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EXHIBIT 2.1.1
AMENDED AND RESTATED
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
MARCH 29, 1999
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APPENDIX A
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.............................. 4
1.4 Contribution and Transfer of Contributed Stock
and Assets............................................ 6
1.5 Dissenter's Rights............................... 9
1.6 Newco Plans...................................... 9
1.7 Registration..................................... 9
1.8 Effects of the VERITAS Merger.................... 9
1.9 Tax Free Reorganization.......................... 10
1.10 Tax-Free Section 351 Transaction................. 10
1.11 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filings........................ 10
1.12 Adoption of Newco Rights Agreement............... 11
1.13 Board of Directors and Officers of Newco; Newco
Certificate of Incorporation and Bylaws.......... 11
1.14 Registration on Form S-4......................... 11
2. REPRESENTATIONS AND WARRANTIES OF SSI AND STI........... 12
2.1 Organization; Good Standing; Qualification and
Power................................................. 12
2.2 Capital Structure................................ 12
2.3 Authority........................................ 14
2.4 SEC Documents.................................... 15
2.5 Disclosure; Information Supplied................. 17
2.6 Compliance with Applicable Laws.................. 17
2.7 Litigation....................................... 17
2.8 ERISA and Other Compliance....................... 18
2.9 Absence of Certain Changes or Events............. 21
2.10 Full Force and Effect............................ 23
2.11 Agreements....................................... 23
2.12 No Defaults...................................... 24
2.13 Certain Agreements............................... 25
2.14 Taxes............................................ 25
2.15 Intellectual Property............................ 26
2.16 Fees and Expenses................................ 28
2.17 Insurance........................................ 28
2.18 Ownership of Property............................ 28
2.19 Environmental Matters............................ 28
2.20 Interested Party Transactions.................... 29
2.21 Fairness Opinion................................. 29
2.22 Title to and Condition and Sufficiency of Group
Assets................................................ 29
2.23 No Restrictive Agreements........................ 30
2.24 Supplier and Customer Relationships.............. 30
2.25 Product and Inventory Status..................... 30
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3. REPRESENTATIONS AND WARRANTIES OF VERITAS AND NEWCO..... 31
3.1 Organization; Good Standing; Qualification and
Power................................................. 31
3.2 Capital Structure................................ 32
3.3 Authority........................................ 33
3.4 SEC Documents.................................... 34
3.5 Disclosure; Information Supplied................. 35
3.6 Compliance with Applicable Laws.................. 35
3.7 Litigation....................................... 35
3.8 ERISA and Other Compliance....................... 36
3.9 Absence of Certain Changes or Events............. 38
3.10 Full Force and Effect............................ 40
3.11 Agreements....................................... 41
3.12 No Defaults...................................... 42
3.13 Certain Agreements............................... 42
3.14 Taxes............................................ 42
3.15 Intellectual Property............................ 43
3.16 Fees and Expenses................................ 45
3.17 Insurance........................................ 45
3.18 Ownership of Property............................ 45
3.19 Environmental Matters............................ 45
3.20 Interested Party Transactions.................... 46
3.21 Fairness Opinion................................. 46
3.22 Title to and Condition and Sufficiency of VERITAS
Assets................................................ 46
3.23 No Restrictive Agreements........................ 47
3.24 Supplier and Customer Relationships.............. 47
3.25 Product and Inventory Status..................... 47
3.26 Tax Representations.............................. 48
4. STI AND SSI COVENANTS................................... 48
4.1 Advice of Changes................................ 48
4.2 Maintenance of Business.......................... 49
4.3 Conduct of Business.............................. 49
4.4 SSI Corporate Approvals.......................... 50
4.5 Letter of SSI's Accountants...................... 50
4.6 Prospectus/Proxy Statement....................... 51
4.7 Regulatory Approvals............................. 52
4.8 Necessary Consents............................... 52
4.9 Access to Information............................ 52
4.10 Satisfaction of Conditions Precedent............. 52
4.11 No Other Negotiations............................ 53
4.12 Books and Records................................ 54
4.13 Transitional Support............................. 54
4.14 Development Agreement and Cross-License
Agreement............................................. 54
4.15 Settlement of Intercompany Accounts.............. 54
4.16 Modification of Joint Contributed Agreements..... 54
4.17 Key Employee Agreements.......................... 55
4.18 Stockholder and Registration Rights Agreement.... 55
4.19 Seagate IP Rights................................ 55
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4.20 Directors' and Officers' Liability Insurance..... 56
4.21 Closing Group Account............................ 56
5. VERITAS AND NEWCO COVENANTS............................. 56
5.1 Advice of Changes................................ 56
5.2 Maintenance of Business.......................... 57
5.3 Conduct of Business.............................. 57
5.4 Stockholder Approval............................. 58
5.5 Letter of VERITAS' Accountants................... 58
5.6 Prospectus/Proxy Statement....................... 59
5.7 State Securities Law Compliance.................. 60
5.8 Regulatory Approvals............................. 60
5.9 Necessary Consents............................... 60
5.10 Access to Information............................ 60
5.11 Books and Records................................ 61
5.12 Transitional Support............................. 61
5.13 Development Agreement and Cross-License
Agreement............................................. 61
5.14 Satisfaction of Conditions Precedent............. 61
5.15 Voting Agreement................................. 61
5.16 VERITAS Employee Plans and Benefit
Arrangements.......................................... 61
5.17 Indemnification and Insurance -- VERITAS......... 63
5.18 Indemnification and Insurance -- Employees....... 64
5.19 Stockholder and Registration Rights Agreement.... 66
5.20 No Other VERITAS Negotiations.................... 66
6. CLOSING MATTERS......................................... 68
6.1 Closing.......................................... 68
6.2 Conversion of VERITAS Common Stock............... 68
6.3 Cancellation of SSI Options and Issuance of Newco
Options............................................... 68
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SSI AND STI...... 68
7.1 Accuracy of Representations and Warranties....... 68
7.2 Covenants........................................ 69
7.3 Compliance with Law.............................. 69
7.4 Consents......................................... 69
7.5 Form S-4......................................... 69
7.6 Opinion of VERITAS and Newco's Counsel........... 69
7.7 VERITAS Stockholder Approval..................... 69
7.8 No Legal Action.................................. 69
7.9 Tax Opinion...................................... 69
7.10 Election of The Contributing Companies Designees
to the Board of Directors of Newco............... 70
7.11 Nasdaq Listing................................... 70
7.12 Incorporation of New Delaware Company............ 70
7.13 HSR Act.......................................... 70
7.14 No Order......................................... 70
7.15 Ancillary Agreements............................. 70
7.16 Stockholder Approval............................. 70
7.17 Delivery of Newco Shares......................... 70
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF VERITAS AND
NEWCO................................................... 71
8.1 Accuracy of Representations and Warranties....... 71
8.2 Covenants........................................ 71
8.3 Compliance with Law.............................. 71
8.4 Consents......................................... 71
8.5 Form S-4......................................... 71
8.6 Opinion of Counsel to STI and SSI................ 71
8.7 VERITAS Stockholder Approval..................... 72
8.8 SSI Corporate Approvals.......................... 72
8.9 No Legal Action.................................. 72
8.10 Tax Opinion...................................... 72
8.11 HSR Act.......................................... 72
8.12 No Order......................................... 72
8.13 Ancillary Agreements............................. 72
