AGREEMENT AND PLAN OF REORGANIZATION
AMONG
VERITAS HOLDING CORPORATION,
A DELAWARE CORPORATION
VERITAS SOFTWARE CORPORATION,
A DELAWARE CORPORATION
SEAGATE TECHNOLOGY, INC.,
A DELAWARE CORPORATION
SEAGATE SOFTWARE, INC.
A DELAWARE CORPORATION
AND
SEAGATE SOFTWARE NETWORK & STORAGE MANAGEMENT GROUP, INC.
A DELAWARE CORPORATION
OCTOBER 5, 1998
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1. PLAN OF REORGANIZATION........................................................2
1.1 The Organization of Newco and Merger Sub.............................2
1.2 The Merger...........................................................2
1.3 Seagate Transaction..................................................3
1.4 Contribution and Transfer of Contributed Stock and Assets............4
1.5 Dissenter's Rights...................................................7
1.6 Newco Plans..........................................................7
1.7 Registration.........................................................7
1.8 Effects of the VERITAS Merger........................................8
1.9 Tax Free Reorganization..............................................8
1.10 Tax-Free Section 351 Transaction.....................................8
1.11 Hart-Scott-Rodino Filings............................................9
1.12 Adoption of Stockholders Rights Plan.................................9
1.13 Board of Directors and Officers of Newco............................10
1.14 Registration on Form S-4............................................10
2. REPRESENTATIONS AND WARRANTIES OF SSI AND STI................................10
2.1 Organization; Good Standing; Qualification and Power................10
2.2 Capital Structure...................................................12
2.3 Authority...........................................................13
2.4 SEC Documents.......................................................14
2.5 Disclosure; Information Supplied....................................15
2.6 Compliance with Applicable Laws.....................................16
2.7 Litigation..........................................................16
2.8 ERISA and Other Compliance..........................................17
2.9 Absence of Certain Changes or Events................................19
2.10 Full Force and Effect...............................................21
2.11 Agreements..........................................................21
2.12 No Defaults.........................................................23
2.13 Certain Agreements..................................................23
2.14 Taxes...............................................................23
2.15 Intellectual Property...............................................24
2.16 Fees and Expenses...................................................26
2.17 Insurance...........................................................26
2.18 Ownership of Property...............................................26
2.19 Environmental Matters...............................................26
2.20 Interested Party Transactions.......................................27
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2.21 Fairness Opinion....................................................27
2.22 Title to and Condition and Sufficiency of Group Assets..............28
2.23 No Restrictive Agreements...........................................28
2.24 Supplier and Customer Relationships.................................28
2.25 Product and Inventory Status........................................29
3. REPRESENTATIONS AND WARRANTIES OF VERITAS AND NEWCO..........................29
3.1 Organization; Good Standing; Qualification and Power................29
3.2 Capital Structure...................................................30
3.3 Authority...........................................................31
3.4 SEC Documents.......................................................32
3.5 Disclosure; Information Supplied....................................33
3.6 Compliance with Applicable Laws.....................................33
3.7 Litigation..........................................................33
3.8 ERISA and Other Compliance..........................................35
3.9 Absence of Certain Changes or Events................................37
3.10 Full Force and Effect...............................................39
3.11 Agreements..........................................................39
3.12 No Defaults.........................................................40
3.13 Certain Agreements..................................................40
3.14 Taxes...............................................................40
3.15 Intellectual Property...............................................41
3.16 Fees and Expenses...................................................43
3.17 Insurance...........................................................43
3.18 Ownership of Property...............................................43
3.19 Environmental Matters...............................................44
3.20 Interested Party Transactions.......................................44
3.21 Fairness Opinion....................................................44
3.22 Title to and Condition and Sufficiency of VERITAS Assets............45
3.23 No Restrictive Agreements...........................................45
3.24 Supplier and Customer Relationships.................................45
3.25 Product and Inventory Status........................................45
3.26 Tax Representations.................................................46
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4. STI AND SSI COVENANTS........................................................46
4.1 Advice of Changes...................................................46
4.2 Maintenance of Business.............................................46
4.3 Conduct of Business.................................................47
4.4 SSI Corporate Approvals.............................................48
4.5 Letter of SSI's Accountants.........................................48
4.6 Prospectus/Proxy Statement..........................................49
4.7 Regulatory Approvals................................................49
4.8 Necessary Consents..................................................50
4.9 Access to Information...............................................50
4.10 Satisfaction of Conditions Precedent................................50
4.11 No Other Negotiations...............................................50
4.12 Books and Records...................................................52
4.13 Transitional Support................................................52
4.14 Development Agreement and Cross-License Agreement...................52
4.15 Settlement of Intercompany Accounts.................................52
4.16 Modification of Joint Contributed Agreements........................52
4.17 Management Employment Contracts.....................................53
4.18 Stockholder and Registration Rights Agreement.......................53
4.19 Seagate IP Rights...................................................53
5. VERITAS AND NEWCO COVENANTS..................................................53
5.1 Advice of Changes...................................................53
5.2 Maintenance of Business.............................................54
5.3 Conduct of Business.................................................54
5.4 Stockholder Approval................................................55
5.5 Letter of VERITAS' Accountants......................................55
5.6 Prospectus/Proxy Statement..........................................55
5.7 State Securities Law Compliance.....................................56
5.8 Regulatory Approvals................................................57
5.9 Necessary Consents..................................................57
5.10 Access to Information...............................................57
5.11 Books and Records...................................................57
5.12 Transitional Support................................................58
5.13 Development Agreement and Cross License Agreement...................58
5.14 Satisfaction of Conditions Precedent................................58
5.15 Voting Agreement....................................................58
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5.16 Group Employee Plans and Benefit Arrangements.......................58
5.17 Indemnification and Insurance-VERITAS...............................59
5.18 Indemnification and Insurance-Employees.............................61
5.19 Stockholder and Registration Rights Agreement.......................63
5.20 No Other VERITAS Negotiations.......................................63
6. CLOSING MATTERS..............................................................64
6.1 Closing.............................................................64
6.2 Exchange of Certificates............................................65
6.3 Exchange of Exchanged SSI Options...................................67
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SSI AND STI...........................67
7.1 Accuracy of Representations and Warranties..........................67
7.2 Covenants...........................................................67
7.3 Compliance with Law.................................................67
7.4 Consents............................................................67
7.5 Form S-4............................................................67
7.6 Opinion of VERITAS and Newco's Counsel..............................68
7.7 VERITAS Stockholder Approval........................................68
7.8 No Legal Action.....................................................68
7.9 Tax Opinion.........................................................68
7.10 Election of The Contributing Companies Designees
to the Board of Directors of Newco..................................68
7.11 Nasdaq Listing......................................................68
7.12 Incorporation of New Delaware Company...............................69
7.13 HSR Act.............................................................69
7.14 No Order............................................................69
7.15 Ancillary Agreements................................................69
7.16 Stockholder Approval................................................69
7.17 Delivery of Newco Shares............................................69
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF VERITAS AND NEWCO.....................69
8.1 Accuracy of Representations and Warranties..........................70
8.2 Covenants...........................................................70
8.3 Compliance with Law.................................................70
8.4 Consents............................................................70
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8.5 Form S-4............................................................70
8.6 Opinion of Counsel to STI and SSI...................................70
8.7 VERITAS Stockholder Approval........................................70
8.8 SSI Corporate Approvals.............................................71
8.9 No Legal Action.....................................................71
8.10 Tax Opinion.........................................................71
8.11 HSR Act.............................................................71
8.12 No Order............................................................71
8.13 Ancillary Agreements................................................71
8.14 Sufficiency of Assets...............................................71
8.15 Intellectual Property Assignments...................................72
8.16 Modification of Joint Contributed Agreements........................72
9. TERMINATION OF AGREEMENT.....................................................72
9.1 Termination.........................................................72
9.2 Notice of Termination...............................................74
9.3 No Liability........................................................74
9.4 Breakup Fee.........................................................74
10. SURVIVAL OF REPRESENTATIONS..................................................75
10.1 No Survival of Representations......................................75
11. INDEMNIFICATION..............................................................75
11.1 Indemnification by SSI and STI......................................75
11.2 Time Limitations on Indemnification.................................76
11.3 No Limitation on Other Rights.......................................77
12. EMPLOYEE MATTERS.............................................................77
12.1 Right to Offer Employment...........................................77
12.2 Termination of Employment...........................................78
12.3 Cooperation.........................................................78
13. TAX MATTERS..................................................................78
13.1 Transaction Taxes; Representation; Transaction Tax Indemnity........79
13.2 No Limitation.......................................................79
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13.3 Treatment of Indemnity Payments.....................................79
13.4 Indemnity for Taxes.................................................79
13.5 Other Tax Matters...................................................80
13.6 Seagate Transaction Items...........................................84
14. MISCELLANEOUS................................................................85
14.1 Governing Law.......................................................85
14.2 Assignment; Binding Upon Successors and Assigns.....................86
14.3 Severability........................................................86
14.4 Counterparts........................................................86
14.5 Other Remedies......................................................86
14.6 Amendment and Waivers...............................................86
14.7 Expenses............................................................87
14.8 Attorneys' Fees.....................................................87
14.9 Notices.............................................................87
14.10 Construction of Agreement...........................................88
14.11 No Joint Venture....................................................88
14.12 Further Assurances..................................................88
14.13 Absence of Third Party Beneficiary Rights...........................88
14.14 Public Announcement.................................................89
14.15 Certain Defined Terms...............................................89
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Exhibit A - Certificate of Merger
Exhibit A-1 - Restated Certificate of Incorporation
Seagate Disclosure Letter
Veritas Disclosure Letter
Exhibit 4.13 - Term Sheet for Transition Services and Facilities Use Agreement
Exhibit 4.14A - Development Agreement
Exhibit 4.14B - Cross License and OEM Agreement
Exhibit 4.17 - Management Employment Contracts
Exhibit 4.18- Rights Agreement
Exhibit 4.18B - Stockholders Agreement
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Exhibit 5.3(g) - Veritas Holding Corporation Certificate of Incorporation and
Bylaws
Exhibit 5.15A - Voting Agreement
Exhibit 5.15B - Veritas Affiliates who Executed Voting Agreements
Exhibit 5.16 - Management Employment Contracts
Exhibit 14.15D - Group Products
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT") is entered
into as of October 5, 1998, by and among VERITAS Software Corporation, a
Delaware corporation including for all purposes VERITAS Surviving Corporation,
("VERITAS"), VERITAS Holding Corporation, a Delaware corporation ("NEWCO"),
Seagate Technology, Inc., a Delaware corporation ("STI"), Seagate Software,
Inc., a Delaware corporation and majority owned subsidiary of STI ("SSI") and
Seagate Software Network & Storage Management Group, Inc., a Delaware
corporation and wholly owned subsidiary of SSI ("NSMG"). The terms defined in
Section 14.15 of this Agreement shall have the meanings therein specified in
this Agreement.
