-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, JDBaF5IZ0qziZlIrMyIJIo7cnfgzJblAUyWS5HNyVakzKAQLv4vJgeZlyBBZjENc 0lN+ltWZmtTckVILcg2Now== 0000950109-95-000152.txt : 19950608 0000950109-95-000152.hdr.sgml : 19950608 ACCESSION NUMBER: 0000950109-95-000152 CONFORMED SUBMISSION TYPE: SC 14D9 PUBLIC DOCUMENT COUNT: 18 FILED AS OF DATE: 19950127 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: PYRAMID TECHNOLOGY CORP CENTRAL INDEX KEY: 0000714865 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPUTERS [3571] IRS NUMBER: 942781589 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC 14D9 SEC ACT: 1934 Act SEC FILE NUMBER: 005-37353 FILM NUMBER: 95503528 BUSINESS ADDRESS: STREET 1: 3860 N FIRST ST CITY: SAN JOSE STATE: CA ZIP: 95134 BUSINESS PHONE: 4084288000 MAIL ADDRESS: STREET 1: 3860 N FIRST STREET CITY: SAN JOSE STATE: CA ZIP: 95134 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: PYRAMID TECHNOLOGY CORP CENTRAL INDEX KEY: 0000714865 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPUTERS [3571] IRS NUMBER: 942781589 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC 14D9 BUSINESS ADDRESS: STREET 1: 3860 N FIRST ST CITY: SAN JOSE STATE: CA ZIP: 95134 BUSINESS PHONE: 4084288000 MAIL ADDRESS: STREET 1: 3860 N FIRST STREET CITY: SAN JOSE STATE: CA ZIP: 95134 SC 14D9 1 SCHEDULE 14D9 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- SCHEDULE 14D-9 SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934 ---------------- PYRAMID TECHNOLOGY CORPORATION (NAME OF SUBJECT COMPANY) PYRAMID TECHNOLOGY CORPORATION (NAME OF PERSON(S) FILING STATEMENT) COMMON STOCK, $.01 PAR VALUE (TITLE OF CLASS OF SECURITIES) 747236107 (CUSIP NUMBER OF CLASS OF SECURITIES) RICHARD H. LUSSIER CHIEF EXECUTIVE OFFICER PYRAMID TECHNOLOGY CORPORATION 3860 N. FIRST STREET SAN JOSE, CALIFORNIA 95134 (408) 428-9000 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT) ---------------- COPY TO: LARRY W. SONSINI, ESQ. DOUGLAS H. COLLOM, ESQ. AARON J. ALTER, ESQ. WILSON, SONSINI, GOODRICH & ROSATI 650 PAGE MILL ROAD PALO ALTO, CALIFORNIA 94304-1050 (415) 493-9300 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ITEM 1. SECURITY AND SUBJECT COMPANY The name of the subject company is Pyramid Technology Corporation, a Delaware corporation (the "Company"), and the address of the principal executive offices of the Company is 3860 N. First Street, San Jose, California 95134. The title and the class of equity securities to which this statement relates is the Common Stock of the Company, $.01 par value per share (the "Shares"). ITEM 2. TENDER OFFER OF THE BIDDER This statement relates to the tender offer (the "Offer") disclosed in a Tender Offer Statement on Schedule 14D-1, dated January 27, 1995 (the "Schedule 14D-1"), of Siemens Nixdorf Mid-Range Acquisition Corp. ("Purchaser"), a Delaware corporation and wholly owned subsidiary of Siemens Nixdorf Informationssysteme AG, a corporation organized under the laws of the Federal Republic of Germany ("SNI AG"), to purchase all of the outstanding Shares at a price of $16.00 per Share, net to the seller in cash without interest, subject to certain conditions set forth including, without limitation, that there shall have been validly tendered at least the number of Shares that when added to the Shares owned by SNI AG or any of its subsidiaries will constitute a majority of outstanding Shares (the "Minimum Condition"). The Offer is being made by Purchaser pursuant to the Agreement and Plan of Merger, dated as of January 20, 1995 (the "Merger Agreement"), among the Company, SNI AG and Purchaser, a copy of which is filed as Exhibit 2.1 to this statement and is incorporated herein by reference. Subject to certain terms and conditions of the Merger Agreement, Purchaser will be merged with and into the Company (the "Merger") as soon as practicable after the expiration of the Offer and the Company will be the surviving corporation (the "Surviving Corporation") in the Merger. The Schedule 14D-1 states that the address of the principal executive offices of SNI AG is Otto-Hahn-Ring 6, 81739 Munich, Germany and the address of the principal executive offices of Purchaser is 1301 Avenue of the Americas, New York, New York 10019-6022. Copies of the press releases issued by the Company and SNI AG on January 27, 1995 are filed as Exhibit 99.1 and Exhibit 99.2 to this statement, respectively, and are incorporated herein by reference. ITEM 3. IDENTITY AND BACKGROUND (a) The name and business address of the Company, which is the entity filing this statement, are set forth in Item 1 above. (b) Certain contracts, agreements, arrangements and understandings between the Company and certain of its directors, executive officers and affiliates are described in the Company's Information Statement in sections entitled "BOARD OF DIRECTORS--Director Compensation" and "CERTAIN RELATIONSHIPS, TRANSACTIONS AND ARRANGEMENTS" and "EXECUTIVE OFFICER COMPENSATION." The Company's Information Statement as mailed to the Company's stockholders on January 27, 1995 (the "Information Statement") is attached hereto as Annex A, filed as Exhibit 20.1 to this statement and is incorporated herein by reference. In addition, certain contracts, agreements, arrangements and understandings relating to the Company and/or the Company's directors, executive officers and affiliates are contained in the Merger Agreement, and are described below under "Merger Agreement," "Additional Agreements, Arrangements and Understandings" and "Present Transactions and Intent with Respect to Securities." MERGER AGREEMENT The following summary of the Merger Agreement is qualified in its entirety by reference to the complete text of the Merger Agreement, which is attached hereto as Exhibit 2.1 and incorporated herein by reference. Capitalized terms not otherwise defined in the following description of the Merger Agreement have the respective meanings ascribed to them in the Merger Agreement. 2 The Offer. The Merger Agreement provides for the commencement of the Offer as promptly as reasonably practicable, but in no event later than five business days after the initial public announcement of Purchaser's intention to commence the Offer. The obligation of Purchaser to accept for payment Shares tendered pursuant to the Offer is subject to the satisfaction of the Minimum Condition and certain other conditions that are described in Section 14 hereof. Purchaser and SNI AG have agreed that no change in the Offer may be made which decreases the price per Share payable in the Offer, reduces the maximum number of Shares to be purchased in the Offer, imposes conditions to the Offer in addition to those set forth in Section 14 hereof, changes the form of consideration payable in the Offer or amends any other terms of the Offer in a manner adverse to the Company's stockholders. The Merger. The Merger Agreement provides that, upon the terms and subject to the conditions thereof, and in accordance with Delaware Law, at the Effective Time, Purchaser shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Purchaser will cease and the Company will continue as the Surviving Corporation (the "Surviving Corporation") and will become an indirect wholly owned subsidiary of SNI AG. Upon consummation of the Merger, each issued and then outstanding Share (other than any Shares held in the treasury of the Company, or owned by Purchaser, SNI AG or any direct or indirect wholly owned subsidiary of SNI AG or of the Company and any Shares which are held by stockholders who have not voted in favor of the Merger or consented thereto in writing and who shall have demanded properly in writing appraisal for such Shares in accordance with Delaware Law) shall be automatically converted into, and exchanged for, the right to receive the Merger Consideration. Pursuant to the Merger Agreement, each share of common stock, par value $.01 per share, of Purchaser issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one share of common stock, par value $.01 per share, of the Surviving Corporation. The Merger Agreement provides that the directors of Purchaser immediately prior to the Effective Time will be the initial directors of the Surviving Corporation and that the officers of the Company immediately prior to the Effective Time will be the initial officers of the Surviving Corporation. The Merger Agreement provides that, at the Effective Time, unless otherwise determined by SNI AG prior to the Effective Time, the Certificate of Incorporation of Purchaser will be the Certificate of Incorporation of the Surviving Corporation. The Merger Agreement also provides that the By-Laws of Purchaser, as in effect immediately prior to the Effective Time, will be the By-Laws of the Surviving Corporation. Agreements of SNI AG, Purchaser and the Company. Pursuant to the Merger Agreement, the Company will, if required by applicable law in order to consummate the Merger, duly call, give notice of, convene and hold an annual or special meeting of its stockholders as soon as practicable following consummation of the Offer for the purpose of considering and taking action on the Merger Agreement and the Transactions (the "Stockholders' Meeting"). If Purchaser acquires at least a majority of the outstanding Shares, Purchaser will have sufficient voting power to approve the Merger, even if no other stockholder votes in favor of the Merger. The Merger Agreement provides that the Company will, if required by applicable law, as soon as practicable following consummation of the Offer, file with the Commission under the Exchange Act, and use its best efforts to have cleared by the Commission, a proxy statement and related proxy materials (the "Proxy Statement") with respect to the Stockholders' Meeting and will cause the Proxy Statement to be mailed to stockholders of the Company at the earliest practicable time. The Company has agreed, subject to its fiduciary duties under applicable law as advised by counsel, to include in the Proxy Statement the recommendation of the Board that the stockholders of the Company approve and adopt the Merger Agreement and the transactions contemplated thereby and to use its best efforts to obtain such approval and adoption. SNI AG and Purchaser have agreed to cause all Shares then owned by them and their subsidiaries to be voted in favor of approval and adoption of the Merger Agreement and the transactions contemplated thereby. The Merger 3 Agreement provides that, in the event that Purchaser shall acquire at least 90 percent of the then outstanding Shares, SNI AG, Purchaser and the Company agree, at the request of Purchaser, to take all necessary and appropriate action to cause the Merger to become effective as promptly as reasonably practicable after such acquisition, without a meeting of the Company's stockholders, in accordance with Delaware Law. Pursuant to the Merger Agreement, the Company has covenanted and agreed that, between the date of the Merger Agreement and the Effective Time, unless SNI AG shall otherwise agree in writing, the businesses of the Company and its subsidiaries (the "Subsidiaries" and, individually, a "Subsidiary") will be conducted only in, and the Company and the Subsidiaries will not take any action except in, the ordinary course of business and in a manner consistent with past practice; and the Company will use its reasonable best efforts to preserve substantially intact the business organization of the Company and the Subsidiaries, to keep available the services of the current officers, employees and consultants of the Company and the Subsidiaries and to preserve the current relationships of the Company and the Subsidiaries with customers, suppliers and other persons with which the Company or any Subsidiary has significant business relations. The Merger Agreement provides that by way of amplification and not limitation, and except as contemplated therein, neither the Company nor any Subsidiary will, between the date of the Merger Agreement and the Effective Time, directly or indirectly do, or propose to do, any of the following, without the prior written consent of SNI AG: (a) amend or otherwise change its Certificate of Incorporation or By-laws or equivalent organizational documents; (b) issue, sell, pledge, dispose of, grant, encumber, or authorize the issuance, sale, pledge, disposition, grant or encumbrance of (i) any shares of capital stock of any class of the Company or any Subsidiary, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including, without limitation, any phantom interest), of the Company or any Subsidiary (except for the issuance of a maximum of 3,449,923 Shares issuable pursuant to employee stock options outstanding on the date of the Merger Agreement, and except for the grant of stock options under the Company's Stock Option and Purchase Plans (and the resulting issuance of shares thereunder) consistent with established practice to certain new employees of the Company hired after December 7, 1994 or (ii) any assets of the Company or any Subsidiary, except for sales of products in the ordinary course of business and in a manner consistent with past practice; (c) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock; (d) reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock; (e) (i) acquire (including, without limitation, by merger, consolidation, or acquisition of stock or assets) any corporation, partnership, other business organization or any division thereof or any material amount of assets, (ii) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any person, or make any loans or advances, except in the ordinary course of business and consistent with past practice, (iii) enter into any contract or agreement other than in the ordinary course of business, consistent with past practice, (iv) other than in the ordinary course of business, consistent with past practice, authorize any single capital expenditure which is in excess of $250,000 or capital expenditures which are, in the aggregate, in excess of $500,000 for the Company and the Subsidiaries taken as a whole, or (v) enter into or amend any contract, agreement, commitment or arrangement with respect to any of the foregoing matters; (f) other than pursuant to disclosed policies or agreements of the Company or any of its Subsidiaries in effect on or prior to the date of the Merger Agreement increase the compensation payable or to become payable to its officers or employees, except for increases in accordance with past practices in salaries or wages of employees of the Company or any Subsidiary who are not officers of the Company, or grant any severance or termination pay to, or enter into any employment or severance agreement with, any director, officer or other employee of the Company or any Subsidiary, or establish, adopt, enter into or amend any collective bargaining, bonus, profit/sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any director, officer or employee; (g) take any action, other than reasonable and usual actions in the ordinary course of business and consistent with past practice, with respect to accounting policies or procedures; (h) make any tax election or settle or compromise any material federal, state, local or foreign income tax liability; (i) pay, discharge or satisfy any claim, liability or obligation 4 (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business and consistent with past practice, of liabilities incurred in the ordinary course of business and consistent with past practice; (j) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of its subsidiaries (other than the Merger); (k) settle or compromise any pending or threatened suit, action or claim which is material or which relates to any of the Transactions; or (l) take or offer or propose to take, or agree to take in writing, or otherwise, any of the actions described above or any action which would make any of the representations or warranties of the Company contained in this Agreement untrue or incorrect as of the date when made if such action had then been taken, or would result in any of the offer conditions not being satisfied. The Merger Agreement provides that, promptly upon the purchase by Purchaser of Shares pursuant to the Offer, and from time to time thereafter, Purchaser will be entitled to designate up to such number of directors, rounded up to the next whole number, on the Board as shall give Purchaser representation on the Board equal to the product of the total number of directors on the Board (giving effect to the directors elected pursuant to this sentence), multiplied by the percentage that the aggregate number of Shares beneficially owned by Purchaser or any affiliate of Purchaser following such purchase bears to the total number of Shares then outstanding, and the Company will, at such time, promptly take all actions necessary to cause Purchaser's designees to be elected as directors of the Company, including increasing the size of the Board or securing the resignations of incumbent directors, or both. The Merger Agreement also provides that, at such times, the Company will cause persons designated by Purchaser to constitute the same percentage as persons designated by Purchaser shall constitute of the Board of (i) each committee of the Board, (ii) each board of directors of each domestic Subsidiary and (iii) each committee of each such board, in each case only to the extent permitted by applicable law. Until the earlier of (i) the time Purchaser acquires a majority of the then outstanding Shares on a fully diluted basis and (ii) the Effective Time, the Company has agreed to use its best efforts to ensure that all the members of the Board and each committee of the Board and such boards and committees of the domestic Subsidiaries as of the date of the Merger Agreement who are not employees of the Company shall remain members of the Board and of such boards and committees. The Merger Agreement provides that following the election or appointment of Purchaser's designees in accordance with the immediately preceding paragraph and prior to the Effective Time, any amendment of the Merger Agreement or the Certificate of Incorporation or By-Laws of the Company, any termination of the Merger Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of SNI AG or Purchaser or waiver of any of the Company's rights thereunder, will require the concurrence of a majority of those directors of the Company then in office who were neither designated by Purchaser nor are employees of the Company. Pursuant to the Merger Agreement, from the date of the Merger Agreement until the Effective Time, the Company will, and will cause the Subsidiaries and the officers, directors, employees, auditors and agents of the Company and the Subsidiaries to, afford the officers, employees and agents of SNI AG and Purchaser complete access at all reasonable times to the officers, employees, agents, properties, offices, plants and other facilities, books and records of the Company and each Subsidiary, and will furnish SNI AG and Purchaser with all financial, operating and other data and information as SNI AG or Purchaser, through its officers, employees or agents, may reasonably request and SNI AG and Purchaser have agreed to keep such information confidential, except in certain circumstances. The Company has agreed that neither it nor any Subsidiary will, and neither the Company nor any Subsidiary will permit any officer, director or agent to solicit, initiate or encourage the submission of any proposal or offer from any person relating to any acquisition or purchase of all or (other than in the ordinary course of business) any portion of the assets of, or any equity interest in, the Company or any Subsidiary or any business combination with the Company or any Subsidiary (whether by a tender offer, exchange offer, merger, consolidation or otherwise), participate in any negotiations regarding, or furnish to any other person 5 any information with respect to, any of the foregoing (an "Acquisition Proposal"). The Merger Agreement requires the Company immediately to cease and cause to be terminated any existing discussions or negotiations with any parties conducted prior to the date of the Merger Agreement with respect to any of the foregoing. The Company has also agreed to notify SNI AG promptly if any such proposal or offer, or any inquiry or contact with any person with respect thereto, is made and, in any such notice to SNI AG, to indicate in reasonable detail the identity of the person making such proposal, offer, inquiry or contact and the terms and conditions of such proposal, offer, inquiry or contact. The Company has also agreed not to release any third party from, or waive any provision of, any confidentiality or standstill agreement to which the Company is a party, except to the extent required by fiduciary obligations under applicable law as advised by independent counsel. Notwithstanding the foregoing, the Merger Agreement provides that, to the extent required by fiduciary obligations under applicable law as advised by independent counsel, the Company may, in response to an Acquisition Proposal which was not solicited after the date of this Agreement, participate in discussions or negotiations with, or furnish information with respect to the Company pursuant to a confidentiality agreement in reasonably customary form, to any person. The Merger Agreement further provides that following the receipt of an Acquisition Proposal, which the Board of Directors of the Company, after consultation with and based on the advice of independent legal counsel and its financial advisor, determines in good faith to be more favorable to the Company's stockholders than the Offer and the Merger (a "Superior Proposal"), the Company may, upon payment of the Fee and Expenses (as defined hereafter) as required by Section 8.01(d)(ii) of the Merger Agreement, terminate the Merger Agreement and accept such Superior Proposal, and the Board of Directors of the Company may approve or recommend such Superior Proposal and, in connection therewith, withdraw or modify its approval or recommendation of the Offer, the Merger Agreement or the Merger. None of the foregoing shall prohibit the Company or its Board of Directors from (i) taking, and disclosing to the Company's stockholders, a position with respect to an Acquisition Proposal pursuant to Rules 14d-9 and 14e-2(a) under the Exchange Act or (ii) making any disclosure to the Company's stockholders that, in the judgment of the Board of Directors of the Company, is required under applicable law. The Merger Agreement provides that, in accordance with the terms of the Company's Executive Officers Nonstatutory Stock Option Plan and Amended and Restated Directors' Option Plan and Share Option Scheme for U.K. Executives (collectively, the "non-1982 Stock Option Plans"), each outstanding employee or director stock option to purchase Shares granted under any non-1982 Stock Option Plan will be made exercisable on the date this Merger Agreement is signed, regardless of whether they would otherwise be exercisable under the terms of such non-1982 Stock Option Plan. Any non-1982 Plan Option not exercised by the Effective Time will be cancelled by the Company and no payment shall be made therefor. The Merger Agreement provides that each outstanding employee or director stock option to purchase Shares (a "1982 Plan Option") granted under the Company's amended 1982 Incentive Stock Option Plan will be made exercisable on the date that Purchaser accepts for payment Shares tendered pursuant to the Offer regardless of whether such stock options would otherwise be exercisable under the terms of the Amended 1982 Incentive Stock Option Plan. The Merger Agreement provides further that, on such date, each 1982 Plan Option, other than any 1982 Plan Option that was granted to any "officer" (as that term is defined in Rule 16a-1(f) promulgated by the SEC) of the Company (a "Section 16 Insider Option") will be cancelled without further action required on the part of the holder of such option, in exchange for the right to receive, as soon as practicable following Purchaser's acceptance for payment of Shares tendered pursuant to the Offer, a cash payment by the Purchaser to the holder in an amount equal to the excess, if any, of $16.00 over the exercise price per share of the 1982 Plan Option minus applicable withholding. Each outstanding Section 16 Insider Option shall be treated in one of two ways. First, with respect to Section 16 Insider Options that were granted at any time before the date that is six months prior to the Effective Time (the "Old Insider Options"), such options must be exercised immediately following their vesting acceleration; to the extent that such Old Insider Options are not so exercised, they will be cancelled by the Company and no payment will be made therefor. Second, with respect to Section 16 Insider Options that were granted at any time on or after the date that is 6 six months prior to the Effective Time (the "Recent Insider Options"), such options will remain outstanding in accordance with their terms (amended as provided below) and will not be affected in any way by the consummation of the Merger, except for their becoming exercisable in full pursuant to the first sentence of this subsection. As soon as practicable following the Effective Time, but at least six months after the grant date of any Recent Insider Option, Parent, in its capacity as sole stockholder of the Surviving Corporation, will approve amendments to the Amended 1982 Incentive Stock Option Plan to provide (a) that upon exercise of a Recent Insider Option, the holder will receive an amount in cash per Share equal to the excess, if any, of $16.00 over the exercise price per share of the Recent Insider Option, minus applicable withholding, and (b) that each Recent Insider Option that has not been exercised as of July 31, 1995 will be cancelled by the Surviving Corporation on such date and no payment shall be made therefor. With respect to the Company's 1987 Employee Stock Purchase Plan (the "Purchase Plan"), the Merger Agreement provides that the offering period currently in progress will be shortened by setting a new exercise date which will be the date immediately preceding the Effective Time (the "New Exercise Date"). The Purchase Plan will terminate immediately following the purchase of Shares on the New Exercise Date. The Merger Agreement provides that SNI AG will cause the Surviving Corporation, for a period of at least two years following the acceptance of Shares by Purchaser pursuant to the Offer, to continue to provide the employees of the Surviving Corporation with the employee pension, welfare and fringe benefits currently in effect (except that as soon as practicable following the Effective Time, SNI AG will cause the Surviving Corporation to amend the Surviving Corporation 401(k) plan to effect an appropriate increase to the rate of employer matching contributions and/or discretionary contributions so as to compensate the employees for the termination of the Purchase Plan) or substitute benefits that are substantially comparable to, and in the aggregate no less favorable than, such employee pension, welfare and fringe benefits. Pursuant to the Merger Agreement, as soon as practicable following the Effective Time, SNI AG will cause the Surviving Corporation to implement a phantom equity or long-term incentive program instead of the stock option plans as currently in effect to reward revenue growth and profitability over a three year period, which program will be designed by SNI AG following good faith consultation with the Surviving Corporation's senior management and under which program potential payments shall be at a level consistent with the objective of preserving the entrepreneurial character of the Surviving Corporation. Such program will also contain provisions providing for the conversion of awards into common equity of the Surviving Corporation in the event of an initial public offering of the common equity of the Surviving Corporation. The Merger Agreement provides that SNI AG will cause the Surviving Corporation to retain the Management Incentive Plan (the "MIP") until September 30, 1995, as modified as provided below, with the same employees remaining eligible for bonuses thereunder. The amounts payable to each of the Surviving Corporation's executive officers participating in the MIP will be increased by 30%. Each other participant in the MIP will be given the right to elect, no later than 30 days following the Effective Time, either (i) the 30% increase described in the immediately proceeding sentence or (ii) a guaranteed minimum bonus equal to 50% of such participant's bonus at 100% target performance. The Merger Agreement provides further that appropriate adjustments will be made to the plan target levels to eliminate the effect of legal, investment banking and other extraordinary fees and expenses incurred by the Surviving Corporation as a consequence of the transactions effected pursuant to the Merger Agreement and the preparation and negotiations leading thereto. Pursuant to the Merger Agreement, SNI AG will cause the Surviving Corporation to establish a bonus system for selected non-MIP, non-sales employees which will reward milestones, for example, in the development of products. As soon as practicable following the Effective Time, SNI AG will cause the Surviving Corporation to enter into retention bonus agreements with up to 30 employees of the Surviving Corporation to be identified by mutual agreement of SNI AG and senior management of the Company. Such 7 retention bonus agreements will be in a form to be established by SNI AG following good faith consultation with senior management of the Surviving Corporation and will provide each covered employee with the opportunity to receive a retention bonus (in addition to any bonus payable under the MIP or other annual bonus plan) of up to 100% of such employee's base salary on the second anniversary of the Effective Time, subject to such employee being employed by the Surviving Corporation on such anniversary date. Pursuant to the Merger Agreement, the Surviving Corporation and SNI AG agree that for a period ending not sooner than the sixth anniversary of the Effective Time, the Surviving Corporation will maintain all rights to indemnification (including with respect to the advancement of expenses incurred in the defense of any action or suit) existing on the date of this Agreement in favor of the present and the former directors, officers, employees and agents of the Company as provided in the Company's Certificate of Incorporation and By-laws and as set forth in the Indemnification Agreements listed in Section 6.07 of the Disclosure Schedule to the Merger Agreement (true and correct copies of which have been made available to Purchaser), in each case as in effect on the date of the Merger Agreement, and that during such period, the Certificate of Incorporation and By-laws of the Surviving Corporation will not be amended to reduce or limit the rights of indemnity afforded to the present and former directors, officers, employees and agents of the Company, or the ability of the Surviving Corporation to indemnify them, nor to hinder, delay or make more difficult the exercise of such rights or indemnity or the ability to indemnify. The Merger Agreement provides that SNI AG and the Surviving Corporation will use their respective reasonable best efforts to maintain in effect for three years from the Effective Time, if available, the current directors' and officers' liability insurance policies maintained by the Company (provided that the Surviving Corporation may substitute therefor policies of at least the same coverage containing terms and conditions which are not materially less favorable) with respect to matters occurring prior to the Effective Time; provided, however, that in no event will the Surviving Corporation be required to expend more than an amount per year equal to 150% of the current annual premiums paid by the Company for such insurance (which premiums the Company has represented to SNI AG and Purchaser to be $533,000 in the aggregate). The Merger Agreement provides that, subject to its terms and conditions, each of the parties thereto will (i) make promptly its respective filings, and thereafter make any other required submissions, under the HSR Act and any other applicable statutes or regulations with respect to the Transactions and (ii) use all reasonable best efforts to take, or cause to be taken, all appropriate action, and to do or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by the Merger Agreement, including, without limitation, using all reasonable best efforts to obtain all licenses, permits (including, without limitation, Environmental Permits), consents, approvals, authorizations, qualifications and orders of governmental authorities and parties to contracts with the Company and the Subsidiaries as are necessary for the consummation of the Transactions and to fulfill the conditions to the Offer and the Merger. SNI AG will give notice promptly to the Chairman of the Committee on Foreign Investment in the United States pursuant to Section 721 of the Defense Production Act of 1950, as amended, and the regulations promulgated thereunder (the "Exon-Florio Provision") of the Transactions, and each of the parties to the Merger Agreement agree to make additional filings and submissions as may be reasonably necessary under the Exon-Florio Provision in respect of the Transactions. Pursuant to the Merger Agreement, SNI AG and the Company agree to consult and cooperate with one another, and consider in good faith the views of one another, in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, opinions or proposals made or submitted by or on behalf of any party hereto in connection with proceedings under or relating to the HSR Act, the Exon-Florio Provision, the pre-notification requirements of any foreign jurisdiction, or any other federal or state antitrust or fair trade law. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of the Merger Agreement, the proper officers and directors of each party to the Merger Agreement are required to use their reasonable best efforts to take all such action. 8 The Merger Agreement provides that, no later than five days after the execution of the Merger Agreement, the Company will notify the New Jersey Department of Environmental Protection and Energy (the "NJDEPE") of the Offer and the other Transactions (including, without limitation, the Merger) pursuant to the requirements of ISRA. Immediately thereafter, the Company will make application to the NJDEPE for a negative declaration or a remediation agreement as appropriate under ISRA. SNI AG will cooperate with and assist the Company in any reasonable manner in connection with obtaining such negative declaration or remediation agreement. The Company will not enter into any remediation agreement without the prior written consent of SNI AG. SNI AG and Purchaser agree to offer to enter into any remediation agreement with the NJDEPE pursuant to the requirements of ISRA as may be necessary to permit the consummation of the Transactions unless such remediation agreement would have a Material Adverse Effect. See Section 15. Representations and Warranties. The Merger Agreement contains various customary representations and warranties of the parties thereto including representations by the Company and Seller as to the absence of certain changes or events concerning the Company's business, compliance with law, litigation, employee benefit plans, real property and leases, trademarks, patents and copyrights, environmental matters, material contracts and insurance. Conditions to the Merger. Under the Merger Agreement, the respective obligations of each party to effect the Merger are subject to the satisfaction at or prior to the Effective Time of the following conditions: (a) the Merger Agreement and the transactions contemplated thereby shall have been approved and adopted by the affirmative vote of the stockholders of the Company to the extent required by Delaware Law and the Company's Certificate of Incorporation; (b) any waiting period (and any extension thereof) applicable to the consummation of the Merger under the HSR Act and any other applicable statutes or regulations shall have expired or been terminated and the Company shall have obtained a negative declaration or executed a remediation agreement with the NJDEPE pursuant to the requirements of ISRA; (c) no foreign, United States or state governmental authority or other agency or commission or foreign, United States or state court of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any law, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) which is then in effect and has the effect of making the acquisition of Shares by SNI AG or Purchaser or any affiliate of either of them illegal or otherwise restricting, preventing or prohibiting consummation of the Transactions; and (d) Purchaser or its permitted assignee shall have purchased all Shares validly tendered and not withdrawn pursuant to the Offer; provided, however, that this condition shall not be applicable to the obligations of SNI AG or Purchaser if, in breach of the Merger Agreement or the terms of the Offer, Purchaser fails to purchase any Shares validly tendered and not withdrawn pursuant to the Offer. Termination; Fees and Expenses. The Merger Agreement provides that it may be terminated and the Merger and the other Transactions may be abandoned at any time prior to the Effective Time, notwithstanding any requisite approval and adoption of the Merger Agreement and the Transactions by the stockholders of the Company (provided, however, that if Shares are purchased pursuant to the Offer, SNI AG or Purchaser may not in any event terminate the Merger Agreement): (a) by mutual written consent duly authorized by the Boards of Directors of SNI AG, Purchaser and the Company; (b) by SNI AG, Purchaser or the Company if (i) the Effective Time shall not have occurred on or before July 31, 1995; provided, however, that the right to terminate the Merger Agreement shall not be available to any party whose failure to fulfill any obligation under the Merger Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date, or (ii) any court of competent jurisdiction or other governmental authority shall have issued an order, decree or ruling or shall have taken any other action restraining, enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other action shall have become final and nonappealable; (c) by SNI AG if (i) as the result of a failure of any condition set forth in Section 14 hereof, (A) Purchaser shall have failed to commence the Offer within 60 days following the date of the Merger Agreement, (B) the Offer shall have terminated or expired in accordance with its terms without Purchaser having accepted any Shares for payment thereunder or (C) Purchaser shall have failed to 9 pay for Shares pursuant to the Offer within 90 days following the commencement of the Offer (or where applicable under the conditions to the Offer set forth in Section 14, within the 120-day period specified therein), unless the occurrence of the event set forth in any of clause (A), (B) or (C) above shall have been caused by or resulted from the failure of SNI AG or Purchaser to perform in any material respect any material covenant or agreement of either of them contained in the Merger Agreement or the material breach by SNI AG or Purchaser of any material representation or warranty of either of them contained in the Merger Agreement (including where such occurrence results from an action by the Company permitted under the Merger Agreement's non- solicitation provision that results from such failure or material breach by SNI AG or Purchaser) or (ii) prior to the purchase of Shares pursuant to the Offer, the Board or any committee thereof shall have withdrawn or modified in a manner adverse to Purchaser or SNI AG its approval or recommendation of the Offer, the Merger Agreement, the Merger or any other Transaction or shall have recommended another Acquisition Proposal, or shall have resolved to do any of the foregoing; or (d) by the Company, upon approval of the Board, if (i) as the result of the failure of any of the conditions set forth in Section 14 hereof, (A) Purchaser shall have failed to commence the Offer within 60 days following the date of the Merger Agreement, (B) the Offer shall have terminated or expired in accordance with its terms without Purchaser having accepted any Shares for payment thereunder or (C) Purchaser shall have failed to pay for Shares pursuant to the Offer within 90 days following the commencement of the Offer (or where applicable under the conditions to the Offer set forth in Section 14, within the 120-day period specified therein), unless the occurrence of the event set forth in any of clauses (A), (B), or (C) above shall have been caused by or resulted from the failure of the Company to perform in any material respect any material covenant or agreement of it contained in the Merger Agreement or the material breach by the Company of any material representation or warranty of it contained in the Merger Agreement, (ii) prior to the purchase of Shares pursuant to the Offer, the Board shall have determined to accept a Superior Proposal pursuant to Section 6.05(b) of the Merger Agreement and the Company has complied with all the provisions of Section 6.05(b) of the Merger Agreement; provided, that such termination under the foregoing provisions will not be effective until the Company has made payment of the full fee required by Section 8.03(a) of the Merger Agreement and has deposited with a mutually acceptable escrow agent $2 million for reimbursement of Expenses (as defined in the Merger Agreement) in accordance with Section 8.03 of the Merger Agreement, or (iii) prior to the purchase of Shares pursuant to the Offer, there has been a willful breach by SNI AG or Purchaser of any representation, warranty, covenant or agreement set forth in the Merger Agreement which breach is not reasonably capable of being cured within 40 business days after the date of the commencement of the Offer. In the event of the termination of the Merger Agreement, the Merger Agreement provides that it will forthwith become void and there will be no liability thereunder on the part of any party thereto except under the provisions of the Merger Agreement related to fees and expenses described below and under certain other provisions of the Merger Agreement which survive termination. The Merger Agreement provides that in the event that (a) any person (including, without limitation, the Company or any affiliate thereof), other than SNI AG or any affiliate of SNI AG, shall have become the beneficial owner of more than 50% of the then outstanding Shares and the Merger Agreement shall have been terminated pursuant to the provisions described in the second preceding paragraph above; (b) any person shall have commenced, publicly proposed or communicated to the Company a proposal that is publicly disclosed for a tender or exchange offer for 50% or more (or which, assuming the maximum amount of securities which could be purchased, would result in any person beneficially owning 50% or more) of the then outstanding Shares or otherwise for the direct or indirect acquisition of the Company or all or a substantial portion of its assets for per Share consideration having a value greater than $16.00 and (i) the Offer shall have remained open for at least 20 business days, (ii) the Minimum Condition shall not have been satisfied, and (iii) the Agreement shall have been terminated pursuant to the provisions described above, and (iv) within 12 months of such termination a Third Party Acquisition (as defined hereafter) shall occur; or (c) the Merger Agreement is terminated pursuant to the provisions described in clause (c)(ii) or clause (d)(ii) of the second preceding paragraph; then, in any such event, the Company will pay SNI AG promptly (but in no event later than five business days after the first of such events shall have occurred) a fee of $7 million 10 (the "Fee"), which amount will be payable in immediately available funds, plus all Expenses (as defined below); provided, however, that neither the Fee nor any Expenses shall be paid if either SNI AG or Purchaser shall be in material breach of its representations and warranties or obligations under the Merger Agreement. The Merger Agreement provides that if it is terminated by SNI AG or Purchaser pursuant to the provisions described in clause (c)(ii) of the third preceding paragraph and neither SNI AG nor Purchaser is in material breach of their respective material covenants and agreements contained in the Merger Agreement or their respective representations and warranties contained in the Merger Agreement, the Company will, whether or not any payment is made pursuant to the provisions described in the immediately preceding paragraph, reimburse each of SNI AG, Purchaser and their affiliates (not later than five business days after submission of statements therefor) for all out-of-pocket expenses and fees up to $2 million in the aggregate (including, without limitation, fees and expenses payable to all banks, investment banking firms, other financial institutions and other persons and their respective agents and counsel for arranging, committing to provide or providing any financing for the Transactions or structuring such transactions and all fees of counsel, accountants, experts and consultants to SNI AG, Purchaser and their affiliates, and all printing and advertising expenses) actually incurred or accrued by either of them or on their behalf in connection with the Transactions, including, without limitation, the financing thereof, and actually incurred or accrued by banks, investment banking firms, other financial institutions and other persons and assumed by SNI AG, Purchaser or their affiliates in connection with the negotiation, preparation, execution and performance of the Merger Agreement, the structuring and financing of the Transactions, and any financing commitments or agreements relating thereto (all of the foregoing being referred to herein collectively as the "Expenses"). Except as set forth in this paragraph, all costs and expenses incurred in connection with the Merger Agreement and the Transactions will be paid by the party incurring such expenses, whether or not any such transaction is consummated. "Third Party Acquisition" means the occurrence of any of the following events: (i) the acquisition of the Company by merger, tender offer, exchange offer, consolidation or otherwise by any person other than SNI AG, Purchaser or any affiliate thereof (a "Third Party"); (ii) the acquisition by any Third Party of all or substantially all of the total assets of the Company and its Subsidiaries, taken as a whole; (iii) the acquisition by a Third Party of 50% or more of the outstanding Shares; (iv) the adoption by the Company of a plan of liquidation or the declaration or payment of an extraordinary dividend; or (v) the repurchase by the Company or any of its Subsidiaries of 50% or more of the outstanding Shares. Delaware Law. The Board of Directors of the Company has approved the Merger Agreement and the transactions contemplated thereby, for purposes of Section 203 of the Delaware General Corporation Law. Accordingly, the restrictions of Section 203 do not apply to the transactions contemplated by the Offer. Section 203 of the Delaware General Corporation Law prevents an "interested stockholder" (generally, a stockholder owning 15% or more of a corporation's outstanding voting stock or an affiliate or associate thereof) from engaging in a "business combination" (defined to include a merger and certain other transactions) with a Delaware corporation for a period of three years following the date on which such stockholder became an interested stockholder unless (i) prior to such date the corporation's board of directors approved either the business combination or the transaction which resulted in such stockholder's becoming an interested stockholder, (ii) upon consummation of the transaction which resulted in such stockholder's becoming an interested stockholder, the interested stockholder owned at least 85% of the corporation's voting stock outstanding at the time the transaction commenced (excluding shares owned by certain employee stock plans and persons who are directors and also officers of the corporation) or (iii) on or subsequent to such date the business combination is approved by the corporation's board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock not owned by the interested stockholder. 11 ADDITIONAL AGREEMENTS, ARRANGEMENTS AND UNDERSTANDINGS Indemnification of Directors and Officers. Section 145 of Delaware General Corporation Law authorizes a court to award, or a corporation's Board of Directors to grant, indemnity to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act of 1933, as amended. Further, in accordance with the Delaware General Corporation Law, the Company's Certificate of Incorporation eliminates the liability of a director to the Company or its stockholders for monetary damages for breaches of his or her fiduciary duty of care, provided that such liability does not arise from certain proscribed conduct (including intentional misconduct and breach of duty of loyalty). The Company's Certificate of Incorporation provides for indemnification of officers and directors to the maximum extent permitted by the Delaware General Corporation Law. In addition, the Company has entered into indemnification agreements with its officers and directors by which the Company provides such persons with the maximum indemnification allowed under applicable law. These agreements also resolve certain procedural and substantive matters which are not covered, or are covered in less detail, in the Certificate of Incorporation and the By-Laws. A copy of the form of such indemnification agreement is filed as Exhibit 10.1 to this statement and incorporated herein by reference. Richard Lussier Employment Agreement. At the request of SNI AG, Richard H. Lussier, Chief Executive Officer and Chairman of the Board of the Company, and Siemens AG have had discussions regarding a senior management position for Mr. Lussier within the Siemens group of companies. The parties expect that the principal terms of an employment agreement relating to such position could include the following: (i) a starting base salary of $400,000 per year, (ii) bonus for the current fiscal year payable under the existing Pyramid Management Incentive Plan, based on a base salary of $400,000 per year and with the payout increased by 30% (consistent with the percentage increase available to other participants in the Management Incentive Plan), (iii) a supplemental executive retirement plan on behalf of Mr. Lussier guaranteeing payment of approximately $280,000 per year upon retirement commencing at age 62, such supplemental executive retirement benefits vesting 30% per year for Mr. Lussier's first two years of service, and the final 40% vesting upon completion of Mr. Lussier's third year of service, (iv) a contingent $500,000 payable under a long-term incentive plan established by SNI AG based on the achievement of certain performance targets and (v) severance agreements and benefits upon certain terminations of employment. The initial term of Mr. Lussier's employment will commence upon the effectiveness of the Merger and terminate three years later. John Chen Management Retention Agreement. At the request of SNI AG, John S. Chen, President and Chief Operating Officer of the Company, has entered into a Management Retention Agreement (the "Chen Agreement") with the Company, commencing upon the effectiveness of the Merger and terminating five years later. Principal terms of the Chen Agreement include (i) serving as Chief Executive Officer of the Company and as a member of the Company's Board of Directors, (ii) termination of Mr. Chen's current employment agreement with the Company upon the effectiveness of the Merger, (iii) a signing bonus of $250,000 and a base salary of not less than $380,000 per year, (iv) an increase in the target bonus for Mr. Chen under the Company's Management Incentive Plan for the current fiscal year from 45% to 60% of Mr. Chen's base salary with the payout increased by 30% (consistent with the percentage increase available to other participants in the Management Incentive Plan), (v) subsequent years' target bonuses to be based on at least 60% of Mr. Chen's base salary, (vi) a retention bonus of $760,000 following two years of continued service with the Company, (vii) payment under phantom equity or long term incentive programs to be established by the Company should the Company achieve certain performance targets based upon a three year period and, if achieved, resulting in a payout of at least $1,000,000, (viii) severance payments and benefits upon certain terminations of employment and (ix) certain payments upon Mr. Chen's death or disability. A copy of the Chen Agreement is filed as Exhibit 10.4 to this statement and is incorporated herein by reference. Amendment to Rights Agreement. Pursuant to the Merger Agreement, the Company amended its Common Shares Rights Agreement between the Company and Bank of America N.T. & S.A. so that the execution of the Merger Agreement, the making of the Offer, the purchase of the Shares pursuant to the 12 Offer or the Merger will not cause or in any way trigger the obligation of the Company to issue the Rights to its stockholders. Additionally, the amendment provides that the Rights Agreement will terminate immediately prior to the purchase of the Shares by Purchaser pursuant to the offer. A copy of the amendment to the Common Shares Rights Agreement is filed as Exhibit 4.1 to this Statement and is incorporated herein by reference. ITEM 4. THE SOLICITATION OR RECOMMENDATION (a) Recommendation. The Board of Directors of the Company (the "Board") at a special meeting held on January 20, 1995 determined that the Offer and the transactions contemplated by the Merger Agreement are fair to, and in the best interests of, the Company's stockholders (other than SNI AG and its affiliates), approved and adopted the Merger Agreement and the transactions contemplated thereby and recommended that stockholders accept the Offer and (if a shareholder vote is required under Delaware Law) approve the Merger Agreement and the Merger. The January 20 meeting of the Board was attended by all directors other than Dr. Rudolph Bodo, SNI AG's designee on the Company's Board, who is also Vice President and General Manager of SNI AG's Mid-Range Systems Unit. Dr. Bodo recused himself from all deliberations of the Board concerning the Offer and the Merger. Subject to Dr. Bodo's absence as a participating Board member, the approval and recommendation of the Board concerning the Offer and the Merger were unanimous. A copy of the Company's letter to stockholders dated January 27, 1995 is filed as Exhibit 20.2 to this statement and is incorporated herein by reference. (b) Background. Reference is made to the Schedule 14D-1 for a summary of Parent's contacts with the Company leading to the execution of the Merger Agreement. (c) Reasons for the Board's Conclusions. In reaching the determination described in paragraph (a) above, the Board considered a number factors, including, without limitation, the following: (i) The historical financial condition and results of operations of the Company, and the projected financial conditions and results of operations of the Company on both a long-term and short-term basis; (ii) The business and strategic objectives of the Company, and the attendant risks involved in achieving those objectives; (iii) A review of the possible alternatives to the Offer and the Merger (including the possibility of continuing to operate the Company as an independent entity and the sale of the Company through a merger or by any other means to other potential buyers), the range of possible values to the Company's stockholders of such alternatives and the timing and the likelihood of actually accomplishing those alternatives; (iv) The detailed financial and valuation analyses presented to the Board by Smith Barney Inc. financial advisor to the Company ("Smith Barney"), including market prices and financial data relating to other companies engaged in businesses considered comparable to the Company and the prices and premiums paid in recent selected acquisitions of companies engaged in businesses considered comparable to those of the Company; (v) The relationship of the Offer price to historical market prices of the Shares and to other relevant valuation measures; (vi) The presentation of Smith Barney at the January 20, 1995 Board meeting and the written opinion (the "Opinion") of Smith Barney as of that date, that the consideration to be received by the stockholders of the Company, pursuant to the Offer and the Merger, is fair, from a financial point of view. The Opinion contains a description of the factors considered, the assumptions made and the scope of review undertaken by Smith Barney in rendering the Opinion. Stockholders are urged to read the Opinion in its entirety. The Opinion has been provided solely for use by the Board of Directors of the Company, only addresses the fairness of the consideration to be received by the Stockholders from a 13 financial point of view and does not constitute a recommendation to any stockholder of the Company to tender their Shares pursuant to the Offer (The text of the Opinion provides that such Opinion may not be published or otherwise used or referred to, nor shall any public reference to Smith Barney be made, without Smith Barney's prior written consent. A copy of the written opinion of Smith Barney, which sets forth the assumptions made, matters considered and basis of their review is attached as Annex B, and filed as Exhibit 99.3 to this Statement.); (vii) A review of discussions between the Company and representatives of other companies in the Company's industry concerning strategy, financing and other relationships which had taken place prior to the Company's discussions and negotiations with SNI AG with respect to the Offer and the Merger; (viii) The absence of any inquiries or expressions of interest concerning a potential transaction with the Company from other potential buyers following the joint public announcement by the Company and SNI AG on January 9, 1995 of their entering into discussions concerning a potential negotiated merger transaction, and the fact that the Merger Agreement does not preclude the Company from discussing with third parties unsolicited competing offers or, subject to payment of a "break-up" fee and expenses, from accepting a competing offer which the Board determines, in the exercise of its fiduciary duties, to be more favorable to the Company's stockholders than the Offer and the Merger; (ix) The likelihood that the proposed acquisition would be consummated, including the experience, reputation and financial condition of SNI AG and its ultimate parent, Siemens AG, and the risks to the Company that the acquisition would not be consummated; and (x) The effect of the transaction on the Company's relationship with its employees and the communities in which it operates. In view of the wide variety of factors considered in connection with its evaluation of the Offer and the Merger, the Board did not find it practicable to, and did not, quantify or otherwise attempt to assign relative weights to the specific factors considered in reaching its respective determinations. ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED On June 7, 1994, the Company entered into a letter agreement with Smith Barney pursuant to which Smith Barney was engaged to act as exclusive financial advisor to the Company and to furnish financial advisory and investment banking services in connection with a variety of potential transactions between the Company and a list of specific companies provided by the Company. This letter agreement was amended on January 9, 1995 to include Siemens Nixdorf Informationssysteme AG as one of the companies identified by the Company. Under the letter agreement, the Company agreed to pay Smith Barney a fee based on the value of a transaction. Assuming the Offer and the Merger are consummated, Smith Barney will receive a total fee of approximately $2.2 million. Of such amount, $250,000 shall be paid for the delivery by Smith Barney of the Opinion described above. In addition to the foregoing compensation, the Company has agreed to reimburse Smith Barney for its reasonable out-of-pocket expenses and to indemnify Smith Barney against certain liabilities arising out of or in connection with this engagement. Neither the Company nor any person acting on its behalf has employed, retained or compensated any other person to make solicitations or recommendations to stockholders on its behalf concerning the Merger or the Offer. ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES (a) Each of Messrs. Mandich, Scott, Smirni and Wishart, executive officers of the Company, were granted an option to purchase 15,000, 15,000, 5,000 and 4,000 shares, respectively, of the Company's Common Stock on January 3, 1995, pursuant to the Company's Amended 1982 Incentive Stock Option Plan. To the Company's knowledge, no other transactions in the Shares has been effected during the past 60 days by the Company or any executive officer, director, affiliate or subsidiary of the Company. 14 (b) To the Company's knowledge, each of the Company's executive officers, directors and affiliates, with the exception of SNI AG and any subsidiary of SNI AG, including Purchaser, whose shares will be canceled immediately prior to the Effective Time pursuant to the Merger Agreement, presently intends to tender all Shares which are held of record or beneficially owned by them pursuant to the Offer, other than Shares, if any, held by any such person which if tendered, could cause such person to incur liability under the provisions of Section 16(b) of the Exchange Act. Pursuant to the Merger Agreement, all employee and director stock options that were granted at any time on or after the date that is six months prior to the Effective Time shall remain outstanding and shall not be affected by the consummation of the Merger, except that they shall become exercisable in full on the date that Purchaser accepts for payment the Shares tendered pursuant to the Offer. As soon as practicable following the Effective Time, but at least six months after the grant date of any such option, SNI AG, in its capacity as sole stockholder of the Surviving Corporation, shall approve amendments to the Amended 1982 Incentive Stock Option Plan to provide (i) that upon exercise of such an option, the holder shall receive an amount in cash per Share equal to the excess, if any, of the Per Share Amount over the exercise price per share of such option, minus applicable withholding and (ii) that each option that has not been exercised as of July 31, 1995 shall be cancelled. ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY (a) Except as set forth in Item 3(b) above, no negotiation is underway or is being undertaken by the Company in response to the Offer which relates to or would result in (i) an extraordinary transaction, such as a merger or reorganization, involving the Company or any of its subsidiaries; (ii) a purchase, sale or transfer of a material amount of assets by the Company or any of its subsidiaries; (iii) a tender offer for or other acquisition of securities by or of the Company; or (iv) any material change in the present capitalization or dividend policy of the Company. (b) There is no transaction, board resolution, agreement in principle or signed contract in response to the Offer other than as disclosed in Item 3(b) of this statement, that relates to or would result in (i) an extraordinary transaction, such as a merger or reorganization, involving the Company or any of its subsidiaries; (ii) a purchase, sale or transfer of a material amount of assets by the Company or any of its subsidiaries; (iii) a tender offer for or other acquisition of securities by or of the Company; or (iv) any material change in the present capitalization or dividend policy of the Company. ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED The Information Statement attached hereto as Annex A is being furnished in connection with the contemplated designation by Purchaser, pursuant to the Merger Agreement, of certain persons to be appointed to the Board of Directors of the Company other than at a meeting of the Company's stockholders, following the purchase by Purchaser of the number of Shares pursuant to the Offer necessary to satisfy the Minimum Condition. On January 9, 1995, an action was filed as a class action in the Court of Chancery of the State of Delaware in and for New Castle County (Pohli v. Pyramid Technology, et al., C.A. No. 13961) (the "Pohli Complaint") against the Company and its directors alleging that the Company had entered into talks with SNI AG for the purchase and sale of the Company for $15 per Share, that the Company had thereby evidenced the intent of its Board of Directors to have the Company consider a change of control transaction, that the directors are obligated to explore all alternatives to maximize shareholder value, that the directors must neutralize SNI AG's bargaining position by establishing bidding procedures or otherwise taking affirmative steps to actively encourage and solicit competing offers for the Company to assure that the highest value will be obtained, that the directors have a conflict of interest between their desire to retain their offices in the Company and their fiduciary obligation to maximize shareholder value in a change of control transaction and consequently will not be able to represent the interests of the Company's public stockholders, and that the directors have embarked upon a negotiating process with SNI AG which will preclude 15 opportunities for other potential purchasers to express interest in acquiring the Company. The Pohli Complaint asks for equitable relief and damages, as well as awarding plaintiff his costs and disbursements, including attorneys' fees. The Company believes that the Pohli Complaint is without merit and intends to contest the matter vigorously. On January 11, 1995, a purported class action complaint entitled John S. Meade v. Pyramid Technology et al., C.V. No. 746621 (the "Meade Complaint") was filed against the Company and its directors in the Superior Court of California in and for the County of Santa Clara. The Meade Complaint alleges, among other things, that the defendants have breached their fiduciary duties to the Company by failing to conduct an active auction designed to maximize shareholder value and by failing to form an independent committee of unaffiliated directors to consider the Offer or other possible business combinations or alternative transactions. Among other things, the Meade Complaint seeks an order directing the Company's directors to carry out their fiduciary duties to the Company's stockholders by exploring third party interest in alternative business combinations with the Company and conducting an open and fair auction of the Company, as well as damages and costs. The Company has advised Purchaser that it believes that the Meade Complaint is without merit and intends to contest the matter vigorously. On January 12, 1995 and January 13, 1995, respectively, two purported class action complaints entitled, respectively, John Velonis v. Pyramid Technology et al., C.V. No. 746669 (the "Velonis Complaint") and Vincent Defeo v. Pyramid Technology et al., C.V. No. 746801 (the "Defeo Complaint") were filed against the Company, its directors and SNI AG in the Superior Court of California in and for the County of Santa Clara. The Velonis Complaint and the Defeo Complaint allege, among other things, that the defendants have breached their fiduciary duties to the Company's stockholders by failing and refusing to attempt in good faith to maximize shareholder value in connection with the sale of the Company by failing to put the Company up for auction and failing to consider offers by other companies to acquire the Company. Among other things, the Velonis Complaint and the Defeo Complaint seek an order directing the Company's directors to carry out their fiduciary duties to the Company's stockholders by cooperating fully with any entity or person having a bona fide interest in proposing any transaction that would maximize shareholder value, including a buy-out or takeover of the Company, and taking all steps necessary to create an active auction of the Company, as well as damages and costs. The Company has advised Purchaser that it believes, and SNI AG believes, that the Velonis Complaint and the Defeo Complaint are without merit and each of the Company and SNI AG intends to contest the matters vigorously. ITEM 9. MATERIAL TO BE FILED AS EXHIBITS Exhibit 2.1 Agreement and Plan of Merger, dated as of January 20, 1995, by and among SNI AG, Purchaser and the Company. Exhibit 4.1 Amendment to Amended and Restated Common Shares Rights Agreement, dated as of January 20, 1995. Exhibit 10.1 Form of Indemnification Agreement between the Company and each of its directors and executive officers. Exhibit 10.2 Statement of Employment Terms, dated as of July 1, 1991, between Richard H. Lussier and the Company. Exhibit 10.3 Statement of Employment Terms, dated as of August 5, 1991, between John S. Chen and the Company. Exhibit 10.4 Management Retention Agreement, dated as of January 20, 1995, between John S. Chen and the Company. Exhibit 10.5 Statement of Employment Terms, dated as of January 25, 1994, between Kent L. Robertson and the Company.
