Exhibit (c)(2)
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT dated as of June 10, 1997 (the "Agreement") is
entered into by and between NetFRAME Systems Incorporated, a Delaware
corporation ("Target"), and Micron Electronics, Inc., a Minnesota corporation
("Acquiror"). Capitalized terms used in this Agreement but not defined herein,
and other terms defined in the Merger Agreement (as defined below) and used in
this Agreement but not defined herein, shall have the meanings ascribed thereto
in the Merger Agreement (as defined below).
RECITALS
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WHEREAS, concurrently with the execution and delivery of this Agreement,
Acquiror, Target and Xxxxxxx Acquisition Corporation, a Delaware corporation and
a wholly-owned subsidiary of Acquiror ("Merger Sub"), are entering into an
Agreement and Plan of Merger (the "Merger Agreement"), which provides that,
among other things, upon the terms and subject to the conditions thereof,
Acquiror and Merger Sub will make a tender offer (the "Offer") for shares of
Common Stock of Target, and, following consummation of such Offer, Merger Sub
will be merged with and into Target (the "Merger"); and
WHEREAS, as a condition to Acquiror's willingness to enter into the Merger
Agreement, Acquiror has requested that Target agree, and Target has so agreed,
to grant to Acquiror an option to acquire shares of Target's Common Stock,
$0.001 par value, upon the terms and subject to the conditions set forth herein;
AGREEMENT
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NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and in the Merger Agreement and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
1. Grant of Option. Target hereby grants to Acquiror an irrevocable
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option (the "Option") to acquire up to a number of shares of the Common Stock,
$0.001 par value, of Target ("Target Shares") equal to 19.9% of the issued and
outstanding shares as of the first date, if any, upon which an Exercise Event
(as defined in Section 1(a) below) shall occur (the "Option Shares"), in the
manner set forth below (i) by paying cash at a price of $1.00 per share (the
"Exercise Price") and/or, at Acquiror's election, (ii) by exchanging therefor
shares of the Common Stock, par value $0.01 per share, of Acquiror ("Acquiror
Shares") at a rate (the "Exercise Ratio"), for each Option Share, of a number of
Acquiror Shares equal to the Exercise Price divided by the closing sale price of
Acquiror Shares on the Nasdaq National Market for the trading day immediately
preceding the date of the Closing (as defined below) of the particular Option
exercise.
2. Exercise of Option; Maximum Proceeds.
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(a) For all purposes of this Agreement, an "Exercise Event" shall have
occurred (i) immediately prior to the earlier of (A) the failure of the Board of
Directors of Target or any committee thereof to recommend the Offer, the Merger
or the Merger Agreement, including any
failure to include such recommendation in the Schedule 14D-9, or its resolution
to that effect, (B) the withdrawal or modification by the Board of Directors of
Target or any committee thereof (including without limitation by amendment of
the Company's Schedule 14D-9), in a manner adverse to Acquiror or Merger Sub,
of the approval or recommendation by such Board or committee of the Offer, the
Merger or the Merger Agreement, or resolution to take such action, (C) the
approval or recommendation of any takeover proposal by the Board of Directors
of Target or any committee thereof, or resolution to take such action, (D) the
redemption or amendment of the Rights Agreement by the Board of Directors of
Target or any committee thereof after the Target has received a takeover
proposal, or resolution to take such action, (E) the execution by the Company
of an agreement (other than a Confidentiality Agreement) with respect to any
Superior Proposal in accordance with Section 5.2(b) of Merger Agreement or
resolution of the Board of Directors of Target or any committee thereof to do
so or (F) the failure, upon a request of Acquiror, to reaffirm Target's
approval or recommendation of the Offer, the Merger or the Merger Agreement,
within two business days after such request is made, or resolution to that
effect, (ii) immediately prior to the consummation of a tender or exchange
offer by a person other than Acquiror for 50% or more of any class of Target's
capital stock, or (iii) immediately prior to the time at which all of the
events specified in Section 6.8(b)(x) and (y) of the Merger Agreement shall
have occurred.