RECITALS
A. The parties intend that, subject to the terms and conditions of this
Agreement, (i) a new Delaware corporation referred to herein as Newco has been
formed by VERITAS solely for the purpose of the transactions contemplated
hereunder; (ii) a newly formed, wholly owned subsidiary of Newco ("MERGER SUB")
will be merged with and into VERITAS, with VERITAS being the surviving
corporation of such merger (the "MERGER"), and all outstanding VERITAS
securities will be converted, on a share for share basis, into Newco securities
having identical rights, preferences and privileges, with Newco assuming all
outstanding options, warrants, convertible debentures and other rights to
purchase shares of capital stock of VERITAS (with all such Newco securities
issued to former VERITAS security holders initially representing the VERITAS
Percentage Interest in Newco), all on the terms set out in this Agreement and in
the Certificate of Merger substantially in the form of Exhibit A hereto (the
"CERTIFICATE OF MERGER") and the applicable provisions of the Delaware General
Corporation Law (the "DELAWARE LAW"); and (iii) the contribution by SSI, STI and
certain of their subsidiaries as herein specified to Newco, all on the terms
herein specified, of all Contributed Stock of the Contributed Companies (with
each of the Contributed Companies thereby becoming a wholly owned subsidiary of
Newco) and the Contributed Assets in consideration for the issuance by Newco to
SSI of shares of Common Stock of Newco, $0.001 par value ("NEWCO COMMON STOCK"),
and the offer by Newco to grant to Employees who are holders of options in SSI
at the Effective Time (herein "OPTIONEES") options to purchase Newco Common
Stock ("NEWCO OPTIONS") in exchange for cancellation of their respective options
to purchase Common Stock of SSI ("NEWCO EXCHANGE OFFER"), which Newco Common
Stock issued to SSI and Newco Options will represent in the aggregate a fully
diluted equity interest in Newco equal to the difference between 100% and the
VERITAS Percentage Interest. The transactions described in subpart (iii) of the
foregoing sentence are collectively the "SEAGATE TRANSACTION."
B. The Newco Common Stock issued in the Merger and in the Seagate
Transaction and the offered exchange of Newco Options for Exchanged SSI Options
in the Seagate Transaction will be registered under the Securities Act of 1933,
as amended (the "SECURITIES ACT"), pursuant to a Newco registration statement.
C. For federal income tax purposes, it is intended that (i) the Merger
qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code and/or as an
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exchange under the provisions of Section 351(a) of the Internal Revenue Code,
and (ii) that the Seagate Transaction, when taken together with the Merger,
qualify as an exchange under the provisions of Section 351 of the Internal
Revenue Code.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. PLAN OF REORGANIZATION
1.1 The Organization of Newco and Merger Sub. VERITAS has formed Newco
under the laws of the State of Delaware for the purposes of the transactions
contemplated by the Merger and in accordance with the terms of this Agreement.
Newco currently has no outstanding securities and has conducted no business and,
prior to the Effective Time, will not issue any securities prior to the
Effective Time, will conduct no business or operations, will have no assets and
will enter into no agreements nor incur any obligations or Liabilities, except
as required or contemplated by this Agreement or necessary to perform its
obligations hereunder. As soon as practicable after the date of this Agreement,
Newco shall form the Merger Sub as a wholly-owned subsidiary, which will conduct
no business prior to Closing except as expressly contemplated hereunder.
1.2 The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time, VERITAS will cause Merger Sub to execute and deliver, and
VERITAS will execute and deliver, a Certificate of Merger providing for the
Merger of Merger Sub with and into VERITAS, with VERITAS being the surviving
corporation upon the effectiveness of the Merger and thereby becoming a
wholly-owned subsidiary of Newco, pursuant to this Agreement, the Certificate of
Merger and in accordance with applicable provisions of the Delaware Law as
follows:
(a) Conversion of VERITAS Common Stock. Each share of the
Common Stock of VERITAS ("VERITAS COMMON STOCK"), that is issued and outstanding
immediately prior to the Effective Time will by virtue of the Merger and at the
Effective Time, and without any further action on the part of VERITAS, Newco or
any holder of VERITAS Common Stock, be converted into one share (the "VERITAS
EXCHANGE RATIO") of validly issued, fully paid and nonassessable Newco Common
Stock.
(b) Conversion of VERITAS Options, Warrants and other
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
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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 obligor on any such convertible debenture or other convertible
debt instrument. The term, exercisability, vesting schedule, status as an
"incentive stock option" under Section 422 of the Internal Revenue Code, if
applicable, and all other terms and conditions of the VERITAS Options and
VERITAS Warrants and VERITAS Debentures will be unchanged and all references in
any option or warrant or debenture agreement governing such option or warrant or
debenture to VERITAS shall be deemed to refer to Newco, where appropriate.
Continuous service as an employee or consultant with VERITAS or any of the
VERITAS Subsidiaries (as hereinafter defined) or VERITAS predecessors will be
credited to an optionee of VERITAS for purposes of determining the number of
shares of Newco Common Stock subject to exercise under a converted VERITAS
Option after the Closing.
(ii) Stock Rights. At the Effective Time, each of
the then outstanding rights to purchase shares of VERITAS Common Stock
(collectively, the "VERITAS STOCK PURCHASE PLAN RIGHTS"), consisting of all
outstanding options to purchase shares under VERITAS' 1993 Employee Stock
Purchase Plan and 1996 Employee Stock Purchase Plan (the "VERITAS STOCK PURCHASE
PLAN"), will by virtue of the Merger, and without any further action on the part
of any holder thereof, be assumed and converted into a right to purchase the
same number of shares of Newco Common Stock on the next "Purchase Date" (as such
term is defined in the VERITAS Stock Purchase Plan) following the Effective Time
at a purchase price per share determined in accordance with the VERITAS Stock
Purchase Plan.
(c) Cancellation of VERITAS-Owned Shares. Each share of
VERITAS Common Stock held in the treasury of VERITAS or any of which are owned
by Newco, VERITAS, or any direct or indirect wholly-owned subsidiary of Newco,
VERITAS immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
1.3 Seagate Transaction.
(a) Issuance of Newco Common Stock. At the Effective Time and
subject to the terms and conditions of this Agreement, Newco will, in
consideration for the contribution and transfer of the Contributed Stock and
Assets to Newco as contemplated by this Agreement, perform the following:
(i) SSI Stock. Issue to SSI that number of
validly issued, fully paid and nonassessable shares of Newco Common Stock which
represents the SSI Percentage Interest less the number of shares of Newco Common
Stock issuable upon exercise of the Newco Options issued in exchange for
Exchanged SSI Options under clause (ii) below.
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(ii) Exchange of Newco Options for Exchanged SSI
Options. Newco shall offer to issue Newco Options (each representing the right
to purchase validly issued, fully paid and nonassessable Newco Common Stock) to
the Optionees in exchange for cancellation of their Exchanged SSI Options at the
Effective Time, all on the terms specified in this Agreement. At the Effective
Time, each of the options to purchase SSI Common Stock held by any of the
Optionees that elects to exchange for a Newco Option in response to Newco's
option exchange offer made pursuant hereto ("EXCHANGED SSI OPTIONS"), will be
exchanged for a Newco Option to purchase that number of shares of Newco Common
Stock determined by multiplying the number of shares of SSI Common Stock subject
to such Exchanged SSI Option at the Effective Time by the "SSI Exchange Ratio"
(as defined below) at an exercise price per share of Newco Common Stock equal to
the exercise price per share of such Exchanged SSI Option immediately prior to
the Effective Time divided by the SSI Exchange Ratio, rounded up to the nearest
cent. The "SSI EXCHANGE RATIO" shall mean the quotient arrived at by dividing
the SSI Per Share Value by the Newco Per Share Value. The "SSI PER SHARE VALUE"
shall equal (A) the product obtained by multiplying (x) the number of validly
issued, fully paid and nonassessable shares of Newco Common Stock which
represents the SSI Percentage Interest by (y) the VERITAS Closing Price plus (B)
the value of IMG (as determined by the Board of Directors of SSI upon advice of
Morgan Stanley & Co. ("Morgan")) all divided by (C) the total number of
outstanding shares of common stock of SSI on a fully diluted as converted basis
immediately prior to the Effective Time. Newco Per Share Value shall equal the
VERITAS Closing Price. The "VERITAS CLOSING PRICE" shall mean the average
closing price of one share of VERITAS Common Stock for the five (5) most recent
days that VERITAS Common Stock has traded ending on the trading day three (3)
business days prior to the Effective Time, as reported by the Nasdaq Stock
Market. The SSI Exchange Ratio, collectively with the VERITAS Exchange Ratio
shall be referred to herein as the "EXCHANGE RATIOS". If the foregoing
calculation results in a Newco Option issued in exchange for an Exchanged SSI
Option being exercisable for a fraction of a share of Newco Common Stock, then
the number of shares of Newco Common Stock subject to such option will be
rounded down to the nearest whole number of shares, with no cash being payable
for such resulting fractional share. The term, exercisability, vesting schedule,
status as an "incentive stock option" under Section 422 of the Internal Revenue
Code, if applicable, and all other terms and conditions of each Newco Option
shall be the same as that of the Exchanged SSI Option exchanged therefor.