16 Exhibit 10.6 Statement of Employment Terms, dated as of October 14, 1992, between Edward W. Scott, Jr. and the Company. Exhibit 10.7 Statement of Employment Terms, dated as of May 27, 1992, between Allan D. Smirni and the Company. Exhibit 10.8 Statement of Employment Terms, dated as of May 27, 1992, between William M. Wishart and the Company. Exhibit 10.9 Common Stock and Warrant Purchase Agreement, dated as of August 21, 1994, between the Company and Siemens Nixdorf Information Systems, Inc.** Exhibit Warrant to Purchase 1,330,000 Shares of Common Stock, dated as 10.10 of September 12, 1994. Exhibit Software and Hardware License Agreement, dated as of August 25, 10.11 1994, between the Company and Siemens Nixdorf Informationssysteme AG.*** Exhibit Registration Rights Agreement, dated as of September 13, 1994, 10.12 by and between the Company and Siemens Nixdorf Information Systems, Inc. Exhibit 20.1 The Company's Information Statement pursuant to Section 14(f) of the Securities Exchange Act of 1934 and Rule 14f-1 thereunder (see Annex A).* Exhibit 20.2 Copy of Letter to Company Stockholders, dated January 27, 1995.* Exhibit 99.1 Form of Press Release issued by the Company and SNI AG on January 23, 1995. Exhibit 99.2 Form of Press Release issued by the Company and SNI AG on January 27, 1995. Exhibit 99.3 Opinion of Smith Barney Inc., dated January 20, 1995 (see Annex B).*
- -------- * Included in materials being distributed to stockholders of the Company. ** Incorporated by reference from Exhibit 10.51 of the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1994. *** Incorporated by reference from Exhibit 10.52 of the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1994. The Company has applied for confidential treatment for portions of this agreement, by letter dated December 14, 1994. Such request for confidential treatment is pending. 17 SIGNATURE After reasonable inquiry and to the best of its knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: January 27, 1995 PYRAMID TECHNOLOGY CORPORATION /s/ RICHARD H. LUSSIER BY: _________________________________ RICHARD H. LUSSIER CHAIRMAN AND CHIEF EXECUTIVE OFFICER 18 [LOGO OF PYRAMID TECHNOLOGY CORPORATION APPEARS HERE] PYRAMID TECHNOLOGY CORPORATION 3860 N. FIRST STREET SAN JOSE, CALIFORNIA 95134 INFORMATION STATEMENT PURSUANT TO SECTION 14(F) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER This Information Statement is being mailed on or about January 27, 1995 as part of the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") to the holders of record at the close of business on January 18, 1995 of the Shares. Capitalized terms used and not otherwise defined herein shall have the meaning ascribed to them in the Schedule 14D-9. You are receiving this Information Statement in connection with the possible election of persons designated by SNI AG to a majority of the seats on the Board of Directors of the Company. Promptly upon the acceptance for payment and payment by the Purchaser for Shares pursuant to the Offer of such number of shares that satisfies the Minimum Condition under the Merger Agreement, Purchaser shall be entitled to designate a number of directors to be elected to the Company's Board (the "Designees") proportional to Purchaser's ownership interest in the Company after giving effect to the acquisition of such Shares, including increasing the size of the Board or securing the resignations of incumbent directors or both. The Company will also cause such Designees to constitute the same percentage of (i) each committee of the Board, (ii) each Board of Directors of each domestic Subsidiary and (iii) each committee of each such board. This Information Statement is required by Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule 14f-1 thereunder. You are urged to read this Information Statement carefully. However, you are not required to take any action. Pursuant to the Merger Agreement, on January 27, 1995, Purchaser commenced the Offer. The Offer is scheduled to expire on February 24, 1995. The information contained in this Information Statement (including information listed in Schedule I attached hereto and information incorporated herein by reference) concerning SNI AG, Purchaser and Designees has been furnished to the Company by SNI AG and Purchaser, and the Company assumes no responsibility for the accuracy of completeness of such information. The Common Stock, $.01 par value per share ("Common Stock"), is the only class of voting securities of the Company outstanding. Each share of Common Stock has one vote. As of January 18, 1995, there were 15,628,591 shares of Common Stock outstanding. GENERAL The Board of Directors of the Company currently consists of eight (8) members. Each director holds office until his successor is elected and qualified or until his earlier death, resignation or removal. A-1 BOARD OF DIRECTORS BUYER DESIGNEES Pursuant to the Merger Agreement, promptly upon the acquisition by Purchaser pursuant to the Offer of such number of Shares that satisfies the Minimum Condition and from time to time thereafter, SNI AG is entitled to have its Designees hold a number of seats on the Company's Board proportional to Purchaser's ownership interest in the Company after giving effect to the acquisition of such Shares. Upon the purchase of such number of Shares pursuant to the Offer, the Company shall cause the Designees to be elected or appointed to the Board including, without limitation, increasing the number of directors and seeking and accepting resignations of incumbent directors. SNI AG has informed the Company that it will choose the Designees from the directors and executive officers listed in Schedule I to Purchaser's Offer to Purchase, a copy of which is being mailed to the Company's stockholders together with this Schedule 14D-9. SNI AG has informed the Company that each of the directors and executive officers listed in Schedule I to the Offer to Purchase has consented to act as a director, if so designated. The information on such Schedule I is incorporated herein by reference. The business address of SNI AG is Otto-Hahn-Ring 6, 81739 Munich, Germany and the business address of the Purchaser is 1301 Avenue of the Americas, New York, New York 10019-6022. It is expected that the Designees may assume office at any time following the purchase by Purchaser pursuant to the Offer of such number of Shares that satisfies the Minimum Condition, which purchase cannot be earlier than February 24, 1995, and that upon assuming office, the Designees will thereafter constitute at least a majority of the Board. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY The names of the current directors of the Company, their ages as of January 27, 1995, and certain other information about them are set forth below. As indicated above, some of the current directors may resign effective immediately following the purchase of Shares by the Purchaser pursuant to the Offer.
DIRECTOR NAME AGE PRINCIPAL OCCUPATION SINCE ---- --- -------------------- -------- Richard H. Lussier.... 57 Chief Executive Officer and Chairman of the 1986 Board of the Company John S. Chen.......... 39 President and Chief Operating Officer of 1993 the Company Dr. Rudolf Bodo....... 64 Vice President and General Manager, Mid- 1994 Range Systems Unit, Siemens Nixdorf Informationssysteme AG Paul J. Chiapparone... 55 Senior Vice President, Electronic Data 1994 Systems Corporation Donald E. Guinn....... 62 Chairman Emeritus, Pacific Telesis Group 1988 Jack L. Hancock....... 64 Retired executive, Pacific Bell 1994 Clarence W. Spangle... 69 Self-employed consultant 1990 George D. Wells....... 59 President and Chief Executive Officer, Exar 1988 Corporation
Except as set forth below, each of the directors has been engaged in his principal occupation described above during the past five years. There are no family relationships among any of the directors or executive officers of the Company. Mr. Lussier joined the Company in November 1986 as President, Chief Executive Officer, and Chairman of the Board. He held the title of President of the Company until June 1993. A-2 Mr. Chen has been President of the Company since June 1993 and has been Chief Operating Officer of the Company since October 1992. Previously, he was the Company's Executive Vice President from August 1991 to September 1992. Prior to that, Mr. Chen held various management and executive positions with Unisys Corporation for twelve years, the last position being Vice President and General Manager of its Unix Systems Group, and prior to that Vice President and General Manager of its RISC Technology Platform Division. Dr. Bodo has been Vice President and General Manager, Mid-Range Systems Unit, SNI AG since April 1993. From October 1990 to March 1993, he was Vice President of the Systems Planning Department of SNI. From 1988 to 1990, Dr. Bodo was Vice President of Systems Planning of the Information Systems Division of SNI AG. Mr. Chiapparone is also a director of Electronic Data Systems Corporation. Mr. Guinn is also a director of Bank of America, N.T. & S.A., BankAmerica Corporation, Brunswick Corporation, The Dial Corp., Pacific Bell, Pacific Telesis Group and Pacific Mutual Life Insurance Co. Mr. Hancock was Executive Vice President of Pacific Bell from January 1989 to December 1993. He is also a director of 3Com Corporation, Whitaker Corporation and Union Bank. Mr. Spangle is also a director of Apertus Technology Inc. and Keytronics Inc. Mr. Wells has served as President and Chief Executive Officer, and as a director of Exar Corporation since June 1992. From April 1985 until June 1992, Mr. Wells was President, Chief Operating Officer and a director of LSI Logic Corporation. Mr. Wells is also a director of Micronics, Inc. and QLogic Corporation. BOARD MEETINGS AND COMMITTEES The Board of Directors of the Company held a total of thirteen (13) meetings during fiscal 1994. The Board of Directors has an Audit Committee, a Compensation Committee and a Nominating Committee. The Audit Committee, which consisted of Donald E. Guinn, Clarence W. Spangle and George D. Wells, held a total of three (3) meetings during fiscal 1994. In fiscal 1994, the Audit Committee recommended engagement of the Company's independent auditors, reviewed the scope of the annual audit, considered comments made by the independent auditors with respect to accounting procedures and internal controls and the action or response by management and reviewed selected accounting procedures and controls of the Company. The Compensation Committee, which also consisted of directors Guinn, Spangle and Wells, held four (4) meetings during fiscal 1994. In fiscal 1994, this Committee reviewed and approved the Company's executive compensation policy and distributions to officers and key employees of the Company. If delegated by the Board, the Committee also makes recommendations to the Board with respect to, and administers, the Company's Amended 1982 Incentive Stock Option Plan, Executive Officers Nonstatutory Stock Option Plan and 1987 Employee Stock Purchase Plan. The Nominating Committee, which consisted of Messrs. Guinn, Spangle and Wells, held two (2) meetings during fiscal 1994. The Committee recommends candidates for election to the Board and selects director nominees for election. It also recommends changes in the size and composition of the Board. It is the Committee's practice to consider nominees recommended by stockholders. Stockholders who wish to submit names of prospective nominees for consideration by the Committee must do so in writing to the Secretary of the Company in accordance with the By-laws of the Company. During fiscal 1994, no director attended fewer than 75% of all such meetings of the Board of Directors and the committees upon which such director served. A-3 DIRECTOR COMPENSATION Non-employee members of the Board of Directors are eligible to receive an annual retainer of $10,000, and fees of $1,000 per Board meeting attended and $750 per Committee meeting attended. In addition, non-employee directors participate in the Amended and Restated Directors' Option Plan (the "Director Plan"). Under the Director Plan, each new non-employee director is granted an initial option to purchase (i) 12,000 shares of Common Stock if he first becomes a new director by June 30, or (ii) 6,000 shares if he first becomes a director on or after July 1. Also, incumbent non-employee directors are entitled to receive automatic grants of options to purchase 6,000 shares of Common Stock on January 31 of each year. The exercise price of these options may not be less than the fair market value of the Common Stock on the date of such grants. Such options are exercisable cumulatively, to the extent of 1/4 of the option stock six months after the date of grant and, thereafter, as to 1/24 of the option stock for each full month that expires while the optionee remains a director. In fiscal 1994, non-employee directors as a group received stock options under the Director Plan totaling 42,000 shares. A-4 STOCK OWNERSHIP INFORMATION SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information, as of January 23, 1995, with respect to the beneficial ownership of the Common Stock of the Company by: (a) each stockholder known by the Company to be the beneficial owner of more than five percent of the Company's Common Stock; (b) each director and nominee of the Company; (c) each Executive Officer named in the Summary Compensation Table below; and (d) all directors and executive officers as a group. The number and percentage of shares beneficially owned is determined under the rules of the Securities and Exchange Commission ("SEC"), and the information is not necessarily indicative of beneficial ownership for any other purpose.
BENEFICIAL OWNERSHIP OF APPROXIMATE COMMON PERCENT OF NAME OF BENEFICIAL OWNER STOCK(1) CLASS ------------------------ ---------- ----------- Siemens Nixdorf Informationssysteme AG.................. 2,717,743 17.38% Otto-Hahn-Ring 6 81739 Munich, Germany Richard H. Lussier(2)................................... 207,814 1.33% John S. Chen(3)......................................... 148,125 * Dr. Rudolf Bodo......................................... -0- N/A Paul J. Chiapparone(4).................................. 6,000 * Donald E. Guinn(5)...................................... 48,104 * Jack L. Hancock(6)...................................... 7,000 * Clarence W. Spangle(7).................................. 24,062 * George D. Wells (8)..................................... 17,652 * Mitchell Mandich(9)..................................... 42,921 * Edward W. Scott, Jr.(10)................................ 46,204 * Allan D. Smirni(11)..................................... 39,141 * All directors and executive officers as a group (13 persons)(12)............................................ 634,947 4.06%
- -------- * Less than 1 percent. (1) Each holder named in the table has sole voting and investment power with respect to all shares of Common Stock beneficially owned subject to community property laws where applicable and the information contained in the footnotes to this table. (2) Represents 187,501 and 20,313 shares subject to options granted to Mr. Lussier under the Amended 1982 Incentive Stock Option Plan and the Executive Officers Nonstatutory Stock Option Plan, respectively, which were exercisable as of January 23, 1995, or within 60 days thereafter. (3) Represents 148,125 shares subject to options granted to Mr. Chen under the Amended 1982 Incentive Stock Option Plan which were exercisable as of January 23, 1995, or within 60 days thereafter. (4) Represents 6,000 shares subject to options granted to Mr. Chiapparone under the Directors Option Plan which were exercisable as of January 23, 1995, or within 60 days thereafter. (5) Represents 5,000 shares beneficially owned by Donald E. Guinn and Darhl M. Guinn, Trustees of the Guinn 1985 Family Trust dated December 19, 1985, and 20,000 and 23,104 shares subject to options granted to Mr. Guinn under the Amended 1982 Incentive Stock Option Plan and the Directors Option Plan, respectively, which were exercisable as of January 23, 1995, or within 60 days thereafter. (6) Includes 6,000 shares subject to options granted to Mr. Hancock under the Directors Option Plan which were exercisable as of January 23, 1995, or within 60 days thereafter. (7) Represents 24,062 shares subject to options granted to Mr. Spangle under the Directors Option Plan which were exercisable as of January 23, 1995, or within 60 days thereafter. A-5 (8) Represents 17,562 shares subject to options granted to Mr. Wells under the Directors Option Plan which were exercisable as of January 23, 1995, or within 60 days thereafter. (9) Includes 42,770 shares subject to options granted to Mr. Mandich under the Amended 1982 Incentive Stock Option Plan which were exercisable as of January 23, 1995, or within 60 days thereafter. (10) Includes 43,100 shares subject to options granted to Mr. Scott under the Amended 1982 Incentive Stock Option Plan which were exercisable as of January 23, 1995, or within 60 days thereafter. (11) Includes 37,375 shares subject to options granted to Mr. Smirni under the Amended 1982 Incentive Stock Option Plan which were exercisable as of January 23, 1995, or within 60 days thereafter. (12) Includes 525,831, 20,313, and 76,729 shares subject to options granted under the Company's Amended 1982 Incentive Stock Option Plan, Executive Officers Nonstatutory Stock Option Plan and Directors' Option Plan, respectively, exercisable on January 23, 1995, or within 60 days thereafter. SECTION 16(A) REPORTING DELINQUENCIES Section 16(a) of the Exchange Act requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, to file certain reports regarding ownership of, and transactions in, the Company's securities with the SEC. Such officers, directors and 10% stockholders are also required by SEC rules to furnish the Company with copies of all Section 16(a) forms that they file. Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons, the Company believes that all applicable Section 16(a) filing requirements were complied with during the fiscal year ended September 30, 1994 by its officers, directors and 10% stockholders. CERTAIN RELATIONSHIPS, TRANSACTIONS AND ARRANGEMENTS In September 1991, the Company loaned John S. Chen, President and Chief Operating Officer, the sum of $100,000. The loan was repaid in full by Mr. Chen in September 1994. The loan (i) had a term of three years, (ii) bore interest at the rate of 8.5%, (iii) provided for the payment of interest and principal at maturity, (iv) was unsecured and (v) could be prepaid any time without penalty. In December 1990, the Company loaned Edward W. Scott, Jr., Executive Vice President, the sum of $300,000. The loan has been forgiven in full through an agreement with the Company providing for loan forgiveness of the principal and interest based on continued employment by Mr. Scott through January 1, 1994, which was achieved. The loan (i) had a term of three years, (ii) bore interest at the rate of 9.0%, (iii) provided for the payment of interest and principal at maturity, (iv) was unsecured and (v) could be prepaid at any time without penalty. In 1985, the Company entered into a Convertible Subordinated and Preferred Stock Purchase Agreement (the "Nixdorf Stock Agreement") with Nixdorf Computer AG ("Nixdorf"). Under the Nixdorf Stock Agreement, Nixdorf purchased approximately 5% of the Company's Common Stock. The Nixdorf Stock Agreement also gave Nixdorf the right to purchase its pro rata share of certain equity financings of the Company as long as Nixdorf holds a minimum 5% stock interest. The Company and Nixdorf also entered into an OEM Agreement in 1985 (the "Nixdorf OEM Agreement"), pursuant to which the Company agreed to sell or license its current and certain future products to Nixdorf for resale or sublicense under Nixdorf's own label. In March 1990, the Company and Nixdorf agreed to extend the term of the Nixdorf OEM Agreement through March 1996. In addition, the Company and Nixdorf in 1990 entered into a Software License Agreement, under which the Company agreed to license its computer operating system software and directly related software programs. A-6 Also in March 1990, Nixdorf exercised its right to purchase approximately 140,000 shares of the Company's Common Stock as part of the Company's secondary public offering of its common stock, to maintain Nixdorf's pro rata equity ownership at approximately 6% of the Company's outstanding shares. In 1990, Nixdorf was acquired by SNI AG, which renamed Nixdorf as Siemens Nixdorf Informationssysteme AG ("SNI AG" herein). The Common Stock of the Company and the rights under the Nixdorf Stock Agreement, the Nixdorf OEM Agreement and Software License Agreement were assigned and transferred to SNI AG. In 1992, the Company and SNI AG also entered into a Master Agreement, pursuant to which the Company agreed to sell computer systems, components, spare parts and services to Siemens Nixdorf and its local country affiliates for resale under its own label. In August 1994, the Company entered into a Common Stock and Warrant Purchase Agreement (the "Siemens Stock Agreement") with Siemens Nixdorf Information Systems, Inc. ("SNI US"), an affiliate of SNI AG. Pursuant to the Siemens Stock Agreement, the Corporation sold SNI AG 2,000,000 shares of its Common Stock for an aggregate price of $17,250,000 and issued a warrant to SNI AG to sell up to an additional 1,330,000 shares at $10.00 per share, which warrant expires on September 30, 1995. Pursuant to the Siemens Stock Agreement, SNI AG designated one of its officers, Dr. Rudolf Bodo, to be elected as a director to the Company's Board of Directors. As part of the August 1994 transactions discussed above, the Company and SNI AG also expanded its cooperative agreements for high-end UNIX-based open systems by entering into a new Software and Hardware License Agreement (the "SNI AG License Agreement") and by amending the Nixdorf OEM Agreement. Under these agreements, SNI AG agreed to license the Company's enhancement of the UNIX operating system for massively parallel processing ("MPP") and received the right to purchase the related MPP hardware product. In fiscal 1994, the Company's sales to SNI AG totaled approximately $11,300,000, or 5.2% of the Company's revenues for that year. Pursuant to the Merger Agreement, upon consummation of the Merger, each holder of a then outstanding director or employee stock option, other than any such options that are held by any director of the Company or any executive officer (as that term is defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended) of the Company that were granted (or deemed to be granted) at any time on or after the date that is six months prior to the consummation of the Merger ("Recent Insider Options"), will be entitled (whether or not such option is then exercisable) to receive in consideration of cancellation of such option (and any outstanding stock appreciation right related thereto) a cash payment from the Company in an amount equal to the difference between the price per Share each holder of Shares will receive in the Merger and the per Share exercise price of such option, multiplied by the number of Shares covered by such option. As a result, directors and executive officers of the Company will be able to exercise outstanding options (with the exception of Recent Insider Options). It is the intention of the parties to the Merger Agreement that the Recent Insider Options will be cancelled no later than six months after the Effective Date and the consideration to be paid for the cancellation of each Recent Insider Option shall be the Option Consideration multiplied by the number of shares covered by such option. At the request of SNI AG, Richard M. Lussier, Chief Executive Officer and Chairman of the Board of the Company, and Siemens AG have had discussions regarding a senior management position for Mr. Lussier within the Siemens group of companies. The parties expect that the principal terms of an employment agreement relating to such position could include a base salary, bonus payments, a supplemental executive retirement plan and payments pursuant to a long-term incentive plan. For a more detailed description of such employment agreement, see the Schedule 14D-9, "Additional Agreements, Arrangements and Understandings." A-7 At the request of SNI AG, John S. Chen, President and Chief Operating Officer of the Company, has entered into a Management Retention Agreement (the "Chen Agreement") with the Company. Terms of the Chen Agreement include serving as Chief Executive Officer of the Company, serving as a director of the Company, signing bonus, base salary, target bonus, retention bonus, payment under phantom equity or long term incentive programs and severance payments and benefits. For a more detailed description of the Chen Agreement, see the Schedule 14D-9, "Additional Agreements, Arrangements and Understandings." EXECUTIVE OFFICER COMPENSATION EXECUTIVE COMPENSATION The following table sets forth all compensation awarded, earned or paid for services rendered in all capacities to the Company during fiscal years ended September 30, 1994, 1993 and 1992 to the Company's Chief Executive Officer and each of its four other most highly compensated executive officers who were serving as executive officers at the end of fiscal 1994. This information includes the dollar values of base salaries, bonus awards, the number of stock options granted and certain other compensation, if any, whether paid or deferred. The Company does not grant SARs and, other than options, has no other long-term compensation programs. SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION AWARDS ANNUAL COMPENSATION ------------ ------------------------- SECURITIES ALL OTHER NAME AND PRINCIPAL SALARY BONUS UNDERLYING COMPENSATION POSITION YEAR ($) ($) OPTIONS (#) ($) ------------------ ---- -------- -------- ------------ ------------ Richard H. Lussier...... 1994 $363,463 $ -0- 156,000 $12,115(1) Chief Executive Officer 1993 332,116 165,900 25,000 7,306 and Chairman of the 1992 320,413 -0- 60,000 7,219 Board John S. Chen............ 1994 290,779 -0- 81,000 64,427(2) President and Chief 1993 246,623 99,540 95,000 5,570 Operating Officer 1992 208,068 56,175 35,000 5,321 Edward W. Scott, Jr..... 1994 224,214 -0- -0- 73,352(3) Executive Vice 1993 209,997 66,360 15,000 149,701 President 1992 215,884 -0- 15,000 143,093 Mitchell Mandich........ 1994 210,338 60,315(4) 12,500 6,836(5) Senior Vice President 1993 170,958(6) 15,000 75,000 3,425 1992 N/A Allan D. Smirni......... 1994 169,345 -0- 7,500 9,725(7) Vice President, General 1993 155,172 31,007 5,000 5,933 Counsel 1992 148,386 -0- 13,000 6,261
- -------- (1) Represents $4,673 for a 401(k) Plan matching contribution and $7,442 for life insurance premiums. (2) Represents $56,800 to compensate Mr. Chen for interest due on a loan in the amount of $100,000, which loan was repaid in full by Mr. Chen, plus compensation for taxes associated with such interest; $5,562 for a 401(k) Plan matching contribution and $2,065 for life insurance premiums. (3) Represents forgiveness of principal and interest in the amount of $68,967 under a 9.0% promissory note in the original amount of $300,000 made to Mr. Scott in 1990, and $4,385 for life insurance premiums. (See "CERTAIN RELATIONSHIPS, TRANSACTIONS AND ARRANGEMENTS.") (4) Represents commission bonus. (5) Represents $4,411 for a 401(k) Plan matching contribution and $2,425 for life insurance premiums. (6) Includes salary for a partial year (employment date 1-18-93). (7) Represents $5,433 for a 401(k) Plan matching contribution and $4,292 for life insurance premiums. A-8 STOCK OPTION GRANTS AND EXERCISES The following table sets forth further information regarding individual grants of options during fiscal 1994 to each of the executive officers named in the Summary Compensation Table above. All such grants were made pursuant to the Company's Amended 1982 Incentive Stock Option Plan. In accordance with the rules of the SEC, the table sets forth the hypothetical gains or "option spreads" that would exist for the options at the end of their respective ten- year terms based on assumed annualized rates of compound stock price appreciation of 5% and 10% from the dates the options were granted to the end of the respective option terms. Actual gains, if any, on option exercises are dependent on the future performance of the Company's Common Stock and overall market conditions. There can be no assurance that the potential realizable values shown in this table will be achieved. OPTION GRANTS IN FISCAL 1994
INDIVIDUAL GRANTS --------------------------------------------- POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL NUMBER OF RATES OF STOCK SECURITIES PERCENTAGE OF PRICE APPRECIATION UNDERLYING TOTAL OPTIONS FOR OPTIONS GRANTED TO EXERCISE OPTION TERM(3) GRANTED EMPLOYEES IN PRICE EXPIRATION ------------------- NAME (#)(1) FISCAL 1994(2) ($/SH) DATE 5% (5) 10% ($) ---- ---------- -------------- -------- ---------- ------ ---------- Richard H. Lussier...... 80,000 7.16 $14.75 01/25/04 $742,096 $1,880,616 76,000 6.80 8.88 09/22/04 424,189 1,074,979 John S. Chen............ 15,000 1.34 14.75 01/25/04 139,143 352,616 66,000 5.91 8.88 09/22/04 368,375 933,535 Edward W. Scott, Jr..... -0- N/A N/A N/A N/A N/A Mitchell Mandich........ 12,500 1.12 14.75 01/25/04 115,952 293,846 Allan D. Smirni......... 7,500 0.67 14.75 01/25/04 69,571 176,308
- -------- (1) Stock options are granted with an exercise price equal to the fair market value of the Company's Common Stock on the date of grant. Options generally become exercisable 25% after the first year and monthly thereafter at the rate of 1/48 of the total grant, and are fully exercisable after 4 years. Options lapse after ten years or, if earlier, 3 months after termination of employment. (2) Based on 1,117,500 shares granted during fiscal 1994. (3) Potential realizable values are net of exercise price but before taxes associated with exercise. These amounts represent certain assumed rates of appreciation only, based on the SEC rules. Actual realizable values, if any, on stock option exercises are dependent on the future performance of the Common Stock, overall market conditions and the option holders' continued employment through the vesting period. A-9 The following table sets forth certain information concerning the exercise of stock options during fiscal 1994 by each of the executive officers named in the Summary Compensation Table above and the number and value at September 30, 1994, of unexercised options held by said individuals. AGGREGATED OPTION EXERCISES IN FISCAL 1994 AND SEPTEMBER 30, 1994 OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED(1) SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT ACQUIRED VALUE OPTIONS AT 9/30/94 9/30/94 ($) ON EXERCISE REALIZED ------------------------- -------------------------- (#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE ----------- -------- ------------------------- -------------------------- Richard H. Lussier...... -0- N/A 193,900 144,080 $ 10,157 $ 781 John S. Chen............ -0- N/A 123,327 145,673 14,219 1,094 Edward W. Scott, Jr..... -0- N/A 41,371 1,729 6,094 469 Mitchell Mandich........ -0- N/A 31,238 42,262 -0- -0- Allan D. Smirni......... -0- N/A 35,456 7,649 2,031 156
- -------- (1) Based on a fair market value of $8.50 per share as of September 30, 1994, the closing price of the Company's Common Stock on that date as reported by the Nasdaq National Market. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION In fiscal year ended September 30, 1994, Messrs. Guinn, Spangle and Wells served as members of the Compensation Committee. No member of the Compensation Committee is or was formerly an officer or an employee of the Company or its subsidiaries. No interlocking relationship exists between the Company's Board of Directors or Compensation Committee and the board of directors or compensation committee of any other company, nor has any such interlocking relationship existed in the past. EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS The Company has employment agreements for the following executive officers of the Company: Richard H. Lussier, John S. Chen, Kent L. Robertson, Edward W. Scott, Jr., Allan D. Smirni and William M. Wishart. The agreements cover the conditions under which termination severance and benefits will be paid by the Company. If termination is for cause, is due to death or disability or is voluntary and not related to a change in control, no severance or benefits will be paid under the agreements. If a change in control of the Company occurs as defined in the agreements, then severance and benefits will be paid as follows: (i) for involuntary termination within 12 months after the change in control, severance equal to 200% of annual base salary and the average of annual cash bonuses paid for three years and 24 months of continued benefits; (ii) for voluntary termination within 6 months after the change in control, severance is equal to 100% of annual base salary and the average of annual cash bonuses paid for three years and 12 months of continued benefits. In the event of involuntary termination not related to a change in control, severance is equal to 100% of annual base salary and the average of annual cash bonuses paid for three years and 12 months of continued benefits will be paid. The agreements terminate upon the earlier of (i) the date that all obligations of the executive officer and the Company are satisfied, (ii) June 30, 1996 or (iii) twenty-four months after a change in control. A-10 COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION COMPENSATION COMMITTEE POLICY The Compensation Committee of the Board of Directors (the "Committee") was responsible for setting executive compensation policy and determining the compensation paid to executive officers of the Corporation. The Committee was comprised of Messrs. Guinn, Spangle and Wells, all of whom are non-employee Directors of the Company. The Company's executive compensation programs are designed to enable it to attract, retain and reward qualified executives while maintaining a strong and direct link between executive pay, the Company's financial performance and stockholder returns. The Committee believes that officers and other employees should have a significant stake in the Company's stock price performance under programs which link executive compensation to stockholder return. This is accomplished through the executive compensation program. There are three main components of the executive compensation program: base salaries, annual bonuses and stock-based long-term incentives. BASE SALARIES The Committee believes that it is in the best interests of stockholders to manage and fix compensation costs at industry rates to enable the Company to secure qualified and talented executive officers under the rapidly changing market conditions in the high technology industry. Accordingly, base salaries for the Company's executive officers have been targeted at average rates paid by competitors to enable the Company to retain highly skilled executives and to attract others as necessary. Base salaries are reviewed annually with the assistance of an independent compensation consultant firm and are adjusted based on individual performance, average increases in high technology companies and general industry, and the going rate for similar positions in similar sized companies in the same geographic area. In this group of companies, the Company targets its base salaries at the median level. The independent compensation consultant firm provides the Company with assistance in research and survey analysis of total executive compensation for competitors and for companies with similar size and products. The compensation of the President and Chief Executive Officer is also directly related to the results of operations and the balance sheet and cash flows for the fiscal year of the Company. Richard H. Lussier, the Chief Executive Officer and Chairman of the Board, received a salary increase of 8.57% based on an analysis of the foregoing factors. This salary increase was effective at the beginning of fiscal year 1995. For all executive officer positions, actual base salary levels are currently at the targeted average levels of the competition. ANNUAL BONUSES The Company maintains a Management Incentive Plan ("MIP") which provides executive officers and other key management employees the opportunity to earn annual cash bonuses. The MIP is intended to motivate and reward officers for the attainment of the Company's annual pretax income and revenue goals, as determined by the Committee. The total bonus compensation for the Company's executive officers has also been targeted at average rates paid by competitors. For all executive officer positions, actual total bonus compensation levels are currently at the targeted average level of the competition. The MIP formula begins to result in bonus payments as a percentage of each individual's target MIP award, when actual performance reaches a predetermined percentage of the preset goal. The payout percent increases in a linear fashion until 100% of the preset goals is achieved, whereupon 100% of a target MIP award would be paid. Above 100% of preset goal performance, the MIP payout percentage differs for the A-11 pretax and revenue goals. When actual pretax income exceeds the preset pretax income target, the actual MIP award paid is 100% of target plus an accelerated percentage for each 1% that actual pretax income exceeds the target. This design results in a highly leveraged total annual compensation program at the Company. It will result in above average total annual compensation in years of above-average performance, and conversely, it will result in below-average total annual compensation in years of below-average performance. The Committee believes that this pay-for-performance result is beneficial to stockholders' interests. The Company's fiscal 1994 performance did not exceed the minimum percentage of the goals established by the Committee. As a result, under the application of the MIP formula, no MIP bonus awards were paid. LONG-TERM INCENTIVES The Committee utilizes stock options as the sole form of long-term incentives. Stock options are normally granted to executives on an annual basis each January under the Amended 1982 Incentive Stock Option Plan. The Committee believes that this program serves to link management and stockholder interests and motivate executives to make long-term decisions and investments that will serve to increase the long-term total return to stockholders. Executive officers received stock option grants during fiscal 1994 (see "Option Grants in Fiscal 1994"). The Company does not have a policy that requires or encourages the Committee to qualify stock options awarded to executive officers for deductibility under Section 162(m) of the Internal Revenue Code of 1986, as amended. However, the Committee does consider the net cost to the Company in making all compensation decisions. Grants of stock options for all participants are not made on the basis of any formal guideline, but rather on the basis of an assessment of individual performance, the relative position of the optionee and relative contribution of the optionee. The allocation of shares granted is governed by the overall constraint of managing the available pool of shares preapproved by stockholders for options. While the grants are intended to be consistent with average competitive practice, the ultimate value received by option holders is directly linked to increases in the Company's stock price and the number of shares granted to a participant. COMPENSATION COMMITTEE Donald E. Guinn Clarence W. Spangle George D. Wells A-12 PERFORMANCE GRAPH The stock price performance graph depicted below shall not be deemed incorporated by reference by any general statement incorporating by reference this information statement into any filing under the Securities Act of 1933, as amended or under the Securities Exchange Act of 1934, as amended. The stock price performance on the graph is not necessarily an indicator of future price performance. The graph below compares the cumulative return of Pyramid Common Stock with the cumulative total return on the Standard & Poor's 500 Composite Index and the Standard & Poor's High Technology Composite Index. The cumulative return depicted is based upon an initial investment of $100 over five years on September 30, 1989 (the last trading day of fiscal 1989), and assumes reinvestment of dividends. [GRAPH APPEARS HERE] COMPARISON OF FIVE YEAR CUMULATIVE RETURN AMONG PYRAMID, S&P 500 AND S&P HIGH TECH
S&P Measurement period S&P HIGH (Fiscal Year Covered) PYRAMID 500 TECH - --------------------- -------- -------- -------- Measurement PT - 09/89 $ 100 $ 100 $ 100 FYE 09/90 $ 107 $ 91 $ 86 FYE 09/91 $ 107 $ 119 $ 105 FYE 09/92 $ 59 $ 132 $ 107 FYE 09/93 $ 147 $ 149 $ 130 FYE 09/94 $ 58 $ 155 $ 151
A-13 [LETTERHEAD OF SMITH BARNEY APPEARS HERE] January 20, 1995 The Board of Directors Pyramid Technology Corporation 3860 North First Street San Jose, CA 95134-1702 Members of the Board: In connection with the proposed acquisition of Pyramid Technology Corporation ("Pyramid" or the "Company"), by Siemens Nixdorf Informationssysteme AG ("Siemens" or "Parent"), you have requested our opinion as to the fairness, from a financial point of view, of the consideration of $16.00 net per share in cash to be received by the holders of the common stock of Pyramid, pursuant to an Agreement and Plan of Merger, dated January 20, 1995 by and among Pyramid, Siemens, and Siemens Nixdorf Mid-Range Acquisition Corp. ("Purchaser") (Siemens Nixdorf Mid-Range Acquisition Corp. is a wholly-owned subsidiary of Siemens) (the "Merger Agreement"). As more fully described in the Merger Agreement, and subject to the terms and conditions specified therein, Siemens Nixdorf Mid- Range Acquisition Corp. shall commence a tender offer to purchase all of the outstanding shares of common stock, par value $.01 per share, of the Company (the "Company Common Stock") (shares of Company Common Stock being hereinafter collectively referred to as "Shares"), other than Shares owned by Siemens, for $16.00 per share (the "Offer") and if the Offer is consummated, a subsequent cash merger between Pyramid and Siemens Nixdorf Mid-Range Acquisition Corp., pursuant to which each share of the Company Common Stock which has not been purchased pursuant to the Offer, other than any Shares owned by Parent, Purchaser or any of its affiliates or Shares issuable upon the exercise of the Parent Warrant (as defined in the Merger Agreement), shall be canceled and extinguished and be converted into and become a right to receive in cash the highest price per share paid pursuant to the Offer (the "Merger"). In arriving at our opinion, we reviewed the Merger Agreement and held discussions with certain senior officers, directors and other representatives and advisors of Pyramid concerning the business, operations and prospects of Pyramid. We examined certain publicly available business and financial information relating to Pyramid and Siemens as well as certain financial forecasts and other data for Pyramid which were provided to us by senior management of Pyramid. We reviewed the financial terms of the Merger as set forth in the Merger Agreement in relation to, among other things: the Company's historical and projected earnings and the capitalization and financial condition of Pyramid. We also considered, to the extent publicly available, the financial terms of certain other similar transactions which we deemed comparable to the Merger and analyzed certain financial and other publicly available information relating to the businesses of other companies whose operations we considered comparable to Pyramid. In addition, we conducted such other analyses and examinations and considered such other financial, economic and market criteria as we deemed necessary to arrive at our opinion. The Board of Directors Pyramid Technology Corporation Page 2 In rendering our opinion, we have assumed and relied, without independent verification, upon the accuracy and completeness of all financial and other information publicly available or furnished to or otherwise discussed with us. With respect to financial forecasts and other information provided to or otherwise discussed with us, we assumed that such forecasts and other information were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of Pyramid as to the expected future financial performance of Pyramid. We have assumed the correctness of, and relied upon the representations of Siemens and Pyramid, pursuant to the Merger Agreement, and have not attempted to independently verify any such information. We have not made or been provided with an independent valuation or appraisal of the assets or liabilities (contingent or otherwise) of Pyramid, nor have we made any physical inspection of the properties or assets of Pyramid. Our opinion is necessarily based upon financial, stock market and other conditions and circumstances existing and disclosed to us as of the date hereof. Smith Barney has been engaged to render financial advisory services to Pyramid in connection with the Offer and Merger and will receive a fee for our services, a significant portion of which is contingent upon consummation of the Merger. We will also receive a fee upon the delivery of this opinion. We have in the past provided financial advisory and investment banking services to Pyramid and have received fees for the rendering of such services. In addition, we and our affiliates (including The Travelers Inc. and its affiliates) may maintain business relationships with Pyramid, Siemens and their affiliates. Our advisory services, and the opinion expressed herein, are provided solely for the use of Pyramid's Board of Directors in its evaluation of the proposed Offer and Merger and are not on behalf of, and are not intended to confer rights or remedies upon, Siemens or its affiliates, any stockholder of Pyramid or Siemens, or any person other than Pyramid's Board of Directors. Our opinion may not be published or otherwise used or referred to, nor shall any public reference to Smith Barney be made, without our prior written consent; provided however, that we consent to the inclusion of this opinion in any Proxy Statement, 14D-9 or otherwise in connection with the proposed transaction. Based upon and subject to the foregoing, our experience as investment bankers, our work as described above and other factors we deemed relevant, we are of the opinion that, as of the date hereof, the consideration to be received by stockholders of Pyramid, pursuant to the Offer and the Merger, is fair, from a financial point of view. Very Truly Yours, Smith Barney Inc. EXHIBIT INDEX
SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION PAGE ------- ----------- ------------ 2.1 Agreement and Plan of Merger, dated as of January 20, 1995, by and among Siemens, Purchaser and the Company. 4.1 Amendment to Amended and Restated Common Shares Rights Agreement, dated as of January 20, 1995............... 10.1 Form of Indemnification Agreement between the Company and each of its directors and executive officers...... 10.2 Statement of Employment Terms, dated as of July 1, 1991, between Richard H. Lussier and the Company...... 10.3 Statement of Employment Terms, dated as of August 5, 1991, between John S. Chen and the Company............ 10.4 Management Retention Agreement, dated as of January 20, 1995, between John S. Chen and the Company............ 10.5 Statement of Employment Terms, dated as of January 25, 1994, between Kent L. Robertson and the Company....... 10.6 Statement of Employment Terms, dated as of October 14, 1992, between Edward W. Scott, Jr. and the Company.... 10.7 Statement of Employment Terms, dated as of May 27, 1992, between Allan D. Smirni and the Company......... 10.8 Statement of Employment Terms, dated as of May 27, 1992, between William M. Wishart and the Company...... 10.9 Common Stock and Warrant Purchase Agreement, dated as of August 21, 1994, between the Company and Siemens Nixdorf Information Systems, Inc.**................... 10.10 Warrant to Purchase 1,330,000 Shares of Common Stock, dated as of September 12, 1994........................ 10.11 Software and Hardware License Agreement, dated as of September 1, 1994, between the Company and Siemens Nixdorf Informationssysteme AG***..................... 10.12 Registration Rights Agreement, dated as of September 13, 1994, by and between the Company and Siemens Nixdorf Information Systems, Inc. .................... 20.1 The Company's Information Statement pursuant to Section 14(f) of the Securities Exchange Act of 1934 and Rule 14f-1 thereunder (see Annex A)*....................... 20.2 Copy of Letter to Company Stockholders, dated January 27, 1995*............................................. 99.1 Form of Press Release issued by the Company and Siemens on January 23, 1995................................... 99.2 Form of Press Release issued by the Company and SNI AG on January 27, 1995................................... 99.3 Opinion of Smith Barney, dated January 20, 1995 (see Annex B)*.............................................