(b) Acquiror may deliver to Target a written notice (an "Exercise
Notice") specifying that it wishes to exercise and close a purchase of Option
Shares upon the occurrence of an Exercise Event and specifying the total number
of Option Shares it wishes to acquire and the form of consideration to be paid
(i) at any time following such time as the Board of Directors of Target shall
have taken any of the actions described in Section 2(a)(i) hereof, (ii) upon
the commencement of a tender or exchange offer by a person other than Acquiror
for 50% or more of any class of Target's capital stock (and/or during any time
which such a tender or exchange offer remains open or has been consummated) or
(iii) at any time following the occurrence of each of the events specified in
Section 6.8(b)(x) and (y) of the Merger Agreement (the events specified in
clauses (i), (ii) or (iii) of this sentence being referred to herein as a
"Conditional Exercise Event"). At any time after delivery of an Exercise
Notice, unless such Exercise Notice is withdrawn by Acquiror, the closing of a
purchase of Option Shares (a "Closing") specified in such Exercise Notice shall
take place at the principal offices of Target upon the occurrence of an
Exercise Event or at such later date prior to the termination of the Option as
may be designated by Acquiror in writing. In the event that no Exercise Event
shall occur prior to termination of the Option, such Exercise Notice shall be
void and of no further force and effect.
(c) The Option shall terminate upon the earliest of (i) the
consummation of the Offer for, and purchase of shares representing, in excess
of 50% of the outstanding Common Stock of Target, (ii) 12 months following the
termination of the Merger Agreement pursuant to Article VIII thereof if a
Conditional Exercise Event shall have occurred on or prior to the date of such
termination, and (iii) the date on which the Merger Agreement is terminated if
no Conditional Exercise Event shall have occurred on or prior to such date of
termination; provided, however, that if the Option is exercisable but cannot
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be exercised by reason of any applicable government order or because the
waiting period related to the issuance of the Option Shares under the HSR Act
shall not have expired or been terminated, then the Option shall not terminate
until the tenth business day after such impediment to exercise shall have been
removed or shall have become final and not subject to appeal. Notwithstanding
the foregoing, the Option may not be exercised if (i) Acquiror
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shall have breached in any material respect any of its covenants or agreements
contained in the Merger Agreement or (ii) the representations and warranties of
Acquiror contained in the Merger Agreement shall not have been true and correct
in all material respects on and as of the date when made.
(d) If Acquiror receives in the aggregate pursuant to Section 6.8(b)
of the Merger Agreement together with proceeds in connection with any sales or
other dispositions of Option Shares or this Option (by virtue of Section 7
hereof or otherwise) and any dividends received by Acquiror declared on Option
Shares, more than the sum of (x) $1.5 million plus (y) the Exercise Price
multiplied by the number of Target Shares purchased by Acquiror pursuant to the
Option, then all proceeds to Acquiror in excess of such sum shall be remitted
by Acquiror to Target.
3. Conditions to Closing. The obligation of Target to issue Option Shares
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to Acquiror hereunder is subject to the conditions that (a) any waiting period
under the HSR Act applicable to the issuance of the Option Shares hereunder
shall have expired or been terminated; (b) all material consents, approvals,
orders or authorizations of, or registrations, declarations or filings with, any
Federal, state or local administrative agency or commission or other Federal,
state or local governmental authority or instrumentality, if any, required in
connection with the issuance of the Option Shares hereunder shall have been
obtained or made, as the case may be; and (c) no preliminary or permanent
injunction or other order by any court of competent jurisdiction prohibiting or
otherwise restraining such issuance shall be in effect. It is understood and
agreed that at any time during which Acquiror shall be entitled to deliver to
Target an Exercise Notice, the parties will use their respective best efforts to
satisfy all conditions to Closing, so that a Closing may take place as promptly
as practicable, and in any event, upon the occurrence of an Exercise Event.