8.14 Sufficiency of Assets............................ 73
8.15 Intellectual Property Assignments................ 73
8.16 Modification of Joint Contributed Agreements..... 73
9. TERMINATION OF AGREEMENT................................ 73
9.1 Termination...................................... 73
9.2 Notice of Termination............................ 75
9.3 No Liability..................................... 75
9.4 Breakup Fee...................................... 75
10. SURVIVAL OF REPRESENTATIONS............................. 76
10.1 No Survival of Representations................... 76
11. INDEMNIFICATION......................................... 76
11.1 Indemnification by SSI and STI................... 76
11.2 Time Limitations on Indemnification.............. 77
11.3 No Limitation on Other Rights.................... 78
12. EMPLOYEE MATTERS........................................ 78
12.1 Right to Offer Employment........................ 78
12.2 Termination of Employment........................ 79
12.3 Cooperation...................................... 80
12.4 Employees Who own SSI Capital Stock.............. 80
13. TAX MATTERS............................................. 80
13.1 Transaction Taxes; Representation; Transaction
Tax Indemnity......................................... 80
13.2 No Limitation.................................... 81
13.3 Treatment of Indemnity Payments.................. 81
13.4 Indemnity for Taxes.............................. 81
13.5 Other Tax Matters................................ 82
13.6 Seagate Transaction Items........................ 86
14. MISCELLANEOUS........................................... 88
14.1 Governing Law.................................... 88
14.2 Assignment; Binding Upon Successors and
Assigns............................................... 88
14.3 Severability..................................... 88
14.4 Counterparts..................................... 88
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14.5 Other Remedies................................... 88
14.6 Amendment and Waivers............................ 88
14.7 Expenses......................................... 89
14.8 Attorneys' Fees.................................. 89
14.9 Notices.......................................... 89
14.10 Construction of Agreement........................ 90
14.11 No Joint Venture................................. 90
14.12 Further Assurances............................... 90
14.13 Absence of Third Party Beneficiary Rights........ 91
14.14 Public Announcement.............................. 91
14.15 Certain Defined Terms............................ 91
14.16 Entire Agreement................................. 96
Exhibit A -- Certificate of Merger
Schedule 1.4(b)(i)(B) -- Liabilities of the Contributing Companies
Exhibit 1.12 -- Form of Newco Rights Agreement
Exhibit 1.13(c)A -- Form of Newco Amended and Restated Certificate of
Incorporation
Exhibit 1.13(c)B -- Form of Newco Amended and Restated Bylaws
SSI Disclosure Letter
VERITAS Disclosure Letter
Exhibit 4.13 -- Term Sheet for Transition Services Agreement
Exhibit 4.14A -- Development Agreement
Exhibit 4.14B -- Cross-License Agreement
Exhibit 4.17A -- STI and SSI Key Employees
Exhibit 4.17B -- Form of Key Employee Agreement
Exhibit 4.18A -- Registration Rights Agreement
Exhibit 4.18B -- Stockholder Agreement
Exhibit 5.3(g) -- Form of Amendment to VERITAS Software Corporation Certificate
of Incorporation
Exhibit 5.15A -- Form of Voting Agreement
Exhibit 5.15B -- VERITAS Affiliates who Executed Voting Agreements
Exhibit 5.16A -- VERITAS Key Employees
Exhibit 14.15A -- Contributed Assets
Exhibit 14.15B -- Contributed Contracts
Exhibit 14.15C -- Contributed Subsidiaries
Exhibit 14.15D -- Group Products
Exhibit 14.15E -- Permitted Encumbrances
Exhibit 14.15F -- Exemplar of Methodology Used to Calculate VERITAS Percentage
Interest
Exhibit 14.15G -- VERITAS Subsidiaries
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION (this
"AGREEMENT") hereby amends and restates, as of March 29, 1999, the Agreement and
Plan of Reorganization 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
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 any and
all outstanding options, warrants, convertible debentures and other rights to
purchase shares of capital stock of VERITAS and obligations to issue shares of
capital stock of VERITAS upon conversion of convertible debentures (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 "CERTIFICATE OF MERGER") and the applicable provisions of
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") upon cancellation of their respective options to purchase
Common Stock of SSI ("NEWCO 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 offer of Newco Options upon cancellation by Employees of
their SSI Options in the Seagate Transaction will be registered under 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 as an exchange under the provisions of Section 351(a)
of the Internal Revenue Code, and
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(ii) that the Seagate Transaction, qualifies as an exchange under the provisions
of Section 351(a) 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 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, 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 October 5, 1998, 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,
VERITAS will execute and deliver and will file with the Secretary of State of
the State of Delaware in accordance with the relevant provisions of the Delaware
Law, 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 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 RATIO") of
validly issued, fully paid and nonassessable Newco Common Stock.
(b) Conversion of VERITAS Options, Warrants and other Convertible
Securities.
(i) Conversion. At the Effective Time, each of the then 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
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 co-obligor on any such convertible
debenture or other convertible debt instrument. The term, exercisability,
vesting schedule, status as an "incentive stock
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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 or VERITAS
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.
1.3 Seagate Transaction.
(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) First SSI Certificate. Issue to SSI 33,000,000 validly issued,
fully paid and nonassessable shares of Newco Common Stock, with such number of
shares to be appropriately adjusted in the event of any VERITAS stock split,
stock combination, reclassification or other similar capital change, or for any
decrease in the VERITAS Closing Price below $35.91, prior to such issuance (the
"FIRST SSI CERTIFICATE").
(ii) Offer of Newco Options for Canceled SSI Options. Prior to the
Effective Time but contingent upon the Closing of the Seagate Transaction, 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 consideration for cancellation of their SSI Options, which offer
shall expire five business days after the Effective Time except that the offer
to Optionees in the United Kingdom shall expire on the fifteenth day after the
Effective Time (for such later date as VERITAS shall determine in its sole
discretion), all on the terms specified in this Agreement. (A) Five business
days after the Effective Time, each of the options to purchase SSI Common Stock
held by any of the Optionees who elect to cancel their SSI Options and (B)
fifteen business days after the Effective Time each of the options to purchase
SSI Common Stock held by any of the Optionees who work and live in the United
Kingdom who elect to cancel their SSI Options and who receive Newco Options in
response to Newco's option
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offer made pursuant hereto (all such cancelled options referred to in clauses
(A) and (B) above, collectively, "CANCELED SSI OPTIONS"), will be canceled, SSI
will deliver to Newco a list of such Canceled SSI Options in accordance with
Section 5.1 hereof, and Newco will issue to Optionees on such list Newco Options
to purchase that number of shares of Newco Common Stock determined by
multiplying the number of shares of SSI Common Stock subject to a Canceled SSI
Option at the Effective Time by the "SSI Ratio" (as defined below) at an
exercise price per share of Newco Common Stock equal to the exercise price per
share of such Canceled SSI Option immediately prior to the Effective Time
divided by the SSI Ratio, rounded up to the nearest cent. The "SSI 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 ▇▇▇▇▇▇) plus (C) the proceeds to be received
by SSI upon the assumed exercise of outstanding SSI Options (including the
Canceled SSI Options and all other options to acquire SSI capital stock), all
divided by (D) 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 five (5) business days prior to the Effective
Time, as reported by the Nasdaq Stock Market. The SSI Ratio, collectively with
the VERITAS Ratio shall be referred to herein as the "RATIOS". If the foregoing
calculation results in a Newco Option, which is issued for a 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 Canceled SSI Option related thereto. 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 issued
Newco Option after the Effective Time.