Continuous service as an employee or consultant with SSI, STI or any of their
direct or indirect subsidiaries will be credited to each Optionee for purposes
of determining the number of shares of Newco Common Stock vested and exercisable
under such exchanged Newco Option after the Effective Time.
1.4 Contribution and Transfer of Contributed Stock and Assets.
(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,
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transferred and delivered to Newco, and at the Effective Time Newco shall accept
the contribution and transfer from the Contributing Companies, all right, title
and interest in and to the Contributed Stock and Assets. Specifically, SSI will
transfer and contribute to Newco the Contributed Stock and the Contributing
Companies will transfer and contribute to Newco the Contributed Assets. All
Contributed Assets of STI shall be deemed first contributed by STI to SSI and
only then by SSI to Newco. Notwithstanding the preceding, the parties hereto
agree to transfer the Contributed Assets which are located outside of the United
States in a mutually agreeable manner. For example, SSI contemplates the
formation of a new entity in Australia (which would become a Contributed
Company) which would acquire the Australian Contributed Assets from Seagate
Software Pty. Ltd. Seagate Software Limited, a company organized under the laws
of the United Kingdom and Delaware, will register branches in the countries of
South Africa, Spain and Dubai. Additionally, with respect to Contributed Assets
located in France, Japan, Sweden, and the Netherlands, such Assets may be
purchased and sold by and among the VERITAS and Seagate entities located in such
countries in exchange for the consideration contributed to Newco by SSI (for
which SSI would receive no additional Newco Common Stock beyond the amounts
contemplated by this Agreement). Furthermore, the parties shall cooperate to
facilitate the transfer, to the extent so desired, of employees related to Group
Business in the countries of Singapore and Malaysia.
(b) Assumption and Exclusion of Liabilities.
(i) Assumed Liabilities. As a result of the
transfer to Newco of the Contributed Stock as aforesaid, Newco will as a matter
of law own all of the outstanding equity capital of the Contributed Companies,
which Contributed Companies in turn shall remain liable for their respective
Liabilities. In addition, subject to the terms and conditions of this Agreement,
Newco (or a subsidiary of Newco designated by Newco and acceptable to SSI)
shall, at the Effective Time, assume, and thereafter pay, perform and discharge
when due those (and only those) Liabilities of the Contributing Companies and/or
their direct and indirect subsidiaries (excluding the Liabilities of the
Contributed Company Group which are governed by the first sentence of this
Section 1.4(b)) that are expressly listed in the following subparagraphs of this
Section 1.4(b)(i) (collectively, the "ASSUMED LIABILITIES") and no other
Liabilities of the Contributing Companies whatsoever:
(A) all Liabilities of the Contributing
Companies under all Contributed Contracts;
(B) all Liabilities of the Contributing
Companies that are included in the 1998 Group Balance Sheet or that are listed
on Schedule 1.4(b) (i) (B);
(C) any and all Liabilities of STI, SSI, and
of their respective direct and indirect subsidiaries with respect to Employees
who accept an offer of employment by Newco excluding liabilities subject to
indemnity under Section 11.1(a); and
(D) those Tax liabilities for which Newco is
responsible pursuant to Section 13, below.
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(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. Seagate will take all actions and will
sign and deliver any and all instruments and documents (including the Bill of
Transfer) reasonably necessary or appropriate to fully effect and perfect the
transfer to Newco (or if Newco so elects, any applicable Newco Subsidiary) of
any and all of the Contributed Stock and Assets held by it and any Contributed
Contracts to which it is a Party. This Section 1.4(c) shall survive Closing for
two years.
(d) Unassignable Assets. Notwithstanding any other provision
of this Agreement or any of the Ancillary Agreements, to the extent that any of
the Contributed Assets are not assignable or otherwise transferable by the
Contributing Companies to Newco without the consent, approval or waiver of
another party thereto or any third party (including any governmental agency), or
if such assignment or transfer would constitute a breach thereof or of any other
material contract binding upon the transferor or any of its affiliates, or a
violation of any applicable law, then neither this Agreement nor such Ancillary
Agreements shall constitute an assignment or transfer (or an attempted
assignment or transfer) thereof until such consent, approval or waiver of such
party or parties has been duly obtained. With respect to each such Contributed
Asset, whose assignment or transfer to Newco requires the consent, approval or
waiver of another party thereto or any third party, Newco and SSI shall
cooperate and use their mutual reasonable, commercial efforts to obtain such
consent, approval or waiver of such other party or parties or such third party
to such assignment or transfer as promptly as practicable prior to the Effective
Time; and each agrees to supply relevant information to such party or parties or
such third party in order to facilitate such objective. Notwithstanding the
foregoing, nothing contained herein shall obligate Newco or any Contributing
Company to expend or pay any amount to third parties to obtain any consents,
approvals or waivers, or to make alternative arrangements available; provided
that where the Contributing Companies are unable to effectively assign to Newco
any Contributed Contract without breaching same due to such lack of third party
consent, the Contributing Companies shall make available to Newco the economic
benefits (such as inbound royalty payments), if any, received by the
Contributing Companies from and after the Effective Time with respect to any
such Contributed Contract.
(e) No Fraudulent Conveyance. The Contributing Companies are
not entering into this Agreement or any Ancillary Agreement with the intent to
defraud, delay or hinder their respective creditors and the consummation of the
transactions contemplated by this Agreement, and the Ancillary Agreements
referenced in this Agreement will not have any such effect. The transfer of the
Contributed Stock and Assets pursuant hereto will not give rise to any right of
any creditor of
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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 shareholders have with respect to the
Seagate Transaction.
1.6 Newco Plans. Newco shall assume, effective as of the Closing, the
VERITAS 1993 Equity Incentive Plan, 1993 Director Stock Option Plan and 1993
Employee Stock Purchase Plan and other VERITAS plans and non-plan grants and
awards. as amended through the Effective Time (collectively, the "NEWCO PLANS").
Newco shall reserve a sufficient number of shares of Newco Common Stock for
issuance pursuant to the exchange of Newco Options for Exchanged SSI Options, as
provided for herein.
1.7 Registration. Newco will cause the Newco Common Stock issuable upon
exercise of outstanding awards under the Newco Plans or upon exercise of the
Newco Options issued to the Optionees in exchange for their Exchanged SSI
Options (collectively, the "STOCK RIGHTS") and the shares reserved for issuance
pursuant to future awards under the Newco Plans to be registered on Form S-8
(the "FORM S-8") promulgated by the Securities and Exchange Commission (the
"SEC") within 10 days after the Effective Time and Newco will use its reasonable
best efforts to maintain the effectiveness of such registration statement or
registration statements for so long as any such Stock Rights shall remain
outstanding. With respect to those individuals who subsequent to the Merger will
be subject to the reporting requirements of Section 16(a) of the Exchange Act
(as hereinafter defined), Newco shall administer the Stock Rights (including the
Newco Options issued in exchange for any Exchanged SSI Option) in a manner that
complies with Rule 16b-3 promulgated by the SEC under the Exchange Act.
1.8 Effects of the VERITAS Merger. At the Effective Time: (a) the
separate existence of Merger Sub will cease and Merger Sub will be merged with
and into VERITAS, with VERITAS being the surviving corporation of the Merger
(the "VERITAS SURVIVING CORPORATION"), pursuant to the terms of this Agreement
and the Certificate of Merger; (b) the Certificate of Incorporation of the
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<PAGE> 16
VERITAS Surviving Corporation shall be in the form attached as Exhibit A-1 to
the Certificate of Merger; (c) the Bylaws of VERITAS immediately prior to the
Effective Time will be the Bylaws of the VERITAS Surviving Corporation; (d) the
directors and officers of VERITAS immediately prior to the Effective Time will
be the directors and officers of the VERITAS Surviving Corporation; (e) each
share of the Common Stock of Merger Sub outstanding immediately prior to the
Effective Time will be converted into one share of Common Stock of the VERITAS
Surviving Corporation; (f) each share of VERITAS Common Stock and each VERITAS
Option, VERITAS Warrant, VERITAS Debenture and VERITAS Stock Purchase Plan Right
outstanding immediately prior to the Effective Time will be converted, and each
Exchanged SSI Option elected to be exchanged shall be exchanged, as provided
above in this Section 1; and (g) the Merger will, from and after the Effective
Time, have all of the effects provided by applicable law, including, without
limitation, the Delaware Law.