- -------- * Included in materials being distributed to stockholders of the Company. ** Incorporated by reference from Exhibit 10.51 of the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1994. *** Incorporated by reference from Exhibit 10.52 of the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1994. The Company has applied for confidential treatment for portions of this agreement, by letter dated December 14, 1994. Such request for confidential treatment is pending. EX-2.1 2 AGREEMENT AND PLAN OF MERGER EXHIBIT 2.1 ----------- CONFORMED COPY ================================================================================ AGREEMENT AND PLAN OF MERGER AMONG SIEMENS NIXDORF INFORMATIONSSYSTEME AG, SIEMENS NIXDORF MID-RANGE ACQUISITION CORP. AND PYRAMID TECHNOLOGY CORPORATION DATED AS OF JANUARY 20, 1995 ================================================================================ TABLE OF CONTENTS PAGE
ARTICLE I THE OFFER --------- SECTION 1.01. The Offer........................................... 1 --------- SECTION 1.02. Company Action...................................... 3 -------------- ARTICLE II THE MERGER ---------- SECTION 2.01. The Merger.......................................... 5 ---------- SECTION 2.02. Effective Time; Closing............................. 5 ----------------------- SECTION 2.03. Effect of the Merger................................ 5 -------------------- SECTION 2.04. Certificate of Incorporation; By-laws............... 5 ------------------------------------- SECTION 2.05. Directors and Officers.............................. 6 ---------------------- SECTION 2.06. Conversion of Securities............................ 6 ------------------------ SECTION 2.07. .................................................... 6 SECTION 2.08. Dissenting Shares................................... 8 ----------------- SECTION 2.09. Surrender of Shares; Stock Transfer Books........... 8 ----------------------------------------- ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY --------------------------------------------- SECTION 3.01. Organization and Qualification; Subsidiaries........ 9 -------------------------------------------- SECTION 3.02. Certificate of Incorporation and By-laws............ 10 ---------------------------------------- SECTION 3.03. Capitalization...................................... 10 -------------- SECTION 3.04. Authority Relative to this Agreement................ 11 ------------------------------------ SECTION 3.05. No Conflict; Required Filings and Consents.......... 11 ------------------------------------------ SECTION 3.06. Compliance.......................................... 12 ---------- SECTION 3.07. SEC Filings; Financial Statements................... 13 --------------------------------- SECTION 3.08. Absence of Certain Changes or Events................ 14 ------------------------------------ SECTION 3.09. Absence of Litigation............................... 14 --------------------- SECTION 3.10. Employee Benefit Plans.............................. 15 ---------------------- SECTION 3.11. Offer Documents; Schedule 14D-9; Proxy Statement.... 17 ------------------------------------------------ SECTION 3.12. Real Property and Leases............................ 18 ------------------------ SECTION 3.13. Trademarks, Patents and Copyrights.................. 18 ---------------------------------- SECTION 3.14. Environmental Matters............................... 19 --------------------- SECTION 3.15. Brokers............................................. 20 ------- SECTION 3.16. Amendment to Rights Agreement....................... 20 -----------------------------
ii PAGE SECTION 3.17. Offer Conditions.................................... 20 ---------------- SECTION 3.18. Agreements.......................................... 20 ---------- SECTION 3.19. Opinion of Financial Advisor........................ 21 ---------------------------- SECTION 3.20. Insurance........................................... 21 ---------
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER ------------------------------------------------------ SECTION 4.01. Corporate Organization.............................. 22 ---------------------- SECTION 4.02. Authority Relative to this Agreement................ 22 ------------------------------------ SECTION 4.03. No Conflict; Required Filings and Consents.......... 22 ------------------------------------------ SECTION 4.04. Financing........................................... 23 --------- SECTION 4.05. Offer Documents; Proxy Statement.................... 23 -------------------------------- SECTION 4.06. Brokers............................................. 23 ------- ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER -------------------------------------- SECTION 5.01. Conduct of Business by the Company Pending the ---------------------------------------------- Merger.............................................. 24 ------ ARTICLE VI ADDITIONAL AGREEMENTS --------------------- SECTION 6.01. Stockholders' Meeting............................... 26 --------------------- SECTION 6.02. Proxy Statement..................................... 26 --------------- SECTION 6.03. Company Board Representation; Section 14(f)......... 27 ------------------------------------------- SECTION 6.04. Access to Information; Confidentiality.............. 28 -------------------------------------- SECTION 6.05. No Solicitation of Transactions..................... 28 ------------------------------- SECTION 6.06. Employee Benefits Matters........................... 29 ------------------------- SECTION 6.07. Directors' and Officers' Indemnification and -------------------------------------------- Insurance........................................... 29 --------- SECTION 6.08. Notification of Certain Matters..................... 30 ------------------------------- SECTION 6.09. Further Action; Reasonable Best Efforts............. 30 --------------------------------------- SECTION 6.10. Public Announcements................................ 31 -------------------- SECTION 6.11. ISRA................................................ 31 ---- SECTION 6.12. Confidentiality Agreement........................... 32 ------------------------- SECTION 6.13. Waiver by the Company of Certain Provisions of the -------------------------------------------------- August Purchase Agreement..................................... 32 -------------------------
iii PAGE
ARTICLE VII CONDITIONS TO THE MERGER ------------------------ SECTION 7.01. Conditions to the Merger............................ 32 ------------------------ ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER --------------------------------- SECTION 8.01. Termination......................................... 33 ----------- SECTION 8.02. Effect of Termination............................... 34 --------------------- SECTION 8.03. Fees and Expenses................................... 35 ----------------- SECTION 8.04. Amendment........................................... 36 --------- SECTION 8.05. Waiver.............................................. 36 ------ ARTICLE IX GENERAL PROVISIONS ------------------ SECTION 9.01. Non-Survival of Representations, Warranties and ----------------------------------------------- Agreements................................................... 37 ---------- SECTION 9.02. Notices............................................. 37 ------- SECTION 9.03. Certain Definitions................................. 38 ------------------- SECTION 9.04. Severability........................................ 39 ------------ SECTION 9.05. Entire Agreement; Assignment........................ 39 ---------------------------- SECTION 9.06. Parties in Interest................................. 39 ------------------- SECTION 9.07. Specific Performance................................ 40 -------------------- SECTION 9.08. Governing Law....................................... 40 ------------- SECTION 9.09. Headings............................................ 40 -------- SECTION 9.10. Counterparts........................................ 40 ------------
ANNEX A -- Conditions to the Offer ANNEX B -- Agreement Respecting the Plans and Other Employee Benefit Matters AGREEMENT AND PLAN OF MERGER dated as of January 20, 1995 (this "Agreement") among SIEMENS NIXDORF INFORMATIONSSYSTEME AG, a corporation --------- organized under the laws of the Federal Republic of Germany ("Parent"), SIEMENS ------ NIXDORF MID-RANGE ACQUISITION CORP., a Delaware corporation and a wholly owned subsidiary of Parent ("Purchaser"), and PYRAMID TECHNOLOGY CORPORATION, a --------- Delaware corporation (the "Company"). ------- WHEREAS, the Boards of Directors of Purchaser and the Company and the Managing Board of Directors of Parent have each determined that it is in the best interests of their respective stockholders for Parent, through Purchaser, to acquire the Company upon the terms and subject to the conditions set forth herein; WHEREAS, in furtherance of such acquisition, it is proposed that Purchaser shall make a cash tender offer (the "Offer") to acquire all the issued ----- and outstanding shares of common stock, par value $.01 per share, of the Company ("Company Common Stock") (shares of Company Common Stock being hereinafter -------------------- collectively referred to as the "Shares"), other than any Shares owned by ------ Parent, Purchaser or any of its affiliates or Shares issuable upon the exercise of the Parent Warrant (as defined hereafter), for $16.00 per Share (such amount, or any greater amount per Share paid pursuant to the Offer, being hereinafter referred to as the "Per Share Amount") net to the seller in cash, without ---------------- interest thereon, upon the terms and subject to the conditions of this Agreement and the Offer; WHEREAS, the Board of Directors of the Company (the "Board") has ----- approved the making of the Offer and resolved and agreed to recommend that holders of Shares tender their Shares pursuant to the Offer; and WHEREAS, also in furtherance of such acquisition, the Boards of Directors of Purchaser and the Company and the Managing Board of Directors of Parent have each approved the merger (the "Merger") of Purchaser with and into ------ the Company in accordance with the General Corporation Law of the State of Delaware ("Delaware Law") following the consummation of the Offer and upon the ------------ terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Purchaser and the Company hereby agree as follows: ARTICLE I THE OFFER --------- SECTION 1.01. The Offer. (a) Provided that this Agreement shall --------- not have been terminated in accordance with Section 8.01 and none of the events set forth in paragraphs (a) through (i) of Annex A hereto shall have occurred or be existing, Purchaser shall commence 2 the Offer in accordance with Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as promptly as reasonably practicable ------------ after the date hereof, but in no event later than five business days after the initial public announcement of Purchaser's intention to commence the Offer. The obligation of Purchaser to accept for payment and pay for Shares tendered pursuant to the Offer shall be subject only to (i) the condition (the "Minimum ------- Condition") that there shall have been validly tendered and not withdrawn prior - --------- to the expiration of the Offer at least the number of Shares that when added to the Shares owned by Parent or any of its subsidiaries on the date hereof (other than Shares issuable upon exercise of the Parent Warrant (as defined in Section 3.03) shall constitute a majority of the then outstanding Shares on a fully diluted basis (including, without limitation, all Shares issuable upon the exercise of any options, warrants or rights (other than any Shares issuable upon the exercise of the Parent Warrant and other than the Rights (as defined in the Rights Agreement (as defined in Section 3.16))) and (ii) the satisfaction of each of the other conditions set forth in Annex A hereto. Purchaser expressly reserves the right to waive any such condition (other than the Minimum Condition, which may not be waived by Parent or Purchaser without the prior written consent of the Company), and the right to increase the price per Share payable in the Offer, and to make any other changes in the terms and conditions of the Offer; provided, however, that no change may be made which decreases the -------- ------- price per Share payable in the Offer, reduces the maximum number of Shares to be purchased in the Offer, imposes conditions to the Offer in addition to those set forth in Annex A hereto, changes the form of consideration payable in the Offer or amends any other terms of the Offer in a manner adverse to the Company's stockholders. The Per Share Amount shall, subject to applicable withholding of taxes, be net to the seller in cash, without interest thereon, upon the terms and subject to the conditions of the Offer. Subject to the terms and conditions of the Offer, Purchaser shall accept for payment and shall pay, as promptly as practicable after expiration of the Offer, for all Shares validly tendered and not withdrawn. Unless this Agreement is earlier terminated in accordance with Section 8.01, the Offer shall remain open until 12:00 p.m., New York City time, on the 20th business day following the commencement of the Offer (such date and time being the "Expiration Date," unless Purchaser extends the Offer as --------------- permitted or required by this Agreement, in which case the "Expiration Date" --------------- means the latest time and date to which the Offer is extended). The Offer may not, without the Company's prior written consent, be extended except as necessary to provide time to satisfy the conditions set forth in Annex A; provided, that Purchaser may extend (and re-extend) the Offer for up to a total - -------- of ten business days, if as of the initial Expiration Date of the Offer, there shall not have been tendered at least 90% of the outstanding Shares so that the Merger could be effected without a meeting of the Company's stockholders in accordance with Section 253 of Delaware Law. Purchaser agrees that if all conditions set forth in Annex A are not satisfied on the initial Expiration Date of the Offer (other than the Minimum Condition, and other than the conditions set forth in clauses (ii) or (iii) of the second paragraph of Annex A or the condition set forth in paragraph (a) of Annex A (which conditions in such clauses (ii) and (iii) and paragraph (a) are subject to a 120-day extension requirement as set forth therein)), Purchaser shall extend (and re-extend) the Offer for up to a maximum of 20 business days to provide time to satisfy such conditions, unless the 3 Company shall have breached any representation, warranty, covenant or agreement set forth in this Agreement, which breach shall result in any conditions set forth in Annex A not being satisfied (and such breach is not reasonably capable of being cured and such condition satisfied prior to the expiration of such 20- business day period). (b) The Offer shall be made by means of an offer to purchase (the "Offer to Purchase") containing the terms set forth in this Agreement and the ---------------- conditions set forth in Annex A. As soon as reasonably practicable on the date of commencement of the Offer, Purchaser shall file with the Securities and Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 --- (together with all amendments and supplements thereto, the "Schedule 14D-1") -------------- with respect to the Offer. The Schedule 14D-1 shall contain or shall incorporate by reference the Offer to Purchase and forms of the related letter of transmittal and any related summary advertisement (the Schedule 14D-1, the Offer to Purchase and such other documents, together with all supplements and amendments thereto, being referred to herein collectively as the "Offer ----- Documents"). The Company and its counsel shall be given an opportunity to review - --------- and comment upon the Offer Documents and any amendments or supplements thereto prior to the filing thereof with the SEC, and Parent and Purchaser shall in good faith consider any such comments. Parent and Purchaser agree to provide the Company and its counsel with any comments which Parent, Purchaser or their counsel may receive from the SEC or the Staff of the SEC with respect to the Offer Documents promptly after receipt thereof. Parent, Purchaser and the Company agree to correct promptly any information provided by any of them for use in the Offer Documents which shall have become false or misleading, and Parent and Purchaser further agree to take all steps necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC and the other Offer Documents as so corrected to be disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. SECTION 1.02. Company Action. (a) The Company hereby approves -------------- of and consents to the Offer and represents that (i) the Board, at a meeting duly called and held on January 20, 1995, has (A) determined that this Agreement and the transactions contemplated hereby, including each of the Offer and the Merger, are fair to and in the best interests of the holders of Shares, (B) approved and adopted this Agreement and the transactions, including, without limitation, the Merger, contemplated hereby and (C) resolved to recommend that the stockholders of the Company accept the Offer and approve and adopt this Agreement and the transactions, including, without limitation, the Merger, contemplated hereby (provided, however, that subject to the provisions of Section 6.05(b) below, such recommendation may be withdrawn, modified or amended in connection with a Superior Proposal (as defined in Section 6.05(b) below)), and (ii) Smith Barney Inc. ("Smith Barney") has delivered to the Board a written ------------ opinion that the consideration to be received by the holders of Shares (other than Parent, Purchaser or their affiliates) pursuant to each of the Offer and the Merger is fair to such holders of Shares from a financial point of view. The Company has been authorized by Smith Barney, subject to prior review by Smith Barney, to include such fairness opinion (or references thereto) 4 in the Offer Documents and in the Schedule 14D-9 (as defined in paragraph (b) of this Section 1.02) and the Proxy Statement (as defined in Section 3.11). The Company hereby consents to the inclusion in the Offer Documents of the recommendation of the Board described in the immediately preceding sentence. The Company has been advised by each of its directors and executive officers that, as of the date of this Agreement, they intend either to tender all Shares beneficially owned by them to Purchaser pursuant to the Offer, unless to do so would subject such person to liability under Section 16(b) of the Exchange Act, or to vote such Shares in favor of the approval and adoption by the stockholders of the Company of this Agreement and the transactions contemplated hereby. (b) As promptly as reasonably practicable on the date of commencement of the Offer, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (together with all amendments and supplements thereto, the "Schedule 14D-9") containing, subject -------------- only to the fiduciary duties of the Board under applicable law as advised by independent counsel, the recommendation of the Board described in Section 1.02(a) and shall disseminate the Schedule 14D-9 to the extent required by Rule 14d-9 promulgated under the Exchange Act, and any other applicable federal securities laws. Purchaser and its counsel shall be given an opportunity to review and comment upon the Schedule 14D-9 and any amendments or supplements thereto, prior to the filing thereof with the SEC, and the Company shall in good faith consider any such comments. The Company, Parent and Purchaser agree to correct promptly any information provided by any of them for use in the Schedule 14D-9 which shall have become false or misleading, and the Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. (c) The Company shall promptly furnish Purchaser with mailing labels containing the names and addresses of all record holders of Shares and with security position listings of Shares held in stock depositories, each as of the most recent date practicable, together with all other available listings and computer files containing names, addresses and security position listings of record holders and non-objecting beneficial owners of Shares. The Company shall furnish Purchaser with such additional information, including, without limitation, updated listings and computer files of stockholders, mailing labels and security position listings, and such other assistance as Parent, Purchaser or their agents may reasonably request. Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Offer or the Merger, Parent and Purchaser shall hold in confidence the information contained in such labels, listings and files, shall use such information only in connection with the Offer and the Merger, and, if this Agreement shall be terminated in accordance with Section 8.01, shall deliver to the Company all copies of such information then in their possession. 5 ARTICLE II THE MERGER ---------- SECTION 2.01. The Merger. Upon the terms and subject to the ---------- conditions set forth in Article VII, and in accordance with Delaware Law, at the Effective Time (as hereinafter defined) Purchaser shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Purchaser shall cease and the Company shall continue as the surviving corporation of the Merger (the "Surviving Corporation"). Notwithstanding --------------------- anything to the contrary contained in this Section 2.01, Parent may elect instead, at any time prior to the fifth business day immediately preceding the date on which the Proxy Statement (as defined in Section 3.11) is mailed initially to the Company's stockholders, to merge the Company with or into Purchaser or another direct or indirect wholly owned subsidiary of SIEMENS AKTIENGESELLSCHAFT, a German corporation (the "Ultimate Parent Company"). In ----------------------- such event, the parties agree to execute an appropriate amendment to this Agreement in order to reflect the foregoing and to provide, as the case may be, that Purchaser or such other wholly owned subsidiary of Parent shall be the Surviving Corporation. SECTION 2.02. Effective Time; Closing. As promptly as ----------------------- practicable after the satisfaction or, if permissible, waiver of the conditions set forth in Article VII, the parties hereto shall cause the Merger to be consummated by filing this Agreement or a certificate of merger or certificate of ownership and merger, as applicable (in either case, the "Certificate of -------------- Merger"), with the Secretary of State of the State of Delaware, in such form as - ------ is required by, and executed in accordance with the relevant provisions of, Delaware Law (the date and time of such filing being the "Effective Time"). -------------- Prior to such filing, a closing shall be held at the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York, 10022, or such other place as the parties shall agree, for the purpose of confirming the satisfaction or waiver, as the case may be, of the conditions set forth in Article VII. SECTION 2.03. Effect of the Merger. At the Effective Time, the -------------------- effect of the Merger shall be as provided in the applicable provisions of Delaware Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all the property, rights, privileges, powers and franchises of the Company and Purchaser shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of the Company and Purchaser shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation. SECTION 2.04. Certificate of Incorporation; By-laws. (a) Unless ------------------------------------- otherwise determined by Parent prior to the Effective Time, at the Effective Time the Certificate of Incorporation of Purchaser, as in effect immediately prior to the Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended as provided by law and such Certificate of Incorporation. 6 (b) Unless otherwise determined by Parent prior to the Effective Time, the By-laws of Purchaser, as in effect immediately prior to the Effective Time, shall be the By-laws of the Surviving Corporation until thereafter amended as provided by law, the Certificate of Incorporation of the Surviving Corporation and such By-laws. SECTION 2.05. Directors and Officers. The directors of Purchaser ---------------------- immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and By-laws of the Surviving Corporation, and the officers of the Company immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified. SECTION 2.06. Conversion of Securities. At the Effective Time, ------------------------ by virtue of the Merger and without any action on the part of Purchaser, the Company or the holders of any of the following securities: (a) Each Share issued and outstanding immediately prior to the Effective Time (other than any Shares to be cancelled pursuant to Section 2.06(b) and any Dissenting Shares (as hereinafter defined)) shall be automatically converted into, and exchanged for, the right to receive an amount equal to the Per Share Amount in cash (the "Merger Consideration") -------------------- payable, without interest, to the holder of such Share, upon surrender, in the manner provided in Section 2.09, less any required withholding tax, of the certificate that formerly evidenced such Share; (b) Each Share held in the treasury of the Company and each Share owned by Purchaser, Parent or any direct or indirect wholly owned subsidiary of Parent or of the Company immediately prior to the Effective Time shall be cancelled without any conversion thereof and no payment or distribution shall be made with respect thereto; and (c) Each share of Common Stock, par value $.01 per share, of Purchaser issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock, par value $.01 per share, of the Surviving Corporation. SECTION 2.07. Employee Stock Options. (a) Executive Officers' ---------------------- ------------------- Nonstatutory Stock Option Plan, Share Option Scheme for U.K. Executives and - --------------------------------------------------------------------------- Amended and Restated Directors' Option Plan. Each outstanding employee or - ------------------------------------------- director stock option to purchase Shares (a "non-1982 Plan Option") granted under any of the Company's Executive Officers Nonstatutory Stock Option Plan, Amended and Restated Directors' Option Plan and Share Option Scheme for U.K. Executives (collectively, the "non-1982 Stock Option Plans"), shall be made exercisable on the date that this Agreement is signed, regardless of whether they would 7 otherwise be exercisable under the terms of such non-1982 Stock Option Plans. Any non-1982 Plan Option not exercised by the Effective Time shall be cancelled by the Company and no payment shall be made therefor. (b) Amended 1982 Incentive Stock Option Plan. Each outstanding ---------------------------------------- employee or director stock option to purchase Shares (a "1982 Plan Option") granted under the Company's Amended 1982 Incentive Stock Option Plan shall be made exercisable on the date that Purchaser accepts for payment of Shares tendered pursuant to the Offer, regardless of whether such stock options would otherwise be exercisable under the terms of the Amended 1982 Incentive Stock Option Plan. Moreover, on such date, each 1982 Plan Option, other than any 1982 Plan Option that was granted to any "officer" (as that term is defined in Rule 16a-1(f) promulgated by the SEC) of the Company (a "Section 16 Insider Option"), shall be cancelled, without further action required on the part of the holder of such option, in exchange for the right to receive, as soon as practicable following Purchaser's acceptance for payment of Shares tendered pursuant to the Offer, a cash payment by the Purchaser to the holder in an amount equal to the excess, if any, of the Per Share Amount over the exercise price per share of the 1982 Plan Option minus applicable withholding. Each outstanding Section 16 Insider Option shall be treated in one of two ways. First, with respect to Section 16 Insider Options that were granted at any time before the date that is six months prior to the Effective Time (the "Old Insider Options"), such options must be exercised immediately following the acceleration of vesting provided for in the first sentence of this subsection; to the extent that such Old Insider Options are not so exercised, they shall be cancelled by the Company and no payment shall be made therefor. Second, with respect to Section 16 Insider Options that were granted at any time on or after the date that is six months prior to the Effective Time (the "Recent Insider Options"), such options shall remain outstanding in accordance with their terms (amended as provided below) and shall not be affected in any way by the consummation of the Merger, except for their becoming exercisable in full pursuant to the first sentence of this subsection. As soon as practicable following the Effective Time, but at least six months after the grant date of any Recent Insider Option, Parent, in its capacity as sole stockholder of the Surviving Corporation, shall approve amendments to the Amended 1982 Incentive Stock Option Plan to provide (a) that upon exercise of a Recent Insider Option, the holder shall receive an amount in cash per Share equal to the excess, if any, of the Per Share Amount over the exercise price per share of the Recent Insider Option, minus applicable withholding, and (b) that each Recent Insider Option that has not been exercised as of July 31, 1995 shall be cancelled by the Surviving Corporation on such date and no payment shall be made therefor. (c) 1987 Employee Stock Purchase Plan. With respect to the --------------------------------- Company's 1987 Employee Stock Purchase Plan (the "Purchase Plan"), the offering period currently in progress shall be shortened by setting a new exercise date which shall be the date immediately preceding the Effective Time (the "New Exercise Date"). The Purchase Plan shall terminate immediately following the purchase of Shares on the New Exercise Date. 8 SECTION 2.08. Dissenting Shares. (a) Notwithstanding any ----------------- provision of this Agreement to the contrary, Shares that are outstanding immediately prior to the Effective Time and which are held by stockholders who shall have not voted in favor of the Merger or consented thereto in writing and who shall have demanded properly in writing appraisal for such Shares in accordance with Section 262 of Delaware Law (collectively, the "Dissenting ---------- Shares") shall not be converted into or represent the right to receive the - ------ Merger Consideration. Such stockholders shall be entitled to receive payment of the appraised value of such Shares held by them in accordance with the provisions of such Section 262, except that all Dissenting Shares held by stockholders who shall have failed to perfect or who effectively shall have withdrawn or lost their rights to appraisal of such Shares under such Section 262 shall thereupon be deemed to have been converted into and to have become exchangeable for, as of the Effective Time, the right to receive the Merger Consideration, without any interest thereon, upon surrender, in the manner provided in Section 2.09 of this Agreement, of the certificate or certificates that formerly evidenced such Shares. (b) The Company shall give Parent (i) prompt notice of any demands for appraisal received by the Company, withdrawals of such demands, and any other instruments served pursuant to Delaware Law and received by the Company and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under Delaware Law. The Company shall not, except with the prior written consent of Parent, make any payment with respect to any demands for appraisal or offer to settle or settle any such demands. SECTION 2.09. Surrender of Shares; Stock Transfer Books. (a) ----------------------------------------- Prior to the Effective Time, Purchaser shall designate a bank or trust company reasonably acceptable to the Company to act as agent (the "Paying Agent") for ------------ the holders of Shares in connection with the Merger to receive the funds to which holders of Shares shall become entitled pursuant to Section 2.06(a). At the Effective Time, Purchaser or Parent shall provide the Paying Agent with sufficient cash to allow the Merger Consideration to be paid by the Paying Agent for each Share then entitled to receive the Merger Consideration. Such funds shall be invested by the Paying Agent as directed by the Surviving Corporation. (b) Promptly after the Effective Time, the Surviving Corporation shall cause to be mailed to each person who was, at the Effective Time, a holder of record of Shares entitled to receive the Merger Consideration pursuant to Section 2.06(a) a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the certificates evidencing such Shares (the "Certificates") shall pass, only upon proper ------------ delivery of the Certificates to the Paying Agent) and instructions for use in effecting the surrender of the Certificates pursuant to such letter of transmittal. Upon surrender to the Paying Agent of a Certificate, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration for each Share formerly evidenced by such Certificate, and 9 such Certificate shall then be cancelled. No interest shall accrue or be paid on the Merger Consideration payable upon the surrender of any Certificate for the benefit of the holder of such Certificate. If payment of the Merger Consideration is to be made to a person other than the person in whose name the surrendered Certificate is registered on the stock transfer books of the Company, it shall be a condition of payment that the Certificate so surrendered shall be endorsed properly or otherwise be in proper form for transfer and that the person requesting such payment shall have paid all transfer and other taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the Certificate surrendered or shall have established to the satisfaction of the Surviving Corporation that such taxes either have been paid or are not applicable. (c) At any time following the third month after the Effective Time, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds which had been made available to the Paying Agent and not disbursed to holders of Shares (including, without limitation, all interest and other income received by the Paying Agent in respect of all funds made available to it), and thereafter such holders shall be entitled to look to the Surviving Corporation (subject to abandoned property, escheat and other similar laws) only as general creditors thereof with respect to any Merger Consideration that may be payable upon due surrender of the Certificates held by them. Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying Agent shall be liable to any holder of a Share for any Merger Consideration delivered in respect of such Share to a public official pursuant to any abandoned property, escheat or other similar law. (d) At the close of business on the day of the Effective Time, the stock transfer books of the Company shall be closed and thereafter there shall be no further registration of transfers of Shares on the records of the Company. From and after the Effective Time, the holders of Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares except as otherwise provided herein or by applicable law. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY --------------------------------------------- The Company hereby represents and warrants to Parent and Purchaser that, except as described in the Disclosure Schedule furnished by the Company to Parent prior to the date of this Agreement (the "Disclosure Schedule") or as set ------------------- forth in, or incorporated by reference into, the SEC Reports (as defined hereafter): SECTION 3.01. Organization and Qualification; Subsidiaries. (a) -------------------------------------------- Each of the Company and each subsidiary of the Company (a "Subsidiary") is a ---------- corporation duly 10 incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the requisite power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to be so incorporated, existing or in good standing or to have such power, authority and governmental approvals would not, individually or in the aggregate, have a Material Adverse Effect (as defined below). The Company and each Subsidiary is duly qualified or licensed as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except for such failures to be so qualified or licensed and in good standing that would not, individually or in the aggregate, have a Material Adverse Effect. When used in connection with the Company or any Subsidiary, the term "Material Adverse Effect" means any change ----------------------- or effect that, when taken together with all other adverse changes and effects that are within the scope of the representations and warranties made by the Company in this Agreement and which are not individually or in the aggregate deemed to have a Material Adverse Effect, is or is reasonably likely to be materially adverse to the business, operations, properties, assets or liabilities (including, without limitation, contingent liabilities) of the Company and the Subsidiaries taken as a whole. A true and complete list of all the Subsidiaries, together with the jurisdiction of incorporation of each Subsidiary and the percentage of the outstanding capital stock of each Subsidiary owned by the Company and each other Subsidiary, is set forth in Section 3.01 of the Disclosure Schedule previously delivered by the Company to Parent. Except as disclosed in such Section 3.01, the Company does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity. (b) Each Subsidiary that is material to the business, operations, properties, assets or liabilities of the Company and the Subsidiaries taken as a whole is so identified in Section 3.01 of the Disclosure Schedule and is referred to herein as a "Material Subsidiary". ------------------- SECTION 3.02. Certificate of Incorporation and By-laws. The Company ---------------------------------------- has heretofore furnished to Parent a complete and correct copy of the Certificate of Incorporation and the By-laws or equivalent organizational documents, each as amended to date, of the Company and each Subsidiary. Such Certificates of Incorporation, By-laws and equivalent organizational documents are in full force and effect. Neither the Company nor any Subsidiary is in violation of any provision of its Certificate of Incorporation, By-laws or equivalent organizational documents. SECTION 3.03. Capitalization. The authorized capital stock of the -------------- Company consists of 30,000,000 Shares. As of January 18, 1995, (i) 15,628,591 Shares are issued and outstanding, all of which are validly issued, fully paid and nonassessable, (ii) no Shares are held in the treasury of the Company, (iii) no Shares are held by the Subsidiaries, (iv) 3,449,923 Shares are reserved for future issuance pursuant to outstanding employee stock options or stock 11 incentive rights granted pursuant to the Company's Stock Option and Purchase Plans and (v) 405,034 Shares are reserved for future issuance pursuant to future grants of employee stock options or stock incentive rights pursuant to the Company's Stock Option and Purchase Plans and (vi) 1,330,000 Shares are reserved for future issuance pursuant to the warrant (the "Parent Warrant") purchased by -------------- Parent pursuant to the Common Stock and Warrant Purchase Agreement dated as of August 21, 1994, between Highnoon and Parent (the "August Purchase Agreement"). ------------------------- Except as set forth in this Section 3.03, and except pursuant to the Rights Agreement (as defined in Section 3.16) and the August Purchase Agreement, there are no options, warrants or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of the Company or any Subsidiary or obligating the Company or any Subsidiary to issue or sell any shares of capital stock of, or other equity interests in, the Company or any Subsidiary. All Shares subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable. There are no outstanding contractual obligations of the Company or any Subsidiary to repurchase, redeem or otherwise acquire any Shares or any capital stock of any Subsidiary or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any Subsidiary or any other person. Each outstanding share of capital stock of each Subsidiary is duly authorized, validly issued, fully paid and nonassessable and each such share owned by the Company or another Subsidiary is free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on the Company's or such other Subsidiary's voting rights, charges and other encumbrances of any nature whatsoever. SECTION 3.04. Authority Relative to this Agreement. The Company has ------------------------------------ all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions, including, without limitation, the Merger, contemplated hereby (the "Transactions"). The ------------ execution and delivery of this Agreement by the Company and the consummation by the Company of the Transactions have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the Transactions (other than, with respect to the Merger, the approval and adoption of this Agreement by the holders of a majority of the then outstanding Shares if and to the extent required by applicable law, and the filing and recordation of appropriate merger documents as required by Delaware Law). This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Parent and Purchaser, constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms. The restrictions on business combinations contained in Section 203 of Delaware Law have been satisfied with respect to the Transactions. SECTION 3.05. No Conflict; Required Filings and Consents. (a) The ------------------------------------------ execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not: (i) conflict with or violate the Certificate of Incorporation or By-laws 12 or equivalent organizational documents of the Company or any Subsidiary, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Company or any Subsidiary or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of the Company or any Subsidiary pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation, except for any such conflicts, violations, breaches, defaults or other occurrences as to which requisite waivers have been obtained or which would not, individually or in the aggregate, have a Material Adverse Effect. (b) The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for applicable requirements, if any, of the Exchange Act, state securities or "blue sky" laws ("Blue Sky Laws") and state takeover laws, the pre-merger ------------- notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder (the "HSR Act"), the ------- requirements of Section 721 of Title VII of the Defense Production Act of 1950, as amended, and the regulations promulgated thereunder (the "Exon-Florio ----------- Provision"), the pre-Merger notification requirements of the Bundeskartellamt, - --------- the post-closing notification requirements of the Investment Canada Act of 1985 (the "ICA"), the requirements of the Industrial Sites Recovery Act ("ISRA"), --- ---- applicable pre-merger notification requirements, if any, under the laws of any other country and filing and recordation of appropriate merger documents as required by Delaware Law and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay consummation of the Offer or the Merger, or otherwise prevent the Company from performing its obligations under this Agreement, and would not, individually or in the aggregate, have a Material Adverse Effect. SECTION 3.06. Compliance. Neither the Company nor any Subsidiary is ---------- in conflict with, or in default or violation of, (i) any law, rule, regulation, order, judgment or decree applicable to the Company or any Subsidiary or by which any property or asset of the Company or any Subsidiary is bound or affected, or (ii) any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary or any property or asset of the Company or any Subsidiary is bound or affected, except for any such conflicts, defaults or violations that would not, individually or in the aggregate, have a Material Adverse Effect. 13 SECTION 3.07. SEC Filings; Financial Statements. (a) The Company --------------------------------- has filed all forms, reports and documents required to be filed by it with the SEC since September 30, 1992, and has heretofore made available to Parent, in the form filed with the SEC, (i) its Annual Reports on Form 10-K for the fiscal years ended September 30, 1992, 1993, and 1994, respectively, (ii) all proxy statements (other than preliminary proxy materials) relating to the Company's meetings of stockholders (whether annual or special) held since January 1, 1992 and (iii) all other forms, reports and other registration statements filed by the Company with the SEC since September 30, 1992 (other than Quarterly Reports on Form 10-Q filed by the Company with the SEC prior to September 30, 1994 (the forms, reports and other documents referred to in clauses (i), (ii) and (iii) above being referred to herein, collectively, as the "SEC Reports"). The SEC ----------- Reports (i) were prepared in accordance with the requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the Exchange Act, as the -------------- case may be, and the rules and regulations thereunder and (ii) did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. No Subsidiary is required to file any form, report or other document with the SEC. (b) Each of the consolidated financial statements (including, in each case, any notes thereto) contained in the SEC Reports was prepared in accordance with generally accepted accounting principles applied on a consistent basis ("GAAP") throughout the periods indicated (except for the notes and as may be ---- indicated in the notes thereto) and each fairly presented the consolidated financial position, results of operations and cash flows of the Company and the consolidated Subsidiaries as at the respective dates thereof and for the respective periods indicated therein (subject, in the case of unaudited statements, to normal and recurring year-end adjustments which were not and are not expected, individually or in the aggregate, to be material in amount). (c) Set forth on Section 3.07(c) of the Disclosure Schedule is the earnings release issued by the Company on January 18, 1995, which, in light of the SEC Reports, does not contain as of the date of this Agreement any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, misleading. (d) Except as and to the extent set forth on the consolidated balance sheet of the Company and the consolidated Subsidiaries as at September 30, 1994, including the notes thereto (the "1994 Balance Sheet"), neither the Company nor ------------------ any Subsidiary has any liability or obligation of any nature (whether accrued, absolute, contingent or otherwise) which would be required to be reflected on a balance sheet, or in the notes thereto, prepared in accordance with GAAP, except for liabilities and obligations (i) disclosed in the SEC Reports, (ii) identified in Section 3.09(d) of the Disclosure Schedule or (iii) incurred in the ordinary course of business 14 consistent with past practice since September 30, 1994 which would not, individually or in the aggregate, have a Material Adverse Effect. (e) The Company has heretofore furnished to Parent complete and correct copies of all amendments and modifications that have not been filed by the Company with the SEC to all agreements, documents and other instruments that previously had been filed by the Company with the SEC and are currently in effect. SECTION 3.08. Absence of Certain Changes or Events. Since September ------------------------------------ 30, 1994, except as contemplated by this Agreement or disclosed in any SEC Report filed since September 30, 1994 and prior to the date of this Agreement, the Company and the Subsidiaries have conducted their businesses only in the ordinary course and in a manner consistent with past practice and, since September 30, 1994, there has not been (i) any change in the business, operations, properties, condition (financial or otherwise), assets or liabilities (including, without limitation, contingent liabilities) or prospects of the Company or any Subsidiary having, individually or in the aggregate, a Material Adverse Effect, (ii) any damage, destruction or loss (whether or not covered by insurance) with respect to any property or asset of the Company or any Subsidiary and having, individually or in the aggregate, a Material Adverse Effect, (iii) any change by the Company in its accounting methods, principles or practices, (iv) any revaluation by the Company of any asset (including, without limitation, any writing down of the value of inventory or writing off of notes or accounts receivable), other than in the ordinary course of business consistent with past practice, (v) any failure by the Company to revalue any asset in accordance with GAAP, (vi) any entry by the Company or any Subsidiary into any commitment or transaction material to the Company and the Subsidiaries taken as a whole, (vii) any declaration, setting aside or payment of any dividend or distribution in respect of any capital stock of the Company or redemption, purchase or other acquisition of any of its securities or (viii) any increase in or establishment of any bonus, insurance, severance, deferred compensation, pension, retirement, profit sharing, stock option (including, without limitation, the granting of stock options, stock appreciation rights, performance awards, or restricted stock awards), stock purchase or other employee benefit plan, or any other increase in the compensation payable or to become payable to any officers or key employees of the Company or any Subsidiary, except in the ordinary course of business consistent with past practice. SECTION 3.09. Absence of Litigation. Except as disclosed in the SEC --------------------- Reports filed prior to the date of this Agreement, there is no claim, action, proceeding or investigation pending or, to the best knowledge of the Company, threatened against the Company or any Subsidiary, or any property or asset of the Company or any Subsidiary, before any court, arbitrator or administrative, governmental or regulatory authority or body, domestic or foreign, which (i) individually or in the aggregate, is reasonably likely to have a Material Adverse Effect or (ii) seeks to delay or prevent the consummation of any Transaction. As of the date hereof, neither the Company nor any Subsidiary nor any property or asset of the Company or any 15 Subsidiary is subject to any order, writ, judgment, injunction, decree, determination or award having, individually or in the aggregate, a Material Adverse Effect. SECTION 3.10. Employee Benefit Plans. (a) Section 3.10 of the ---------------------- Disclosure Schedule contains a true and complete list of (i) all employee benefit plans (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option, ----- stock purchase, restricted stock, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance or other benefit plans, programs or arrangements, and all employment, termination, severance or other similar contracts or agreements to which the Company or any Subsidiary is a party, with respect to which the Company or any Subsidiary has any obligation or which are maintained, contributed to or sponsored by the Company or any Subsidiary for the benefit of any current or former employee, officer or director of the Company or any Subsidiary and (ii) each employee benefit plan for which the Company or any Subsidiary could incur liability under Section 4069 of ERISA, in the event such plan were terminated, or under Section 4212(c) of ERISA, or in respect of which the Company or any Subsidiary remains secondarily liable under Section 4204 of ERISA (collectively, the "Plans"). Each Plan is in ----- writing or, if not, a written description thereof is set forth in Section 3.10 of the Disclosure Schedule, and the Company has made available to Parent a true and complete copy of each Plan and a true and complete copy of each material document prepared in connection with each such Plan, including, without limitation, (i) a copy of each trust or other funding arrangement, (ii) each summary plan description and summary of material modifications, (iii) the most recently filed Internal Revenue Service ("IRS") Form 5500 and (iv) the most --- recently received IRS determination letter for each such Plan. Except in the ordinary course of business, neither the Company nor any Subsidiary has any express or implied commitment (i) to create, incur liability with respect to or cause to exist any other employee benefit plan, program or arrangement, (ii) to enter into any contract or agreement to provide compensation or benefits to any individual or (iii) to modify, change or terminate any Plan, other than with respect to a modification, change or termination required by ERISA or the Internal Revenue Code of 1986, as amended (the "Code"). ---- (b) Other than as specifically disclosed in Section 3.10 of the Disclosure Schedule, none of the Plans maintained by the Company are subject to Title IV of ERISA, and neither the Company nor any other entity that is or was under common control with the Company (within the meaning of (S)(S) 414(b) and (c) of the Code) has ever maintained a plan subject to Title IV of ERISA. Except as specifically disclosed in Section 3.10 of the Disclosure Schedule, none of the Plans (i) provides for the payment of separation, severance, termination or similar-type benefits to any person, (ii) obligates the Company or any Subsidiary to pay separation, severance, termination or other benefits as a result of any Transaction or (iii) obligates the Company or any Subsidiary to make any payment or provide any benefit that could be subject to a tax under Section 4999 of the Code. None of the Plans provides for or promises retiree medical, disability or life insurance benefits to any current or former employee, officer or director of the Company or any Subsidiary. 16 (c) Each Plan which is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the IRS that such Plan is so qualified. To the best of the Company's knowledge, no fact or event has occurred since the date of any such determination letter from the IRS that could adversely affect the qualified status of any such Plan or the exempt status of any such trust. Each trust maintained or contributed to by the Company or any Subsidiary which is intended to be qualified as a voluntary employees' beneficiary association exempt from federal income taxation under Sections 501(a) and 501(c)(9) of the Code has received a favorable determination letter from the IRS that it is so qualified and so exempt, and no fact or event has occurred since the date of such determination by the IRS that could adversely affect such qualified or exempt status. (d) To the best of the Company's knowledge, there has been no prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any Plan. Neither the Company nor any Subsidiary is currently liable or has previously incurred any material liability for any tax or penalty arising under Section 4971, 4972, 4979, 4980 or 4980B of the Code or Section 502(c) of ERISA, and no fact or event exists which could give rise to any such liability. No complete or partial termination has occurred within the five years preceding the date hereof with respect to any Plan that is an employee pension benefit plan as defined in Section 3(2) of ERISA. (e) Each Plan is now and has been operated in all respects in accordance with the requirements of all applicable laws, including, without limitation, ERISA and the Code, and the Company and each Subsidiary have performed all obligations required to be performed by them under, are not in any respect in default under or in violation of, and have no knowledge of any default or violation by any party to, any Plan, except for such failures of compliance or performance, defaults and violations which do not individually, or in the aggregate, have a Material Adverse Effect. All contributions, premiums or payments required to be made with respect to any Plan are fully deductible for income tax purposes and no such deduction previously claimed has been challenged by any government entity. The 1994 Balance Sheet reflects an accrual of all amounts of employer contributions and premiums accrued but unpaid with respect to the Plans. (f) The Company and the Subsidiaries have not incurred any liability under, and have complied in all respects with, the Worker Adjustment Retraining Notification Act and the regulations promulgated thereunder ("WARN") ---- and do not reasonably expect to incur any such liability as a result of actions taken or not taken prior to the Effective Time. Section 3.10(f) of the Disclosure Schedule lists (i) all the employees terminated or laid off by the Company or any Subsidiary during the 90 days prior to the date hereof and (ii) all the employees of the Company or any Subsidiary who have experienced a reduction in hours of work of more than 50% (other than voluntary reductions in hours per week) during any month during the 90 days prior to the date hereof and describes all notices given by the Company and the Subsidiaries in connection with WARN. The Company will, by written notice to Parent and 17 Purchaser, update Section 3.10(f) of the Disclosure Schedule to include any such terminations, layoffs and reductions in hours from the date hereof through the Effective Time and will provide Parent and Purchaser with any related information which they may reasonably request. (g) In addition to the foregoing, with respect to each Plan that is not subject to United States law (a "Foreign Benefit Plan"): -------------------- (i) All employer and employee contributions to each Foreign Benefit Plan required by law or by the terms of such Foreign Benefit Plan have been made, or, if applicable, accrued in accordance with normal accounting practices; (ii) The fair market value of the assets of each funded Foreign Benefit Plan, the liability of each insurer for any Foreign Benefit Plan funded through insurance or the book reserve established for any Foreign Benefit Plan, together with any accrued contributions, is sufficient to procure or provide for the benefits determined on any ongoing basis (actual or contingent) accrued to the Effective Time with respect to all current and former participants under such Foreign Benefit Plan according to the actuarial assumptions and valuations most recently used to determine employer contributions to such Foreign Benefit Plan, and no transaction contemplated by this Agreement shall cause such assets or insurance obligations to be less than such benefit obligations, except where any such shortfall would not have a Material Adverse Effect; and (iii) Each Foreign Benefit Plan required to be registered has been registered and has been maintained in good standing with applicable regulatory authorities. Each Foreign Benefit Plan is now and always has been operated in full compliance with all applicable non-United States laws, except for such failure of compliance as does not, individually or in the aggregate, have a Material Adverse Effect. SECTION 3.11. Offer Documents; Schedule 14D-9; Proxy Statement. ------------------------------------------------ Neither the Schedule 14D-9 nor any information supplied by the Company for inclusion in the Offer Documents shall, at the respective times the Schedule 14D-9, the Offer Documents or any amendments or supplements thereto are filed with the SEC or are first published, sent or given to stockholders of the Company, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading. Neither the proxy statement to be sent to the stockholders of the Company in connection with the Stockholders' Meeting (as hereinafter defined) or the information statement to be sent to such stockholders, as appropriate (such proxy statement or information statement, as amended or supplemented, being referred to herein as the "Proxy Statement"), --------------- shall, at the date the Proxy Statement (or any amendment or supplement thereto) is first mailed to stockholders of the Company, at the time of the Stockholders' Meeting and at the Effective 18 Time, be false or misleading with respect to any material fact, or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Stockholders' Meeting which shall have become false or misleading. The Schedule 14D-9 and the Proxy Statement shall comply in all material respects as to form with the requirements of applicable federal securities laws, including the Exchange Act and the rules and regulations thereunder. SECTION 3.12. Real Property and Leases. (a) Neither the ------------------------ Company nor any Subsidiary owns any real property. (b) Section 3.12(b)(i) of the Disclosure Schedule lists each parcel of real property leased by the Company or any Subsidiary requiring annual rental payments exceeding $250,000 (the "Leased Real Property"). With respect to -------------------- any Leased Real Property, there exists no material default by the Company or any Subsidiary or, to the knowledge of the Company, by any other party under any lease relating thereto. Except as disclosed in Section 3.12(b)(ii) of the Disclosure Schedule, neither the Company nor any Subsidiary has leased or subleased any of the Leased Real Property to any other person. SECTION 3.13. Trademarks, Patents and Copyrights. Except as set ---------------------------------- forth on Schedule 3.13 to the Disclosure Schedule: (a) each of the Company and the Subsidiaries owns, possesses, and has the right to use, has the right to bring actions for the infringement of, or, where necessary, has made timely and proper application for, and diligently protected and enforced its rights in all Intellectual Property Rights (as hereinafter defined) owned by the Company or any Subsidiary, or used in, contemplated for use in, or necessary or required for the conduct of its business as currently conducted; (b) no royalties, honorariums or fees in excess of $50,000 per annum are payable by the Company or its Subsidiaries to other persons by reason of the ownership or use of the Intellectual Property Rights; (c) to the best of the Company's knowledge, no product or service that is designed, manufactured, marketed, performed or sold by the Company or the Subsidiaries violates any license or infringes any Intellectual Property Rights of another, nor is there any anticipated or pending or written threat of a claim or litigation against the Company or its Subsidiaries (nor to the knowledge of the Company does there exist any basis therefor) claiming infringement or violation of or contesting the validity of, or right to use, any Intellectual Property Rights; and 19 (d) none of the Company or the Subsidiaries has received notice that any use or contemplated use of any Intellectual Property Rights, or that the operation of or proposed operation of the Company's or the Subsidiaries' businesses, conflicts or will conflict with the rights of others; and (e) the Company and Subsidiaries have not granted any exclusive rights in the Intellectual Property Rights to any third party, including to develop, manufacture, use, market or service the Company's current products or Intellectual Property Rights. As used herein, the term "Intellectual Property Rights" means all industrial and ---------------------------- intellectual property rights, including, without limitation, Proprietary Technology (as hereinafter defined), patents, patent applications, patent rights, trademarks, trademark applications, trade names, service marks, service mark applications, copyrights, know-how, certificates of public convenience and necessity, franchises, licenses, trade secrets, proprietary processes and formulae used by the Company in its businesses. As used herein, "Proprietary ----------- Technology" means all source code, designs, algorithms, layouts, processes, - ---------- inventions, trade secrets, know-how and other proprietary rights pertaining to any product or service manufactured, marketed, performed or provided, or proposed to be manufactured, marketed, performed or provided (as the case may be), by the Company or the Subsidiaries or used, employed or exploited in the development, license, sale, marketing, distribution or maintenance thereof, and all documentation and media embodying or relating to the above, including, without limitation, manuals, models, prototypes, memoranda, know-how, notebooks, computer program software databases, patents and patent applications, trademarks and trademark applications, copyrights and copyright applications, records and disclosures. SECTION 3.14. Environmental Matters. (a) For purposes of this --------------------- Agreement, the following terms shall have the following meanings: (i) "Hazardous Substances" means (A) those substances defined in or regulated under -------------------- the following federal statutes and their state counterparts, as each may be amended from time to time, and all regulations thereunder: the Hazardous Materials Transportation Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and Rodenticide Act and the Clean Air Act; (B) petroleum and petroleum products including crude oil and any fractions thereof; (C) natural gas, synthetic gas, and any mixtures thereof; (D) radon; (E) any other contaminant; and (F) any substance with respect to which a federal, state or local agency requires environmental investigation, monitoring, reporting or remediation; and (ii) "Environmental Laws" means any federal, state or local law ------------------ (A) relating to releases or threatened releases of Hazardous Substances or materials containing Hazardous Substances; (B) relating to the manufacture, handling, transport, use, treatment, storage or disposal of Hazardous Substances or materials containing Hazardous Substances; or (C) otherwise relating to pollution of the environment or the protection of human health. 20 (b) Except as described in Section 3.14 of the Disclosure Schedule or as would not, individually or in the aggregate, have a Material Adverse Effect: (i) the Company has not violated and is not in violation of any Environmental Law; (ii) none of the properties currently or formerly owned or leased by the Company (including, without limitation, soils and surface and ground waters) are contaminated with any Hazardous Substance; (iii) the Company is not liable for any off-site contamination; (iv) the Company is not liable under any Environmental Law; (v) the Company has all permits, licenses and other authorizations required under any Environmental Law ("Environmental Permits"); --------------------- and (vi) the Company has always been and is in compliance with its Environmental Permits. SECTION 3.15. Brokers. No broker, finder or investment banker ------- (other than Smith Barney) is entitled to any brokerage, finder's or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the Company. The Company has heretofore furnished to Parent a complete and correct copy of all agreements between the Company and Smith Barney pursuant to which such firm would be entitled to any payment relating to the Transactions. SECTION 3.16. Amendment to Rights Agreement. The Board has taken ----------------------------- such corporate action as is necessary to amend the Common Shares Rights Agreement dated as of December 12, 1988, as amended (the "Rights Agreement"), ---------------- between the Company and Bank of America, N.T. & S.A., as Rights Agent, so that none of the execution of this Agreement, the making of the Offer, the purchase of Shares pursuant to the Offer or the Merger shall cause Purchaser, Parent or any affiliate of Purchaser or Parent to become an "Acquiring Person" or cause a "Shares Acquisition Date", "Distribution Date" or "Triggering Event" to occur (each as defined in the Rights Agreement). Additionally, the Board has taken such corporate action as is necessary to amend the Rights Agreement so that the Final Expiration Date (as defined in the Rights Agreement) shall occur immediately prior to the purchase of Shares by Purchaser pursuant to the Offer. SECTION 3.17. Offer Conditions. To the Company's knowledge, since ---------------- September 30, 1994, no event has occurred and no circumstance has arisen which could reasonably be expected to result in a failure to satisfy any of the conditions to the Offer set forth in Annex A hereto. SECTION 3.18. Agreements. Except as set forth on Schedule 3.18 to ---------- the Disclosure Schedule or on Schedule 2.12 to the Disclosure Schedule delivered by the Company pursuant to the August Purchase Agreement, to the Company's knowledge, the Company and the Subsidiaries are not parties to any material written or oral contract or commitment not made in the ordinary course of business and, whether or not made in the ordinary course of business, the Company and the Subsidiaries are not parties to any written or oral (i) contract or commitment with any labor union, (ii) contract or commitment for the future purchase of fixed assets (other than materials or supplies required to manufacture the Company's products in the 21 ordinary course of business) in excess of $500,000 in the aggregate or for the future purchase of materials, supplies or equipment in excess of normal operating requirements, (iii) agreements, indentures or commitments relating to the borrowing of money in excess of $250,000 individually or to the mortgaging, pledging or otherwise placing of a lien on any assets of the Company or the Subsidiaries (other than relating to equipment held under capitalized leases or secured by purchase money security interests), (iv) guaranty of any obligation (other than any obligation of a Subsidiary) in excess of $250,000 individually, (v) agreement or other commitment for capital expenditures in excess of $500,000 individually, (vi) contract or agreement under which the Company or the Subsidiaries are obligated to pay any broker's fees, finder's fees or any such similar fees to any third party (other than as are incidental to the operation of its business in the ordinary course of business consistent with industry practices or in connection with the Transactions), (vii) contract or agreement for the payment or receipt of any royalty, (viii) license for the use of any patent, know-how, trademark, trade name, copyright or other intellectual property which is material to the financial condition or operations of the Company or (ix) other contract, agreement, arrangement or understanding that is material to the financial condition or operations of the Company and the Subsidiaries, taken as a whole. The Company has furnished or made available to counsel for Purchaser true and correct copies of all such agreements and such other documents as have been requested by Purchaser or their authorized representatives. Each of the foregoing contracts is valid, binding and in full force and effect in accordance with its terms. SECTION 3.19. Opinion of Financial Advisor. The Company has ---------------------------- received the written opinion of Smith Barney to the effect that the consideration to be received by the stockholders of the Company pursuant to the Offer and the Merger is fair to such stockholders from a financial point of view, a copy of which opinion has been delivered to Parent. SECTION 3.20. Insurance. Each of the Company and the Subsidiaries --------- maintains such insurance coverage, including amounts, described on Schedule 3.20 to the Disclosure Schedule. Such insurance listed on Schedule 3.20 to the Disclosure Schedule is outstanding and in full force and effect and all premiums with respect to such policies are currently paid. Each of the Company and the Subsidiaries has not during the past three fiscal years been denied or had revoked or rescinded any insurance policy. