CONFORMED COPY
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT dated as of June 22, 1997 between Tandem
Computers Incorporated, a Delaware corporation (the "Company"), and Compaq
Computer Corporation, a Delaware corporation (the "Grantee").
W I T N E S S E T H :
WHEREAS, Company and Grantee are simultaneously with the
execution and delivery of this Agreement entering into a Merger Agreement (the
"Merger Agreement") pursuant to which, among other things, Company will, upon
the terms and subject to the conditions stated therein, merge with a
subsidiary of Grantee; and
WHEREAS, in order to induce Grantee to enter into the Merger
Agreement, Company has agreed to grant to Grantee the Stock Option (as
hereinafter defined), upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and in the Merger Agreement, and for other good and
valuable consideration, the adequacy of which is hereby acknowledged, the
parties hereto agree as follows:
1. Grant of Stock Option. Company hereby grants to Grantee an
irrevocable option (the "Stock Option") to purchase for $22.44 per share
(the "Exercise Price") in cash up to 17,400,000 shares (the "Shares") of
its common stock, $.025 par value (the "Common Stock").
2. Exercise of Stock Option. (a) Grantee may, subject to the
provisions of this Section, exercise the Stock Option, in whole or in part,
at any time or from time to time, after the occurrence of a Trigger Event
and prior to the Termination Date. "Trigger Event" means the occurrence of
an event that will entitle Parent to receive the payment contemplated by
Section 10.04(b) of the Merger Agreement. "Termination Date" means the
earliest to occur of (i) the Effective Time (as defined in the Merger
Agreement); (ii) the date 18 months after the first occurrence of a
Trigger Event; (iii) five years from the date hereof; or (iv) the
termination of the Merger Agreement if, but only if, the Merger Agreement
is terminated for reasons that are not directly or indirectly related to
(x) the commencement of, or any person's direct or indirect indication of
interest inmaking, an Acquisition Proposal (as defined in the Merger
Agreement) or (y) the breach of any provision of Section 5.02(a) or 5.03
thereof. Notwithstanding the occurrence of the Termination Date, Grantee
shall be entitled to purchase shares of Common Stock pursuant to any
exercise of the Stock Option if Grantee exercised the Stock Option prior to
the occurrence of the Termination Date.
(b) Grantee may purchase Shares pursuant to the Stock Option
only if both of the following conditions are satisfied: no preliminary or
permanent injunction or other order, decree or ruling against the sale or
delivery of the Shares issued by any federal or state court of competent
jurisdiction in the United States is in effect at such time and any
applicable waiting period under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 0000 (xxx "XXX Xxx") shall have expired or been terminated at or prior
to such time.
(c) If Grantee wishes to exercise the Stock Option, it shall
do so by giving Company written notice to such effect, specifying the number
of Shares to be purchased and a place and closing date not earlier than one
business day nor later than 10 business days from the date of the notice. If
the closing cannot be consummated on such date because any condition to the
purchase of Shares has not been satisfied or as a result of any restriction
arising under any applicable law or regulation, the closing shall occur five
days (or such earlier time as Grantee may specify) after satisfaction of all
such conditions and the cessation of all such restrictions.
(d) At any closing, (i) Grantee shall make payment to
Company of the aggregate purchase price for the Shares to be purchased by
delivery to Company of a certified, cashier's or bank check payable to the
order of Company or otherwise as mutually agreed and (ii) Company shall
deliver to Grantee a certificate representing the purchased Shares, registered
in the name of Grantee or its designee.
3. Representations and Warranties of Company. Company hereby
represents and warrants to Grantee as follows:
(a) Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. The execution,
delivery and performance by Company of this Agreement and the consummation of
the transactions contemplated hereby are within Company's corporate powers,
have been duly authorized by all necessary corporate action, require no
action by or in respect of, or filing with, any governmental body, agency,
official, except for any filings required to be made under the HSR Act, do
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the certificate of incorporation or by-laws of Company or
of any judgment, injunction, order or decree binding upon Company or any of its
subsidiaries and will not require any consent, approval or notice under and
will not conflict with, or result in the breach or termination of any
provision of or constitute a default (with or without the giving of notice or
the lapse of time or both) under, or allow the acceleration of the performance
of, any material obligation of Company or any of its subsidiaries under, or
result in the creation of a lien, charge or encumbrance upon, any of the
properties, assets or business of Company or any of its subsidiaries under any
indenture, mortgage, deed of trust, lease, licensing agreement, contract,
instrument or other agreement to which Company or any of its subsidiaries is a
party or by which Company or any of its subsidiaries or any of their
respective assets or properties is subject or bound. This Agreement has been
duly executed and delivered by Company and constitutes a valid and binding
agreement of Company.