4. Closing. At any Closing, (a) Target shall deliver to Acquiror a single
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certificate in definitive form representing the number of Target Shares
designated by Acquiror in its Exercise Notice, such certificate to be registered
in the name of Acquiror and to bear the legend set forth in Section 10 hereof,
against delivery of (b) payment by Acquiror to Target of the aggregate purchase
price for the Target Shares so designated and being purchased by delivery of (i)
a certified check or bank check and/or, at Acquiror's election, (ii) a single
certificate in definitive form representing the number of Acquiror Shares being
issued by Acquiror in consideration therefor (based on the Exercise Ratio), such
certificate to be registered in the name of Target and to bear the legend set
forth in Section 10 hereof.
5. Representations and Warranties of Target. Target represents and
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warrants to Acquiror that (a) Target is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder; (b) the execution and delivery of this Agreement by
Target and consummation by Target of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Target and
no other corporate proceedings on the part of Target are necessary to authorize
this Agreement or any of the transactions contemplated hereby; (c) this
Agreement has been duly executed and delivered by Target and constitutes a
legal, valid and binding obligation of Target and, assuming this Agreement
constitutes a legal, valid and binding obligation of Acquiror, is enforceable
against Target in accordance with its terms, except as enforceability may be
limited by bankruptcy and
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other laws affecting the rights and remedies of creditors generally and general
principles of equity; (d) except for any filings required under the HSR Act,
Target has taken all necessary corporate and other action to authorize and
reserve for issuance and to permit it to issue upon exercise of the Option, and
at all times from the date hereof until the termination of the Option will have
reserved for issuance, a sufficient number of unissued Target Shares for
Acquiror to exercise the Option in full and will take all necessary corporate
or other action to authorize and reserve for issuance all additional Target
Shares or other securities which may be issuable pursuant to Section 9(a) upon
exercise of the Option, all of which, upon their issuance and delivery in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable; (e) upon delivery of the Target Shares and any other
securities to Acquiror upon exercise of the Option, Acquiror will acquire such
Target Shares or other securities free and clear of all material claims, liens,
charges, encumbrances and security interests of any kind or nature whatsoever,
excluding those imposed by Acquiror; (f) the execution and delivery of this
Agreement by Target do not, and the performance of this Agreement by Target
will not, (i) violate the Certificate of Incorporation or Bylaws of Target,
(ii) conflict with or violate any order applicable to Target or any of its
subsidiaries or by which they or any of their property is bound or affected or
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give rise to
any right of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or encumbrance on any property or assets of Target or
any of its subsidiaries pursuant to, any contract or agreement to which Target
or any of its subsidiaries is a party or by which Target or any of its
subsidiaries or any of their property is bound or affected, except, in the case
of clauses (ii) and (iii) above, for violations, conflicts, breaches, defaults,
rights of termination, amendment, acceleration or cancellation, liens or
encumbrances which would not, individually or in the aggregate, have a Material
Adverse Effect on Target; (g) the execution and delivery of this Agreement by
Target does not, and the performance of this Agreement by Target will not,
require any consent, approval, authorization or permit of, or filing with, or
notification to, any Governmental Entity except pursuant to the HSR Act; and
(h) any Acquiror Shares acquired pursuant to this Agreement will not be
acquired by Target with a view to the public distribution thereof and Target
will not sell or otherwise dispose of such shares in violation of applicable
law or this Agreement.
