Registration of Securities Issued in a Business-Combination Transaction — Form S-4
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-4 Form S-4 Registration Statement 253 1.33M
2: EX-2.1 Amended & Restated Agreement & Plan of Reorg 50 253K
3: EX-2.2 Form of Agree. of Merger of Jts Corp.& Atari Corp. 8 31K
4: EX-3.1 Restated Certificate of Incorp - Jt Storage 21 72K
5: EX-3.2 Form of Restated Cert. of Incorp - Jts Corp. 4 24K
6: EX-3.3 By-Laws of Jt Storage, Inc. 14 48K
7: EX-3.4 Form of By-Laws of Jts Corporation (Post Merger) 28 135K
8: EX-4.1 Form of Common Stock Certificate Jts Corporation 2 20K
9: EX-4.2 Jt Storage Registration Rights Agreement 18 79K
10: EX-4.3 Atari & Security Pac.Natl Bank Indenture 4/29/87 94 263K
11: EX-4.4 Federated Grp/Security Pacific Natl Bank Indenture 102 366K
12: EX-4.5 Federated Group/Security Pacific 1st Sup Indenture 8 31K
13: EX-4.6 Warrant to Purchase Common Stock/Venture Lending 15 63K
14: EX-4.7 Warrant to Purchase Stock/Silicon Valley Bank 9 45K
15: EX-4.8 Warrant to Purchse Common Stock/Lunenburg S.A. 7 33K
16: EX-5.1 Opinion of Cooley Godward Et. Al. 1 17K
17: EX-8.1 Form of Cooley Godward Tax Opinion 3 23K
18: EX-8.2 Form of Wilson Sonsini Et. Al Tax Opinion 3 22K
19: EX-9.1 Atari Corp. Amended & Restated Voting Agreement 5 32K
20: EX-9.2 Jt Storage Amended & Restated Voting Agreement 5 32K
21: EX-10.1 Jt Storage 1995 Sop Amended & Restated 3/19/96 33 106K
30: EX-10.10 Restricted Stk Pur Agree/Kenneth D. Wing 1/2/96 22 77K
31: EX-10.11 Restricted Stk Pur Agree/W. Virginia Walker 1/5/96 22 78K
32: EX-10.12 Restricted Stk Pur Agree/David B. Pearce 1/2/96 21 70K
33: EX-10.13 Convertible Promissory Note 5 24K
34: EX-10.14 Promissory Note/Certain Principal Stkhldrs 1/19/96 6 25K
35: EX-10.15 Subord Secured Convertible Prom Note/Atari 2/13/96 35 136K
36: EX-10.16 Stock Purchase Agreement/Lunenburg 4/4/96 29 138K
37: EX-10.17 Draft/Technical Know How License Agreement 12 45K
38: EX-10.18 Lease Jts & Cilker Revocable Trust 6/15/95 41 161K
39: EX-10.19 Loan Agree Modular Elec (I) & Indusrial Credit 37 94K
22: EX-10.2 Jt Storage 1996 Non-Employee Directors Sop 3/19/96 14 52K
40: EX-10.20 Loan Agree Modular & Industrial Credit 10/11/94 44 113K
41: EX-10.21 Loan Agree Modular Electronic/Credit Invest India 19 48K
42: EX-10.22 Agreed Order Comprising Controversies 2/4/94 27 90K
43: EX-10.23 Master Agreement/Teac & Jt Storage, Inc. 32 95K
44: EX-10.24 License Agree Teac & Jt Storage 2/24/94 28 110K
45: EX-10.25 Development Agree Compaq & Jt Storage 6/16/94 32 120K
46: EX-10.26 Purchase Agree/Jts & Compaq 6/16/94 11 48K
47: EX-10.27 Technology Transfer Agree Western Digital 2/3/95 42 89K
48: EX-10.28 Agree Jt Storage & Pont Peripherals 1/31/95 24 100K
23: EX-10.3 Putnam Streamlined Standard 401(K) & Profit Shar 109 365K
24: EX-10.4 Indemnity Agreement 7 33K
25: EX-10.5 Employment Agreement 4 27K
26: EX-10.6 Jt Storage Consulting Agreement/Roger W. Johnson 5 29K
27: EX-10.7 Restricted Stk Pur Agree/David T. Mitchell 1/2/96 22 76K
28: EX-10.8 Restricted Stk Pur Agree/David T. Mitchell 3/6/96 21 79K
29: EX-10.9 Restricted Stk Pur Agree/Sirjang Lal Tandon 3/6/96 21 79K
49: EX-21.1 List of Subsidiaries 1 13K
50: EX-23.1 Consent of Arthur Andersen LLP 1 14K
51: EX-23.2 Consent of Deloitte & Touche LLP 1 14K
52: EX-27.1 Financial Data Schedule 1 16K
53: EX-99.1 Form of Jts Proxy 2 16K
54: EX-99.2 Form of Atari Proxy 2 16K
EX-2.1 — Amended & Restated Agreement & Plan of Reorg
Exhibit Table of Contents
EXHIBIT 2.1
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
ATARI CORPORATION
AND
JT STORAGE, INC.
April 8, 1996
TABLE OF CONTENTS
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ARTICLE I - THE MERGER........................................................ 2
1.1 The Merger.................................................. 2
1.2 Closing; Effective Time..................................... 2
1.3 Effect of the Merger........................................ 2
1.4 Certificate of Incorporation; Bylaws........................ 2
1.5 Directors and Executive Officers............................ 3
1.6 Effect on Capital Stock..................................... 3
1.7 Surrender of Certificates................................... 4
1.8 No Further Ownership Rights in Atari Stock.................. 5
1.9 Lost, Stolen or Destroyed Certificates...................... 5
1.10 Tax Consequences............................................ 5
1.11 Taking of Necessary Action; Further Action.................. 5
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF JTS............................ 6
2.1 Organization, Standing and Power............................ 6
2.2 Capital Structure........................................... 7
2.3 Authority................................................... 8
2.4 Financial Statements........................................ 9
2.5 Absence of Certain Changes.................................. 9
2.6 Absence of Undisclosed Liabilities.......................... 9
2.7 Litigation.................................................. 10
2.8 Restrictions on Business Activities......................... 10
2.9 Governmental Authorization.................................. 10
2.10 Title to Property........................................... 10
2.11 Intellectual Property....................................... 11
2.12 Environmental Matters....................................... 11
2.13 Tax......................................................... 11
2.14 Employee Benefit Plans...................................... 12
2.15 Certain Agreements Affected by the Merger................... 13
2.16 Employee Matters............................................ 13
2.17 Interested Party Transactions............................... 14
2.18 Insurance................................................... 14
2.19 Compliance With Laws........................................ 14
2.20 Minute Books................................................ 14
2.21 Complete Copies of Materials................................ 14
2.22 Brokers' and Finders' Fees.................................. 15
2.23 Registration Statement; Proxy Statement/Prospectus.......... 15
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TABLE OF CONTENTS
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2.24 Vote Required................................................ 15
2.25 Board Approval............................................... 15
2.26 Underlying Documents......................................... 15
2.27 Representations Complete..................................... 16
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF ATARI.......................... 16
3.1 Organization, Standing and Power............................. 16
3.2 Capital Structure............................................ 16
3.3 Authority.................................................... 17
3.4 SEC Documents; Financial Statements.......................... 18
3.5 Absence of Certain Changes................................... 18
3.6 Absence of Undisclosed Liabilities........................... 19
3.7 Litigation................................................... 19
3.8 Restrictions on Business Activities.......................... 19
3.9 Governmental Authorization................................... 19
3.10 Title to Property............................................ 19
3.11 Intellectual Property........................................ 20
3.12 Environmental Matters........................................ 20
3.13 Tax.......................................................... 21
3.14 Employee Benefit Plans....................................... 21
3.15 Certain Agreements Affected by the Merger.................... 22
3.16 Employee Matters............................................. 22
3.17 Interested Party Transactions................................ 23
3.18 Insurance.................................................... 23
3.19 Compliance With Laws......................................... 23
3.20 Minute Books................................................. 23
3.21 Complete Copies of Materials................................. 24
3.22 Broker's and Finders' Fees................................... 24
3.23 Registration Statement; Proxy Statement/Prospectus........... 24
3.24 Opinion of Financial Advisor................................. 24
3.25 Board Approval............................................... 24
3.26 Vote Required................................................ 24
3.27 Underlying Documents......................................... 24
3.28 Representations Complete..................................... 25
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TABLE OF CONTENTS
(continued)
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ARTICLE IV - CONDUCT PRIOR TO THE EFFECTIVE TIME.............................. 25
4.1 Conduct of Business of JTS and Atari........................ 25
4.2 Conduct of Business of JTS.................................. 26
4.3 Conduct of Business of Atari................................ 27
4.4 No Other JTS Negotiations................................... 28
4.5 No Other Atari Negotiations................................. 29
ARTICLE V - ADDITIONAL AGREEMENTS............................................. 30
5.1 Proxy Statement/Prospectus; Registration Statement.......... 30
5.2 Meetings of Stockholders.................................... 30
5.3 Access to Information....................................... 31
5.4 Public Disclosure........................................... 31
5.5 Consents; Cooperation....................................... 31
5.6 Continuity of Interest Certificates......................... 31
5.7 Voting Agreements........................................... 32
5.8 FIRPTA...................................................... 32
5.9 Legal Requirements.......................................... 32
5.10 Blue Sky Laws............................................... 32
5.11 Atari Employee Benefit Plans................................ 33
5.12 Atari Debentures............................................ 33
5.13 Form S-8.................................................... 33
5.14 Tax-Free Reorganization; Tax Returns........................ 33
5.15 Registration Rights......................................... 33
5.16 Indemnification of Officers and Directors................... 33
5.17 Listing of JTS Common Stock................................. 34
5.18 Atari Consent to JTS Transaction with Moduler............... 34
5.19 Atari SEC Documents......................................... 34
5.20 Best Efforts and Further Assurances......................... 34
ARTICLE VI - CONDITIONS TO THE MERGER......................................... 34
6.1 Conditions to Obligations of Each Party to Effect the Merger 34
6.2 Additional Conditions to Obligations of JTS................. 36
6.3 Additional Conditions to the Obligations of Atari........... 37
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TABLE OF CONTENTS
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ARTICLE VII - TERMINATION, AMENDMENT AND WAIVER.............................. 38
7.1 Termination................................................ 38
7.2 Effect of Termination...................................... 39
7.3 Expenses................................................... 39
7.4 Amendment.................................................. 39
7.5 Extension; Waiver.......................................... 40
ARTICLE VIII - GENERAL PROVISIONS............................................ 40
8.1 Non-Survival at Effective Time............................. 40
8.2 Absence of Third Party Beneficiary Rights.................. 40
8.3 Notices.................................................... 40
8.4 Interpretation............................................. 41
8.5 Counterparts............................................... 41
8.6 Entire Agreement; Nonassignability; Parties in Interest.... 41
8.7 Severability............................................... 42
8.8 Remedies Cumulative........................................ 42
8.9 Governing Law.............................................. 42
8.10 Rules of Construction...................................... 42
8.11 Amendment and Restatement.................................. 42
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SCHEDULES
JTS Disclosure Schedule
Atari Disclosure Schedule
Schedule 5.6(a) - JTS Significant Stockholders
Schedule 5.6(b) - Atari Significant Shareholders
Schedule 5.7(a) - JTS Voting Agreement Signatories
Schedule 5.7(b) - Atari Voting Agreement Signatories
Schedule 5.15 - Registration Rights Holders
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EXHIBITS
Exhibit A Form of Amended and Restated Certificate of Incorporation
Exhibit B Form of Amended and Restated Bylaws
Exhibit C-1 Form of JTS Voting Agreement
Exhibit C-2 Form of Atari Voting Agreement
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
This AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION (the
"Agreement") is made and entered into as of April 8, 1996, by and between Atari
Corporation, a Nevada corporation ("Atari"), and JT Storage, Inc., a Delaware
corporation ("JTS").
RECITALS
A. Atari is in the business of designing, manufacturing and selling
computers, computer peripheral products and video games.
B. JTS is in the business of designing, manufacturing and selling
computer peripheral products including mass storage computer disc drives.
C. The Boards of Directors of JTS and Atari believe it is in the best
interests of their respective companies and the stockholders of their respective
companies that JTS and Atari combine into a single company through the statutory
merger of Atari with and into JTS (the "Merger") and, in furtherance thereof,
have approved the Merger.
D. In connection with the Merger, among other things, the outstanding
shares of Atari Common Stock, $.01 par value ("Atari Common Stock"), shall be
converted into shares of JTS Common Stock, $.000001 par value ("JTS Common
Stock"), at the rate set forth herein.
E. JTS and Atari desire to make certain representations and warranties
and other agreements in connection with the Merger.
F. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under the provisions of Section 368(a)(1)(A) of the Code.
G. This Agreement amends and restates that certain Agreement and Plan
of Reorganization by and among Atari, JTS and JTS Acquisition Corporation dated
as of February 12, 1996.
NOW, THEREFORE, in consideration of the covenants and representations
set forth herein, and for other good and valuable consideration, the parties
agree as follows:
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ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement, a Certificate of
Merger prepared in accordance with Delaware Law (as defined herein) and Nevada
Law (as defined herein) and reasonably acceptable to counsel to JTS and counsel
to Atari (the "Certificate of Merger"), and the applicable provisions of the
Delaware General Corporation Law ("Delaware Law") and Nevada General Corporation
Law ("Nevada Law"), Atari shall be merged with and into JTS, the separate
corporate existence of Atari shall cease and JTS shall continue as the surviving
corporation. JTS as the surviving corporation after the Merger is hereinafter
sometimes referred to as the "Surviving Corporation."
1.2 Closing; Effective Time. The closing of the transactions
contemplated hereby (the "Closing") shall take place as soon as practicable
after the satisfaction or waiver of each of the conditions set forth in Article
VI hereof or at such other time as the parties hereto agree (the "Closing
Date"). The Closing shall take place at the offices of Wilson Sonsini Goodrich &
Rosati, P.C., 650 Page Mill Road, Palo Alto, California, or at such other
location as the parties hereto agree. In connection with the Closing, the
parties hereto shall cause the Merger to be consummated by filing the
Certificate of Merger with (i) the Secretary of State of the State of Delaware
and with the Recorder of the County in which the registered office of JTS is
located, in accordance with the relevant provisions of Delaware Law and (ii) the
Secretary of State of the State of Nevada, in accordance with the relevant
provisions of Nevada Law (the time of such filings being the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of Delaware Law and Nevada Law. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the
property, rights, privileges, powers and franchises of Atari shall vest in the
Surviving Corporation, and all debts, liabilities and duties of Atari shall
become the debts, liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of JTS,
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 Delaware Law and such Certificate of Incorporation; provided,
however, that the Certificate of Incorporation of the Surviving Corporation
shall be amended and restated in the form attached hereto as Exhibit A.