(iii) Second SSI Certificate. No later than the twentieth (20th)
business day after the Closing, Newco shall issue to SSI that number of validly
issued, fully paid and nonassessable shares of Newco Common Stock equal to the
SSI Percentage Interest minus the number of shares issued on the First SSI
Certificate and minus the number of shares of Newco Common Stock issuable upon
exercise of the Newco Options issued with respect to the Canceled SSI Options
pursuant to Section 1.3(a)(ii). If the Newco Offer to the Optionees in the
United Kingdom has not expired on such twentieth (20(th)) business day after the
Closing because Newco has extended the Newco Offer to such Optionees, then the
parties shall amend this Agreement as necessary to provide that (A) the Second
Certificate shall not include such shares as may be issued upon exercise of all
Newco Options issued to such Optionees assuming all such Optionees elect to
cancel all of their SSI Options, and (B) a third SSI certificate may be
delivered at such date as shall be agreed by the parties. For the sole purpose
of calculating the number of shares of Newco Common Stock remaining due to SSI
hereunder, the number of shares issuable upon exercise of such Newco Options
shall be determined in accordance with the "treasury
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stock" methodology as set forth in the definition of the VERITAS Percentage
Interest herein if the VERITAS Percentage Interest is determined on that basis.
If the treasury stock methodology is not used to determine the VERITAS
Percentage Interest, then the number of shares issuable upon exercise of Newco
Options issued with respect to Canceled SSI Options shall be determined in the
same manner as used to determine the number of shares of Newco Common Stock
issuable upon exercise of Newco Options received by VERITAS option holders in
exchange for their VERITAS Options.
1.4 Contribution and Transfer of Contributed Stock and Assets.
(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 following Contributed Assets which are located outside of
the United States as follows:
(i) With respect to Contributed Assets located in France, Japan,
and Australia, such Contributed Assets shall be purchased and sold by and among
the VERITAS and Seagate entities located in such countries in exchange for
amounts of cash consideration, as determined by STI, equal in total to the extra
amount contributed to Newco by SSI (beyond what otherwise would be contributed
to Newco by the Contributing Companies and the Contributing Companies will
receive no additional Newco Common Stock for the extra amount of contributed
cash beyond the amounts of Newco Common Stock contemplated by this Agreement).
The parties shall execute bills of sale reflecting the transfer of any such
Contributed Assets which shall reflect the purchase price (contributed to Newco
by SSI) and only such amount shall be reported as the purchase price for all Tax
reporting purposes; no party shall have a position inconsistent therewith.
(ii) The parties shall cooperate to facilitate the transfer of
Employees with respect to facilities located in Singapore, Sweden, Malaysia,
Mexico, Canada, Hong Kong and the P.R.C.
(iii) Seagate Software Limited, a company organized under the laws
of the United Kingdom, will register a branch in South Africa and the
Contributed Assets and Employees located in South Africa shall be transferred to
Seagate Software Limited.
(b) Assumption and Exclusion of Liabilities.
(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
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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 Closing Group Account or that are listed on Schedule
1.4(b)(i)(B) attached hereto;
(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), 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. The Contributing Companies will take all actions
and will sign and deliver any and all instruments and documents (including the
▇▇▇▇ 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 either of
them and any Contributed Contracts to which they are 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
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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 or otherwise transfer to Newco any Contributed
Asset without constituting a breach 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 Asset.
(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. 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 stockholders 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 Newco Options issued pursuant to Section 1.3(a)(ii)
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 upon cancellation of their Canceled 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 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
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administer the Stock Rights (including the Newco Options issued upon any
cancellation of the Canceled SSI Options) 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, 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 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 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filings. VERITAS, STI, and Newco will, and VERITAS
shall use its reasonable best efforts to cause Warburg, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇ 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
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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 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 Newco Rights Agreement. Newco will prior to the Effective
Time have adopted a mutually agreed Rights Agreement (the "NEWCO RIGHTS
AGREEMENT") a form of which is attached hereto as Exhibit 1.12.
1.13 Board of Directors and Officers of Newco; Newco Certificate of
Incorporation and Bylaws.
(a) Board of Directors. 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 Newco Stockholders held in 1999, 2000 and 2001,
respectively. At the Effective Time, the directors of Newco shall consist of the
current VERITAS directors plus ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, nominees
of SSI. In addition ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ as an employee of Newco shall also be
appointed to the Board. At the Effective Time, ▇▇▇▇ ▇▇▇▇▇▇ shall be the Chairman
of the Board of Newco. At the Effective Time, the Class A Directors shall
consist of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇, the Class B
Directors shall consist of ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ and the Class C Directors shall consist of ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ van den Bosch and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
(b) Officers. At the Effective Time, ▇▇▇▇ ▇▇▇▇▇▇ shall be the CEO and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ shall be the President and Chief Operating Officer of
Newco.
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(c) Certificate of Incorporation and Bylaws. Attached hereto as Exhibits
1.13(c)A and 1.13(c)B are the respective forms of Amended and Restated
Certificate of Incorporation and Bylaws of Newco to be in effect at the
Effective Time.
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 issuance of Newco Options upon cancellation
of Canceled SSI Options shall be registered under the Securities Act on Form S-4
(as hereinafter defined). As promptly as practicable after October 5, 1998,
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
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.
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, SSI and STI, on behalf
of each and all of the Representing Seagate Entities, hereby represent and
warrant to VERITAS that as of October 5, 1998:
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.
(a) 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
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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 October 5, 1998 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 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. The final
list of Canceled SSI Options delivered to VERITAS by SSI pursuant to Section
4.1(b) hereof will reflect but will not expressly identify any option grants,
exercises or cancellations, elections to cancel and other changes to the
Canceled SSI Options list occurring after October 5, 1998.
(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. Newco will have no obligation to assume
any such outstanding registration rights obligations of the Contributed
Companies or of the Contributing Companies.
(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
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transactions contemplated by this Agreement and the Ancillary Agreements. This
Agreement and the Ancillary Agreements attached to this Agreement have been duly
approved by the Boards of Directors of SSI, STI and NSMG and, prior to the
Effective Time, will be approved by the Board of Directors of each of the other
Contributing Companies. This Agreement has been and, prior to the Effective
Time, the Ancillary Agreements will be, duly executed and delivered by STI, SSI
and NSMG. Subject to receiving such stockholder approval, this Agreement is, or,
in the case of each of the Ancillary Agreements will be, a valid and binding
obligation of STI, SSI and NSMG, each enforceable against STI, SSI and NSMG in
accordance with its 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 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) Governmental 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
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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
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 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 as Schedule 2.4(c)(1) to the SSI Disclosure Letter are the
audited combined financial statements of the Group Business dated as of July 3,
1998, including a combined balance
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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 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 October 5, 1998, 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 October 5, 1998, 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
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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 those 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 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 Group
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.
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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' 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 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 Group Employee 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 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 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
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Company or Contributed Company will timely provide to 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 Company 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 in either
case 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 Employee from devoting his or her
full business time to the affairs of Newco after the Effective Time.
(h) The Contributed Company 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) None of the Contributed Companies are indebted to any executive
officer or director of any 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 in Section
2.8(i) to the SSI Disclosure Letter or except as disclosed in the 1998 Group
Balance Sheet or the Seagate SEC Documents, is any officer, director, employee
or shareholder so indebted to any of SSI or any of the Contributed Companies,
nor does any Employee have any right to force SSI or any Contributing Company to
repurchase any stock.
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2.9 Absence of Certain Changes or Events. Except as disclosed in the
Seagate SEC Documents filed prior to October 5, 1998, 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 occurring after October 5, 1998, 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 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 Group Permitted
Encumbrances) on any Group Asset in excess of $2,500,000 individually or in the
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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 2.9(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 Governmental Permits, the
absence of which would not have a Material Adverse Effect on the Group Business.