(b) Except for any filings required to be made under the HSR
Act, Company has taken all necessary corporate and other action to
authorize and reserve and to permit it to issue, and at all times from the
date hereof until such time as the obligation to deliver Shares upon the
exercise of the Stock Option terminates, will have reserved for issuance,
upon any exercise of the Stock Option, the number of Shares subject to the
Stock Option (less the number of Shares previously issued upon any partial
exercise of the Stock Option). All of the Shares to be issued pursuant to
the Stock Option have been duly authorized and, upon issuance and delivery
thereof pursuant to this Agreement, will be duly authorized, validly
issued, fully paid and nonassessable, and shall be delivered free and clear
of all claims, liens, charges, encumbrances and security interest. Shares
issued upon exercise of the Stock Option will not be subject to any
preemptive or similar rights. The Board of Directors of Company has taken
all necessary action to render the Company's Rights Plan inapplicable to
the exercise of the Stock Option.
(c) The representations and warranties of Company contained
in the Merger Agreement are true and correct.
4. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Company that any Shares acquired upon exercise of
the Stock Option will not be sold or otherwise disposed of by Grantee except
in compliance with the Securities Act of 1933, as amended (the "Securities
Act").
5. Adjustment Upon Changes in Capitalization or
Merger. (a) In the event of any change in Company's capital stock by
reason of a stock dividend, split-up, merger, recapitalization,
combination, exchange of shares, or similar transaction, the type and
number of shares or securities subject to the Stock Option, and the
Exercise Price thereof, will be adjusted appropriately, and proper
provision will be made in the agreements governing such transaction, so
that Grantee will receive upon exercise of the Stock Option the number and
class of shares or other securities or property that Grantee would have
received in respect of Common Stock if the Stock Option had been exercised
immediately prior to such event or the record date therefor, as applicable.
Without limiting the parties' relative rights and obligations under the
Merger Agreement, if any additional shares of Common Stock are issued after
the date of this Agreement (other than pursuant to an event described in
the first sentence of this Section), the number of shares of Common Stock
subject to the Stock Option will be adjusted so that, after such issuance,
it equals 15% of the number of shares of Common Stock then issued and
outstanding, without giving effect to any shares subject to or issued
pursuant to the Stock Option.
(b) Without limiting the parties' relative rights and
obligations under the Merger Agreement, in the event that Company enters
into an agreement to consolidate with or merge into any person, other than
Grantee or one of its subsidiaries, and Company will not be the continuing
or surviving corporation in such consolidation or merger, to permit any
person, other than Grantee or one of its subsidiaries, to merge into
Company and Company will be the continuing or surviving corporation, but in
connection with such merger, the shares of Common Stock outstanding
immediately prior to the consummation of such merger will be changed into
or exchanged for stock or other securities of Company or any other person
or cash or any other property, or the shares of Common Stock outstanding
immediately prior to the consummation of such merger will, after such
merger, represent less than 50% of the outstanding voting securities of the
merged company, or to sell or otherwise transfer all or substantially all
of its assets to any person, other than Grantee or one of its subsidiaries,
then, and in each such case, the agreement governing such transaction will
make proper provision so that the Stock Option will, upon the consummation
of any such transaction and upon the terms and conditions set forth herein,
be converted into, or exchanged for, an option with identical terms
appropriately adjusted to acquire the number and class of shares or other
securities or property that Grantee would have received in respect of
Common Stock if the Stock Option had been exercised immediately prior to
such consolidation, merger, sale or transfer or the record date therefor,
as applicable and make any other necessary adjustments.
6. Further Assurances; Remedies. (a) Company agrees to execute
and deliver such other documents and instruments and take such further
actions as may be necessary or appropriate or as Grantee may reasonably
request in order to ensure that Grantee receives the full benefits of this
Agreement. Prior to the Termination Date, Company will refrain from
taking any action which would have the effect of preventing or disabling
Company from delivering the Shares to Grantee upon any exercise of the Stock
Option, or from otherwise performing its obligations under this Agreement.
(b) The parties agree that Grantee would be irreparably
damaged if for any reason Company failed to issue any of the Shares (or
other securities or property deliverable pursuant to Section 5) upon
exercise of the Stock Option or to perform any of its other obligations
under this Agreement, and that Grantee would not have an adequate remedy at
law for money damages in such event. Accordingly, Grantee shall be
entitled to specific performance and injunctive and other equitable relief
to enforce the performance of this Agreement by Company. This provision is
without prejudice to any other rights that Grantee may have against Company
for any failure to perform its obligations under this Agreement.
(c) The Board of Directors of Company shall take such
further action as is requested by Grantee to render the Rights Plan
inapplicable to the exercise of the Stock Option.