(b) The Bylaws of JTS, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended; provided, however, that the Bylaws of the Surviving
Corporation shall be amended and restated in the form attached hereto as Exhibit
B.
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1.5 Directors and Executive Officers. At the Effective Time, the
directors of the Surviving Corporation shall be Sirjang Lal Tandon, David T.
Mitchell, Jean D. Deleage, Alan Azan, Roger W. Johnson, LipBu Tan, Jack Tramiel
and Michael Rosenberg. The executive officers of JTS immediately prior to the
Effective Time shall constitute the only executive officers of the Surviving
Corporation as of the Effective Time, unless otherwise designated by JTS.
1.6 Effect on Capital Stock. By virtue of the Merger and without any
action on the part of JTS, Atari or the holders of any of the following
securities:
(a) Conversion of Atari Common Stock. At the Effective Time, each
share of Atari Common Stock issued and outstanding immediately prior to the
Effective Time (other than any shares of Atari Common Stock to be canceled
pursuant to Section 1.6(b)) will be canceled and extinguished and be converted
automatically into the right to receive one (1) share of JTS Common Stock (the
"Exchange Ratio").
(b) Cancellation of Certain Stock. At the Effective Time, each
share of Atari Common Stock owned by JTS or any direct or indirect wholly-owned
subsidiary of JTS immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
(c) Atari Stock Options. At the Effective Time, all options to
purchase Atari Common Stock then outstanding under the Atari Amended 1986 Stock
Option Plan (the "Atari Stock Option Plan") shall be assumed by JTS in
accordance with Section 5.11.
(d) Atari Debentures. At the Effective Time, JTS shall assume all
obligations of Atari under Atari's 5 1/4% Convertible Subordinated Debentures
Due 2002 (the "Atari Debentures"), and such debentures shall be convertible into
shares of JTS Common Stock in accordance with Section 5.12.
(e) Federated Debentures. To the extent required by that certain
Indenture dated as of April 15, 1985 from the The Federated Group, Inc. to
Security Pacific National Bank, as trustee, together with the first supplemental
indenture thereto dated as of September 24, 1987, at the Effective Time, JTS
shall assume any obligations of Atari under the 7 1/2% Convertible Subordinated
Debentures due April 15, 2010 of The Federated Group, Inc. (the "Federated
Debentures").
(f) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Atari Common Stock or JTS Common Stock), reorganization, recapitalization or
other like change with respect to Atari Common Stock, JTS Common Stock or JTS
Series A Preferred Stock, $.000001 par value ("JTS Series A Preferred Stock"),
occurring after the date hereof and prior to the Effective Time.
(g) Fractional Shares. No fraction of a share of JTS Common Stock
will be issued, but in lieu thereof each holder of shares of Atari Common Stock
who would otherwise be entitled to a fraction of a share of JTS Common Stock
(after aggregating all fractional shares of JTS Common Stock to be received by
such holder) shall receive from JTS an amount of cash (rounded to the nearest
whole
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cent) equal to the product of (i) such fraction, multiplied by (ii) the closing
price of a share of Atari Common Stock on the trading day immediately prior to
the Effective Time, as reported by the American Stock Exchange.
1.7 Surrender of Certificates.
(a) Exchange Agent. Registrar and Transfer Company, Cranford, NJ,
shall act as exchange agent (the "Exchange Agent") in the Merger.
(b) JTS to Provide Common Stock and Cash. Promptly after the
Effective Time, JTS shall make available to the Exchange Agent for exchange in
accordance with this Article I, through such procedures as JTS may reasonably
adopt, (i) the shares of JTS Common Stock issuable pursuant to Section 1.6(a) in
exchange for shares of Atari Common Stock outstanding immediately prior to the
Effective Time and (ii) cash in an amount sufficient to permit payment of cash
in lieu of fractional shares pursuant to Section 1.6(g).
(c) Exchange Procedures. Promptly after the Effective Time, the
Surviving Corporation shall cause to be mailed to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to the
Effective Time represented outstanding shares of Atari Common Stock, whose
shares were converted into the right to receive shares of JTS Common Stock (and
cash in lieu of fractional shares) pursuant to Section 1.6, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon receipt of the
Certificates by the Exchange Agent, and shall be in such form and have such
other provisions as JTS may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of JTS Common Stock (and cash in lieu of fractional shares).
Upon surrender of a Certificate for cancellation to the Exchange Agent or to
such other agent or agents as may be appointed by JTS, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing the number of whole
shares of JTS Common Stock and payment in lieu of fractional shares which such
holder has the right to receive pursuant to Section 1.6, and the Certificate so
surrendered shall forthwith be canceled. Until so surrendered, each outstanding
Certificate that, prior to the Effective Time, represented shares of Atari
Common Stock will be deemed from and after the Effective Time, for all corporate
purposes, other than the payment of dividends, to evidence the ownership of the
number of full shares of JTS Common Stock into which such shares of Atari Common
Stock shall have been so converted and the right to receive an amount in cash in
lieu of the issuance of any fractional shares in accordance with Section 1.6.
(d) Distributions With Respect to Unexchanged Shares. No dividends
or other distributions with respect to JTS Common Stock with a record date after
the Effective Time will be paid to the holder of any unsurrendered Certificate
with respect to the shares of JTS Common Stock represented thereby until the
holder of record of such Certificate shall surrender such Certificate. Subject
to applicable law, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of JTS
Common Stock issued in exchange therefor, without interest, at the time of such
surrender, the amount of any such dividends or other distributions with a
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record date after the Effective Time theretofore payable (but for the provisions
of this Section 1.7(d)) with respect to such shares of JTS Common Stock.
(e) Transfers of Ownership. If any certificate for shares of JTS
Common Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the Certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange will have paid to JTS or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
JTS Common Stock in any name other than that of the registered holder of the
Certificate surrendered, or established to the satisfaction of JTS or any agent
designated by it that such tax has been paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in this
Section 1.7, none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to any person for any amount properly paid to a public
official pursuant to any applicable abandoned property, escheat or similar law.
1.8 No Further Ownership Rights in Atari Stock. All shares of JTS
Common Stock issued upon the surrender for exchange of shares of Atari Common
Stock in accordance with the terms hereof (including any cash paid in lieu of
fractional shares) shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of Atari Common Stock, and there shall be
no further registration of transfers on the records of the Surviving Corporation
of shares of Atari Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
1.9 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares of JTS
Common Stock (and cash in lieu of fractional shares) as may be required pursuant
to Section 1.6; provided, however, that JTS may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against JTS,
the Surviving Corporation or the Exchange Agent with respect to the Certificates
alleged to have been lost, stolen or destroyed.
1.10 Tax Consequences. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368 of
the Code.
1.11 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Atari, the officers and directors of Atari are fully
authorized in the name of the corporation or otherwise to take, and will take,
all such lawful and necessary action, so long as such action is not inconsistent
with this Agreement.
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1.12 Dissenting JTS Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of JTS Common Stock or JTS Series A Preferred Stock held by
a holder who has exercised dissenters' rights for such shares in accordance with
Delaware Law or California General Corporation Law to the extent such law is
applicable by virtue of Section 2115 thereof ("California Law") and who, as of
the Effective Time, has not effectively withdrawn or lost such dissenters'
rights ("Dissenting Shares"), shall be entitled to such rights as are granted by
Delaware Law or California Law.
(b) JTS shall give Atari (i) prompt notice of any written demands
received by JTS for an appraisal of shares of capital stock of JTS pursuant to
Section 262 of Delaware Law or Chapter 13 of California Law, withdrawals of such
demands, and any other related instruments served pursuant to Delaware Law or
California Law and received by JTS and (ii) the opportunity to participate in
all negotiations and proceedings with respect to such demands. JTS shall not,
except with the prior written consent of Atari, voluntarily make any payment
with respect to any such demands or offer to settle or settle any such demands.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF JTS
In this Agreement, any reference to any event, change, condition or
effect being "material" with respect to any entity or group of entities means
any material event, change, condition or effect related to the condition
(financial or otherwise), properties, assets (including intangible assets),
liabilities, business, operations, results of operations or prospects of such
entity or group of entities. In this Agreement, any reference to a "Material
Adverse Effect" with respect to any entity or group of entities means any event,
change or effect that is materially adverse to the condition (financial or
otherwise), properties, assets, liabilities, business, operations, results of
operations or prospects of such entity and its subsidiaries, taken as a whole.
In this Agreement, any reference to a party's "knowledge" means such
party's actual knowledge after due and diligent inquiry.
Except as disclosed in a document of even date herewith and delivered
by JTS to Atari prior to the execution and delivery of this Agreement and
referring to the representations and warranties in this Agreement (the "JTS
Disclosure Schedule"), JTS represents and warrants to Atari as follows:
2.1 Organization, Standing and Power. Each of JTS and its subsidiaries
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization. Each of JTS and its subsidiaries has
the corporate power to own its properties and to carry on its business as now
being conducted and as proposed to be conducted and is duly qualified to do
business and is in good standing in each jurisdiction in which the failure to be
so qualified and in good standing would have a Material Adverse Effect on JTS
and its subsidiaries, taken as a whole. JTS has delivered a true and
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correct copy of the Certificate of Incorporation and Bylaws or other charter
documents, as applicable, of JTS and each of its subsidiaries, each as amended
to date, to Atari. Neither JTS nor any of its subsidiaries is in violation of
any of the provisions of its Certificate of Incorporation or Bylaws or
equivalent organizational documents. JTS is the owner of all outstanding shares
of capital stock of each of its subsidiaries and all such shares are duly
authorized, validly issued, fully paid and nonassessable. All of the outstanding
shares of capital stock of each such subsidiary are owned by JTS free and clear
of all liens, charges, claims or encumbrances or rights of others. There are no
outstanding subscriptions, options, warrants, puts, calls, rights, exchangeable
or convertible securities or other commitments or agreements of any character
relating to the issued or unissued capital stock or other securities of any such
subsidiary, or otherwise obligating JTS or any such subsidiary to issue,
transfer, sell, purchase, redeem or otherwise acquire any such securities.
Except as disclosed in the JTS Disclosure Schedule, JTS does not directly or
indirectly own any equity or similar interest in, or any interest convertible or
exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
2.2 Capital Structure. The authorized capital stock of JTS consists of
90,000,000 shares of Common Stock, $.000001 par value, and 70,000,000 shares of
Preferred Stock, $.000001 par value, all of which is designated Series A
Preferred Stock, of which there were issued and outstanding as of the close of
business on April 5, 1996, 9,204,741 shares of Common Stock and 29,696,370
shares of Series A Preferred. The JTS Disclosure Schedule contains a true and
complete list of the holders of JTS Common Stock and JTS Series A Preferred
Stock and the number of shares held by each such holder on April 5, 1996. There
are no other outstanding shares of capital stock or voting securities. Each
outstanding share of JTS Series A Preferred Stock is convertible into one (1)
share of JTS Common Stock. All outstanding shares of JTS Common Stock and JTS
Series A Preferred Stock are duly authorized, validly issued, fully paid and
non-assessable and are free of any liens or encumbrances other than any liens or
encumbrances created by or imposed upon the holders thereof, and are not subject
to preemptive rights or rights of first refusal created by statute, the
Certificate of Incorporation or Bylaws of JTS or any agreement to which JTS is a
party or by which it is bound. As of the close of business on April 5, 1996, JTS
has reserved (i) 4,300,000 shares of JTS Common Stock for issuance to employees
and consultants pursuant to the JTS 1995 Stock Option Plan (the "JTS Stock
Option Plan"), of which 37,554 shares have been issued pursuant to option
exercises and 3,680,358 shares are subject to outstanding, unexercised options,
(ii) 600,000 shares of JTS Common Stock for issuance upon the exercise of
outstanding, unexercised JTS Warrants and (iii) 32,500,000 shares of JTS Series
A Preferred Stock and JTS Common Stock for issuance upon conversion of the note
issued to Atari on February 13, 1996 and upon exercise of the warrants issuable
to Atari pursuant to such note. Since April 5, 1996, JTS has not issued or
granted additional options under the JTS Stock Option Plan. Other than pursuant
to this Agreement, there are no other options, warrants, calls, rights,
commitments or agreements of any character to which JTS is a party or by which
it is bound obligating JTS to issue, deliver, sell, repurchase or redeem, or
cause to be issued, delivered, sold, repurchased or redeemed, any shares of
capital stock of JTS or obligating JTS to grant, extend, accelerate the vesting
of, change the price of, or otherwise amend or enter into any such option,
warrant, call, right, commitment or agreement. The terms of the JTS Stock Option
Plan and the JTS Warrants permit the assumption or substitution of options or
warrants, as applicable, to purchase Atari Common Stock as provided in this
Agreement, without the consent or approval of the holders of such securities,
the JTS stockholders, or otherwise. True and
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complete copies of all agreements and instruments relating to or issued under
the JTS Stock Option Plan or JTS Warrants have been made available to Atari and
such agreements and instruments have not been amended, modified or supplemented,
and there are no agreements to amend, modify or supplement such agreements or
instruments in any case from the form made available to Atari. The shares of JTS
Common Stock to be issued pursuant to the Merger will be duly authorized,
validly issued, fully paid, and non-assessable.
2.3 Authority. JTS has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of JTS, subject only to the approval of the Merger
by JTS's stockholders as contemplated by Section 6.1(a). This Agreement has been
duly executed and delivered by JTS and constitutes the valid and binding
obligation of JTS. The execution and delivery of this Agreement by JTS does not,
and the consummation of the transactions contemplated hereby will not, conflict
with, or result in any violation of, or default under (with or without notice or
lapse of time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any benefit under (i) any provision of
the Certificate of Incorporation or Bylaws of JTS or any of its subsidiaries, as
amended, or (ii) any material mortgage, indenture, lease, contract or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to JTS or
any of its subsidiaries or any of their properties or assets. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any court, administrative agency or commission or other governmental
authority or instrumentality ("Governmental Entity") is required by or with
respect to JTS or any of its subsidiaries in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) the filing of the Certificate of Merger as provided in
Section 1.2, (ii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities laws and the securities laws of any foreign country; (iii) such
filings as may be required under the Hart- Scott-Rodino Antitrust Improvements
Act of 1976, as amended ("HSR"); and (iv) such other consents, authorizations,
filings, approvals and registrations which, if not obtained or made, would not
have a Material Adverse Effect on JTS and its subsidiaries, taken as a whole,
and would not prevent, alter or materially delay any of the transactions
contemplated by this Agreement. The JTS Disclosure Schedule sets forth a full
and complete list of all necessary consents, waivers and approvals of third
parties applicable to the operations of JTS that are required to be obtained by
JTS in connection with the execution and delivery of this Agreement or the
Merger Agreement by JTS or the consummation by JTS of the transactions
contemplated hereby or thereby, except any such consents, waivers and approvals,
which, if not obtained, would not have a Material Adverse Effect on JTS and its
subsidiaries, taken as a whole. Prior to the Closing Date, JTS will obtain all
such consents.