6. Representations and Warranties of Acquiror. Acquiror represents and
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warrants to Target that (a) Acquiror is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Minnesota and has
the corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder; (b) the execution and delivery of this Agreement by
Acquiror and the consummation by Acquiror of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Acquiror and no other corporate proceedings on the part of Acquiror are
necessary to authorize this Agreement or any of the transactions contemplated
hereby; (c) this Agreement has been duly executed and delivered by Acquiror and
constitutes a legal, valid and binding obligation of Acquiror and, assuming this
Agreement constitutes a legal, valid and binding obligation of Target, is
enforceable against Acquiror in accordance with its terms, except as
enforceability may be limited by bankruptcy and other laws affecting the rights
and remedies of creditors generally and general principles of equity; (d) except
for any filings required under the HSR Act, Acquiror has taken (or will in a
timely manner take) all necessary corporate and other action in connection with
any exercise of the Option; (e) upon delivery of the Acquiror Shares to Target
in consideration of any acquisition of Target Shares pursuant hereto, Target
will acquire such Acquiror Shares free and clear of all material claims, liens,
charges, encumbrances and security interests of any kind or
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nature whatsoever, excluding those imposed by Target; (f) the execution and
delivery of this Agreement by Acquiror do not, and the performance of this
Agreement by Acquiror will not, (i) violate the Certificate of Incorporation or
Bylaws of Acquiror, (ii) conflict with or violate any order applicable to
Acquiror or any of its subsidiaries or by which they or any of their property
is bound or affected or (iii) result in any breach of or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give rise to any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the property or assets of Acquiror or any of its subsidiaries pursuant to, any
contract or agreement to which Acquiror or any of its subsidiaries is a party
or by which Acquiror or any of its subsidiaries or any of their property is
bound or affected, except, in the case of clauses (ii) and (iii) above, for
violations, conflicts, breaches, defaults, rights of termination, amendment,
acceleration or cancellation, liens or encumbrances which would not,
individually or in the aggregate, have a Material Adverse Effect on Acquiror;
(g) the execution and delivery of this Agreement by Acquiror does not, and the
performance of this Agreement by Acquiror will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity except pursuant to the HSR Act; and (h) any Target Shares
acquired upon exercise of the Option will not be acquired by Acquiror with a
view to the public distribution thereof and Acquiror will not sell or otherwise
dispose of such shares in violation of applicable law or this Agreement.
7. Certain Rights.
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(a) Acquiror Put. Acquiror may deliver to Target a written notice (a
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"Put Notice") at any time during which Acquiror may deliver an Exercise Notice
specifying that it wishes to sell the Option, to the extent not previously
exercised, at the price set forth in subparagraph (i) below (as limited by
subparagraph (iii) below), and the Option Shares, if any, acquired by Acquiror
pursuant thereto, at the price set forth in subparagraph (ii) below (as limited
by subparagraph (iii) below) (the "Put"). At any time after delivery of a Put
Notice, unless such Put Notice is withdrawn by Acquiror, the closing of the Put
(the "Put Closing") shall take place at the principal offices of Target upon
the occurrence of an Exercise Event or at such later date prior to the
termination of the Option as may be designated by Acquiror in writing. In the
event that no Exercise Event shall occur prior to termination of the Option,
such Put Notice shall be void and of no further force and effect.
(i) The difference between the "Market/Tender Offer Price" for
Target Shares as of the date Acquiror gives notice of its intent to exercise
its rights under this Section 7(a) (defined as the higher of (A) the highest
price per share offered as of such date pursuant to any takeover proposal which
was made prior to such date and not terminated or withdrawn as of such date and
(B) the highest closing sale price of Target Shares on the Nasdaq National
Market during the 20 trading days ending on the trading day immediately
preceding such date) and the Exercise Price, multiplied by the number of Target
Shares purchasable pursuant to the Option, but only if the Market/Tender Offer
Price is greater than the Exercise Price. For purposes of determining the
highest price offered pursuant to any takeover proposal which involves
consideration other than cash, the value of such consideration shall be equal
to the higher of (x) if securities of the same class of the proponent as such
consideration are traded on any national securities exchange or by any
registered securities association, a value based on the closing sale price or
asked price for such securities on their principal trading market on such date
and (y) the value ascribed to such
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consideration by the proponent of such takeover proposal or if no such value is
ascribed, a value determined in good faith by the Board of Directors of Target.
(ii) The Exercise Price paid by Acquiror for Target Shares
acquired pursuant to the Option plus the difference between the Market/Tender
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Offer Price and such Exercise Price (but only if the Market/Tender Offer Price
is greater than the Exercise Price) multiplied by the number of Target Shares
so purchased. If Acquiror issued Acquiror Shares in connection with any
exercise of the Option, the Exercise Price in connection with such exercise
shall be calculated as set forth in the last sentence of Section 1 as if
Acquiror had exercised its right to pay cash instead of issuing Acquiror
Shares.