2.11 Agreements. Schedule 2.11 of the SSI Disclosure Letter lists all the
contracts as of October 5, 1998 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
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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);
(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 October 5, 1998, 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 the Contributing Companies who are parties thereto under
any Contributed Contract in any 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
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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 reserves 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 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 material Tax liens have been filed against 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
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RIGHTS") and such ownership or rights to use, sell or license are reasonably
sufficient for the 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 Group 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 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 October 5, 1998 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
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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 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 ▇▇▇▇▇▇, a copy of which has been provided to
VERITAS (the "▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 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 Group 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 ).
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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 (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 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 October 5, 1998, 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 October 5, 1998 from ▇▇▇▇▇▇ to the effect that, as of October 5,
1998, the terms of the transactions contemplated by this Agreement and the
Ancillary Agreements are fair to SSI 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
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own the Group Assets and have good and marketable title thereto, free and clear
of all Encumbrances whatsoever, other than the Group 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 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, with
respect to the Contributed Assets and Stock, will be transferred to Newco free
and clear of all Encumbrances, other than Group Permitted Encumbrances. Such
transfer of the Contributed Assets and Stock 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 Closing Group Account, 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 Contributed Assets and Stock, free and clear of all Encumbrances, other
than Group 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,
"GROUP RESTRICTIVE AGREEMENTS"), in a manner, in any of the foregoing cases,
which will have a Material Adverse Effect on 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
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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 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 as of October
5, 1998:
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 any and all of the VERITAS Assets held by
such company 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 as amended prior to
September 30, 1998 and will deliver to SSI or its counsel prior to the Effective
Time the equivalent charter documents of VERITAS and each of its Subsidiaries as
amended to the Closing. Except for the VERITAS Subsidiaries, neither 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 as of the date of
September 30, 1998 the 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
are 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 on September 30, 1998 are set forth
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in Section 3.2(a) of the VERITAS Disclosure Letter and are validly issued, fully
paid and nonassessable free and clear of any Encumbrances and not subject to
preemptive rights pursuant to any statute, pursuant to the Certificate of
Incorporation or Bylaws of VERITAS, 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 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 as of September 30,
1998, 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 September 30, 1998.
(b) No Other Commitments. Except as set forth in Section 3.2(b) 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 attached to this
Agreement have been duly approved by the Boards of Directors of Newco and
VERITAS. This Agreement and the Voting Agreements have been, and prior to the
Effective Time, the other Ancillary Agreements will be, duly executed and
delivered by Newco and VERITAS. Subject to receiving such stockholder approval,
this Agreement and the Voting Agreements are, and at the Closing the other
Ancillary Agreements will be, valid and binding obligations of Newco and
VERITAS, enforceable against Newco and VERITAS in accordance with their
respective terms, except as enforceability may be limited by bankruptcy and
other similar laws and general principles of equity.
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(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 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 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 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.
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(b) VERITAS Financial Statements; Absence of Undisclosed
Liabilities. The audited consolidated financial statements, dated as of and for
the period ended, December 31, 1997, 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 (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 reasonably
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 October 5, 1998, 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 October
5, 1998, 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, any of the VERITAS
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Assets or the VERITAS 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 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 October 5, 1998, 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 material 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 company's assets, 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 VERITAS 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.
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
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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, the "VERITAS BENEFIT ARRANGEMENTS"). Each VERITAS
Benefit Arrangement maintained by VERITAS or any VERITAS Subsidiary 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 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 in which any of the employees
participate (collectively, the "VERITAS EMPLOYEE PLANS"). Copies of all VERITAS
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 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 Plans maintained by any member of the
VERITAS Group (i) is a Multiemployer Plan, or a Multiple Employer Plan, for
which Newco could incur liability under Section 4063 or 4064 of ERISA, 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 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 coverage available pursuant to Section 4980B of the
Internal Revenue Code and 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).
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(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.
3.9 Absence of Certain Changes or Events. Except as disclosed in the
VERITAS SEC Documents filed prior to October 5, 1998, 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 terminated
employees or consultants in the ordinary course of business, consistent with
past practice), 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 or to become payable by VERITAS to the VERITAS employees,
except in the
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ordinary course of the business, consistent with past practice and except as
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 occurring after
October 5, 1998, 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 exceeding $2,500,000 in the aggregate;
(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 individually or 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 $2,500,000;
(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 which are set forth in Section
3.11(h) and Section 3.11(i) of the VERITAS Disclosure Letter;
(n) any labor dispute with69, or charge of unfair labor practice by, any
member of the VERITAS Group (other than routine individual grievances), any
activity or
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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 campaign 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), or any
change to accounting methods.
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. Schedule 3.11 of the VERITAS Disclosure Letter lists all
VERITAS contracts as of October 5, 1998 of the type described below to which any
member of the 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 VERITAS 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 will not exceed $2,500,000 in the aggregate);
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(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
those entered into 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 of the material VERITAS
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 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, 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 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 October 5, 1998, 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
reserves 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 that are adequately provided for or reflected in the VERITAS Balance
Sheet) 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, or to VERITAS' Knowledge proposed to be assessed,
incurred or accrued (other than liabilities for Taxes arising in the ordinary
course of business). To VERITAS' Knowledge, VERITAS has not received
notification that any material issues have been raised (or are currently
pending) by the Internal Revenue Service or any other
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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.
No taxing authority is currently conducting an audit of any of the aforesaid Tax
returns of VERITAS or, to VERITAS' Knowledge, 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 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 (but unassessed) additional Taxes have been
asserted and no material Tax liens have been 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 hereof.
3.15 Intellectual Property.
(a) VERITAS owns, or has the right to use, sell or license such
Intellectual Property Rights 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 or infringes any Intellectual Property Right of any other
party, (ii) there is no pending or threatened claim
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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.
(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 of all Intellectual Property Rights arising from
the services performed for VERITAS or the VERITAS Subsidiary by such persons to
his/her employer or principal which is VERITAS or a VERITAS Subsidiary, except
where the absence of such 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 as of October 5, 1998, 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
the ability to market any material VERITAS Product in any material jurisdiction
or with respect to any material market or industry, and VERITAS is not in breach
or default of any such license, sublicense, agreement or permission in a manner
which would have a Material Adverse Effect on the VERITAS Business. 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 (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. VERITAS has not
knowingly taken or knowingly failed to take any action that, directly or
indirectly, has caused any Intellectual Property Rights in source
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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 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
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 where such Hazardous Materials would cause a Material Adverse Effect
on 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, to VERITAS' Knowledge, there
has been no litigation brought or 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 October 5, 1998, no officer or director of VERITAS, or
any
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"affiliate" or "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 October 5, 1998 from DLJ to the effect that, as of October 5, 1998,
the VERITAS Ratio is fair to VERITAS from a financial point of view.
3.22 Title to and Condition and Sufficiency of VERITAS Assets. A member of
the VERITAS Group owns, or at the Closing 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, 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 Closing in the Conduct
of the VERITAS Business) (collectively, "VERITAS RESTRICTIVE AGREEMENTS"), in a
manner, in any of the foregoing cases, which will have a Material Adverse Effect
on Newco.
3.24 Supplier and Customer Relationships. To VERITAS' Knowledge, (i) the
VERITAS Group has good commercial working relationships with the customers for
the VERITAS Business, and (ii) since January 1, 1998, no customer of, or
supplier to, the VERITAS Business, 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 actions would cause a Material
Adverse Effect on VERITAS, and to VERITAS' Knowledge, no customer or supplier
has threatened to take any such action.