7. HSR Filing; Listing of Shares; Notification of Record Dates.
(a) Promptly after the date hereof, and from time to time thereafter if
necessary, Grantee and Company shall each file with the Federal Trade
Commission and the Antitrust Division of the United States Department of
Justice all required pre-merger notification and report forms and other
documents and exhibits required to be filed under the HSR Act to permit the
purchase of the Shares pursuant hereto. Company agrees to use its
reasonable best efforts to assist Grantee in satisfying the condition
described in Section 2(b)(ii).
(b) Promptly after the date hereof, and from time to time
thereafter if necessary, Company will apply to list all of the Shares
subject to the Stock Option on the New York Stock Exchange and will use its
best efforts to obtain approval of such listing as soon as practicable.
(c) Company shall give Grantee at least 10 days' prior
written notice before setting the record date for determining the holders
of record of shares of Common Stock entitled to notice of, or to vote on,
any matter, to receive any dividend or distribution or to participate in
any rights offering or other matter, or to receive any other benefit or
right, with respect to shares of Common Stock.
8. Registration of the Shares. (a) If Grantee requests
Company in writing to register under the Securities Act any of the Shares
purchased by Grantee hereunder, Company will use its best efforts to cause
the offering of the Shares so specified in such request to be registered as
soon as practicable so as to permit the sale or other distribution by
Grantee of the Shares specified in its request (and to keep such
registration in effect for a period of at least 90 days), and in connection
therewith prepare and file as promptly as reasonably possible (but in no
event later than 60 days from receipt of Grantee's request) a registration
statement under the Securities Act to effect such registration on an
appropriate form, which would permit the sale of the Shares by Grantee in
the manner specified by Grantee in its request. Company shall not be
obligated to make effective more than three registration statements
pursuant to the foregoing sentence.
(b) Company shall notify Grantee in writing not less than 10
days prior to filing a registration statement under the Securities Act
(other than a filing on Form S-4 or S-8) with respect to any Common Stock.
If Grantee wishes to have any portion of its Shares included in such
registration statement, it shall advise Company in writing to that effect
within two business days following receipt of such notice, and Company will
thereupon include the number of Shares indicated by Grantee under such
Registration Statement.
(c) Any registration statement prepared and filed under this
Section 8 and any sale covered thereby, will be at Company's expense except
for underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto. In connection with any
registration pursuant to this Section 8, Company and Grantee will provide
each other and any underwriter of the offering with customary
representations, warranties, covenants, indemnification, and contribution
in connection with such registration.
9. Miscellaneous. (a) Amendments. This Agreement may not
be modified, amended, altered or supplemented, except upon the execution
and delivery of a written agreement executed by the parties hereto.
(b) Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly received if so given) by delivery in
person or by cable, telegram or telex (with copies by registered or
certified mail, postage prepaid, return receipt requested), to the
respective parties as follows:
To Grantee:
J. Xxxxx Xxxxxxx, Esq.
Senior Vice President
General Counsel & Secretary
Compaq Computer Corporation
00000 XX 000
Xxxxxxx, XX 00000
Fax: 000-000-0000
with a copy to:
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxxxxxx Xxxxx
To Company:
Xxxx Xxxxxx
Chief Executive Officer
Tandem Computers Incorporated
00000 Xxxxxx Xxxxxxx
Xxxxxxxxx, XX 00000-0000
and
Xxxxxxxxx X. Xxxxx
Vice President, General Counsel
& Secretary
00000 X. Xxxxxx Xxxxxx, XXX 000-00
Xxxxxxxxx, XX
Fax: 000-000-0000
with a copy to:
Xxxxxxxx & Xxxxxxxx LLP
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx
Xxxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx
or to such other address as either party may have furnished to
the other in writing in accordance herewith, except that notices of change of
address shall only be effective upon receipt.
(c) Severability. If any term, provision, covenant or
restriction of this Agreement is held to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
(d) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
(e) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be an original, but all of which
together shall constitute one and the same agreement.
(f) Headings. The section headings herein are for
convenience only and shall not affect the construction hereof.
(g) Assignment. This Agreement shall be binding upon each
party hereto and such party's successors and assigns. This Agreement shall
not be assignable by Company, except by operation of law, but may be
assigned by Grantee in whole or in part to any affiliate of Grantee.
(h) Survival. All representations, warranties and covenants
contained herein shall survive the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby, except as
otherwise provided herein.
(i) Time of the Essence. The parties agree that time shall
be of the essence in the performance of obligations hereunder.
IN WITNESS WHEREOF, Company and Grantee have caused this
Agreement to be duly executed as of the day and year first above written.
TANDEM COMPUTERS
INCORPORATED
By: /s/ Xxxx Xxxxxx
--------------------------
Xxxx Xxxxxx
Vice Chairman and
Chief Executive Officer
COMPAQ COMPUTER CORPORATION
By: /s/ Xxxxxxx Xxxxxxxx
--------------------------
Xxxxxxx Xxxxxxxx
President and Chief
Executive Officer