The Stock Purchase Agreement dated as of April 4, 1996 between JTS and
Lunenburg, S.A., a Panama corporation, together with all documents executed in
connection therewith (the "Moduler Agreement"), has been duly executed and
delivered by JTS, the transactions contemplated thereby have been consummated,
and the Moduler Agreement constitutes a valid and binding obligation of JTS. JTS
has provided to Atari a true, correct and complete copy of the Moduler
Agreement, and has performed all obligations required to be performed by it to
date under the Moduler Agreement. To JTS' best
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knowledge, (a) the other parties to the Moduler Agreement have performed all
obligations required to be performed by them to date under such agreement, (b)
as to such other parties, the Moduler Agreement is valid, binding and
enforceable in accordance with its terms and (c) the Moduler Agreement is in
full force and effect with no default or dispute or basis therefor existing with
respect thereto.
2.4 Financial Statements. JTS has furnished to Atari its audited
consolidated balance sheet, consolidated statements of operations and
consolidated statements of stockholders equity and cash flows as of and for the
year ended January 28, 1996, and the audited statement of assets and
liabilities, statement of revenues and expenses and cash flows of The Hard Disk
Drive Division of Moduler as of and for the year ended January 28, 1996
(collectively, the "JTS Financial Statements"). The JTS Financial Statements,
including the notes thereto, were complete and correct in all material respects
as of their respective dates, complied as to form in all material respects with
applicable accounting requirements as of their respective dates, and have been
prepared in accordance with generally accepted accounting principles applied on
a basis consistent throughout the periods indicated and consistent with each
other (except as may be indicated in the notes thereto). The JTS Financial
Statements are in accordance with the books and records of JTS and fairly
present the consolidated financial condition and operating results of JTS and
its subsidiaries at the dates and during the periods indicated therein. There
has been no change in JTS accounting policies except as described in the notes
to the JTS Financial Statements.
2.5 Absence of Certain Changes. Since January 28, 1996, (the "JTS
Balance Sheet Date"), JTS has conducted its business in the ordinary course
consistent with past practice and there has not occurred: (i) any change, event
or condition (whether or not covered by insurance) that has resulted in, or
might reasonably be expected to result in, a Material Adverse Effect to JTS and
its subsidiaries, taken as a whole; (ii) any acquisition, sale or transfer of
any material asset of JTS or any of its subsidiaries other than in the ordinary
course of business and consistent with past practice; (iii) any change in
accounting methods or practices (including any change in depreciation or
amortization policies or rates) by JTS or any revaluation by JTS of any of its
or any of its subsidiaries' assets; (iv) any issuance or agreement to issue or
any commitment to issue any equity security, bond, note or other security of JTS
or any of its subsidiaries; (v) any declaration, setting aside, or payment of a
dividend or other distribution with respect to the shares of JTS, or any direct
or indirect redemption, purchase or other acquisition by JTS of any of its
shares of capital stock; (vi) any material contract entered into by JTS or any
of its subsidiaries, other than in the ordinary course of business and as
provided to Atari, or any amendment or termination of, or default under, any
material contract to which JTS or any of its subsidiaries is a party or by which
it is bound; or (vii) any negotiation or agreement by JTS or any of its
subsidiaries to do any of the things described in the preceding clauses (i)
through (vii) (other than negotiations with Atari regarding the transactions
contemplated by this Agreement).
2.6 Absence of Undisclosed Liabilities. JTS has no material obligations
or liabilities of any nature (matured or unmatured, fixed or contingent) other
than (i) those set forth or adequately provided for in the JTS balance sheet and
the Moduler statement of assets and liabilities, each as included in the JTS
Financial Statements, and true, correct and complete copies of which have been
provided to Atari, (collectively, the "JTS Balance Sheet"), (ii) those incurred
in the ordinary course of business and not required to be set forth in the JTS
Balance Sheet under generally accepted accounting principles, and
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(iii) those incurred in the ordinary course of business since the JTS Balance
Sheet Date and consistent with past practice.
2.7 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of JTS or any of its
subsidiaries, threatened against JTS or any of its subsidiaries or any of their
respective properties or any of their respective officers or directors (in their
capacities as such) that, individually or in the aggregate, could have a
Material Adverse Effect on JTS and its subsidiaries, taken as a whole. There is
no judgment, decree or order against JTS or any of its subsidiaries, or, to the
knowledge of JTS and its subsidiaries, any of their respective directors or
officers (in their capacities as such), that could prevent, enjoin, alter or
delay any of the transactions contemplated by this Agreement, or that could have
a Material Adverse Effect on JTS and its subsidiaries, taken as a whole.
2.8 Restrictions on Business Activities. There is no agreement,
judgment, injunction, order or decree binding upon JTS or any of its
subsidiaries which has or could have the effect of prohibiting or materially
impairing any current or future business practice of JTS or any of its
subsidiaries, any acquisition of property by JTS or any of its subsidiaries or
the conduct of business by JTS or any of its subsidiaries as currently conducted
or as proposed to be conducted by JTS or any of its subsidiaries.
2.9 Governmental Authorization. JTS and each of its subsidiaries have
obtained each federal, state, county, local or foreign governmental consent,
license, permit, grant, or other authorization of a Governmental Entity (i)
pursuant to which JTS or any of its subsidiaries currently operates or holds any
interest in any of its properties or (ii) which is required for the operation of
JTS's or any of its subsidiaries' business or the holding of any such interest
(herein collectively called "JTS Authorizations"), and all of such JTS
Authorizations are in full force and effect, except where the failure to obtain
or have any of such JTS Authorizations could not reasonably be expected to have
a Material Adverse Effect on JTS and its subsidiaries, taken as a whole.
2.10 Title to Property. JTS and its subsidiaries have good and
marketable title to all of their respective properties, interests in properties
and assets, real and personal, reflected in the JTS Balance Sheet or acquired
after the JTS Balance Sheet Date (except properties, interests in properties and
assets sold or otherwise disposed of since the JTS Balance Sheet Date thereof in
the ordinary course of business), free and clear of all mortgages, liens,
pledges, charges or encumbrances of any kind or character, except (i) the lien
of current taxes not yet due and payable, (ii) such imperfections of title,
liens and easements as do not and will not materially detract from or interfere
with the use of the properties subject thereto or affected thereby, or otherwise
materially impair business operations involving such properties and (iii) liens
securing debt which is reflected on the JTS Balance Sheet. The plants, property
and equipment of JTS and its subsidiaries that are used in the operations of
their businesses are in good operating condition and repair. All properties used
in the operations of JTS and its subsidiaries are reflected in the JTS Balance
Sheet to the extent generally accepted accounting principles require the same to
be reflected. The JTS Disclosure Schedule identifies each parcel of real
property owned or leased by JTS or any of its subsidiaries.
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2.11 Intellectual Property. JTS and its subsidiaries own, or are
licensed or otherwise possess legally enforceable rights to use all patents,
trademarks, trade names, service marks, copyrights, and any applications
therefor, maskworks, net lists, schematics, technology, know-how, computer
software programs or applications (in both source code and object code form),
and tangible or intangible proprietary information or material ("Intellectual
Property") that are used or proposed to be used in the business of JTS and its
subsidiaries as currently conducted or as proposed to be conducted by JTS and
its subsidiaries. To the knowledge of JTS and its subsidiaries, there is no
material unauthorized use, disclosure, infringement or misappropriation of any
Intellectual Property rights of JTS or any of its subsidiaries, any trade secret
material to JTS or any of its subsidiaries, or any Intellectual Property right
of any third party to the extent licensed by or through JTS or any of its
subsidiaries, by any third party, including any employee or former employee of
JTS or any of its subsidiaries. Neither JTS nor any of its subsidiaries has
entered into any agreement to indemnify any other person against any charge of
infringement of any Intellectual Property, other than indemnification provisions
(i) listed on the JTS Disclosure Schedule or (ii) contained in purchase orders
arising in the ordinary course of business.
2.12 Environmental Matters.
(a) To the knowledge of JTS and its subsidiaries, no substance
that is regulated by any foreign, federal, state or local governmental authority
or that has been designated by any such authority to be radioactive, toxic,
hazardous or otherwise a danger to health or the environment (herein a
"Hazardous Material") is present in, on or under any property that JTS or any of
its subsidiaries has at any time owned, operated, occupied or leased (herein a
"JTS Facility"), except to the extent that such presence has not had and could
not reasonably be expected to have a Material Adverse Effect on JTS and its
subsidiaries, taken as a whole.
(b) To the knowledge of JTS and its subsidiaries, neither JTS nor
any of its subsidiaries has transported, stored, used, disposed of,
manufactured, released or exposed its employees or any other person to Hazardous
Materials ("Hazardous Materials Activity") in material violation of any
applicable foreign, federal, state or local statute, rule, regulation, order or
law.
(c) To the knowledge of JTS and its subsidiaries, each of JTS and
its subsidiaries is and at all times has been in compliance with all foreign,
federal, state and local laws relating to emissions, discharges, releases or
threatened releases of Hazardous Materials, except to the extent noncompliance
with such laws has not had and could not reasonably be expected to have a
Material Adverse Effect on JTS and its subsidiaries, taken as a whole.
(d) No action, proceeding, permit revocation, writ, injunction or
claim is pending, or to the knowledge of JTS and its subsidiaries threatened,
concerning the Hazardous Materials Activities of JTS or any of its subsidiaries
and/or any JTS Facilities. Neither JTS nor any of its subsidiaries is aware of
any fact or circumstance which could impose any material environmental liability
upon JTS or any of its subsidiaries.
2.13 Taxes. JTS and each of its subsidiaries, and any consolidated,
combined, unitary or aggregate group for Tax purposes of which JTS or any of its
subsidiaries is or has been a member have
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timely filed all Tax Returns required to be filed by it, have paid all Taxes
shown thereon to be due and has provided adequate accruals in accordance with
generally accepted accounting principles in its financial statements for any
Taxes that have not been paid, whether or not shown as being due on any Tax
Returns. Except as disclosed in the JTS Disclosure Schedule, (i) no material
claim for Taxes has become a lien against the property of JTS or any of its
subsidiaries or is being asserted against JTS or any of its subsidiaries other
than liens for Taxes not yet due and payable, (ii) no audit of any Tax Return of
JTS or any of its subsidiaries is being conducted by a Tax authority, (iii) no
extension of the statute of limitations on the assessment of any Taxes has been
granted by JTS or any of its subsidiaries and is currently in effect, and (iv)
there is no agreement, contract or arrangement to which JTS or any of its
subsidiaries is a party that may result in the payment of any amount that would
not be deductible by reason of Sections 280G, 162 or 404 of the Code. Neither
JTS nor any of its subsidiaries is a party to any tax sharing or tax allocation
agreement nor does JTS or any of its subsidiaries owe any amount under any such
agreement. As used herein, "Taxes" shall mean all taxes of any kind, including,
without limitation, those on or measured by or referred to as income, gross
receipts, sales, use, ad valorem, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, value added,
property or windfall profits taxes, customs, duties or similar fees, assessments
or charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any governmental authority,
domestic or foreign. As used herein, "Tax Return" shall mean any return, report
or statement required to be filed with any governmental authority with respect
to Taxes. JTS and each of its subsidiaries are in full compliance with all terms
and conditions of any Tax exemptions or other Tax-sharing agreement or order of
a foreign government and the consummation of the Merger shall not have any
adverse effect on the continued validity and effectiveness of any such Tax
exemptions or other Tax-sharing agreement or order.
2.14 Employee Benefit Plans.
(a) The JTS Disclosure Schedule lists, with respect to JTS, any
trade or business (whether or not incorporated) which is treated as a single
employer with JTS (an "ERISA Affiliate") within the meaning of Section 414(b),
(c), (m) or (o) of the Code or any subsidiary of JTS (i) all employee benefit
plans (as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), (ii) all loans to employees in excess of $50,000,
loans to officers, and any stock option, stock purchase, phantom stock, stock
appreciation right, supplemental retirement, severance, sabbatical, disability,
employee relocation, cafeteria (Code section 125), life insurance or accident
insurance plans, programs or arrangements, (iii) all bonus, deferred
compensation or incentive plans, programs or arrangements, (iv) other material
fringe or employee benefit plans, programs or arrangements that apply to senior
management of JTS and that do not generally apply to all employees, and (v) any
current or former employment or executive compensation or severance agreements,
written or otherwise, as to which current or contingent obligations of JTS of
greater than $50,000 exist for the benefit of, or relating to, any current or
former employee, consultant or director of JTS (together, the "JTS Employee
Plans"), and a copy of each such JTS Employee Plan and each summary plan
description and annual report on the Form 5500 series required to be filed with
any government agency for each JTS Employee Plan for the three most recent Plan
years has been delivered to Atari.
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(b) (i) None of the JTS Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person; (ii) there has
been no "prohibited transaction," as such term is defined in Section 406 of
ERISA and Section 4975 of the Code, with respect to any JTS Employee Plan, which
could reasonably be expected to have, in the aggregate, a Material Adverse
Effect on JTS or its subsidiaries; (iii) all JTS Employee Plans have been
administered in compliance with the requirements prescribed by any and all
statutes, rules and regulations (including ERISA and the Code, orders, or
governmental rules and regulations currently in effect with respect thereto and
including all applicable requirements for notification to participants or to the
Department of Labor, Internal Revenue Service or Secretary of the Treasury),
except as would not have, in the aggregate, a Material Adverse Effect on JTS or
its subsidiaries, and JTS and each of its subsidiaries have performed all
obligations required to be performed by them under, are not in any material
respect in default under or violation of, and have no knowledge of any material
default or violation by any other party to, any of the JTS Employee Plans; (iv)
each JTS Employee Plan intended to qualify under Section 401(a) of the Code and
each trust intended to qualify under Section 501(a) of the Code has received a
favorable determination letter from the Internal Revenue Service (the "IRS") as
to such qualification, and nothing has occurred which could reasonably be
expected to cause the loss of such qualification or exemption; (v) all material
contributions required to be made by JTS or any of its subsidiaries to any JTS
Employee Plan have been made on or before their due dates and a reasonable
amount has been accrued for contributions to each JTS Employee Plan for the
current plan years; and (vi) no JTS Employee Plan is covered by, and neither JTS
nor any subsidiary has incurred or expects to incur any liability under Title IV
of ERISA or Section 412 of the Code.