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER ------------------------------------------------------ Parent and Purchaser hereby, jointly and severally, represent and warrant to the Company that: 22 SECTION 4.01. Corporate Organization. Purchaser is a corporation ---------------------- duly incorporated, validly existing and in good standing under the laws of the State of Delaware. Parent is a corporation duly incorporated, validly existing and in good standing under the laws of the Federal Republic of Germany. Each of Parent and Purchaser has the requisite power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to be so incorporated, existing or in good standing or to have such power, authority and governmental approvals would not, individually or in the aggregate, adversely affect the ability of Parent and Purchaser to perform their obligations hereunder and to consummate the Transactions. SECTION 4.02. Authority Relative to this Agreement. Each of ------------------------------------ Parent and Purchaser has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transactions. The execution and delivery of this Agreement by Parent and Purchaser and the consummation by Parent and Purchaser of the Transactions have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of Parent or Purchaser are necessary to authorize this Agreement or to consummate the Transactions (other than, with respect to the Merger, the filing and recordation of appropriate merger documents as required by Delaware Law). This Agreement has been duly and validly executed and delivered by Parent and Purchaser and, assuming the due authorization, execution and delivery by the Company, constitutes a legal, valid and binding obligation of each of Parent and Purchaser enforceable against each of Parent and Purchaser in accordance with its terms. SECTION 4.03. No Conflict; Required Filings and Consents. (a) ------------------------------------------ The execution and delivery of this Agreement by Parent and Purchaser do not, and the performance of this Agreement by Parent and Purchaser will not, (i) conflict with or violate the Certificate of Incorporation or By-laws (or equivalent governing documents) of either Parent or Purchaser, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to Parent or Purchaser or by which any property or asset of either of them is bound or affected, or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of Parent or Purchaser pursuant to, any material note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Parent or Purchaser is a party or by which Parent or Purchaser or any property or asset of either of them is bound or affected, except for any such conflicts, violations, breaches, defaults or other occurrences which would not, individually or in the aggregate, adversely affect the ability of Parent and Purchaser to perform their obligations hereunder and to consummate the Transactions. (b) The execution and delivery of this Agreement by Parent and Purchaser do not, and the performance of this Agreement by Parent and Purchaser will not, require any 23 consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for applicable requirements, if any, of the Exchange Act, Blue Sky Laws and state takeover laws, the HSR Act, the Exon-Florio Provision, ISRA, the Bundeskartellamt, the ICA, applicable pre-merger notification requirements, if any, under the laws of any other country and filing and recordation of appropriate merger documents as required by Delaware Law and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay consummation of the Offer or the Merger, or otherwise prevent Parent or Purchaser from performing their respective obligations under this Agreement. SECTION 4.04. Financing. Parent has or will have sufficient funds --------- to permit Purchaser to acquire all the outstanding Shares in the Offer and the Merger. SECTION 4.05. Offer Documents; Proxy Statement. The Offer -------------------------------- Documents will not, at the time the Offer Documents are filed with the SEC or are first published, sent or given to stockholders of the Company, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading. The information supplied by Parent for inclusion in the Schedule 14D-9 and the Proxy Statement (or any amendment or supplement thereto) will not, at the respective times the Schedule 14D-9, the Proxy Statement or any amendments or supplements thereto are filed with the SEC or are first published, sent or given to stockholders of the Company, at the time of the Stockholders' Meeting and at the Effective Time, as the case may be, contain any statement which, at such time and in light of the circumstances under which it is made, is false or misleading with respect to any material fact, or omits to state any material fact required to be stated therein or necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the Offer or the solicitation of proxies for the Stockholders' Meeting which shall have become false or misleading. Notwithstanding the foregoing, Parent and Purchaser make no representation or warranty with respect to any information supplied by the Company or any of its representatives which is contained in any of the foregoing documents or the Offer Documents. The Offer Documents shall comply in all material respects as to form with the requirements of applicable federal securities laws, including the Exchange Act and the rules and regulations thereunder. SECTION 4.06. Brokers. No broker, finder or investment banker ------- (other than Goldman, Sachs & Co.) is entitled to any brokerage, finder's or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of Parent or Purchaser. 24 ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER -------------------------------------- SECTION 5.01. Conduct of Business by the Company Pending the ----------------------------------------------- Merger. The Company covenants and agrees that, between the date of this - ------ Agreement and the Effective Time, unless Parent shall otherwise agree in writing, the businesses of the Company and the Subsidiaries shall be conducted only in, and the Company and the Subsidiaries shall not take any action except in, the ordinary course of business and in a manner consistent with past practice; and the Company shall use its reasonable best efforts to preserve substantially intact the business organization of the Company and the Subsidiaries, to keep available the services of the current officers, employees and consultants of the Company and the Subsidiaries and to preserve the current relationships of the Company and the Subsidiaries with customers, suppliers and other persons with which the Company or any Subsidiary has significant business relations. By way of amplification and not limitation, except as contemplated by this Agreement or as set forth in Section 5.01 of the Disclosure Schedule, neither the Company nor any Subsidiary shall, between the date of this Agreement and the Effective Time, directly or indirectly do, or propose to do, any of the following without the prior written consent of Parent: (a) amend or otherwise change its Certificate of Incorporation or By-laws or equivalent organizational documents; (b) issue, sell, pledge, dispose of, grant, encumber, or authorize the issuance, sale, pledge, disposition, grant or encumbrance of, (i) any shares of capital stock of any class of the Company or any Subsidiary, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including, without limitation, any phantom interest), of the Company or any Subsidiary (except for the issuance of a maximum of 3,449,923 Shares issuable pursuant to employee stock options outstanding on the date hereof, and except for the grant of stock options under the Company's Stock Option and Purchase Plans (and the resulting issuance of shares thereunder) consistent with established practice to new employees of the Company hired after December 7, 1994, and identified in Section 5.01 of the Disclosure Schedule) or (ii) any assets of the Company or any Subsidiary, except for sales of products in the ordinary course of business and in a manner consistent with past practice; (c) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock; (d) reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock; 25 (e) (i) acquire (including, without limitation, by merger, consolidation, or acquisition of stock or assets) any corporation, partnership, other business organization or any division thereof or any material amount of assets; (ii) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any person, or make any loans or advances, except in the ordinary course of business and consistent with past practice; (iii) enter into any contract or agreement other than in the ordinary course of business, consistent with past practice; (iv) other than in the ordinary course of business, consistent with past practice, authorize any single capital expenditure which is in excess of $250,000 or capital expenditures which are, in the aggregate, in excess of $500,000 for the Company and the Subsidiaries taken as a whole; or (v) enter into or amend any contract, agreement, commitment or arrangement with respect to any matter set forth in this Section 5.01(e); (f) other than pursuant to policies or agreements of the Company or any of its Subsidiaries in effect on or prior to the date of this Agreement and disclosed in Section 3.10 of the Disclosure Schedule, increase the compensation payable or to become payable to its officers or employees, except for increases in accordance with past practices in salaries or wages of employees of the Company or any Subsidiary who are not officers of the Company, or grant any severance or termination pay to, or enter into any employment or severance agreement with, any director, officer or other employee of the Company or any Subsidiary, or establish, adopt, enter into or amend any collective bargaining, bonus, profit/sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any director, officer or employee; (g) take any action, other than reasonable and usual actions in the ordinary course of business and consistent with past practice, with respect to accounting policies or procedures; (h) make any tax election or settle or compromise any material federal, state, local or foreign income tax liability; (i) pay, discharge or satisfy any claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business and consistent with past practice, of liabilities incurred in the ordinary course of business and consistent with past practice; 26 (j) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of its Subsidiaries (other than the Merger); (k) settle or comprise any pending or threatened suit, action or claim which is material or which relates to any of the Transactions; or (l) take or offer or propose to take, or agree to take in writing, or otherwise, any of the actions described in paragraphs (a) through (k) of this Section 5.01 or any action which would make any of the representations or warranties of the Company contained in this Agreement untrue or incorrect as of the date when made if such action had then been taken, or would result in any of the Offer conditions not being satisfied. ARTICLE VI ADDITIONAL AGREEMENTS --------------------- SECTION 6.01. Stockholders' Meeting. (a) If required by --------------------- applicable law in order to consummate the Merger, the Company, acting through the Board, shall, if required, in accordance with applicable law and the Company's Certificate of Incorporation and By-laws, (i) duly call, give notice of, convene and hold an annual or special meeting of its stockholders as soon as practicable following consummation of the Offer for the purpose of considering and taking action on this Agreement and the Transactions (the "Stockholders' ------------- Meeting") and (ii) subject to its fiduciary duties under applicable law as - ------- advised by independent counsel, (A) include in the Proxy Statement the recommendation of the Board that the stockholders of the Company approve and adopt this Agreement and the transactions contemplated hereby and (B) use its reasonable best efforts to obtain such approval and adoption. At the Stockholders' Meeting, Parent and Purchaser shall cause all Shares then owned by them and their subsidiaries to be voted in favor of the approval and adoption of this Agreement and the transactions contemplated hereby. (b) Notwithstanding the foregoing, in the event that Purchaser shall acquire at least 90 percent of the then outstanding Shares, the parties hereto agree, at the request of Purchaser, subject to Article VII, to take all necessary and appropriate action to cause the Merger to become effective, in accordance with Section 253 of Delaware Law, as promptly as reasonably practicable after such acquisition, without a meeting of the stockholders of the Company. SECTION 6.02. Proxy Statement. If required by applicable law, as --------------- promptly as practicable following consummation of the Offer, the Company shall file the Proxy Statement 27 with the SEC under the Exchange Act, and shall use its best efforts to have the Proxy Statement cleared by the SEC. Parent, Purchaser and the Company shall cooperate with each other in the preparation of the Proxy Statement, and the Company shall notify Parent of the receipt of any comments of the SEC with respect to the Proxy Statement and of any requests by the SEC for any amendment or supplement thereto or for additional information and shall provide to Parent promptly copies of all correspondence between the Company or any representative of the Company and the SEC. The Company shall give Parent and its counsel the opportunity to review the Proxy Statement prior to its being filed with the SEC and shall give Parent and its counsel the opportunity to review all amendments and supplements to the Proxy Statement and all responses to requests for additional information and replies to comments prior to their being filed with, or sent to, the SEC. Each of the Company, Parent and Purchaser agrees to use its reasonable best efforts, after consultation with the other parties hereto, to respond promptly to all such comments of and requests by the SEC and to cause the Proxy Statement and all required amendments and supplements thereto to be mailed to the holders of Shares entitled to vote at the Stockholders' Meeting at the earliest practicable time. SECTION 6.03. Company Board Representation; Section 14(f). (a) ------------------------------------------- Promptly upon the purchase by Purchaser of Shares pursuant to the Offer and from time to time thereafter, Purchaser shall be entitled to designate up to such number of directors, rounded up to the next whole number, on the Board as shall give Purchaser representation on the Board equal to the product of the total number of directors on the Board (giving effect to the directors elected pursuant to this sentence) multiplied by the percentage that the aggregate number of Shares beneficially owned by Purchaser or any affiliate of Purchaser following such purchase bears to the total number of Shares then outstanding, and the Company shall, at such time, promptly take all actions necessary to cause Purchaser's designees to be elected as directors of the Company, including increasing the size of the Board or securing the resignations of incumbent directors or both. The Company shall cause persons designated by Purchaser to constitute the same percentage as persons designated by Purchaser shall constitute of the Board of (i) each committee of the Board, (ii) each board of directors of each domestic Subsidiary and (iii) each committee of each such board, in each case only to the extent permitted by applicable law. Notwithstanding the foregoing, until the earlier of (i) the time Purchaser acquires a majority of the then outstanding Shares on a fully diluted basis and (ii) the Effective Time, the Company shall use its best efforts to ensure that all the members of the Board and each committee of the Board and such boards and committees of the domestic Subsidiaries as of the date hereof who are not employees of the Company shall remain members of the Board and of such boards and committees. (b) The Company shall promptly take all actions required pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order to fulfill its obligations under this Section 6.03 and shall include in the Schedule 14D-9 such information with respect to the Company and its officers and directors as is required under Section 14(f) and Rule 14f-1 to fulfill such obligations. Parent or Purchaser shall supply to the Company and be 28 solely responsible for any information with respect to either of them and their nominees, officers, directors and affiliates required by such Section 14(f) and Rule 14f-1. (c) Following the election or appointment of designees of Purchaser pursuant to this Section 6.03, prior to the Effective Time, any amendment of this Agreement or the Certificate of Incorporation or By-laws of the Company, any termination of this Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of Parent or Purchaser or waiver of any of the Company's rights hereunder shall require the concurrence of a majority of the directors of the Company then in office who neither were designated by Purchaser nor are employees of the Company. SECTION 6.04. Access to Information; Confidentiality. (a) From -------------------------------------- the date hereof to the Effective Time, the Company shall, and shall cause the Subsidiaries and the officers, directors, employees, auditors and agents of the Company and the Subsidiaries to, afford the officers, employees and agents of Parent and Purchaser complete access at all reasonable times to the officers, employees, agents, properties, offices, plants and other facilities, books and records of the Company and each Subsidiary, and shall furnish Parent and Purchaser with all financial, operating and other data and information as Parent or Purchaser, through its officers, employees or agents, may reasonably request. (b) All information obtained by Parent or Purchaser pursuant to this Section 6.04 shall be kept confidential in accordance with the provisions of Section 7.7 of the August Purchase Agreement. (c) No investigation pursuant to this Section 6.04 shall affect any representation or warranty in this Agreement of any party hereto or any condition to the obligations of the parties hereto. SECTION 6.05. No Solicitation of Transactions. (a) Neither the ------------------------------- Company nor any Subsidiary shall, and neither the Company nor any Subsidiary shall permit any officer, director or agent to solicit, initiate or encourage the submission of any proposal or offer from any person relating to any acquisition or purchase of all or (other than in the ordinary course of business) any portion of the assets of, or any equity interest in, the Company or any Subsidiary or any business combination with the Company or any Subsidiary (whether by a tender offer, exchange offer, merger, consolidation or otherwise), participate in any negotiations regarding, or furnish to any other person any information with respect to, any of the foregoing (an "Acquisition Proposal"). -------------------- The Company immediately shall cease and cause to be terminated all existing discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing. The Company shall notify Parent promptly if any such proposal or offer, or any inquiry or contact with any person with respect thereto, is made and shall, in any such notice to Parent, indicate in reasonable detail the identity of the person making such proposal, offer, inquiry or contact and the terms and conditions of such proposal, offer, inquiry or contact. 29 The Company agrees not to release any third party from, or waive any provision of, any confidentiality or standstill agreement to which the Company is a party, except to the extent required by fiduciary obligations under applicable law as advised by independent counsel. (b) Notwithstanding the foregoing, to the extent required by fiduciary obligations under applicable law as advised by independent counsel, the Company may, in response to an Acquisition Proposal which was not solicited after the date of this Agreement, participate in discussions or negotiations with, or furnish information with respect to the Company pursuant to a confidentiality agreement in reasonably customary form, to any person. In addition, following the receipt of an Acquisition Proposal, which the Board of Directors of the Company, after consultation with and based on the advice of independent legal counsel and its financial advisor, determines in good faith to be more favorable to the Company's stock-holders than the Offer and the Merger (a "Superior Proposal"), the Company may, upon payment of the Fee and Expenses ----------------- (as defined hereafter) as required by Section 8.01(d)(ii), terminate this Agreement pursuant to such Section 8.01(d)(ii) and accept such Superior Proposal, and the Board of Directors of the Company may approve or recommend such Superior Proposal (and, in connection therewith, withdraw or modify its approval or recommendation of the Offer, this Agreement or the Merger. Nothing contained in this Section 6.05(b) shall prohibit the Company or its Board of Directors from (i) taking, and disclosing to the Company's stockholders, a position with respect to an Acquisition Proposal pursuant to Rules 14d-9 and 14e-2(a) under the Exchange Act or (ii) making any disclosure to the Company's stockholders that, in the judgment of the Board of Directors or the Company, is required under applicable law. SECTION 6.06. Employee Benefits Matters. Annex B hereto sets ------------------------- forth certain agreements among the parties hereto with respect to the Plans and other employee benefits matters. SECTION 6.07. Directors' and Officers' Indemnification and --------------------------------------------- Insurance. (a) The Surviving Corporation and --------- Parent agree that for a period ending not sooner than the sixth anniversary of the Effective Time, the Surviving Corporation will maintain all rights to indemnification (including with respect to the advancement of expenses incurred in the defense of any action or suit) existing on the date of this Agreement in favor of the present and the former directors, officers, employees and agents of the Company as provided in the Company's Certificate of Incorporation and Bylaws and as set forth in the Indemnification Agreements listed in Section 6.07 of the Disclosure Schedule (true and correct copies of which have been made available to Purchaser), in each case as in effect on the date of this Agreement, and that during such period, the Certificate of Incorporation and Bylaws of the Surviving Corporation shall not be amended to reduce or limit the rights of indemnity afforded to the present and former directors, officers, employees and agents of the Company, or the ability of the Surviving Corporation to indemnify them, nor to hinder, delay or make more difficult the exercise of such rights or indemnity or the ability to indemnify. 30 (b) Parent and the Surviving Corporation shall use their respective reasonable best efforts to maintain in effect for three years from the Effective Time, if available, the current directors' and officers' liability insurance policies maintained by the Company (provided that the Surviving Corporation may substitute therefor policies of at least the same coverage containing terms and conditions which are not materially less favorable) with respect to matters occurring prior to the Effective Time; provided, however, that in no event shall -------- ------- the Surviving Corporation be required to expend pursuant to this Section 6.07(b) more than an amount per year equal to 150% of current annual premiums paid by the Company for such insurance (which premiums the Company represents and warrants to be $533,000 in the aggregate). (c) Should any claim or claims be made against any present or former director, officer, employee or agent of the Company, arising from such person's service as such, on or prior to the sixth anniversary of the Effective Time, the provisions of this Section 6.07 respecting the Certificate of Incorporation and Bylaws and the obligation of indemnity of the Parent and the Surviving Corporation shall continue in effect until the final disposition of all such claims. (d) In the event that Parent or the Surviving Corporation or any of their successors or assigns consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, then and in each such case, proper provisions shall be made so that the successors and assigns or Parent or the Surviving Corporation, as the case may be, or, at Parent's option, Parent shall assume the obligations of Parent or the Surviving Corporation set forth in this Section 6.07. (e) The provisions of this Section 6.07 are intended to be for the benefit of, and shall be enforceable by, each indemnified party and such party's heirs and representatives. SECTION 6.08. Notification of Certain Matters. The Company shall ------------------------------- give prompt notice to Parent, and Parent shall give prompt notice to the Company, of (i) the occurrence, or non-occurrence, of any event the occurrence, or non-occurrence, of which would be likely to cause any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect and (ii) any material failure of the Company, Parent or Purchaser, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the -------- ------- delivery of any notice pursuant to this Section 6.08 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. SECTION 6.09. Further Action; Reasonable Best Efforts. Upon the --------------------------------------- terms and subject to the conditions hereof, each of the parties hereto shall (i) make promptly its respective filings, and thereafter make any other required submissions, under the HSR Act and the other regulatory provisions listed in Section 3.05 with respect to the Transactions and (ii) use all 31 reasonable best efforts to take, or cause to be taken, all appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the Transactions, including, without limitation, using all reasonable best efforts to obtain all licenses, permits (including, without limitation, Environmental Permits), consents, approvals, authorizations, qualifications and orders of governmental authorities and parties to contracts with the Company and the Subsidiaries as are necessary for the consummation of the Transactions and to fulfill the conditions to the Offer and the Merger. Parent shall give notice promptly to the Chairman of the Committee on Foreign Investment in the United States pursuant to the Exon-Florio Provision of the Transactions, and each of the parties hereto shall make such additional filings and submissions as may be reasonably necessary under the Exon-Florio Provision in respect of the Transactions. Parent and the Company will consult and cooperate with one another, and consider in good faith the views of one another, in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, opinions or proposals made or submitted by or on behalf of any party hereto in connection with proceedings under or relating to the HSR Act, the Exon-Florio Provision, the pre-notification requirements of any foreign jurisdiction, or any other federal or state antitrust or fair trade law. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of each party to this Agreement shall use their reasonable best efforts to take all such action. No provision of this Section 6.09 shall be interpreted as requiring the Company to continue its recommendation to stockholders when such recommendation can be withdrawn or modified under Section 6.05(b). Parent and Purchaser agree to offer to enter into any remediation agreement with the NJDEPE pursuant to the requirements of ISRA as may be necessary to permit the consummation of the Transactions unless such remediation agreement would have a Material Adverse Effect. SECTION 6.10. Public Announcements. Parent and the Company shall -------------------- consult with each other before issuing any press release or otherwise making any public statements with respect to this Agreement or any Transaction and shall not issue any such press release or make any such public statement prior to such consultation and agreement as to the terms of such release, except as may be required by law or any listing agreement with a national securities exchange to which Parent or the Company is a party. SECTION 6.11. ISRA. No later than five days after the execution of ---- this Agreement, the Company shall notify the New Jersey Department of Environmental Protection and Energy (the "NJDEPE") of the Offer and the other ------ Transactions (including, without limitation, the Merger) pursuant to the requirements of ISRA. Immediately thereafter, the Company shall make application to the NJDEPE for a negative declaration or a remediation agreement as appropriate under ISRA. Parent shall cooperate with and assist the Company in any reasonable manner in connection with obtaining such negative declaration or remediation agreement. The Company shall not enter in any remediation agreement without the prior written consent of Parent. 32 SECTION 6.12. Confidentiality Agreement. The Company hereby waives ------------------------- the provisions of Section 7.7 of the August Purchase Agreement regarding confidential information as and only to the extent necessary to permit the consummation of each Transaction. Upon the acceptance for payment of Shares pursuant to the Offer, Section 7.7 of the August Purchase Agreement shall be deemed to have terminated without further action by the parties thereto. SECTION 6.13. Waiver by the Company of Certain Provisions of the -------------------------------------------------- August Purchase Agreement. The Company hereby waives the provisions of Sections - ------------------------- 7.1, 7.2, 7.3, 7.4, 7.5, 7.6, 7.9, 8.1, 8.2 and 8.3 of the August Purchase Agreement. This Agreement shall, to the extent that there is any conflict between the terms of this Agreement and the terms of the August Purchase Agreement, supersede the August Purchase Agreement. If this Agreement shall be terminated for any reason, the terms and provisions of the August Purchase Agreement shall remain in full force and effect. ARTICLE VII CONDITIONS TO THE MERGER ------------------------ SECTION 7.01. Conditions to the Merger. The respective obligations ------------------------ of each party to effect the Merger shall be subject to the satisfaction at or prior to the Effective Time of the following conditions: (a) Stockholder Approval. This Agreement and the transactions -------------------- contemplated hereby shall have been approved and adopted by the affirmative vote of the stockholders of the Company to the extent required by Delaware Law and the Certificate of Incorporation of the Company; (b) Regulatory Approvals. Any waiting period (and any extension -------------------- thereof) applicable to the consummation of the Merger under the HSR Act and the other regulatory provisions listed in Section 3.05 shall have expired or been terminated, and the Company shall have obtained a negative declaration or executed a remediation agreement with the NJDEPE pursuant to the requirements of ISRA; (c) No Order. No foreign, United States or state governmental -------- authority or other agency or commission or foreign, United States or state court of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any law, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) which is then in effect and has the effect of making the acquisition of Shares by Parent or Purchaser or any affiliate of either of them illegal or otherwise restricting, preventing or prohibiting consummation of the Transactions; and 33 (d) Offer. Purchaser or its permitted assignee shall have ----- purchased all Shares validly tendered and not withdrawn pursuant to the Offer; provided, however, that this condition shall not be applicable to -------- ------- the obligations of Parent or Purchaser if, in breach of this Agreement or the terms of the Offer, Purchaser fails to purchase any Shares validly tendered and not withdrawn pursuant to the Offer. ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER --------------------------------- SECTION 8.01. Termination. This Agreement may be terminated and the ----------- Merger and the other Transactions may be abandoned at any time prior to the Effective Time, notwithstanding any requisite approval and adoption of this Agreement and the transactions contemplated hereby by the stockholders of the Company (provided, however, that if Shares are purchased pursuant to the Offer, -------- ------- Parent or Purchaser may not in any event terminate this Agreement): (a) By mutual written consent duly authorized by the Boards of Directors of Parent, Purchaser and the Company; or (b) By either Parent, Purchaser or the Company if (i) the Effective Time shall not have occurred on or before July 31, 1995; provided, however, that the right to terminate this Agreement under this -------- ------- Section 8.01(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date or (ii) any court of competent jurisdiction or other governmental authority shall have issued an order, decree, ruling or taken any other action restraining, enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other action shall have become final and nonappealable; or (c) By Parent if (i) as the result of a failure of any condition set forth in Annex A hereto, (A) Purchaser shall have failed to commence the Offer within 60 days following the date of this Agreement, (B) the Offer shall have terminated or expired in accordance with its terms without Purchaser having accepted any Shares for payment thereunder, and without Purchaser having had an obligation under Section 1.01 of this Agreement to extend the Offer, or (C) Purchaser shall have failed to pay for Shares pursuant to the Offer within 90 days following the commencement of the Offer (or where applicable under the conditions to the Offer set forth in Annex A, within the 120-day period specified therein), unless the occurrence of the event set forth in any of clauses (A), (B) or (C) above shall have been caused by or resulted from the failure of Parent or Purchaser to perform in any material respect any material covenant or agreement of 34 either of them contained in this Agreement or the material breach by Parent or Purchaser of any material representation or warranty of either of them contained in this Agreement (including where such occurrence results from an action by the Company permitted under Section 6.05(b) that results from such failure or material breach by Parent or Purchaser) or (ii) prior to the purchase of Shares pursuant to the Offer, the Board or any committee thereof shall have withdrawn or modified in a manner adverse to Purchaser or Parent its approval or recommendation of the Offer, this Agreement, the Merger or any other Transaction or shall have recommended another Acquisition Proposal, or shall have resolved to do any of the foregoing; or (d) By the Company, upon approval of the Board, if (i) as the result of the failure of any of the conditions set forth in Annex A hereto, (A) Purchaser shall have failed to commence the Offer within 60 days following the date of this Agreement, (B) the Offer shall have terminated or expired in accordance with its terms without Purchaser having accepted any Shares for payment thereunder or (C) Purchaser shall have failed to pay for Shares pursuant to the Offer within 90 days following the commencement of the Offer (or where applicable under the conditions to the Offer set forth in Annex A, within the 120-day period specified therein), unless the occurrence of the event set forth in any of clauses (A), (B) or (C) above shall have been caused by or resulted from the failure of the Company to perform in any material respect any material covenant or agreement of it contained in this Agreement or the material breach by the Company of any material representation or warranty of it contained in this Agreement, (ii) prior to the purchase of Shares pursuant to the Offer, the Board shall have determined to accept a Superior Proposal pursuant to Section 6.05(b) and the Company has complied with all the provisions of Section 6.05(b); provided that such termination under this Section 8.01(d) shall not be -------- effective until the Company has made payment of the full fee required by Section 8.03(a) hereof and has deposited with a mutually acceptable escrow agent $2 million for reimbursement of Expenses (as defined below) in accordance with Section 8.03, or (iii) prior to the purchase of Shares pursuant to the Offer, there has been a willful breach by Parent or Purchaser of any representation, warranty, covenant or agreement set forth in this Agreement which breach is not reasonably capable of being cured by within 40 business days after the date of the commencement of the Offer. SECTION 8.02. Effect of Termination. In the event of the termination --------------------- of this Agreement pursuant to Section 8.01, this Agreement shall forthwith become void, and there shall be no liability on the part of any party hereto, except (i) as set forth in Sections 8.03 and 9.01 and (ii) nothing herein shall relieve any party from liability for any breach hereof. 35 SECTION 8.03. Fees and Expenses. (a) In the event that ----------------- (i) any person (including, without limitation, the Company or any affiliate thereof), other than Parent or any affiliate of Parent, shall have become the beneficial owner of more than 50% of the then outstanding Shares and this Agreement shall have been terminated pursuant to Section 8.01; or (ii) any person shall have commenced, publicly proposed or communicated to the Company a proposal that is publicly disclosed for a tender or exchange offer for 50% or more (or which, assuming the maximum amount of securities which could be purchased, would result in any person beneficially owning 50% or more) of the then outstanding Shares or otherwise for the direct or indirect acquisition of the Company or all or a substantial portion of its assets for per Share consideration having a value greater than the Per Share Amount and (A) the Offer shall have remained open for at least 20 business days, (B) the Minimum Condition shall not have been satisfied, (C) this Agreement shall have been terminated pursuant to Section 8.01, and (D) within 12 months of such termination a Third Party Acquisition (as defined hereafter) shall occur; or (iii) this Agreement is terminated pursuant to Section 8.01(c)(ii) or 8.01(d)(ii); then, in any such event, the Company shall pay Parent promptly (but in no event later than five business days after the first of such events shall have occurred) a fee of $7 million (the "Fee"), which amount shall be payable in --- immediately available funds, plus all Expenses (as hereinafter defined); provided, however, that neither the Fee nor any Expenses shall be paid pursuant - -------- ------- to this Section 8.03 if either Parent or Purchaser shall be in material breach of its representations and warranties or obligations hereunder. (b) "Expenses" shall mean all out-of-pocket expenses and fees up to $2 million in the aggregate (including, without limitation, fees and expenses payable to all banks, investment banking firms, other financial institutions and other persons and their respective agents and counsel for arranging, committing to provide or providing any financing for the Transactions or structuring the Transactions and all fees of counsel, accountants, experts and consultants to Parent, Purchaser and their affiliates, and all printing and advertising expenses) actually incurred or accrued by either of them or on their behalf in connection with the Transactions, including, without limitation, the financing thereof, and actually incurred or accrued by banks, investment banking firms, other financial institutions and other persons and assumed by Parent, Purchaser or their affiliates in connection with the negotiation, preparation, execution and performance of this Agreement, the structuring and financing of the Transactions and any financing commitments or agreements relating thereto. 36 (c) Except as set forth in this Section 8.03, all costs and expenses incurred in connection with this Agreement and the Transactions shall be paid by the party incurring such expenses, whether or not any Transaction is consummated. (d) In the event that the Company shall fail to pay the Fee or any Expenses when due, the term "Expenses" shall be deemed to include the costs and expenses actually incurred or accrued by Parent, Purchaser and their affiliates (including, without limitation, fees and expenses of counsel) in connection with the collection under and enforcement of this Section 8.03, together with interest on such unpaid Fee and Expenses, commencing on the date that the Fee or such Expenses became due, at a rate equal to the rate of interest publicly announced by Citibank, N.A., from time to time, in the City of New York, as such bank's Base Rate plus 3%. (e) "Third Party Acquisition" means the occurrence of any of the ----------------------- following events: (i) the acquisition of the Company by merger, tender offer, exchange offer, consolidation or otherwise by any person other than Parent, Purchaser or any affiliate thereof (a "Third Party"); (ii) the acquisition by ----------- any Third Party of all or substantially all of the total assets of the Company and its Subsidiaries, taken as a whole; (iii) the acquisition by a Third Party of 50% or more of the outstanding Shares; (iv) the adoption by the Company of a plan of liquidation or the declaration or payment of an extraordinary dividend; or (v) the repurchase by the Company or any of its Subsidiaries of 50% or more of the outstanding Shares. SECTION 8.04. Amendment. Subject to Section 6.03, this Agreement may --------- be amended by the parties hereto by action taken by or on behalf of their respective Boards of Directors at any time prior to the Effective Time; provided, however, that, after the approval and adoption of this Agreement and - -------- ------- the transactions contemplated hereby by the stockholders of the Company, no amendment may be made which would reduce the amount or change the type of consideration into which each Share shall be converted upon consummation of the Merger or changes any other terms or conditions of this Agreement if the changes alone or in the aggregate, would adversely affect the stockholders of the Company. This Agreement may not be amended except by an instrument in writing signed by the parties hereto. SECTION 8.05. Waiver. At any time prior to the Effective Time, ------ unless expressly limited elsewhere in this Agreement, any party hereto may (i) extend the time for the performance of any obligation or other act of any other party hereto, (ii) waive any inaccuracy in the representations and warranties contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any agreement or condition contained herein. Any such extension or waiver shall be valid if set forth in an instrument in writing signed by the party or parties to be bound thereby. 37 ARTICLE IX GENERAL PROVISIONS ------------------ SECTION 9.01. Non-Survival of Representations, Warranties and ----------------------------------------------- Agreements. The representations, warranties and agreements in this Agreement - ---------- shall terminate at the Effective Time or upon the termination of this Agreement pursuant to Section 8.01, as the case may be, except that the agreements set forth in Articles II and IX and Sections 6.06 and 6.07 shall survive the Effective Time indefinitely and those set forth in Sections 6.04, 6.13 and 8.03 and Article IX shall survive termination indefinitely. SECTION 9.02. Notices. All notices, requests, claims, demands and ------- other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, telecopy, telegram, facsimile or telex or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9.02): if to Parent or Purchaser: Siemens Nixdorf Informationssysteme AG Otto-Hahn-Ring 6 81739 Munich Germany Facsimile No: 011 49 89 636 42922 Attention: Gerhard Schulmeyer Adrian van Hammerstein with a copy to each of: Siemens Corporation 1301 Avenue of the Americas New York, New York Facsimile No: (212) 258-4945 Attention: E. Robert Lupone Shearman & Sterling 599 Lexington Avenue New York, New York 10022 Facsimile No: (212) 848-7179/80 Attention: Peter D. Lyons, Esq. 38 if to the Company: Pyramid Technology Corporation 3860 N. First Street San Jose, CA 95134 Facsimile No: (408) 428-8820 Attention: Richard H. Lussier with a copy to: Wilson, Sonsini, Goodrich & Rosati 650 Page Mill Road Palo Alto, CA 94304-1050 Facsimile No: (415) 493-6811 Attention: Larry W. Sonsini, Esq. SECTION 9.03. Certain Definitions. For purposes of this Agreement, ------------------- the term: (a) "affiliate" of a specified person means a person who --------- directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, such specified person; (b) "beneficial owner" with respect to any Shares means a person ---------------- who shall be deemed to be the beneficial owner of such Shares (i) which such person or any of its affiliates or associates (as such term is defined in Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly or indirectly, (ii) which such person or any of its affiliates or associates has, directly or indirectly, (A) the right to acquire (whether such right is exercisable immediately or subject only to the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of consideration rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding or (iii) which are beneficially owned, directly or indirectly, by any other persons with whom such person or any of its affiliates or associates or person with whom such person or any of its affiliates or associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any Shares; (c) "business day" means any day on which the principal offices ------------ of the SEC in Washington, D.C. are open to accept filings, or, in the case of determining a date when any payment is due, any day on which banks are not required or authorized to close in the City of New York; 39 (d) "control" (including the terms "controlled by" and "under ------- ------------- ----- common control with") means the possession, directly or indirectly or as ------------------- trustee or executor, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, as trustee or executor, by contract or credit arrangement or otherwise; (e) "person" means an individual, corporation, partnership, ------ limited partnership, syndicate, person (including, without limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government; and (f) "subsidiary" or "subsidiaries" of the Company, the Surviving ---------- ------------ Corporation, Parent or any other person means an affiliate controlled by such person, directly or indirectly, through one or more intermediaries. SECTION 9.04. Severability. If any term or other provision of this ------------ Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the Transactions be consummated as originally contemplated to the fullest extent possible. SECTION 9.05. Entire Agreement; Assignment. This Agreement ---------------------------- constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. This Agreement shall not be assigned by operation of law or otherwise, except that Parent and Purchaser may assign all or any of their rights and obligations hereunder to any affiliate of Parent provided that no such assignment shall relieve the assigning party of its obligations hereunder if such assignee does not perform such obligations. SECTION 9.06. Parties in Interest. This Agreement shall be binding ------------------- upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, other than Section 6.07 (which is intended to be for the benefit of the persons covered thereby and may be enforced by such persons). 40 SECTION 9.07. Specific Performance. The parties hereto agree that -------------------- irreparable damage would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity. SECTION 9.08. Governing Law. This Agreement shall be governed by, ------------- and construed in accordance with, the laws of the State of Delaware applicable to contracts executed in and to be performed in that State. All actions and proceedings arising out of or relating to this Agreement shall be heard and determined in any state or federal court sitting in the state of Delaware. SECTION 9.09. Headings. The descriptive headings contained in this -------- Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 9.10. Counterparts. This Agreement may be executed in one or ------------ more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. 41 IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. ATTEST: SIEMENS NIXDORF INFORMATIONSSYSTEME AG /s/Michael W. Schiefen By/s/ Gerhard Schulmeyer - --------------------------------- -------------------------------- Name: Gerhard Schulmeyer Title: Chairman /s/Michael W. Schiefen By/s/Adrian v. Hammerstein - --------------------------------- -------------------------------- Name: Adrian v. Hammerstein Title: Attorney-in-fact ATTEST: SIEMENS NIXDORF MID-RANGE ACQUISITION CORP. /s/ Michael W. Schiefen By/s/Gerhard Schulmeyer - --------------------------------- -------------------------------- Name: Gerhard Schulmeyer Title: President /s/ Michael W. Schiefen By/s/Adrian v. Hammerstein - --------------------------------- -------------------------------- Name: Adrian v. Hammerstein Title: Secretary ATTEST: PYRAMID TECHNOLOGY CORPORATION /s/ Michael W. Schiefen By/s/ Richard H. Lussier - --------------------------------- -------------------------------- Name: Richard H. Lussier Title: Chairman ANNEX A ------- Conditions to the Offer ----------------------- The capitalized terms used in this Annex A have the meanings set forth in the attached Agreement, except that the term "Merger Agreement" shall be deemed to refer to the attached Agreement. Notwithstanding any other provision of the Offer, subject to the terms of the Merger Agreement (including the Purchaser's obligation to extend the Offer as provided in the Merger Agreement), Purchaser shall not be required to accept for payment or pay for any Shares tendered pursuant to the Offer, and may terminate or amend the Offer and may postpone the acceptance for payment of and payment for Shares tendered, if (i) the Minimum Condition shall not have been satisfied, (ii) any applicable waiting period under the HSR Act and the other regulatory provisions listed in Section 3.05 of the Merger Agreement shall not have expired or been terminated prior to the expiration of the Offer, (iii) the Company shall not have obtained a negative declaration or executed a remediation agreement with the NJDEPE pursuant to the requirements of ISRA or (iv) (A) the applicable waiting period under the Exon-Florio Provision shall not have expired, (B) the Committee on Foreign Investment in the United States ("CFIUS") shall have initiated an investigation of the Transactions or (C) if CFIUS initiates an investigation, the applicable waiting period under the Exon-Florio Provision relating to such investigation shall not have expired, or such investigation shall have been completed and the President shall have announced a decision to take action pursuant to the Exon-Florio Provision before the expiration of the period ending on the 15th day (or if such day is not a business day, the next business day) following the completion of such investigation, which has a substantial likelihood of resulting, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph (a) below or such 15 day waiting period shall not have expired; provided, however, that prior to the expiration of 120 days following the date - -------- ------- of the Merger Agreement, Purchaser shall not terminate the Offer by reason of the non-satisfaction of either of the conditions set forth in clauses (ii), (iii) or (iv) above and shall extend the Offer and shall use its reasonable best efforts to cause the satisfaction of such conditions (it being understood that this proviso shall not prohibit Purchaser from terminating the Offer or failing to extend the Offer by reason of the non-satisfaction of any other condition of the Offer). Furthermore, notwithstanding any other term of the Offer, subject to the terms of the Merger Agreement, Purchaser shall not be required to accept for payment or pay for any Shares tendered pursuant to the Offer, and may terminate or amend the Offer and may postpone the acceptance for payment of and payment for Shares tendered, if, at any time on or after the date of the Merger Agreement, and prior to the acceptance for payment of Shares, any of the following conditions exist: (a) there shall be pending any action or proceeding instituted by any governmental authority before any court or governmental, administrative or regulatory authority or agency, domestic or foreign, (i) challenging or seeking to make illegal, A-2 materially delay or otherwise directly or indirectly restrain or prohibit or make materially more costly the making of the Offer, the acceptance for payment of, or payment for, any Shares by Parent, Purchaser or any other affiliate of Parent, or the consummation of any other Transaction, or seeking to obtain material damages in connection with any Transaction; (ii) seeking to prohibit or limit materially the ownership or operation by the Company, Parent or any of their subsidiaries of all or any material portion of the business or assets of the Company, Parent or any of their subsidiaries, or to compel the Company, Parent or any of their subsidiaries to dispose of or hold separate all or any material portion of the business or assets of the Company, Parent or any of their subsidiaries, as a result of the Transactions; (iii) seeking to impose or confirm limitations on the ability of Parent, Purchaser or any other affiliate of Parent to exercise effectively full rights of ownership of any Shares, including, without limitation, the right to vote any Shares acquired by Purchaser pursuant to the Offer or otherwise on all matters properly presented to the Company's stockholders, including, without limitation, the approval and adoption of this Agreement and the transactions contemplated hereby; (iv) seeking to require divestiture by Parent, Purchaser or any other affiliate of Parent of any Shares; or (v) which otherwise has a Material Adverse Effect or which is reasonably likely to materially adversely affect the business, operations, properties, condition (financial or otherwise), assets or liabilities (including, without limitation, contingent liabilities) of Parent; provided, however, that prior to the expiration of 120 days -------- ------- following the date hereof, Purchaser shall not terminate the Offer by reason of the non-satisfaction of the conditions set forth in this paragraph (a) and shall extend the Offer and use its reasonable best efforts to cause the satisfaction of such condition unless there shall be in effect any permanent injunction or other order, decree, judgment or ruling that has become final and nonappealable by any court or governmental, administrative or regulatory authority or agency, domestic or foreign, which in any case shall have an effect specified in any of clauses (i) through (v) above (it being understood that this proviso shall not prohibit Purchaser from terminating the Offer or failing to extend the Offer by reason of the non-satisfaction of any other condition of the Offer); (b) there shall have been any action taken, or any statute, rule, regulation, legislation, interpretation, judgment, order or injunction enacted, entered, enforced, promulgated, amended, issued or deemed applicable to (i) Parent, the Company or any subsidiary or affiliate of Parent or the Company or (ii) any Transaction, by any legislative body, court, government or governmental, administrative or regulatory authority or agency, domestic or foreign, which has a substantial likelihood of resulting, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; (c) except as set forth in the Disclosure Schedule, there shall have occurred any change, condition, event or development that has a Material Adverse Effect; A-3 (d) there shall have occurred (i) any general suspension of, or limitation on prices for, trading in securities of the Company on the NASDAQ National Market System, (ii) any extraordinary or material adverse change in the market price of the Shares or in the United States securities markets or financial markets generally, including, without limitation, a decline, measured from the date hereof, in the Standard & Poor's 500 Index by an amount in excess of 25%, (iii) any material adverse change in United States currency exchange rates or a suspension of, or limitation on, currency exchange markets, (iv) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or Germany, (v) any limitation (whether or not mandatory) by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, on, or other event that, in the reasonable judgment of Purchaser, might affect, the extension of credit by banks or other lending institutions, (vi) a commencement of a war or armed hostilities or other national or international calamity directly or indirectly involving the armed forces of the United States or Germany which could reasonably be expected to have a Material Adverse Effect or materially adversely affect (or materially delay) the consummation of the Offer or (vii) in the case of any of the foregoing existing on the date hereof, a material acceleration or worsening thereof; (e) (i) it shall have been publicly disclosed or Purchaser shall have otherwise learned that beneficial ownership (determined for the purposes of this paragraph as set forth in Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the then outstanding Shares has been acquired by any person, other than Parent or any of its affiliates or (ii) (A) the Board or any committee thereof shall have withdrawn or modified in a manner adverse to Parent or Purchaser the approval or recommendation of the Offer, the Merger or the Merger Agreement or approved or recommended any Acquisition Proposal other than the Offer and the Merger or (B) the Board or any committee thereof shall have resolved to do any of the foregoing (except for such action under (A) or (B) that results from the failure of Parent or Purchaser to perform in any material respect any material covenant or agreement of either of them contained in the Merger Agreement or the material breach by Parent or Purchaser of any material representation or warranty of either of them contained in the Merger Agreement); (f) any representation or warranty of the Company in the Merger Agreement which is qualified as to materiality shall not be true and correct or any such representation or warranty that is not so qualified shall not be true and correct in any material respect, in each case as if such representation or warranty was made as of such time on or after the date of the Merger Agreement; A-4 (g) the Company shall have failed to perform in any material respect any obligation or to comply in any material respect with any agreement or covenant of the Company to be performed or complied with by it under the Merger Agreement; (h) the Merger Agreement shall have been terminated in accordance with its terms; or (i) Purchaser and the Company shall have agreed that Purchaser shall terminate the Offer or postpone the acceptance for payment of or payment for Shares thereunder; which, in the reasonable judgment of Purchaser in any such case, and regardless of the circumstances (including any action or inaction by Parent or any of its affiliates) giving rise to any such condition, makes it inadvisable to proceed with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of Purchaser and Parent and may be asserted by Purchaser or Parent regardless of the circumstances giving rise to any such condition or may be waived by Purchaser or Parent in whole or in part at any time and from time to time in their sole discretion, except that the Minimum Condition may not be waived by Parent or Purchaser without the prior written consent of the Company. The failure by Parent or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right; the waiver of any such right with respect to particular facts and other circumstances shall not be deemed a waiver with respect to any other facts and circumstances; and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. ANNEX B ------- AGREEMENTS RESPECTING EMPLOYEE BENEFIT MATTERS (a) Benefits Following the Effective Time. Parent shall cause the ------------------------------------- Surviving Corporation for a period of at least two years following the acceptance of Shares by Purchaser pursuant to the Offer to continue to provide the employees of the Surviving Corporation with the employee pension, welfare and fringe benefits currently in effect (subject to paragraph (c) below) or substitute benefits that are substantially comparable to, and in the aggregate no less favorable than, such employee pension, welfare and fringe benefits. (b) Phantom Equity or Long-Term Incentive Program. As soon as practicable --------------------------------------------- following the Effective Time, Parent shall cause the Surviving Corporation to implement a phantom equity or long-term incentive program instead of the Stock Option Plans as currently in effect to reward revenue growth and profitability over a three year period, which program shall be designed by Parent following good faith consultation with the Surviving Corporation's senior management and under which program potential payments shall be at a level consistent with the objective of preserving the entrepreneurial character of the Surviving Corporation. Such program shall also contain provisions providing for the conversion of awards into common equity of the Surviving Corporation in the event of an initial public offering of the common equity of the Surviving Corporation. (c) Amendment to 401(k) Plan. As soon as practicable following the ------------------------ Effective Time, Parent shall cause the Surviving Corporation to amend the Surviving Corporation 401(k) plan to effect an appropriate increase to the rate of employer matching contributions and/or discretionary contributions so as to compensate the employees of the Surviving Corporation for the termination of the 1987 Stock Purchase Plan. (d) Management Incentive Plan. Parent shall cause the Surviving ------------------------- Corporation to retain the Management Incentive Plan (the "MIP") until September 30, 1995, as modified as provided below, with the same employees remaining eligible for bonuses thereunder. The amounts payable to each of the Surviving Corporation's executive officers participating in the MIP shall be increased by 30%. Each other participant in the MIP shall be given the right to elect, no later than 30 days following the Effective Time, either (i) the 30% increase described in the immediately proceeding sentence or (ii) a guaranteed minimum bonus equal to 50% of such participant's bonus at 100% target performance. Appropriate adjustments shall be made to the plan target levels to eliminate the effect of legal, investment banking and other extraordinary fees and expenses incurred by the Surviving Corporation as a consequence of the transactions effected pursuant to this Agreement and the preparation and negotiations leading thereto. (e) Incentive Plan for Selected Non-MIP Employees. Parent shall cause the --------------------------------------------- Surviving Corporation to establish a bonus system for selected non-MIP, non- sales employees which will reward milestones, for example, in the development of products. B-2 (f) Retention Bonuses. As soon as practicable following the Effective ----------------- Time, Parent shall cause the Surviving Corporation to enter into retention bonus agreements with up to 30 employees of the Surviving Corporation to be identified by mutual agreement of Parent and senior management of the Company. Such retention bonus agreements shall be in a form to be established by Parent following good faith consultation with senior management of the Surviving Corporation and shall provide each covered employee with the opportunity to receive a retention bonus (in addition to any bonus payable under the MIP or other annual bonus plan) of up to 100% of such employee's base salary on the second anniversary of the Effective Time, subject to such employee being employed by the Surviving Corporation on such anniversary date. EX-4.1 3 AMENDMENT TO AMENDED/RESTATED COMMON SHARES RIGHTS AGREEMENT EXHIBIT 4.1 ----------- AMENDMENT TO AMENDED AND RESTATED ---------------------------------- COMMON SHARES RIGHTS AGREEMENT ------------------------------ This Amendment (the "Amendment") is made effective as of January 20, 1995 to the Common Shares Rights Agreement (the "Agreement") dated as of December 12, 1988 and Amended and Restated as of June 30, 1991, and as further amended August 19, 1994, between Pyramid Technology Corporation, a Delaware corporation (the "Company"), and Chemical Trust Company of California (the "Rights Agent"). The Company has entered into an Agreement and Plan of Merger (the "Merger Agreement") dated as of January 20, 1995 among the Company, Siemens Nixdorf Informationssysteme AG, a corporation organized under the laws of the Federal Republic of Germany ("Parent") and Siemens Nixdorf Mid-Range Acquisition Corp., a Delaware corporation ("Purchaser"), pursuant to which Purchaser shall make a cash tender offer (the "Offer") to acquire all of the issued and outstanding shares of Common Stock of the Company (all issued and outstanding shares of Common Stock of the Company being referred to herein as the "Common Shares") for $16.00 per Share. In furtherance of such acquisition, all necessary corporate action on the part of each of Parent, Purchaser and the Company has been taken to approve the merger of Purchaser with and into the Company or, at the election of Purchaser and Parent, the merger of the Company with and into Purchaser (the "Merger") following consummation of the Offer. In connection with its approval of the Offer and the Merger, the Company's Board of Directors, on January 20, 1995, authorized the taking of such action by the Company as is necessary to make the provisions of the Agreement inapplicable to the making of the Offer, the purchase of the Common Shares, the execution of the Merger Agreement and any other transaction contemplated by the Merger Agreement (the "Transactions"). Accordingly, the Company and the Rights Agent desire to amend the Agreement as set forth herein in accordance with Section 27 of the Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby amend the Agreement and agree as follows: 1. Amendment to Section 1(a). Section 1(a) of the Agreement is hereby ------------------------- amended to add the following sentence at the end thereof: "Notwithstanding anything in this Section 1(a) to the contrary, none of the execution of the Merger Agreement, the making of the Offer, the purchase of the Common Shares pursuant to the Offer or the Merger shall cause Parent, Purchaser nor any of their Affiliates or Associates to become an `Acquiring Person.'" 2. Amendment to Section 1(c). Section 1(c) of the Agreement is hereby ------------------------- amended to add an additional paragraph immediately following subparagraph (iii) thereof: "Notwithstanding anything in this Section 1(c) to the contrary, Parent, Purchaser and their Affiliates and Associates shall not be deemed the `Beneficial Owner' of or to `beneficially own' pursuant to Sections 1(c)(i), 1(c)(ii), 1(c)(iii) above any securities which any of them may acquire, or may have or be deemed to have the right to acquire or vote, or as a result of any action taken, pursuant to or in compliance with, and on or after the date of, the Merger Agreement." -2- 3. Amendment to Section 1(h). Section 1(h) of the Agreement is hereby ------------------------- amended to add the following sentence at the end thereof: "Notwithstanding anything in this Section 1(h) to the contrary, none of the execution of the Merger Agreement, the making of the Offer, the purchase of the Common Shares pursuant to the Offer or the Merger shall cause a `Distribution Date' to occur." 4. Amendment to Section 1(k). Section 1(k) of the Agreement is hereby ------------------------- amended to read in its entirety as follows: "`Final Expiration Date' shall mean the earlier to occur of (i) immediately prior to the purchase of the Common Shares by Purchaser pursuant to the Offer or (ii) December 12, 1998." 5. Amendment to Section 1(s). Section 1(s) of the Agreement is hereby ------------------------- amended to add the following clause at the end thereof: ", other than the Merger (as defined in the Merger Agreement)." 6. Amendment to Section 1(t). Section 1(t) of the Agreement is hereby ------------------------- amended to add the following sentence at the end thereof: "Notwithstanding anything in this Section 1(t) to the contrary, none of the execution of the Merger Agreement, the making of the Offer, the purchase of the Common Shares pursuant to the Offer or the Merger shall cause a `Shares Acquisition Date' to occur." 7. Amendment to Section 1(x). Section 1(x) of the Agreement is hereby ------------------------- amended to add the following sentence at the end thereof: -3- "Notwithstanding anything in this Section 1(x) to the contrary, none of the execution of the Merger Agreement, the making of the Offer, the purchase of the Common Shares pursuant to the Offer or the Merger shall cause a `Triggering Event' to occur." 8. Amendment to Add Sections 1(y), 1(z), 1(aa) and 1(bb). Section 1 of ----------------------------------------------------- the Agreement is hereby amended to add additional subsections (y), (z), (aa) and (bb) to read in their entirety as follows: "(y) `Merger Agreement' shall mean the Agreement and Plan of Merger dated as of January 20, 1995 among Parent, Purchaser and the Company, as the same may hereafter be amended. (z) `Parent' shall mean Siemens Nixdorf Informationssysteme, AG, a corporation organized under the laws of the Federal Republic of Germany. (aa) `Purchaser' shall mean Siemens Nixdorf Mid-Range Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Parent. (bb) `Transactions' shall mean all transactions contemplated by the Merger Agreement, including, without limitation, the Merger (as defined in the Merger Agreement)." 9. Amendment to Add Section 13(g). Section 13 of the Agreement is hereby ------------------------------ amended to add additional subsection (g) to read in its entirety as follows: "(g) Notwithstanding anything in this Agreement to the contrary, Section 13 shall not be applicable to the Merger (as defined in the Merger Agreement). Upon consummation of the Merger, all Rights hereunder shall expire." -4- 10. Consent Required to Amend. As long as neither Parent nor Purchaser is ------------------------- in material breach of the Merger Agreement and the Merger Agreement has not been terminated in accordance with its terms, the provisions of this Amendment and their substantive effect may not be amended or modified without the consent of Parent and Merger Subsidiary. 11. Effect of Amendment. Except as expressly modified herein, the ------------------- Agreement shall remain in full force and effect. 