Merger Agreement between Hewlett-Packard and Compaq Computer

AGREEMENT AND PLAN OF REORGANIZATION

 

BY AND AMONG

 

HEWLETT-PACKARD COMPANY,

 

HELOISE MERGER CORPORATION

 

 AND

 

 COMPAQ COMPUTER CORPORATION

 

 Dated as of September 4, 2001

 

 

TABLE OF CONTENTS

Article I            THE MERGER

      1.1              The Merger
      1.2              Effective Time; Closing
      1.3              Effect of the Merger
      1.4              Certificate of Incorporation and Bylaws
      1.5              Directors and Officers
      1.6              Effect on Capital Stock
      1.7              Surrender of Certificates
      1.8              No Further Ownership Rights in Compaq Common Stock
      1.9              Lost, Stolen or Destroyed Certificates
      1.10            Tax Consequences
      1.11            Further Action
 

Article II            REPRESENTATIONS AND WARRANTIES OF COMPAQ

      2.1              Organization; Standing and Power; Charter Documents; Subsidiaries
      2.2              Capital Structure
      2.3              Authority; Non-Contravention; Necessary Consents
      2.4              SEC Filings; Financial Statements
      2.5              Absence of Certain Changes or Events
      2.6              Taxes
      2.7              Intellectual Property
      2.8              Compliance; Permits
      2.9              Litigation
      2.10            Brokers' and Finders' Fees
      2.11            Transactions with Affiliates
      2.12            Employee Benefit Plans
      2.13            Environmental Matters
      2.14            Contracts
      2.15            Disclosure
      2.16            Board Approval
      2.17            Fairness Opinion
      2.18            Rights Plan
      2.19            Takeover Statutes
 

Article III           REPRESENTATIONS AND WARRANTIES OF HP AND MERGER SUB

      3.1              Organization; Standing and Power; Charter Documents; Subsidiaries
      3.2              Capital Structure
      3.3              Authority; Non-Contravention; Necessary Consents
      3.4              SEC Filings; Financial Statements
      3.5              Absence of Certain Changes or Events
      3.6              Taxes
      3.7              Intellectual Property
      3.8              Compliance; Permits
      3.9              Litigation
      3.10            Brokers' and Finders' Fees
      3.11            Employee Benefit Plans
      3.12            Environmental Matters
      3.13            Contracts
      3.14            Disclosure
      3.15            Board Approval
      3.16            Fairness Opinion
      3.17            Rights Plan
 

Article IV          CONDUCT PRIOR TO THE EFFECTIVE TIME

      4.1              Conduct of Business
 

Article V           ADDITIONAL AGREEMENTS

      5.1              Prospectus/Proxy Statement; Registration Statement
      5.2              Meetings of Stockholders; Board Recommendation.
      5.3              Acquisition Proposals
      5.4              Confidentiality; Access to Information; No Modification of Representations,     
                        Warranties or Covenants
      5.5              Public Disclosure
      5.6              Regulatory Filings; Reasonable Efforts
      5.7              Notification of Certain Matters
      5.8              Third-Party Consents 
      5.9              Equity Awards and Employee Benefits
     5.10             Form S-8
     5.11             Indemnification
     5.12             Board of Directors and Executive Officers of HP
     5.13             NYSE and PCX Listings
     5.14             Compaq Affiliates; Restrictive Legend
     5.15             Treatment as Reorganization
     5.16             Rights Plans
     5.17             Section 16 Matters
     5.18             Merger Sub Compliance
     5.19             Conveyance Taxes
 

Article VI          CONDITIONS TO THE MERGER

       6.1             Conditions to the Obligations of Each Party to Effect the Merger
       6.2             Additional Conditions to the Obligations of Compaq
       6.3             Additional Conditions to the Obligations of HP
 

Article VII         TERMINATION, AMENDMENT AND WAIVER

         7.1           Termination
         7.2           Notice of Termination; Effect of Termination
         7.3           Fees and Expenses
         7.4           Amendment
         7.5           Extension; Waiver
 

Article VIII        GENERAL PROVISIONS

         8.1           Non-Survival of Representations and Warranties
         8.2           Notices
         8.3           Interpretation; Knowledge
         8.4           Counterparts
         8.5           Entire Agreement; Third-Party Beneficiaries
         8.6           Severability
         8.7           Other Remedies; Specific Performance
         8.8           Governing Law
         8.9           Rules of Construction
         8.10         Assignment
         8.11         Waiver of Jury Trial

 

 

AGREEMENT AND PLAN OF REORGANIZATION

 

This AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT") is made and entered into as of September 4, 2001, by and among Hewlett-Packard Company, a Delaware corporation ("HP"), Heloise Merger Corporation, a Delaware corporation and direct wholly-owned subsidiary of HP ("MERGER SUB"), and Compaq Computer Corporation, a Delaware corporation ("COMPAQ").