(c) With respect to each JTS Employee Plan that constitutes a
group health plan within the meaning of Section 5000(b)(1) of the Code or
Section 607(1) of ERISA, JTS and each of its United States subsidiaries have
complied with the applicable health care continuation and notice provisions of
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), and the proposed regulations thereunder, except to the extent that
such failure to comply would not, in the aggregate, have a Material Adverse
Effect on JTS and its subsidiaries.
2.15 Certain Agreements Affected by the Merger. Neither the execution
and delivery of this Agreement nor the consummation of the transaction
contemplated hereby will (i) result in any payment (including, without
limitation, severance, unemployment compensation, golden parachute, bonus or
otherwise) becoming due to any director or employee of JTS or any of its
subsidiaries, (ii) increase any benefits otherwise payable by JTS or (iii)
result in the acceleration of the time of payment or vesting of any such
benefits.
2.16 Employee Matters. Except as to matters which could not, in the
aggregate, have a Material Adverse Effect on JTS and its subsidiaries, taken as
a whole, JTS and each of its subsidiaries are in compliance in all respects with
all currently applicable laws and regulations respecting employment,
discrimination in employment, terms and conditions of employment, wages, hours
and occupational safety and health and employment practices, and is not engaged
in any unfair labor practice. There are no pending claims against JTS or any of
its subsidiaries under any workers compensation plan or policy or for long term
disability. Neither JTS nor any of its subsidiaries has any material obligations
under COBRA with respect to any former employees or qualifying beneficiaries
thereunder. There are no
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controversies pending or, to the knowledge of JTS or any of its subsidiaries,
threatened, between JTS or any of its subsidiaries and any of their respective
employees, which controversies have or could have a Material Adverse Effect on
JTS and its subsidiaries, taken as a whole. Neither JTS nor any of its
subsidiaries is a party to any collective bargaining agreement or other labor
unions contract nor does JTS nor any of its subsidiaries know of any activities
or proceedings of any labor union or organize any such employees.
2.17 Interested Party Transactions. Except as disclosed in the JTS
Disclosure Schedule, neither JTS nor any of its subsidiaries is indebted to any
director, officer, employee or agent of JTS or any of its subsidiaries (except
for amounts due as normal salaries and in reimbursement of ordinary expenses),
and no such person is indebted to JTS or any of its subsidiaries. Except as
disclosed in the JTS Disclosure Schedule, no officer, director or stockholder of
JTS or any affiliate of such person has, either directly or indirectly, (i) an
interest in any corporation, partnership, firm or other person or entity which
furnishes or sells services or products which are similar to those furnished or
sold by JTS or (ii) a beneficial interest in a contract or agreement to which
JTS is a party or by which JTS may be bound. For purposes of this Section 2.17,
there shall be disregarded any interest which arose solely from the ownership of
less than a one percent (1%) equity interest in a corporation whose stock is
regularly traded on a national securities exchange or over-the-counter market.
2.18 Insurance. JTS and each of its subsidiaries have policies of
insurance and bonds of the type and in amounts customarily carried by persons
conducting businesses or owning assets similar to those of JTS and its
subsidiaries. There is no claim pending under any of such policies or bonds as
to which coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds. All premiums due and payable under all such policies and
bonds have been paid and JTS and its subsidiaries are otherwise in compliance
with the terms of such policies and bonds. JTS has no knowledge of any
threatened termination of, or premium increase with respect to, any of such
policies.
2.19 Compliance With Laws. Each of JTS and its subsidiaries has
complied with, are not in violation of, and have not received any notices of
violation with respect to, any federal, state, local or foreign statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for such violations or failures to comply as
could not be reasonably expected to have a Material Adverse Effect on JTS and
its subsidiaries, taken as a whole.
2.20 Minute Books. The minute books of JTS and its subsidiaries made
available to Atari contain a complete and accurate summary of all meetings of
directors and stockholders or actions by written consent since the time of
incorporation of JTS and the respective subsidiaries through the date of this
Agreement, and reflect all transactions referred to in such minutes accurately
in all material respects.
2.21 Complete Copies of Materials. JTS has delivered or made available
true and complete copies of each document which has been requested by Atari or
its counsel in connection with their legal and accounting review of JTS and its
subsidiaries.
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2.22 Brokers' and Finders' Fees. JTS has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
2.23 Registration Statement; Proxy Statement/Prospectus. The
information supplied by JTS for inclusion in the registration statement on Form
S-4 (or such other or successor form as shall be appropriate, the "Registration
Statement") pursuant to which the shares of JTS Common Stock to be issued in the
Merger will be registered with the Securities and Exchange Commission (the
"SEC") shall not at the time the Registration Statement (including any
amendments or supplements thereto) is declared effective by the SEC 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 therein, in
light of the circumstances under which they were made, not misleading. The
information supplied by JTS for inclusion in the proxy statement/prospectus to
be sent to the stockholders of JTS and Atari in connection with the meeting of
JTS's stockholders to consider the Merger (the "JTS Stockholders Meeting") and
in connection with the meeting of Atari's stockholders to consider the Merger
(the "Atari Stockholders Meeting") (such proxy statement/prospectus as amended
or supplemented is referred to herein as the "Proxy Statement") shall not, on
the date the Proxy Statement is first mailed to JTS's stockholders and Atari's
stockholders, at the time of the JTS Stockholders Meeting, at the time of the
Atari Stockholders Meeting and at the Effective Time, 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 omit to state any
material fact necessary in order to make the statements made therein not false
or misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the JTS Stockholders Meeting or the Atari Stockholders Meeting which
has become false or misleading. If at any time prior to the Effective Time any
event or information should be discovered by JTS which should be set forth in an
amendment to the Registration Statement or a supplement to the Proxy Statement,
JTS shall promptly inform Atari. Notwithstanding the fore going, JTS makes no
representation, warranty or covenant with respect to any information supplied by
Atari which is contained in any of the foregoing documents.
2.24 Vote Required. The affirmative votes of the holders of (i) a
majority of the shares of JTS Common Stock and JTS Series A Preferred Stock
outstanding on the record date set for the JTS Stockholders Meeting, voting
together, (ii) a majority of the shares of JTS Common Stock outstanding on the
record date set for the JTS Stockholders Meeting, voting separately as a class,
and (iii) at least two-thirds of the shares of JTS Series A Preferred
outstanding on the record date set for the JTS Stockholders Meeting, voting
separately as a class, are the only votes of the holders of any of JTS's capital
stock necessary to approve this Agreement and the transactions contemplated
hereby.
2.25 Board Approval. The Board of Directors of JTS has unanimously (i)
approved this Agreement and the Merger, (ii) determined that the Merger is in
the best interests of the stockholders of JTS and is on terms that are fair to
such stockholders and (iii) recommended that the stockholders of JTS approve
this Agreement and the Merger.
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2.26 Underlying Documents. True and complete copies of all underlying
documents set forth on the JTS Disclosure Schedule or described as having been
disclosed or delivered to Atari pursuant to this Agreement have been furnished
to Atari.
2.27 Representations Complete. None of the representations or
warranties made by JTS herein or in any Schedule hereto, including the JTS
Disclosure Schedule, or certificate furnished by JTS pursuant to this Agreement,
when all such documents are read together in their entirety, contains or will
contain at the Effective Time any untrue statement of a material fact, or omits
or will omit at the Effective Time to state any material fact necessary in order
to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ATARI
Except as disclosed in the Atari SEC Documents (as defined in Section
3.4) or in a document of even date herewith and delivered by Atari to JTS prior
to the execution and delivery of this Agreement and referring to the
representations and warranties in this Agreement (the "Atari Disclosure
Schedule"), Atari represents and warrants to JTS as follows:
3.1 Organization, Standing and Power. The Atari Disclosure Schedule
identifies each subsidiary of Atari that is a "significant subsidiary" of Atari
as defined by Rule 1-02(v) of Regulation S-X (the "Significant Subsidiaries").
Atari and each of its Significant Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization. Each of Atari and its Significant Subsidiaries has the corporate
power to own its properties and to carry on its business as now being conducted
and as proposed to be conducted and is duly qualified to do business and is in
good standing in each jurisdiction in which the failure to be so qualified and
in good standing would have a Material Adverse Effect on Atari and its
subsidiaries, taken as a whole. Atari has delivered a true and correct copy of
the Articles of Incorporation and Bylaws or other charter documents, as
applicable, of Atari and each of its Significant Subsidiaries, each as amended
to date, to JTS. Neither Atari nor any of its Significant Subsidiaries is in
violation of any of the provisions of its Articles of Incorporation or Bylaws or
equivalent organizational documents. Atari is the owner of all outstanding
shares of capital stock of each of its subsidiaries and all such shares are duly
authorized, validly issued, fully paid and nonassessable. All of the outstanding
shares of capital stock of each such subsidiary are owned by Atari free and
clear of all liens, charges, claims or encumbrances or rights of others. There
are no outstanding subscriptions, options, warrants, puts, calls, rights,
exchangeable or convertible securities or other commitments or agreements of any
character relating to the issued or unissued capital stock or other securities
of any such subsidiary, or otherwise obligating Atari or any such subsidiary to
issue, transfer, sell, purchase, redeem or otherwise acquire any such
securities. Except as disclosed in the Atari SEC Documents (as defined in
Section 3.4), Atari does not directly or indirectly own any equity or similar
interest in, or any interest convertible or exchangeable or exercisable for, any
equity or similar interest in, any corporation, partnership, joint venture or
other business association or entity.
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3.2 Capital Structure. The authorized capital stock of Atari consists
of 100,000,000 shares of Common Stock, $.01 par value, and 10,000,000 shares of
Preferred Stock, $.01 par value, of which there were issued and outstanding as
of the close of business on March 29, 1996, 63,727,318 shares of Common Stock
and no shares of Preferred Stock. There are no other outstanding shares of
capital stock or voting securities of Atari, other than shares of Atari Common
Stock issued after March 29, 1996 upon the exercise of options issued under the
Atari 1986 Stock Option Plan (the "Atari Stock Option Plan"). All outstanding
shares of Atari have been duly authorized, validly issued, fully paid and are
nonassessable and free of any liens or encumbrances other than any liens or
encumbrances created by or imposed upon the holders thereof, and are not subject
to preemptive rights or rights of first refusal created by statute, the Articles
of Incorporation or Bylaws of Atari or any agreement to which Atari is a party
or by which it is bound. As of the close of business on March 29, 1996, Atari
has reserved 3,000,000 shares of Common Stock for issuance to employees,
directors and consultants pursuant to the Atari Stock Option Plan, of which
599,674 shares have been issued pursuant to option exercises, and 899,125 shares
are subject to outstanding, unexercised options. Since March 29, 1996, Atari has
not issued or granted additional options under the Atari Stock Option Plan.
There are no other options, warrants, calls, rights, commitments or agreements
of any character to which Atari is a party or by which it is bound obligating
Atari to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of the capital stock of
Atari or obligating Atari to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement.
3.3 Authority. Atari has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Atari, subject only to the approval of the
Merger by the Atari stockholders as contemplated by Section 6.1(a). This
Agreement has been duly executed and delivered by Atari and constitutes the
valid and binding obligations of Atari. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated hereby
will not, conflict with, or result in any violation of, or default under (with
or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under (i) any provision of the Articles of Incorporation or Bylaws of
Atari or any of its Significant Subsidiaries, as amended, or (ii) any material
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Atari or any of its Significant
Subsidiaries or any of their properties or assets. No consent, approval, order
or authorization of, or registration, declaration or filing with, any
Governmental Entity, is required by or with respect to Atari or any of its
Significant Subsidiaries in connection with the execution and delivery of this
Agreement by Atari or the consummation by Atari of the transactions contemplated
hereby, except for (i) the filing of the Certificate of Merger as provided in
Section 1.2, (ii) the filing with the SEC and the American Stock Exchange of the
Proxy Statement relating to the Atari Stockholders Meeting, (iii) the filing of
a Form 8-K and Form 10-C with the SEC and the American Stock Exchange within 15
days and 10 days, respectively, after the Closing Date, (iv) any filings as may
be required under applicable state securities laws and the securities laws of
any foreign country, (v) such filings as may be required under HSR, (vi) such
filings as may be required under the rules and regulations of the American Stock
Exchange, and (vii) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a Material Adverse
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Effect on Atari and its subsidiaries, taken as a whole, and would not prevent,
alter or materially delay any of the transactions contemplated by this
Agreement. The Atari Disclosure Schedule sets forth a full and complete list of
all necessary consents, waivers and approvals of third parties applicable to the
operations of Atari that are required to be obtained by Atari in connection with
the execution and delivery of this Agreement or the Merger Agreement by Atari or
the consummation by Atari of the transactions contemplated hereby or thereby,
except any such consents, waivers and approvals, which, if not obtained, would
not have a Material Adverse Effect on Atari and its subsidiaries, taken as a
whole. Prior to the Closing Date, Atari will obtain all such consents.
3.4 SEC Documents; Financial Statements. Atari has furnished to JTS a
true and complete copy of each report, registration statement, definitive proxy
statement, and other filings filed with the SEC by Atari since January 1, 1993
(other than filings pursuant to Section 16 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any registration statement on Form
S-8), and prior to the Effective Time, Atari will have furnished JTS with true
and complete copies of any additional documents (other than filings pursuant to
Section 16 of the Exchange Act, and any registration statement on Form S-8)
filed with the SEC by Atari prior to the Effective Time (collectively, the
"Atari SEC Documents"). As of their respective filing dates, the Atari SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the Securities Act, and none of the Atari SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not misleading,
except to the extent corrected by a subsequently filed Atari SEC Document. The
financial statements of Atari, including the notes thereto, included in the
Atari SEC Documents (the "Atari Financial Statements") were complete and correct
in all material respects as of their respective dates, complied as to form in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto as of their
respective dates, and have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent throughout the periods
indicated and consistent with each other (except as may be indicated in the
notes thereto or, in the case of unaudited statements included in Quarterly
Reports on Form 10-Qs, as permitted by Form 10-Q of the SEC). The Atari
Financial Statements are in accordance with the books and records of Atari and
fairly present the consolidated financial condition and operating results of
Atari and its subsidiaries at the dates and during the periods indicated therein
(subject, in the case of unaudited statements, to normal, recurring year-end
adjustments). There has been no change in Atari accounting policies except as
described in the notes to the Atari Financial Statements.