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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 non-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 and 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.
(a) During the period from October 5, 1998 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, (i) of any event occurring
subsequent to October 5, 1998 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, (ii) of any event that would reasonably be likely to have
a Material Adverse Effect on the Group Business, and (iii) 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.
(b) SSI will deliver to VERITAS by February 28, 1999 an electronic copy
of SSI's option tracking system data file as of such date. Ten business days
after the Effective Time, SSI will deliver to Newco an electronic copy of SSI's
option tracking system data file as of such date, in the same form as the prior
delivery, but which shall contain the final list of Canceled SSI Options.
4.2 Maintenance of Business. During the period from October 5, 1998 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 carry on and preserve the Group
Business and relationships with
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customers, suppliers, employees and others related to Group Business in
substantially the same manner as it has prior to October 5, 1998.
4.3 Conduct of Business. During the period from October 5, 1998 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 Group Permitted Encumbrances and except for Encumbrances arising
under credit facilities existing as of October 5, 1998;
(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;
(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 material claim against a third party;
(i) cause any member of the Contributed Company Group to merge,
consolidate or reorganize with or acquire any entity that is not a member of the
Contributed Company Group, 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) or Section 1.4(a) hereof;
(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;
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(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 .
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 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
▇-▇▇
▇▇
▇▇▇▇▇▇▇▇▇▇/▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 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.
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 October 5, 1998 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
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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 October 5, 1998 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 October 5, 1998 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 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
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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 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 except for
records relating to preparation or audit of tax returns, for which this Section
4.12 will survive until the expiration of the applicable Tax statute of
limitations.
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
AGREEMENT").
4.14 Development Agreement and Cross-License Agreement. The Development
Agreement and the Cross-License Agreement shall be effective as of the Effective
Time.
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. SSI has provided to
VERITAS a list of the Contributed Contracts and the contracts to which the
Contributed Companies are a party which create rights or obligations of both the
Group Business and the business of the Contributing Companies other than the
Group Business (the "JOINT CONTRIBUTED AGREEMENTS"). As soon as feasible after
the date hereof, SSI and VERITAS will negotiate to agree upon a mutually
acceptable arrangement between SSI and Newco and, if required, other parties
with respect to the treatment of such contracts. To date, the parties have
agreed as follows: with respect to distributors who distribute both Group
Products and the products of any business retained by the Contributing Companies
or their subsidiaries (who are not a Contributed Company), the parties shall
request that the other party (or parties) to such contract terminate the Joint
Contributed Agreement and enter into two new contracts on the same terms and
conditions as the terminated Joint Contributed
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Agreement, one with Newco (or the relevant Contributed Company) and one with the
Contributing Company or a retained subsidiary thereof, provide that Newco and
its subsidiaries, on the one hand, and the Contributing Companies and their
retained subsidiaries, on the other hand, shall each receive an equitable share
of the benefits, 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 Key Employee Agreements. STI and SSI will informally encourage
(without having to incur any cost) each of the Key Employees listed on Exhibit
4.17A to execute their respective Key Employee Agreements a form of which is
attached hereto as Exhibit 4.17B.
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 "REGISTRATION RIGHTS AGREEMENT") and shall
be subject to the other rights and restrictions contained in the Stockholder
Agreement in the form attached hereto as Exhibit 4.18B (the "STOCKHOLDER
AGREEMENT"). As of the Effective Time, the Registration Rights Agreement shall
be executed by SSI and the Stockholder Agreement shall be executed by STI and
SSI.
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 additional items not
so transferred are discovered, then (a) the Group Assets shall be expanded to
include, and there shall be duly assigned to Newco by the appropriate
Contributing Company, all such additional Intellectual Property Rights and
Intangible Assets required for the production of the Group Products provided
such Intellectual Property Rights were acquired or developed with funds charged
to the Group Financial Statements; or (b) if not so charged to the Group
Financial Statements, Newco shall be provided a non-exclusive, fully paid,
perpetual, irrevocable license to use 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, irrevocable license to use 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.
4.20 Directors' and Officers' Liability Insurance. STI and/or SSI shall
use their commercially reasonable efforts to maintain directors' and officers'
liability insurance as STI and/or SSI shall have in effect from time to time,
covering the acts or omissions on or before the Effective Time of those
Employees who are or have been directors and officers of STI or SSI or their
subsidiaries and who become employees of Newco as of the Effective Time. STI
and/or SSI will not voluntarily seek to increase the deductible nor decrease the
limits under such insurance, provided however such action shall be governed by
the insurance marketplace on commercially reasonable and available terms, and
STI
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and/or SSI will endeavor to give written notice to VERITAS prior to any
cancellation or non-renewal of the STI and/or SSI coverage.
4.21 Closing Group Account. SSI shall deliver to Newco the assets and
liabilities section of a balance sheet of the Group Business as of the Closing
Date (the "CLOSING GROUP ACCOUNT") within thirty days following the Closing
Date. The Closing Group Account shall be prepared in the same manner as the 1998
Group Balance Sheet and in compliance with the representations and warranties
contained in Section 2.4(c) hereof.
5. VERITAS and NEWCO Covenants
5.1 Advice of Changes.
(a) During the period from October 5, 1998 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 October 5, 1998 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.
(b) Ten days prior to the Effective Time, VERITAS will deliver to SSI a
certificate from VERITAS' transfer agent indicating the number of shares of
Common Stock outstanding at the end of business on the eleventh day preceding
the Effective Time and a certificate from VERITAS' Secretary indicating the
number of shares of VERITAS Common Stock issuable upon exercise or conversion of
any outstanding options, warrants or convertible debentures outstanding on such
date. VERITAS will deliver to SSI by 8:00 a.m. on the fifteenth business day
after the Effective Time a certificate from VERITAS' transfer agent indicating
the number of shares of Common Stock outstanding at the end of business on the
day of the Closing (calculated without regard to the shares of Common Stock
issued with respect to the First SSI Certificate or issued in connection with
the TeleBackup Transaction) and a certificate from VERITAS' Secretary indicating
the number of shares of VERITAS Common Stock issuable upon exercise or
conversion of any outstanding options, warrants or convertible debentures
outstanding at the end of business on the day of the Closing (calculated without
regard to shares issuable upon exchange of exchangeable shares of TeleBackup or
issuable upon exercise of options issued in connection with the TeleBackup
transaction) and showing the calculation, as of the date of Closing, of the
VERITAS Percentage Interest and the SSI Percentage Interest.
5.2 Maintenance of Business. During the period from October 5, 1998 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 October 5, 1998.
5.3 Conduct of Business. During the period from October 5, 1998 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
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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;
(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 credit facilities existing as of October 5, 1998;
(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 the Form of the Amendment to the
VERITAS Certificate of Incorporation attached hereto as 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.
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
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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 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
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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 upon
cancellation of the Canceled 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 October 5, 1998 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 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
▇-▇▇
▇▇
▇▇▇▇▇▇▇ 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 except for records
relating to preparation of and audit of tax returns, for which this Section 5.11
will survive until the expiration of the applicable Tax statute of limitations.
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 Agreement.
5.13 Development Agreement and Cross-License Agreement. The Development
Agreement and Cross-License Agreement shall be effective as of the Effective
Time.
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 October 5, 1998 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 VERITAS 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
beginning June 1, and ending on February 15, 2001 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 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 Key Employee Agreements (the form of which is attached hereto as
Exhibit 4.17B) with the Key Employees who are identified on Exhibit 4.17A and on
Exhibit 5.16A attached hereto.
