement.
14.13 Absence of Third Party Beneficiary Rights. Except as provided in
-----------------------------------------
Section 5.18, no provisions of this Agreement are intended, nor will be
interpreted, to provide or create any third party beneficiary rights of any kind
in any holder of the stock of VERITAS, Newco, any Contributing Company or a
member of the Contributed Company Group or any Employee, client, customer,
affiliate, stockholder, partner or any party hereto or any other person or
entity, and, except as so provided, all provisions hereof will be personal
solely between the parties to this Agreement and no other person or entity shall
have any cause of action as a third party beneficiary of this Agreement.
14.14 Public Announcement. Upon execution of this Agreement, VERITAS and
-------------------
SSI promptly will issue a joint press release approved by both parties
announcing the Merger. Thereafter, VERITAS or STI or SSI may issue such press
releases, and make such other disclosures regarding the Merger, as they may each
determine (after consultation with legal counsel) to be required under
applicable securities laws or NASD rules; VERITAS, SSI and STI shall confer with
the other party prior to any press release or disclosure relating to the Merger
or Seagate Transaction.
14.15 Certain Defined Terms. As used in this Agreement, the following
---------------------
terms shall have the following meanings.
"AFFILIATE" means, with respect to a specified person, any other person
that directly or indirectly controls, is controlled by, or is under common
control with, such specified person or which hold at least a 10% ownership
interest in said person.
"ANCILLARY AGREEMENTS" means, collectively, the Stockholder Agreement, the
Registration Rights Agreement, the Xxxx of Transfer, the Development Agreement,
the Patent Assignment, the Copyright Assignment and the Trademark Assignment,
the Transition Services and Facilities Use Agreement, the Cross License
Agreement and the Voting Agreement (as such terms are defined herein).
"XXXX OF TRANSFER" means the Xxxx of Transfer for the Contributed Assets
(other than the Contributed Stock) to be executed and delivered by the holders
of such Contributed Assets and Newco at the Effective Time in form mutually
acceptable to SSI and Newco.
"BUSINESS RECORDS" shall mean SSI's general and financial records,
financial information, marketing and sales information, pricing, marketing
plans, business plans, financial and business projections and other files and
records evidencing the Group Business in the possession of or control of the
Contributing Companies but not the Contributed Companies (including but not
limited to any such records, information, plans and files relating to any Group
Assets).
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"CLAIM ASSETS" shall mean all claims, security or similar deposits, rights
to refunds, chooses in action, causes of action, rights of recovery or rights to
damages, rights of set-off and other rights of recoupment (including without
limitation any of the foregoing related to the payment of Taxes) to the extent
arising out of the Conduct of the Group Business or directly related to any of
the Group Assets.
"CLOSING" and "EFFECTIVE TIME" have the meanings specified for such term in
Section 6.1.
"CONDUCT OF THE GROUP BUSINESS" means the conduct in all material respects
of the Group Business as conducted on the date of this Agreement and at Closing.
"CONDUCT OF VERITAS' BUSINESS" means the conduct in all material respects
of the Group Business as conducted on the date of this Agreement and at Closing.
"CONTRIBUTED ASSETS" shall mean those assets that are owned, leased or
licensed by the Contributing Companies that are (a) listed on Schedule 1.4(a),
(b) Intellectual Property Rights material to the production, development,
support or marketing of the Group Products (subject to the provisions of Section
4.19), or (c) used primarily in the Group Business, and all Contributed
Contracts to which any of the Contributing Companies is a party and subject to
Section 4.15, all Financial Assets.
"CONTRIBUTED COMPANIES" means Seagate Software Network & Storage Management
Group, Inc., a Delaware corporation, Seagate Software Limited, a corporation
formed under the laws of the United Kingdom, Seagate Software GmbH, a
corporation formed under the laws of Germany, Seagate Software International
Holdings Ltd., a limited liability company organized under the laws of the
Cayman Islands, and Seagate Software Storage Management Group, Inc., a Delaware
corporation.
"CONTRIBUTED COMPANY GROUP" means the Contributed Companies and their
direct or indirect subsidiaries, if any, identified on attached Schedule 14.15A.