3.5 Absence of Certain Changes. Since December 31, 1995 (the "Atari
Balance Sheet Date"), Atari has conducted its business in the ordinary course
consistent with past practice and there has not occurred: (i) any change, event
or condition (whether or not covered by insurance) that has resulted in, or
might reasonably be expected to result in, a Material Adverse Effect to Atari
and its subsidiaries, taken as a whole; (ii) any acquisition, sale or transfer
of any material asset of Atari or any of its subsidiaries other than in the
ordinary course of business and consistent with past practice; (iii) any change
in accounting methods or practices (including any change in depreciation or
amortization policies or rates) by Atari or any revaluation by Atari of any of
its assets; (iv) any issuance or agreement to issue or any commitment to issue
any equity security, bond, note or other security of Atari or any of its
subsidiaries; (v) any declaration, setting aside, or payment of a dividend or
other distribution with respect to the shares
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of Atari, or any direct or indirect redemption, purchase or other acquisition by
Atari of any of its shares of capital stock; (vi) any material contract entered
into by Atari, other than in the ordinary course of business and as provided to
JTS, or any amendment or termination of, or default under, any material contract
to which Atari is a party or by which it is bound; or (vii) any negotiation or
agreement by Atari or any of its subsidiaries to do any of the things described
in the preceding clauses (i) through (vii) (other than negotiations with JTS
regarding the transactions contemplated by this Agreement).
3.6 Absence of Undisclosed Liabilities. Atari has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
Balance Sheet included in Atari's Annual Report on Form 10-K for the period
ended December 31, 1995 (the "Atari Balance Sheet"), (ii) those incurred in the
ordinary course of business and not required to be set forth in the Atari
Balance Sheet under generally accepted accounting principles, and (iii) those
incurred in the ordinary course of business since the Atari Balance Sheet Date
and consistent with past practice.
3.7 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Atari or any of its
subsidiaries, threatened against Atari or any of its subsidiaries or any of
their respective properties or any of their respective officers or directors (in
their capacities as such) that, individually or in the aggregate, could have a
Material Adverse Effect on Atari and its subsidiaries, taken as a whole. There
is no judgment, decree or order against Atari or any of its subsidiaries or, to
the knowledge of Atari or any of its subsidiaries, any of their respective
directors or officers (in their capacities as such) that could prevent, enjoin,
alter or delay any of the transactions contemplated by this Agreement, or that
could have a Material Adverse Effect on Atari and its subsidiaries, taken as a
whole. The outcome of the matter In re The Federated Group, Inc. Alleged Debtor
U.S.B.C. (N.D.Cal. Div. 5) No. 92-50412-JRG Chapter 7, is not reasonably likely
to have a Material Adverse Effect on Atari and its subsidiaries, taken as a
whole.
3.8 Restrictions on Business Activities. There is no agreement,
judgment, injunction, order or decree binding upon Atari or any of its
subsidiaries which has or could have the effect of prohibiting or materially
impairing any current or future business practice of Atari or any of its
subsidiaries, any acquisition of property by Atari or any of its subsidiaries or
the conduct of business by Atari or any of its subsidiaries as currently
conducted or as proposed to be conducted by Atari or any of its subsidiaries.
3.9 Governmental Authorization. Atari and each of its subsidiaries have
obtained each federal, state, county, local or foreign governmental consent,
license, permit, grant, or other authorization of a Governmental Entity (i)
pursuant to which Atari or any of its subsidiaries currently operates or holds
any interest in any of its properties or (ii) which is required for the
operation of Atari's or any of its subsidiaries' business or the holding of any
such interest (herein collectively called "Atari Authorizations"), and all of
such Atari Authorizations are in full force and effect, except where the failure
to obtain or have any of such Atari Authorizations could not reasonably be
expected to have a Material Adverse Effect on Atari and its subsidiaries, taken
as a whole.
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3.10 Title to Property. Atari and its Significant Subsidiaries have
good and marketable title to all of their respective properties, interests in
properties and assets, real and personal, reflected in the Atari Balance Sheet
or acquired after the Atari Balance Sheet Date (except properties, interests in
properties and assets sold or otherwise disposed of since the Atari Balance
Sheet Date thereof in the ordinary course of business), free and clear of all
mortgages, liens, pledges, charges or encumbrances of any kind or character,
except (i) the lien of current taxes not yet due and payable, (ii) such
imperfections of title, liens and easements as do not and will not materially
detract from or interfere with the use of the properties subject thereto or
affected thereby, or otherwise materially impair business operations involving
such properties and (iii) liens securing debt which is reflected on the Atari
Balance Sheet. The plants, property and equipment of Atari and its Significant
Subsidiaries that are used in the operations of their businesses are in good
operating condition and repair. All properties used in the operations of Atari
and its Significant Subsidiaries are reflected in the Atari Balance Sheet to the
extent generally accepted accounting principles require the same to be
reflected. The Atari Disclosure Schedule identifies each parcel of real property
owned or leased by Atari or any of its Significant Subsidiaries
3.11 Intellectual Property. Atari and its Significant Subsidiaries own,
or are licensed or otherwise possess legally enforceable rights to use all
Intellectual Property that are used or proposed to be used in the business of
Atari and its Significant Subsidiaries as currently conducted or as proposed to
be conducted by Atari and its subsidiaries, except to the extent that the
failure to have such rights have not had and could not reasonably be expected to
have a Material Adverse Effect on Atari and its subsidiaries, taken as a whole.
To the knowledge of Atari and its Significant Subsidiaries, there is no material
unauthorized use, disclosure, infringement or misappropriation of any
Intellectual Property rights of Atari or any of its subsidiaries, any trade
secret material to Atari or any of its subsidiaries, or any Intellectual
Property right of any third party to the extent licensed by or through Atari or
any of its subsidiaries, by any third party, including any employee or former
employee of Atari or any of its subsidiaries. Neither Atari nor any of its
subsidiaries has entered into any agreement to indemnify any other person
against any charge of infringement of any Intellectual Property, other than
indemnification provisions (i) listed on the Atari Disclosure Schedule or (ii)
contained in purchase orders arising in the ordinary course of business.
3.12 Environmental Matters.
(a) To the knowledge of Atari and its Significant Subsidiaries, no
Hazardous Material is present in, on or under any property that Atari or any of
its subsidiaries has at any time owned, operated, occupied or leased (herein an
"Atari Facility"), except to the extent that such presence has not had and could
not reasonably be expected to have a Material Adverse Effect on Atari and its
subsidiaries, taken as a whole.
(b) To the knowledge of Atari and its Significant Subsidiaries,
neither Atari nor any of its subsidiaries has engaged in a Hazardous Materials
Activity in material violation of any applicable foreign, federal, state or
local statute, rule, regulation, order or law.
(c) To the knowledge of Atari and its Significant Subsidiaries,
each of Atari and its subsidiaries is and at all times has been in compliance
with all foreign, federal, state and local laws relating
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to emissions, discharges, releases or threatened releases of Hazardous
Materials, except to the extent noncompliance with such laws has not had and
could not reasonably be expected to have a Material Adverse Effect on Atari and
its subsidiaries, taken as a whole.
(d) No action, proceeding, permit revocation, writ, injunction or
claim is pending, or to the knowledge of Atari and its subsidiaries threatened,
concerning the Hazardous Materials Activities of Atari or any of its
subsidiaries and/or any Atari Facilities. Neither Atari nor any of its
Significant Subsidiaries is aware of any fact or circumstance which could impose
any material environmental liability upon Atari or any of its subsidiaries.
3.13 Taxes. Atari and each of its subsidiaries, and any consolidated,
combined, unitary or aggregate group for Tax purposes of which Atari or any of
its subsidiaries is or has been a member have timely filed all Tax Returns
required to be filed by it, have paid all Taxes shown thereon to be due and has
provided adequate accruals in accordance with generally accepted accounting
principles in its financial statements for any Taxes that have not been paid,
whether or not shown as being due on any Tax Returns. Except as disclosed in the
Atari SEC Documents, (i) no material claim for Taxes has become a lien against
the property of Atari or any of its subsidiaries or is being asserted against
Atari or any of its subsidiaries other than liens for Taxes not yet due and
payable, (ii) no audit of any Tax Return of Atari or any of its subsidiaries is
being conducted by a Tax authority, (iii) no extension of the statute of
limitations on the assessment of any Taxes has been granted by Atari or any of
its subsidiaries and is currently in effect, and (iv) there is no agreement,
contract or arrangement to which Atari or any of its subsidiaries is a party
that may result in the payment of any amount that would not be deductible by
reason of Sections 280G, 162 or 404 of the Code. Neither Atari nor any of its
subsidiaries is a party to any tax sharing or tax allocation agreement nor does
Atari or any of its subsidiaries owe any amount under any such agreement. As
used herein, "Taxes" shall mean all taxes of any kind, including, without
limitation, those on or measured by or referred to as income, gross receipts,
sales, use, ad valorem, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, value added, property
or windfall profits taxes, customs, duties or similar fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any governmental authority,
domestic or foreign. As used herein, "Tax Return" shall mean any return, report
or statement required to be filed with any governmental authority with respect
to Taxes. Atari and each of its subsidiaries are in full compliance with all
terms and conditions of any Tax exemptions or other Tax-sharing agreement or
order of a foreign government and the consummation of the Merger shall not have
any adverse effect on the continued validity and effectiveness of any such Tax
exemption or other Tax-sharing agreement or order.
3.14 Employee Benefit Plans.
(a) The Atari Disclosure Schedule lists, with respect to Atari,
any ERISA affiliate of Atari or any subsidiary of Atari (i) all employee benefit
plans (as defined in Section 3(3) of ERISA), (ii) all loans to employees in
excess of $50,000, loans to officers, and any stock option, stock purchase,
phantom stock, stock appreciation right, supplemental retirement, severance,
sabbatical, disability, employee relocation, cafeteria (Code section 125), life
insurance or accident insurance plans, programs or arrangements, (iii) all
bonus, deferred compensation or incentive plans, programs or arrangements,
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(iv) other material fringe or employee benefit plans, programs or arrangements
that apply to senior management of Atari and that do not generally apply to all
employees, and (v) any current or former employment or executive compensation or
severance agreements, written or otherwise, as to which current or contingent
obligations of Atari of greater than $50,000 exist for the benefit of, or
relating to, any current or former employee, consultant or director of Atari
(together, the "Atari Employee Plans"), and a copy of each such Atari Employee
Plan and each summary plan description and annual report on the Form 5500 series
required to be filed with any government agency for each Atari Employee Plan for
the three most recent Plan years has been delivered to JTS.
(b) (i) None of the Atari Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person; (ii) there has
been no "prohibited transaction," as such term is defined in Section 406 of
ERISA and Section 4975 of the Code, with respect to any Atari Employee Plan,
which could reasonably be expected to have, in the aggregate, a Material Adverse
Effect on Atari or its subsidiaries; (iii) all Atari Employee Plans have been
administered in compliance with the requirements prescribed by any and all
statutes, rules and regulations (including ERISA and the Code, orders, or
governmental rules and regulations currently in effect with respect thereto and
including all applicable requirements for notification to participants or to the
Department of Labor, Internal Revenue Service or Secretary of the Treasury),
except as would not have, in the aggregate, a Material Adverse Effect on Atari
or its subsidiaries, and Atari and each of its subsidiaries have performed all
obligations required to be performed by them under, are not in any material
respect in default under or violation of, and have no knowledge of any material
default or violation by any other party to, any of the Atari Employee Plans;
(iv) each Atari Employee Plan intended to qualify under Section 401(a) of the
Code and each trust intended to qualify under Section 501(a) of the Code has
received a favorable determination letter from the IRS as to such qualification,
and nothing has occurred which could reasonably be expected to cause the loss of
such qualification or exemption; (v) all material contributions required to be
made by Atari or any of its subsidiaries to any Atari Employee Plan have been
made on or before their due dates and a reasonable amount has been accrued for
contributions to each Atari Employee Plan for the current plan years; and (vi)
no Atari Employee Plan is covered by, and neither Atari nor any subsidiary has
incurred or expects to incur any liability under Title IV of ERISA or Section
412 of the Code.
(c) With respect to each Atari Employee Plan that constitutes a
group health plan within the meaning of Section 5000(b)(1) of the Code or
Section 607(1) of ERISA, Atari and each of its United States subsidiaries have
complied with the applicable health care continuation and notice provisions of
COBRA and the proposed regulations thereunder, except to the extent that such
failure to comply would not, in the aggregate, have a Material Adverse Effect on
Atari and its subsidiaries.
3.15 Certain Agreements Affected by the Merger. Neither the execution
and delivery of this Agreement nor the consummation of the transaction
contemplated hereby will (i) result in any payment (including, without
limitation, severance, unemployment compensation, golden parachute, bonus or
otherwise) becoming due to any director or employee of Atari or any of its
subsidiaries, (ii) increase any benefits otherwise payable by Atari or (iii)
result in the acceleration of the time of payment or vesting of any such
benefits.
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3.16 Employee Matters. Except as to matters which could not, in the
aggregate, have a Material Adverse Effect on Atari and its subsidiaries, taken
as a whole, Atari and each of its Significant Subsidiaries are in compliance in
all respects with all currently applicable laws and regulations respecting
employment, discrimination in employment, terms and conditions of employment,
wages, hours and occupational safety and health and employment practices, and is
not engaged in any unfair labor practice. There are no pending claims against
Atari or any of its subsidiaries under any workers compensation plan or policy
or for long term disability. Neither Atari nor any of its subsidiaries has any
material obligations under COBRA with respect to any former employees or
qualifying beneficiaries thereunder. There are no controversies pending or, to
the knowledge of Atari or any of its subsidiaries, threatened, between Atari or
any of its subsidiaries and any of their respective employees, which
controversies have or could have a Material Adverse Effect on Atari and its
subsidiaries, taken as a whole. Neither Atari nor any of its subsidiaries is a
party to any collective bargaining agreement or other labor unions contract nor
does Atari nor any of its subsidiaries know of any activities or proceedings of
any labor union or organize any such employees.
3.17 Interested Party Transactions. Except as disclosed in the Atari
Disclosure Schedule or the Atari SEC Documents, neither Atari nor any of its
subsidiaries is indebted to any director, officer, employee or agent of Atari or
any of its subsidiaries (except for amounts due as normal salaries and in
reimbursement of ordinary expenses), and no such person is indebted to Atari or
any of its subsidiaries. Except as disclosed in the Atari Disclosure Schedule or
the Atari SEC Documents, no officer, director or shareholder of Atari or any
affiliate of such person has, either directly or indirectly, (i) an interest in
any corporation, partnership, firm or other person or entity which furnishes or
sells services or products which are similar to those furnished or sold by Atari
or (ii) a beneficial interest in a contract or agreement to which Atari is a
party or by which Atari may be bound. For purposes of this Section 3.17, there
shall be disregarded any interest which arose solely from the ownership of less
than a one percent (1%) equity interest in a corporation whose stock is
regularly traded on a national securities exchange or over-the-counter market.