(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
▇-▇▇
▇▇
▇▇▇▇▇▇▇ 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 October 5, 1998, 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 October 5,
1998 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
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 October 5, 1998. 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
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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).
(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 as of October 5, 1998, 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
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Group Business and (B) provided they become Employees, officers or directors of
Newco ("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 October 5, 1998
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 Closing Date.
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 coverage 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 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.
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(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, exchange
or cancellation of SSI capital stock or options in connection with the Seagate
Transaction (other than its obligations under 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. As of the
Effective Time, the Registration Rights Agreement shall be executed by Newco and
the Stockholder Agreement shall be executed by Newco and VERITAS.
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 Proposal (as
defined below). From and after October 5, 1998 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%
or 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
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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 that it 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).
(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 a 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") (i) 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 SSI 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 and (ii) will take place
concurrently with the Effective Time.
6.2 Conversion of VERITAS Common Stock. Each share of 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 of validly issued, fully paid and nonassessable Newco
Common Stock.
6.3 Cancellation of SSI Options and Issuance of Newco Options. Newco,
contingent on the consummation of the Seagate Transaction, shall offer to issue
at the Closing to each Employee who has agreed to cancel his/her SSI Options and
who will become a
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Newco employee, that number of Newco Options as specified in and 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 as of October 5, 1998 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 VERITAS and 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.
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.
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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 will be treated as a tax-free 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 ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
to the 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.
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 the First SSI
Certificate to SSI.
▇-▇▇
▇▇
▇. 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 October 5, 1998 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 the Group Business, 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.
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
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, 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.
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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.
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 (the "PATENT
ASSIGNMENT"); (ii) the "Backup Exec" registered trademark (the "TRADEMARK
ASSIGNMENT"); and (iii) the copyright on Back-up Exec (the "COPYRIGHT
ASSIGNMENT", and, together with the Intellectual Property Rights in clauses (i)
and (ii), collectively, 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
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business 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:
(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
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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;
(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"); or
(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 June 1, 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 June 30, 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 June 30, 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 June 30, 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 July 31, 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, and 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 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.
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(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 a Newco Liability for failure to perform its
obligations under Section 1.3(a)(ii) or the Newco Options issued pursuant
thereto) 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;
(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 foreign,
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
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covenants in Section 1.4(e) hereof (the Heading of which is "No Fraudulent
Conveyance") or any Liabilities related to non-compliance with bulk transfer
laws in connection with the Seagate Transaction;
(d) IMG;
(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) attached hereto; 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.
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,
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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 such date, 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; and (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 date of
the Closing, 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
offers 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.
(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 the 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 of
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
prior to the Effective Time or who do not accept Newco's offer of employment
pursuant to Section 12.1(b) in accordance with the continuation health care
coverage requirements of COBRA and (ii) provide COBRA continuation coverage to
any former employee of the
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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 being 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.
(c) Employees (as defined in Section 12.1(a)) who are terminated by
Newco within two days after the Effective Time (the "TERMINATED EMPLOYEES")
shall be entitled to elect COBRA continuation coverage with the appropriate
Contributing Company for themselves or their qualified beneficiaries, provided,
however that Newco shall reimburse SSI for the cost of such COBRA continuation
coverage in excess of the premiums paid to SSI by the terminated employees and
their qualified beneficiaries.
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.
12.4 Employees Who own SSI Capital Stock. With respect to the unvested but
purchased shares of SSI Common Stock (the "83(B) SHARES") owned by ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇ (collectively, the
"83(B) EMPLOYEES"), immediately prior to the Effective Time, thirty-five percent
(35%) of the unvested 83(b) Shares held by each such 83(b) Employee shall become
vested and, accordingly, SSI's repurchase option with respect to such 83(b)
Shares shall lapse. The remaining sixty-five percent (65%) of the unvested 83(b)
Shares held by each such 83(b) Employee shall be repurchased by SSI pursuant to
the terms of such 83(b) Employee's restricted stock purchase agreement (the
"REPURCHASED SHARES"). In addition, immediately prior to the Effective Time, SSI
shall grant each 83(b) Employee an option (the "NEW SSI OPTION") to purchase
shares of SSI common stock which shall have the same aggregate "Spread" (as
defined in the next sentence) as the Repurchased Shares. The Spread shall mean
the difference between the fair market value of a share of the SSI Common Stock
on the sixth day prior to the Effective Time and the exercise price per share of
the option or an 83(b) Share. Each New SSI Option shall be subject to SSI's
standard terms for stock option grants, shall initially be unvested but shall
preserve the vesting schedule of the Repurchased Shares and shall be included by
Newco in its option exchange offer to the Employees pursuant to Section
1.3(a)(ii) of this Agreement.
13. Tax Matters
13.1 Transaction Taxes; Representation; Transaction Tax Indemnity. STI
and/or SSI, on the one hand, and Newco, on the other, shall each bear half of
the first $1,000,000 of Transaction Taxes (as defined below). Thereafter, STI
and SSI 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 STI and
SSI agree to cooperate in
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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.
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, notwithstanding the
provisions of Section 11.2, 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 Internal Revenue Code to the contrary, or any other event which
conclusively established a contrary position.
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
1998 Group 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 Internal Revenue Code. Further, no
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Section 338 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 Affiliates
or any member of the Contributed Company Group 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 1998 Group 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 Group. Newco shall also be responsible for, shall pay
and perform, and shall indemnify, defend and hold harmless the Contributing
Companies from (i) those Tax indemnifications given to the former shareholders
of On-Demand Software, Inc. by the Contributing Companies in connection with the
sale of said company to NSMG (up to a maximum amount of $3,000,000), and (ii)
Unforeseen Tax Liabilities for which Newco is responsible as provided in Section
11.1(e) (as determined without the limitations in Section 11.2).
13.5 Other Tax Matters.
(a) The Contributed Companies, the Contributing Companies, Newco and
VERITAS 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. STI and SSI shall, within a reasonable time after the
Effective Time 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 their
best efforts to deliver to Newco a schedule listing the tax basis of each of the
Contributed Stock and Assets.
(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 Effective Time 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
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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 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 Effective Time) 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 would not, but for this
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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.
(i) If Newco, a Contributed Company or any of their respective
Affiliates receive 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.
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(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 (A) will qualify as a tax-free reorganization
described in Section 368(a) of the Code and (B) 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 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.
sec. 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. sec.sec. 1.351-3(c) and 1.368-3.
13.6 Seagate Transaction Items.
(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.
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(iv) After taking into account (and thus deeming shares to be
issued as of the Effective Time) any planned or intended (as of October 5, 1998
or the Effective Time) issuances of Newco stock and the exercise of any Newco
stock rights (including warrants, options, convertible instruments), the
stockholders of VERITAS immediately prior to the transactions contemplated by
this Agreement and SSI 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 Newco shares held by SSI 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 stockholders 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 section 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.
(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 (including without limitation with respect to matters
associated with the TeleBackup 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, Section 1.9
and Section 1.10 shall survive the Closing of the Seagate Transaction at the
Effective Time and extend 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
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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.
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, 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. This 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 (i) SSI shall reimburse VERITAS upon the Closing for
$300,000 of the cost incurred by VERITAS to print and file Form S-4 with respect
to the Seagate Transaction; and (ii) 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 this
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
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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
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.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Wilson, Sonsini, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
And if to VERITAS or VERITAS Software Corporation
or Newco to: VERITAS Software Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Fenwick & West LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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
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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.