"CONTRIBUTED COMPANY PROPERTY" shall mean all of the assets, real,
personal, tangible and intangible, owned, leased, licensed or otherwise held by
any member of the Contributed Company Group.
"CONTRIBUTED CONTRACTS" means all agreements, contracts, understandings,
arrangements, commitments, mortgages, indentures, leases, licenses, permits,
franchises, instruments, notes, bonds, indemnities, guarantees, loan agreements,
credit agreements, representations, warranties, deeds, assignments, powers of
attorney, certificates, purchase orders, work orders, insurance policies,
benefit plans, covenants, assurances or undertakings of any nature (i) to which
any of the Contributed Company Group is a party, or (ii) which are used in the
Group Business including but not limited to those listed on Schedule 14.15B
subject in the case of Joint Contributed Agreements to the provisions of 8.16.
"CONTRIBUTED STOCK AND ASSETS" means the Contributed Stock and the
Contributed Assets.
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"CONTRIBUTED SUBSIDIARIES" means the direct or indirect subsidiaries of the
Contributed Companies identified in Section 14.15C of the SSI Disclosure Letter.
"CONTRIBUTING COMPANIES" means the STI, SSI, Seagate Software S.A., an
entity formed under the laws of the France, Nippon Seagate Software KK, an
entity formed under the laws of Japan, Seagate Software A.B., an entity formed
under the laws of Sweden, Seagate Software Pty. Ltd., an entity formed under the
laws of Australia, Seagate Technology International, a Cayman Islands limited
liability company, Penang Seagate Industries Sdn. Bhd., an entity formed under
the laws of Malaysia, Seagate Software Limited, an entity formed under the laws
of Hong Kong, Seagate Information Management Group Limited, a corporation
organized under the laws of the United Kingdom and Delaware with respect to its
South African branch, and any other subsidiary of SSI which may own any interest
in the Contributed Stock and Assets to be conveyed to Newco or that is liable
for any Assumed Liability to be assumed by Newco under the term of this
Agreement.
"CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON CONTROL
WITH") means the possession, directly or indirectly, of the power to direct or
cause the direction of the management policies of a person, whether through the
ownership of stock, as an officer, director or partner, by contract or
otherwise.
"DISPOSAL," "RELEASE," and "THREATENED RELEASE" shall have the definitions
assigned thereto by the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. (S) 9601 et seq., as amended ("CERCLA").
"DELAWARE LAW" means the Delaware General Corporation Law, as in effect
from time to time.
"DOLLARS" or "$" means U.S. dollars.
"EFFECTIVE TIME" shall mean the effective time and date that the
Certificate of Merger is deemed filed with the Secretary of State of the State
of Delaware in accordance with the relevant provisions of the Delaware Law.
"ENVIRONMENTAL DAMAGE" means any actual or alleged Liability (including
without limitation Liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or relating to (i) the
presence, discharge, emission or release into the environment of any Hazardous
Substance or (ii) facts or circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law.
"ENVIRONMENTAL LAWS" means all federal, state, local and international laws
and regulations relating to pollution, the protection of human health or the
environment (including without limitation ambient air, surface water, ground
water, land surface or subsurface strata), including without limitation laws and
regulations relating to emissions, discharges, releases or threatened releases
of Hazardous Substances, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances.
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"EMPLOYEE" has the meaning specified in Section 12.1(a).
"ENCUMBRANCE" means any pledge, lien, collateral assignment, security
interest, mortgage, deed of trust, title retention, conditional sale or other
security arrangement, or any charge, adverse claim of title, ownership or use,
or any other encumbrance of any kind.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rulings and regulations promulgated thereunder.
"EXCLUDED LIABILITIES" shall have the meaning defined for it in Section
1.4(b)(ii).
"FINANCIAL ASSETS" shall mean (i) all cash and cash equivalents of any of
the Contributed Companies, Contributed Subsidiaries or Contributing Companies
arising from or generated by the Group Business; (ii) any of the Contributed
Companies or Contributed Subsidiaries and other Group Business accounts
receivable, unbilled receivables, and other amounts receivable from or to third
parties; (iii) all rights of any of the Contributed Companies or Contributed
Subsidiaries of every nature and description under or arising out of all
insurance policies of any of the Contributed Companies or Contributed
Subsidiaries; and (iv) the minute books, stock ledgers and Tax records of any of
the Contributed Companies or Contributed Subsidiaries.