12. Counterparts. This Amendment may be executed in any number of ------------ counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed, all as of the day and year first above written. PYRAMID TECHNOLOGY CORPORATION, a Delaware corporation By:________________________ Title:_____________________ CHEMICAL TRUST COMPANY OF CALIFORNIA, as Rights Agent By:________________________ Title:_____________________ -5- EX-10.1 4 FORM OF INDEMNIFICATION AGREEMENT EXHIBIT 10.1 ------------ INDEMNIFICATION AGREEMENT ------------------------- THIS INDEMNIFICATION AGREEMENT ("Agreement") is made as of this _____ day of ____________, 199__ by and between Pyramid Technology Corporation, a Delaware corporation (the "Company"), and ___________________________ ("Indemnitee"). WHEREAS, the Company and Indemnitee recognize the increasing difficulty in obtaining directors' and officers' liability insurance, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance; WHEREAS, the Company and Indemnitee further recognize the substantial increase in corporate litigation in general, subjecting officers and directors to expensive litigation risks at the same time as the availability and coverage of liability insurance has been severely limited; WHEREAS, Indemnitee does not regard the current protection available as adequate under the present circumstances, and Indemnitee and other officers and directors of the Company may not be willing to continue to serve as officers and directors without additional protection; and WHEREAS, the Company desires to attract and retain the services of highly qualified individuals, such as Indemnitee, to serve as officers and directors of the Company and to indemnify its officers and directors so as to provide them with the maximum protection permitted by law. NOW, THEREFORE, the Company and Indemnitee hereby agree as follows: 1. INDEMNIFICATION. --------------- (a) Third Party Proceedings. The Company shall indemnify Indemnitee ----------------------- if Indemnitee is or was a party or is threatened to be made a party to any threatened, pending or completed action or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) by reason of the fact that Indemnitee is or was a director, officer, employee or agent of the Company, or any subsidiary of the Company, by reason of any action or inaction on the part of Indemnitee while an officer or director or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) actually and reasonably incurred by Indemnitee in connection with such action or proceeding if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe Indemnitee's conduct was unlawful. The termination of any action or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or --------------- its equivalent, shall not, of itself, create a presumption that (i) Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in the best interests of the Company, or (ii) with respect to any criminal action or proceeding, Indemnitee had reasonable cause to believe that Indemnitee's conduct was unlawful. (b) Proceedings By or in the Right of the Company. The Company shall --------------------------------------------- indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made a party to any threatened, pending or completed action or proceeding by or in the right of the Company or any subsidiary of the Company to procure a judgment in its favor by reason of the fact that Indemnitee is or was a director, officer, employee or agent of the Company, or any subsidiary of the Company, by reason of any action or inaction on the part of Indemnitee while an officer or director or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees) and, to the fullest extent permitted by law, amounts paid in settlement, in each case to the extent actually and reasonably incurred by Indemnitee in connection with the defense or settlement of such action or proceeding if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the best interests of the Company and its shareholders, except that no indemnification shall be made in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged to be liable to the Company in the performance of Indemnitee's duty to the Company and its shareholders unless and only to the extent that the court in which such action or proceeding is or was pending shall determine upon application that, in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for expenses and then only to the extent that the court shall determine. (c) Mandatory Payment of Expenses. To the extent that Indemnitee has ----------------------------- been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Paragraphs (a) and (b) of this Paragraph 1 or the defense of any claim, issue or matter therein, Indemnitee shall be indemnified against expenses (including attorneys fees) actually and reasonably incurred by Indemnitee in connection therewith. -2- 2. EXPENSES; INDEMNIFICATION PROCEDURE. ----------------------------------- (a) Advancement of Expenses. The Company shall advance all expenses ----------------------- incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of any civil or criminal action or proceeding referenced in Section 1(a) or (b) hereof (but not amounts actually paid in settlement of any such action or proceeding). Indemnitee hereby undertakes to repay such amounts advanced only if, and to the extent that, it shall ultimately be determined that Indemnitee is not entitled to be indemnified by the Company as authorized hereby. The advances to be made hereunder shall be paid by the Company to Indemnitee within twenty (20) days following delivery of a written request therefor by Indemnitee to the Company. (b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a -------------------------------- condition precedent to his right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any claim made against Indemnitee for which indemnification will or could be sought under this Agreement. Notice to the Company shall be directed to the Chief Executive Officer of the Company at the address shown on the signature page of this Agreement (or such other address as the Company shall designate in writing to Indemnitee). Notice shall be deemed received three business days after the date postmarked if sent by domestic certified or registered mail, properly addressed; otherwise notice shall be deemed received when such notice shall actually be received by the Company. In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee's power. (c) Procedure. Any indemnification provided for in Section 1 shall be --------- made no later than forty-five (45) days after receipt of the written request of Indemnitee. If a claim under this Agreement, under any statute, or under any provision of the Company's Articles of Incorporation or By-laws providing for indemnification, is not paid in full by the Company within forty-five (45) days after a written request for payment thereof has first been received by the Company, Indemnitee may, but need not, at any time thereafter bring an action against the Company to recover the unpaid amount of the claim and, subject to Section 12 of this Agreement, Indemnitee shall also be entitled to be paid for the expenses (including attorneys' fees) of bringing such action. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in connection with any action or proceeding in advance of its final disposition) that Indemnitee has not met the standards of conduct which make it permissible under applicable law for the Company to indemnify Indemnitee for the amount claimed, but the burden of proving such defense shall be on the Company, and Indemnitee shall be entitled -3- to receive interim payments of expenses pursuant to Subsection 2(a) unless and until such defense may be finally adjudicated by court order or judgment from which no further right of appeal exists. It is the parties' intention that if the Company contests Indemnitee's right to indemnification, the question of Indemnitee's right to indemnification shall be for the court to decide, and neither the failure of the Company (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel, or its shareholders) to have made a determination that indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the applicable standard of conduct required by applicable law, nor an actual determination by the Company (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel, or its shareholders) that Indemnitee has not met such applicable standard of conduct, shall create a presumption that Indemnitee has or has not met the applicable standard of conduct. (d) Notice to Insurers. If, at the time of the receipt of a notice of ------------------ a claim pursuant to Section 2(b) hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies. (e) Selection of Counsel. In the event the Company shall be obligated -------------------- under Section 2(a) hereof to pay the expenses of any proceeding against Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, with counsel approved by Indemnitee, which approval shall not be unreasonably withheld, upon the delivery to Indemnitee of written notice of its election so to do. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same proceeding, provided that (i) Indemnitee shall have the right to employ his counsel in any such proceeding at Indemnitee's expense; and (ii) if (A) the employment of counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense or (C) the Company shall not, in fact, have employed counsel to assume the defense of such proceeding, then the fees and expenses of Indemnitee's counsel shall be at the expense of the Company. -4- 3. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY. ------------------------------------------------- (a) Scope. Notwithstanding any other provision of this Agreement, the ----- Company hereby agrees to indemnify the Indemnitee to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Company's Articles of Incorporation, the Company's By-laws or by statute. In the event of any change, after the date of this Agreement, in any applicable law, statute or rule which expands the right of a California corporation to indemnify a member of its board of directors or an officer, such changes shall be, ipso facto, within the ---- ----- purview of Indemnitee's rights and Company's obligations, under this Agreement. In the event of any change in any applicable law, statute or rule which narrows the right of a California corporation to indemnify a member of its Board of Directors or an officer, such changes, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement shall have no effect on this Agreement or the parties' rights and obligations hereunder. (b) Nonexclusivity. The indemnification provided by this Agreement -------------- shall not be deemed exclusive of any rights to which Indemnitee may be entitled under the Company's Articles of Incorporation, its By-laws, any agreement, any vote of shareholders or disinterested directors, the California General Corporation Law, or otherwise, both as to action in Indemnitee's official capacity and as to action in another capacity while holding such office. The indemnification provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified capacity even though he may have ceased to serve in such capacity at the time of any action or other covered proceeding. 4. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any ----------------------- provision of this Agreement to indemnification by the Company for some or a portion of the expenses, judgments, fines or penalties actually or reasonably incurred by him in the investigation, defense, appeal or settlement of any civil or criminal action or proceeding, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such expenses, judgments, fines or penalties to which Indemnitee is entitled. 5. MUTUAL ACKNOWLEDGEMENT. Both the Company and Indemnitee acknowledge ---------------------- that in certain instances, Federal law or applicable public policy may prohibit the Company from indemnifying its directors and officers under this Agreement or otherwise. Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the Securities and Exchange Commission to submit the question of indemnification to a -5- court in certain circumstances for a determination of the Company's right under public policy to indemnify Indemnitee. 6. DIRECTORS' AND OFFICERS' LIABILITY INSURANCE. The Company shall, from -------------------------------------------- time to time, make the good faith determination whether or not it is practicable for the Company to obtain and maintain a policy or policies of insurance with reputable insurance companies providing the officers and directors of the Company with coverage for losses from wrongful acts, or to ensure the Company's performance of its indemnification obligations under this Agreement. Among other considerations, the Company will weigh the costs of obtaining such insurance coverage against the protection afforded by such coverage. In all policies of directors' and officers' liability insurance, Indemnitee shall be named as an insured in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company's directors, if Indemnitee is a director; or of the Company's officers, if Indemnitee is not a director of the Company but is an officer; or of the Company's key employees, if Indemnitee is not an officer or director but is a key employee. Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain such insurance if the Company determines in good faith that such insurance is not reasonably available, if the premium costs for such insurance are disproportionate to the amount of coverage provided, if the coverage provided by such insurance is limited by exclusions so as to provide an insufficient benefit, or if Indemnitee is covered by similar insurance maintained by a subsidiary or parent of the Company. 7. SEVERABILITY. Nothing in this Agreement is intended to require or ------------ shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. The Company's inability, pursuant to court order, to perform its obligations under this Agreement shall not constitute a breach of this Agreement. The provisions of this Agreement shall be severable as provided in this Section 7. If this Agreement or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify Indemnitee to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated, and the balance of this Agreement not so invalidated shall be enforceable in accordance with its terms. 8. EXCEPTIONS. Any other provision herein to the contrary ----------- notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement: (a) Claims Initiated by Indemnitee. To indemnify or advance expenses ------------------------------ to Indemnitee with respect to proceedings or claims initiated or brought voluntarily by Indemnitee and not by -6- way of defense, except with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under Section 317 of the California General Corporation Law, but such indemnification or advancement of expenses may be provided by the Company in specific cases if the Board of Directors has approved the initiation or bringing of such suit; or (b) Lack of Good Faith. To indemnify Indemnitee for any expenses ------------------ incurred by the Indemnitee with respect to any proceeding instituted by Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by the Indemnitee in such proceeding was not made in good faith or was frivolous; or (c) Insured Claims. To indemnify Indemnitee for expenses or -------------- liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) which have been paid directly to Indemnitee by an insurance carrier under a policy of directors' and officers' liability insurance maintained by the Company; or (d) Claims Under Section 16(b). To indemnify Indemnitee for expenses -------------------------- and the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute. 9. CONSTRUCTION OF CERTAIN PHRASES. ------------------------------- (a) For purposes of this Agreement, references to the "Company" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that if Indemnitee is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued. (b) For purposes of this Agreement, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on Indemnitee with respect to an employee benefit plan; and references to "serving at -7- the request of the Company" shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants, or beneficiaries. 10. COUNTERPARTS. This Agreement may be executed in one or more ------------ counterparts, each of which shall constitute an original. 11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the ---------------------- Company and its successors and assigns, and shall inure to the benefit of Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns. 12. ATTORNEYS' FEES. In the event that any action is instituted by --------------- Indemnitee under this Agreement to enforce or interpret any of the terms hereof, Indemnitee shall be entitled to be paid all court costs and expenses, including reasonable attorneys' fees, incurred by Indemnitee with respect to such action, unless as a part of such action, the court of competent jurisdiction determines that each of the material assertions made by Indemnitee as a basis for such action were not made in good faith or were frivolous. In the event of an action instituted by or in the name of the Company under this Agreement or to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be paid all court costs and expenses, including attorneys' fees, incurred by Indemnitee in defense of such action (including with respect to Indemnitee's counterclaims and cross-claims made in such action), unless as a part of such action the court determines that each of Indemnitee's material defenses to such action were made in bad faith or were frivolous. 13. NOTICE. All notices, requests, demands and other communications under ------- this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and receipted for by the party addressee, on the date of such receipt, or (ii) if mailed by domestic certified or registered mail with postage prepaid, on the third business day after the date postmarked. Addresses for notice to either party are as shown on the signature page of this Agreement, or as subsequently modified by written notice. 14. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby ------------------------ irrevocably consent to the jurisdiction of the courts of the State of California for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be brought only in the state courts of the State of California. 15. CHOICE OF LAW. This Agreement shall be governed by and its provisions ------------- construed in accordance with the laws of the State -8- of California as applied to contracts between California residents entered into and to be performed entirely within California. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. PYRAMID TECHNOLOGY CORPORATION By:_____________________________ Title:__________________________ Address: 3860 North First Street San Jose, CA 95134 AGREED TO AND ACCEPTED: INDEMNITEE: Name: ___________________________ Address: ________________________ ________________________ -9- EX-10.2 5 STATEMENT OF EMPLOYMENT TERMS: LUSSIER EXHIBIT 10.2 ------------ PYRAMID TECHNOLOGY CORPORATION STATEMENT OF EMPLOYMENT TERMS ----------------------------- This Statement of Employment Terms (the "Statement") is effective as of July 1, 1991, by and between Richard H. Lussier (the "Employee") and Pyramid Technology Corporation, a Delaware corporation (the "Company"). R E C I T A L S A. The Employee presently serves at the pleasure of the Board of Directors as the Chairman of the Board, Chief Executive Officer and President of the Company and performs significant strategic and management responsibilities necessary to the continued conduct of the Company's business and operations. B. The Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication and objectivity of the Employee, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. C. In addition to providing for severance benefits unrelated to a Change of Control, the Board believes that it is imperative to provide the Employee with certain severance benefits upon the Employee's termination of employment following a Change of Control which provide the Employee with enhanced financial security and provide sufficient incentive and encouragement to the Employee to remain with the Company following a Change of Control. D. In order to accomplish the foregoing objectives, the Board of Directors has directed the Company, upon execution of this Statement by the Employee, to commit to the terms provided herein. E. Certain capitalized terms used in the Statement are defined in Section 3 below. In consideration of the mutual covenants herein contained, and in consideration of the continuing employment of Employee by the Company, the parties agree as follows: 1. Term of Employment. The Company and the Employee acknowledge that ------------------ the Employee's employment is at will, as defined under applicable law. If the Employee's employment terminates for any reason, the Employee shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Statement, or as may otherwise be available in accordance with the Company's established employee plans and policies at the time of termination. The provisions of this Statement shall terminate upon the earlier of (i) the date that all obligations of the parties hereunder have been satisfied, (ii) June 30, 1996, or (iii) twenty-four (24) months after a Change of Control. A termination of the provisions of this Statement pursuant to the preceding sentence shall be effective for all purposes, except that such termination shall not affect the payment or provision of compensation or benefits on account of a termination of employment occurring prior to the termination of the provisions of this Statement. 2. Severance Benefits. ------------------ (a) Termination Following A Change of Control. If the Employee has ----------------------------------------- been employed by the Company for not less than 180 days and is terminated following a Change of Control within the time period set forth below, then the Employee shall be entitled to receive severance benefits as follows, subject to Section 4 below: (i) Involuntary Termination. If the Employee's employment is ----------------------- terminated as a result of Involuntary Termination (as defined in Section 3(b) below) within twelve (12) months after a Change of Control, then the Employee shall be entitled to receive severance pay in an amount equal to two (2) times the sum of (i) the Employee's base salary at the annualized rate for the year coinciding with the year of payment and (ii) the average of the annual cash bonus received by the Employee for the three (3) years immediately preceding or ending coincident with the year of payment (whichever average produces the higher amount). Any severance payments to which the Employee is entitled pursuant to this section shall be paid in a lump sum within thirty (30) days of the Employee's termination. In addition, for a period of twenty-four (24) months after any termination under this Section 2(a)(i), the Company shall be obligated to continue to make available to the Employee and to pay for all health and medical benefit, life and other similar insurance plans existing on the date of the Employee's termination. (ii) Voluntary Resignation. If the Employee's employment terminates --------------------- by reason of the Employee's voluntary resignation (and is not an Involuntary Termination or a termination for Cause) within six (6) months after a Change of Control, then the Employee shall be entitled to receive severance pay in an amount equal to the sum of (i) the Employee's base salary at the annualized rate for the year coinciding with the year of payment and (ii) the average of the annual cash bonus received by the Employee for the three (3) years immediately preceding or ending coincident with the year of payment (whichever average produces the higher amount). Any severance payments to which the Employee is entitled pursuant to this section shall be paid in a lump sum within thirty (30) days of the Employee's termination. In addition, for a period of twelve -2- (12) months after any termination under this Section 2(a)(ii), the Company shall be obligated to continue to make available to the Employee and to pay for all health and medical benefit, life and other similar insurance plans existing on the date of the Employee's termination. (iii) Disability; Death. If at any time the Company terminates the ----------------- Employee's employment as a result of the Employee's Disability, or such Employee's employment is terminated at any time due to the death of the Employee, then the Employee shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then existing severance and benefits plans and policies at the time of such Disability or death. (iv) Termination for Cause. If the Employee is terminated for Cause --------------------- at any time, then the Employee shall not be entitled to receive any severance or other benefits following the date of such termination, and the Company shall have no obligation to provide for the continuation of any health and medical benefit or life insurance plans existing on the date of such termination. (b) Termination Apart from Change of Control. If the Employee has ---------------------------------------- been employed by the Company for not less than 180 days and the Employee's employment is terminated for any reason, either prior to the occurrence of a Change of Control or after the period following a Change of Control prescribed in Section 2(a)(i) or (ii), then the Employee shall be entitled to receive severance benefits as follows: (i) Involuntary Termination. If the Employee's employment is ----------------------- terminated as a result of Involuntary Termination, then the Employee shall be entitled to receive severance pay in an amount equal to the sum of (i) the Employee's base salary at the annualized rate for the year coinciding with the year of payment and (ii) the average of the annual cash bonus received by the Employee for the three (3) years immediately preceding or ending coincident with the year of payment (whichever average produces the higher amount). Any severance payments to which the Employee is entitled pursuant to this section shall be paid in a lump sum within thirty (30) days of the Employee's termination. In addition, for a period of twelve (12) months after any termination under this Section 2(b)(i), the Company shall be obligated to continue to make available to the Employee and to pay for all health and medical benefit, life and other similar insurance plans existing on the date of the Employee's termination. (ii) Voluntary Resignation. If the Employee's employment --------------------- terminates by reason of the Employee's voluntary resignation (and is not an Involuntary Termination or a termination for Cause), then the Employee shall not be entitled to receive any -3- severance or other benefits following the date of such termination, and the Company shall have no obligation to provide for the continuation of any health and medical benefit or life insurance plans existing on the date of such termination. (iii) Disability; Death. If the Company terminates the ----------------- Employee's employment as a result of the Employee's Disability, or such Employee's employment is terminated due to the death of the Employee, then the Employee shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then existing severance and benefits plans and policies at the time of such Disability or death. (iv) Termination for Cause. If the Employee is terminated for --------------------- Cause, then the Employee shall not be entitled to receive any severance or other benefits following the date of such termination, and the Company shall have no obligation to provide for the continuation of any health and medical benefit or life insurance plans existing on the date of such termination. 3. Definition of Terms. The following terms referred to in this ------------------- Statement shall have the following meanings: (a) Change of Control. "Change of Control" shall mean the occurrence ----------------- of any of the following events: (i) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities; or (ii) A change in the composition of the Board of Directors of the Company, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or (iii) The stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior -4- thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets. (b) Involuntary Termination. "Involuntary Termination" shall mean (i) ----------------------- without the Employee's express written consent, the assignment to the Employee of any duties or the significant reduction of the Employee's duties, either of which is inconsistent with the Employee's position with the Company and responsibilities in effect immediately prior to such assignment, or the removal of the Employee from such position and responsibilities, which is not effected for Disability or for Cause; (ii) without the Employee's express written consent, a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to the Employee immediately prior to such reduction; (iii) a reduction by the Company in the base salary and/or bonus of the Employee as in effect immediately prior to such reduction; (iv) a material reduction by the Company in the kind or level of employee benefits to which the Employee is entitled immediately prior to such reduction with the result that the Employee's overall benefits package is significantly reduced; (v) the relocation of the Employee to a facility or a location more than 50 miles from the Employee's then present location, without the Employee's express written consent; (vi) any purported termination of the Employee by the Company which is not effected for death or Disability or for Cause, or any purported termination for which the grounds relied upon are not valid; or (vii) the failure of the Company to obtain the assumption of the terms of this Statement by any successors contemplated in Section 5 below. (c) Cause. "Cause" shall mean (i) any act of personal dishonesty taken by ----- the Employee in connection with his responsibilities as an employee and intended to result in substantial personal enrichment of the Employee, (ii) the conviction of a felony, (iii) a willful act by the Employee which constitutes gross misconduct and which is injurious to the Company, and (iv) continued violations by the Employee of the Employee's obligations as an employee of the Company which are demonstrably willful and deliberate on the Employee's part after there has been delivered to the Employee a written demand for performance from the Company which describes the basis for the Company's belief that the Employee has not substantially performed his duties. (d) Disability. "Disability" shall mean that the Employee has been unable ---------- to perform his duties as an employee of the Company as the result of his incapacity due to physical or -5- mental illness, and such inability, at least 26 weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Employee or the Employee's legal representative (such agreement as to acceptability not to be unreasonably withheld). Termination resulting from Disability may only be effected after at least 30 days' written notice by the Company of its intention to terminate the Employee's employment. In the event that the Employee resumes the performance of substantially all of his duties as an employee of the Company before the termination of his employment becomes effective, the notice of intent to terminate shall automatically be deemed to have been revoked. 4. Limitation on Payments. ---------------------- (a) Basic Rule. In the event that any payment or benefit received or ---------- to be received by the Employee pursuant to this Statement or otherwise (collectively, the "Payments") would (i) be treated as a "parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), or any similar or successor provision to 280G and (ii) but for this Section 4(a), be subject to the excise tax imposed by Section 4999 of the Code or any similar or successor provision to Section 4999 (the "Excise Tax"), then, subject to the provisions of Section 4(b) hereof, such Payments shall be reduced to the largest amount which the Employee determines would result in no portion of the Payments being subject to the Excise Tax. The determination of any required reduction pursuant to this Section 4(a) (including the determination as to which specific Payments shall be reduced) shall be made initially by the Employee in consultation with the Company. If the Employee and the Company shall disagree upon the amount of such reduction, then the Company shall, at its expense, promptly call upon Ernst & Young, independent accountants, to make such determination, and such determination shall be conclusive and binding upon the Employee and the Company or any related corporation for all purposes. The Company and its related corporations waive all claims and rights against the Employee with respect to such determination except as specifically set forth in the next sentence. If the Internal Revenue Service (the "IRS") determines that Payments are subject to the Excise Tax, then the Company or any related corporation, as their exclusive remedy, shall seek to enforce the provisions of Section 4(b) hereof. Such enforcement of Section 4(b) hereof shall be the only remedy against the Employee, under any and all applicable state and federal laws or otherwise, for the failure to reduce the Payments so that no portion thereof is subject to the Excise Tax. The Company or related corporation shall reduce Payments in accordance with Section 4(a) only upon written notice to the Employee indicating the amount of such reduction, if any, and the Employee's agreement to the amount of such reduction (subject, in the event of disagreement, to a determination by Ernst & Young on the basis provided above). -6- (b) Remedy. If, notwithstanding the reduction described in Section ------ 4(a) hereof, the IRS determines that the Employee is liable for the Excise Tax as a result of the receipt of Payments, then the Employee shall, subject to the provisions of this Statement, be obligated to pay to the Company (the "Repayment Obligation") an amount of money equal to the "Repayment Amount." The Repayment Amount with respect to Payments shall be the smallest such amount, if any, as shall be required to be paid to the Company so that the Employee's net proceeds with respect to Payments (after taking into account the payment of the Excise Tax imposed on Payments) shall be maximized. Notwithstanding the foregoing, the Repayment Amount with respect to Payments shall be zero if a Repayment Amount of more than zero would not eliminate the Excise Tax imposed on Payments. If the Excise Tax is not eliminated through the performance of the Repayment Obligation, the Employee shall pay the Excise Tax. The Repayment Obligation shall be performed within 30 days of either (i) the Employee entering into a binding agreement with the IRS as to the amount of the Employee's Excise Tax liability or (ii) a final determination by the IRS or a court decision requiring the Employee to pay the Excise Tax with respect to Payments from which no appeal is available or is timely taken. 5. Successors. ---------- (a) Company's Successors. Any successor to the Company (whether -------------------- direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company's business and/or assets shall assume the obligations under this Statement and agree expressly to perform the obligations under this Statement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Statement, the term "Company" shall include any successor to the Company's business and/or assets which executes and delivers the assumption agreement described in this subsection (a) or which becomes bound by the terms of this Statement by operation of law. (b) Employee's Successors. The terms of this Statement and all --------------------- rights of the Employee hereunder shall inure to the benefit of, and be enforceable by, the Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. 6. Notice. ------ (a) General. Notices and all other communications contemplated by ------- this Statement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of the Employee, mailed -7- notices shall be addressed to him at the home address which he most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary. (b) Notice of Termination. Any termination by the Company for Cause --------------------- or by the Employee as a result of a voluntary resignation or an Involuntary Termination shall be communicated by a notice of termination to the other party hereto given in accordance with Section 6 of this Statement. Such notice shall indicate the specific termination provision in this Statement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the termination date (which shall be not more than 15 days after the giving of such notice). The failure by the Employee to include in the notice any fact or circumstance which contributes to a showing of Involuntary Termination shall not waive any right of the Employee hereunder or preclude the Employee from asserting such fact or circumstance in enforcing his rights hereunder. 7. Miscellaneous Provisions. ------------------------ (a) Eligibility for Contract Benefits. If the Employee has been --------------------------------- employed by the Company for less than 180 days at the time of termination (whether by Involuntary Termination, voluntary resignation, termination for Cause, Death or Disability), then the Employee shall not be entitled to any severance or other benefits pursuant to this Statement. (b) No Duty to Mitigate. The Employee shall not be required to ------------------- mitigate the amount of any payment contemplated by this Statement (whether by seeking new employment or in any other manner), nor shall any such payment be reduced by any earnings that the Employee may receive from any other source. (c) Waiver. No provision of this Statement shall be modified, ------ waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Employee and by an authorized officer of the Company (other than the Employee). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Statement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time. (d) Choice of Law. The validity, interpretation, construction and ------------- performance of this Statement shall be governed by the laws of the State of California. -8- (e) Severability. The invalidity or unenforceability of any ------------ provision or provisions of this Statement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect. (f) Arbitration. Any dispute or controversy arising under or in ----------- with this Statement shall be settled exclusively by arbitration in San Jose, California, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. Punitive damages shall not be awarded. (g) No Assignment of Benefits. The rights of any person to payments ------------------------- or benefits under this Statement shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor's process, and any action in violation of this subsection (g) shall be void. (h) Employment Taxes. Subject to Section 4, all payments made ---------------- pursuant to this Statement will be subject to withholding of applicable income and employment taxes. (i) Assignment by Company. The Company may assign its rights under --------------------- this Statement to an affiliate, and an affiliate may assign its rights under this Statement to another affiliate of the Company or to the Company; provided, however, that no assignment shall be made if the net worth of the assignee is less than the net worth of the Company at the time of assignment. In the case of any such assignment, the term "Company" when used in a section of this Statement shall mean the corporation that actually employs the Employee. (j) Counterparts. This Statement may be executed in counterparts, ------------ each of which shall be deemed an original, but all of which together will constitute one and the same instrument. -9- IN WITNESS WHEREOF, each of the parties has executed this Statement, in the case of the Company by its duly authorized officer, as of the day and year first above written. COMPANY PYRAMID TECHNOLOGY CORPORATION By: /S/ KENT L. ROBERTSON ------------------------------ Title: VICE PRESIDENT AND CHIEF FINANCIAL OFFICER EMPLOYEE /S/ RICHARD H. LUSSIER ------------------------------- Richard H. Lussier -10- EX-10.3 6 STATEMENT OF EMPLOYMENT TERMS: CHEN (8/5/91) EXHIBIT 10.3 ------------ PYRAMID TECHNOLOGY CORPORATION STATEMENT OF EMPLOYMENT TERMS ----------------------------- This Statement of Employment Terms (the "Statement") is effective as of August 5, 1991, by and between John S. Chen (the "Employee") and Pyramid Technology Corporation, a Delaware corporation (the "Company"). R E C I T A L S A. The Employee presently serves at the pleasure of the Board of Directors as the Executive Vice President of the Company and performs significant strategic and management responsibilities necessary to the continued conduct of the Company's business and operations. B. The Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication and objectivity of the Employee, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. C. In addition to providing for severance benefits unrelated to a Change of Control, the Board believes that it is imperative to provide the Employee with certain severance benefits upon the Employee's termination of employment following a Change of Control which provide the Employee with enhanced financial security and provide sufficient incentive and encouragement to the Employee to remain with the Company following a Change of Control. D. In order to accomplish the foregoing objectives, the Board of Directors has directed the Company, upon execution of this Statement by the Employee, to commit to the terms provided herein. E. Certain capitalized terms used in the Statement are defined in Section 3 below. In consideration of the mutual covenants herein contained, and in consideration of the continuing employment of Employee by the Company, the parties agree as follows: 1. Term of Employment. The Company and the Employee acknowledge ------------------ that the Employee's employment is at will, as defined under applicable law. If the Employee's employment terminates for any reason, the Employee shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Statement, or as may otherwise be available in accordance with the Company's established employee plans and policies at the time of termination. The provisions of this Statement shall terminate upon the earlier of (i) the date that all obligations of the parties hereunder have been satisfied, (ii) June 30, 1996, or (iii) twenty-four (24) months after a Change of Control. A termination of the provisions of this Statement pursuant to the preceding sentence shall be effective for all purposes, except that such termination shall not affect the payment or provision of compensation or benefits on account of a termination of employment occurring prior to the termination of the provisions of this Statement. 2. Severance Benefits. ------------------ (a) Termination Following A Change of Control. If the Employee has ----------------------------------------- been employed by the Company for not less than 180 days and is terminated following a Change of Control within the time period set forth below, then the Employee shall be entitled to receive severance benefits as follows, subject to Section 4 below: (i) Involuntary Termination. If the Employee's employment is ----------------------- terminated as a result of Involuntary Termination (as defined in Section 3(b) below) within twelve (12) months after a Change of Control, then the Employee shall be entitled to receive severance pay in an amount equal to two (2) times the sum of (i) the Employee's base salary at the annualized rate for the year coinciding with the year of payment and (ii) the average of the annual cash bonus received by the Employee for the three (3) years immediately preceding or ending coincident with the year of payment (whichever average produces the higher amount). Any severance payments to which the Employee is entitled pursuant to this section shall be paid in a lump sum within thirty (30) days of the Employee's termination. In addition, for a period of twenty-four (24) months after any termination under this Section 2(a)(i), the Company shall be obligated to continue to make available to the Employee and to pay for all health and medical benefit, life and other similar insurance plans existing on the date of the Employee's termination. (ii) Voluntary Resignation. If the Employee's employment --------------------- terminates by reason of the Employee's voluntary resignation (and is not an Involuntary Termination or a termination for Cause) within six (6) months after a Change of Control, then the Employee shall be entitled to receive severance pay in an amount equal to the sum of (i) the Employee's base salary at the annualized rate for the year coinciding with the year of payment and (ii) the average of the annual cash bonus received by the Employee for the three (3) years immediately preceding or ending coincident with the year of payment (whichever average produces the higher amount). Any severance payments to which the Employee is entitled pursuant to this section shall be paid in a lump sum within thirty (30) days of the Employee's termination. In addition, for a period of twelve -2- (12) months after any termination under this Section 2(a)(ii), the Company shall be obligated to continue to make available to the Employee and to pay for all health and medical benefit, life and other similar insurance plans existing on the date of the Employee's termination. (iii) Disability; Death. If at any time the Company terminates ----------------- the Employee's employment as a result of the Employee's Disability, or such Employee's employment is terminated at any time due to the death of the Employee, then the Employee shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then existing severance and benefits plans and policies at the time of such Disability or death. (iv) Termination for Cause. If the Employee is terminated for --------------------- Cause at any time, then the Employee shall not be entitled to receive any severance or other benefits following the date of such termination, and the Company shall have no obligation to provide for the continuation of any health and medical benefit or life insurance plans existing on the date of such termination. (b) Termination Apart from Change of Control. If the Employee has ---------------------------------------- been employed by the Company for not less than 180 days and the Employee's employment is terminated for any reason, either prior to the occurrence of a Change of Control or after the period following a Change of Control prescribed in Section 2(a)(i) or (ii), then the Employee shall be entitled to receive severance benefits as follows: (i) Involuntary Termination. If the Employee's employment ----------------------- is terminated as a result of Involuntary Termination, then the Employee shall be entitled to receive severance pay in an amount equal to the sum of (i) the Employee's base salary at the annualized rate for the year coinciding with the year of payment and (ii) the average of the annual cash bonus received by the Employee for the three (3) years immediately preceding or ending coincident with the year of payment (whichever average produces the higher amount). Any severance payments to which the Employee is entitled pursuant to this section shall be paid in a lump sum within thirty (30) days of the Employee's termination. In addition, for a period of twelve (12) months after any termination under this Section 2(b)(i), the Company shall be obligated to continue to make available to the Employee and to pay for all health and medical benefit, life and other similar insurance plans existing on the date of the Employee's termination. (ii) Voluntary Resignation. If the Employee's employment --------------------- terminates by reason of the Employee's voluntary resignation (and is not an Involuntary Termination or a termination for Cause), then the Employee shall not be entitled to receive any -3- severance or other benefits following the date of such termination, and the Company shall have no obligation to provide for the continuation of any health and medical benefit or life insurance plans existing on the date of such termination. (iii) Disability; Death. If the Company terminates the ----------------- Employee's employment as a result of the Employee's Disability, or such Employee's employment is terminated due to the death of the Employee, then the Employee shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then existing severance and benefits plans and policies at the time of such Disability or death. (iv) Termination for Cause. If the Employee is terminated for --------------------- Cause, then the Employee shall not be entitled to receive any severance or other benefits following the date of such termination, and the Company shall have no obligation to provide for the continuation of any health and medical benefit or life insurance plans existing on the date of such termination. 3. Definition of Terms. The following terms referred to in this ------------------- Statement shall have the following meanings: (a) Change of Control. "Change of Control" shall mean the occurrence ----------------- of any of the following events: (i) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities; or (ii) A change in the composition of the Board of Directors of the Company, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or (iii) The stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior -4- thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets. (b) Involuntary Termination. "Involuntary Termination" shall mean ----------------------- (i) without the Employee's express written consent, the assignment to the Employee of any duties or the significant reduction of the Employee's duties, either of which is inconsistent with the Employee's position with the Company and responsibilities in effect immediately prior to such assignment, or the removal of the Employee from such position and responsibilities, which is not effected for Disability or for Cause; (ii) without the Employee's express written consent, a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to the Employee immediately prior to such reduction; (iii) a reduction by the Company in the base salary and/or bonus of the Employee as in effect immediately prior to such reduction; (iv) a material reduction by the Company in the kind or level of employee benefits to which the Employee is entitled immediately prior to such reduction with the result that the Employee's overall benefits package is significantly reduced; (v) the relocation of the Employee to a facility or a location more than 50 miles from the Employee's then present location, without the Employee's express written consent; (vi) any purported termination of the Employee by the Company which is not effected for death or Disability or for Cause, or any purported termination for which the grounds relied upon are not valid; or (vii) the failure of the Company to obtain the assumption of the terms of this Statement by any successors contemplated in Section 5 below. (c) Cause. "Cause" shall mean (i) any act of personal dishonesty ----- taken by the Employee in connection with his responsibilities as an employee and intended to result in substantial personal enrichment of the Employee, (ii) the conviction of a felony, (iii) a willful act by the Employee which constitutes gross misconduct and which is injurious to the Company, and (iv) continued violations by the Employee of the Employee's obligations as an employee of the Company which are demonstrably willful and deliberate on the Employee's part after there has been delivered to the Employee a written demand for performance from the Company which describes the basis for the Company's belief that the Employee has not substantially performed his duties. (d) Disability. "Disability" shall mean that the Employee has been ---------- unable to perform his duties as an employee of the Company as the result of his incapacity due to physical or -5- mental illness, and such inability, at least 26 weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Employee or the Employee's legal representative (such agreement as to acceptability not to be unreasonably withheld). Termination resulting from Disability may only be effected after at least 30 days' written notice by the Company of its intention to terminate the Employee's employment. In the event that the Employee resumes the performance of substantially all of his duties as an employee of the Company before the termination of his employment becomes effective, the notice of intent to terminate shall automatically be deemed to have been revoked. 4. Limitation on Payments. ---------------------- (a) Basic Rule. In the event that any payment or benefit received or ---------- to be received by the Employee pursuant to this Statement or otherwise (collectively, the "Payments") would (i) be treated as a "parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), or any similar or successor provision to 280G and (ii) but for this Section 4(a), be subject to the excise tax imposed by Section 4999 of the Code or any similar or successor provision to Section 4999 (the "Excise Tax"), then, subject to the provisions of Section 4(b) hereof, such Payments shall be reduced to the largest amount which the Employee determines would result in no portion of the Payments being subject to the Excise Tax. The determination of any required reduction pursuant to this Section 4(a) (including the determination as to which specific Payments shall be reduced) shall be made initially by the Employee in consultation with the Company. If the Employee and the Company shall disagree upon the amount of such reduction, then the Company shall, at its expense, promptly call upon Ernst & Young, independent accountants, to make such determination, and such determination shall be conclusive and binding upon the Employee and the Company or any related corporation for all purposes. The Company and its related corporations waive all claims and rights against the Employee with respect to such determination except as specifically set forth in the next sentence. If the Internal Revenue Service (the "IRS") determines that Payments are subject to the Excise Tax, then the Company or any related corporation, as their exclusive remedy, shall seek to enforce the provisions of Section 4(b) hereof. Such enforcement of Section 4(b) hereof shall be the only remedy against the Employee, under any and all applicable state and federal laws or otherwise, for the failure to reduce the Payments so that no portion thereof is subject to the Excise Tax. The Company or related corporation shall reduce Payments in accordance with Section 4(a) only upon written notice to the Employee indicating the amount of such reduction, if any, and the Employee's agreement to the amount of such reduction (subject, in the event of disagreement, to a determination by Ernst & Young on the basis provided above). -6- (b) Remedy. If, notwithstanding the reduction described in Section ------ 4(a) hereof, the IRS determines that the Employee is liable for the Excise Tax as a result of the receipt of Payments, then the Employee shall, subject to the provisions of this Statement, be obligated to pay to the Company (the "Repayment Obligation") an amount of money equal to the "Repayment Amount." The Repayment Amount with respect to Payments shall be the smallest such amount, if any, as shall be required to be paid to the Company so that the Employee's net proceeds with respect to Payments (after taking into account the payment of the Excise Tax imposed on Payments) shall be maximized. Notwithstanding the foregoing, the Repayment Amount with respect to Payments shall be zero if a Repayment Amount of more than zero would not eliminate the Excise Tax imposed on Payments. If the Excise Tax is not eliminated through the performance of the Repayment Obligation, the Employee shall pay the Excise Tax. The Repayment Obligation shall be performed within 30 days of either (i) the Employee entering into a binding agreement with the IRS as to the amount of the Employee's Excise Tax liability or (ii) a final determination by the IRS or a court decision requiring the Employee to pay the Excise Tax with respect to Payments from which no appeal is available or is timely taken. 5. Successors. ---------- (a) Company's Successors. Any successor to the Company (whether -------------------- direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company's business and/or assets shall assume the obligations under this Statement and agree expressly to perform the obligations under this Statement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Statement, the term "Company" shall include any successor to the Company's business and/or assets which executes and delivers the assumption agreement described in this subsection (a) or which becomes bound by the terms of this Statement by operation of law. (b) Employee's Successors. The terms of this Statement and all --------------------- rights of the Employee hereunder shall inure to the benefit of, and be enforceable by, the Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. 6. Notice. ------ (a) General. Notices and all other communications contemplated by ------- this Statement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of the Employee, mailed -7- notices shall be addressed to him at the home address which he most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary. (b) Notice of Termination. Any termination by the Company for --------------------- Cause or by the Employee as a result of a voluntary resignation or an Involuntary Termination shall be communicated by a notice of termination to the other party hereto given in accordance with Section 6 of this Statement. Such notice shall indicate the specific termination provision in this Statement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the termination date (which shall be not more than 15 days after the giving of such notice). The failure by the Employee to include in the notice any fact or circumstance which contributes to a showing of Involuntary Termination shall not waive any right of the Employee hereunder or preclude the Employee from asserting such fact or circumstance in enforcing his rights hereunder. 7. Miscellaneous Provisions. ------------------------ (a) Eligibility for Contract Benefits. If the Employee has been --------------------------------- employed by the Company for less than 180 days at the time of termination (whether by Involuntary Termination, voluntary resignation, termination for Cause, Death or Disability), then the Employee shall not be entitled to any severance or other benefits pursuant to this Statement. (b) No Duty to Mitigate. The Employee shall not be required to ------------------- mitigate-the amount of any payment contemplated by this Statement (whether by seeking new employment or in any other manner), nor shall any such payment be reduced by any earnings that the Employee may receive from any other source. (c) Waiver. No provision of this Statement shall be modified, ------ waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Employee and by an authorized officer of the Company (other than the Employee). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Statement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time. (d) Choice of Law. The validity, interpretation, construction and ------------- performance of this Statement shall be governed by the laws of the State of California. -8- (e) Severability. The invalidity or unenforceability of any ------------ provision or provisions of this Statement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect. (f) Arbitration. Any dispute or controversy arising under or in ----------- connection with this Statement shall be settled exclusively by arbitration in San Jose, California, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. Punitive damages shall not be awarded. (g) No Assignment of Benefits. The rights of any person to ------------------------- payments or benefits under this Statement shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor's process, and any action in violation of this subsection (g) shall be void. (h) Employment Taxes. Subject to Section 4, all payments made ---------------- pursuant to this Statement will be subject to withholding of applicable income and employment taxes. (i) Assignment by Company. The Company may assign its rights under --------------------- this Statement to an affiliate, and an affiliate may assign its rights under this Statement to another affiliate of the Company or to the Company; provided, however, that no assignment shall be made if the net worth of the assignee is less than the net worth of the Company at the time of assignment. In the case of any such assignment, the term "Company" when used in a section of this Statement shall mean the corporation that actually employs the Employee. (j) Counterparts. This Statement may be executed in counterparts, ------------ each of which shall be deemed an original, but all of which together will constitute one and the same instrument. -9- IN WITNESS WHEREOF, each of the parties has executed this Statement, in the case of the Company by its duly authorized officer, as of the day and year first above written. COMPANY PYRAMID TECHNOLOGY CORPORATION By: /S/ KENT L. ROBERTSON ------------------------------ Title: SENIOR VICE PRESIDENT EMPLOYEE /S/ JOHN S. CHEN ---------------------------------- John S. Chen -10- EX-10.4 7 STATEMENT OF EMPLOYMENT: CHEN (1/20/95) EXHIBIT 10.4 ------------ MANAGEMENT RETENTION AGREEMENT THIS MANAGEMENT RETENTION AGREEMENT is entered into as of January 20, 1995, by and between PYRAMID TECHNOLOGY CORPORATION, a Delaware corporation (the "Company"), and John S. Chen ("Executive"). WHEREAS, Executive is and has been employed by the Company and is currently serving as the President and Chief Operating Officer of the Company; and WHEREAS, the Company and Executive are parties to a Statement of Employment Terms, dated as of August 5, 1991, which sets forth the terms and conditions of Executive's employment with the Company (the "Original Agreement"); and WHEREAS, Executive and the Company desire to terminate the Original Agreement; and WHEREAS, the Company desires to continue to employ Executive and to assure itself of the continued services of Executive for the term of employment provided for in this Management Retention Agreement (the "Agreement"), and Executive desires to be employed by the Company for such period, upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the covenants and agreements hereinafter set forth, the parties hereto agree as follows: 1. TERMINATION OF ORIGINAL AGREEMENT; EFFECTIVENESS OF AGREEMENT. The ------------------------------------------------------------- Company and Executive agree that the Original Agreement shall be terminated, and shall be of no further force and effect, as of the Effective Date (as specified in Section 3 of this Agreement). This Agreement shall become effective only upon the Effective Date and shall have no force or effect for so long as the Effective Date does not occur. The Company and Executive agree that neither party shall be liable to the other under any provision of the Original Agreement, and that this Agreement shall govern the terms and conditions of Executive's employment with the Company, from and after the Effective Date. 2. EMPLOYMENT; DUTIES. The Company and Executive hereby agree that ------------------ Executive's continued employment with the Company during the Employment Terms (as defined in Section 3 of this Agreement) shall be upon the terms and conditions set forth herein. During the Employment Term, Executive shall serve as Chief Executive Officer of the Company and as a member of the Company's board of directors (the "Board"), and shall render such business and professional services in the performance of his duties as shall be assigned to him by the Board. Executive shall devote his full time and efforts to perform his duties faithfully, diligently and to the best of his ability to advance the interests of the Company. Executive shall not serve as a director, employee, consultant or advisor to any other corporation or other business enterprise without the prior written consent of the Board. Executive may serve in any capacity with any civic, educational or charitable organization or any trade association without the approval of the Board, provided that such activities do not interfere with his duties and obligations under this Agreement. 3. TERM OF EMPLOYMENT. Executive's employment under this Agreement shall ------------------ commence at the Effective Time, as such term is defined in the Agreement and Plan of Merger (the "Merger Agreement") among Siemens Nixdorf Informationssysteme AG ("SNI"), HN Acquisition Corp. and the Company (the "Effective Date"), and shall terminate on the earlier of (i) the fifth anniversary of the Effective Date, or (ii) termination of Executive's employment pursuant to this Agreement (the period commencing on the Effective Date and ending on the fifth anniversary thereof is hereinafter referred to as the "Employment Term"). 4. COMPENSATION. ------------ (a) Signing Bonus. In consideration of Executive's agreement to ------------- continue his employment with the Company, on or as soon as practicable (but no more than 60 days) following the Effective Date, the Company shall pay Executive a signing bonus of $250,000. (b) Base Salary. The Company shall pay Executive throughout the term of ----------- this Agreement a base salary (the "Base Salary") at a rate of not less than $380,000 per year, payable in equal monthly installments. Once increased, such higher salary shall constitute Executive's Base Salary. (c) Bonus. During the Employment Term, Executive shall be eligible to ----- participate in any annual bonus plan maintained from time to time by the Company for senior executives. For the year ending September 30, 1995, Executive's target bonus payout under the Company's Management Incentive Plan shall be increased from 45% to 60% of Base Salary (in addition to the 30% increase provided in Annex B to the Merger Agreement), resulting in an aggregate target bonus payout of 78% of Base Salary. For subsequent years during the Employment Term, Executive's target bonus payout shall be at least 60% of Base Salary. (d) Retention Bonus. In consideration of Executive's services --------------- hereunder, on the second anniversary of the Effective Date, provided that Executive is employed by the Company on such date, the Company shall pay Executive a bonus in an amount equal to $760,000. Notwithstanding the foregoing, at the election of Executive, to be made prior to the first anniversary of the Effective Date, Executive shall participate in a supplemental pension arrangement in lieu of the retention bonus described in the immediately preceding sentence. Under such supplemental pension arrangement, the specific terms of which shall be negotiated in good faith by Executive and SNI, (i) the right to receive supplemental pension benefits shall vest on the second anniversary of the Effective Date and (ii) the aggregate actuarial present value of such supplemental pension benefits determined as of the second anniversary of the Effective Date shall be $760,000. 5. EMPLOYEE BENEFITS. ----------------- (a) General. Executive shall be included in all employee benefit plans, ------- programs or arrangements (including, without limitation, any plans, programs or arrangements providing for retirement benefits, health and life insurance, automobile (or automobile allowance), vacation and paid holidays) which shall be established by the Company for, or made available to, its senior executives, or shall be entitled to benefits comparable to such plans, programs or arrangements. With respect to Executive's participation in any phantom equity or long-term incentive program established in accordance with paragraph (b) of Annex B to the Merger Agreement, assuming that a three-year, long-term incentive target performance is achieved, as set forth in Exhibit A --------- hereto and subject to Executive's continued employment, Executive shall be entitled to a plan payment of at least $1,000,000, it being understood and agreed that the targets set forth on Exhibit A may be adjusted by mutual --------- agreement of Executive and the Company in connection with the detailed development of the phantom equity or long-term incentive program in accordance with paragraph (b) of Annex B to the Merger Agreement. (b) Reimbursement of Expenses. The Company shall reimburse Executive ------------------------- for all out-of-pocket expenses reasonably incurred and paid by him in the performance of his duties pursuant to this Agreement. Such reimbursement shall be in accordance with the Company's policies and documentation required to support the deductibility of such expenses for federal income tax purposes. 