 

RECITALS

 

      A. The respective Boards of Directors of HP, Merger Sub and Compaq have deemed it advisable and in the best interests of their respective corporations and stockholders that HP and Compaq consummate the business combination and other transactions provided for herein in order to advance their respective long-term strategic business interests.

 

      B. The respective Boards of Directors of HP, Merger Sub and Compaq have approved, in accordance with applicable provisions of the laws of the state of  Delaware ("DELAWARE LAW"), this Agreement and the transactions contemplated hereby, including the Merger (as defined in Section 1.1).

 

      C. The Board of Directors of HP has resolved to recommend to its stockholders approval of the issuance of shares of HP Common Stock (as defined in Section 1.6(a)) in connection with the Merger (the "STOCK ISSUANCE").  

 

      D. The Board of Directors of Compaq has resolved to recommend to its stockholders approval and adoption of this Agreement and approval of the Merger.

 

      E. HP, as the sole stockholder of Merger Sub, has approved and adopted this Agreement and approved the Merger.

 

      F. HP, Merger Sub and Compaq desire to make certain representations, warranties and agreements in connection with the Merger and also to prescribe certain conditions to the Merger.

 

      G. For United States federal income tax purposes, the parties intend that the Merger qualify as a reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "CODE"), and the parties intend, by executing this Agreement, to adopt a plan of reorganization within the meaning of Section 354(a) of the Code.

 

NOW, THEREFORE, in consideration of the covenants, promises and  representations set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

ARTICLE I

THE MERGER

 

      1.1 THE MERGER. At the Effective Time (as defined in Section 1.2) and subject to and upon the terms and conditions of this Agreement and the applicable provisions of Delaware Law, Merger Sub shall be merged with and into Compaq (the "MERGER"), the separate corporate existence of Merger Sub shall cease and Compaq shall continue as the surviving corporation. Compaq, as the  surviving corporation after the Merger, is hereinafter sometimes referred to as the "SURVIVING CORPORATION."                                                    

 

      1.2 EFFECTIVE TIME; CLOSING. Subject to the provisions of this Agreement, the parties hereto shall cause the Merger to be consummated by filing a Certificate of Merger with the Secretary of State of the State of Delaware in accordance with the relevant provisions of Delaware Law (the "CERTIFICATE OF MERGER") (the time of such filing with the Secretary of State of the State of Delaware (or such later time as may be agreed in writing by Compaq and HP and specified in the Certificate of Merger) being the "EFFECTIVE TIME") as soon as practicable on or after the Closing Date (as defined below). The closing of the Merger (the "CLOSING") shall take place at the offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation, located at 650 Page Mill Road, Palo Alto, California, at a time and date to be specified by the parties, which shall be no later than the second business day after the satisfaction or waiver of the conditions set forth in Article VI, or at such other time, date and location as the parties hereto agree in writing (the "CLOSING DATE").

 

      1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger shall be as provided in this Agreement and the applicable provisions of Delaware Law.

 

      1.4 CERTIFICATE OF INCORPORATION AND BYLAWS.  At the Effective Time, the Certificate of Incorporation of Compaq shall be amended and restated in its entirety to be identical to the Certificate of Incorporation of Merger Sub, as in effect immediately prior to the Effective Time, until thereafter amended in accordance with Delaware Law and as provided in such Certificate of Incorporation; PROVIDED, HOWEVER, that at the Effective Time, Article I of the Certificate of Incorporation of the Surviving Corporation shall be amended and restated in its entirety to read as follows: "The name of the corporation is Compaq Computer Corporation." At the Effective Time, the Bylaws of Compaq shall be amended and restated in their entirety to be identical to the Bylaws of Merger Sub, as in effect immediately prior to the Effective Time, until thereafter amended in accordance with Delaware Law and as provided in such Bylaws. 

 

      1.5 DIRECTORS AND OFFICERS. The initial directors of the Surviving Corporation shall be the directors of Merger Sub immediately prior to the Effective Time, until their respective successors are duly elected or appointed and qualified. The initial officers of the Surviving Corporation shall be the officers of Merger Sub immediately prior to the Effective Time, until their respective successors are duly appointed.