"GAAP" means United States generally accepted accounting principles and
practices as in effect from time to time and applied consistently throughout the
periods involved.
"GOVERNMENTAL ANTITRUST AUTHORITY" means any federal, state, local or non-
U.S. governmental or quasi-governmental authority charged with the
administration or enforcement of antitrust, competition or merger control laws
or regulations.
"GOVERNMENTAL PERMITS" means all municipal, state, local, federal and other
governmental franchises, permits, licenses, agreements, waivers and
authorizations from, issued or granted by, any jurisdiction.
"GROUP ASSETS" shall mean the Contributed Assets and all Contributed
Company Property, considered collectively.
"GROUP BUSINESS" means the business of STI and its direct and indirect
subsidiaries with respect to the Group Products, as reflected in the 1998 Group
Balance Sheet, including without limitation the business of developing,
manufacturing, marketing, licensing, distributing, using, operating, installing,
servicing, supporting, maintaining, repairing or otherwise using or commercially
exploiting all or any aspect of any or all of the Group Products or of any
Intangible Assets or Intellectual Property Rights related to any of the Group
Products.
"GROUP FINANCIAL STATEMENTS" has the meaning given in Section 2.4(c).
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"GROUP GOVERNMENTAL PERMITS" means those Governmental Permits required for
the Conduct of the Group Business (including without limitation the manufacture
or sale of the Group Products) that are held by any member of the Contributed
Company Group or held, in whole or in part, primarily by a Contributing Company
and required for the Conduct of the Group Business, or necessary for the use or
operation of any of the Group Assets (including without limitation the Real
Property Assets) or the manufacture or sale of any of the Group Products, to the
extent legally transferable in accordance with this Agreement;
"GROUP PRODUCTS" means the software and other products listed in the Group
product list attached hereto as Exhibit 14.15D marketed or sold by any member of
the Contributed Company Group or the Contributing Companies and all software
under development for or licensed by the Group Business (together with all
derivative works, upgrades, modifications, enhancements and configurations of
any of the foregoing now existing or under development and all software and
components included in any configuration of any of the foregoing, and all
development and QA tools, utilities and diagnostics used to develop any of the
foregoing, in each case whether or not ever commercially offered or price-
listed, and whether or not in development).
"HAZARDOUS MATERIALS" means: (i) any pollutant, contaminant, toxic,
hazardous or noxious substance or waste which is regulated by the laws of any
state, local, federal or other governmental authority or jurisdiction, including
but not limited to the State of Florida and the United States Government, and
includes but is not limited to (a) any oil or petroleum compounds, flammable
substances, explosives, radioactive materials, or any other materials or
pollutants which pose a hazard to persons or cause any real property to be in
violation of any Environmental Laws, (b) to the extent so regulated, asbestos or
any asbestos-containing material of any kind or character, (c) polychlorinated
biphenyls, as regulated by the Toxic Substances Control Act, 15 U.S.C. (S) 2601
et seq., (d) any materials or substances designated as "hazardous substances"
-- ----
pursuant to (1) Section 311 of the Clean Water Act, 33 U.S.C. (S) 1251 et seq.,
-- ----
or (2) Section 101 of the Comprehensive Environmental Response, Compensation,
and Liability Act, 42 U.S.C. (S) 9601 et seq., (e) "chemical substance," "new
-- ----
chemical substance," or "hazardous chemical substance or mixture" pursuant to
Sections 3, 6 and 7 of the Toxic Substances Control Act, 15 U.S.C. (S) 2601 et
--
seq., and (f) any "hazardous waste" pursuant to Section 1004 of the Resource
----
Conservation and Recovery Act, 42 U.S.C. (S) 6901 et seq.
-- ----
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"IMG" means the business of SSI that does not constitute the Group
Business.