(iii) Notwithstanding subparagraphs (i) and (ii) above,
pursuant to this Section 7 Target shall not be required to pay Acquiror in
excess of an aggregate of (x) $1.5 million plus (y) the Exercise Price paid by
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Acquiror for Target shares acquired pursuant to the Option minus (z) any
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amounts paid to Acquiror by Target pursuant to Section 6.8(b) of the Merger
Agreement.
(b) Redelivery of Acquiror Shares. If Acquiror has acquired Target
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Shares pursuant to exercise of the Option by the issuance and delivery of
Acquiror Shares, then Target shall, if so requested by Acquiror, in fulfillment
of its obligation pursuant to the first clause of Section 7(a)(ii) with respect
to the Exercise Price paid in the form of Acquiror Shares only, redeliver the
certificate(s) for such Acquiror Shares to Acquiror, free and clear of all
claims, liens, charges, encumbrances and security interests of any kind or
nature whatsoever, other than those imposed by Acquiror.
(c) Payment and Redelivery of Option or Shares. At the Put Closing,
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Target shall pay the required amount to Acquiror in immediately available funds
(and Acquiror Shares, if applicable) and Acquiror shall surrender to Target the
Option and the certificates evidencing the Target Shares purchased by Acquiror
pursuant thereto, and Acquiror shall represent and warrant that such shares are
then free and clear of all claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever, other than those imposed by Target.
(d) Target Call. If Acquiror has acquired Option Shares pursuant to
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exercise of the Option (the date of any Closing relating to any such exercise
herein referred to as an "Exercise Date") and no takeover proposal with respect
to Target has been consummated at any time after the date of this Agreement and
prior to the date one year following such Exercise Date (nor has Target entered
into a definitive agreement or letter of intent with respect to such a takeover
proposal which agreement or letter of intent remains in effect at the end of
such year), then, at any time after the date one year following such Exercise
Date and prior to the date 18 months following such Exercise Date, Target may
require Acquiror, upon delivery to Acquiror of written notice, to sell to Target
any Target Shares held by Acquiror as of the day that is ten business days after
the date of such notice, up to a number of shares equal to the number of Option
Shares acquired by Acquiror pursuant to exercise of the Option in connection
with such Exercise Date. The per share purchase price for such sale (the
"Target Call Price") shall be equal to the Exercise Price, plus an amount equal
to seven percent (7.0%) of the Exercise Price per annum, compounded annually,
since the applicable Exercise Date, less any dividends paid on the Target Shares
to be purchased by Target pursuant to this Section 7(d). The closing of any
sale of Target Shares pursuant to this Section 7(d) shall take place at the
principal offices of Target at a time and on a
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date designated by Target in the aforementioned notice to Acquiror, which date
shall be no more than 20 and no less than 12 business days from the date of
such notice. The Target Call Price shall be paid in immediately available
funds, provided that, in the event Acquiror has acquired Option Shares pursuant
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to exercise of the Option by issuance and delivery of Acquiror Shares, at the
option of Target, the Target Call Price for part or all of any purchase of
Target Shares pursuant to this Section 7(d), up to a number of such shares
equal to the number of Option Shares acquired by Acquiror by issuance and
delivery of Acquiror Shares, shall be paid by delivery of a number of Acquiror
Shares equal to the Target Call Price divided by the closing sale price of
Acquiror Shares on the Nasdaq National Market for the trading day immediately
preceding the date of the Exercise Date on which the Option Shares to be
purchased by Target pursuant to this Section 7(d) were originally issued to
Acquiror.
(e) Restrictions on Transfer. Until the termination of the Option,
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Target shall not sell, transfer or otherwise dispose of any Acquiror Shares
acquired by it pursuant to this Agreement.