6. TERMINATION OF EMPLOYMENT. ------------------------- (a) Termination without Cause; Resignation for Good Reason. ------------------------------------------------------ (i) General. Subject to the provisions of Section 6(a)(ii) and ------- 6(a)(iii), if, prior to the expiration of the Employment Term, Executive's employment is terminated by the Company without Cause (as defined in Section 6(c) of this Agreement), or if Executive resigns from his employment hereunder for Good Reason (as defined in Section 6(d) of this Agreement), the Company shall pay Executive cash severance in an aggregate amount equal to (A) if such termination occurs on or prior to the second anniversary of the Effective Date, two (2) times the sum of (x) the Executive's Base Salary at the annualized rate for the year coinciding with the year of payment and (y) the average of the annual cash bonus received by the Executive for the three (3) years immediately preceding or ending coincident with the year of payment (whichever average produces the higher amount) or (B) if such termination occurs following the second anniversary of the Effective Date, the sum of (x) the Executive's Base Salary at the annualized rate for the year coinciding with the year of payment and (y) the average of the annual cash bonus received by the Executive for the three (3) years immediately preceding or ending coincident with the year of payment (whichever average produces the higher amount). Any severance payments to which the Executive is entitled pursuant to this section shall be paid in a lump sum within thirty (30) days of the Executive's termination. In addition, for a period of twenty-four (24) months (or twelve (12) months if such termination occurs following the second anniversary of the Effective Date) after any termination under this Section 6(a)(i) (the "Severance Period"), the Company shall be obligated to continue to make available to the Executive and to pay for all health and medical benefit, life and other similar insurance plans existing on the date of the Executive's termination. Executive shall have no further right to receive any other compensation, or to participate in any other plan, arrangement, or benefit, after such termination or resignation of employment, except as provided -3- in the previous sentence, and except as may be required by applicable law, including, but not limited to, any rights Executive may have under Title I, Part 6 of the Employee Retirement Income Security Act of 1974, as amended. (ii) Conditions Applicable to the Severance Period. If, during the --------------------------------------------- Severance Period, Executive materially breaches his obligations under Sections 8, 9 or 10 of this Agreement, the Company may, upon written notice to Executive, offset the damages it incurs as a consequence of such breach against any further payments or benefits due Executive pursuant to this Section 6(a). (iii) Death During Severance Period. In the event of Executive's ----------------------------- death during the Severance Period, the Company shall have no further obligations under this Agreement, other than the provision to Executive's dependents of continued health and medical benefit and similar insurance plans for the balance of the Severance Period. (iv) Date of Termination. The date of termination of Employment ------------------- without Cause shall be the date specified in a written notice of termination to Executive. The date of resignation for Good Reason shall be the date specified in the written notice of resignation from Executive to the Company. (b) Termination for Cause; Resignation Without Good Reason. ------------------------------------------------------ (i) General. If, prior to the expiration of the Employment Term, ------- Executive's employment is terminated by the Company for Cause, or if Executive resigns from his employment hereunder other than for Good Reason on or prior to the first anniversary of the Effective Date, Executive shall be entitled only to payment of all amounts earned or owing to Executive through and including the date of termination or resignation, it being specifically understood and agreed that Executive shall have no right to any full or partial annual bonus for the year in which such termination occurs. Executive shall have no further right to receive any other compensation, or to participate in any other plan, arrangement or benefit, after such termination or resignation of employment, except as provided in the previous sentence, and except as may be required by applicable law, including, but not limited to, any rights Executive may have under Title I, Part 6 of the Employee Retirement Income Security Act of 1974, as amended. (ii) Resignation Without Good Reason Following the First --------------------------------------------------- Anniversary of the Effective Date. If, prior to the expiration of the Employment - --------------------------------- Term but following the first anniversary of the Effective Date, Executive resigns from his employment hereunder other than for Good Reason, Executive shall receive, for the lesser of one year from the date of resignation or until Executive secures new full-time employment, compensation continuation payments paid in accordance with the Company's customary salary payroll practices at an annualized rate equal to the sum of the Executive's Base Salary annualized for the year coinciding with the year of resignation and the average of the annual cash bonuses received by Executive for the three (3) years immediately preceding or ending coincidental with the year of resignation (whichever average -4- produces the higher amount). In addition, for the period Executive is receiving compensation continuation payments pursuant to this Section 6(b)(ii), the Company shall be obligated to continue to make available to the Executive and to pay for all health and medical benefit, life and other similar insurance plans existing on the date of the Executive's resignation. Executive shall have no further right to receive any other compensation, or to participate in any other plan, arrangement, or benefit, after such termination or resignation of employment, except as provided in the previous sentence, and except as may be required by applicable law, including, but not limited to, any rights Executive may have under Title I, Part 6 of the Employee Retirement Income Security Act of 1974, as amended. (iii) Date of Termination. The date of termination for Cause shall ------------------- be the date of receipt by Executive of a written Notice of Termination provided for in Section 6(b)(iv). The date of resignation without Good Reason shall be the date specified in the written notice of resignation from Executive to the Company, or if no date is specified therein, ten (10) business days after receipt by the Company of written notice of resignation from Executive. (iv) Notice of Termination. Termination of Executive's employment --------------------- for Cause shall be communicated by delivery to Executive of a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board at a meeting of the Board called and held for such purpose (a "Notice of Termination"). For purposes of this Agreement, no purported termination of Executive's employment for Cause shall be effective without delivery of such Notice of Termination. (c) Cause. Termination for "Cause" shall mean termination of ----- Executive's employment because of Executive's (i) involvement in fraud, misappropriation or embezzlement related to the business or property of the Company, (ii) conviction for, or guilty plea to, a felony, (iii) willful material breach of this Agreement, (iv) breach of Sections 8, 9 or 10 of this Agreement, or (v) willful and continued failure to substantially perform his duties hereunder (other than as result of illness); provided, however, that if -------- ------- such Cause is reasonably curable, the Company shall not terminate Executive's employment hereunder unless the Board first gives notice of its intention to terminate and of the grounds for such termination, and Executive has not, within thirty (3) days following receipt of the notice, cured such Cause. (d) Good Reason. For purposes of this Agreement, "Good Reason" shall ----------- mean (i) the assignment to Executive of any duties, or the reduction of Executive's duties, either of which results in a material diminution in Executive's duties and responsibilities as set forth in Section 2 hereof, (ii) a reduction by the Company in the Base Salary of Executive as in effect immediately prior to such reduction, (iii) a material reduction by the Company in the kind or level of employee benefits to which Executive is entitled immediately prior to such reduction with the result that Executive's overall benefits package is significantly reduced (other than a reduction applicable to senior executives generally), (iv) a failure to pay or provide any material item of compensation or benefits in accordance with the terms of this Agreement or any applicable employee plan in which Executive participates, (v) the relocation of Executive to a facility or a location more than fifty (50) -5- miles from Executive's then present location, without Executive's express written consent or (vi) any Change of Control (as hereinafter defined) of the Company occurring after the Effective Date; provided, however, that if such Good -------- ------- Reason is reasonably curable, Executive shall not resign from employment hereunder unless Executive first gives notice of his intention to resign for Good Reason and of the grounds for such resignation, and the Company has not, within thirty (30) days following receipt of the notice, cured such Good Reason, as determined in good faith by Executive. "Change of Control" shall mean the occurrence of any of the following events as used herein, after the Effective Date: (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) other than SNI or its affiliates (a "Third Party") is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities; (ii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation that is a Third Party, other than a merger of consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (iii) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets to a Third Party. 7. DEATH OR PERMANENT DISABILITY. ----------------------------- (a) Death. If Executive's employment hereunder is terminated by death, ----- Executive's estate shall be entitled only to payment of all amounts earned or owed to Executive through and including the date of Executive's death. Notwithstanding the foregoing, if Executive dies prior to the second anniversary of the Effective Date, Executive's estate shall also receive, within sixty (60) days of Executive's death, a pro rata retention bonus determined by multiplying $760,000 by a fraction, the numerator of which is the number of days elapsed between the Effective Date and the date of Executive's death, and the denominator of which is 730. The Company shall have no further obligations under this Agreement, except as provided in the previous sentence, and except as may be required by applicable law, including, but not limited to, any rights Executive may have under Title I, Part 6 of the Employee Retirement Income Security Act of 1974, as amended. (b) Permanent Disability. In the event Executive shall become -------------------- permanently disabled (as defined below), Executive shall be entitled only to payment of Executive's Base Salary earned through and including the last day of the six-month period referred to below. The Company shall have no further obligations under this Agreement, except as may be provided under the Long-Term Disability Policy maintained by the Company or as may be required by applicable law, including, but not limited to, any rights Executive may have under Title I, Part 6 of the Employee Retirement Income Security Act of 1974, as amended. Notwithstanding the foregoing, if Executive becomes permanently disabled prior to the second anniversary of the Effective Date, Executive shall also receive, within sixty (60) days of Executive's termination by reason of permanent disability, -6- a pro rata retention bonus determined by multiplying $760,000 by a fraction, the numerator of which is the number of days elapsed between the Effective Date and the date of termination by reason of permanent disability, and the denominator of which is 730. Executive shall be considered permanently disabled if Executive is absent from employment or unable to render services hereunder on a full-time basis by reason of physical or mental illness or disability of six (6) months or more in the aggregate in any twelve (12) month period during the term of this Agreement. Any question as to the existence or extent of Executive's disability upon which Executive and the Company cannot agree, shall be determined by a qualified independent physician selected by the Company and approved by Executive. 8. TRADE SECRETS; NON-SOLICITATION. ------------------------------- (a) Trade Secrets. During the Employment Term and at all times ------------- thereafter (unless such secrets or information become part of the public domain, other than through Executive's breach of this Section 8), Executive shall hold in secrecy for the Company, SNI and their respective subsidiaries and affiliates (the "Group") all trade secrets and other confidential information relating to the Group's business and affairs that may come to his knowledge or have come to his knowledge while heretofore employed by the Company or its subsidiaries, including, but not limited to, matters of a technical nature, such as scientific, trade or engineering secrets, "know-how," formulae, secret processes or machines, inventions and research projects, and matters of a business nature, such as information about costs, profits, markets, sales, lists of customers and suppliers, and other information of a similar nature, and plans for future development. Except as required in the performance of his duties to the Company under this Agreement, Executive shall not use for his own benefit or disclose to any person, directly or indirectly, such matters unless such use or disclosure has been specifically authorized in writing by the Company in advance. (b) Non-Solicitation. For a period of one (1) year following the ---------------- termination of Executive's employment hereunder for any reason except a resignation by Executive for Good Reason, Executive shall not, without the prior written consent of the Company, directly or indirectly, as a sole proprietor, member of a partnership, stockholder or investor, officer or director of a corporation, or as an employee, associate, consultant, independent contractor or agent of any person, partnership, corporation or other business organization or entity other than the Company or any other member of the Group (i) solicit or endeavor to entice away from the Group any person or entity who is, or during the then most recent twelve (12) month period, was employed by, or had served as an agent or key consultant of the Group, or (ii) solicit or endeavor to entice away from the Group any person or entity who is, or was within the then most recent twelve (12) month period, a customer or client (or reasonably anticipated (or reasonably anticipated (to the general knowledge of Executive or the public) to become a customer or client) of the Group. 9. RETURN OF DOCUMENTS AND PROPERTY. Upon the termination of Executive's -------------------------------- employment by the Company, or at any time upon the request of the Company, Executive (or his heir or personal representative) shall deliver to the Company (a) all documents and materials containing trade secrets and other confidential information relating to the Group's business and -7- affairs, and (b) all other documents,materials and other property belonging to the Group that are in the possession or under the control of Executive. 10. INVENTIONS. Without further consideration, Executive shall (a) ---------- promptly notify, make full disclosure to and assign to the Company, any and all inventions, discoveries and improvements ("Inventions"), made or developed by him, wholly or in part, at any time during his employment with the Company that pertain to the business carried on or products or services being sold or developed by the Group during such period, whether patentable or not, (b) assist the Company in obtaining for itself at its own expense United States of America and foreign patents and other rights on any and all of the Inventions which Executive is obligated to disclose to the Company, and (c) at the Company's expense promptly execute, whether during his employment or thereafter, all applications or other endorsements necessary or appropriate to obtain said patents and other rights for the Company and to protect its title thereto. Any Inventions made or developed by Executive within six (6) months after termination of employment with the Company that pertain to the business carried on or products or services being sold or developed by the Group at the time of such termination shall, as between Executive and the Company, be conclusively presumed to have been made during Executive's employment with the Company. The foregoing provision shall not require Executive to assign any Invention that would cause the foregoing provision to be void or unenforceable under Section 2870 of the California Labor Code, and Executive acknowledges receipt of the notification required by Section 2872 of the California Labor Code. 11. REMEDIES. Any breach, violation or evasion by Executive of the terms -------- of this Agreement, including specifically, but not limited to, Sections 8, 9 or 10, will result in immediate and irreparable injury and harm to the Company and will cause damage to the Company in amounts difficult to ascertain. Accordingly, the Company shall be entitled to the remedies of injunction and specific performance, or either of such remedies, as well as all other remedies to which the Company may be entitled, at law, in equity or otherwise. 12. LIMITATION ON PAYMENTS. ---------------------- (a) Basic Rule. Subject to Section 12(c) below, in the event that any ---------- payment or benefit received or to be received by Executive pursuant to this Agreement or otherwise (collectively, the "Payments") would (i) be treated as a "parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), or any similar or successor provision to 280G and (ii) but for this Section 12(a), be subject to this excise tax imposed by Section 4999 of the Code or any similar or successor provision to Section 4999 (the "Excise Tax"), then, subject to the provisions of Section 12(b) hereof, such Payments shall be reduced to the largest amount which would result in no portion of the Payments being subject to the Excise Tax. The determination of any required reduction pursuant to this Section 12(a) (including the determination as to which specific Payments shall be reduced) shall be made initially by Executive in consultation with the Company. If Executive and the Company shall disagree upon the amount -8- of such reduction, then the Company shall, at its expense, promptly call upon Ernst & Young, independent accountants, to make such determination, and such determination shall be conclusive and binding upon Executive and the Company or any related corporation for all purposes. The Company and its related corporations waive all claims and rights against Executive with respect to such determination, except as specifically set forth in the next sentence. If the Internal Revenue Service (the "IRS") determines the Payments are subject to the Excise Tax, then the Company or any related corporation, as their exclusive remedy, shall seek to enforce the provisions of Section 12(b) hereof. Such enforcement of Section 12(b) hereof shall be the only remedy against Executive, under any and all applicable state and federal laws or otherwise, for the failure to reduce the Payments so that no portion thereof is subject to the Excise Tax. The Company or related corporation shall reduce Payments in accordance with Section 12(a) only upon written notice to Executive indicating the amount of such reduction, if any, and Executive's agreement to the amount of such reduction (subject, in the event of disagreement, to a determination by Ernst & Young on the basis provided above). (b) Remedy. If, notwithstanding the reduction described in Section ------ 12(a) hereof, the IRS determines that Executive is liable for the Excise Tax as a result of the receipt of Payments, then Executive shall, subject to the provisions of this Agreement, be obligated to pay to the Company (the "Repayment Obligation") an amount of money equal to the "Repayment Amount." The Repayment Amount with respect to Payments shall be the smallest such amount, if any, as shall be required to be paid to the Company so that Executive net proceeds with respect to Payments (after taking into account the payment of the Excise Tax imposed on Payments) shall be maximized. Notwithstanding the foregoing, the Repayment Amount with or more than zero would not eliminate the Excise Tax imposed on Payments. If the excise Tax is not eliminated through the performance of the Repayment Obligation, Executive shall pay the Excise Tax. The Repayment Obligation shall be performed within thirty (30) days of either (i) the Employee entering into a binding agreement with the IRS as to the amount of the Executive's Excise Tax liability or (ii) a final determination by the IRS or a court decision requiring the Employee to pay the Excise Tax with respect to Payments from which no appeal is available or is timely taken. (c) Special Rule in the Event of a Termination Without Cause or ----------------------------------------------------------- Resignation for Good Reason. Notwithstanding the foregoing provision of this - --------------------------- Section 12, in the event Executive's employment is terminated by the Company without Cause, or Executive resigns for Good Reason, and any amounts or benefits to be received by Executive pursuant to Section 6(a) of this Agreement causes any Payments, as reasonably determined by the Company with the advice of nationally recognized tax counsel or accounting firm, to be subject to Excise Tax, the provisions of this Section 12(c) shall apply instead of Sections 12(a) and 12(b). In the event this Section 12(c) applies, Executive shall receive an additional payment from the Company (the "Additional Payment") in the amount necessary so that, after application of the Excise Tax and state, federal and local income taxes to the Payments and the Additional Payment, Executive shall receive the same aggregate after-tax benefit that he would have received had the Payments not been subject to the Excise Tax. -9- 13. ASSIGNMENT. Executive's rights and obligations under this Agreement ---------- shall not be assignable by Executive. The Company's rights and obligations under this Agreement shall not be assignable by the Company, except as incident to the transfer, by merger, liquidation or otherwise, or all or substantially all of the business of the Company. 14. NOTICES. Any notice required or permitted under this Agreement shall ------- be given in writing and shall be deemed to have been effectively made or given if personally delivered, or if telegraphed, telexed, cabled or mailed to the other party at its address set forth below in this Section 14, or at such other address as such party may designate by written notice to the other party hereto. Any effective notice hereunder shall be deemed given on the date personally delivered or on the date telegraphed, telexed, cabled or deposited in the United States mail (sent by certified mail, return receipt requested) mailed, as the case may be, at the following address: (i) If to the Company: PYRAMID TECHNOLOGY CORPORATION 3860 N. First Street San Jose, California 95134 Attention: with a copy to: SIEMENS NIXFORT INFORMATIONSSYSTEME AG Otto-Hahn-Ring 6 81739 Munich Fax #011 4989 636 42922 Attention: G. Schulmeyer (ii) If to Executive: John S. Chen PYRAMID TECHNOLOGY CORPORATION 3860 N. First Street San Jose, California 95134 15. DISPUTES. Any disputes under this Agreement between the parties -------- hereto shall be settled by arbitration in San Francisco, California under the auspices of, and in accordance with the rules of, the American Arbitration Association, by an arbitrator who is mutually agreeable to the parties hereto, or, if the Company and Executive cannot agree on the selection of the arbitrator, then before three arbitrators, one of which shall be appointed by Executive, one of which shall be appointed by the Company, and the third of which shall be chosen by the American Arbitration Association (such arbitrator or arbitrators hereinafter referred to as the "Arbitrator"). The decision in such arbitration shall be final and conclusive on the parties and judgment upon such decision may -10- be entered in any court having jurisdiction thereof. The parties hereby agree that the Arbitrator shall be empowered to enter an equitable decree mandating specific enforcement of the terms of this Agreement, including an injunction restraining the Executive from engaging in activities prohibited in Section 8, 9 or 10. The Company and Executive shall share equally all expenses of the Arbitrator incurred in any arbitration hereunder; provided, however, that the -------- ------- Company or Executive, as the case may be, shall bear all expenses of the Arbitrator determines that the claim or position of such party was frivolous and without reasonable foundation. Executive hereby agrees and submits to jurisdiction before each and every court for purposes of enforcing the provisions of this Section 15. 16. SEVERABILITY. If an arbitrator or a court of competent jurisdiction ------------ determines that any term or provision hereof is invalid or unenforceable, (a) the remaining terms and provisions hereof shall be unimpaired and (b) such court shall have the authority to replace such invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision. 17. ENTIRE AGREEMENT. This Agreement represents the entire agreement of ---------------- the parties and shall supersede any and all previous contracts, arrangements or understandings between the Company and Executive. The Agreement may be amended at any time only by mutual written agreement of the parties hereto. 18. WITHHOLDING. The Company shall be entitled to withhold, or cause to ----------- be withheld, from payment any amount of withholding taxes required by law with respect to payments made to Executive in connection with his employment hereunder. 19. GOVERNING LAW. This Agreement shall be construed, interpreted and ------------- governed in accordance with the laws of California without reference to rules relating to conflict of law. 20. SUCCESSORS. This Agreement shall be binding upon and inure to the ---------- benefit of, and shall be enforceable by Executive and the Company, their respective heirs, executors, administrators and assigns. In the event the Company is merged, consolidated, liquidated by a parent corporation, or otherwise combined into one or more corporations, the provisions of this Agreement shall be binding upon and inure to the benefit of the parent corporation or the corporation resulting from such merger, or to which the asset shall be sold or transferred, which corporation from and after the date of such merger, consolidation, sale or transfer shall be deemed to be the Company for purposes of this Agreement. In the event of any other assignment of this Agreement by the Company, by operation of law or otherwise, the Company shall remain primarily liable for its obligations hereunder. This Agreement shall not be assignable by Executive. 21. HEADINGS. The headings of sections herein are included solely for -------- convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. -11- 22. COUNTERPARTS. This Agreement may be executed by either of the parties ------------ hereto in counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. PYRAMID TECHNOLOGY CORPORATION By: _________________________ Name: Title: EXECUTIVE ______________________________ John S. Chen -12- EXHIBIT A (TO MANAGEMENT RETENTION AGREEMENT) THREE-YEAR LONG-TERM INCENTIVE TARGET PERFORMANCE
$ Million FY95 FY96 FY97 Sum - --------------------------------------------------- Profit before tax 10 20 45 75 Revenue 280 400 560 1,240 - ---------------------------------------------------
Notes: 1) Profit before taxes is net of payouts under all bonus plans, including MIP and the long-term incentive plan. 2) Appropriate adjustments shall be made to the FY95 plan target levels to eliminate the effect of expenses uniquely related to this transaction which shall include legal, investment banking and other extraordinary fees and expenses incurred by the Surviving Corporation as a consequence of the transactions effected pursuant to this Agreement and the preparation and negotiations leading thereto. 3) Target levels for each year will be adjusted to eliminate expenses arising from certain provisions of Annex B to the Agreement and Plan of Merger, specifically: (i) increases in payments under the terms of the Management Incentive Plan, with no limit, (ii) payments under an Incentive Plan for Selected Non-MIP Employees, to a maximum of $2 million over 3 years, and (iii) payments for Retention Bonuses, to a maximum of $3 million over 3 years. 4) The target levels for each year will be adjusted to eliminate the impact of payments under the Signing Bonus and Retention Bonus provisions of this Agreement. EX-10.5 8 STATEMENT OF EMPLOYMENT TERMS: ROBERTSON EXHIBIT 10.5 ------------ PYRAMID TECHNOLOGY CORPORATION STATEMENT OF EMPLOYMENT TERMS ----------------------------- This Statement of Employment Terms (the "Statement") is effective as of January 25, 1994, by and between Kent L. Robertson (the "Employee") and Pyramid Technology Corporation, a Delaware corporation (the "Company"). R E C I T A L S A. The Employee presently serves at the pleasure of the Board of Directors as the Senior Vice President, Chief Financial Officer and Secretary of the Company and performs significant strategic and management responsibilities necessary to the continued conduct of the Company's business and operations. B. The Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication and objectivity of the Employee, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. C. In addition to providing for severance benefits unrelated to a Change of Control, the Board believes that it is imperative to provide the Employee with certain severance benefits upon the Employee's termination of employment following a Change of Control which provide the Employee with enhanced financial security and provide sufficient incentive and encouragement to the Employee to remain with the Company following a Change of Control. D. In order to accomplish the foregoing objectives, the Board of Directors has directed the Company, upon execution of this Statement by the Employee, to commit to the terms provided herein. E. Certain capitalized terms used in the Statement are defined in Section 3 below. In consideration of the mutual covenants herein contained, and in consideration of the continuing employment of Employee by the Company, the parties agree as follows: 1. Term of Employment. The Company and the Employee acknowledge that the ------------------ Employee's employment is at will, as defined under applicable law. If the Employee's employment terminates for any reason, the Employee shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Statement, or as may otherwise be available in accordance with the Company's established employee plans and policies at the time of termination. The provisions of this Statement shall terminate upon the earlier of (i) the date that all obligations of the parties hereunder have been satisfied, (ii) June 30, 1996, or (iii) twenty-four (24) months after a Change of Control. A termination of the provisions of this Statement pursuant to the preceding sentence shall be effective for all purposes, except that such termination shall not affect the payment or provision of compensation or benefits on account of a termination of employment occurring prior to the termination of the provisions of this Statement. 2. Severance Benefits. ------------------ (a) Termination Following A Change of Control. If the Employee has ----------------------------------------- been employed by the Company for not less than 180 days and is terminated following a Change of Control within the time period set forth below, then the Employee shall be entitled to receive severance benefits as follows, subject to Section 4 below: (i) Involuntary Termination. If the Employee's employment is ----------------------- terminated as a result of Involuntary Termination (as defined in Section 3(b) below) within twelve (12) months after a Change of Control, then the Employee shall be entitled to receive severance pay in an amount equal to two (2) times the sum of (i) the Employee's base salary at the annualized rate for the year coinciding with the year of payment and (ii) the average of the annual cash bonus received by the Employee for the three (3) years immediately preceding or ending coincident with the year of payment (whichever average produces the higher amount). Any severance payments to which the Employee is entitled pursuant to this section shall be paid in a lump sum within thirty (30) days of the Employee's termination. In addition, for a period of twenty-four (24) months after any termination under this Section 2(a)(i), the Company shall be obligated to continue to make available to the Employee and to pay for all health and medical benefit, life and other similar insurance plans existing on the date of the Employee's termination. (ii) Voluntary Resignation. If the Employee's employment --------------------- terminates by reason of the Employee's voluntary resignation (and is not an Involuntary Termination or a termination for Cause) within six (6) months after a Change of Control, then the Employee shall be entitled to receive severance pay in an amount equal to the sum of (i) the Employee's base salary at the annualized rate for the year coinciding with the year of payment and (ii) the average of the annual cash bonus received by the Employee for the three (3) years immediately preceding or ending coincident with the year of payment (whichever average produces the higher amount). Any severance payments to which the Employee is entitled pursuant to this section shall be paid in a lump sum within thirty (30) days of the Employee's termination. In addition, for a period of twelve -2- (12) months after any termination under this Section 2(a)(ii), the Company shall be obligated to continue to make available to the Employee and to pay for all health and medical benefit, life and other similar insurance plans existing on the date of the Employee's termination. (iii) Disability; Death. If at any time the Company ----------------- terminates the Employee's employment as a result of the Employee's Disability, or such Employee's employment is terminated at any time due to the death of the Employee, then the Employee shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then existing severance and benefits plans and policies at the time of such Disability or death. (iv) Termination for Cause. If the Employee is terminated for --------------------- Cause at any time, then the Employee shall not be entitled to receive any severance or other benefits following the date of such termination, and the Company shall have no obligation to provide for the continuation of any health and medical benefit or life insurance plans existing on the date of such termination. (b) Termination Apart from Change of Control. If the Employee has ---------------------------------------- been employed by the Company for not less than 180 days and the Employee's employment is terminated for any reason, either prior to the occurrence of a Change of Control or after the period following a Change of Control prescribed in Section 2(a)(i) or (ii), then the Employee shall be entitled to receive severance benefits as follows: (i) Involuntary Termination. If the Employee's employment is ----------------------- terminated as a result of Involuntary Termination, then the Employee shall be entitled to receive severance pay in an amount equal to the sum of (i) the Employee's base salary at the annualized rate for the year coinciding with the year of payment and (ii) the average of the annual cash bonus received by the Employee for the three (3) years immediately preceding or ending coincident with the year of payment (whichever average produces the higher amount). Any severance payments to which the Employee is entitled pursuant to this section shall be paid in a lump sum within thirty (30) days of the Employee's termination. In addition, for a period of twelve (12) months after any termination under this Section 2(b)(i), the Company shall be obligated to continue to make available to the Employee and to pay for all health and medical benefit, life and other similar insurance plans existing on the date of the Employee's termination. (ii) Voluntary Resignation. If the Employee's employment --------------------- terminates by reason of the Employee's voluntary resignation (and is not an Involuntary Termination or a termination for Cause), then the Employee shall not be entitled to receive any -3- severance or other benefits following the date of such termination, and the Company shall have no obligation to provide for the continuation of any health and medical benefit or life insurance plans existing on the date of such termination. (iii) Disability; Death. If the Company terminates the ----------------- Employee's employment as a result of the Employee's Disability, or such Employee's employment is terminated due to the death of the Employee, then the Employee shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then existing severance and benefits plans and policies at the time of such Disability or death. (iv) Termination for Cause. If the Employee is terminated for --------------------- Cause, then the Employee shall not be entitled to receive any severance or other benefits following the date of such termination, and the Company shall have no obligation to provide for the continuation of any health and medical benefit or life insurance plans existing on the date of such termination. 3. Definition of Terms. The following terms referred to in this ------------------- Statement shall have the following meanings: (a) Change of Control. "Change of Control" shall mean the ----------------- occurrence of any of the following events: (i) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities; or (ii) A change in the composition of the Board of Directors of the Company, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or (iii) The stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior -4- thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets. (b) Involuntary Termination. "Involuntary Termination" shall mean ----------------------- (i) without the Employee's express written consent, the assignment to the Employee of any duties or the significant reduction of the Employee's duties, either of which is inconsistent with the Employee's position with the Company and responsibilities in effect immediately prior to such assignment, or the removal of the Employee from such position and responsibilities, which is not effected for Disability or for Cause; (ii) without the Employee's express written consent, a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to the Employee immediately prior to such reduction; (iii) a reduction by the Company in the base salary and/or bonus of the Employee as in effect immediately prior to such reduction; (iv) a material reduction by the Company in the kind or level of employee benefits to which the Employee is entitled immediately prior to such reduction with the result that the Employee's overall benefits package is significantly reduced; (v) the relocation of the Employee to a facility or a location more than 50 miles from the Employee's then present location, without the Employee's express written consent; (vi) any purported termination of the Employee by the Company which is not effected for death or Disability or for Cause, or any purported termination for which the grounds relied upon are not valid; or (vii) the failure of the Company to obtain the assumption of the terms of this Statement by any successors contemplated in Section 5 below. (c) Cause. "Cause" shall mean (i) any act of personal dishonesty ----- taken by the Employee in connection with his responsibilities as an employee and intended to result in substantial personal enrichment of the Employee, (ii) the conviction of a felony, (iii) a willful act by the Employee which constitutes gross misconduct and which is injurious to the Company, and (iv) continued violations by the Employee of the Employee's obligations as an employee of the Company which are demonstrably willful and deliberate on the Employee's part after there has been delivered to the Employee a written demand for performance from the Company which describes the basis for the Company's belief that the Employee has not substantially performed his duties. (d) Disability. "Disability" shall mean that the Employee has been ---------- unable to perform his duties as an employee of the Company as the result of his incapacity due to physical or -5- mental illness, and such inability, at least 26 weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Employee or the Employee's legal representative (such agreement as to acceptability not to be unreasonably withheld). Termination resulting from Disability may only be effected after at least 30 days' written notice by the Company of its intention to terminate the Employee's employment. In the event that the Employee resumes the performance of substantially all of his duties as an employee of the Company before the termination of his employment becomes effective, the notice of intent to terminate shall automatically be deemed to have been revoked. 4. Limitation on Payments. ---------------------- (a) Basic Rule. In the event that any payment or benefit received ---------- or benefit received by the Employee pursuant to this Statement or otherwise (collectively, the "Payments") would (i) be treated as a "parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), or any similar or successor provision to 280G and (ii) but for this Section 4(a), be subject to the excise tax imposed by Section 4999 of the Code or any similar or successor provision to Section 4999 (the "Excise Tax"), then, subject to the provisions of Section 4(b) hereof, such Payments shall be reduced to the largest amount which the Employee determines would result in no portion of the Payments being subject to the Excise Tax. The determination of any required reduction pursuant to this Section 4(a) (including the determination as to which specific Payments shall be reduced) shall be made initially by the Employee in consultation with the Company. If the Employee and the Company shall disagree upon the amount of such reduction, then the Company shall, at its expense, promptly call upon Ernst & Young, independent accountants, to make such determination, and such determination shall be conclusive and binding upon the Employee and the Company or any related corporation for all purposes. The Company and its related corporations waive all claims and rights against the Employee with respect to such determination except as specifically set forth in the next sentence. If the Internal Revenue Service (the "IRS") determines that Payments are subject to the Excise Tax, then the Company or any related corporation, as their exclusive remedy, shall seek to enforce the provisions of Section 4(b) hereof. Such enforcement of Section 4(b) hereof shall be the only remedy against the Employee, under any and all applicable state and federal laws or otherwise, for the failure to reduce the Payments so that no portion thereof is subject to the Excise Tax. The Company or related corporation shall reduce Payments in accordance with Section 4(a) only upon written notice to the Employee indicating the amount of such reduction, if any, and the Employee's agreement to the amount of such reduction (subject, in the event of disagreement, to a determination by Ernst & Young on the basis provided above). -6- (b) Remedy. If, notwithstanding the reduction described in Section ------ 4(a) hereof, the IRS determines that the Employee is liable for the Excise Tax as a result of the receipt of Payments, then the Employee shall, subject to the provisions of this Statement, be obligated to pay to the Company (the "Repayment Obligation") an amount of money equal to the "Repayment Amount." The Repayment Amount with respect to Payments shall be the smallest such amount, if any, as shall be required to be paid to the Company so that the Employee's net proceeds with respect to Payments (after taking into account the payment of the Excise Tax imposed on Payments) shall be maximized. Notwithstanding the foregoing, the Repayment Amount with respect to Payments shall be zero if a Repayment Amount of more than zero would not eliminate the Excise Tax imposed on Payments. If the Excise Tax is not eliminated through the performance of the Repayment Obligation, the Employee shall pay the Excise Tax. The Repayment Obligation shall be performed within 30 days of either (i) the Employee entering into a binding agreement with the IRS as to the amount of the Employee's Excise Tax liability or (ii) a final determination by the IRS or a court decision requiring the Employee to pay the Excise Tax with respect to Payments from which no appeal is available or is timely taken. 5. Successors. ---------- (a) Company's Successors. Any successor to the Company (whether -------------------- direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company's business and/or assets shall assume the obligations under this Statement and agree expressly to perform the obligations under this Statement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Statement, the term "Company" shall include any successor to the Company's business and/or assets which executes and delivers the assumption agreement described in this subsection (a) or which becomes bound by the terms of this Statement by operation of law. (b) Employee's Successors. The terms of this Statement and all --------------------- rights of the Employee hereunder shall inure to the benefit of, and be enforceable by, the Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. 6. Notice. ------ (a) General. Notices and all other communications contemplated by ------- this Statement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of the Employee, mailed -7- notices shall be addressed to him at the home address which he most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary. (b) Notice of Termination. Any termination by the Company for --------------------- Cause or by the Employee as a result of a voluntary resignation or an Involuntary Termination shall be communicated by a notice of termination to the other party hereto given in accordance with Section 6 of this Statement. Such notice shall indicate the specific termination provision in this Statement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the termination date (which shall be not more than 15 days after the giving of such notice). The failure by the Employee to include in the notice any fact or circumstance which contributes to a showing of Involuntary Termination shall not waive any right of the Employee hereunder or preclude the Employee from asserting such fact or circumstance in enforcing his rights hereunder. 7. Miscellaneous Provisions. ------------------------ (a) Eligibility for Contract Benefits. If the Employee has been --------------------------------- employed by the Company for less than 180 days at the time of termination (whether by Involuntary Termination, voluntary resignation, termination for Cause, Death or Disability), then the Employee shall not be entitled to any severance or other benefits pursuant to this Statement. (b) No Duty to Mitigate. The Employee shall not be required to ------------------- mitigate the amount of any payment contemplated by this Statement (whether by seeking new employment or in any other manner), nor shall any such payment be reduced by any earnings that the Employee may receive from any other source. (c) Waiver. No provision of this Statement shall be modified, ------ waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Employee and by an authorized officer of the Company (other than the Employee). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Statement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time. (d) Choice of Law. The validity, interpretation, construction and ------------- performance of this Statement shall be governed by the laws of the State of California. -8- (e) Severability. The invalidity or unenforceability of any ------------ provision or provisions of this Statement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect. (f) Arbitration. Any dispute or controversy arising under or in ----------- connection with this Statement shall be settled exclusively by arbitration in San Jose, California, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. Punitive damages shall not be awarded. (g) No Assignment of Benefits. The rights of any person to ------------------------- payments or benefits under this Statement shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor's process, and any action in violation of this subsection (g) shall be void. (h) Employment Taxes. Subject to Section 4, all payments made ---------------- pursuant to this Statement will be subject to withholding of applicable income and employment taxes. (i) Assignment by Company. The Company may assign its rights under --------------------- this Statement to an affiliate, and an affiliate may assign its rights under this Statement to another affiliate of the Company or to the Company; provided, however, that no assignment shall be made if the net worth of the assignee is less than the net worth of the Company at the time of assignment. In the case of any such assignment, the term "Company" when used in a section of this Statement shall mean the corporation that actually employs the Employee. (j) Counterparts. This Statement may be executed in counterparts, ------------ each of which shall be deemed an original, but all of which together will constitute one and the same instrument. -9- IN WITNESS WHEREOF, each of the parties has executed this Statement, in the case of the Company by its duly authorized officer, as of the day and year first above written. COMPANY PYRAMID TECHNOLOGY CORPORATION By: /S/ RICHARD H. LUSSIER ------------------------------ Title: CHIEF EXECUTIVE OFFICER EMPLOYEE /S/ KENT L. ROBERTSON ---------------------------------- KENT L. ROBERTSON -10- EX-10.6 9 STATEMENT OF EMPLOYMENT TERMS: SCOTT EXHIBIT 10.6 ------------ PYRAMID TECHNOLOGY CORPORATION STATEMENT OF EMPLOYMENT TERMS ----------------------------- This Statement of Employment Terms (the "Statement") is effective as of October 14, 1992, by and between (the "Employee") and Pyramid Technology Corporation, a Delaware corporation (the "Company"). R E C I T A L S A. The Employee presently serves at the pleasure of the Board of Directors as the Executive Vice President of the Company and performs significant strategic and management responsibilities necessary to the continued conduct of the Company's business and operations. B. The Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication and objectivity of the Employee, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. C. In addition to providing for severance benefits unrelated to a Change of Control, the Board believes that it is imperative to provide the Employee with certain severance benefits upon the Employee's termination of employment following a Change of Control which provide the Employee with enhanced financial security and provide sufficient incentive and encouragement to the Employee to remain with the Company following a Change of Control. D. Employee wishes to have the Company relinquish its rights under a deed of trust securing the promissory note dated December 7, 1990. E. In order to accomplish the foregoing objectives, the Board of Directors has directed the Company, upon execution of this Statement by the Employee, to commit to the terms provided herein. F. Certain capitalized terms used in the Statement are defined in Section 3 below. In consideration of the mutual covenants herein contained, and in consideration of the continuing employment of Employee by the Company, the parties agree as follows: 1. Term of Employment. The Company and the Employee acknowledge that the ------------------ Employee's employment is at will, as defined under applicable law. If the Employee's employment terminates for any reason, the Employee shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Statement, or as may otherwise be available in accordance with the Company's established employee plans and policies at the time of termination. The provisions of this Statement shall terminate upon the earlier of (i) the date that all obligations of the parties hereunder have been satisfied, (ii) June 30, 1996, or (iii) twenty-four (24) months after a Change of Control. A termination of the provisions of this Statement pursuant to the preceding sentence shall be effective for all purposes, except that such termination shall not affect the payment or provision of compensation or benefits on account of a termination of employment occurring prior to the termination of the provisions of this Statement. 2. Severance Benefits. ------------------ (a) Termination Following A Change of Control. If the Employee has ----------------------------------------- been employed by the Company for not less than 180 days and is terminated following a Change of Control within the time period set forth below, then the Employee shall be entitled to receive severance benefits as follows, subject to Section 4 below: (i) Involuntary Termination. If the Employee's employment is ----------------------- terminated as a result of Involuntary Termination (as defined in Section 3(b) below) within twelve (12) months after a Change of Control, then the Employee shall be entitled to receive severance pay equal to the amount by which his maximum severance, as defined in this paragraph, exceeds his negotiated liabilities to the Company, as defined in this paragraph. The Employee's maximum severance shall be equal to two (2) times the sum of (i) the Employee's base salary at the annualized rate for the year coinciding with the year of payment and (ii) the average of the annual cash bonus received by the Employee for the three (3) years immediately preceding or ending coincident with the year of payment (whichever average produces the higher amount). The Employee's negotiated liabilities shall be equal to the indebtedness remaining on the promissory note dated December 7, 1990 after taking into account any payments already received and the Loan Forgiveness Schedule for Edward Scott, Jr. attached hereto. Any severance payments to which the Employee is entitled pursuant to this section shall be paid in a lump sum within thirty (30) days of the Employee's termination. In addition, for a period of twenty-four (24) months after any termination under this Section 2(a)(i), the Company shall be obligated to continue to make available to the Employee and to pay for all health and medical benefit, life and other similar insurance plans existing on the date of the Employee's termination. -2- (ii) Voluntary Resignation. If the Employee's employment terminates by reason of the Employee's voluntary resignation (and is not an Involuntary Termination or a termination for Cause) within six (6) months after a Change of Control, then the Employee shall be entitled to receive severance pay equal to the amount by which his maximum severance, as defined in this paragraph, exceeds his negotiated liabilities to the Company, as defined in this paragraph. The Employee's maximum severance shall be equal to the sum of (i) the Employee's base salary at the annualized rate for the year coinciding with the year of payment and (ii) the average of the annual cash bonus received by the Employee for the three (3) years immediately preceding or ending coincident with the year of payment (whichever average produces the higher amount). The Employee's negotiated liabilities shall be equal to the indebtedness remaining on the promissory note dated December 7, 1990 after taking into account any payments already received and the Loan Forgiveness Schedule for Edward Scott, Jr. attached hereto. Any severance payments to which the Employee is entitled pursuant to this section shall be paid in a lump sum within thirty (30) days of the Employee's termination. In addition, for a period of twelve (12) months after any termination under this section 2(a)(ii), the Company shall be obligated to continue to make available to the Employee and to pay for all health and medical benefit, life and other similar insurance plans existing on the date of the Employee's termination. (iii) Disability; Death. If at any time the Company terminates ----------------- the Employee's employment as a result of the Employee's Disability, or such Employee's employment is terminated at any time due to the death of the Employee, then the Employee shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then existing severance and benefits plans and policies at the time of such Disability or death. (iv) Termination for Cause. If the Employee is terminated for --------------------- Cause at any time, then the Employee shall not be entitled to receive any severance or other benefits following the date of such termination, and the Company shall have no obligation to provide for the continuation of any health and medical benefit or life insurance plans existing on the date of such termination. (b) Termination Apart from Change of Control. If the Employee has ---------------------------------------- been employed by the Company for not less than 180 days and the Employee's employment is terminated for any reason, either prior to the occurrence of a Change of Control or after the period following a Change of Control prescribed in Section 2(a)(i) or (ii), then the Employee shall be entitled to receive severance benefits as follows: -3- (i) Involuntary Termination. If the Employee's employment is ----------------------- terminated as a result of Involuntary Termination, then the Employee shall be entitled to receive severance pay equal to the amount by which his maximum severance, as defined in this paragraph, exceeds his negotiated liabilities, as defined in this paragraph. The Employee's severance pay shall be equal to the sum of (i) the Employee's base salary at the annualized rate for the year coinciding with the year of payment and (ii) the average of the annual cash bonus received by the Employee for the three (3) years immediately preceding or ending coincident with the year of payment (whichever average produces the higher amount). The Employee's negotiated liabilities shall be equal to the indebtedness remaining on the promissory note dated December 7, 1990 after taking into account any payments already received and the Loan Forgiveness Schedule for Edward Scott, Jr. attached hereto. Any severance payments to which the Employee is entitled pursuant to this section shall be paid in a lump sum within thirty (30) days of the Employee's termination. In addition, for a period of twelve (12) months after any termination under this section 2(b)(i), the Company shall be obligated to continue to make available to the Employee and to pay for all health and medical benefit, life and other similar insurance plans existing on the date of the Employee's termination. (ii) Voluntary Resignation. If the Employee's employment terminates by reason of the Employee's voluntary resignation (and is not an Involuntary Termination or a termination for Cause), then the Employee shall not be entitled to receive any severance or other benefits following the date of such termination, and the Company shall have no obligation to provide for the continuation of any health and medical benefit or life insurance plans existing on the date of such termination. Any balance owing on the promissory note, after taking into account payments received and the Loan Forgiveness Schedule shall become due and owing in a lump sum on the date of termination. (iii) Disability; Death. If the Company terminates the ----------------- Employee's employment as a result of the Employee's Disability, or such Employee's employment is terminated at any time due to the death of the Employee, then the Employee shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then existing severance and benefits plans and policies at the time of such Disability or death. (iv) Termination for Cause. If the Employee is terminated for --------------------- Cause, then the Employee shall not be entitled to receive any severance or other benefits following the date of such termination, and the Company shall have no obligation to provide for the continuation of any health and medical benefit or life insurance plans existing on the date of such termination. -4- 3. Definition of Terms. The following terms referred to in this Statement ------------------- shall have the following meanings: (a) Change of Control. "Change of Control" shall mean the occurrence ----------------- of any of the following events: (i) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities; or (ii) A change in the composition of the Board of Directors of the Company, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or (iii) The stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets. (b) Involuntary Termination. "Involuntary Termination" shall mean ----------------------- (i) without the Employee's express written consent, the assignment to the Employee of any duties or the significant reduction of the Employee's duties, either of which is inconsistent with the Employee's position with the Company and responsibilities in effect immediately prior to such assignment, or the removal of the Employee from such position and responsibilities, which is not effected for Disability or for Cause; (ii) without the Employee's express written consent, a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to the Employee immediately prior to such reduction; (iii) a reduction by the Company in the -5- base salary and/or bonus of the Employee as in effect immediately prior to such retention; (iv) a material reduction by the Company in the kind or level of employee benefits is significantly reduced; (v) the relocation of the Employee to a facility or a location more than 50 miles from the Employee's then present location, without the Employee's express written consent; (vi) any purported termination of the Employee by the Company which is not effected for death or Disability or for Cause, or any purported termination for which the grounds relied upon are not valid; or (vii) the failure of the Company to obtain the assumption of the terms of this Statement by any successors contemplated in Section 5 below. (c) Cause. "Cause" shall mean (i) any act of personal dishonesty ----- taken by the Employee in connection with his responsibilities as an employee and intended to result in substantial personal enrichment of the Employee, (ii) the conviction of a felony, (iii) a willful act by the Employee which constitutes gross misconduct and which is injurious to the Company, and (iv) continued violations by the Employee of the Employee's obligations as an employee of the Company which are demonstrably willful and deliberate on the Employee's part after there has been delivered to the Employee a written demand for performance from the Company which describes the basis for the Company's belief that the Employee has not substantially performed his duties. (d) Disability. "Disability" shall mean that the Employee has been ---------- unable to perform his duties as an employee of the Company as the result of his incapacity due to physical or mental illness, and such inability, at least 26 weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Employee or the Employee's legal representative (such agreement as to acceptability not to be unreasonably withheld). Termination resulting from Disability may only be effected after at least 30 days' written notice by the Company of its intention to terminate the Employee's employment. In the event that the Employee resumes the performance of substantially all of his duties as an employee of the Company before the termination of his employment becomes effective, the notice of intent to terminate shall automatically be deemed to have been revoked. 4. Limitation on Payments. ---------------------- (a) Basic Rule. In the event that any payment or benefit received or ---------- to be received by the Employee pursuant to this Statement or otherwise (collectively, the "Payments") would (i) be treated as a "parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), or any similar or successor provision to 280G and (ii) but for this Section 4(a), be subject to the excise tax imposed by Section 4999 of the Code or any similar or successor provision to Section 4999 -6- (the "Excise Tax"), then, subject to the provisions of Section 4(b) hereof, such Payments shall be reduced to the largest amount which the Employee determines would result in no portion of the Payments being subject to the Excise Tax. The determination of any required reduction pursuant to this Section 4(a) (including the determination as to which specific Payments shall be reduced) shall be made initially by the Employee in consultation with the Company. If the Employee and the Company shall disagree upon the amount of such reduction, then the Company shall, at its expense, promptly call upon Ernst & Young, independent accountants, to make such determination, and such determination shall be conclusive and binding upon the Employee and the Company or any related corporation for all purposes. The Company and its related corporations waive all claims and rights against the Employee with respect to such determination except as specifically set forth in the next sentence. If the Internal Revenue Service (the "IRS") determines that Payments are subject to the Excise Tax, then the Company or any related corporation, as their exclusive remedy, shall seek to enforce the provisions of Section 4(b) hereof. Such enforcement of Section 4(b) hereof shall be the only remedy against the Employee, under any and all applicable state and federal laws or otherwise, for the failure to reduce the Payments so that no portion thereof is subject to the Excise Tax. The Company or related corporation shall reduce Payments in accordance with Section 4(a) only upon written notice to the Employee indicating the amount of such reduction, if any, and the Employee's agreement to the amount of such reduction (subject, in the event of disagreement, to a determination by Ernst & Young on the basis provided above). (b) Remedy. If, notwithstanding the reduction described in Section ------ 4(a) hereof, the IRS determines that the Employee is liable for the Excise Tax as a result of the receipt of Payments, then the Employee shall, subject to the provisions of this Statement, be obligated to pay to the Company (the "Repayment Obligation") an amount of money equal to the "Repayment Amount." The Repayment Amount with respect to Payments shall be the smallest such amount, if any, as shall be required to be paid to the Company so that the Employee's net proceeds with respect to Payments (after taking into account the payment of the Excise Tax imposed on Payments) shall be maximized. Notwithstanding the foregoing, the Repayment Amount with respect to Payments shall be zero if a Repayment Amount of more than zero would not eliminate the Excise Tax imposed on Payments. If the Excise Tax is not eliminated through the performance of the Repayment Obligation, the Employee shall pay the Excise Tax. The Repayment Obligation shall be performed within 30 days of either (i) the Employee entering into a binding agreement with the IRS as to the amount of the Employee's Excise Tax liability or (ii) a final determination by the IRS or a court decision requiring the Employee to pay the Excise Tax with respect to Payments from which no appeal is available or is timely taken. -7- 5. Successors. ---------- (a) Company's Successors. Any successor to the Company (whether -------------------- direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company's business and/or assets shall assume the obligations under this Statement and agree expressly to perform the obligations under this Statement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Statement, the term "Company" shall include any successor to the Company's business and/or assets which executes and delivers the assumption agreement described in this subsection (a) or which becomes bound by the terms of this Statement by operation of law. (b) Employee's Successors. The terms of this Statement and all --------------------- rights of the Employee hereunder shall inure to the benefit of, and be enforceable by, the Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. 6. Notice. ------ (a) General. Notices and all other communications contemplated by ------- this Statement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of the Employee, mailed notices shall be addressed to him at the home address which he most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary. (b) Notice of Termination. Any termination by the Company for Cause --------------------- or by the Employee as a result of a voluntary resignation or an Involuntary Termination shall be communicated by a notice of termination to the other party hereto given in accordance with Section 6 of this Statement. Such notice shall indicate the specific termination provision in this Statement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the termination date (which shall be not more than 15 days after the giving of such notice). The failure by the Employee to include in the notice any fact or circumstance which contributes to a showing of Involuntary Termination shall not waive any right of the Employee hereunder or preclude the Employee from asserting such fact or circumstance in enforcing his rights hereunder. -8- 7. Miscellaneous Provisions. ------------------------ (a) Eligibility for Contract Benefits. If the Employee has been --------------------------------- employed by the Company for less than 180 days at the time of termination (whether by Involuntary Termination, voluntary resignation, termination for Cause, Death or Disability), then the Employee shall not be entitled to any severance or other benefits pursuant to this Statement. (b) No Duty to Mitigate. The Employee shall not be required to ------------------- mitigate the amount of any payment contemplated by this Statement (whether by seeking new employment or in any other manner), nor shall any such payment be reduced by any earnings that the Employee may receive from any other source. (c) Waiver. No provision of this Statement shall be modified, waived ------ or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Employee and by an authorized officer of the Company (other than the Employee). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Statement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time. (d) Choice of Law. The validity, interpretation, construction and ------------- performance of this Statement shall be governed by the laws of the State of California. (e) Severability. The invalidity or unenforceability of any provision ------------ or provisions of this Statement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect. (f) Arbitration. Any dispute or controversy arising under or in ----------- connection with this Statement shall be settled exclusively by the following procedures: (1) the party claiming to be aggrieved shall furnish to the other party a written statement identifying the grievance, and specifying the action demanded to remedy the grievance; (2) if the responding party does not provide the remedy specified by the grieving party in step (1) above or does not otherwise satisfy the grieving party, the parties shall mediate the dispute before a mediator to be jointly selected by the parties; (3) if the mediation does not produce a mutually satisfactory settlement, the dispute shall be settled by arbitration in San Jose, California, in accordance with the rules of the American Arbitration Association then in effect provided, however, that no arbitration may proceed unless steps (1) and (2) have been complied with. Judgment may be entered on the arbitrator's award in any court having jurisdiction. The arbitrator shall have no authority to add to, subtract from or to refuse -9- to enforce any lawful term of the contract or to award punitive damages. (g) No Assignment of Benefits. The rights of any person to payments ------------------------- or benefits under this Statement shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor's process, and any action in violation of this subsection (g) shall be void. (h) Employment Taxes. Subject to Section 4, all payments made ---------------- pursuant to this Statement will be subject to withholding of applicable income and employment taxes. (i) Assignment by Company. The Company may assign its rights under --------------------- this Statement to an affiliate, and an affiliate may assign its rights under this Statement to another affiliate of the Company or to the Company; provided, however, that no assignment shall be made if the net worth of the assignee is less than the net worth of the Company at the time of assignment. In the case of any such assignment, the term "Company" when used in a section of this Statement shall mean the corporation that actually employs the Employee. (j) Counterparts. This Statement may be executed in counterparts, ------------ each of which shall be deemed an original, but all of which together will constitute one and the same instrument. (k) Entire Agreement. This agreement constitutes the entire agreement ---------------- between the parties with respect to the subject matter contained herein and supersedes all prior negotiations, statements, representations or agreements on these issues, including but not limited to, the statement of employment terms dated July 1, 1991 between the parties provided, however, that the promissory note dated December 7, 1990 is not superseded, forgiven or otherwise modified except as may be expressly provided in this agreement, and this note and the obligations thereunder remains in full force and effect. This agreement may not be modified or amended without a written instrument executed by both parties. -10- IN WITNESS WHEREOF, each of the parties has executed this Statement, in the case of the Company by its duly authorized officer, as of the day and year first above written. COMPANY PYRAMID TECHNOLOGY CORPORATION By: /S/ RICHARD H. LUSSIER ------------------------------ Title: CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER & PRESIDENT EMPLOYEE /S/ EDWARD W. SCOTT, JR. ---------------------------------- Edward W. Scott, Jr. -11- PYRAMID TECHNOLOGY CORPORATION Loan Forgiveness Schedule for Edward W. Scott, Jr.