"INSOLVENCY ACTION" means, with respect to a person, any or all of the
following: (i) the voluntary or involuntary filing, with respect to such
person, of a petition for relief, or any other effort to seek relief, under any
Insolvency Proceeding; (ii) such person or any of its assets otherwise becoming
the subject of an Insolvency Proceeding; (iii) the formal or informal
dissolution, liquidation or winding up of such person, or any efforts to
initiate or carry out such dissolution, liquidation or winding up; (iv) the
appointment of (or efforts or attempts to appoint) a receiver,
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liquidator, sequestrator, trustee, custodian or other similar officer with
respect to such person or any part of its assets or properties; or (v) any
composition of the indebtedness of such person or any assignment for the benefit
of such person's creditors.
"INSOLVENCY PROCEEDING" means any or all of the following actions, events
or proceedings: (i) any voluntary or involuntary case, contested matter or other
proceeding under the United States Bankruptcy Code, as amended, and any
successor law or laws thereto; or (ii) any case, action or other proceeding
under any bankruptcy, insolvency, debt reorganization or similar law (whether
now or hereafter in effect) of any state, country or other jurisdiction.
"INTANGIBLE ASSETS" means, collectively, all intangible assets, properties
and rights required for the development of the Group Products, constituting
software (in both source code and binary code form), technology, works of
authorship, manuals, logbooks, notebooks, user's guides, programmers' notes,
documentation, know-how, trade secrets, training materials (for both training of
customers and of service personnel).
"INTELLECTUAL PROPERTY RIGHTS" means, collectively, all of the following
worldwide intangible legal rights including those existing or acquired by
ownership, license or other legal operation, whether or not filed, perfected,
registered or recorded and whether now or hereafter existing, filed, issued or
acquired: (i) patents, patent applications, and patent rights, including any
and all continuations, continuations-in-part, divisions, reissues,
reexaminations or extensions thereof; (ii) inventions (whether patentable or not
in any country), invention disclosures, industrial designs, improvements, trade
secrets, proprietary information, know-how, technology and technical data; (iii)
rights associated with works of authorship (including without limitation
audiovisual works), including without limitation copyrights, copyright
applications and copyright registrations, moral rights, mask work rights, mask
work applications and mask work registrations; (iv) rights in trade secrets
(including without limitation rights in Industrial Property, customer, vendor
and prospect lists and all associated information or databases and other
confidential or proprietary information), and all rights relating to the
protection of the same including without limitation rights under nondisclosure
agreements; (v) any other proprietary rights in technology, including software,
all source and object code, algorithms, architecture, structure, display
screens, layouts, inventions, development tools and all documentation and media
constituting, describing or relating to the above, including, without
limitation, manuals, memoranda, records, business information, or trade marks,
trade dress or names, anywhere in the world; (vi) any rights analogous to those
set forth in the preceding clauses and any other proprietary rights relating to
intangible property, including without limitation brand names, trademarks,
service marks, trademark and service xxxx registrations and applications
therefor, trade names, rights in trade dress and packaging and all goodwill
associated with the same; and (vii) all rights to xxx or make any claims for any
past, present or future infringement, misappropriation or unauthorized use of
any of the foregoing rights and the right to all income, royalties, damages and
other payments that are now or may hereafter become due or payable with respect
to any of the foregoing rights, including without limitation damages for past,
present or future infringement, misappropriation or unauthorized use thereof;
and (viii) rights under license agreements for the foregoing.
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"INTERCOMPANY ACCOUNTS" means the net amounts payable by or owing to the
Group Business as of the Effective Time as a consequence of the Conduct of the
Group Business, in the ordinary course, (i) pursuant to (a) the tax sharing
agreement, (b) the intercompany revolving loan agreement, (c) the general
services agreement, all of which are between the Contributed Company Group, on
the one hand, and STI and its direct or indirect subsidiaries (other than the
Contributed Company Group) on the other hand, or (ii) as a consequence of
reimbursements by SSI or STI of amounts paid by them for the Conduct of the
Business in the ordinary course; provided, however that in no event shall the
Group Business be responsible for amounts attributable to the IMG Business.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended, and the rulings and regulations promulgated thereunder.