1.9 Tax Free Reorganization. The parties adopt this Agreement (to the
extent it relates to the Merger) as a plan of reorganization and intend the
Merger to be a tax-free reorganization under Section 368(a)(1)(A) of the
Internal Revenue Code by virtue of the provisions of Section 368(a)(2)(E) of the
Internal Revenue Code . The Newco Common Stock issued in the Merger will be
issued solely in exchange for the VERITAS Common Stock, and no other transaction
other than the Merger represents, provides for or is intended to be an
adjustment to the consideration paid for the VERITAS Common Stock. No
consideration that could constitute "other property" within the meaning of
Section 356(b) of the Internal Revenue Code is being transferred by Newco for
the VERITAS Common Stock in the Merger. The parties shall not take a position on
any tax return inconsistent with this Section 1.9. In addition, Newco hereby
represents, and will represent as of the Effective Time, that it intends to
continue VERITAS' historic businesses or use a significant portion of VERITAS'
business assets in a trade or business.
1.10 Tax-Free Section 351 Transaction. The contribution and transfer of
the Contributed Stock and Assets to Newco in exchange for Newco Common Stock
when taken together with the Merger as contemplated by this Agreement are
intended to constitute a tax-free exchange within the meaning of Section 351(a)
of the Internal Revenue Code and the Newco Common Stock issued therein will be
issued solely in exchange for the Contributed Stock and Assets transferred in
the Seagate Transaction and no consideration that could constitute other
property within the meaning of Internal Revenue Code Section 351(b) is being
transferred by Newco to SSI. The parties shall not take a position on any tax
return inconsistent with this Section 1.10.
1.11 Hart-Scott-Rodino Filings. VERITAS, STI, and Newco will, and
VERITAS shall use its reasonable best efforts to cause Warburg, Pincus
Investors, L.P. ("WARBURG") and Mark Leslie to, as promptly as practicable
prepare and file the applicable notices and forms (if any) required to be filed
by them under the HSR Act or comparable laws of non-U.S. governmental entities,
and comply promptly with any appropriate requests from the Federal Trade
Commission, the United States Department of Justice or any other Governmental
Antitrust Authority for additional information and documentary material. The
parties hereto will not take any action that will have the effect of
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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 Stockholders Rights Plan. Newco will prior to the
Effective Time have adopted a mutually agreed Stockholders Right Agreement.
1.13 Board of Directors and Officers of Newco.
(a) At the Effective Time, Newco will have a staggered Board
of Directors, consisting of three classes, A, B and C, consisting of three, four
and three directors, respectively, with initial terms ending at the annual
meeting of Stockholders held in 1999, 2000 and 2001, respectively. At the
Effective Time, the directors of Newco shall consist of the current VERITAS
directors plus Stephen J. Luczo and Gregory B. Kerfoot, nominees of SSI. In
addition Terence R. Cunningham as an employee of Newco shall also be appointed
to the Board. At the Effective Time, Mark Leslie shall be the Chairman of the
Board of Newco. At the Effective Time, the Class A Directors shall consist of
Gregory B. Kerfoot, Geoffrey Squire and Roel Pieper, the Class B Directors shall
consist of Mark Leslie, Joseph Rizzi, William Janeway and Terence R. Cunningham
and the Class C Directors shall consist of Steven Brooks, Fred van den Bosch and
Stephen J. Luczo.
(b) Officers. At the Effective Time, Mark Leslie shall be the
CEO and Terence Cunningham shall be the President and Chief Operating Officer of
Newco.
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1.14 Registration on Form S-4. The Newco Common Stock to be issued in
the Merger to VERITAS stockholders and the Newco Common Stock to be issued in
the Seagate Transaction to SSI and the exchange of Newco Options for Exchanged
SSI Options shall be registered under the Securities Act on Form S-4 (as
hereinafter defined). As promptly as practicable after the date of this
Agreement, Newco, with the cooperation of VERITAS and SSI, shall prepare and
file with the SEC a Form S-4 registration statement (the "FORM S-4"), together
with the prospectus/joint proxy statement to be included therein (the
"PROSPECTUS/PROXY STATEMENT") and any other documents required by the Securities
Act or the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), in
connection with the Merger and the Seagate Transaction. The transactions
described in the Form S-4 shall be closed as promptly as practicable following
the effective date of the Form S-4, subject to Sections 7 and 8 hereof.
2. REPRESENTATIONS AND WARRANTIES OF SSI AND STI
Except as set forth in the respectively referenced provisions of the
SSI Disclosure Letter delivered by SSI and STI on behalf of themselves and any
other Contributing Companies (collectively, "REPRESENTING SEAGATE ENTITIES") to
VERITAS concurrently herewith and certified by an officer of SSI and STI, on
behalf of all of the Representing Seagate Entities, respectively, to be true,
accurate and complete to the best of his/her knowledge (the "SSI DISCLOSURE
LETTER"), SSI and STI, on behalf of each and all of the Representing Seagate
Entities, hereby represent and warrant to VERITAS that:
2.1 Organization; Good Standing; Qualification and Power. The
Contributed Subsidiaries are all of the subsidiaries of the Contributed
Companies or any of their direct or indirect subsidiaries. Each of the
Contributed Companies and each of the Contributed Subsidiaries and each of the
Contributing Companies is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its formation, has all
requisite corporate power and authority to own, lease and operate any and all of
the Group Assets held by such company and for the Conduct of the Group Business
as now being conducted by such company, and is duly qualified and in good
standing to do business in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification
necessary, other than in such jurisdictions where the failure so to qualify
would not have a Material Adverse Effect on the Group Business. SSI has
delivered to VERITAS or its counsel complete and correct copies of the charter
documents of the Contributed Companies and SSI will deliver to VERITAS or its
counsel prior to the Effective Time the equivalent charter documents of the
Contributed Subsidiaries, in each case as amended through Closing. Except for
the Contributed Subsidiaries, none of the Contributed Companies nor any of the
Contributed Subsidiaries owns, directly or indirectly, any capital stock or
other equity interest of any corporation or has any direct or indirect equity or
ownership interest in any other business, whether organized as a corporation,
partnership, joint venture or otherwise.
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<PAGE> 19
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 stock of the Contributed Companies or
of any of the Contributed Subsidiaries are held by any of them in their treasury
or reserved for issuance upon the exercise of options or warrants. Except as
specified in Section 2.2(a) of the SSI Disclosure Schedule, all outstanding
shares of the capital stock of the Contributed Companies on the date hereof are
set forth in Section 2.2(a) of the SSI Disclosure Letter and are validly issued,
fully paid and nonassessable and free and clear of any Encumbrances and not
subject to preemptive rights under any statute, pursuant to the Certificate of
Incorporation or Bylaws of the Contributed Companies, or pursuant to any
agreement or document to which any of them is a party or by which any of them is
bound. All outstanding shares of the capital stock of each of the Contributed
Subsidiaries are validly issued, fully paid and nonassessable and are owned by a
Contributed Company, or one of the Contributed Subsidiaries, free and clear of
any Encumbrances. SSI has provided VERITAS with a correct and complete list of
each of the options to purchase SSI Common Stock ("SSI OPTIONS") as of September
9, 1998, including the name of the optionees, the plan pursuant to which such
SSI Options were issued (if applicable), the number of shares covered by such
SSI Options, the per share exercise price of such SSI Options, and the vesting
schedule applicable to such SSI Options, including the number of shares vested
as of such date. SSI will provide Newco with an update to such optionee list ten
(10) days prior to the Closing that will reflect any option grants, exercises or
cancellations occurring after the date of signing this Agreement and as of such
date.
(b) No Other Commitments. Except as set forth in Section
2.2(b) of the SSI Disclosure Letter there are no options, warrants, calls,
rights, commitments, conversion rights or agreements of any character to which
the Contributed Companies is a party or by which any of them is bound obligating
them to issue, deliver or sell, or cause to be issued, delivered or sold, any
shares of their capital stock, or securities convertible into or exchangeable
for shares of their capital stock, or obligating any of them to grant, extend or
enter into any such option, warrant, call, right, commitment, conversion right
or agreement. There is no voting trust, proxy or other agreement or
understanding to which STI, SSI, or any of their respective direct or indirect
subsidiaries is a party with respect to the voting of the capital stock of any
member of the Contributed Company Group. All shares of capital stock of any
member of the Contributed Company Group are held free and clear of any
Encumbrances.
(c) Registration Rights. Neither the Contributed Companies nor
the Contributing Companies is under any obligation to register under the
Securities Act any of the presently outstanding securities of the Contributed
Companies, any securities of the Contributed Companies that may be subsequently
issued, which offering would have a Material Adverse Effect on Newco, except as
disclosed in the SSI Disclosure Letter.
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<PAGE> 20
(d) No VERITAS Ownership. None of STI, SSI or any of their
direct or indirect subsidiaries owns, or will own immediately prior to the
Effective Time, any VERITAS Common Stock.
2.3 Authority.
(a) Corporate Action. Subject to approval of this Agreement
and the Ancillary Agreements by SSI's stockholders, each of STI, SSI and NSMG
have all requisite corporate power and authority to enter into this Agreement
and the Ancillary Agreements, to perform their respective obligations hereunder
and thereunder, and to consummate the transactions contemplated by this
Agreement and the Ancillary Agreements. This Agreement and the Ancillary
Agreements have been duly approved by the Boards of Directors of each of them
Contributing Companies and have been duly executed and delivered by STI, SSI and
NSMG and are the valid and binding obligations of STI, SSI and NSMG enforceable
against STI, SSI and NSMG in accordance with their respective terms, except as
enforceability may be limited by bankruptcy and other similar laws and general
principles of equity.