Date Employed Cumulative Amount of Through Loan Forgiveness ------------- -------------------- January 1, 1992 $ 33,333 April 1, 1992 66,667 July 1, 1992 100,000 October 1, 1992 133,333 January 1, 1993 167,000 April 1, 1993 200,000 July 1, 1993 233,000 October 1, 1993 267,000 January 1, 1994 300,000
-12- EX-10.7 10 STATEMENT OF EMPLOYMENT TERMS: SMIRNI EXHIBIT 10.7 ------------ PYRAMID TECHNOLOGY CORPORATION STATEMENT OF EMPLOYMENT TERMS ----------------------------- This Statement of Employment Terms (the "Statement") is effective as of May 27, 1992, by and between Allan D. Smirni (the "Employee") and Pyramid Technology Corporation, a Delaware corporation (the "Company"). R E C I T A L S A. The Employee presently serves at the pleasure of the Board of Directors as the Vice President, General Counsel and Secretary of the Company and performs significant strategic and management responsibilities necessary to the continued conduct of the Company's business and operations. B. The Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication and objectivity of the Employee, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. C. In addition to providing for severance benefits unrelated to a Change of Control, the Board believes that it is imperative to provide the Employee with certain severance benefits upon the Employee's termination of employment following a Change of Control which provide the Employee with enhanced financial security and provide sufficient incentive and encouragement to the Employee to remain with the Company following a Change of Control. D. In order to accomplish the foregoing objectives, the Board of Directors has directed the Company, upon execution of this Statement by the Employee, to commit to the terms provided herein. E. Certain capitalized terms used in the Statement are defined in Section 3 below. In consideration of the mutual covenants herein contained, and in consideration of the continuing employment of Employee by the Company, the parties agree as follows: 1. Term of Employment. The Company and the Employee acknowledge ------------------ that the Employee's employment is at will, as defined under applicable law. If the Employee's employment terminates for any reason, the Employee shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Statement, or as may otherwise be available in accordance with the Company's established employee plans and policies at the time of termination. The provisions of this Statement shall terminate upon the earlier of (i) the date that all obligations of the parties hereunder have been satisfied, (ii) June 30, 1996, or (iii) twenty-four (24) months after a Change of Control. A termination of the provisions of this Statement pursuant to the preceding sentence shall be effective for all purposes, except that such termination shall not affect the payment or provision of compensation or benefits on account of a termination of employment occurring prior to the termination of the provisions of this Statement. 2. Severance Benefits. ------------------ (a) Termination Following A Change of Control. If the Employee has ----------------------------------------- been employed by the Company for not less than 180 days and is terminated following a Change of Control within the time period set forth below, then the Employee shall be entitled to receive severance benefits as follows, subject to Section 4 below: (i) Involuntary Termination. If the Employee's employment is ----------------------- terminated as a result of Involuntary Termination (as defined in Section 3(b) below) within twelve (12) months after a Change of Control, then the Employee shall be entitled to receive severance pay in an amount equal to two (2) times the sum of (i) the Employee's base salary at the annualized rate for the year coinciding with the year of payment and (ii) the average of the annual cash bonus received by the Employee for the three (3) years immediately preceding or ending coincident with the year of payment (whichever average produces the higher amount). Any severance payments to which the Employee is entitled pursuant to this section shall be paid in a lump sum within thirty (30) days of the Employee's termination. In addition, for a period of twenty-four (24) months after any termination under this Section 2(a)(i), the Company shall be obligated to continue to make available to the Employee and to pay for all health and medical benefit, life and other similar insurance plans existing on the date of the Employee's termination. (ii) Voluntary Resignation. If the Employee's employment --------------------- terminates by reason of the Employee's voluntary resignation (and is not an Involuntary Termination or a termination for Cause) within six (6) months after a Change of Control, then the Employee shall be entitled to receive severance pay in an amount equal to the sum of (i) the Employee's base salary at the annualized rate for the year coinciding with the year of payment and (ii) the average of the annual cash bonus received by the Employee for the three (3) years immediately preceding or ending coincident with the year of payment (whichever average produces the higher amount). Any severance payments to which the Employee is entitled pursuant to this section shall be paid in a lump sum within thirty (30) days of the Employee's termination. In addition, for a period of twelve -2- (12) months after any termination under this Section 2(a)(ii), the Company shall be obligated to continue to make available to the Employee and to pay for all health and medical benefit, life and other similar insurance plans existing on the date of the Employee's termination. (iii) Disability; Death. If at any time the Company terminates the ----------------- Employee's employment as a result of the Employee's Disability, or such Employee's employment is terminated at any time due to the death of the Employee, then the Employee shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then existing severance and benefits plans and policies at the time of such Disability or death. (iv) Termination for Cause. If the Employee is terminated for Cause --------------------- at any time, then the Employee shall not be entitled to receive any severance or other benefits following the date of such termination, and the Company shall have no obligation to provide for the continuation of any health and medical benefit or life insurance plans existing on the date of such termination. (b) Termination Apart from Change of Control. If the Employee has ---------------------------------------- been employed by the Company for not less than 180 days and the Employee's employment is terminated for any reason, either prior to the occurrence of a Change of Control or after the period following a Change of Control prescribed in Section 2(a)(i) or (ii), then the Employee shall be entitled to receive severance benefits as follows: (i) Involuntary Termination. If the Employee's employment is ----------------------- terminated as a result of Involuntary Termination, then the Employee shall be entitled to receive severance pay in an amount equal to the sum of (i) the Employee's base salary at the annualized rate for the year coinciding with the year of payment and (ii) the average of the annual cash bonus received by the Employee for the three (3) years immediately preceding or ending coincident with the year of payment (whichever average produces the higher amount). Any severance payments to which the Employee is entitled pursuant to this section shall be paid in a lump sum within thirty (30) days of the Employee's termination. In addition, for a period of twelve (12) months after any termination under this Section 2(b)(i), the Company shall be obligated to continue to make available to the Employee and to pay for all health and medical benefit, life and other similar insurance plans existing on the date of the Employee's termination. (ii) Voluntary Resignation. If the Employee's employment terminates --------------------- by reason of the Employee's voluntary resignation (and is not an Involuntary Termination or a termination for Cause), then the Employee shall not be entitled to receive any -3- severance or other benefits following the date of such termination, and the Company shall have no obligation to provide for the continuation of any health and medical benefit or life insurance plans existing on the date of such termination. (iii) Disability; Death. If the Company terminates the Employee's ----------------- employment as a result of the Employee's Disability, or such Employee's employment is terminated due to the death of the Employee, then the Employee shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then existing severance and benefits plans and policies at the time of such Disability or death. (iv) Termination for Cause. If the Employee is terminated for --------------------- Cause, then the Employee shall not be entitled to receive any severance or other benefits following the date of such termination, and the Company shall have no obligation to provide for the continuation of any health and medical benefit or life insurance plans existing on the date of such termination. 3. Definition of Terms. The following terms referred to in this ------------------- Statement shall have the following meanings: (a) Change of Control. "Change of Control" shall mean the occurrence ----------------- of any of the following events: (i) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities; or (ii) A change in the composition of the Board of Directors of the Company, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or (iii) The stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior -4- thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets. (b) Involuntary Termination. "Involuntary Termination" shall mean (i) ----------------------- without the Employee's express written consent, the assignment to the Employee of any duties or the significant reduction of the Employee's duties, either of which is inconsistent with the Employee's position with the Company and responsibilities in effect immediately prior to such assignment, or the removal of the Employee from such position and responsibilities, which is not effected for Disability or for Cause; (ii) without the Employee's express written consent, a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to the Employee immediately prior to such reduction; (iii) a reduction by the Company in the base salary and/or bonus of the Employee as in effect immediately prior to such reduction; (iv) a material reduction by the Company in the kind or level of employee benefits to which the Employee is entitled immediately prior to such reduction with the result that the Employee's overall benefits package is significantly reduced; (v) the relocation of the Employee to a facility or a location more than 50 miles from the Employee's then present location, without the Employee's express written consent; (vi) any purported termination of the Employee by the Company which is not effected for death or Disability or for Cause, or any purported termination for which the grounds relied upon are not valid; or (vii) the failure of the Company to obtain the assumption of the terms of this Statement by any successors contemplated in Section 5 below. (c) Cause. "Cause" shall mean (i) any act of personal dishonesty taken by ----- the Employee in connection with his responsibilities as an employee and intended to result in substantial personal enrichment of the Employee, (ii) the conviction of a felony, (iii) a willful act by the Employee which constitutes gross misconduct and which is injurious to the Company, and (iv) continued violations by the Employee of the Employee's obligations as an employee of the Company which are demonstrably willful and deliberate on the Employee's part after there has been delivered to the Employee a written demand for performance from the Company which describes the basis for the Company's belief that the Employee has not substantially performed his duties. (d) Disability. "Disability" shall mean that the Employee has been unable ---------- to perform his duties as an employee of the Company as the result of his incapacity due to physical or -5- mental illness, and such inability, at least 26 weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Employee or the Employee's legal representative (such agreement as to acceptability not to be unreasonably withheld). Termination resulting from Disability may only be effected after at least 30 days' written notice by the Company of its intention to terminate the Employee's employment. In the event that the Employee resumes the performance of substantially all of his duties as an employee of the Company before the termination of his employment becomes effective, the notice of intent to terminate shall automatically be deemed to have been revoked. 4. Limitation on Payments. ---------------------- (a) Basic Rule. In the event that any payment or benefit received or ---------- to be received by the Employee pursuant to this Statement or otherwise (collectively, the "Payments") would (i) be treated as a "parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), or any similar or successor provision to 280G and (ii) but for this Section 4(a), be subject to the excise tax imposed by Section 4999 of the Code or any similar or successor provision to Section 4999 (the "Excise Tax"), then, subject to the provisions of Section 4(b) hereof, such Payments shall be reduced to the largest amount which the Employee determines would result in no portion of the Payments being subject to the Excise Tax. The determination of any required reduction pursuant to this Section 4(a) (including the determination as to which specific Payments shall be reduced) shall be made initially by the Employee in consultation with the Company. If the Employee and the Company shall disagree upon the amount of such reduction, then the Company shall, at its expense, promptly call upon Ernst & Young, independent accountants, to make such determination, and such determination shall be conclusive and binding upon the Employee and the Company or any related corporation for all purposes. The Company and its related corporations waive all claims and rights against the Employee with respect to such determination except as specifically set forth in the next sentence. If the Internal Revenue Service (the "IRS") determines that Payments are subject to the Excise Tax, then the Company or any related corporation, as their exclusive remedy, shall seek to enforce the provisions of Section 4(b) hereof. Such enforcement of Section 4(b) hereof shall be the only remedy against the Employee, under any and all applicable state and federal laws or otherwise, for the failure to reduce the Payments so that no portion thereof is subject to the Excise Tax. The Company or related corporation shall reduce Payments in accordance with Section 4(a) only upon written notice to the Employee indicating the amount of such reduction, if any, and the Employee's agreement to the amount of such reduction (subject, in the event of disagreement, to a determination by Ernst & Young on the basis provided above). -6- (b) Remedy. If, notwithstanding the reduction described in Section ------ 4(a) hereof, the IRS determines that the Employee is liable for the Excise Tax as a result of the receipt of Payments, then the Employee shall, subject to the provisions of this Statement, be obligated to pay to the Company (the "Repayment Obligation") an amount of money equal to the "Repayment Amount." The Repayment Amount with respect to Payments shall be the smallest such amount, if any, as shall be required to be paid to the Company so that the Employee's net proceeds with respect to Payments (after taking into account the payment of the Excise Tax imposed on Payments) shall be maximized. Notwithstanding the foregoing, the Repayment Amount with respect to Payments shall be zero if a Repayment Amount of more than zero would not eliminate the Excise Tax imposed on Payments. If the Excise Tax is not eliminated through the performance of the Repayment Obligation, the Employee shall pay the Excise Tax. The Repayment Obligation shall be performed within 30 days of either (i) the Employee entering into a binding agreement with the IRS as to the amount of the Employee's Excise Tax liability or (ii) a final determination by the IRS or a court decision requiring the Employee to pay the Excise Tax with respect to Payments from which no appeal is available or is timely taken. 5. Successors. ---------- (a) Company's Successors. Any successor to the Company (whether -------------------- direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company's business and/or assets shall assume the obligations under this Statement and agree expressly to perform the obligations under this Statement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Statement, the term "Company" shall include any successor to the Company's business and/or assets which executes and delivers the assumption agreement described in this subsection (a) or which becomes bound by the terms of this Statement by operation of law. (b) Employee's Successors. The terms of this Statement and all --------------------- rights of the Employee hereunder shall inure to the benefit of, and be enforceable by, the Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. 6. Notice. ------ (a) General. Notices and all other communications contemplated by ------- this Statement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of the Employee, mailed -7- notices shall be addressed to him at the home address which he most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary. (b) Notice of Termination. Any termination by the Company for Cause --------------------- or by the Employee as a result of a voluntary resignation or an Involuntary Termination shall be communicated by a notice of termination to the other party hereto given in accordance with Section 6 of this Statement. Such notice shall indicate the specific termination provision in this Statement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the termination date (which shall be not more than 15 days after the giving of such notice). The failure by the Employee to include in the notice any fact or circumstance which contributes to a showing of Involuntary Termination shall not waive any right of the Employee hereunder or preclude the Employee from asserting such fact or circumstance in enforcing his rights hereunder. 7. Miscellaneous Provisions. ------------------------ (a) Eligibility for Contract Benefits. If the Employee has been --------------------------------- employed by the Company for less than 180 days at the time of termination (whether by Involuntary Termination, voluntary resignation, termination for Cause, Death or Disability), then the Employee shall not be entitled to any severance or other benefits pursuant to this Statement. (b) No Duty to Mitigate. The Employee shall not be required to ------------------- mitigate the amount of any payment contemplated by this Statement (whether by seeking new employment or in any other manner), nor shall any such payment be reduced by any earnings that the Employee may receive from any other source. (c) Waiver. No provision of this Statement shall be modified, waived ------ or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Employee and by an authorized officer of the Company (other than the Employee). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Statement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time. (d) Choice of Law. The validity, interpretation, construction and ------------- performance of this Statement shall be governed by the laws of the State of California. -8- (e) Severability. The invalidity or unenforceability of any provision or ------------ provisions of this Statement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect. (f) Arbitration. Any dispute or controversy arising under or in connection ----------- with this Statement shall be settled exclusively by arbitration in San Jose, California, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. Punitive damages shall not be awarded. (g) No Assignment of Benefits. The rights of any person to payments or ------------------------- benefits under this Statement shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor's process, and any action in violation of this subsection (g) shall be void. (h) Employment Taxes. Subject to Section 4, all payments made pursuant to ---------------- this Statement will be subject to withholding of applicable income and employment taxes. (i) Assignment by Company. The Company may assign its rights under this --------------------- Statement to an affiliate, and an affiliate may assign its rights under this Statement to another affiliate of the Company or to the Company; provided, however, that no assignment shall be made if the net worth of the assignee is less than the net worth of the Company at the time of assignment. In the case of any such assignment, the term "Company" when used in a section of this Statement shall mean the corporation that actually employs the Employee. (j) Counterparts. This Statement may be executed in counterparts, each of ------------ which shall be deemed an original, but all of which together will constitute one and the same instrument. -9- IN WITNESS WHEREOF, each of the parties has executed this Statement, in the case of the Company by its duly authorized officer, as of the day and year first above written. COMPANY PYRAMID TECHNOLOGY CORPORATION By: /s/ RICHARD H. LUSSIER ------------------------------ Title: CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER & PRESIDENT EMPLOYEE /S/ ALLAN D. SMIRNI ----------------------------------- Allan D. Smirni -10- EX-10.8 11 STATEMENT OF EMPLOYMENT TERMS: WISHART EXHIBIT 10.8 ------------ PYRAMID TECHNOLOGY CORPORATION STATEMENT OF EMPLOYMENT TERMS ----------------------------- This Statement of Employment Terms (the "Statement") is effective as of May 27, 1992, by and between William M. Wishart (the "Employee") and Pyramid Technology Corporation, a Delaware corporation (the "Company"). R E C I T A L S A. The Employee presently serves at the pleasure of the Board of Directors as the Vice President, Human Resources of the Company and performs significant strategic and management responsibilities necessary to the continued conduct of the Company's business and operations. B. The Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication and objectivity of the Employee, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. C. In addition to providing for severance benefits unrelated to a Change of Control, the Board believes that it is imperative to provide the Employee with certain severance benefits upon the Employee's termination of employment following a Change of Control which provide the Employee with enhanced financial security and provide sufficient incentive and encouragement to the Employee to remain with the Company following a Change of Control. D. In order to accomplish the foregoing objectives, the Board of Directors has directed the Company, upon execution of this Statement by the Employee, to commit to the terms provided herein. E. Certain capitalized terms used in the Statement are defined in Section 3 below. In consideration of the mutual covenants herein contained, and in consideration of the continuing employment of Employee by the Company, the parties agree as follows: 1. Term of Employment. The Company and the Employee acknowledge that ------------------ the Employee's employment is at will, as defined under applicable law. If the Employee's employment terminates for any reason, the Employee shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Statement, or as may otherwise be available in accordance with the Company's established employee plans and policies at the time of termination. The provisions of this Statement shall terminate upon the earlier of (i) the date that all obligations of the parties hereunder have been satisfied, (ii) June 30, 1996, or (iii) twenty-four (24) months after a Change of Control. A termination of the provisions of this Statement pursuant to the preceding sentence shall be effective for all purposes, except that such termination shall not affect the payment or provision of compensation or benefits on account of a termination of employment occurring prior to the termination of the provisions of this Statement. 2. SeveranceBenefits. ----------------- (a) Termination Following A Change of Control. If the Employee ----------------------------------------- has Benefits.been employed by the Company for not less than 180 days and is terminated following a Change of Control within the time period set forth below, then the Employee shall be entitled to receive severance benefits as follows, subject to Section 4 below: (i) Involuntary Termination. If the Employee's employment ----------------------- is terminated as a result of Involuntary Termination (as defined in Section 3(b) below) within twelve (12) months after a Change of Control, then the Employee shall be entitled to receive severance pay in an amount equal to two (2) times the sum of (i) the Employee's base salary at the annualized rate for the year coinciding with the year of payment and (ii) the average of the annual cash bonus received by the Employee for the three (3) years immediately preceding or ending coincident with the year of payment (whichever average produces the higher amount). Any severance payments to which the Employee is entitled pursuant to this section shall be paid in a lump sum within thirty (30) days of the Employee's termination. In addition, for a period of twenty-four (24) months after any termination under this Section 2(a)(i), the Company shall be obligated to continue to make available to the Employee and to pay for all health and medical benefit, life and other similar insurance plans existing on the date of the Employee's termination. (ii) Voluntary Resignation. If the Employee's employment --------------------- terminates by reason of the Employee's voluntary resignation (and is not an Involuntary Termination or a termination for Cause) within six (6) months after a Change of Control, then the Employee shall be entitled to receive severance pay in an amount equal to the sum of (i) the Employee's base salary at the annualized rate for the year coinciding with the year of payment and (ii) the average of the annual cash bonus received by the Employee for the three (3) years immediately preceding or ending coincident with the year of payment (whichever average produces the higher amount). Any severance payments to which the Employee is entitled pursuant to this section shall be paid in a lump sum within thirty (30) days of the Employee's termination. In addition, for a period of twelve -2- (12) months after any termination under this Section 2(a)(ii), the Company shall be obligated to continue to make available to the Employee and to pay for all health and medical benefit, life and other similar insurance plans existing on the date of the Employee's termination. (iii) Disability; Death. If at any time the Company ----------------- terminates the Employee's employment as a result of the Employee's Disability, or such Employee's employment is terminated at any time due to the death of the Employee, then the Employee shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then existing severance and benefits plans and policies at the time of such Disability or death. (iv) Termination for Cause. If the Employee is terminated --------------------- for Cause at any time, then the Employee shall not be entitled to receive any severance or other benefits following the date of such termination, and the Company shall have no obligation to provide for the continuation of any health and medical benefit or life insurance plans existing on the date of such termination. (b) Termination Apart from Change of Control. If the Employee has ---------------------------------------- been employed by the Company for not less than 180 days and the Employee's employment is terminated for any reason, either prior to the occurrence of a Change of Control or after the period following a Change of Control prescribed in Section 2(a)(i) or (ii), then the Employee shall be entitled to receive severance benefits as follows: (i) Involuntary Termination. If the Employee's employment ----------------------- is terminated as a result of Involuntary Termination, then the Employee shall be entitled to receive severance pay in an amount equal to the sum of (i) the Employee's base salary at the annualized rate for the year coinciding with the year of payment and (ii) the average of the annual cash bonus received by the Employee for the three (3) years immediately preceding or ending coincident with the year of payment (whichever average produces the higher amount). Any severance payments to which the Employee is entitled pursuant to this section shall be paid in a lump sum within thirty (30) days of the Employee's termination. In addition, for a period of twelve (12) months after any termination under this Section 2(b)(i), the Company shall be obligated to continue to make available to the Employee and to pay for all health and medical benefit, life and other similar insurance plans existing on the date of the Employee's termination. (ii) Voluntary Resignation. If the Employee's employment --------------------- terminates by reason of the Employee's voluntary resignation (and is not an Involuntary Termination or a termination for Cause), then the Employee shall not be entitled to receive any -3- severance or other benefits following the date of such termination, and the Company shall have no obligation to provide for the continuation of any health and medical benefit or life insurance plans existing on the date of such termination. (iii) Disability; Death. If the Company terminates the ----------------- Employee's employment as a result of the Employee's Disability, or such Employee's employment is terminated due to the death of the Employee, then the Employee shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then existing severance and benefits plans and policies at the time of such Disability or death. (iv) Termination for Cause. If the Employee is terminated --------------------- for Cause, then the Employee shall not be entitled to receive any severance or other benefits following the date of such termination, and the Company shall have no obligation to provide for the continuation of any health and medical benefit or life insurance plans existing on the date of such termination. 3. Definition of Terms. The following terms referred to in this ------------------- Statement shall have the following meanings: (a) Change of Control. "Change of Control" shall mean the ----------------- occurrence of any of the following events: (i) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities; or (ii) A change in the composition of the Board of Directors of the Company, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or (iii) The stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior -4- thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets. (b) Involuntary Termination. "Involuntary Termination" shall ----------------------- mean (i) without the Employee's express written consent, the assignment to the Employee of any duties or the significant reduction of the Employee's duties, either of which is inconsistent with the Employee's position with the Company and responsibilities in effect immediately prior to such assignment, or the removal of the Employee from such position and responsibilities, which is not effected for Disability or for Cause; (ii) without the Employee's express written consent, a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to the Employee immediately prior to such reduction; (iii) a reduction by the Company in the base salary and/or bonus of the Employee as in effect immediately prior to such reduction; (iv) a material reduction by the Company in the kind or level of employee benefits to which the Employee is entitled immediately prior to such reduction with the result that the Employee's overall benefits package is significantly reduced; (v) the relocation of the Employee to a facility or a location more than 50 miles from the Employee's then present location, without the Employee's express written consent; (vi) any purported termination of the Employee by the Company which is not effected for death or Disability or for Cause, or any purported termination for which the grounds relied upon are not valid; or (vii) the failure of the Company to obtain the assumption of the terms of this Statement by any successors contemplated in Section 5 below. (c) Cause. "Cause" shall mean (i) any act of personal dishonesty ----- taken by the Employee in connection with his responsibilities as an employee and intended to result in substantial personal enrichment of the Employee, (ii) the conviction of a felony, (iii) a willful act by the Employee which constitutes gross misconduct and which is injurious to the Company, and (iv) continued violations by the Employee of the Employee's obligations as an employee of the Company which are demonstrably willful and deliberate on the Employee's part after there has been delivered to the Employee a written demand for performance from the Company which describes the basis for the Company's belief that the Employee has not substantially performed his duties. (d) Disability. "Disability" shall mean that the Employee has ---------- been unable to perform his duties as an employee of the Company as the result of his incapacity due to physical or -5- mental illness, and such inability, at least 26 weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Employee or the Employee's legal representative (such agreement as to acceptability not to be unreasonably withheld). Termination resulting from Disability may only be effected after at least 30 days' written notice by the Company of its intention to terminate the Employee's employment. In the event that the Employee resumes the performance of substantially all of his duties as an employee of the Company before the termination of his employment becomes effective, the notice of intent to terminate shall automatically be deemed to have been revoked. 4. Limitation on Payments. ---------------------- (a) Basic Rule. In the event that any payment or benefit ---------- received or to be received by the Employee pursuant to this Statement or otherwise (collectively, the "Payments") would (i) be treated as a "parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), or any similar or successor provision to 280G and (ii) but for this Section 4(a), be subject to the excise tax imposed by Section 4999 of the Code or any similar or successor provision to Section 4999 (the "Excise Tax"), then, subject to the provisions of Section 4(b) hereof, such Payments shall be reduced to the largest amount which the Employee determines would result in no portion of the Payments being subject to the Excise Tax. The determination of any required reduction pursuant to this Section 4(a) (including the determination as to which specific Payments shall be reduced) shall be made initially by the Employee in consultation with the Company. If the Employee and the Company shall disagree upon the amount of such reduction, then the Company shall, at its expense, promptly call upon Ernst & Young, independent accountants, to make such determination, and such determination shall be conclusive and binding upon the Employee and the Company or any related corporation for all purposes. The Company and its related corporations waive all claims and rights against the Employee with respect to such determination except as specifically set forth in the next sentence. If the Internal Revenue Service (the "IRS") determines that Payments are subject to the Excise Tax, then the Company or any related corporation, as their exclusive remedy, shall seek to enforce the provisions of Section 4(b) hereof. Such enforcement of Section 4(b) hereof shall be the only remedy against the Employee, under any and all applicable state and federal laws or otherwise, for the failure to reduce the Payments so that no portion thereof is subject to the Excise Tax. The Company or related corporation shall reduce Payments in accordance with Section 4(a) only upon written notice to the Employee indicating the amount of such reduction, if any, and the Employee's agreement to the amount of such reduction (subject, in the event of disagreement, to a determination by Ernst & Young on the basis provided above). -6- (b) Remedy. If, notwithstanding the reduction described in ------ Section 4(a) hereof, the IRS determines that the Employee is liable for the Excise Tax as a result of the receipt of Payments, then the Employee shall, subject to the provisions of this Statement, be obligated to pay to the Company (the "Repayment Obligation") an amount of money equal to the "Repayment Amount." The Repayment Amount with respect to Payments shall be the smallest such amount, if any, as shall be required to be paid to the Company so that the Employee's net proceeds with respect to Payments (after taking into account the payment of the Excise Tax imposed on Payments) shall be maximized. Notwithstanding the foregoing, the Repayment Amount with respect to Payments shall be zero if a Repayment Amount of more than zero would not eliminate the Excise Tax imposed on Payments. If the Excise Tax is not eliminated through the performance of the Repayment Obligation, the Employee shall pay the Excise Tax. The Repayment Obligation shall be performed within 30 days of either (i) the Employee entering into a binding agreement with the IRS as to the amount of the Employee's Excise Tax liability or (ii) a final determination by the IRS or a court decision requiring the Employee to pay the Excise Tax with respect to Payments from which no appeal is available or is timely taken. 5. Successors. ---------- (a) Company's Successors. Any successor to the Company (whether -------------------- direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company's business and/or assets shall assume the obligations under this Statement and agree expressly to perform the obligations under this Statement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Statement, the term "Company" shall include any successor to the Company's business and/or assets which executes and delivers the assumption agreement described in this subsection (a) or which becomes bound by the terms of this Statement by operation of law. (b) Employee's Successors. The terms of this Statement and all --------------------- rights of the Employee hereunder shall inure to the benefit of, and be enforceable by, the Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. 6. Notice. ------ (a) General. Notices and all other communications contemplated ------- by this Statement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of the Employee, mailed -7- notices shall be addressed to him at the home address which he most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary. (b) Notice of Termination. Any termination by the Company for --------------------- Cause or by the Employee as a result of a voluntary resignation or an Involuntary Termination shall be communicated by a notice of termination to the other party hereto given in accordance with Section 6 of this Statement. Such notice shall indicate the specific termination provision in this Statement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the termination date (which shall be not more than 15 days after the giving of such notice). The failure by the Employee to include in the notice any fact or circumstance which contributes to a showing of Involuntary Termination shall not waive any right of the Employee hereunder or preclude the Employee from asserting such fact or circumstance in enforcing his rights hereunder. 7. Miscellaneous Provisions. ------------------------ (a) Eligibility for Contract Benefits. If the Employee has been --------------------------------- employed by the Company for less than 180 days at the time of termination (whether by Involuntary Termination, voluntary resignation, termination for Cause, Death or Disability), then the Employee shall not be entitled to any severance or other benefits pursuant to this Statement. (b) No Duty to Mitigate. The Employee shall not be required to ------------------- mitigate the amount of any payment contemplated by this Statement (whether by seeking new employment or in any other manner), nor shall any such payment be reduced by any earnings that the Employee may receive from any other source. (c) Waiver. No provision of this Statement shall be modified, ------ waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Employee and by an authorized officer of the Company (other than the Employee). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Statement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time. (d) Choice of Law. The validity, interpretation, construction and ------------- performance of this Statement shall be governed by the laws of the State of California. -8- (e) Severability. The invalidity or unenforceability of any ------------ provision or provisions of this Statement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect. (f) Arbitration. Any dispute or controversy arising under or in ----------- connection with this Statement shall be settled exclusively by arbitration in San Jose, California, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. Punitive damages shall not be awarded. (g) No Assignment of Benefits. The rights of any person to ------------------------- payments or benefits under this Statement shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor's process, and any action in violation of this subsection (g) shall be void. (h) Employment Taxes. Subject to Section 4, all payments made ---------------- pursuant to this Statement will be subject to withholding of applicable income and employment taxes. (i) Assignment by Company. The Company may assign its rights --------------------- under this Statement to an affiliate, and an affiliate may assign its rights under this Statement to another affiliate of the Company or to the Company; provided, however, that no assignment shall be made if the net worth of the assignee is less than the net worth of the Company at the time of assignment. In the case of any such assignment, the term "Company" when used in a section of this Statement shall mean the corporation that actually employs the Employee. (j) Counterparts. This Statement may be executed in ------------ counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument. -9- IN WITNESS WHEREOF, each of the parties has executed this Statement, in the case of the Company by its duly authorized officer, as of the day and year first above written. COMPANY PYRAMID TECHNOLOGY CORPORATION By: /S/ RICHARD H. LUSSIER ------------------------------ Title: CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER & PRESIDENT EMPLOYEE /S/ WILLIAM M. WISHART ----------------------------------- William M. Wishart -10- EX-10.10 12 WARRANT TO PURCHASE COMMON STOCK EXHIBIT 10.10 ------------- THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR A PERFECTED EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933. RIGHT TO PURCHASE 1,330,000 SHARES EXERCISABLE SUBJECT TO THE PROVISIONS SET FORTH HEREIN PYRAMID TECHNOLOGY CORPORATION (A DELAWARE CORPORATION) COMMON STOCK PURCHASE WARRANT THIS CERTIFIES that, for value received, Siemens Nixdorf Information Systems, Inc. (the "Holder") is entitled to purchase and receive from Pyramid Technology Corporation (the "Company") 1,330,000 shares of the Company's common stock, $.01 par value ("Common Stock") (subject to adjustment as provided herein), at a purchase price of $10.00 per share (subject to adjustment as provided herein), upon and subject to the terms and conditions hereinafter set forth. This Warrant may be exercised in whole or in part from time to time and must be exercised, if at all, at any time commencing September 12, 1994 (the "Commencement Date") and continuing for a period of 12 months up to 5:00 p.m. California time, on September 12, 1995 (the "Expiration Date"). TERMS AND CONDITIONS OF WARRANT 1. Nontransferability of Warrant. This Warrant is nontransferable and ----------------------------- may be exercised only by the Holder or his Permitted Assignee (as defined in Section 4 hereof). Any transfer of this Warrant must comply with the requirements of Section 4 below, and a Permitted Assignee shall be required to accept this Warrant subject to all rights and obligations of the Holder as set forth herein. 2. Exercise of Warrant. This Warrant may be exercised by the Holder as ------------------- to the whole or any lesser number of shares of Common Stock covered hereby upon surrender of this Warrant to the Company at its principal office in San Jose, California, prior to the Expiration Date, together with the Subscription Form attached hereto, duly executed by the Holder, and payment to the Company in cash of the price herein set forth (subject to adjustment as provided herein) for the shares to be purchased. Certificates for the shares so purchased shall be delivered to the Holder within a reasonable time, not exceeding 30 days, after exercise of the stock purchase rights represented by this Warrant. The exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the business day on which the holder surrenders this Warrant to the Company and satisfies all of the requirements of this Section 2. Upon such exercise, Holder will be deemed a shareholder of record of those shares with all rights of a shareholder (including, without limitation, all voting rights with respect to such shares and all rights to receive any dividends with respect to such shares). If this Warrant is to be exercised in respect of less than all of the shares of Common Stock covered hereby, the Holder shall be entitled to receive a new warrant covering the number of shares in respect of which this Warrant shall not have been exercised and is still subject to exercise. Such new warrant shall be in all other respects identical to this Warrant. 3. Covenants of the Company. The Company covenants and agrees that all ------------------------ equity securities which may be issued upon the exercise of the rights represented by this Warrant, upon issuance and payment therefor in accordance herewith, will be duly authorized, validly issued, fully paid and nonassessable shares of capital stock of the Company. The Company further covenants and agrees that, during the period within which the stock purchase rights represented by this Warrant may be exercised, the Company will at all times have duly authorized, and duly reserved for issuance upon the exercise of the purchase rights evidenced by this Warrant, a number of shares of its Common Stock sufficient for such issuance. 4. Restrictions. Neither this Warrant nor any of the stock purchase ------------ rights represented hereby may be sold, assigned, transferred, subdivided, or otherwise disposed of by the Holder, directly or indirectly, other than to any wholly-owned subsidiary or affiliate of the Holder (a "Permitted Assignee"), except with the prior written consent of the Company. Any securities to be issued upon exercise of this Warrant may not be sold, assigned, transferred or otherwise disposed of unless the securities are registered under the Securities Act of 1933, as amended (the "Securities Act"), or unless an exemption is available and perfected under the Securities Act and any applicable state securities laws. Unless a registration statement with respect to such shares of Common Stock is effective at the time, any shares of Common Stock issued upon the exercise of this Warrant shall bear the following legend: -2- "The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Act"), but have been issued or transferred pursuant to an exemption from the registration requirements of the Act. No distribution, sale, offer for sale, transfer, delivery or other disposition of these securities may be effected unless a registration statement for such securities under the Act is effective or an exemption therefrom is available and perfected." 5. Adjustments. In case at any time the Company shall by stock split, ----------- stock dividend, reclassification or otherwise subdivide its outstanding shares of Common Stock into a greater number of shares, the purchase price per share of Common Stock in effect hereunder immediately prior to such subdivision shall be proportionately reduced and the number of shares deliverable upon the exercise of this Warrant shall be proportionately increased on the record date of such split, dividend, reclassification or other adjustment so that the Holder shall be entitled to receive the aggregate number and kind of shares of capital stock pursuant to this Warrant as it would have received had it exercised this Warrant before any such event, and conversely, in case the outstanding shares of Common Stock shall be combined into a smaller number of shares in a reclassification or otherwise, the exercise price in effect immediately prior to such combination shall be proportionately increased and the number of shares deliverable upon the exercise of this Warrant shall be proportionately decreased on the record date of such split, dividend, reclassification or other adjustment so that the Holder shall be entitled to receive the aggregate number and kind of shares of capital stock pursuant to this Warrant as it would have received had it exercised this Warrant before any such event. If any capital reorganization or reclassification of Common Stock or any Voting Stock shall be effected in such a way that holders of Common Stock (or any other securities of the Company then issuable upon exercise of this Warrant) shall be entitled to receive securities with respect to or in exchange for Common Stock (or such other securities) then, as a condition of such capital reorganization or reclassification, lawful and adequate provision shall be made whereby the Holder shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions specified in this Warrant and in lieu of the shares of Common Stock (or other securities) of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby, such securities as may be issued with respect to or in exchange for a number of shares of Common Stock (or such other securities) immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby had such reorganization or reclassification not taken place, and in each such case appropriate provision shall be made with respect to the rights and interests of the Holder to the end that the provisions of this Warrant shall thereafter be applicable, as nearly as is reasonably practicable, in relation to any securities -3- thereafter deliverable upon the exercise hereof. All adjustments shall occur successively whenever such events occur. In the event of any adjustment to the Warrant set forth herein, the Company agrees to provide notice thereof to the Holder in accordance with paragraph 6 below and, upon receipt of this Warrant, to issue an adjusted Warrant setting forth the then current price and number of shares issuable upon exercise thereof. 6. Notices by Company. In case at any time (i) the Company shall pay any ------------------ dividend payable in equity securities with respect to Common Stock to the holders of outstanding Common Stock, (ii) the Company shall offer for subscription pro rata to all holders of outstanding Common Stock any additional shares of equity securities, (iii) there shall be any capital reorganization or reclassification of the equity securities of the Company, or any consolidation or merger of the Company with or sale of all or substantially all of the Company's assets to another corporation, or (iv) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company, then, in any one or more of such cases, the Company shall give written notice by first class mail, postage prepaid, addressed to the Holder at its address shown on the books of the Company, of the date on which (a) the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights, or (b) such reorganization, reclassification, consolidation, merger, sale of assets, dissolution, liquidation or winding-up shall take place, as the case may be. Such notice shall also specify the date as of which the holders of Common Stock of record shall participate in such dividend, distribution or subscription rights, or shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale of assets, dissolution, liquidation, or winding-up, as the case may be. Such written notice shall be received by the Holder at least seven days prior to the action to be taken and not less than three days prior to the record date on which the Company's transfer books are closed with respect thereto. 7. Absence of Stockholder Rights. Until exercise of the stock purchase ----------------------------- rights conferred by this Warrant, this Warrant does not confer upon the Holder any right whatsoever as a stockholder of the Company. 8. Expiration. This Warrant shall become void as to all securities of ---------- the Company in respect of which the stock purchase rights hereunder are not fully exercised, and payment has not been made for the securities issuable upon such exercise, on or before the Expiration Date; provided that in the case of the earlier dissolution of the Company, this Warrant shall become void on the date fixed for such dissolution. -4- 9. Notice of Intention to Exercise or Transfer. The Holder, by ------------------------------------------- acceptance hereof, agrees to give written notice to the Company before exercising this Warrant or transferring any Common Stock issued upon the exercise hereof, and each subsequent holder of any of such Common Stock which is subject to paragraph 4 hereof shall give written notice to the Company before retransferring any of such Common Stock unless such Common Stock has previously been registered. Such notice shall inform the Company of the Holder's intention to exercise this Warrant or the Holder's or such holder's intention to effect such transfer or retransfer, as the case may be, and shall describe briefly the date and time when this Warrant will be surrendered in such exercise and the number of shares to be made the subject of such exercise; or, in case of a transfer of Common Stock, the Holder's or such holder's intention as to the disposition to be made of shares of Common Stock issued upon the exercise hereof. Promptly after receiving such written notice of an intended transfer, if the Company otherwise consents in writing to such transfer or retransfer, the Company shall present copies thereof to its counsel. If in the opinion of such counsel the proposed transfer of shares may be effected without registration or qualification (under any federal or state law) of the shares of Common Stock issued on the exercise hereof, the Company, as promptly as reasonably practicable, shall notify the Holder or such holder of such opinion, whereupon the Holder or such holder shall be entitled to effect the intended transfer of shares received upon the previous exercise of this Warrant. 10. Amendments. This Warrant may not be amended without the prior written ---------- consent of the Holder and the Company. 11. Governing Law. This Warrant is made subject to and shall be construed ------------- under the laws of the State of Delaware as applied to contracts entered into solely between residents of, and to be performed entirely within, such state. The parties agree that the state and federal courts situated in the State of Delaware shall have exclusive jurisdiction to resolve any disputes with respect to this Warrant, with each party irrevocably consenting to the jurisdiction thereof for any actions, suits or proceedings arising out of or relating to this Warrant. The parties hereto irrevocably waive trial by jury. In the event of any litigation hereunder, the prevailing party shall be entitled to costs and reasonable attorneys' fees. In the event of any breach of the provisions of this Warrant, the parties shall be entitled to equitable relief, including in the form of injunctions and orders for specific performance, where the applicable legal standards for such relief in such courts are met, in addition to all other remedies available to the parties with respect thereto at law or in equity. Notwithstanding anything to the contrary herein or which may be based on facts or circumstances pertaining to this Warrant, the Company hereby irrevocably and unconditionally waives and releases all rights and claims that it may now or hereafter have that Siemens' parent, Siemens Aktiengesellschaft or any of Siemens' affiliates organized outside the United States (including Siemens -5- Nixdorf Informationssysteme AG, ("SNI")), is subject to the jurisdiction of the federal or state courts of the United States with respect to this Warrant, provided that nothing in such waiver and release shall affect the Company's - -------- rights, if any, to pursue any claim whatsoever against Siemens Aktiengesellschaft or SNI in the courts of the Federal Republic of Germany. In addition, the Holder hereby irrevocably and unconditionally waives and releases all rights and claims that it may now or hereafter have that the Company is subject to the jurisdiction of the courts of the Federal Republic of Germany with respect to this Warrant, provided that nothing in such waiver and release shall affect the Holder's rights, if any, to pursue any claim whatsoever against the Company in the federal or state courts of the United States. 12. Severability. If any provision of this Warrant or any portion thereof ------------ is determined to be unlawful or unenforceable, such provision or portion shall be deemed to be severed from this Warrant and every other provision shall remain in full force and effect. IN WITNESS WHEREOF, the Company, has caused this Warrant to be signed by its duly authorized officers this 12 day of September, 1994. PYRAMID TECHNOLOGY CORPORATION By: /s/ Richard H. Lussier --------------------------- Name: Richard H. Lussier -------------------------- Title: Chairman and Chief Executive Officer ------------------------------------- -6- SUBSCRIPTION FORM [TO BE EXECUTED UPON EXERCISE OF THE ANNEXED WARRANT] Date __________________ TO: PYRAMID TECHNOLOGY CORPORATION The undersigned, pursuant to the annexed Warrant, hereby exercises the right to purchase ______ shares of the Common Stock of Pyramid Technology Corporation, covered by such Warrant, and tenders payment herewith in full therefor at the price per share provided by such Warrant. _______________________________ -7- EX-10.12 13 REGISTRATION RIGHTS AGREEMENT EXHIBIT 10.12 ------------- - -------------------------------------------------------------------------------- REGISTRATION RIGHTS AGREEMENT dated as of September 13, 1994 by and between PYRAMID TECHNOLOGY CORPORATION and SIEMENS NIXDORF INFORMATION SYSTEMS, INC. - -------------------------------------------------------------------------------- TABLE OF CONTENTS Page 1. Effectiveness......................................................... 1 2. Demand Registration................................................... 1 3. Company Registration.................................................. 2 4. Obligations of the Company............................................ 2 5. Standoff Agreement.................................................... 4 6. Expenses.............................................................. 4 7. Indemnification....................................................... 5 (a) Indemnification by the Company ................................ 5 (b) Indemnification by the Purchaser............................... 5 (c) Notice of Claims............................................... 6 8. Termination of Registration Rights.................................... 6 9. Notices............................................................... 7 10. Captions and Headings................................................. 8 11. Entire Agreement; Amendments.......................................... 8 12. Governing Law......................................................... 8 13. Assignability......................................................... 8 14. Severability.......................................................... 8 15. Counterparts.......................................................... 8 -i- REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of September 13, 1994, by and between Pyramid Technology Corporation, a Delaware corporation (the "Company"), and Siemens Nixdorf Information Systems, Inc., a Massachusetts corporation (the "Purchaser"). Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to them in the Purchase Agreement (as defined below). A. The Purchaser intends to purchase an equity interest in the Company pursuant to the terms and conditions of a certain Common Stock and Warrant Purchase Agreement dated as of August 21, 1994 (the "Purchase Agreement"). B. The Purchase Agreement requires that the Company enter into this Agreement with the Purchaser. NOW, THEREFORE, in consideration of the foregoing, the parties to this Agreement hereby agree as follows: 1. Effectiveness. The rights and obligations of the parties hereto shall ------------- be effective only upon the closing of the transactions contemplated by the Purchase Agreement. 2. Demand Registration. If, at any time and from time to time after ------------------- September 13, 1995, the Purchaser shall request the Company in writing to register under the Securities Act of 1933, as amended (the "Securities Act"), any shares of the Common Stock of the Company (the "Common Stock") owned by the Purchaser or its Affiliates immediately prior to the Closing (as defined in the Purchase Agreement) or acquired by the Purchaser or its Affiliates under the Purchase Agreement or acquired by exercise of the Warrant (as defined in the Purchase Agreement) (the shares of Common Stock so acquired and subject to such request being herein referred to as the "Subject Stock"), the Company shall use its best efforts to cause the shares of Subject Stock specified in such request to be registered as soon as reasonably practicable so as to permit the sale thereof, and in connection therewith shall prepare and file a Form S-3 registration statement or such other form as is then available (or any successor form of registration statement to such Form S-3 or other available registration statement) with the Securities and Exchange Commission (the "SEC") under the Securities Act to effect such registration; provided, however, that such request shall (i) specify the number of shares of Subject Stock intended to be offered and sold, which number of shares shall represent Subject Stock (A) with an aggregate market value of at least $4,000,000, based on the average closing sale price of the Common Stock for the ten (10) trading days preceding the date prior to the date of the Purchaser's request first received by the Company, and (B) that does not exceed 15% of the then outstanding Voting Stock of the Company (as defined in the Purchase Agreement), (ii) express the present intention of the Purchaser to offer or cause the offering of such shares of Subject Stock for distribution, (iii) describe the nature or method of the proposed offer and sale thereof, and (iv) contain the undertaking of the Purchaser to provide all such information and materials and take all such action as may be required in order to permit the Company to comply with all applicable requirements of the SEC and to obtain any desired acceleration of the effective date of such registration statement. Notwithstanding the foregoing and Section 4 hereof, upon delivery to the Purchaser of written notice, the Company shall be entitled, with reasonable justifi- cation, upon written request to the Purchaser from the Company and its underwriters to postpone filing of the registration statement for a reasonable period of time, but not in excess of sixty (60) days. The Company shall not be required to effect more than three demand registration statements under this Agreement. 3. Company Registration. -------------------- (a) If, at any time after September 13, 1995 the Company shall determine to register any shares of Common Stock, whether for its own account or for a security holder or holders exercising their respective demand registration rights (to the extent any may be granted in the future), other than (i) a registration relating solely to employee benefit plans on Form S-1 or S-8 or similar forms which may be promulgated in the future, or (ii) a registration on Form S-4 or similar form which may be promulgated in the future relating solely to a SEC Rule 145 transaction, the Company will promptly give to the Purchaser written notice thereof and include in such registration (and any related qualification under Blue Sky laws or other compliance), and in any underwriting involved therein, all Subject Stock specified in a written request, made within fifteen (15) business days after receipt of such written notice from the Company by the Purchaser. (b) If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Purchaser as a part of the written notice given pursuant to Section 3(a). In such event the right of the Purchaser to registration pursuant to this Section 3 shall be conditioned upon such Purchaser's agreeing to participate in such underwriting and in the inclusion of the Purchaser's Subject Stock in the underwriting to the extent provided herein. The Purchaser shall (together with the Company) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company. Notwithstanding any other provision of this Section 3, if the underwriter determines that marketing factors require a limitation of the number of shares to be underwritten, the underwriter may exclude all or any portion of the Subject Stock requested to be included. The Company shall so advise the Purchaser and the other holders distributing their Common Stock through such underwriting, if any, and the number of Subject Stock and other securities that may be included in the registration and underwriting shall be allocated among all holders thereof (other than those holders who are exercising their demand registration rights) in proportion, as nearly as practicable, to the respective amounts of Common Stock entitled to inclusion in such registration held by such holders at the time of filing the registration statement. If the Purchaser disapproves of the terms of any such underwriting, the Purchaser may elect to withdraw therefrom by written notice to the Company and the underwriter. Any Common Stock excluded or withdrawn from such underwriting shall be withdrawn from such registration. 4. Obligations of the Company. Whenever the Company is required by the -------------------------- provisions of this Agreement to use its best efforts to effect the registration of any Common Stock under the Securities Act, the Company shall (i) prepare and, as soon as possible (in any event within 60 days of Purchaser's request), file with the SEC a registration statement with respect to the shares of Subject Stock, and shall use its best efforts to cause such registration statement to become effective and to remain effective until the earlier of the sale of the shares of Subject Stock so registered or sixty (60) days subsequent to the effective date of such registration; (ii) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to -2- make and to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all securities proposed to be registered in such registration statement until the earlier of the sale of the shares of Subject Stock so registered or sixty (60) days subsequent to the effective date of such registration statement, (iii) furnish to the Purchaser such number of copies of any prospectus (including any preliminary prospectus and any amended or supplemented prospectus) in conformity with the requirements of the Securities Act as the Purchaser may reasonably request in order to effect the offering and sale of the shares of Subject Stock to be offered and sold, but only while the Company shall be required under the provisions hereof to cause the registration statement to remain current; (iv) use its best efforts to register or qualify the shares of Subject Stock covered by such registration statement under the securities or blue sky laws of such states as the Purchaser shall reasonably request, maintain any such registration or qualification current until the earlier of the sale of the shares of Subject Stock so registered or sixty (60) days subsequent to the effective date of the registration statement, and do any and all other acts and things either necessary or advisable to enable the Purchaser to consummate the public sale or other disposition of the shares of Subject Stock in jurisdictions where the Purchaser desires to effect such sales or other disposition (but the Company shall not be required to take any action that would subject it to the general jurisdiction of the courts of any jurisdiction in which it is not so subject or to qualify as a foreign corporation in any jurisdiction where the Company is not so qualified); (v) notify Purchaser at any time when a registration statement, prospectus and any amendments thereto relating to the Subject Shares covered by such registration statement and/or prospectus (and amendments thereto) is required to be delivered under the Securities Act within the appropriate period mentioned in clause (iii) above of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and at the request of Purchaser, prepare and furnish to Purchaser a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Subject Shares, such prospectus shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; (vi) at the request of Purchaser, if such Subject Shares are being sold through underwriters, furnish to the underwriters on the date that such Subject Shares are delivered to the underwriters for sale in connection with a registration pursuant to this Agreement, or, if such Subject Shares are not being sold through underwriters, furnish to Purchaser on the date that the registration statement with respect to such Subject Shares becomes effective (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Purchaser; and (ii) a letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Purchaser; (vii) otherwise use its best efforts to comply with all rules and regulations of the SEC, NASDAQ and any stock market on which the Subject Shares may be traded; (viii) take all such other action either necessary or desirable to permit the shares of Subject Stock held by the Purchaser to be registered and disposed of in accordance with the method of disposition described herein; and (ix) take all such other action so that the Subject Shares may be freely tradable in compliance with rules and regulations of NASDAQ or the exchange where the Subject Shares may be traded. If requested, and provided that the underwriter or -3- underwriters are reasonably satisfactory to the Company, the Company shall enter into an underwriting agreement with a nationally recognized investment banking firm or firms containing representations, warranties, indemnities and agreements then customarily included by an issuer in underwriting agreements with respect to secondary distributions. The Company shall not cause the registration under the Securities Act of any other shares of its Common Stock or other Securities to become effective (other than registration of any employee stock plan, or registration in connection with any Rule 145 or similar transaction) during the effectiveness of a registration requested hereunder for an underwritten public offering if, in the judgment of the underwriter or underwriters, marketing factors would adversely affect the selling price of the Subject Stock. In connection with any offering of shares of Subject Stock registered pursuant to this Agreement, the Company shall furnish the Purchaser with unlegended certificates representing ownership of the shares of Subject Stock being sold in such denominations as the Purchaser shall request. 5. Standoff Agreement. The Purchaser agrees in connection with any ------------------ registration of the Company's securities, upon request of the Company or the underwriters managing any underwritten offering of the Company's securities, not to sell, make any short sale of, loan, grant any option for the purchase of or otherwise dispose of any of the Subject Stock (other than those included in the registration pursuant to the exercise of rights hereunder) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed 120 days) from the effective date of such registration as may be requested by the Company or such managing underwriters, provided that the officers and directors of the Company enter into similar agreements. 6. Expenses. -------- (a) All regular expenses, other than discounts and commissions with respect to the Subject Stock to be registered by the Purchaser, incurred in connection with any registration pursuant to Section 2 and Section 3 shall be borne by the Company. The costs and expenses of any such registration shall include, without limitation, all fees and expenses of the Company's counsel and its accountants, all fees and expenses of one counsel for all the participating selling stockholders, including Purchaser, and all other costs and expenses of the Company incident to the preparation, printing and filing under the Securities Act of the registration statement and all amendments and supplements thereto and the cost of furnishing copies of each preliminary prospectus, each final prospectus and each amendment or supplement thereto to underwriters, dealers and other purchasers of the securities so registered, the costs and expenses incurred in connection with the qualification of such securities so registered under the "blue sky" laws of various jurisdictions, the fees and expenses of the Company's transfer agent and all other costs and expenses of complying with the provisions of this Section 1 with respect to such registration (collectively, "Registration Expenses"). However, the Company shall not be required to pay for any Registration Expenses of any registration proceeding begun pursuant to Section 2 if the registration request is subsequently withdrawn solely at the request of the Purchaser, in which case the Purchaser shall bear such expenses. (b) Excluding the Registration Expenses, the Purchaser (and other holders including any Common Stock in such registration) shall pay all other expenses incurred on its behalf (which shall include only those underwriting discounts and commissions related to its own shares of subject stock) with respect to any registration pursuant to Section 2 or 3, including any counsel for the Purchaser (other -4- than counsel as provided in Section 6(a)) and all underwriting discounts and selling commissions with respect to the Subject Stock sold by them pursuant to such registration statement. 7. Indemnification. --------------- (a) Indemnification by the Company. In the case of any offering ------------------------------ registered pursuant to this Agreement, the Company agrees to indemnify and hold the Purchaser, each of its directors and officers, each underwriter of shares of Subject Stock under such registration and each person who controls any of the foregoing within the meaning of the Securities Act harmless against any and all losses, claims, damages or liabilities (including legal costs and expenses) including any of the foregoing incurred in settlement of any litigation commenced or threatened, to which they or any of them may become subject under the Securities Act or any other statute or common law or otherwise, and to reimburse them, from time to time upon request, for any legal or other expenses incurred by them in connection with investigating any claims and defending any actions, insofar as any such losses, claims, damages, liabilities or actions shall arise out of or shall be based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the registration statement relating to the sale of such shares of Subject Stock, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus (as amended or supplemented if the Company shall have filed with the SEC any amendment thereof or supplement thereto) if used prior to the effective date of such registration statement or contained in the prospectus (as amended or supplemented if the Company shall have filed with the SEC any amendment thereof or supplement thereto), if used within the period during which the Company shall be required to keep the registration statement to which such prospectus relates current pursuant to the terms of this Agreement, or the omission or alleged omission to state therein (if so used) a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading or (iii) any violation by the Company of the Securities Act, NASDAQ rules or state securities or blue sky laws applicable to the Company relating to any action or inaction in connection with the registration of any offering pursuant to this Agreement, provided, however, that the indemnification agreement contained in this Section 7(a) shall not apply to such losses, claims, damages, liabilities or actions which shall arise from the sale of shares of Subject Stock to any person if such losses, claims, damages, liabilities or actions shall arise out of or shall be based upon any such untrue statement or alleged untrue statement, or any such omission or alleged omission, if such statement or omission shall have been (x) made in reliance upon and in conformity with information furnished in writing to the Company by Purchaser or any such underwriter specifically for use in connection with the preparation of the registration statement or any preliminary prospectus or prospectus contained in the registration statement or any such amendment thereof or supplement thereto, or (y) made in any preliminary prospectus, and the prospectus contained in the registration statement as declared effective or in the form filed by the Company with the SEC pursuant to Rule 424 under the Securities Act shall have corrected such statement or omission and a copy of such prospectus shall not have been sent or given to such person at or prior to the confirmation of such sale to him. (b) Indemnification by the Purchaser. In the case of each offering -------------------------------- registered pursuant to this Agreement, the Purchaser agrees, and each underwriter participating therein shall agree, in the same manner and to the same extent as set forth in Section 7(a) of this Agreement, to indemnify and hold -5- harmless the Company and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, its directors and those officers of the Company who shall have signed any such registration statement with respect to any statement in or omission from such registration statement or any preliminary prospectus (as amended or as supplemented, if amended or supplemented as aforesaid) or prospectus contained in such registration statement (as amended or as supplemented, if amended or supplemented as aforesaid), if such statement or omission shall have been made in reliance upon and in conformity with information furnished in writing to the Company by the Purchaser or such underwriter specifically for use in connection with the preparation of such registration statement or any preliminary prospectus or prospectus contained in such registration statement or any preliminary prospectus or prospectus contained in such registration statement or any such amendment thereof or supplement thereto, provided, however, that the maximum liability of the Purchaser in respect of such indemnification shall be the amount of net proceeds actually received by Purchaser from the sale of Subject Shares effected pursuant to such registration. (c) Notice of Claims. Each party indemnified under Section 7(a) or ---------------- Section 7(b) of this Agreement shall, promptly after receipt of notice of the commencement of any action against such indemnified party in respect of which indemnity may be sought, notify the indemnifying party in writing of the commencement thereof. The omission of any indemnified party so to notify an indemnifying party of any such action shall not relieve the indemnifying party from any liability in respect of such action which it may have to such indemnified party on account of the indemnity agreement contained in Section 7(a) or Section 7(b) of this Agreement, unless the indemnifying party was prejudiced by such omission, and in no event shall relieve the indemnifying party from any other liability which it may have to such indemnified party. In case any such action shall be brought against any indemnified party and it shall notify an indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified parts of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under Section 7(a) or Section 7(b) of this Agreement for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. Notwithstanding the above, however, if representation of one or more indemnified parties by the counsel retained by the indemnifying party would be inappropriate due to actual conflicting interests between such indemnified parties (the "conflicting indemnified parties") and any other party represented by such counsel in such proceeding, then such conflicting indemnified parties shall have the right to retain one separate counsel, chosen by the holders of a majority of the Subject Stock included in the registration, at the expense of the indemnifying party. No indemnifying party, (i) in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, which consent shall not unreasonably be withheld, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation, or (ii) shall be liable for amounts paid in any settlement if such settlement is effected without the consent of the indemnifying party, which consent shall not be unreasonably withheld. 8. Termination of Registration Rights. The registration rights granted ---------------------------------- pursuant to this Agreement shall terminate at such time as all shares of Subject Stock beneficially owned by the -6- Purchaser can be sold within any given three-month period without compliance with the registration requirements of the Securities Act pursuant to Rule 144 and a written opinion to that effect of legal counsel for the Company is delivered to the Purchaser which shall be reasonably satisfactory in form and substance to legal counsel for the Purchaser. 9. Notices. Any notice or other communication given under this ------- Agreement shall be sufficient if in writing and sent by registered or certified mail or facsimile, return receipt requested, postage prepaid, to a party at its address set forth below (or at such other address as shall be designated for such purpose by such party in a written notice to the other party hereto): (a) if to the Company, to it at: Pyramid Technology Corporation 3860 N. First Street San Jose, CA 95134 Attn: Chief Financial Officer (408) 428-8820 (fax) with a copy to: Larry W. Sonsini, Esq. Wilson Sonsini Goodrich & Rosati 650 Page Mill Road Palo Alto, CA 94304-1050 (415) 496-4084 (fax) (b) if to Purchaser, to it at: Siemens Nixdorf Information Systems, Inc. c/o Siemens Nixdorf Informationssysteme AG, Postcach 2160 Furstenalle 7W-4790 Paderborn, Germany Attn: Mr. G. Schulmeyer 011-4989-636-2519 (fax) with a copy to: Siemens Corporation 1301 Avenue of the Americas, 42nd Floor New York, NY 10019 Attn: E. Robert Lupone, Legal Department (212) 258-4945 (fax) All such notices and communications shall be effective when received by the addressee. -7- 10. Captions and Headings. The captions and headings used herein are --------------------- for convenience and ease of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 11. Entire Agreement; Amendments. This Agreement contains the entire ---------------------------- agreement among the parties hereto with respect to the transactions contemplated herein and supersedes all prior agreements and understandings among the parties relating to the subject matter hereof. This Agreement may be altered or amended only by an instrument in writing signed by the Company and the Purchaser. 12. Governing Law. This Agreement is made subject to and shall be ------------- construed under the laws of the State of Delaware as applied to contracts entered into solely between residents of, and to be performed entirely within, such state. The parties agree that the state and federal courts situated in the State of Delaware shall have exclusive jurisdiction to resolve any disputes within respect to this Agreement, with each party irrevocably consenting to the jurisdiction thereof for any actions, suits or proceedings arising out of or relating to this Agreement. The parties hereto irrevocably waive trial by jury. In the event of any litigation hereunder, the prevailing party shall be entitled to costs and reasonable attorneys' fees. In the event of any breach of the provisions of this Agreement, the parties shall be entitled to equitable relief, including in the form of injunctions and orders for specific performance, where the applicable legal standards for such relief in such courts are met, in addition to all other remedies available to the parties with respect thereto at law or in equity. Notwithstanding anything to the contrary herein or which may be based on facts or circumstances pertaining to this Agreement, the Company hereby irrevocably and unconditionally waives and releases all rights and claims that it may now or hereafter have that Purchaser's parent, Siemens Aktiengesellschaft or any of Purchaser's Affiliates organized outside the United States (including Siemens Nixdorf Informationssysteme AG, ("SNI")), is subject to the jurisdiction of the federal and state courts of the United States with respect to this Agreement, provided that nothing in such waiver and release shall affect the Company's rights, if any, to pursue any claim whatsoever against Siemens Aktiengesellschaft or SNI in the courts of the Federal Republic of Germany. In addition, the Purchaser hereby irrevocably and unconditionally waives and releases all rights and claims that it may now or hereafter have that the Company is subject to the jurisdiction of the courts of the Federal Republic of Germany with respect to this Agreement, provided that nothing in such waiver and release shall affect Purchaser's rights, if any, to pursue any claim whatsoever against the Company in the federal or state courts of the United States. 13. Assignability. This Agreement shall be binding upon and shall ------------- inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement may not be assigned by the Purchaser without the prior written consent of the Company except to its wholly-owned subsidiaries and Affiliates. 14. Severability. If any provision of this Agreement or any portion ------------ thereof is finally determined to be unlawful or unenforceable, such provision or portion thereof shall be deemed to be severed from this Agreement. Every other provision, and any portion of such an invalidated provision that is not invalidated by such a determination, shall remain in full force and effect. 15. Counterparts. This Agreement may be executed in counterpart ------------ copies, each of which shall be deemed an original and all of which, when taken together, shall constitute one instrument. -8- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective authorized officers as of the date aforesaid. "COMPANY" PYRAMID TECHNOLOGY CORPORATION By: ------------------------------------ Name: Title: "PURCHASER" SIEMENS NIXDORF INFORMATION SYSTEMS, INC. By: ------------------------------------ Name: Title: By: ------------------------------------ Name: Title: -9- EX-20.1 14 INFORMATION STATEMENT EXHIBIT 20.1 ------------ [LOGO OF PYRAMID TECHNOLOGY CORPORATION APPEARS HERE] PYRAMID TECHNOLOGY CORPORATION 3860 N. FIRST STREET SAN JOSE, CALIFORNIA 95134 INFORMATION STATEMENT PURSUANT TO SECTION 14(F) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER This Information Statement is being mailed on or about January 27, 1995 as part of the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") to the holders of record at the close of business on January 18, 1995 of the Shares. Capitalized terms used and not otherwise defined herein shall have the meaning ascribed to them in the Schedule 14D-9. You are receiving this Information Statement in connection with the possible election of persons designated by SNI AG to a majority of the seats on the Board of Directors of the Company. Promptly upon the acceptance for payment and payment by the Purchaser for Shares pursuant to the Offer of such number of shares that satisfies the Minimum Condition under the Merger Agreement, Purchaser shall be entitled to designate a number of directors to be elected to the Company's Board (the "Designees") proportional to Purchaser's ownership interest in the Company after giving effect to the acquisition of such Shares, including increasing the size of the Board or securing the resignations of incumbent directors or both. The Company will also cause such Designees to constitute the same percentage of (i) each committee of the Board, (ii) each Board of Directors of each domestic Subsidiary and (iii) each committee of each such board. This Information Statement is required by Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule 14f-1 thereunder. You are urged to read this Information Statement carefully. However, you are not required to take any action. Pursuant to the Merger Agreement, on January 27, 1995, Purchaser commenced the Offer. The Offer is scheduled to expire on February 24, 1995. The information contained in this Information Statement (including information listed in Schedule I attached hereto and information incorporated herein by reference) concerning SNI AG, Purchaser and Designees has been furnished to the Company by SNI AG and Purchaser, and the Company assumes no responsibility for the accuracy of completeness of such information. The Common Stock, $.01 par value per share ("Common Stock"), is the only class of voting securities of the Company outstanding. Each share of Common Stock has one vote. As of January 18, 1995, there were 15,628,591 shares of Common Stock outstanding. GENERAL The Board of Directors of the Company currently consists of eight (8) members. Each director holds office until his successor is elected and qualified or until his earlier death, resignation or removal. A-1 BOARD OF DIRECTORS BUYER DESIGNEES Pursuant to the Merger Agreement, promptly upon the acquisition by Purchaser pursuant to the Offer of such number of Shares that satisfies the Minimum Condition and from time to time thereafter, SNI AG is entitled to have its Designees hold a number of seats on the Company's Board proportional to Purchaser's ownership interest in the Company after giving effect to the acquisition of such Shares. Upon the purchase of such number of Shares pursuant to the Offer, the Company shall cause the Designees to be elected or appointed to the Board including, without limitation, increasing the number of directors and seeking and accepting resignations of incumbent directors. SNI AG has informed the Company that it will choose the Designees from the directors and executive officers listed in Schedule I to Purchaser's Offer to Purchase, a copy of which is being mailed to the Company's stockholders together with this Schedule 14D-9. SNI AG has informed the Company that each of the directors and executive officers listed in Schedule I to the Offer to Purchase has consented to act as a director, if so designated. The information on such Schedule I is incorporated herein by reference. The business address of SNI AG is Otto-Hahn-Ring 6, 81739 Munich, Germany and the business address of the Purchaser is 1301 Avenue of the Americas, New York, New York 10019-6022. It is expected that the Designees may assume office at any time following the purchase by Purchaser pursuant to the Offer of such number of Shares that satisfies the Minimum Condition, which purchase cannot be earlier than February 24, 1995, and that upon assuming office, the Designees will thereafter constitute at least a majority of the Board. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY The names of the current directors of the Company, their ages as of January 27, 1995, and certain other information about them are set forth below. As indicated above, some of the current directors may resign effective immediately following the purchase of Shares by the Purchaser pursuant to the Offer.