"KEY EMPLOYEES" are identified in Schedule 14.15E-1.
"LIABILITIES" (or when used with reference to a single item described
below, "LIABILITY") means debts, liabilities and obligations (whether pecuniary
or not, including without limitation obligations to perform or forbear from
performing acts or services), fines or penalties, whether accrued or fixed,
absolute or contingent, matured or unmatured, determined or determinable, known
or unknown, including without limitation those arising under any law, action or
governmental order, liabilities for Taxes and those arising under any contract,
agreement, arrangement, commitment or undertaking of any kind whatsoever
(whether written or oral, express or implied), including, without limitation,
those arising under any Contributed Contract.
"LOSS" means and includes any and all Liability, loss, damage, claim,
expense, cost, fine, fee, penalty, obligation, or injury, including, without
limitation, those resulting from any and all claims, actions, suits, demands,
assessments, investigations, judgments, orders, awards, arbitrations,
settlements or other proceedings, together with reasonable costs and expenses,
including the reasonable attorneys' and experts' fees, court costs, arbitration
costs, filing fees and other legal costs and expenses relating thereto, together
with interest accrued on each of the foregoing amounts from the date the same
was incurred at the lower of (i) the prime rate charged from time to time by the
Bank of America, N.T. & S.A. or (ii) the highest rate of interest permitted
under applicable law.
"MANAGEMENT EMPLOYMENT CONTRACTS" means the Management Employment Contracts
to be executed by Newco and the Key Employees listed on attached Schedule
14.15E-1 and the employees of Veritas listed on Schedule 14.15E-2 prior to the
Effective Time as provided in Section 5.16 in the form attached hereto as
Exhibit 4.17(a).
----
"MATERIAL ADVERSE EFFECT ON NEWCO" means any event, change or effect would
have a material adverse effect on the business, tangible and intangible assets,
financial condition, and future operations of Newco and its subsidiaries, taken
as a whole, after the Effective Time or prevent in any material respect Newco
from taking the actions anticipated by this Agreement and the Ancillary
Agreements to be taken by Newco and this Subsidiaries on and after the Effective
Time.
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"MATERIAL ADVERSE EFFECT ON THE GROUP BUSINESS" means any event, change or
effect which would have a material adverse effect on the business, tangible and
intangible assets, financial condition, and results of operations of the Group
Business, taken as a whole, or prevent in any material respect the performance
by SSI, STI, and their subsidiaries of the actions anticipated by this Agreement
and the Ancillary Agreements to be taken by them on or before the Closing.
"MATERIAL ADVERSE EFFECT ON VERITAS" means any event, change or effect
would have a material adverse effect on the business, tangible and intangible
assets, financial condition, and results of operations of VERITAS and the
VERITAS Subsidiaries, taken as a whole , or prevent in any material respect the
performance by VERITAS and its subsidiaries of the actions anticipated by this
Agreement and the Ancillary Agreements to be taken by them on or before the
Closing.
"MINORITY HOLDER" means holders of shares of SSI other than STI.
"NEWCO INDEMNITEES" means and includes Newco and any present or future
officer, director, employee, affiliate, stockholder or agent of Newco.
"DEVELOPMENT AND LICENSE AGREEMENT" means the Development and License
Agreement to be executed and delivered by Newco and STI simultaneously with this
Agreement in the form attached hereto as Exhibit 4.14(a).
"OPTIONEE PERCENTAGE INTEREST" means a fully diluted equity interest in
Newco (taking into account all options, warrants and convertible debentures on
an as-converted basis) immediately following the Effective Time represented by
the aggregate number of shares of Newco Common Stock issuable upon exercise of
the Newco Options issued in exchange for Exchanged SSI Options pursuant to the
provisions of Section 1.3(a)(ii) hereof.
"Permitted Encumbrance" means Encumbrances (a) as disclosed as an
encumbrance in the SSI Disclosure Schedule 14.15F or in the Seagate SEC
Documents filed prior to the date of this Agreement, (b) Encumbrances for
Liabilities reflected in the Group Financial Statements or the VERITAS Financial
Statements as appropriate, (c) liens for taxes not yet delinquent, (d) liens
imposed by law and incurred in the ordinary course of business to carriers,
warehousemen, laborers, material men and the like not yet due and payable, (e)
immaterial imperfections of title set forth in the SSI Disclosure Letter (f)
Encumbrances which are not material in amount or which will not materially
interfere with the use of the Group Assets for the Conduct of the Group
Business.