(b) No Conflict. Neither the execution, delivery and
performance of this Agreement and the Ancillary Agreements nor the consummation
of the transactions contemplated hereby or thereby, nor compliance with the
provisions hereof, will (i) conflict with, or result in any violations of, or
cause a default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, amendment, cancellation or acceleration of
any obligation contained in, or the loss of any material benefit under, or
result in the creation of any Encumbrance upon any of the Group Assets or
Contributed Stock under, any term, condition or provision of (x) the Certificate
of Incorporation or Bylaws or equivalent organizational documents of any of the
Contributing Companies or the Contributed Companies or any of the Contributed
Subsidiaries or (y) any of the Contributed Contracts or any other loan or credit
agreement, note, bond, mortgage, indenture, lease or other material agreement,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Contributed Companies, the Contributed Companies' Property, the
Contributed Stock or the Contributed Assets, other than any such conflicts,
violations, defaults, rights or Encumbrances which, individually or in the
aggregate, would not have a Material Adverse Effect on the Group Business; or
(ii) require the affirmative vote of the holders of greater than a majority of
the issued and outstanding capital stock of any member of the Contributing
Companies or any member of the Contributed Company Group.
(c) Consents. Except (i) as set forth in Section 2.3(c) of the
SSI Disclosure Letter; (ii) such filings, authorizations, orders and approvals
as may be required under state takeover laws; (iii) such filings and
notifications as may be necessary under the HSR Act; (iv) the filings,
authorizations, orders, notifications, and approvals contemplated by this
Agreement or the Ancillary Agreements; and (v) such other governmental or third
party consents, filings, authorizations, orders and approvals which if not
obtained or made, would not have a Material Adverse Effect on Newco or have a
material adverse effect on the ability of the Contributing Companies to
consummate the transactions contemplated by this Agreement or the Ancillary
Agreements, no consent, approval,
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<PAGE> 21
order or authorization of, or registration, declaration or filing with, any
governmental entity is required to be obtained by the Contributing Companies or
any member of the Contributed Company Group in connection with the execution and
delivery of this Agreement or the Ancillary Agreements by SSI, STI and NSMG or
the performance of the Contributing Companies and the Contributed Companies of
the respective obligations herein pertaining to such company.
2.4 SEC Documents.
(a) SEC Reports. SSI and STI have delivered to VERITAS or its
counsel correct and complete copies of the final version of each report,
schedule, registration statement and definitive proxy statement filed by SSI
and/or STI with the SEC on or after June 27, 1997 with respect to the Group
Business or the Group Assets (the "SEAGATE SEC DOCUMENTS"), which are the
material documents (other than preliminary material) that SSI and STI were
required to file with the SEC on or after June 27, 1997 with respect to the
Group Business or the Group Assets. As of their respective dates or, in the case
of registration statements, their effective dates, and except as disclosed in
the Seagate SEC Documents, none of the Seagate SEC Documents (including all
exhibits and schedules thereto and documents incorporated by reference therein)
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading as of such time of filing, and there is no requirement under the
Securities Act or the Exchange Act, as the case may be, to have amended any such
filing, except for such 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
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of the date thereof (the "SSI CONSOLIDATED FINANCIAL STATEMENTS BALANCE SHEET
DATE") or (ii) are of a normally recurring nature and were incurred after the
SSI Consolidated Financial Statements Balance Sheet Date in the ordinary course
of business consistent with past practice. All liabilities and valuation
accounts established and reflected in the STI/SSI Consolidated Financial
Statements are, to Seagate's Knowledge, reasonably adequate. At the SSI
Consolidated Financial Statements Balance Sheet Date, there were no material
loss contingencies (as such term is used in Statement of Financial Accounting
Standards No. 5 ("STATEMENT NO. 5") issued by the Financial Accounting Standards
Board in March 1975) arising from the conduct of the business of SSI and its
consolidated subsidiaries which are required to be provided for or disclosed,
but are not provided for or disclosed, in the SSI Consolidated Financial
Statements in accordance with Statement No. 5.
(c) Group Financial Statements; Absence of Undisclosed
Liabilities. Attached hereto as Schedule 2.4(c)(1) are the audited combined
financial statements of the Group Business dated as of July 3, 1998, including a
combined balance sheet as of July 3, 1998 (the "1998 GROUP BALANCE SHEET") and a
combined balance sheet for June 27, 1997, together with combined statements of
operations, cash flows, and Group Business equity for the three years in the
period ended July 3, 1998 (collectively the "GROUP FINANCIAL STATEMENTS"). The
Group Financial Statements comply in all material respects with the then
applicable accounting requirements and rules and regulations of the Securities
and Exchange Commission with respect thereto, and present fairly, in all
material respects, the combined financial position of the Group Business as of
July 3, 1998 and June 27, 1997, and the combined results of its operations and
its cash flows for each of the three years in the period ended July 3, 1998, in
conformity with GAAP. The Contributed Company Group and the Contributing
Companies (with respect to the Group Business) have no Liabilities of 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
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<PAGE> 23
misleading in light of the circumstances under which they were furnished. None
of the information supplied or to be supplied by STI or SSI for inclusion or
incorporation by reference in the Form S-4 and Prospectus/Proxy Statement will,
at the time the information is supplied contain, after giving effect to any
supplement or amendment thereto, any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein in light of the circumstances under which they are made,
not materially misleading.
2.6 Compliance with Applicable Laws. Except as disclosed in the Seagate
SEC Documents filed prior to the date of this Agreement, the Group Business is
not being conducted in violation of any law, ordinance, regulation, rule or
order of any governmental entity where such violation would have a Material
Adverse Effect on the Group Business. Except as disclosed in the Seagate SEC
Documents filed prior to the date of this Agreement, neither SSI, STI, any
Contributing NSMG Company, nor any member of the Contributed Company Group has
been notified in writing by any governmental entity that any investigation or
review with respect to the Contributed Companies or any of the Contributed
Subsidiaries, any of the Group Assets or the Group Business is pending or
threatened, nor has any governmental entity notified any of them in writing of
its intention to conduct the same, which investigation or review could
reasonably be expected to have a Material Adverse Effect on the Group Business.
The Group Assets include all permits, licenses and franchises from governmental
entities required for the Conduct of the Group Business, except for those whose
absence would not have a Material Adverse Effect on the Group Business and then
which would terminate as a consequence of the Seagate Transaction.
2.7 Litigation. Except as would not reasonably be expected to have a
Material Adverse Effect on the Group Business or as set forth in Section 2.7 of
the SSI Disclosure Letter or as disclosed in the Seagate SEC Documents, there is
no suit, action, arbitration, demand, claim or 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
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<PAGE> 24
Assets or the Contributed Stock are subject, including, without limitation,
laws, rules and regulations relating to occupational health and safety, equal
employment opportunities, fair employment practices, and sex, race, religious
and age discrimination. To Seagate's Knowledge, there is no claim, action, suit,
arbitration, mediation, investigation or other proceeding of any nature pending
or, threatened, at law or in equity, by way of arbitration or before any court,
governmental department, commission, board or agency that: (i) may adversely
affect, contest or challenge any party's authority, right or ability to perform
its obligations under this Agreement or any of the Ancillary Agreements; (ii)
challenges or contests the Contributing Companies' or the Contributed Companies'
right, title or ownership of any of the Group Assets or the Contributed Stock or
seeks to impose an Encumbrance (other than a Permitted Encumbrance) on, or a
transfer of title or ownership of, any of the Group Assets or the Contributed
Stock; (iii) asserts that any action taken by any employee, consultant or
contractor of the Contributed Companies or Contributing Companies in connection
with the Group Business infringes or misappropriates any Intellectual Property
Rights of any third party; (iv) seeks to enjoin, prevent or hinder operation of
the Group Business; (v) seeks to enjoin, prevent, or hinder the consummation of
any of the transactions contemplated by this Agreement or any of the Ancillary
Agreements; (vi) would impair or have an adverse affect on Newco's right or
ability to use or exploit any of the Group Assets; (vii) involves or relates to
any potentially material claim against Contributing Companies or the Group
Assets by any creditor thereof; or (viii) involves any claim of fraudulent
conveyance or any similar claim, except in cases (ii), (iii), (iv), (vi) and
(vii) where such proceeding could not reasonably be expected to have a Material
Adverse Effect on Newco.
2.8 ERISA and Other Compliance.
(a) Section 2.8 of the SSI Disclosure Letter lists each
employment, severance, compensation or other similar contract, arrangement or
policy and each plan or arrangement (written or oral) providing for insurance
coverage (including any self-insured arrangements), workers' benefits, vacation
benefits, severance benefits, disability benefits, death benefits,
hospitalization benefits, retirement benefits, deferred compensation,
profit-sharing, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits for employees, consultants or directors
(other than workers compensation, unemployment compensation and other government
mandated programs) which both (A) is entered into, maintained or contributed to,
as the case may be, by any member of the Contributed Company Group or any of the
Contributing Companies, and (B) covers any Employee (collectively as the "GROUP
BENEFIT ARRANGEMENTS"). Each Group Benefit Arrangement maintained by any member
of the Contributed Company Group has been maintained in substantial compliance
with its terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations which are applicable to such Group Benefit
Arrangement except as would not have a Material Adverse Effect on the Group
Business. Section 2.8(a) of the SSI Disclosure Letter also identifies each
"employee benefit plan," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") ("EMPLOYEE BENEFIT PLAN"), in
which any of the Employees participate (collectively, the "GROUP EMPLOYEE
PLANS"). Copies of all Group Benefit
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Arrangements have been made available to VERITAS or its counsel. All
contributions or premiums currently due and payable with respect to any of the
Group Employee Plans have been made as required under ERISA or have been accrued
on the 1998 Group Balance Sheet or will be made prior to the Effective Time.