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
Sections 5.17 and 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 and the Seagate Transaction. Thereafter, VERITAS or STI or
SSI may issue such press releases, and make such other disclosures regarding the
Merger and the Seagate Transaction, as they may each determine (after
consultation with legal counsel) to be required under applicable securities laws
or the rules of the Nasdaq Stock Market; 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.
"1998 GROUP BALANCE SHEET" is defined in Section 2.4(c).
"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 ▇▇▇▇ of Transfer, the Development
Agreement, the agreements relating to the Patent Assignment, the Copyright
Assignment and the Trademark Assignment, the Transition Services Agreement, the
Cross-License Agreement and the Voting Agreement (as such terms are defined
herein).
"ASSUMED LIABILITIES" is defined in Section 1.4(b)(i).
"▇▇▇▇ OF TRANSFER" means the ▇▇▇▇ 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.
"CANCELED SSI OPTION" is defined in Section 1.3(a)(ii).
"CERTIFICATE OF MERGER" is defined in Recital A.
"CHANGE IN VERITAS BOARD RECOMMENDATION" is defined in Section 9.1(i).
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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" has the meaning specified for such term in Section 6.1.
"CLOSING GROUP ACCOUNT" is defined in Section 4.21.
"COBRA" is defined in Section 2.8(c).
"CONDUCT OF THE GROUP BUSINESS" means the conduct in all material
respects of the Group Business as conducted on October 5, 1998 and at Closing.
"CONDUCT OF THE VERITAS' BUSINESS" means the conduct in all material
respects of the Group Business as conducted on October 5, 1998 and at Closing.
"CONTRIBUTED ASSETS" shall mean those assets, including real property
assets, that are owned, leased or licensed by the Contributing Companies that
are (a) listed on Exhibit 14.15A attached hereto, (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, and Arcada Software Limited (U.K.), a corporation organized under
the laws of the United Kingdom and Wales.
"CONTRIBUTED COMPANY GROUP" means the Contributed Companies and the
Contributed Subsidiaries.
"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 Exhibit 14.15B
attached hereto subject in the case of Joint Contributed Agreements to the
provisions of Section 8.16. The Contributed Contracts do not include the Tax
Allocation Agreement dated April 4, 1996 or the Intra-Company Revolving Loan
Agreement, dated June 28, 1996.
"CONTRIBUTED GROUP ALTERNATIVE PROPOSAL" is defined in Section 4.11(a).
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"CONTRIBUTED SUBSIDIARIES" means the direct or indirect subsidiaries of
the Contributed Companies identified in Exhibit 14.15C attached hereto.
"CONTRIBUTED STOCK" means all of the capital stock of the Contributed
Companies.
"CONTRIBUTED STOCK AND ASSETS" means the Contributed Stock and the
Contributed Assets.
"CONTRIBUTING COMPANIES" means STI, SSI and any other subsidiary of STI
or SSI (other than the Contributed Companies) 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.
"COPYRIGHT ASSIGNMENT" is defined in Section 8.15.
"CORE IP" is defined in Section 8.15.
"CROSS-LICENSE AGREEMENT" means the Cross-License and OEM Agreement
signed by the parties on October 5, 1998 attached hereto as Exhibit 4.14B
executed and delivered by Seagate Software Information Management Group, Inc.,
Newco and VERITAS simultaneously with this Agreement.
"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. sec. 9601 et seq., as amended
("CERCLA").
"DELAWARE LAW" means the Delaware General Corporation Law, as in effect
from time to time.
"DEVELOPMENT AGREEMENT" means the Development and License Agreement
signed by the parties on October 5, 1998 attached hereto as Exhibit 4.14A
executed and delivered by Newco, VERITAS and STI simultaneously with this
Agreement.
"DLJ" means ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation.
"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.
"EMPLOYEE" and "EMPLOYEES" has the meaning specified in Section 12.1(a).
"EMPLOYEE BENEFIT PLAN" is defined in Section 2.8(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.
"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
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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.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rulings and regulations promulgated thereunder.
"EXCHANGE ACT" is the Security Exchange Act of 1934, as amended.
"EXCLUDED LIABILITIES" shall have the meaning defined for it in Section
1.4(b)(ii).
"FINAL DATE" is defined in the last paragraph of Section 9.1.
"FINAL LIST" is defined in Section 12.1(a).
"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; (iv) all Claim Assets; and (v) the minute books, stock ledgers and
Tax records of any of the Contributed Companies or Contributed Subsidiaries.
"FIRST SSI CERTIFICATE" is defined in Section 1.3(a)(i).
"FORM S-4" is defined in Section 1.14.
"FORM S-8" is defined in Section 1.7.
"FORMER EMPLOYEES" is defined in Section 12.2(b).
"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 BENEFIT ARRANGEMENTS" is defined in Section 2.8(a).
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"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 EMPLOYEE PLANS" is defined in Section 2.8(a).
"GROUP FINANCIAL STATEMENTS" has the meaning given in Section 2.4(c).
"GROUP FINANCIAL STATEMENTS BALANCE SHEET DATE" is defined in Section
2.4(c).
"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 PERMITTED ENCUMBRANCE" means Encumbrances (a) as disclosed as an
encumbrance in Exhibit 14.15E attached hereto or in the Seagate SEC Documents
filed prior to October 5, 1998, (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.
"GROUP PERSONS" is defined in Section 5.18(a).
"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).
"GROUP RESTRICTIVE AGREEMENTS" is defined in Section 2.23.
"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
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regulated by the Toxic Substances Control Act, 15 U.S.C. sec. 2601 et seq., (d)
any material or substances designated as "hazardous substances" pursuant to (1)
Section 311 of the Clean Water Act, 33 U.S.C. sec. 1251 et seq., or (2) Section
101 of the Comprehensive Environmental Response, Compensation, and Liability
Act, 42 U.S.C. sec. 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. sec. 2601 et seq., and
(f) any "hazardous waste" pursuant to Section 1004 of the Resource Conservation
and Recovery Act, 42 U.S.C. sec. 6901 et seq.
"HSR ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ 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.
"INDEMNIFIED PARTIES" is defined in Section 5.17(c).
"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, 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 and 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
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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
▇▇▇▇ registrations and applications therefor, trade names, rights in trade dress
and packaging and all goodwill associated with the same; and (vii) all rights to
▇▇▇ 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.
"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 Allocation
Agreement dated, as of April 4, 1996 between STI and SSI, as amended, (b) the
Intercompany Revolving Loan Agreement dated as of June 28, 1996 between STI and
SSI as amended, (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.
"INTERIM PERIOD" is defined in Section 13.5(h).
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended, and the rulings and regulations promulgated thereunder.
"JOINT CONTRIBUTED AGREEMENTS" is defined in Section 4.16.
"KEY EMPLOYEES" means those individuals identified in Exhibits 4.17A and
5.16A attached hereto.
"KEY EMPLOYEE AGREEMENTS" means the Key Employee Agreements in the form
attached hereto as Exhibit 4.17B.
"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
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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.
"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 its subsidiaries on and after
the Effective Time.
"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.
"MATERIAL CONTRIBUTED CONTRACTS" is defined in the Preamble of Section
2.11.
"MATERIAL VERITAS CONTRACTS" is defined in Section 3.11.
"MERGER" is defined in Recital A.
"MERGER SUB" is defined in Recital A.
"MINORITY HOLDERS" means holders of shares of SSI other than STI.
"▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ENGAGEMENT LETTER" is defined in Section 2.16.
"▇▇▇▇▇▇" means ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co.
"MULTIEMPLOYER PLAN" is defined in Section 2.8(b).