8. Registration Rights.
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(a) Following the termination of the Merger Agreement, each party
hereto (a "Holder") may by written notice (a "Registration Notice") to the
other party (the "Registrant") request the Registrant to register under the
Securities Act all or any part of the shares acquired by such Holder pursuant
to this Agreement (the "Registrable Securities") in order to permit the sale or
other disposition of such shares by Holder; provided, however, that any such
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Registration Notice must relate to at least 100,000 shares of Common Stock of
the Registrant (as adjusted for splits, etc.) and that any rights to require
registration hereunder shall terminate with respect to any shares that may be
sold pursuant to Rule 144(k) under the Securities Act. The Registrant shall
have the option exercisable by written notice delivered to the Holder within
ten business days after the receipt of the Registration Notice, irrevocably to
agree to purchase all or any part of the Registrable Securities for cash at a
price (the "Option Price") equal to the product of (i) the number of
Registrable Securities so purchased and (ii) the per share average of the
closing sale prices of the Registrant's Common Stock on the Nasdaq National
Market for the 20 trading days immediately preceding the date of the
Registration Notice. Any such purchase of Registrable Securities by the
Registrant hereunder shall take place at a closing to be held at the principal
executive offices of the Registrant or its counsel at any reasonable date and
time designated by the Registrant in such notice within ten business days after
delivery of such notice. The payment for the shares to be purchased shall be
made by delivery at the time of such closing of the Option Price in immediately
available funds.
(b) If the Registrant does not elect to exercise its option to
purchase pursuant to Section 8(a) with respect to all Registrable Securities,
the Registrant shall use all reasonable efforts to effect, as promptly as
practicable, the registration under the Securities Act of the unpurchased
Registrable Securities requested to be registered in the Registration Notice;
provided, however, that (i) neither party shall be entitled to more than an
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aggregate of two effective registration statements hereunder and (ii) the
Registrant will not be required to file any such registration statement during
any period of time (not to exceed 40 days after a Registration Notice in the
case of clause (A) below or 90 days after a Registration Notice in the case of
clauses (B) and (C) below) when (A) the Registrant is in possession of material
non-public information which it reasonably believes would be detrimental to be
disclosed at such time and, in the written opinion
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of counsel to such Registrant, such information would have to be disclosed if a
registration statement were filed at that time; (B) such Registrant is required
under the Securities Act to include audited financial statements for any period
in such registration statement and such financial statements are not yet
available for inclusion in such registration statement; or (C) such Registrant
determines, in its reasonable judgment, that such registration would interfere
with any financing, acquisition or other material transaction involving the
Registrant. If consummation of the sale of any Registrable Securities pursuant
to a registration hereunder does not occur within 180 days after the filing
with the SEC of the initial registration statement therefor, the provisions of
this Section 8 shall again be applicable to any proposed registration, it being
understood that neither party shall be entitled to more than an aggregate of
two effective registration statements hereunder. The Registrant shall use all
reasonable efforts to cause any Registrable Securities registered pursuant to
this Section 8 to be qualified for sale under the securities or blue sky laws
of such jurisdictions as the Holder may reasonably request and shall continue
such registration or qualification in effect in such jurisdictions; provided,
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however, that the Registrant shall not be required to qualify to do business in,
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or consent to general service of process in, any jurisdiction by reason of this
provision.
(c) The registration rights set forth in this Section 8 are subject
to the condition that the Holder shall provide the Registrant with such
information with respect to such Holder's Registrable Securities, the plan for
distribution thereof, and such other information with respect to such Holder
as, in the reasonable judgment of counsel for the Registrant, is necessary to
enable the Registrant to include in a registration statement all material facts
required to be disclosed with respect to a registration thereunder.
(d) A registration effected under this Section 8 shall be effected at
the Registrant's expense, except for underwriting discounts and commissions and
the fees and expenses of counsel to the Holder, and the Registrant shall
provide to the underwriters such documentation (including certificates,
opinions of counsel and "comfort" letters from auditors) as are customary in
connection with underwritten public offerings and as such underwriters may
reasonably require. In connection with any registrations, the Holder and the
Registrant agree to enter into an underwriting agreement reasonably acceptable
to each such party, in form and substance customary for transactions of this
type with the underwriters participating in such offering.
(e) Indemnification.