(b) None of the Employee Benefit Plans maintained by any of
the Contributing Companies or any member of the Contributed Company Group (i) is
a multiemployer plan, within the meaning of Section 3(37) or 4001(a)(3) of ERISA
(a "MULTIEMPLOYER PLAN"), or a single employer pension plan, within the meaning
of Section 4001(a)(15) of ERISA, for which Newco could incur liability 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 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 Companies Group and the Contributing
Companies are in compliance with all applicable laws, agreements and contracts
relating to employment, employment practices, wages, hours, and terms and
conditions of employment (including, but not limited to,
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employee compensation matters) with respect in all such cases to the Employees,
except where the failure to be in compliance would not have a Material Adverse
Effect on Newco.
(f) The Contributed Company Group and the Contributing
Companies have, to Seagate's Knowledge, good labor relations and to Seagate's
Knowledge there are no facts indicating that the consummation of the
transactions contemplated hereby will have a Material Adverse Effect on labor
relations with Employees or that any of the Employees intends to leave its or
their employ, where the same would have a Material Adverse Effect on the Group
Business.
(g) To Seagate's Knowledge, no Employee who is a key developer
of a Group Product is subject to any agreement, obligation, order or other legal
hindrance that impedes or might impede such executive or key employee from
devoting his or her full business time to the affairs of Newco after the
Effective Time.
(h) The Contributed Companies Group and the Contributing
Companies have, to Seagate's Knowledge and with respect only to the Employees,
complied with all laws, rules and regulations relating to the employment of
labor, including provisions thereof relating to wages, hours, equal opportunity,
collective bargaining and the payment of social security and other Taxes, except
where non-compliance would not have a Material Adverse Effect on the Group
Business.
(i) The Contributed Companies are not indebted to any
executive officer or director of such Contributed Company, whether by loan,
advance or otherwise, other than for salaries accrued but not yet payable and
reimbursable out-of-pocket expenses incurred in the ordinary course of business
consistent with past practice and not yet payable, nor, except as described on
Schedule 2.8(i) to the SSI Disclosure Letter is any officer, director, employee
or shareholder so indebted to any of SSI or any of the Contributed Companies,
except as disclosed in the 1998 Group Balance Sheet or the Seagate SEC
Documents, nor does any Employee have any right to force SSI or any Contributing
Company to repurchase any stock.
2.9 Absence of Certain Changes or Events. Except as disclosed in the
Seagate SEC Documents filed prior to the date of this Agreement, since the Group
Balance Sheet Date (i.e., July 3, 1998) there has not occurred:
(a) any change or event which could reasonably be expected to
have a Material Adverse Effect on the Group Business;
(b) any amendments or changes in the Certificate of
Incorporation or Bylaws of any member of the Contributed Company Group;
(c) any damage, destruction or loss to or of the Group Assets
not covered by insurance, which would have a Material Adverse Effect on the
Group Business;
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<PAGE> 27
(d) any redemption, repurchase or other acquisition of shares
of any member of the Contributed Company Group, or any declaration, setting
aside or payment of any dividend or other distribution by any Contributing
Company or any member of the Contributed Company Group to any entity other than
a member of the Contributed Company Group (whether in cash, stock or property)
of the Group Assets or any proceeds generated by the conduct of the Group
Business;
(e) any material increase in or modification of the
compensation or benefits payable, or to become payable, by the Contributed
Companies to the Employees, except in the ordinary course of the business,
consistent with past practice and except as necessary to respond to third party
solicitation of Employees;
(f) other than as required by applicable statute or
governmental regulation, any material increase in or modification of any Group
Benefit Arrangement (including, but not limited to, the granting of stock
options, restricted stock awards or stock appreciation rights) that will become
binding upon Newco upon consummation of the transactions contemplated herein,
for or with respect to any of the Employees, other than (i) in the ordinary
course of the business, consistent with past practice, or to respond to third
party solicitation of Employees and (ii) if after the date of this Agreement,
which is authorized, if required, pursuant to Section 4.3 below;
(g) any sale of a material amount of the Group Assets, or any
acquisition by any member of the Contributed Company Group of a material amount
of assets, other than in the ordinary course of the business, consistent with
past practice;
(h) any alteration in any term of any outstanding capital
stock or rights to acquire capital stock of SSI or any member of the Contributed
Company Group, including, but not limited to, acceleration of the vesting or any
change in the terms of any outstanding stock options;
(i) other than in the ordinary course of business, consistent
with past practice, (A) any incurrence, assumption or guarantee by any member of
the Contributed Company Group of any debt of any person, other than any member
of the Contributed Company Group, for borrowed money in an amount exceeding
$2,500,000 in the aggregate; (B) issuance or sale by any member of the
Contributed Company Group of any securities convertible into or exchangeable for
their respective debt securities; or (C) issuance or sale of options or other
rights to acquire from SSI, STI, or the Contributed Company Group, directly or
indirectly, debt securities of any member of the Contributed Company Group, or
any securities convertible into or exchangeable for any such debt securities;
(j) any creation or assumption by a Contributing Company or a
member of the Contributed Company Group of any Encumbrance (other than Permitted
Encumbrances) on any Group Asset in excess of $2,500,000 individually or in the
aggregate, other than to refinance a liability reflected in the SSI Financial
Statements or the Group Financial Statements in the ordinary course of business;
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(k) any making by any member of the Contributed Company Group
of any loan, advance or capital contribution to or investment in any person
other than to refinance a liability reflected in the SSI Financial Statements or
the Group Financial Statements and other than (i) loans, advances or capital
contributions made in the ordinary course of the business, and (ii) other loans
and advances, where the aggregate amount of any such items outstanding at any
time does not exceed $2,500,000;
(l) any amendment of, relinquishment, termination or
non-renewal by the Contributing Companies or the Contributed Company Group of
any Contributed Contract, other than in the ordinary course of business
consistent with past practice;
(m) any transfer or grant of a right under Intellectual
Property Rights included in the Group Assets, other than those transferred or
granted in the ordinary course of business, consistent with past practice,
except for any grant of a right to source code or grant of any exclusive rights
to any Intellectual Property Rights included in the Group Assets, each of which
shall be set forth in Section 2.09(m) of the SSI Disclosure Letter;
(n) any labor dispute with, or charge of unfair labor practice
by, SSI (relating to Employees) or any member of the Contributed Company Group
(other than routine individual grievances), any activity or proceeding by a
labor union or representative thereof to organize any Employees or, to Seagate's
Knowledge, any campaign being conducted to solicit authorization from Employees
to be represented by such labor union, where such dispute, practice, activity,
proceeding, or campaign would have a Material Adverse Effect on the Group
Business; or
(o) any agreement by any member of the Contributed Company
Group to take any of the actions described in the preceding clauses (a) through
(n) (other than the transactions contemplated by this Agreement or the Ancillary
Agreements); or any change to accounting methods.
2.10 Full Force and Effect. Each of the Contributed Contracts and Group
Governmental Permits is in full force and effect and is not subject to any
breach or default thereunder by any Contributing Company or any member of the
Contributed Company Group or, to Seagate's Knowledge, any other party thereto,
except for those Contributed Contracts and Group Governmental Permits, the
absence of which would not have a Material Adverse Effect on the Group Business.
2.11 Agreements. Section 2.11 of the SSI Disclosure Letter lists all
the contracts as of the date of this Agreement of the type described below to
which any member of the Contributed Company Group is a party and which is
material to the Group Business (herein, the "MATERIAL CONTRIBUTED CONTRACTS")
(and copies of all such Material Contributed Contracts have been identified to
and made available for review by VERITAS or its counsel):
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<PAGE> 29
(a) contract with or commitment to any labor union which would
have a Material Adverse Effect on the Group Business;
(b) continuing contract for the future purchase, sale or
manufacture of products, material, supplies, equipment or services requiring
payment to or from any member of the Contributed Company Group or any
Contributing Company, the non-continuance of which would have a Material Adverse
Effect on the Group Business, or in which any member of the Contributed Company
Group or any Contributing Company has granted or received manufacturing rights,
most favored nations pricing provisions or exclusive marketing rights relating
to the Group Products, other than purchase contracts with vendors who are not
the top ten (10) vendors of any member of the Contributed Company Group or of
any Contributing Companies (as measured by purchases from them in the most
recently ended fiscal year);
(c) contract providing for the development of technology used
or incorporated in any Group Products currently distributed in connection with
the Group Business or which requires any member of the Contributed Company Group
to perform specified development work for a third party, the non-continuance of
which would have a Material Adverse Effect on the Group Business;
(d) joint venture contract or agreement or other agreement
which is reasonably expected to involve a sharing of profits or losses in any
one year in excess of $2,500,000 individually or in the aggregate from any joint
enterprise with any party (other than any member of the Contributed Company
Group);
(e) indenture, mortgage, promissory note, loan agreement,
guarantee or other agreement or commitment for the borrowing of money, for a
line of credit or for a leasing transaction of a type required to be capitalized
in accordance with Statement of Financial Accounting Standards No. 13 of the
Financial Accounting Standards Board (other than those reflected in the SSI
Financial Statements or the Group Financial Statements, or those pursuant to
which payments by any member of the Contributed Company Group will not exceed
$2,500,000 in the aggregate);
(f) agreement or arrangement for the sale of any Group Assets
having a value individually or in the aggregate exceeding $2,500,000 (other than
those entered into in the ordinary course of business consistent with past
practice);
(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
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the Group Business, excluding commercially available, non-customized software
sold at retail or sold at less than $5,000 per license or per seat; or
(i) agreement between or among STI, SSI and any member of the
Contributed Company Group regarding inter-company loans, revenue or cost or Tax
sharing, ownership or license of Seagate IP Rights for Group Products, or
intercompany royalties or dividends.