3.18 Insurance. Atari and each of its Significant Subsidiaries have
policies of insurance and bonds of the type and in amounts customarily carried
by persons conducting businesses or owning assets similar to those of Atari and
its subsidiaries. There is no claim pending under any of such policies or bonds
as to which coverage has been questioned, denied or disputed by the underwriters
of such policies or bonds. All premiums due and payable under all such policies
and bonds have been paid and Atari and its Significant Subsidiaries are
otherwise in compliance with the terms of such policies and bonds. Atari has no
knowledge of any threatened termination of, or premium increase with respect to,
any of such policies.
3.19 Compliance With Laws. Each of Atari and its Significant
Subsidiaries has complied with, are not in violation of, and have not received
any notices of violation with respect to, any federal, state, local or foreign
statute, law or regulation with respect to the conduct of its business, or the
ownership or operation of its business, except for such violations or failures
to comply as could not be reasonably expected to have a Material Adverse Effect
on Atari and its subsidiaries, taken as a whole.
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3.20 Minute Books. The minute books of Atari and its subsidiaries made
available to JTS contain a complete and accurate summary of all meetings of
directors and stockholders or actions by written consent since the time of
incorporation of Atari and the respective subsidiaries through the date of this
Agreement, and reflect all transactions referred to in such minutes accurately
in all material respects.
3.21 Complete Copies of Materials. Atari has delivered or made
available true and complete copies of each document which has been requested by
JTS or its counsel in connection with their legal and accounting review of Atari
and its subsidiaries.
3.22 Broker's and Finders' Fees. Atari has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
3.23 Registration Statement; Proxy Statement/Prospectus. The
information supplied by Atari for inclusion in the Registration Statement shall
not, at the time the Registration Statement (including any amendments or
supplements thereto) is declared effective by the SEC, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The information supplied by Atari for inclusion
in the Proxy Statement shall not, on the date the Proxy Statement is first
mailed to JTS's stockholders and Atari's stockholders, at the time of the JTS
Stockholders Meeting, at the time of the Atari Stockholders Meeting and at the
Effective Time, 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 omit to state any material fact necessary in order to make the
statements therein not false or misleading; or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the JTS Stockholders Meeting or the Atari
Stockholders Meeting which has become false or misleading. If at any time prior
to the Effective Time any event or information should be discovered by Atari
which should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement, Atari will promptly inform JTS.
Notwithstanding the foregoing, Atari makes no representation, warranty or
covenant with respect to any information supplied by JTS which is contained in
any of the foregoing documents.
3.24 Opinion of Financial Advisor. Atari has been advised in writing by
its financial advisor, Montgomery Securities, that in such advisor's opinion, as
of the date hereof, the consideration to be paid by Atari hereunder is fair,
from a financial point of view, to Atari.
3.25 Board Approval. The Board of Directors of Atari has unanimously
(i) approved this Agreement and the Merger, (ii) determined that the Merger is
in the best interests of its stockholders and is on terms that are fair to such
stockholders and (iii) recommended that its stockholders approve this Agreement
and the Merger.
3.26 Vote Required. The affirmative vote of the holders of a majority
of the shares of Atari Common Stock outstanding on the record date set for the
Atari Stockholders Meeting is the only vote of the holders of any of Atari's
capital stock necessary to approve this Agreement and the transactions
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contemplated hereby. No shareholder of Atari will be entitled to statutory
dissenters rights under Nevada Law as a result of the Merger.
3.27 Underlying Documents. True and complete copies of all underlying
documents set forth on the Atari Disclosure Schedule or described as having been
disclosed or delivered to JTS pursuant to this Agreement have been furnished to
JTS.
3.28 Representations Complete. None of the representations or
warranties made by Atari herein or in any Schedule hereto, including the Atari
Disclosure Schedule, or certificate furnished by Atari pursuant to this
Agreement, or the Atari SEC Documents, when all such documents are read together
in their entirety, contains or will contain at the Effective Time any untrue
statement of a material fact, or omits or will omit at the Effective Time to
state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of JTS and Atari. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, each of JTS and Atari agrees (except to
the extent expressly contemplated by this Agreement or as consented to in
writing by the other), to carry on its and its subsidiaries' business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay and to cause its subsidiaries to pay debts and
taxes when due (subject to good faith disputes over such debts or taxes) and to
pay or perform other obligations when due. Each of JTS and Atari agrees to
promptly notify the other of any event or occurrence not in the ordinary course
of its or its subsidiaries' business, and of any event which could have a
Material Adverse Effect on it and its subsidiaries, taken as a whole. Without
limiting the foregoing, except as expressly contemplated by this Agreement,
neither JTS nor Atari shall do, cause or permit any of the following, or allow,
cause or permit any of its subsidiaries to do, cause or permit any of the
following, without the prior written consent of the other:
(a) Charter Documents. Cause or permit any amendments to its
Certificate of Incorporation or Bylaws (except as contemplated by Section 1.4
hereof);
(b) Issuance of Securities. Issue, deliver or sell or authorize or
propose the issuance, delivery or sale of, or purchase or propose the purchase
of, any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities, other than the issuance of shares of its Common Stock
pursuant to the exercise of stock options, warrants or other rights therefor
outstanding as of the date of this Agreement; provided, however, that in
addition to any grants specifically described on the JTS Disclosure Schedule,
JTS may, in the ordinary course of business consistent with past practice, grant
options for the purchase of up to 250,000 shares of JTS Common Stock under the
JTS Stock Option Plan and issue shares of JTS Common Stock upon the
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exercise of such options; and provided, further, that Atari may issue securities
under the Atari Option Plan.
(c) Dividends; Changes in Capital Stock. Declare or pay any
dividends on or make any other distributions (whether in cash, stock or
property) in respect of any of its capital stock, or split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock except from former employees, directors and
consultants in accordance with agreements providing for the repurchase of shares
in connection with any termination of service to it or its subsidiaries;
(d) Acquisitions. Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to its and its parent's/subsidiaries' business, taken as a whole;
(e) Taxes. Other than in the ordinary course of business, make or
change any material election in respect of Taxes, adopt or change any accounting
method in respect of Taxes, file any material Return or any amendment to a
material Return, enter into any closing agreement, settle any claim or
assessment in respect of Taxes, or consent to any extension or waiver of the
limitation period applicable to any claim or assessment in respect of Taxes;
(f) Stock Option Plans, Etc. Accelerate, amend or change the
period of exercisability of options, warrants or other rights granted under its
employee stock plans or authorize cash payments in exchange for any options,
warrants or other rights granted under any of such plans;
(g) Other. Take, or agree in writing or otherwise to take, any of
the actions described in Sections 4.1(a) through (f) above, or any action which
would make any of its representations or warranties contained in this Agreement
untrue or incorrect or prevent it from performing or cause it not to perform its
covenants hereunder.
4.2 Conduct of Business of JTS. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, except as expressly contemplated by this Agreement, JTS
shall not do, cause or permit any of the following, or allow, cause or permit
any of its subsidiaries to do, cause or permit any of the following, without the
prior written consent of Atari:
(a) Material Contracts. Enter into any material contract or
commitment, or violate, amend or otherwise modify or waive any of the terms of
any of its material contracts, other than in the ordinary course of business
consistent with past practice;
(b) Intellectual Property. Transfer to any person or entity any
rights to its Intellectual Property other than in the ordinary course of
business consistent with past practice;
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(c) Dispositions. Sell, lease, license or otherwise dispose of or
encumber any of its properties or assets which are material, individually or in
the aggregate, to its and its subsidiaries' business, taken as a whole, except
in the ordinary course of business consistent with past practice;
(d) Indebtedness. Incur any indebtedness for borrowed money (except
amounts borrowed under JTS's existing revolving credit line or drawdowns of
existing credit facilities for working capital or construction purposes only) or
guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others;
(e) Revaluation. Revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business and other than as
disclosed in the JTS Disclosure Schedule;
(f) Payment of Obligations. Pay, discharge or satisfy in an amount
in excess of $50,000 in any one case or $250,000 in the aggregate, any claim,
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise) arising other than in the ordinary course of business, other than
the payment, discharge or satisfaction of liabilities reflected or reserved
against in the JTS Financial Statements;
(g) Termination or Waiver. Terminate or waive any right of
substantial value, other than in the ordinary course of business;
(h) Employee Benefit Plans. Adopt or amend any employee benefit or
stock purchase or option plan;
(i) Lawsuits. Commence a lawsuit other than (i) for the routine
collection of bills, (ii) in such cases where it in good faith determines that
failure to commence suit would result in the material impairment of a valuable
aspect of its business, provided that it consults with Atari prior to the filing
of such a suit, (iii) in such cases in which the damages or legal fees are not
reasonably expected to material, or (iv) for a breach of this Agreement; or
(j) Other. Take, or agree in writing or otherwise to take, any of
the actions described in Sections 4.2(a) through (i) above, or any action which
would make any of its representations or warranties contained in this Agreement
untrue or incorrect or prevent it from performing or cause it not to perform its
covenants hereunder.
4.3 Conduct of Business of Atari. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, except as expressly contemplated by this
Agreement, Atari shall not do, cause or permit any of the following, or allow,
cause or permit any of its subsidiaries to do, cause or permit any of the
following, without the prior written consent of JTS:
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(a) Material Contracts. Enter into any material contract or
commitment, or violate, amend or otherwise modify or waive any of the terms of
any of its material contracts, other than in the ordinary course of business
consistent with past practice;
(b) Intellectual Property. Transfer to any person or entity any
rights to its Intellectual Property other than in the ordinary course of
business consistent with past practice;
(c) Dispositions. Sell, lease, license or otherwise dispose of or
encumber any of its properties or assets which are material, individually or in
the aggregate, to its and its subsidiaries' business, taken as a whole, except
in the ordinary course of business consistent with past practice;
(d) Indebtedness. Incur any indebtedness for borrowed money (except
amounts borrowed under JTS's existing revolving credit line or drawdowns of
existing credit facilities for working capital or construction purposes only) or
guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others;
(e) Revaluation. Revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business and other than as
disclosed in the Atari Disclosure Schedule;
(f) Payment of Obligations. Pay, discharge or satisfy in an amount
in excess of $50,000 in any one case or $250,000 in the aggregate, any claim,
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise) arising other than in the ordinary course of business, other than
the payment, discharge or satisfaction of liabilities reflected or reserved
against in the Atari Financial Statements;
(g) Capital Expenditures. Make any capital expenditures, capital
additions or capital improvements except in the ordinary course of business and
consistent with past practice, and in any event not to exceed $25,000 per
quarter;
(h) Termination or Waiver. Terminate or waive any right of
substantial value, other than in the ordinary course of business;
(i) Employee Benefit Plans. Adopt or amend any employee benefit or
stock purchase or option plan;
(j) Lawsuits. Commence a lawsuit other than (i) for the routine
collection of bills, (ii) in such cases where it in good faith determines that
failure to commence suit would result in the material impairment of a valuable
aspect of its business, provided that it consults with JTS prior to the filing
of such a suit, (iii) in such cases in which the damages or legal fees are not
reasonably expected to material, or (iv) for a breach of this Agreement; or
(k) Other. Take, or agree in writing or otherwise to take, any of
the actions described in Sections 4.3(a) through (j) above, or any action which
would make any of its representations or
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warranties contained in this Agreement untrue or incorrect or prevent it from
performing or cause it not to perform its covenants hereunder.
4.4 No Other JTS Negotiations. From and after the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms, JTS shall not, directly or indirectly
(i) solicit, initiate discussion or engage in negotiations with any person
(whether such negotiations are initiated by JTS or otherwise) or take any other
action intended or designed to facilitate the efforts of any person, other than
Atari, relating to the possible acquisition of JTS or any of its subsidiaries
(whether by way of merger, purchase of capital stock, purchase of assets of
otherwise) or any of its or their capital stock or any material portion of its
or their assets (with any such efforts by any such person, including a firm
proposal to make such an acquisition, to be referred to as a "JTS Acquisition
Proposal") (ii) provide non-public information with respect to JTS or any of its
subsidiaries to any person, other than Atari, relating to a possible JTS
Acquisition Proposal by any person, other than Atari, (iii) enter into an
agreement with any person, other than Atari, providing for a possible JTS
Acquisition Proposal, or (iv) make or authorize any statement, recommendation or
solicitation in support of any possible JTS Acquisition Proposal by any person
other than Atari. If JTS or any of its subsidiaries receives any unsolicited
offer or proposal to enter negotiations relating to a JTS Acquisition Proposal,
JTS shall immediately notify Atari thereof, including information as to the
identity of the party making any such offer or proposal and the specific terms
of such offer or proposal, as the case may be. JTS recognizes and acknowledges
that a breach of this Section 4.4 may cause irreparable and material loss and
damage to Atari as to which Atari may not have an adequate remedy at law or in
damages and that, accordingly, JTS agrees that the issuance of an injunction or
other equitable remedy is the appropriate remedy for any such breach.
4.5 No Other Atari Negotiations. From and after the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms, Atari shall not, directly or indirectly
(i) solicit, initiate discussion or engage in negotiations with any person
(whether such negotiations are initiated by Atari or otherwise) or take any
other action intended or designed to facilitate the efforts of any person, other
than JTS, relating to the possible acquisition of Atari (whether by way of
merger, purchase of capital stock, purchase of assets of otherwise) or any of
its capital stock or any material portion of its assets (with any such efforts
by any such person, including a firm proposal to make such an acquisition, to be
referred to as an "Atari Acquisition Proposal") (ii) provide non-public
information with respect to Atari to any person, other than JTS, relating to a
possible Atari Acquisition Proposal by any person, other than JTS, (iii) enter
into an agreement with any person, other than JTS, providing for a possible
Atari Acquisition Proposal, or (iv) make or authorize any statement,
recommendation or solicitation in support of any possible Atari Acquisition
Proposal by any person other than JTS. If Atari receives any unsolicited offer
or proposal to enter negotiations relating to an Atari Acquisition Proposal,
Atari shall immediately notify JTS thereof, including information as to the
identity of the party making any such offer or proposal and the specific terms
of such offer or proposal, as the case may be. Atari recognizes and acknowledges
that a breach of this Section 4.5 may cause irreparable and material loss and
damage to JTS as to which JTS may not have an adequate remedy at law or in
damages and that, accordingly, JTS agrees that the issuance of an injunction or
other equitable remedy is the appropriate remedy for any such breach.