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(i) The Registrant will indemnify the Holder, each of its
directors and officers and each person who controls the Holder within the
meaning of Section 15 of the Securities Act, and each underwriter of the
Registrant's securities, with respect to any registration, qualification or
compliance which has been effected pursuant to this Agreement, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a 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 any violation by the Registrant of any rule or
regulation promulgated under the
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Securities Act applicable to the Registrant in connection with any such
registration, qualification or compliance, and the Registrant will reimburse
the Holder and, each of its directors and officers and each person who controls
the Holder within the meaning of Section 15 of the Securities Act, and each
underwriter for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, provided that the Registrant will not be liable in
any such case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission or
alleged untrue statement or omission, made in reliance upon and in conformity
with written information furnished to the Registrant by such Holder or director
or officer or controlling person or underwriter seeking indemnification.
(ii) The Holder will indemnify the Registrant, each of its
directors and officers and each underwriter of the Registrant's securities
covered by such registration statement and each person who controls the
Registrant within the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged statement) of a material fact contained in such registration statement,
prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by
the Holder of any rule or regulation promulgated under the Securities Act
applicable to the Holder in connection with any such registration,
qualification or compliance, and will reimburse the Registrant, such directors,
officers or control persons or underwriters for any legal or any other expenses
reasonably incurred in connection with investigating, preparing or defending
any such claim, loss, damage, liability or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Registrant by the
Holder for use therein, provided that in no event shall any indemnity under
this Section 8(e) exceed the gross proceeds of the offering received by the
Holder.
(iii) Each party entitled to indemnification under this Section
8(e) (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party (whose approval shall not be unreasonably withheld), and the
Indemnified Party may participate in such defense at such party's expense;
provided, however, that the Indemnifying Party shall pay such expense if
-------- -------
representation of the Indemnified Party by counsel retained by the Indemnifying
Party would be inappropriate due to actual or potential differing interests
between the Indemnified Party and any other party represented by such counsel
in such proceeding, and provided further that the failure of any Indemnified
-------- -------
Party to give notice as provided herein shall not relieve the Indemnifying
Party of its obligations under this Section 8(e) unless the failure to give
such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action. No Indemnifying Party, in the defense of any such claim or
litigation shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
9
litigation. No Indemnifying Party shall be required to indemnify any
Indemnified Party with respect to any settlement entered into without such
Indemnifying Party's prior consent (which shall not be unreasonably withheld).
9. Adjustment Upon Changes in Capitalization; Rights Plans.
-------------------------------------------------------
(a) In the event of any change in the Target Shares by reason of stock
dividends, stock splits, reverse stock splits, mergers (other than the Merger),
recapitalizations, combinations, exchanges of shares and the like, the type and
number of shares or securities subject to the Option, the Exercise Ratio and the
Exercise Price shall be adjusted appropriately, and proper provision shall be
made in the agreements governing such transaction so that Acquiror shall
receive, upon exercise of the Option, the number and class of shares or other
securities or property that Acquiror would have received in respect of the
Target Shares if the Option had been exercised immediately prior to such event
or the record date therefor, as applicable.
(b) The Board of Directors of Target shall have duly authorized and
approved the amendment to Target's Rights Agreement to exclude Acquiror and its
Affiliates and Associates from the definition of "Acquiring Person" therein,
with respect to, among other things, the beneficial ownership of shares of
Target Common Stock which Acquiror, or its Affiliates and Associates, have
acquired or have the right to acquire pursuant to this Agreement. Target shall
take any and all action necessary to ensure that (i) such amendment is executed
by the Company and the Rights Agent and becomes effective within five days of
the date hereof, (ii) neither Acquiror, nor its Affiliates or Associates,
becomes an "Acquiring Person" as a result of Acquiror's rights or actions under
this Agreement and (iii) a "Distribution Date" as defined therein, does not
occur as a result of Acquiror's rights or actions under this Agreement.
10. Restrictive Legends. Each certificate representing Option Shares
-------------------
issued to Acquiror hereunder, and each certificate representing Acquiror Shares
delivered to Target at a Closing, shall include a legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
11. Listing and HSR Filing. Target, upon the request of Acquiror, shall
----------------------
promptly file an application to list the Target Shares to be acquired upon
exercise of the Option for quotation on the Nasdaq National Market and shall use
its best efforts to obtain approval of such listing as soon as practicable.