"PERSON" means any individual, partnership, limited liability company,
firm, corporation, association, trust, unincorporated organization or other
entity, as well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
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"REAL PROPERTY ASSETS" shall mean all real property assets required for the
Conduct of the Group Business.
"RESTRICTIVE AGREEMENT" has the meaning specified in Section 2.23.
"SEAGATE'S KNOWLEDGE" or "KNOWN TO SEAGATE". A particular fact or other
matter shall be deemed to be within "Seagate's Knowledge" or "Known to Seagate"
if any officer of SSI or a Contributed Company or any officer of STI responsible
for the Group Business has current actual knowledge of such fact or other
matter.
"SOLVENT" shall mean, with respect to any person on a particular date, that
on such date (a) the fair value of the property of such person is greater than
the total amount of liabilities, including contingent liabilities, of such
person; (b) the present fair salable value of the assets of such person is not
less than the amount that will be required to pay the probable liability of such
person on its debts as they become absolute and matured; (c) such person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such person's ability to pay as such debts and liabilities mature; and
(d) such person is not engaged in a business or transaction, and is not about to
engage in a business or transaction, for which such person's property would
constitute an unreasonably small capital. The amount of contingent liabilities
(such as litigation, guarantees and pension plan liabilities) at any time shall
be computed as the amount that, in light of all the facts and circumstances
existing at the time, represents the amount that can reasonably be expected to
become an actual or matured liability.
"SSI PERCENTAGE INTEREST" means a fully diluted equity interest in Newco
(taking into account all options, warrants and convertible debentures on an as-
converted basis) equal to 100% less the VERITAS Percentage Interest.
"SEAGATE TRANSACTION" shall have the meaning described in Recital A hereto.
"SSI DISCLOSURE LETTER" means a letter dated as of date hereof and
supplemented with the prior written consent of VERITAS at any time prior to the
Closing, delivered by STI and SSI to Newco and VERITAS concurrently with the
execution of this Agreement and certified by an officer of each of STI and SSI
on behalf of each such entity, to be true, accurate and complete.
"TAX" or "TAXES" means all taxes of any kind whatsoever (whether payable
directly or by withholding), including without limitation franchise, income,
gross receipts, personal property, real property, ad valorem, value added,
sales, use, documentary, stamp, intangible personal property, withholding or
other taxes, together with any interest and penalties, additions to tax or
additional amounts with respect thereto imposed by any taxing authority.
"VERITAS" is VERITAS Software Corporation and VERITAS Surviving
Corporation.
"VERITAS ASSETS" are the tangible and intangible, real and personal assets
owned, leased or licensed by VERITAS.
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"VERITAS BUSINESS" is the business of VERITAS as carried on immediately
prior to the Seagate Transaction, including without limitation VERITAS' business
of developing, manufacturing, marketing, licensing, distributing, using,
operating, installing, servicing, supporting, maintaining, repairing or
otherwise using or commercially exploiting all or any aspect of any or all of
the VERITAS Products or VERITAS Assets.
"VERITAS CONTRACTS" means all agreements, contracts, understandings,
arrangements, commitments, mortgages, indentures, leases, licenses, permits,
franchises, instruments, notes, bonds, indemnities, guarantees, loan agreements,
credit agreements, representations, warranties, deeds, assignments, powers of
attorney, certificates, purchase orders, work orders, insurance policies,
benefit plans, covenants, assurances or undertakings of any nature to which
VERITAS or the VERITAS Subsidiaries are a party.
"VERITAS EMPLOYEES" are the employees of VERITAS.