Notwithstanding the foregoing, nothing contained in this Agreement (i) shall
prevent the Board of Directors of Atari from referring any third party to this
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Section 4.5 or providing a copy of this Agreement (other than the JTS Disclosure
Schedule) to any third party, (ii) shall prevent the Board of Directors of Atari
from considering, negotiating, approving and recommending to the shareholders of
Atari an unsolicited bona fide written Atari Acquisition Proposal which the
Board of Directors of Atari determines in good faith (after consultation with
its financial advisors and after consultation with outside counsel as to whether
the Board of Directors is required to do so in order to discharge properly its
fiduciary duties to shareholders under applicable law) would result in a
transaction more favorable to the Company's shareholders from a financial point
of view than the transaction contemplated by this Agreement (any such Atari
Acquisition Proposal being referred to herein as a "Superior Atari Proposal").
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement/Prospectus; Registration Statement. As promptly as
practicable after the execution of this Agreement, JTS and Atari shall prepare,
and Atari shall file with the SEC, preliminary proxy materials relating to the
approval of the Merger and the transactions contemplated hereby by the
stockholders of each of JTS and Atari and, as promptly as practicable following
receipt of SEC comments thereon, JTS and Atari shall file with the SEC a
Registration Statement on Form S-4 (or such other or successor form as shall be
appropriate), which complies in form with applicable SEC requirements and shall
use all reasonable efforts to cause the Registration Statement to become
effective as soon thereafter as practicable. The Proxy Statement shall include
the recommendation of the Board of Directors of JTS in favor of the Merger;
provided that such recommendation may not be included or may be withdrawn if
previously included if JTS's Board of Directors, upon written advice of its
outside legal counsel, shall determine that to include such recommendation or
not withdraw such recommendation if previously included would constitute a
breach of the Board's fiduciary duty under applicable law. The Proxy Statement
shall include the recommendation of the Board of Directors of Atari in favor of
the Merger; provided that such recommendation may not be included or may be
withdrawn if previously included if Atari's Board of Directors, upon written
advice of its outside legal counsel, shall determine that to include such
recommendation or not withdraw such recommendation if previously included would
constitute a breach of the Board's fiduciary duty under applicable law.
5.2 Meetings of Stockholders.
(a) JTS shall promptly after the date hereof take all action
necessary in accordance with Delaware Law and its Certificate of Incorporation
and Bylaws to convene the JTS Stockholders Meeting on or prior to June 30, 1996
or as soon thereafter as is practicable. JTS shall consult with Atari and use
all reasonable efforts to hold the JTS Stockholders Meeting on the same day as
the Atari Stockholders Meeting and shall not postpone or adjourn (other than for
the absence of a quorum) the JTS Stockholders Meeting without the consent of
Atari. JTS shall use its best efforts to solicit from stockholders of JTS
proxies in favor of the Merger and shall take all other action necessary or
advisable to secure the vote or consent of stockholders required to effect the
Merger.
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(b) Atari shall promptly after the date hereof take all action
necessary in accordance with Nevada Law and its Articles of Incorporation and
Bylaws to convene the Atari Stockholders Meeting on or prior to June 30, 1996 or
as soon thereafter as is practicable. Atari shall consult with JTS and shall use
all reasonable efforts to hold the Atari Stockholders Meeting on the same day as
the JTS Stockholders Meeting and shall not postpone or adjourn (other than for
the absence of a quorum) the Atari Stockholders Meeting without the consent of
JTS. Atari shall use its best efforts to solicit from stockholders of Atari
proxies in favor of the Merger and shall take all other action necessary or
advisable to secure the vote or consent of stockholders required to effect the
Merger.
5.3 Access to Information. JTS shall afford Atari and its accountants,
counsel and other representatives, reasonable access during normal business
hours during the period prior to the Effective Time to (i) all of JTS's and its
subsidiaries' properties, books, contracts, commitments and records, and (ii)
all other information concerning the business, properties and personnel of JTS
and its subsidiaries as Atari may reasonably request. JTS agrees to provide to
Atari and its accountants, counsel and other representatives copies of internal
financial statements promptly upon request. Atari shall afford JTS and its
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time to (i) all of
Atari's and its subsidiaries' properties, books, contracts, commitments and
records, and (ii) all other information concerning the business, properties and
personnel of Atari and its subsidiaries as JTS may reasonably request. Atari
agrees to provide to JTS and its accountants, counsel and other representatives
copies of internal financial statements promptly upon request. No information or
knowledge obtained in any investigation pursuant to this Section 5.3 shall
affect or be deemed to modify any representation or warranty contained herein or
the conditions to the obligations of the parties to consummate the Merger.
5.4 Public Disclosure. Atari and JTS shall consult with each other
before issuing any press release or otherwise making any public statement or
making any other public (or non-confidential) disclosure regarding the terms of
this Agreement and the transactions contemplated hereby, and neither shall issue
any such press release or make any such statement or disclosure without the
prior approval of the other (which approval shall not be unreasonably withheld),
except as may be required by law.
5.5 Consents; Cooperation. Each of Atari and JTS shall promptly apply
for or otherwise seek, and use its best efforts to obtain, all consents and
approvals required to be obtained by it for the consummation of the Merger,
including those required under HSR, and shall use its best efforts to obtain all
necessary consents, waivers and approvals under any of its material contracts in
connection with the Merger for the assignment thereof or otherwise. The parties
hereto 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 and proposals made or
submitted by or on behalf of any party hereto in connection with proceedings
under or relating to HSR or any other federal or state antitrust or fair trade
law.
5.6 Continuity of Interest Certificates.
(a) Schedule 5.6(a) sets forth those persons who hold one percent
(1%) or more of the outstanding shares of JTS capital stock (the "JTS
Significant Stockholders"). JTS shall provide Atari
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such information and documents as Atari shall reasonably request for purposes of
reviewing such list. JTS shall use its best efforts to deliver or cause to be
delivered to Atari, concurrently with the execution of this Agreement (and in
each case prior to the Effective Time) from each of the JTS Significant
Stockholders, an executed Continuity of Interest Certificate in a form
reasonably satisfactory to counsel to Atari. The Surviving Company shall be
entitled to place appropriate legends on the certificates evidencing any JTS
Common Stock held by such JTS Significant Stockholders, and to issue appropriate
stop transfer instructions to the transfer agent for JTS Common Stock,
consistent with the terms of such Continuity of Interest Certificates.
(b) Schedule 5.6(b) sets forth those persons who hold five percent
(5%) or more of the outstanding shares of Atari capital stock (the "Atari
Significant Stockholders"). Atari shall provide JTS such information and
documents as JTS shall reasonably request for purposes of reviewing such list.
Atari shall use its best efforts to deliver or cause to be delivered to JTS,
concurrently with the execution of this Agreement (and in each case prior to the
Effective Time) from each of the Atari Significant Stockholders, an executed
Continuity of Interest Certificate in a form reasonably satisfactory to counsel
to JTS. The Surviving Company shall be entitled to place appropriate legends on
the certificates evidencing any JTS Common Stock to be received by such Atari
Significant Stockholders pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for JTS Common
Stock, consistent with the terms of such Continuity of Interest Certificates.
5.7 Voting Agreements.
(a) Prior to or concurrently with the execution of this Agreement,
each JTS stockholder named in Schedule 5.7(a) shall have executed and delivered
to Atari a Voting Agreement substantially in the form of Exhibit C-1 attached
hereto.
(b) Prior to or concurrently with the execution of this Agreement,
each Atari stockholder named in Schedule 5.7(b) shall have executed and
delivered to JTS a Voting Agreement substantially in the form of Exhibit C-2
attached hereto.
5.8 FIRPTA. Promptly following the Closing, JTS and Atari shall deliver
to the IRS appropriate notices that their capital stock is not a "U.S. Real
Property Interest" as defined in and in accordance with the requirements of
Treasury Regulation Section 1.897-2(h)(2).
5.9 Legal Requirements. Each of Atari and JTS will, and will cause
their respective subsidiaries to, take all reasonable actions necessary to
comply promptly with all legal requirements which may be imposed on them with
respect to the consummation of the transactions contemplated by this Agreement
and will promptly cooperate with and furnish information to any party hereto
necessary in connection with any such requirements imposed upon such other party
in connection with the consummation of the transactions contemplated by this
Agreement and will take all reasonable actions necessary to obtain (and will
cooperate with the other parties hereto in obtaining) any consent, approval,
order or authorization of, or any registration, declaration or filing with, any
Governmental Entity or other person, required to be obtained or made in
connection with the taking of any action contemplated by this Agreement.
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5.10 Blue Sky Laws. JTS shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the JTS Common Stock in connection with the
Merger. Atari shall use its best efforts to assist JTS as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable in connection with the issuance of JTS Common Stock in connection
with the Merger.
5.11 Atari Employee Benefit Plans. At the Effective Time, each
outstanding option to purchase shares of Atari Common Stock under the Atari
Stock Option Plan whether vested or unvested, will be assumed by JTS. Each such
option so assumed by JTS under this Agreement shall continue to have, and be
subject to, the same terms and conditions set forth in the Atari Stock Option
Plan immediately prior to the Effective Time, except that (i) such option will
be exercisable for that number of whole shares of JTS Common Stock equal to the
product of the number of shares of Atari Common Stock that were issuable upon
exercise of such option immediately prior to the Effective Time multiplied by
the Exchange Ratio, rounded down to the nearest whole number of shares of JTS
Common Stock, and (ii) the per share exercise price for the shares of JTS Common
Stock issuable upon exercise of such assumed option will be equal to the
quotient determined by dividing the exercise price per share of Atari Common
Stock at which such option was exercisable immediately prior to the Effective
Time by the Exchange Ratio, rounded up to the nearest whole cent. It is the
intention of the parties that the options so assumed by JTS qualify following
the Effective Time as incentive stock options as defined in Section 422 of the
Code to the extent such options qualified as incentive stock options prior to
the Effective Time.
5.12 Atari Debentures. Each Atari Debenture, upon its surrender to JTS
at any time at or following the Closing, shall be exchanged for a debenture in
substantially identical form (i) representing the right to convert into that
number of shares of JTS Common Stock equal to the number of shares of Atari
Common Stock for which such debenture was previously convertible multiplied by
the Exchange Ratio, rounded down to the nearest whole number of shares of JTS
Common Stock, and (ii) with a per share conversion price for the shares of JTS
Common Stock issuable upon exercise of such assumed debenture equal to the
quotient determined by dividing the conversion price per share of JTS Common
Stock at which such debenture was convertible immediately prior to the Effective
Time by the Exchange Ratio, rounded up to the nearest whole cent.
5.13 Form S-8. JTS agrees to file, no later than five (5) days after
the Closing, a registration statement on Form S-8 covering the shares of JTS
Common Stock issuable pursuant to outstanding options under the Atari Stock
Option Plan assumed by JTS.
5.14 Tax-Free Reorganization; Tax Returns. Atari and JTS shall each use
its best efforts to cause the Merger to be treated as a "reorganization" within
the meaning of Section 368(a)(1)(A) of the Code and shall report the Merger as
such in all federal and, to the extent permitted, all state and local tax
returns filed after the Effective Time of the Merger.
5.15 Registration Rights. At or prior to the Closing, JTS shall provide
to the holders of Atari Common Stock listed on Schedule 5.15 hereto, the
registration rights set forth in that certain Registration Rights Agreement
dated as of February 3, 1995 by and among JTS and the entities listed on Exhibit
A thereto, by amending such agreement in a form reasonably acceptable to counsel
to Atari.
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5.16 Indemnification of Officers and Directors. After the Effective
Time, the Surviving Corporation shall (to the extent not prohibited by law)
indemnify and hold harmless, and pay in advance expenses, costs, damages,
settlements and fees to each director or officer of Atari serving as such as of
the date hereof as provided in the Nevada law or the Articles of Incorporation
or bylaws of Atari or any indemnification agreement to which Atari and such
officer or director is a party, in each case as in effect at the date hereof,
which provisions shall survive the Merger and shall continue in full force and
effect after the Effective Time.
5.17 Listing of JTS Common Stock. Atari and JTS shall each use its best
efforts to cause the JTS Common Stock to be approved for listing on the Nasdaq
National Market or the American Stock Exchange, such that trading in JTS Common
Stock shall commence on the first trading day following the Closing.
5.18 Atari Consent to JTS Transaction with Moduler. JTS covenants and
agrees with Atari that JTS will not amend or modify the Moduler Agreement
without the prior written consent of Atari.
5.19 Atari SEC Documents. Atari covenants and agrees with JTS that from
and after the date hereof, Atari will timely file all reports which it is
required to file with the SEC pursuant to the Exchange Act.
5.20 Best Efforts and Further Assurances. Each of the parties to this
Agreement shall use its best efforts to effectuate the transactions contemplated
hereby and to fulfill or cause to be fulfilled the conditions to closing under
this Agreement. Each party hereto, at the reasonable request of another party
hereto, shall execute and deliver such other instruments and do and perform such
other acts and things as may be necessary or desirable for effecting completely
the consummation of this Agreement and the transactions contemplated hereby.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to consummate and effect
this Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by agreement of all the
parties hereto:
(a) Stockholder Approval. This Agreement and the Merger shall have
been approved and adopted by (i) the holders of a majority of the shares of JTS
Common Stock and JTS Series A Preferred Stock outstanding as of the record date
set for the JTS Stockholders Meeting, voting together, (ii) a majority of the
shares of JTS Common Stock outstanding on the record date set for the JTS
Stockholders Meeting, voting separtely as a class, (iii) the holders of at least
two-thirds of the shares of JTS Series A Preferred outstanding as of the record
date set for the JTS Stockholders Meeting, voting
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separately as a class, and (iv) the holders of a majority of the shares of Atari
Common Stock outstanding as of the record date set for the Atari Stockholders
Meeting.
(b) Registration Statement Effective. The SEC shall have declared
the Registration Statement effective. No stop order suspending the effectiveness
of the Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose, and no similar proceeding in respect of the Proxy
Statement, shall have been initiated or threatened by the SEC; and all requests
for additional information on the part of the SEC shall have been complied with
to the reasonable satisfaction of the parties hereto.
(c) Exchange Act Registration Statement Effective. JTS shall have
filed a Registration Statement on Form 8-A with the SEC pursuant to the Exchange
Act (the "Form 8-A"). The SEC shall have declared the Form 8-A effective. No
stop orders suspending the effectiveness of the Form 8-A or any part thereof
shall have been issued and no proceeding for that purpose, shall have been
initiated or threatened by the SEC.
(d) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger, nor shall any proceeding
brought by an administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking any of the foregoing
be pending; nor shall there be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal. In the event an
injunction or other order shall have been issued, each party agrees to use its
reasonable diligent efforts to have such injunction or other order lifted.