 

      1.6 EFFECT ON CAPITAL STOCK. Subject to the terms and conditions of this Agreement, at the Effective Time, by virtue of the Merger and without any action on the part of HP, Merger Sub, Compaq or the holders of any shares of capital stock of Compaq, the following shall occur:

 

            (a) COMPAQ COMMON STOCK. Each share of the Common Stock, par value $0.01 per share, of Compaq (together with the associated Compaq Right (as defined in Section 2.2(a)) under the Compaq Rights Agreement (as defined in Section 2.2(a)) ("COMPAQ COMMON STOCK") issued and outstanding immediately prior to the Effective Time, other than any shares of Compaq Common Stock to be canceled pursuant to Section 1.6(c), will be canceled and extinguished and automatically converted (subject to Section 1.6(f)) into the right to receive 0.6325 of a validly issued, fully paid and nonassessable share (the "EXCHANGE RATIO") of the Common Stock, par value $0.01 per share, of HP (together with any associated HP Right (as defined in Section 3.2(a)) under the HP Rights Agreement (as defined in Section 3.2(a)) ("HP COMMON STOCK") upon surrender of the certificate representing such share of Compaq Common Stock in the manner provided in Section 1.7 (or in the case of a lost, stolen or destroyed certificate, upon delivery of an affidavit (and bond, if required) in the manner provided in Section 1.9).

 

            (b) REPURCHASE RIGHTS. If any shares of Compaq Common Stock outstanding immediately prior to the Effective Time are unvested or are subject to a repurchase option, risk of forfeiture or other condition under any applicable restricted stock purchase agreement or other agreement with Compaq, then the shares of HP Common Stock issued in exchange for such shares of Compaq Common Stock will also be unvested and subject to the same repurchase option, risk of forfeiture or other condition, and the certificates representing such shares of HP Common Stock may accordingly be marked with appropriate legends.  Compaq shall take all action that may be necessary to ensure that, from and after the Effective Time, the Surviving Corporation is entitled to exercise any  such repurchase option or other right set forth in any such restricted stock purchase agreement or other agreement.

 

            (c) CANCELLATION OF TREASURY AND HP OWNED STOCK. Each share of Compaq Common Stock held by Compaq or HP or any direct or indirect wholly-owned Subsidiary of Compaq or of HP immediately prior to the Effective Time shall be canceled and extinguished without any conversion thereof.

 

            (d) CAPITAL STOCK OF MERGER SUB. Each share of common stock, par value $0.01, of Merger Sub (the "MERGER SUB COMMON STOCK") issued and outstanding prior immediately to the Effective Time shall be converted into one validly issued, fully paid and nonassessable shares of common stock, par value $0.01 per share, of the Surviving Corporation.

 

            (e) STOCK OPTIONS; EMPLOYEE STOCK PURCHASE PLANS. At the Effective Time, all Compaq Options (as defined in Section 2.2(b)) outstanding under each Compaq Stock Option Plan (as defined in Section 2.12(a) hereof) shall be assumed by HP in accordance with Section 5.9. Rights outstanding under Compaq's Employee Stock Purchase Plan and any other employee stock purchase plan of Compaq (collectively, the "COMPAQ PURCHASE PLANS") shall be treated as set forth in Section 5.9(c).

 

(f) FRACTIONAL SHARES. No fraction of a share of HP Common Stock will be issued by virtue of the Merger, but in lieu thereof each holder of shares of Compaq Common Stock who would otherwise be entitled to a fraction of a share of HP Common Stock (after aggregating all fractional shares of HP Common Stock that otherwise would be received by such holder) shall, upon surrender of such holder's Certificate(s) (as defined in Section 1.7(c)), receive from HP an amount of cash (rounded to the nearest whole cent), without interest, equal to the product of: (i) such fraction, multiplied by (ii) the average closing price of one share of HP Common Stock for the ten (10) most recent trading days that HP Common Stock has traded ending on the trading day one day prior to the Effective Time, as reported on the New York Stock Exchange, Inc. ("NYSE") Composite Transactions Tape.

 

(g) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be adjusted to reflect fully the appropriate effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into HP Common Stock or Compaq Common Stock), reorganization, recapitalization, reclassification or other like change with respect to HP Common Stock or Compaq Common Stock having a record date on or after the date hereof and prior to the Effective Time.

 

      1.7 SURRENDER OF CERTIFICATES.

 

(a) EXCHANGE AGENT. HP shall select Computershare Investor Services LLC or another institution reasonably satisfactory to Compaq to act as the exchange agent (the "EXCHANGE AGENT") in the Merger.

 

(b) HP TO PROVIDE COMMON STOCK. Promptly after the Effective Time, HP shall enter into an agreement with the Exchange Agent, reasonably satisfactory to Compaq, which shall provide that HP shall make available to the Exchange Agent for exchange in accordance with this Article I, the shares of HP Common Stock issuable pursuant to Section 1.6(a) in exchange for outstanding shares of Compaq Common Stock. In addition, HP shall make available as necessary from time to time after the Effective Time as needed, cash in an amount sufficient for payment in lieu of fractional shares pursuant to Section 1.6(f) and any dividends or distributions which holders of shares of Compaq Common Stock may be entitled pursuant to Section 1.7(d). Any cash and HP Common Stock deposited with the Exchange Agent shall hereinafter be referred to as the "EXCHANGE FUND."  ...