2.12 No Defaults. Except as disclosed in the Seagate SEC Documents
filed prior to the date of this Agreement, to Seagate's Knowledge, there exists
no event (including closing of the transactions contemplated by this Agreement),
condition or occurrence which, after notice or lapse of time, or both, would
constitute a default by under any Contributed Contract in an manner which would
have a Material Adverse Effect on the Group Business.
2.13 Certain Agreements. Neither the execution and delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby, will, (i) result in any payment in an amount
exceeding $250,000 individually or $2,500,000 in the aggregate (including,
without limitation, severance, unemployment compensation, golden parachute,
bonus or otherwise) becoming due by any member of the Contributed Company Group
(or by any Contributing Company, with respect to the Group Business) or to any
Employee(s) under any Group Benefit Arrangement or otherwise, (ii) increase any
benefits otherwise payable by Newco under any Group Benefit Arrangement by more
than $250,000 individually or $2,500,000 in the aggregate, or (iii) result in
the acceleration of the time of payment or vesting of any such benefits.
2.14 Taxes. The Contributed Companies and, with respect to the Group
Businesses, the Contributing Companies, have filed, or caused to be filed, all
Tax returns required to be filed by them and have paid, or caused to be paid,
all Taxes that are shown on such Tax returns as due and payable, other than such
Taxes as are being contested in good faith and for which adequate liabilities
have been established on the 1998 Group Balance Sheet, other than where the
failure to so file, pay or withhold would not have a Material Adverse Effect on
the Group Business. All Taxes required to have been paid or accrued by the
Contributed Companies and, with respect to the Group Businesses, the
Contributing Companies for all periods prior to the 1998 Group Balance Sheet
have been fully paid (except for Taxes that are adequately provided for or
reflected in the 1998 Group Balance Sheet) except where a failure to do so would
not have a Material Adverse Effect on the Group Business. Since the date of the
1998 Group Balance Sheet, no material Tax liability relating to the Group
Business has been assessed, or is, to Seagate's Knowledge, proposed to be
assessed, incurred or accrued (other than liabilities for Taxes arising in the
ordinary course of business). To Seagate's 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
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<PAGE> 31
Group Business. Any deficiencies asserted or assessments (including interest and
penalties) made as a result of any examination by the Internal Revenue Service
or by appropriate national, state or departmental authorities of the Tax returns
with respect to the Group Business or the Contributed Companies have been fully
paid or are adequately provided for in the 1998 Group Balance Sheet, except
where a failure to do so would not have a Material Adverse Effect on the Group
Business, and, to Seagate's Knowledge, no material proposed (but unassessed)
additional Taxes have been asserted and no Tax liens have been filed with
respect to the Group Business or the Contributed Companies or against any of the
Group Assets other than for Taxes not yet due and payable. None of the members
of the Contributed Company Group (i) has made an election to be treated as a
"consenting corporation" under Section 341(f) of the Internal Revenue Code or
(ii) is a "personal holding company" within the meaning of Section 542 of the
Internal Revenue Code. This representation does not apply to Taxes or Tax
matters relating to Taxes for which Newco and its affiliates are entitled to
indemnification under Section 13 hereof.
2.15 Intellectual Property.
(a) The Contributed Companies and, insofar as it relates to
the Group Business, the Contributing Companies own, or have the right to use,
sell or license such Intellectual Property Rights as are necessary or required
for the Conduct of the Group Business (such Intellectual Property Rights being
hereinafter collectively referred to as the "SEAGATE IP RIGHTS") and such
ownership or rights to use, sell or license are reasonably sufficient for such
conduct of the Group Business, except for any failure to own or have the right
to use, sell or license that would not have a Material Adverse Effect on the
Group Business.
(b) All Seagate IP Rights are owned free and clear of any
Encumbrances (other than Permitted Encumbrances).
(c) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not constitute
a material breach of any material instrument or material agreement in respect of
any Seagate IP Rights licensed by or to any Contributing Company or Contributed
Company (the "SEAGATE IP RIGHTS AGREEMENTS"), will not cause the forfeiture or
termination or give rise to a right of forfeiture or termination of any Seagate
IP Right or materially impair the right of Newco to use, sell or license any
Seagate IP Right or portion thereof (except where such breach, forfeiture,
termination or impairment would not have a Material Adverse Effect on the Group
Business);
(d) There are no royalties, honoraria, fees or other payments
payable by any member of the Contributed Company Group or any Contributing
Company to any person by reason 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.
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(f) To Seagate's Knowledge, (i) neither the manufacture,
marketing, license, sale or intended use of any Group Product violates any
license or agreement relating thereto or infringes any Intellectual Property
Right of any other party, (ii) there is no pending or threatened claim or
litigation contesting the validity, ownership or right to use, sell, license or
dispose of any Seagate IP Right, and (iii) no third party has notified the
Contributing Companies or the Contributed Company Group that any Seagate IP
Right, or the proposed use, sale, license or disposition thereof, conflicts or
will conflict with the rights of any other party, nor is there any basis
therefor, except for any violations, infringements, claims or litigation that
would not have a Material Adverse Effect on the Group Business.
(g) The Contributing Companies and the Contributed Company
Group have taken reasonable and practicable steps designed to safeguard and
maintain the secrecy and confidentiality of, and its proprietary rights in, all
material trade secrets or other confidential information constituting Seagate IP
Rights. To Seagate's Knowledge, no current or prior officers, employees or
consultants of the Contributing Companies or the Contributed Company Group claim
an ownership interest in any Seagate IP Rights as a result of having been
involved in the development of such property while so employed, or retained, or
otherwise. To Seagate's Knowledge, all development employees of the Seagate IP
Rights, and all other officers, employees and consultants of the Contributed
Company Group have executed and delivered an agreement regarding the protection
of proprietary information and the assignment to his/her employer or principal
of the Seagate IP Rights arising from the services performed by such persons,
except where this absence of such agreement would not have a Material Adverse
Effect on the Group Business.
(h) Section 2.15(h) of the SSI Disclosure Letter sets forth
and summarizes each of the Seagate IP Rights as of the date of this Agreement
the absence of which would have a Material Adverse Effect on the Group Business
that a third party owns and that SSI or the Contributed Business Group uses
pursuant to a license, sublicense, agreement or other permission, and describes
and identifies such license, sublicense, agreement or other permission
(excluding shrink wrap licenses to commercially available software sold at
retail). Such license, sublicense, agreement or permission covering the item is
legal, valid, binding, enforceable and in full force and effect and will
continue to be legal, valid, binding, enforceable and in full force and effect
on identical terms to Newco's benefit immediately following the Effective Time,
except where it would not have a Material Adverse Effect on Newco, and such
license, sublicense, agreement or permission does not restrict the ability to
market any material Group Product in any material jurisdiction or with respect
to any material market or industry, and neither SSI nor the Contributed Company
Group is in breach or default of any such license, sublicense, agreement or
permission in a manner which would have a Material Adverse Effect on the Group
Business. No person other than the Contributing Companies holds any license or
other right to manufacture, modify, or create derivative works of any of the
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
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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 Morgan, a copy of which has been provided to
VERITAS (the "MORGAN STANLEY ENGAGEMENT LETTER), no member of the Contributed
Company Group and none of the Contributing Companies has paid or become
obligated to pay any fee or commission to any broker, finder or intermediary in
connection with the transactions contemplated by this Agreement and the
Ancillary Agreements.
2.17 Insurance. The members of the Contributed Company Group maintain
fire and casualty, general liability, business interruption, directors and
officers, product liability and sprinkler and water damage insurance that they
believe to be reasonably prudent for their respective businesses.
2.18 Ownership of Property. Except for Permitted Encumbrances, the
Contributed Company Group and the Contributing Companies own, or at the
Effective Time will own, the Contributed Company Assets, free and clear of all
Encumbrances. All real and personal property included in the Group Assets is
operational and suitable for its intended use, subject to ordinary wear and
tear. To Seagate's Knowledge, no member of the Contributed Company Group is in
violation in any material respect with any zoning, building or safety ordinance,
regulation or requirement or other law or regulation applicable to the operation
of its respective owned or leased properties (the violation of which would have
a Material Adverse Effect on the Group Business ).
2.19 Environmental Matters.
(a) During the period that the Contributed Companies and the
Contributing Companies (with respect to the Group Assets or any real estate
leased thereunder) have leased or owned their respective properties or owned or
operated their respective facilities, there have been, to Seagate's Knowledge,
no disposals, releases or threatened releases of Hazardous Materials on, from,
under or about such properties or facilities which would cause a Material
Adverse Effect on Newco. To Seagate's Knowledge there is no presence, disposals,
releases or threatened releases of Hazardous Materials on, from, under or about
any of such properties or facilities, which may have occurred prior to said
Member of the Contributed Company Group or the Contributing Companies (with
respect to the Group Assets or any real estate leased thereunder) having taken
possession of any of
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such properties or facilities, where such Hazardous Materials would cause a
Material Adverse Effect on the Newco.