(e) Governmental Approval. Atari and JTS and their respective
subsidiaries shall have timely obtained from each Governmental Entity all
approvals, waivers and consents, if any, necessary for consummation of or in
connection with the Merger and the several transactions contemplated hereby,
including such approvals, waivers and consents as may be required under the
Securities Act, under state Blue Sky laws, and under HSR.
(f) Tax Opinion. Atari and JTS shall have received substantially
identical written opinions of Wilson Sonsini Goodrich & Rosati, P.C., and Cooley
Godward Castro Huddleson & Tatum, in form and substance reasonably satisfactory
to them, to the effect that the Merger will constitute a reorganization within
the meaning of Section 368(a) of the Code, and such opinions shall not have been
withdrawn. In rendering such opinions, counsel shall be entitled to rely upon
representations of Atari and JTS and certain stockholders of Atari and JTS.
(g) Listing of JTS Common Stock. The JTS Common Stock shall have
been approved for quotation on the Nasdaq National Market or the American Stock
Exchange.
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(h) Limit on JTS Dissenting Shares. No more than 5.0% of the shares
of JTS Common Stock and JTS Series A Preferred Stock shall be Dissenting Shares
or entitled to exercise any dissenters or appraisal rights with respect to the
Merger.
(i) Continuity of Interest Certificates. Atari shall have received
from each of the JTS Significant Stockholders an executed Continuity of Interest
Certificate as contemplated by Section 5.6 hereof. JTS shall have received from
each of the Atari Significant Shareholders an executed Continuity of Interest
Certificate as contemplated by Section 5.6 hereof.
(j) Supplemental Indentures. To the extent required by the
indenture related to the Atari Debentures or the indenture related to the
Federated Debentures, Atari and JTS shall have entered into supplemental
indentures with the trustees for such debentures, such supplemental indentures
to be in a form reasonably satisfactory to counsel to Atari and counsel to JTS.
6.2 Additional Conditions to Obligations of JTS. The obligations of JTS
to consummate and effect this Agreement and the transactions contemplated hereby
shall be subject to the satisfaction at or prior to the Effective Time of each
of the following conditions, any of which may be waived, in writing, by JTS:
(a) Representations, Warranties and Covenants. (i) The
representations and warranties of Atari in this Agreement shall be true and
correct in all respects on and as of the Effective Time as though such
representations and warranties were made on and as of such time, except to the
extent that the failure of such representations and warranties to be true and
accurate in such respects has not had and could not reasonably be expected to
have a Material Adverse Effect on Atari and its subsidiaries and (ii) Atari
shall have performed and complied in all respects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by it as of the Effective Time, except to the extent that the
failure to so perform or comply has not had and could not reasonably be expected
to have a Material Adverse Effect on Atari and its subsidiaries.
(b) Certificate of Atari. JTS shall have been provided with a
certificate executed on behalf of Atari by its President and its Chief Financial
Officer to the effect that, as of the Effective Time:
(i) all representations and warranties made by Atari under
this Agreement are true and complete in all respects except to the extent that
the failure of such representations and warranties to be true and accurate in
such respects has not had and could not reasonably be expected to have a
Material Adverse Effect on Atari and its subsidiaries; and
(ii) all covenants, obligations and conditions of this
Agreement to be performed by Atari on or before such date have been so performed
in all respects except to the extent that the failure to so perform or comply
has not had and could not reasonably be expected to have a Material Adverse
Effect on Atari and its subsidiaries.
(c) Third Party Consents. JTS shall have been furnished with
evidence satisfactory to it of the consent or approval of those persons whose
consent or approval shall be required in
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connection with the Merger under any material contract of Atari or any of its
Significant Subsidiaries or otherwise.
(d) Injunctions or Restraints on Conduct of Business. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint
provision limiting or restricting JTS' conduct or operation of the business of
Atari and its subsidiaries, following the Merger shall be in effect, nor shall
any proceeding brought by an administrative agency or commission or other
Governmental Entity, domestic or foreign, seeking the foregoing be pending.
(e) Legal Opinions. JTS shall have received legal opinions from
Wilson Sonsini Goodrich & Rosati, P.C. and Atari's Nevada counsel, which
opinions shall be reasonably satisfactory to counsel to JTS.
(f) No Material Adverse Changes. There shall not have occurred any
material adverse change in the condition (financial or otherwise), properties,
assets (including intangible assets), liabilities, business, operations, results
of operations or prospects of Atari and its subsidiaries, taken as a whole.
6.3 Additional Conditions to the Obligations of Atari. The obligations
of Atari to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, by Atari:
(a) Representations, Warranties and Covenants. (i) The
representations and warranties of JTS in this Agreement shall be true and
correct in all respects on and as of the Effective Time as though such
representations and warranties were made on and as of such time, except to the
extent that the failure of such representations and warranties to be true and
accurate in such respects has not had and could not reasonably be expected to
have a Material Adverse Effect on JTS and its subsidiaries and (ii) JTS shall
have performed and complied in all respects with all covenants, obligations and
conditions of this Agreement required to be performed and complied with by it as
of the Effective Time, except to the extent that the failure to so perform or
comply has not had and could not reasonably be expected to have a Material
Adverse Effect on JTS and its subsidiaries.
(b) Certificate of JTS. Atari shall have been provided with a
certificate executed on behalf of JTS by its Chief Executive Officer and Chief
Financial Officer to the effect that, as of the Effective Time:
(i) all representations and warranties made by JTS under this
Agreement are true and complete in all respects; except to the extent that the
failure of such representations and warranties to be true and accurate in such
respects has not had and could not reasonably be expected to have a Material
Adverse Effect on JTS and its subsidiaries; and
(ii) all covenants, obligations and conditions of this
Agreement to be performed by JTS on or before such date have been so performed
in all respects except to the extent that
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the failure to so perform or comply has not had and could not reasonably be
expected to have a Material Adverse Effect on JTS and its subsidiaries.
(c) Third Party Consents. Atari shall have been furnished with
evidence satisfactory to it of the consent or approval of those persons whose
consent or approval shall be required in connection with the Merger under any
material contract of JTS or any of its subsidiaries or otherwise.
(d) Injunctions or Restraints on Conduct of Business. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint
provision limiting or restricting JTS' conduct or operation of the business of
JTS and its subsidiaries, following the Merger shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
Governmental Entity, domestic or foreign, seeking the foregoing be pending.
(e) Legal Opinion. Atari shall have received a legal opinion from
Cooley Godward Castro Huddleson & Tatum, which opinion shall be reasonably
satisfactory to counsel to Atari.
(f) No Material Adverse Changes. There shall not have occurred any
material adverse change in the condition (financial or otherwise), properties,
assets (including intangible assets), liabilities, business, operations, results
of operations or prospects of JTS and its subsidiaries, taken as a whole.
(g) Conversion of JTS Series A Preferred Stock. Each outstanding
share of JTS Series A Preferred Stock shall be converted into one (1) share of
JTS Common Stock.
(h) Right of First Refusal and Co-Sale Agreement. The provisions of
the Right of First Refusal and Co-Sale Agreement dated as of February 3, 1995 by
and among JTS and certain other parties, as amended, shall have terminated.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. Notwithstanding approval of this Agreement by the
stockholders of JTS or Atari, this Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) by mutual written consent of JTS and Atari;
(b) by Atari if (i) it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of JTS,
which has or can reasonably be expected to have a Material Adverse Effect on JTS
and its subsidiaries, taken as a whole, and such breach has not been cured
within five (5) days after written notice to JTS (provided that, no cure period
shall be required for a breach which by
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its nature cannot be cured) or (ii) there shall be any final action taken, or
any statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any Governmental Entity, which would prohibit JTS's
ownership or operation of all or a material portion of the business of Atari or
any of its subsidiaries, or compel Atari or any of Atari's subsidiaries or JTS
or any of JTS's subsidiaries to dispose of or hold separate or otherwise
relinquish all or a material portion of the business or assets of JTS or any of
JTS's subsidiaries or Atari or any of Atari's subsidiaries as a result of the
Merger.
(c) by JTS if (i) it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
Atari, which has or can reasonably be expected to have a Material Adverse Effect
on Atari and its subsidiaries, taken as a whole, and such breach has not been
cured within five (5) days after written notice to Atari (provided that, no cure
period shall be required for a breach which by its nature cannot be cured) or
(ii) there shall be any final action taken, or any statute, rule, regulation or
order enacted, promulgated or issued or deemed applicable to the Merger by any
Governmental Entity, which would prohibit JTS's ownership or operation of all or
a material portion of the business of JTS or any of its subsidiaries, or compel
Atari or any of Atari's subsidiaries or JTS or any of JTS's subsidiaries to
dispose of or hold separate or otherwise relinquish all or a material portion of
the business or assets of JTS or any of JTS's subsidiaries or Atari or any of
Atari's subsidiaries as a result of the Merger.
(d) by any party hereto if: (i) the Closing has not occurred by
July 31, 1996, (ii) there shall be a final, non-appealable order of a federal or
state court in effect preventing consummation of the Merger; (iii) there shall
be any final action taken, or any statute, rule, regulation or order enacted,
promulgated or issued or deemed applicable to the Merger by any Governmental
Entity which would make consummation of the Merger illegal; (iv) if JTS's
stockholders do not approve the Merger and this Agreement by the requisite vote
at JTS Stockholders Meeting; (v) if Atari's stockholders do not approve the
Merger and this Agreement by the requisite vote at the Atari Stockholders
Meeting; or (vi) if the Atari Board of Directors shall have accepted, approved
or recommended to the shareholders of Atari a Superior Atari Proposal.
Where action is taken to terminate this Agreement pursuant to this
Section 7.1, it shall be sufficient for such action to be authorized by the
Board of Directors of the party taking such action and for such party to then
notify the other parties in writing of such action.
7.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Atari and JTS or
their respective officers, directors, stockholders or affiliates, except to the
extent that such termination results from the breach by a party hereto of any of
its representations, warranties or covenants set forth this Agreement; provided
that, the provisions of Section 7.3 (Expenses) and this Section 7.2 shall remain
in full force and effect and survive any termination of this Agreement.
7.3 Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expense, except
that expenses incurred in connection with printing the Proxy Materials
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and the S-4 Registration Statement, registration and filing fees incurred in
connection with the S-4 Registration Statement and the Proxy Materials and fees,
costs and expenses associated with compliance with applicable state securities
laws, listing of the JTS Common Stock on the Nasdaq National Market or the
American Stock Exchange, and with HSR in connection with the Merger shall be
shared equally by JTS and Atari.
7.4 Amendment. The boards of directors of the parties hereto may cause
this Agreement to be amended at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto; provided that an
amendment made subsequent to adoption of the Agreement by the stockholders of
JTS or Atari shall not (i) alter or change the amount or kind of consideration
to be received on conversion of the Atari Common Stock, (ii) alter or change any
term of the Certificate of Incorporation of the Surviving Corporation to be
effected by the Merger, or (iii) alter or change any of the terms and conditions
of the Agreement if such alteration or change would adversely affect the holders
of Atari Common Stock.
7.5 Extension; Waiver. At any time prior to the Effective Time any
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival at Effective Time. The representations, warranties and
agreements set forth in this Agreement shall terminate at the Effective Time,
except that the agreements set forth in Article I, Section 5.8 (FIRPTA), Section
5.11 (Employee Benefit Plans), Section 5.12 (Atari Debentures), Section 5.13
(Form S-8), Section 5.14 (Tax Free Reorganization; Tax Returns), Section 5.16
(Indemnification), Section 5.20 (Best Efforts and Further Assurances), 7.3
(Expenses), and this Article VIII shall survive the Effective Time.
8.2 Absence of Third Party Beneficiary Rights. No provisions of this
Agreement are intended, nor will be interpreted, to provide or create any third
party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, stockholder, partner or employee of any party hereto or any
other person or entity unless specifically provided otherwise herein, and,
except as so provided, all provisions hereof will be personal solely between the
parties to this Agreement.
8.3 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or
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certified mail (return receipt requested) or sent via facsimile (with
confirmation of receipt) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to Atari, to:
Atari Corporation
455 South Mathilda Avenue
Sunnyvale, California 94086
Attention: Jack Tramiel
Facsimile No.: (408) 328-0909
Telephone No.: (408) 328-0900
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Jeffrey D. Saper, Esq.
Facsimile No.: (415) 493-6811
Telephone No.: (415) 493-9300
(b) if to JTS, to:
JTS Corporation
166 Baypointe Parkway
San Jose, California 95134
Attention: David T. Mitchell
Facsimile No.: (408) 468-1619
Telephone No.: (408) 468-1800
with a copy to:
Cooley Godward Castro Huddleson & Tatum
Five Palo Alto Square
Palo Alto, California 94306
Attention: Andrei M. Manoliu, Esq.
Facsimile No.: (415) 857-0663
Telephone No.: (415) 843-5000
8.4 Interpretation. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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8.5 Counterparts. This Agreement may be executed in counterparts, both
of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties, it being understood that all parties need
not sign the same counterpart.
8.6 Entire Agreement; Nonassignability; Parties in Interest. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Schedules, including the JTS Disclosure Schedule and the Atari Disclosure
Schedule (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof; (b) are not intended to confer upon any other person any rights or
remedies hereunder; and (c) shall not be assigned by operation of law or
otherwise.
8.7 Severability. In the event that any provision of this Agreement,
or the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.8 Remedies Cumulative. Except as otherwise provided herein, any and
all remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby, or by law or equity
upon such party, and the exercise by a party of any one remedy will not preclude
the exercise of any other remedy.
8.9 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, regardless of the laws
that might otherwise govern under applicable principles of conflicts of law.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction of
any court located in the County of Santa Clara, California, in connection with
any matter based upon or arising out of this Agreement or the matters
contemplated herein, agrees that process may be served upon them in any manner
authorized by the laws of the State of California for such persons and waives
and covenants not to assert or plead any objection which they might otherwise
have to such jurisdiction and such process.
8.10 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation, preparation and execution of
this Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document will be construed against the party drafting such agreement or
document.
8.11 Amendment and Restatement. The parties hereto hereby consent and
agree that this Agreement shall constitute an amendment and restatement of that
certain Agreement and Plan of Reorganization by and among Atari, JTS and JTS
Acquisition Corporation dated as of February 12, 1996.
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IN WITNESS WHEREOF, JTS and Atari have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized,
all as of the date first written above.
JT STORAGE, INC.
By: /s/David T. Mitchell
----------------------
President
ATARI CORPORATION
By: /s/Sam Tramiel
----------------------
President
Dates Referenced Herein and Documents Incorporated by Reference
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