"MULTIPLE EMPLOYER PLAN" is defined in Section 2.8(b).
"NEWCO COMMON STOCK" is defined in Recital A.
"NEWCO OFFER" is defined in Recital A.
"NEWCO OPTIONS" is defined in Recital A.
"NEWCO PLANS" is defined in Section 1.6.
"NEWCO RIGHTS AGREEMENT" is defined in Section 1.12.
"NEWCO" means VERITAS Holding Corporation, a Delaware corporation.
"NONDISCLOSURE AGREEMENT" is defined in Section 4.9.
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"NSMG" means Network & Storage Management Group, Inc., a Delaware
corporation.
"OMITTED BALANCE SHEET LIABILITIES" is defined in Section 11.1(e).
"OPTIONEES" is defined in Recital A.
"PATENT ASSIGNMENT" is defined in Section 8.15.
"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.
"POST-CLOSING PERIOD" is defined in Section 13.5(b).
"PRE-CLOSING PERIOD" is defined in Section 13.5(b).
"PRELIMINARY LIST" is defined in Section 12.1(a).
"PROSPECTUS" is defined in Section 5.6.
"PROSPECTUS/PROXY STATEMENT" is defined in Section 1.14.
"RATIOS" is defined in Section 1.3(a)(ii).
"REAL PROPERTY ASSETS" shall mean all real property assets required for
the Conduct of the Group Business.
"REGISTRATION RIGHTS AGREEMENT" is defined in Section 4.18.
"REPRESENTING SEAGATE ENTITIES" is defined in the Preamble of Section 2.
"RETURNS" is defined in Section 13.1.
"SEAGATE IP RIGHTS" is defined in Section 2.15(a).
"SEAGATE IP RIGHTS AGREEMENTS" is defined in Section 2.15(c).
"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.
"SEAGATE SEC DOCUMENTS" is defined in Section 2.4(a).
"SEAGATE TRANSACTION" shall have the meaning described in Recital A
hereto.
"SEC" is the Securities and Exchange Commission.
"SECURITIES ACT" is the Securities Act of 1933, as amended.
"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,
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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 CONSOLIDATED FINANCIAL STATEMENTS" is defined in Section 2.4(b).
"SSI CONSOLIDATED FINANCIAL STATEMENTS BALANCE SHEET" is defined in
Section 2.4(b).
"SSI DISCLOSURE LETTER" means a letter dated as of October 5, 1998 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.
"SSI OPTIONS" is defined in Section 2.2(a).
"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.
"SSI RATIO" is defined in Section 1.3(a)(ii).
"SSI PER SHARE VALUE" is defined in Section 1.3(a)(ii).
"SSI" means Seagate Software, Inc., a Delaware corporation.
"STATEMENT NO. 5" is Statement of Financial Accounting Standard No. 5.
"STOCK RIGHTS" is defined in Section 1.7.
"STOCKHOLDER AGREEMENT" is defined in Section 4.18.
"STI" means Seagate Technology, Inc., a Delaware corporation.
"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.
"TAX ALLOCATION AGREEMENT" is defined in Section 13.5(d).
"TELEBACKUP TRANSACTION" means the acquisition by Newco of TeleBackup
Systems, Inc., a Canadian company, pursuant to the terms of that certain
Combination Agreement dated September 1, 1998 entered into between VERITAS and
TeleBackup Systems, Inc. (the "TELEBACKUP COMBINATION AGREEMENT").
"THRESHOLD AMOUNT" is defined in Section 11.1(e).
"TRADEMARK ASSIGNMENT" is defined in Section 8.15.
"TRANSACTION TAXES" is defined in Section 13.1.
"TRANSITION SERVICES AGREEMENT" is defined in Section 4.13.
"UNFORESEEN TAX LIABILITIES" is defined in Section 11.1(e).
"VERITAS" is VERITAS Software Corporation and VERITAS Surviving
Corporation.
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"VERITAS ALTERNATIVE PROPOSAL" is defined in Section 5.20(a).
"VERITAS ASSETS" are the tangible and intangible, real and personal
assets owned, leased or licensed by VERITAS.
"VERITAS BALANCE SHEET" is defined in Section 3.14.
"VERITAS BENEFIT ARRANGEMENT" is defined in Section 3.8(a).
"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 CLOSING PRICE" is defined in Section 1.3(a)(ii).
"VERITAS COMMON STOCK" is defined in Section 1.2(a).
"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 DEBENTURES" is defined in Section 1.2(b)(i).
"VERITAS DISCLOSURE LETTER" is defined in the preamble of Section 3.
"VERITAS EMPLOYEES" are the employees of VERITAS.
"VERITAS EMPLOYEE PLANS" is defined in Section 3.8(a).
"VERITAS FINANCIAL STATEMENTS" is defined in Section 3.4(b).
"VERITAS FINANCIAL STATEMENTS BALANCE SHEET DATE" is defined in Section
3.4(b).
"VERITAS GROUP" is defined in the Preamble of Section 3.
"VERITAS IP RIGHTS" is defined in Section 3.15(a).
"VERITAS IP RIGHTS AGREEMENTS" is defined in Section 3.15(c).
"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 OPTIONS" is defined in Section 1.2(b)(i).
"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
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purpose, "treasury stock method" means that the number of shares issuable upon
exercise of all outstanding options and warrants of Newco immediately after the
Effective Time (but excluding any shares issuable upon exchange of TeleBackup
"Exchangeable Shares" (as such term is defined in the TeleBackup Combination
Agreement) or any shares issuable upon exercise of options assumed by Newco in
connection with the TeleBackup Transaction) 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 such outstanding options and
warrants which have exercise prices less than the VERITAS Closing 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 PERMITTED ENCUMBRANCE" means Encumbrances (a) as disclosed as
an Encumbrance in the VERITAS Disclosure Schedule or the VERITAS SEC Documents
filed prior to October 5, 1998, (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 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 PLANS" is defined in Section 1.2(b)(i).
"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 RATIO" is defined in Section 1.2(a).
"VERITAS RESTRICTIVE AGREEMENTS" is defined in Section 3.23.
"VERITAS SEC DOCUMENTS" is defined in Section 3.4(a).
"VERITAS SUBSIDIARY" shall mean any direct or indirect subsidiary of
VERITAS listed on Exhibit 14.15G attached hereto.
"VERITAS STOCK PURCHASE PLAN" is defined in Section 1.2(b)(ii).
"VERITAS STOCK PURCHASE PLAN RIGHTS" is defined in Section 1.2(b)(ii).
"VERITAS STOCKHOLDER APPROVAL" is defined in Section 5.20(b).
"VERITAS STOCKHOLDER REJECTION" is defined in Section 9.1(h).
"VERITAS SURVIVING CORPORATION" is defined in Section 1.8.
"VERITAS WARRANTS" is defined in Section 1.2(b)(i).
"VOTING AGREEMENT" is defined in Section 5.15.
"WARBURG" is Warburg, ▇▇▇▇▇▇ Investors, L.P. a limited partnership.
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
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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.
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IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated 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: By:
----------------------------------- -----------------------------------
President and Chief Executive President and Chief Executive
Officer Officer
VERITAS HOLDING CORPORATION,
a Delaware corporation
By:
-----------------------------------
President
SEAGATE SOFTWARE, INC., SEAGATE SOFTWARE NETWORK &
a Delaware corporation STORAGE MANAGEMENT
GROUP, INC.
a Delaware corporation
By: By:
----------------------------------- -----------------------------------
President and Chief Operating President and Chief Executive
Officer Officer
[SIGNATURE PAGE TO AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION]
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