(b) None of the properties or facilities which are Group
Assets is or has been the subject of an Environmental Violation, which would
cause a Material Adverse Effect on Newco. During the time that a Member of the
Contributed Company Group or the Contributing Companies (with respect to the
Group Assets or any real estate leased thereunder) owned or leased its
respective properties and facilities, none of said companies and, to Seagate's
Knowledge, no third party, used, generated, manufactured or stored on, under or
about such properties or facilities or transported to or from such properties or
facilities any Hazardous Materials (except those Hazardous Materials associated
with general office use or janitorial supplies) in a manner which would result
in a Material Adverse Effect on Newco.
(c) During the time that any member of the Contributed Company
Group and the Contributing Companies (with respect to the Group Assets or any
real estate leased thereunder) owned or leased its respective properties and
facilities, to Seagate's Knowledge, there has been no litigation brought or
threatened against any such Company, or any settlement reached by any such
Company with, any party or parties concerning the presence, disposal, release or
threatened release of any Hazardous Materials on, from or under any of such
properties or facilities or relating to any alleged Environmental Violation,
except for litigation or settlement which would not have a Material Adverse
Effect on Newco.
2.20 Interested Party Transactions. Except as disclosed in the Seagate
SEC Documents filed prior to the date of this Agreement, no officer or director
of a Contributing Company, or any "affiliate" or "associate" (as those terms are
defined in Rule 405 promulgated under the Securities Act) of a Contributing
Company has, either directly or indirectly, a material interest in: (i) any
person or entity which purchases from or sells, licenses or furnishes to the
Contributed Company Group in connection with the Group Business, any goods,
property, technology or intellectual or other property rights or services; or
(ii) any Contributed Contract; which, in the case of either subpart (i) or (ii)
would have a Material Adverse Effect on the Group Business.
2.21 Fairness Opinion. SSI's Board of Directors has received an opinion
dated as of the date hereof from Morgan to the effect that, as of the date
hereof, the terms of the transactions contemplated by this Agreement and the
Ancillary Agreements are fair to SSI's stockholders from a financial point of
view.
2.22 Title to and Condition and Sufficiency of Group Assets. A Member
of the Contributed Company Group and/or a Contributing Company owns or at the
Closing will own the Group Assets and have good and marketable title thereto,
free and clear of all Encumbrances whatsoever, other than the Permitted
Encumbrances. The Group Assets transferred to Newco constitute all assets,
properties, rights, contracts and Intellectual Property Rights that are
necessary or required for the Conduct of the Group Business, without (i) the
need to purchase, license or acquire any other material asset or property; (ii)
violating any contractual rights of any third party; or
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(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 will be transferred to, Newco free and
clear of all Encumbrances, other than Permitted Encumbrances. Such transfer can
occur without obtaining the consent or approval of any person, except where the
failure to transfer the Group Asset would not have a Material Adverse Effect on
Newco. To the extent that VERITAS is assuming obligations that have an
associated deferred revenue on the 1998 Group Balance Sheet, the cash associated
with such deferred revenue shall be transferred to Newco. At the Closing, the
Contributing Companies will contribute, transfer and deliver to Newco all right,
title and interest in and to all Group Assets, free and clear of all
Encumbrances, other than Permitted Encumbrances. The Group Products includes all
software under development by the Group Business.
2.23 No Restrictive Agreements. Other than this Agreement and the
Ancillary Agreements, neither any Member of the Contributed Company Group nor
SSI nor any of the Group Assets is bound, or materially and adversely affected
by, any judgment, injunction, order, decree, contract, covenant or agreement
(noncompete or otherwise) that restricts or prohibits (or purports to restrict
or prohibit) the Conduct of the Group Business or from competing for the sale of
the Group Products anywhere in the world (including without limitation any
contracts, covenants or agreements restricting the geographic area in which the
Group Business may sell, license, market, distribute or support any Group
Products or restricting the markets, customers or industries that Newco may
address after the Closing in the Conduct of the Group Business (collectively,
"RESTRICTIVE AGREEMENTS"), in a manner, in any of the foregoing cases, which
will have a Material Adverse Effect upon Newco.
2.24 Supplier and Customer Relationships. To Seagate's Knowledge, (i)
the Contributed Company Group has good commercial working relationships with the
customers for the Group Business, and (ii) since January 1, 1998, no customer
of, or supplier to the Group Business has canceled or otherwise terminated any
material relationship concerning the Group Business with the Contributed Company
Group or SSI (with respect to the Group), or materially decreased or limited its
purchases or provision of materials supplied to the Group Business or under any
Material Contributed Contract from the corresponding period in 1997, where any
of the foregoing actions would cause a Material Adverse Effect on the Group
Business, and to Seagate's Knowledge, no customer or supplier has threatened to
take any such action.
2.25 Product and Inventory Status.
(a) Product Quality, Warranty Claims. All Group Products
manufactured, sold, licensed, leased or delivered in connection with the Group
Business conform in all material respects to applicable contractual commitments,
express and implied warranties, and, to Seagate's Knowledge, there is no
material Liability (nor any basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand giving
rise to any material
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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:
3.1 Organization; Good Standing; Qualification and Power. The VERITAS
Subsidiaries are all of the subsidiaries of VERITAS or any of its direct or
indirect subsidiaries. VERITAS and each of the VERITAS Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its formation, has all requisite corporate power and
authority to own, lease and operate the VERITAS Assets and for the Conduct of
the VERITAS Business as now being conducted, and is duly qualified and in good
standing to do business in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification
necessary, other than in such jurisdictions where the failure so to qualify
would not have a Material Adverse Effect on VERITAS. VERITAS has delivered to
SSI or its counsel complete and correct copies of the Certificate of
Incorporation and Bylaws of VERITAS and will deliver to SSI or its counsel prior
to the Effective Time the equivalent charter documents of each VERITAS
Subsidiary, in each case as amended to the date of this Agreement. Except for
the VERITAS Subsidiaries, none of VERITAS nor any of the VERITAS Subsidiaries
owns, directly or indirectly, any capital stock or other equity interest of any
corporation or has any direct or indirect equity or ownership interest in any
other business, whether organized as a corporation, partnership, joint venture
or otherwise.
3.2 Capital Structure.
(a) Stock and Options. The authorized and issued and
outstanding capital stock of VERITAS, the VERITAS Subsidiaries and Newco is set
forth in Section 3.2(a) of the VERITAS Disclosure Letter. Except as specified in
Section 3.2(a) of the VERITAS Disclosure Letter, no
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shares of the capital stock of VERITAS or of any of the VERITAS Subsidiaries was
held by any of them in their treasury or reserved for issuance upon the exercise
of options or warrants. All outstanding shares of the capital stock of VERITAS
are set forth in Section 3.2(a) of the VERITAS Disclosure Letter and are validly
issued, fully paid and nonassessable and not subject to preemptive rights
pursuant to any statute, pursuant to the Certificate of Incorporation or Bylaws
of VERITAS, or pursuant to any agreement or document to which any of them is a
party or by which any of them is bound. All outstanding shares of the capital
stock of each of the VERITAS Subsidiaries are validly issued, fully paid and
nonassessable and are owned by VERITAS, or one of the VERITAS Subsidiaries, free
and clear of any Encumbrances. Section 3.2(a) of the VERITAS Disclosure Letter
contains a correct and complete list of each of the VERITAS Options, VERITAS
Warrants and VERITAS Debentures, including the name of the holders of such
VERITAS Options and VERITAS Warrants, the plan pursuant to which such VERITAS
Options were issued (if applicable), the number of shares covered by such
VERITAS Options, VERITAS Warrants and VERITAS Debentures (or into which it is
convertible), the per share exercise price of such VERITAS Options, VERITAS
Warrants and VERITAS Debentures, and the vesting schedule applicable to such
VERITAS Options, including the number of shares vested as of the date of this
Agreement.
(b) No Other Commitments. Except as set forth in Section
3.3(a) of the VERITAS Disclosure Letter, there are no options, warrants, calls,
rights, commitments, conversion rights or agreements of any character to which
VERITAS or any of its respective direct and indirect subsidiaries, is a party or
by which any of them is bound obligating them to issue, deliver or sell, or
cause to be issued, delivered or sold, any shares of their capital stock, or
securities convertible into or exchangeable for shares of their capital stock,
or obligating any of them to grant, extend or enter into any such option,
warrant, call, right, commitment, conversion right or agreement. There is no
voting trust, proxy or other agreement or understanding to which VERITAS or any
of its respective direct or indirect subsidiaries is a party with respect to the
voting of the capital stock of any member of the VERITAS Group. All shares of
capital stock of any member of the VERITAS Group are held free and clear of any
Encumbrances.
(c) Registration Rights. Neither VERITAS nor any of their
respective subsidiaries is under any obligation to register under the Securities
Act any of its presently outstanding securities or any securities that may be
subsequently issued which offering would have a Material Adverse Effect on
Newco, except as disclosed in the VERITAS Disclosure Letter.
3.3 Authority.
(a) Corporate Action. Subject to approval of this Agreement
and the Ancillary Agreements by the stockholders of VERITAS, VERITAS has all
requisite corporate power and authority to enter into this Agreement and the
Ancillary Agreements, to perform its obligations hereunder and thereunder, and
to consummate the transactions contemplated by this Agreement and the Ancillary
Agreements. This Agreement and the Ancillary Agreements have been duly executed
and delivered by VERITAS and are the valid and binding obligation of VERITAS
enforceable
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against VERITAS in accordance with their terms, except as enforceability may be
limited by bankruptcy and other similar laws and general principles of equity.
(b) No Conflict. Neither the execution, delivery and
performance of this Agreement and the Ancillary Agreements nor the consummation
of the transactions contemplated hereby or thereby nor compliance with the
provisions hereof will (i) conflict with, or result in any violations of, or
cause a default (with or without notice or