DIRECTOR NAME AGE PRINCIPAL OCCUPATION SINCE ---- --- -------------------- -------- Richard H. Lussier.... 57 Chief Executive Officer and Chairman of the 1986 Board of the Company John S. Chen.......... 39 President and Chief Operating Officer of 1993 the Company Dr. Rudolf Bodo....... 64 Vice President and General Manager, Mid- 1994 Range Systems Unit, Siemens Nixdorf Informationssysteme AG Paul J. Chiapparone... 55 Senior Vice President, Electronic Data 1994 Systems Corporation Donald E. Guinn....... 62 Chairman Emeritus, Pacific Telesis Group 1988 Jack L. Hancock....... 64 Retired executive, Pacific Bell 1994 Clarence W. Spangle... 69 Self-employed consultant 1990 George D. Wells....... 59 President and Chief Executive Officer, Exar 1988 Corporation
Except as set forth below, each of the directors has been engaged in his principal occupation described above during the past five years. There are no family relationships among any of the directors or executive officers of the Company. Mr. Lussier joined the Company in November 1986 as President, Chief Executive Officer, and Chairman of the Board. He held the title of President of the Company until June 1993. A-2 Mr. Chen has been President of the Company since June 1993 and has been Chief Operating Officer of the Company since October 1992. Previously, he was the Company's Executive Vice President from August 1991 to September 1992. Prior to that, Mr. Chen held various management and executive positions with Unisys Corporation for twelve years, the last position being Vice President and General Manager of its Unix Systems Group, and prior to that Vice President and General Manager of its RISC Technology Platform Division. Dr. Bodo has been Vice President and General Manager, Mid-Range Systems Unit, SNI AG since April 1993. From October 1990 to March 1993, he was Vice President of the Systems Planning Department of SNI. From 1988 to 1990, Dr. Bodo was Vice President of Systems Planning of the Information Systems Division of SNI AG. Mr. Chiapparone is also a director of Electronic Data Systems Corporation. Mr. Guinn is also a director of Bank of America, N.T. & S.A., BankAmerica Corporation, Brunswick Corporation, The Dial Corp., Pacific Bell, Pacific Telesis Group and Pacific Mutual Life Insurance Co. Mr. Hancock was Executive Vice President of Pacific Bell from January 1989 to December 1993. He is also a director of 3Com Corporation, Whitaker Corporation and Union Bank. Mr. Spangle is also a director of Apertus Technology Inc. and Keytronics Inc. Mr. Wells has served as President and Chief Executive Officer, and as a director of Exar Corporation since June 1992. From April 1985 until June 1992, Mr. Wells was President, Chief Operating Officer and a director of LSI Logic Corporation. Mr. Wells is also a director of Micronics, Inc. and QLogic Corporation. BOARD MEETINGS AND COMMITTEES The Board of Directors of the Company held a total of thirteen (13) meetings during fiscal 1994. The Board of Directors has an Audit Committee, a Compensation Committee and a Nominating Committee. The Audit Committee, which consisted of Donald E. Guinn, Clarence W. Spangle and George D. Wells, held a total of three (3) meetings during fiscal 1994. In fiscal 1994, the Audit Committee recommended engagement of the Company's independent auditors, reviewed the scope of the annual audit, considered comments made by the independent auditors with respect to accounting procedures and internal controls and the action or response by management and reviewed selected accounting procedures and controls of the Company. The Compensation Committee, which also consisted of directors Guinn, Spangle and Wells, held four (4) meetings during fiscal 1994. In fiscal 1994, this Committee reviewed and approved the Company's executive compensation policy and distributions to officers and key employees of the Company. If delegated by the Board, the Committee also makes recommendations to the Board with respect to, and administers, the Company's Amended 1982 Incentive Stock Option Plan, Executive Officers Nonstatutory Stock Option Plan and 1987 Employee Stock Purchase Plan. The Nominating Committee, which consisted of Messrs. Guinn, Spangle and Wells, held two (2) meetings during fiscal 1994. The Committee recommends candidates for election to the Board and selects director nominees for election. It also recommends changes in the size and composition of the Board. It is the Committee's practice to consider nominees recommended by stockholders. Stockholders who wish to submit names of prospective nominees for consideration by the Committee must do so in writing to the Secretary of the Company in accordance with the By-laws of the Company. During fiscal 1994, no director attended fewer than 75% of all such meetings of the Board of Directors and the committees upon which such director served. A-3 DIRECTOR COMPENSATION Non-employee members of the Board of Directors are eligible to receive an annual retainer of $10,000, and fees of $1,000 per Board meeting attended and $750 per Committee meeting attended. In addition, non-employee directors participate in the Amended and Restated Directors' Option Plan (the "Director Plan"). Under the Director Plan, each new non-employee director is granted an initial option to purchase (i) 12,000 shares of Common Stock if he first becomes a new director by June 30, or (ii) 6,000 shares if he first becomes a director on or after July 1. Also, incumbent non-employee directors are entitled to receive automatic grants of options to purchase 6,000 shares of Common Stock on January 31 of each year. The exercise price of these options may not be less than the fair market value of the Common Stock on the date of such grants. Such options are exercisable cumulatively, to the extent of 1/4 of the option stock six months after the date of grant and, thereafter, as to 1/24 of the option stock for each full month that expires while the optionee remains a director. In fiscal 1994, non-employee directors as a group received stock options under the Director Plan totaling 42,000 shares. A-4 STOCK OWNERSHIP INFORMATION SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information, as of January 23, 1995, with respect to the beneficial ownership of the Common Stock of the Company by: (a) each stockholder known by the Company to be the beneficial owner of more than five percent of the Company's Common Stock; (b) each director and nominee of the Company; (c) each Executive Officer named in the Summary Compensation Table below; and (d) all directors and executive officers as a group. The number and percentage of shares beneficially owned is determined under the rules of the Securities and Exchange Commission ("SEC"), and the information is not necessarily indicative of beneficial ownership for any other purpose.
BENEFICIAL OWNERSHIP OF APPROXIMATE COMMON PERCENT OF NAME OF BENEFICIAL OWNER STOCK(1) CLASS ------------------------ ---------- ----------- Siemens Nixdorf Informationssysteme AG.................. 2,717,743 17.38% Otto-Hahn-Ring 6 81739 Munich, Germany Richard H. Lussier(2)................................... 207,814 1.33% John S. Chen(3)......................................... 148,125 * Dr. Rudolf Bodo......................................... -0- N/A Paul J. Chiapparone(4).................................. 6,000 * Donald E. Guinn(5)...................................... 48,104 * Jack L. Hancock(6)...................................... 7,000 * Clarence W. Spangle(7).................................. 24,062 * George D. Wells (8)..................................... 17,652 * Mitchell Mandich(9)..................................... 42,921 * Edward W. Scott, Jr.(10)................................ 46,204 * Allan D. Smirni(11)..................................... 39,141 * All directors and executive officers as a group (13 persons)(12)............................................ 634,947 4.06%
- -------- * Less than 1 percent. (1) Each holder named in the table has sole voting and investment power with respect to all shares of Common Stock beneficially owned subject to community property laws where applicable and the information contained in the footnotes to this table. (2) Represents 187,501 and 20,313 shares subject to options granted to Mr. Lussier under the Amended 1982 Incentive Stock Option Plan and the Executive Officers Nonstatutory Stock Option Plan, respectively, which were exercisable as of January 23, 1995, or within 60 days thereafter. (3) Represents 148,125 shares subject to options granted to Mr. Chen under the Amended 1982 Incentive Stock Option Plan which were exercisable as of January 23, 1995, or within 60 days thereafter. (4) Represents 6,000 shares subject to options granted to Mr. Chiapparone under the Directors Option Plan which were exercisable as of January 23, 1995, or within 60 days thereafter. (5) Represents 5,000 shares beneficially owned by Donald E. Guinn and Darhl M. Guinn, Trustees of the Guinn 1985 Family Trust dated December 19, 1985, and 20,000 and 23,104 shares subject to options granted to Mr. Guinn under the Amended 1982 Incentive Stock Option Plan and the Directors Option Plan, respectively, which were exercisable as of January 23, 1995, or within 60 days thereafter. (6) Includes 6,000 shares subject to options granted to Mr. Hancock under the Directors Option Plan which were exercisable as of January 23, 1995, or within 60 days thereafter. (7) Represents 24,062 shares subject to options granted to Mr. Spangle under the Directors Option Plan which were exercisable as of January 23, 1995, or within 60 days thereafter. A-5 (8) Represents 17,562 shares subject to options granted to Mr. Wells under the Directors Option Plan which were exercisable as of January 23, 1995, or within 60 days thereafter. (9) Includes 42,770 shares subject to options granted to Mr. Mandich under the Amended 1982 Incentive Stock Option Plan which were exercisable as of January 23, 1995, or within 60 days thereafter. (10) Includes 43,100 shares subject to options granted to Mr. Scott under the Amended 1982 Incentive Stock Option Plan which were exercisable as of January 23, 1995, or within 60 days thereafter. (11) Includes 37,375 shares subject to options granted to Mr. Smirni under the Amended 1982 Incentive Stock Option Plan which were exercisable as of January 23, 1995, or within 60 days thereafter. (12) Includes 525,831, 20,313, and 76,729 shares subject to options granted under the Company's Amended 1982 Incentive Stock Option Plan, Executive Officers Nonstatutory Stock Option Plan and Directors' Option Plan, respectively, exercisable on January 23, 1995, or within 60 days thereafter. SECTION 16(A) REPORTING DELINQUENCIES Section 16(a) of the Exchange Act requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, to file certain reports regarding ownership of, and transactions in, the Company's securities with the SEC. Such officers, directors and 10% stockholders are also required by SEC rules to furnish the Company with copies of all Section 16(a) forms that they file. Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons, the Company believes that all applicable Section 16(a) filing requirements were complied with during the fiscal year ended September 30, 1994 by its officers, directors and 10% stockholders. CERTAIN RELATIONSHIPS, TRANSACTIONS AND ARRANGEMENTS In September 1991, the Company loaned John S. Chen, President and Chief Operating Officer, the sum of $100,000. The loan was repaid in full by Mr. Chen in September 1994. The loan (i) had a term of three years, (ii) bore interest at the rate of 8.5%, (iii) provided for the payment of interest and principal at maturity, (iv) was unsecured and (v) could be prepaid any time without penalty. In December 1990, the Company loaned Edward W. Scott, Jr., Executive Vice President, the sum of $300,000. The loan has been forgiven in full through an agreement with the Company providing for loan forgiveness of the principal and interest based on continued employment by Mr. Scott through January 1, 1994, which was achieved. The loan (i) had a term of three years, (ii) bore interest at the rate of 9.0%, (iii) provided for the payment of interest and principal at maturity, (iv) was unsecured and (v) could be prepaid at any time without penalty. In 1985, the Company entered into a Convertible Subordinated and Preferred Stock Purchase Agreement (the "Nixdorf Stock Agreement") with Nixdorf Computer AG ("Nixdorf"). Under the Nixdorf Stock Agreement, Nixdorf purchased approximately 5% of the Company's Common Stock. The Nixdorf Stock Agreement also gave Nixdorf the right to purchase its pro rata share of certain equity financings of the Company as long as Nixdorf holds a minimum 5% stock interest. The Company and Nixdorf also entered into an OEM Agreement in 1985 (the "Nixdorf OEM Agreement"), pursuant to which the Company agreed to sell or license its current and certain future products to Nixdorf for resale or sublicense under Nixdorf's own label. In March 1990, the Company and Nixdorf agreed to extend the term of the Nixdorf OEM Agreement through March 1996. In addition, the Company and Nixdorf in 1990 entered into a Software License Agreement, under which the Company agreed to license its computer operating system software and directly related software programs. A-6 Also in March 1990, Nixdorf exercised its right to purchase approximately 140,000 shares of the Company's Common Stock as part of the Company's secondary public offering of its common stock, to maintain Nixdorf's pro rata equity ownership at approximately 6% of the Company's outstanding shares. In 1990, Nixdorf was acquired by SNI AG, which renamed Nixdorf as Siemens Nixdorf Informationssysteme AG ("SNI AG" herein). The Common Stock of the Company and the rights under the Nixdorf Stock Agreement, the Nixdorf OEM Agreement and Software License Agreement were assigned and transferred to SNI AG. In 1992, the Company and SNI AG also entered into a Master Agreement, pursuant to which the Company agreed to sell computer systems, components, spare parts and services to Siemens Nixdorf and its local country affiliates for resale under its own label. In August 1994, the Company entered into a Common Stock and Warrant Purchase Agreement (the "Siemens Stock Agreement") with Siemens Nixdorf Information Systems, Inc. ("SNI US"), an affiliate of SNI AG. Pursuant to the Siemens Stock Agreement, the Corporation sold SNI AG 2,000,000 shares of its Common Stock for an aggregate price of $17,250,000 and issued a warrant to SNI AG to sell up to an additional 1,330,000 shares at $10.00 per share, which warrant expires on September 30, 1995. Pursuant to the Siemens Stock Agreement, SNI AG designated one of its officers, Dr. Rudolf Bodo, to be elected as a director to the Company's Board of Directors. As part of the August 1994 transactions discussed above, the Company and SNI AG also expanded its cooperative agreements for high-end UNIX-based open systems by entering into a new Software and Hardware License Agreement (the "SNI AG License Agreement") and by amending the Nixdorf OEM Agreement. Under these agreements, SNI AG agreed to license the Company's enhancement of the UNIX operating system for massively parallel processing ("MPP") and received the right to purchase the related MPP hardware product. In fiscal 1994, the Company's sales to SNI AG totaled approximately $11,300,000, or 5.2% of the Company's revenues for that year. Pursuant to the Merger Agreement, upon consummation of the Merger, each holder of a then outstanding director or employee stock option, other than any such options that are held by any director of the Company or any executive officer (as that term is defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended) of the Company that were granted (or deemed to be granted) at any time on or after the date that is six months prior to the consummation of the Merger ("Recent Insider Options"), will be entitled (whether or not such option is then exercisable) to receive in consideration of cancellation of such option (and any outstanding stock appreciation right related thereto) a cash payment from the Company in an amount equal to the difference between the price per Share each holder of Shares will receive in the Merger and the per Share exercise price of such option, multiplied by the number of Shares covered by such option. As a result, directors and executive officers of the Company will be able to exercise outstanding options (with the exception of Recent Insider Options). It is the intention of the parties to the Merger Agreement that the Recent Insider Options will be cancelled no later than six months after the Effective Date and the consideration to be paid for the cancellation of each Recent Insider Option shall be the Option Consideration multiplied by the number of shares covered by such option. At the request of SNI AG, Richard M. Lussier, Chief Executive Officer and Chairman of the Board of the Company, and Siemens AG have had discussions regarding a senior management position for Mr. Lussier within the Siemens group of companies. The parties expect that the principal terms of an employment agreement relating to such position could include a base salary, bonus payments, a supplemental executive retirement plan and payments pursuant to a long-term incentive plan. For a more detailed description of such employment agreement, see the Schedule 14D-9, "Additional Agreements, Arrangements and Understandings." A-7 At the request of SNI AG, John S. Chen, President and Chief Operating Officer of the Company, has entered into a Management Retention Agreement (the "Chen Agreement") with the Company. Terms of the Chen Agreement include serving as Chief Executive Officer of the Company, serving as a director of the Company, signing bonus, base salary, target bonus, retention bonus, payment under phantom equity or long term incentive programs and severance payments and benefits. For a more detailed description of the Chen Agreement, see the Schedule 14D-9, "Additional Agreements, Arrangements and Understandings." EXECUTIVE OFFICER COMPENSATION EXECUTIVE COMPENSATION The following table sets forth all compensation awarded, earned or paid for services rendered in all capacities to the Company during fiscal years ended September 30, 1994, 1993 and 1992 to the Company's Chief Executive Officer and each of its four other most highly compensated executive officers who were serving as executive officers at the end of fiscal 1994. This information includes the dollar values of base salaries, bonus awards, the number of stock options granted and certain other compensation, if any, whether paid or deferred. The Company does not grant SARs and, other than options, has no other long-term compensation programs. SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION AWARDS ANNUAL COMPENSATION ------------ ------------------------- SECURITIES ALL OTHER NAME AND PRINCIPAL SALARY BONUS UNDERLYING COMPENSATION POSITION YEAR ($) ($) OPTIONS (#) ($) ------------------ ---- -------- -------- ------------ ------------ Richard H. Lussier...... 1994 $363,463 $ -0- 156,000 $12,115(1) Chief Executive Officer 1993 332,116 165,900 25,000 7,306 and Chairman of the 1992 320,413 -0- 60,000 7,219 Board John S. Chen............ 1994 290,779 -0- 81,000 64,427(2) President and Chief 1993 246,623 99,540 95,000 5,570 Operating Officer 1992 208,068 56,175 35,000 5,321 Edward W. Scott, Jr..... 1994 224,214 -0- -0- 73,352(3) Executive Vice 1993 209,997 66,360 15,000 149,701 President 1992 215,884 -0- 15,000 143,093 Mitchell Mandich........ 1994 210,338 60,315(4) 12,500 6,836(5) Senior Vice President 1993 170,958(6) 15,000 75,000 3,425 1992 N/A Allan D. Smirni......... 1994 169,345 -0- 7,500 9,725(7) Vice President, General 1993 155,172 31,007 5,000 5,933 Counsel 1992 148,386 -0- 13,000 6,261
- -------- (1) Represents $4,673 for a 401(k) Plan matching contribution and $7,442 for life insurance premiums. (2) Represents $56,800 to compensate Mr. Chen for interest due on a loan in the amount of $100,000, which loan was repaid in full by Mr. Chen, plus compensation for taxes associated with such interest; $5,562 for a 401(k) Plan matching contribution and $2,065 for life insurance premiums. (3) Represents forgiveness of principal and interest in the amount of $68,967 under a 9.0% promissory note in the original amount of $300,000 made to Mr. Scott in 1990, and $4,385 for life insurance premiums. (See "CERTAIN RELATIONSHIPS, TRANSACTIONS AND ARRANGEMENTS.") (4) Represents commission bonus. (5) Represents $4,411 for a 401(k) Plan matching contribution and $2,425 for life insurance premiums. (6) Includes salary for a partial year (employment date 1-18-93). (7) Represents $5,433 for a 401(k) Plan matching contribution and $4,292 for life insurance premiums. A-8 STOCK OPTION GRANTS AND EXERCISES The following table sets forth further information regarding individual grants of options during fiscal 1994 to each of the executive officers named in the Summary Compensation Table above. All such grants were made pursuant to the Company's Amended 1982 Incentive Stock Option Plan. In accordance with the rules of the SEC, the table sets forth the hypothetical gains or "option spreads" that would exist for the options at the end of their respective ten- year terms based on assumed annualized rates of compound stock price appreciation of 5% and 10% from the dates the options were granted to the end of the respective option terms. Actual gains, if any, on option exercises are dependent on the future performance of the Company's Common Stock and overall market conditions. There can be no assurance that the potential realizable values shown in this table will be achieved. OPTION GRANTS IN FISCAL 1994
INDIVIDUAL GRANTS --------------------------------------------- POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL NUMBER OF RATES OF STOCK SECURITIES PERCENTAGE OF PRICE APPRECIATION UNDERLYING TOTAL OPTIONS FOR OPTIONS GRANTED TO EXERCISE OPTION TERM(3) GRANTED EMPLOYEES IN PRICE EXPIRATION ------------------- NAME (#)(1) FISCAL 1994(2) ($/SH) DATE 5% (5) 10% ($) ---- ---------- -------------- -------- ---------- ------ ---------- Richard H. Lussier...... 80,000 7.16 $14.75 01/25/04 $742,096 $1,880,616 76,000 6.80 8.88 09/22/04 424,189 1,074,979 John S. Chen............ 15,000 1.34 14.75 01/25/04 139,143 352,616 66,000 5.91 8.88 09/22/04 368,375 933,535 Edward W. Scott, Jr..... -0- N/A N/A N/A N/A N/A Mitchell Mandich........ 12,500 1.12 14.75 01/25/04 115,952 293,846 Allan D. Smirni......... 7,500 0.67 14.75 01/25/04 69,571 176,308
- -------- (1) Stock options are granted with an exercise price equal to the fair market value of the Company's Common Stock on the date of grant. Options generally become exercisable 25% after the first year and monthly thereafter at the rate of 1/48 of the total grant, and are fully exercisable after 4 years. Options lapse after ten years or, if earlier, 3 months after termination of employment. (2) Based on 1,117,500 shares granted during fiscal 1994. (3) Potential realizable values are net of exercise price but before taxes associated with exercise. These amounts represent certain assumed rates of appreciation only, based on the SEC rules. Actual realizable values, if any, on stock option exercises are dependent on the future performance of the Common Stock, overall market conditions and the option holders' continued employment through the vesting period. A-9 The following table sets forth certain information concerning the exercise of stock options during fiscal 1994 by each of the executive officers named in the Summary Compensation Table above and the number and value at September 30, 1994, of unexercised options held by said individuals. AGGREGATED OPTION EXERCISES IN FISCAL 1994 AND SEPTEMBER 30, 1994 OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED(1) SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT ACQUIRED VALUE OPTIONS AT 9/30/94 9/30/94 ($) ON EXERCISE REALIZED ------------------------- -------------------------- (#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE ----------- -------- ------------------------- -------------------------- Richard H. Lussier...... -0- N/A 193,900 144,080 $ 10,157 $ 781 John S. Chen............ -0- N/A 123,327 145,673 14,219 1,094 Edward W. Scott, Jr..... -0- N/A 41,371 1,729 6,094 469 Mitchell Mandich........ -0- N/A 31,238 42,262 -0- -0- Allan D. Smirni......... -0- N/A 35,456 7,649 2,031 156
- -------- (1) Based on a fair market value of $8.50 per share as of September 30, 1994, the closing price of the Company's Common Stock on that date as reported by the Nasdaq National Market. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION In fiscal year ended September 30, 1994, Messrs. Guinn, Spangle and Wells served as members of the Compensation Committee. No member of the Compensation Committee is or was formerly an officer or an employee of the Company or its subsidiaries. No interlocking relationship exists between the Company's Board of Directors or Compensation Committee and the board of directors or compensation committee of any other company, nor has any such interlocking relationship existed in the past. EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS The Company has employment agreements for the following executive officers of the Company: Richard H. Lussier, John S. Chen, Kent L. Robertson, Edward W. Scott, Jr., Allan D. Smirni and William M. Wishart. The agreements cover the conditions under which termination severance and benefits will be paid by the Company. If termination is for cause, is due to death or disability or is voluntary and not related to a change in control, no severance or benefits will be paid under the agreements. If a change in control of the Company occurs as defined in the agreements, then severance and benefits will be paid as follows: (i) for involuntary termination within 12 months after the change in control, severance equal to 200% of annual base salary and the average of annual cash bonuses paid for three years and 24 months of continued benefits; (ii) for voluntary termination within 6 months after the change in control, severance is equal to 100% of annual base salary and the average of annual cash bonuses paid for three years and 12 months of continued benefits. In the event of involuntary termination not related to a change in control, severance is equal to 100% of annual base salary and the average of annual cash bonuses paid for three years and 12 months of continued benefits will be paid. The agreements terminate upon the earlier of (i) the date that all obligations of the executive officer and the Company are satisfied, (ii) June 30, 1996 or (iii) twenty-four months after a change in control. A-10 COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION COMPENSATION COMMITTEE POLICY The Compensation Committee of the Board of Directors (the "Committee") was responsible for setting executive compensation policy and determining the compensation paid to executive officers of the Corporation. The Committee was comprised of Messrs. Guinn, Spangle and Wells, all of whom are non-employee Directors of the Company. The Company's executive compensation programs are designed to enable it to attract, retain and reward qualified executives while maintaining a strong and direct link between executive pay, the Company's financial performance and stockholder returns. The Committee believes that officers and other employees should have a significant stake in the Company's stock price performance under programs which link executive compensation to stockholder return. This is accomplished through the executive compensation program. There are three main components of the executive compensation program: base salaries, annual bonuses and stock-based long-term incentives. BASE SALARIES The Committee believes that it is in the best interests of stockholders to manage and fix compensation costs at industry rates to enable the Company to secure qualified and talented executive officers under the rapidly changing market conditions in the high technology industry. Accordingly, base salaries for the Company's executive officers have been targeted at average rates paid by competitors to enable the Company to retain highly skilled executives and to attract others as necessary. Base salaries are reviewed annually with the assistance of an independent compensation consultant firm and are adjusted based on individual performance, average increases in high technology companies and general industry, and the going rate for similar positions in similar sized companies in the same geographic area. In this group of companies, the Company targets its base salaries at the median level. The independent compensation consultant firm provides the Company with assistance in research and survey analysis of total executive compensation for competitors and for companies with similar size and products. The compensation of the President and Chief Executive Officer is also directly related to the results of operations and the balance sheet and cash flows for the fiscal year of the Company. Richard H. Lussier, the Chief Executive Officer and Chairman of the Board, received a salary increase of 8.57% based on an analysis of the foregoing factors. This salary increase was effective at the beginning of fiscal year 1995. For all executive officer positions, actual base salary levels are currently at the targeted average levels of the competition. ANNUAL BONUSES The Company maintains a Management Incentive Plan ("MIP") which provides executive officers and other key management employees the opportunity to earn annual cash bonuses. The MIP is intended to motivate and reward officers for the attainment of the Company's annual pretax income and revenue goals, as determined by the Committee. The total bonus compensation for the Company's executive officers has also been targeted at average rates paid by competitors. For all executive officer positions, actual total bonus compensation levels are currently at the targeted average level of the competition. The MIP formula begins to result in bonus payments as a percentage of each individual's target MIP award, when actual performance reaches a predetermined percentage of the preset goal. The payout percent increases in a linear fashion until 100% of the preset goals is achieved, whereupon 100% of a target MIP award would be paid. Above 100% of preset goal performance, the MIP payout percentage differs for the A-11 pretax and revenue goals. When actual pretax income exceeds the preset pretax income target, the actual MIP award paid is 100% of target plus an accelerated percentage for each 1% that actual pretax income exceeds the target. This design results in a highly leveraged total annual compensation program at the Company. It will result in above average total annual compensation in years of above-average performance, and conversely, it will result in below-average total annual compensation in years of below-average performance. The Committee believes that this pay-for-performance result is beneficial to stockholders' interests. The Company's fiscal 1994 performance did not exceed the minimum percentage of the goals established by the Committee. As a result, under the application of the MIP formula, no MIP bonus awards were paid. LONG-TERM INCENTIVES The Committee utilizes stock options as the sole form of long-term incentives. Stock options are normally granted to executives on an annual basis each January under the Amended 1982 Incentive Stock Option Plan. The Committee believes that this program serves to link management and stockholder interests and motivate executives to make long-term decisions and investments that will serve to increase the long-term total return to stockholders. Executive officers received stock option grants during fiscal 1994 (see "Option Grants in Fiscal 1994"). The Company does not have a policy that requires or encourages the Committee to qualify stock options awarded to executive officers for deductibility under Section 162(m) of the Internal Revenue Code of 1986, as amended. However, the Committee does consider the net cost to the Company in making all compensation decisions. Grants of stock options for all participants are not made on the basis of any formal guideline, but rather on the basis of an assessment of individual performance, the relative position of the optionee and relative contribution of the optionee. The allocation of shares granted is governed by the overall constraint of managing the available pool of shares preapproved by stockholders for options. While the grants are intended to be consistent with average competitive practice, the ultimate value received by option holders is directly linked to increases in the Company's stock price and the number of shares granted to a participant. COMPENSATION COMMITTEE Donald E. Guinn Clarence W. Spangle George D. Wells A-12 PERFORMANCE GRAPH The stock price performance graph depicted below shall not be deemed incorporated by reference by any general statement incorporating by reference this information statement into any filing under the Securities Act of 1933, as amended or under the Securities Exchange Act of 1934, as amended. The stock price performance on the graph is not necessarily an indicator of future price performance. The graph below compares the cumulative return of Pyramid Common Stock with the cumulative total return on the Standard & Poor's 500 Composite Index and the Standard & Poor's High Technology Composite Index. The cumulative return depicted is based upon an initial investment of $100 over five years on September 30, 1989 (the last trading day of fiscal 1989), and assumes reinvestment of dividends. [GRAPH APPEARS HERE] COMPARISON OF FIVE YEAR CUMULATIVE RETURN AMONG PYRAMID, S&P 500 AND S&P HIGH TECH
S&P Measurement period S&P HIGH (Fiscal Year Covered) PYRAMID 500 TECH - --------------------- -------- -------- -------- Measurement PT - 09/89 $ 100 $ 100 $ 100 FYE 09/90 $ 107 $ 91 $ 86 FYE 09/91 $ 107 $ 119 $ 105 FYE 09/92 $ 59 $ 132 $ 107 FYE 09/93 $ 147 $ 149 $ 130 FYE 09/94 $ 58 $ 155 $ 151
A-13 EX-20.2 15 LETTER TO STOCKHOLDERS EXHIBIT 20.2 ------------ [LOGO OF PYRAMID TECHNOLOGY Pyramid Technology Corporation APPEARS HERE] 3860 N. First Street San Jose, CA 95134-1702 408-428-9000 January 27, 1995 Dear Stockholder: As you may be aware, on January 20, 1995, Pyramid Technology Corporation ("Pyramid") entered into a merger agreement with Siemens Nixdorf Informationssysteme AG ("SNI AG") and its indirect wholly owned subsidiary, Siemens Nixdorf Mid-Range Acquisition Corp. ("Purchaser"), pursuant to which Purchaser agreed to commence as promptly as practicable a tender offer for Pyramid Common Stock for a cash price of $16.00 per share. The agreement provides that, following completion of the tender offer, SNI AG will cause the Purchaser to merge into Pyramid and any Pyramid shares that are not acquired through the tender offer will be converted in the merger into the right to receive the same consideration as is paid in the tender offer. YOUR BOARD HAS DETERMINED THAT THE OFFER AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS (OTHER THAN SNI AG AND ITS AFFILIATES). THE BOARD RECOMMENDS THAT YOU ACCEPT THE OFFER AND TENDER YOUR SHARES PURSUANT TO THE OFFER. In arriving at its recommendation, the Board gave careful consideration to a number of factors as described in the enclosed Schedule 14D-9, including the opinion of Smith Barney Inc., Pyramid's financial advisor, that the consideration to be received by the stockholders of Pyramid, pursuant to the Offer and the Merger, is fair from a financial point of view. We urge you to read the enclosed Schedule 14D-9 and the related tender offer materials carefully. On behalf of Pyramid's Board of Directors, I thank you for the support you have given to Pyramid over the years. Sincerely, /s/ Richard H. Lussier Richard H. Lussier Chairman and Chief Executive Officer EX-99.1 16 PRESS RELEASE/SIEMENS EXHIBIT 99.1 ------------ For Immediate Release Contact: Kent L. Robertson Sr. Vice President and CFO Pyramid Technology Corporation (408) 428-9000 Jochen Doering Vice President, Corp. Communications Siemens Nixdorf Informationssysteme AG 011 49-89-636-42700 PYRAMID TECHNOLOGY TO BE ACQUIRED BY SIEMENS NIXDORF San Jose, Calif., and Paderborn, Germany, January 23, 1995 -- Pyramid Technology Corporation (NASDAQ: PYRD) and Siemens Nixdorf Informationssyteme AG ("SNI"), a wholly owned subsidiary of Siemens AG, jointly announced today that they have entered into an agreement pursuant to which a wholly-owned subsidiary of SNI will acquire all of the outstanding common stock of Pyramid not currently owned by SNI for an aggregate purchase price of approximately $207 million. Under the agreement, SNI's subsidiary will commence a tender offer for all outstanding common stock of Pyramid for $16.00 per share in cash. The tender offer will be followed by a merger in which any shares not acquired by SNI's subsidiary in the tender offer will be acquired for the same amount of cash. SNI currently owns over 17% of the outstanding stock of Pyramid. The tender offer, which has been approved by Pyramid's board of directors, will commence no later than January 27 and will be conditioned on a majority of the outstanding shares of Pyramid being tendered as well as other customary conditions, including regulatory approvals. Richard H. Lussier, Pyramid's chairman and chief executive officer, made the following statement: "We are very pleased to become part of the SNI family. We feel this transaction is fair to both the shareholders and the employees of Pyramid. With the backing of SNI, our goal is to expand our market presence and to exploit our technological leadership." Gerhard Schulmeyer, SNI president and chief executive officer, stated: "I am very pleased that our two companies have come to terms. SNI's relationship with Pyramid has evolved over a number of years. While this has been mutually beneficial, we have together come to the conclusion that a closer link between the companies is necessary in order to be able to fully realize our joint potential in terms of both market coverage and technology competence. MORE . . . PYRAMID ACQUIRED BY SNI PAGE 2 OF 2 "Pyramid will retain its corporate identify, but will operate within the framework of SNI's world-wide mid-range computer business. It is especially important to us that this agreement has the support of Pyramid management. The success of our combined operation depends upon maintaining that support in the future." SNI, Paderborn, Germany, is a systems partner with universal expertise in the field of information technology. It is one of the world's largest companies in this area and is the largest supplier of information technology of European origin. In the past fiscal year (October 1, 1993 to September 30, 1994), SNI had revenues of more than U.S. $7.3 billion. SNI has a workforce of more than 39,000 and is represented in 45 countries. SNI is a separate legal unit within the Siemens organization. In the fiscal year 1993/94, Siemens AG had worldwide sales of more than U.S. $51 billion. Founded in 1847, the company numbers among the world's largest electrical and electronics companies. Founded in 1981, Pyramid Technology develops scalable enterprise servers that deliver high-quality, high-performance solutions for the mid-range to high- end of the open systems market. Pyramid provides data center-class support for business-critical environments, complemented by a full suite of professional programs and support tools that help customers successfully implement scalable enterprise computing. In the past fiscal year (October 1, 1993 to September 30, 1994), Pyramid had revenues of approximately $218 million. Pyramid has a workforce of approximately 850 employees. EX-99.2 17 PRESS RELEASE/SNI AG EXHIBIT 99.2 ------------ PRESS RELEASE CONTACT: Mr. Kevin Kimball Corporate Communications Siemens Corporation Telephone: (212) 258-4335 Mr. Kent Robertson Senior Vice President, Chief Financial Officer Pyramid Technology Corporation Telephone: (408) 428-9000 FOR IMMEDIATE RELEASE SIEMENS NIXDORF LAUNCHES TENDER OFFER FOR PYRAMID TECHNOLOGY CORPORATION NEW YORK, NEW YORK AND SAN JOSE, CALIFORNIA, January 27, 1995. Siemens Nixdorf Informationssysteme AG ("SNI AG"), a wholly owned subsidiary of Siemens AG, and Pyramid Technology Corporation ("Pyramid") (NASDAQ: PYRD) jointly announced today that SNI AG, through Siemens Nixdorf Mid-Range Acquisition Corp. ("SNI Mid-Range"), an indirect wholly-owned subsidiary of SNI AG, have commenced a tender offer (the "Offer") to purchase all outstanding shares of common stock, par value $0.01 per share (the "Shares"), of Pyramid not currently owned by SNI AG and its subsidiaries, for $16.00 per Share, net to the seller in cash. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the expiration of the Offer at least that number of Shares that, when added to the Shares currently owned by SNI AG and its affiliates, constitutes a majority of the Shares, as well as other customary conditions, including regulatory approvals. The Offer is being made pursuant to an Agreement and Plan of Merger dated as of January 20, 1995 (the "Merger Agreement") among SNI AG, SNI Mid-Range and Pyramid. The Merger Agreement provides that, among other things, as soon as practicable after the purchase of Shares pursuant to the Offer and the satisfaction of the other conditions set forth in the Merger Agreement and in accordance with the relevant provisions of the General Corporation Law of the State of Delaware, SNI Mid-Range will be merged with and into Pyramid (the "Merger"). All shares not purchased in the Offer will be converted into the right to receive $16.00 in cash at the time of the Merger. The Board of Directors of Pyramid has determined that each of the Offer and the Merger is fair to, and in the best interests of, the stockholders of Pyramid and recommends that all Pyramid stockholders accept the Offer and tender the Shares owned by them. Smith Barney Inc. acted as financial advisor to Pyramid in the transaction. The Offer and withdrawal rights expire at 12:00 Midnight, New York City time on Friday, February 24, 1995, unless the Offer is extended. The information filed with the Securities and Exchange Commission in connection with the Offer may be obtained by calling the information agent, Georgeson & Company, toll free at 800-223-2064. SNI AG, Paderborn, Germany, is a systems partner with universal expertise in the field of information technology. It is one of the world's largest companies in this area and is the largest supplier of information technology of European origin. In the past fiscal year (October 1, 1993 to September 30, 1994), SNI AG had revenues of more than U.S. $7.3 billion. SNI AG has a work force of more than 39,000 and is represented in 45 countries. SNI AG is a separate legal unit within the Siemens organization. In the fiscal year 1993/94, Siemens AG had worldwide sales of more than U.S. $51 billion. Founded in 1847, Siemens AG numbers among the world's largest electrical and electronics companies. Founded in 1981, Pyramid develops scalable enterprise servers that deliver high quality, high performance solutions for mid-range to high-end of the open systems market. Pyramid provides data center-class support for business critical environments, complemented by a full suite of professional programs and support tools that help customers successfully implement scalable enterprise computing. In the past fiscal year (October 1, 1993 to September 30, 1994), Pyramid had revenues of approximately $218 million. Pyramid has a work force of approximately 850 employees. Goldman, Sachs & Co. is acting as dealer manager for the Offer and has acted as financial advisor to SNI AG. 2 EX-99.3 18 OPINION OF SMITH BARNEY EXHIBIT 99.3 ------------ [LETTERHEAD OF SMITH BARNEY APPEARS HERE] January 20, 1995 The Board of Directors Pyramid Technology Corporation 3860 North First Street San Jose, CA 95134-1702 Members of the Board: In connection with the proposed acquisition of Pyramid Technology Corporation ("Pyramid" or the "Company"), by Siemens Nixdorf Informationssysteme AG ("Siemens" or "Parent"), you have requested our opinion as to the fairness, from a financial point of view, of the consideration of $16.00 net per share in cash to be received by the holders of the common stock of Pyramid, pursuant to an Agreement and Plan of Merger, dated January 20, 1995 by and among Pyramid, Siemens, and Siemens Nixdorf Mid-Range Acquisition Corp. ("Purchaser") (Siemens Nixdorf Mid-Range Acquisition Corp. is a wholly-owned subsidiary of Siemens) (the "Merger Agreement"). As more fully described in the Merger Agreement, and subject to the terms and conditions specified therein, Siemens Nixdorf Mid- Range Acquisition Corp. shall commence a tender offer to purchase all of the outstanding shares of common stock, par value $.01 per share, of the Company (the "Company Common Stock") (shares of Company Common Stock being hereinafter collectively referred to as "Shares"), other than Shares owned by Siemens, for $16.00 per share (the "Offer") and if the Offer is consummated, a subsequent cash merger between Pyramid and Siemens Nixdorf Mid-Range Acquisition Corp., pursuant to which each share of the Company Common Stock which has not been purchased pursuant to the Offer, other than any Shares owned by Parent, Purchaser or any of its affiliates or Shares issuable upon the exercise of the Parent Warrant (as defined in the Merger Agreement), shall be canceled and extinguished and be converted into and become a right to receive in cash the highest price per share paid pursuant to the Offer (the "Merger"). In arriving at our opinion, we reviewed the Merger Agreement and held discussions with certain senior officers, directors and other representatives and advisors of Pyramid concerning the business, operations and prospects of Pyramid. We examined certain publicly available business and financial information relating to Pyramid and Siemens as well as certain financial forecasts and other data for Pyramid which were provided to us by senior management of Pyramid. We reviewed the financial terms of the Merger as set forth in the Merger Agreement in relation to, among other things: the Company's historical and projected earnings and the capitalization and financial condition of Pyramid. We also considered, to the extent publicly available, the financial terms of certain other similar transactions which we deemed comparable to the Merger and analyzed certain financial and other publicly available information relating to the businesses of other companies whose operations we considered comparable to Pyramid. In addition, we conducted such other analyses and examinations and considered such other financial, economic and market criteria as we deemed necessary to arrive at our opinion. The Board of Directors Pyramid Technology Corporation Page 2 In rendering our opinion, we have assumed and relied, without independent verification, upon the accuracy and completeness of all financial and other information publicly available or furnished to or otherwise discussed with us. With respect to financial forecasts and other information provided to or otherwise discussed with us, we assumed that such forecasts and other information were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of Pyramid as to the expected future financial performance of Pyramid. We have assumed the correctness of, and relied upon the representations of Siemens and Pyramid, pursuant to the Merger Agreement, and have not attempted to independently verify any such information. We have not made or been provided with an independent valuation or appraisal of the assets or liabilities (contingent or otherwise) of Pyramid, nor have we made any physical inspection of the properties or assets of Pyramid. Our opinion is necessarily based upon financial, stock market and other conditions and circumstances existing and disclosed to us as of the date hereof. Smith Barney has been engaged to render financial advisory services to Pyramid in connection with the Offer and Merger and will receive a fee for our services, a significant portion of which is contingent upon consummation of the Merger. We will also receive a fee upon the delivery of this opinion. We have in the past provided financial advisory and investment banking services to Pyramid and have received fees for the rendering of such services. In addition, we and our affiliates (including The Travelers Inc. and its affiliates) may maintain business relationships with Pyramid, Siemens and their affiliates. Our advisory services, and the opinion expressed herein, are provided solely for the use of Pyramid's Board of Directors in its evaluation of the proposed Offer and Merger and are not on behalf of, and are not intended to confer rights or remedies upon, Siemens or its affiliates, any stockholder of Pyramid or Siemens, or any person other than Pyramid's Board of Directors. Our opinion may not be published or otherwise used or referred to, nor shall any public reference to Smith Barney be made, without our prior written consent; provided however, that we consent to the inclusion of this opinion in any Proxy Statement, 14D-9 or otherwise in connection with the proposed transaction. Based upon and subject to the foregoing, our experience as investment bankers, our work as described above and other factors we deemed relevant, we are of the opinion that, as of the date hereof, the consideration to be received by stockholders of Pyramid, pursuant to the Offer and the Merger, is fair, from a financial point of view. Very Truly Yours, Smith Barney Inc. -----END PRIVACY-ENHANCED MESSAGE-----