Acquiror, upon the request of Target, shall promptly file an application to list
the Acquiror Shares issued and delivered to Target pursuant to Section 1 for
quotation on the Nasdaq National Market and shall use its best efforts to obtain
approval of such listing as soon as practicable. Promptly after the date
hereof, each of the parties hereto shall promptly file with the Federal Trade
Commission and the Antitrust Division of the United States Department of Justice
all required premerger notification and report forms and other documents and
exhibits required to be filed under the HSR Act to permit the acquisition of the
Target Shares subject to the Option at the earliest possible date.
12. Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the parties hereto and their respective successors and permitted
assigns. Nothing contained in this
10
Agreement, express or implied, is intended to confer upon any person other than
the parties hereto and their respective successors and permitted assigns any
rights or remedies of any nature whatsoever by reason of this Agreement. Any
shares sold by a party in compliance with the provisions of Section 8 shall,
upon consummation of such sale, be free of the restrictions imposed with
respect to such shares by this Agreement and any transferee of such shares
shall not be entitled to the rights of such party. Certificates representing
shares sold in a registered public offering pursuant to Section 8 shall not be
required to bear the legend set forth in Section 10.
13. Specific Performance. The parties recognize and agree that if for any
--------------------
reason any of the provisions of this Agreement are not performed in accordance
with their specific terms or are otherwise breached, immediate and irreparable
harm or injury would be caused for which money damages would not be an adequate
remedy. Accordingly, each party agrees that in addition to other remedies the
other party shall be entitled to an injunction restraining any violation or
threatened violation of the provisions of this Agreement. In the event that any
action shall be brought in equity to enforce the provisions of the Agreement,
neither party will allege, and each party hereby waives the defense, that there
is an adequate remedy at law.
14. Entire Agreement. This Agreement and the Merger Agreement (including
----------------
the appendices thereto) constitute the entire agreement between the parties with
respect to the subject matter hereof and supersede all other prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof.
15. Further Assurances. Each party will execute and deliver all such
------------------
further documents and instruments and take all such further action as may be
necessary in order to consummate the transactions contemplated hereby.
16. Validity. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. In
the event any Governmental Entity of competent jurisdiction holds any provision
of this Agreement to be null, void or unenforceable, the parties hereto shall
negotiate in good faith and shall execute and deliver an amendment to this
Agreement in order, as nearly as possible, to effectuate, to the extent
permitted by law, the intent of the parties hereto with respect to such
provision.
17. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Target, to:
NetFRAME Systems Incorporated
0000 Xxxxxx Xxxx
Xxxxxxxx, XX 00000
Attn: President and Chief Executive Officer
Fax: (000) 000-0000
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with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxx X. Xxxxxxx, Esq.
Xxxxx Xxxxxx, Esq.
(b) if to Acquiror, to:
Micron Electronics, Inc.
000 Xxxx Xxxxxxx Xxxx
Xxxxx, Xxxxx 00000
Attn: President and Chief Executive Officer
Fax: (000) 000-0000
with a copy to:
Fenwick & West LLP
Two Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. XxXxxxxx, Esq.
Xxxxx X. Xxxxx, Esq.
18. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State.
19. Counterparts. This Agreement may be executed in two counterparts,
------------
each of which shall be deemed to be an original, but both of which, taken
together, shall constitute one and the same instrument.
20. Expenses. Except as otherwise expressly provided herein or in the
--------
Merger Agreement, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
21. Amendments; Waiver. This Agreement may be amended by the parties
------------------
hereto and the terms and conditions hereof may be waived only by an instrument
in writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
22. Assignment. Neither of the parties hereto may sell, transfer, assign
----------
or otherwise dispose of any of its rights or obligations under this Agreement or
the Option created hereunder to any other person, without the express written
consent of the other party, except that the rights and obligations hereunder
shall inure to the benefit of and be binding upon any successor of a party
hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first
above written.
NetFRAME Systems Incorporated
By: /s/ XXXXXX X. XXXXXX
---------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President and Chief Executive Officer
Micron Electronics, Inc.
By: /s/ T. XXXX XXXX
---------------------------------------------
Name: T.Xxxx Xxxx
Title: Executive Vice President and
Chief Financial Officer
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