"VERITAS PERMITTED ENCUMBRANCE" means Encumbrances (a) as disclosed as an
Encumbrance in the VERITAS Disclosure Schedule or the VERITAS SEC Documents
filed prior to the date of this Agreement, (b) Encumbrances for liabilities
reflected in the VERITAS Financial Statements, (c) liens for current taxes not
yet delinquent, (d) liens imposed by law and incurred in the ordinary course of
business to carriers, warehousemen, laborers, material men and the like not yet
due, (e) immaterial imperfections of title set forth in the title report(s), if
any, referred to in the VERITAS Disclosure Letter (f) Encumbrances which are not
material in amount or which will not materially interfere with the use of the
VERITAS Assets for the Conduct of the VERITAS Business.
"VERITAS PRODUCTS" means the software and other products marketed or sold
by VERITAS and all of software products currently under development by or for
VERITAS or for use or sale or license by VERITAS (in each case together with all
of the software, products, and other items listed on VERITAS' products price
list) and all derivative works, upgrades, modifications, enhancements and
configurations of any of the foregoing and all software and components included
in any configuration of any of the foregoing, and all development tools,
utilities and diagnostics used to develop any of the foregoing in each case
whether or not ever commercially offered or price-listed, and whether or not in
development).
"VERITAS PERCENTAGE INTEREST" means that percentage of the fully diluted
Common Stock equivalent equity interests in Newco (assuming conversion of all
convertible securities and exercise of all options and warrants) immediately
following the Effective Time which equals the greater of (a) 60% or (b) that
percentage which results in the holders of VERITAS Common Stock, options,
warrants and convertible debentures immediately before the Effective Time
owning, immediately after the Effective Time, 60% of the Common Stock equivalent
equity interests in Newco computed using the treasury stock method with respect
to the outstanding options and warrants but not with respect to convertible
debentures (which shall be treated as-if-converted to Common Stock). For this
purpose, "treasury stock method" means that the number of shares issuable upon
exercise of all outstanding options and warrants will be deemed to be reduced by
the number of shares that could be repurchased at the VERITAS Closing Price with
the proceeds from the hypothetical exercise of all outstanding options and
warrants which have exercise prices less than the VERITAS Closing
-90-
Price. Attached hereto as Exhibit 14.15H is an exemplar of the methodology to be
used in calculating the VERITAS Percentage Interest at the Closing.
"VERITAS PERMITS AND APPROVALS" are all municipal, state, local, federal
and other franchises, permits licenses, agreements, waivers and authorizations
from, issued or granted by, any Governmental Entity held by VERITAS or any of
its subsidiaries and required for the conduct of VERITAS' Business.
"VERITAS' KNOWLEDGE" or "KNOWN TO VERITAS". A particular fact or other
matter shall be deemed to be within "VERITAS' Knowledge" or "Known to VERITAS"
if any officer of VERITAS has current actual knowledge of such fact or other
matter.
"VERITAS SUBSIDIARY" shall mean any direct or indirect subsidiary of
VERITAS listed on Schedule 14.15.G.
14.16 Entire Agreement. This Agreement and the exhibits hereto
----------------
constitute the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and supersede all prior and contemporaneous
agreements or understandings, inducements or conditions, express or implied,
written or oral, between the parties with respect hereto other than the
Nondisclosure Agreement, which shall remain in full force and effect. The
express terms hereof control and supersede any course of performance or usage of
the trade inconsistent with any of the terms hereof.
[Remainder of Page Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
Plan of Reorganization as of the date first above written.
VERITAS SOFTWARE CORPORATION, SEAGATE TECHNOLOGY, INC.,
a Delaware corporation a Delaware corporation
By: /s/ Xxxx Xxxxxx By: /s/ Xxxxxxx X. Xxxxx
------------------------------ --------------------------------
President and Chief Executive President and Chief Executive
Officer Officer
VERITAS HOLDING CORPORATION,
a Delaware corporation
By: /s/ Xxxx Xxxxxx
------------------------------
President
SEAGATE SOFTWARE, INC., SEAGATE SOFTWARE NETWORK &
a Delaware corporation STORAGE MANAGEMENT
GROUP, INC.
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxxxxxx By: /s/ Xxxxxxx X. Xxxxxxxxxx
------------------------------ -------------------------------
President and Chief Executive President and Chief Executive
Officer Officer
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
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