AGREEMENT AND PLAN OF MERGER
by and among
NORTEL NETWORKS CORPORATION,
NORTH SUBSIDIARY, INC.
and
PERIPHONICS CORPORATION
Dated as of August 24, 1999
TABLE OF CONTENTS
Page
ARTICLE I CERTAIN DEFINITIONS...............................................................................1
1.01. Certain Definitions.....................................................................................1
ARTICLE II THE MERGER; EFFECTS OF THE MERGER................................................................8
2.01. The Merger..............................................................................................8
2.02. Effective Date and Effective Time.......................................................................9
2.03. Tax Consequences........................................................................................9
ARTICLE III CONVERSION OF SHARES; EXCHANGE PROCEDURES.......................................................9
3.01. Conversion of Shares....................................................................................9
3.02. Issuance of Shares of the Surviving Corporation........................................................10
3.03. Rights as Stockholders; Stock Transfers................................................................10
3.04. Fractional Shares......................................................................................10
3.05. Exchange Procedures....................................................................................10
3.06. Anti-Dilution Provisions...............................................................................11
3.07. Stock Options and Other Stock Plans.....................................................................12
ARTICLE IV ACTIONS PENDING MERGER..........................................................................13
4.01. Forbearances of the Company............................................................................13
4.02. Forbearances of Parent.................................................................................16
ARTICLE V REPRESENTATIONS AND WARRANTIES...................................................................16
5.01. Representations and Warranties of the Company.........................................................16
5.02. Representations and Warranties of Parent and Sub......................................................29
ARTICLE VI COVENANTS.......................................................................................33
6.01. Reasonable Best Efforts................................................................................33
6.02. Stockholder Approvals..................................................................................34
6.03. Registration Statement.................................................................................34
6.04. Press Releases.........................................................................................35
6.05. Access; Information....................................................................................35
6.06. Acquisition Proposals..................................................................................36
6.07. Affiliate Agreements...................................................................................37
6.08. Takeover Laws..........................................................................................37
6.09. The Company Rights Agreement...........................................................................37
6.10. Shares Listed..........................................................................................38
6.11. Regulatory Applications................................................................................38
6.12. Indemnification........................................................................................39
6.13. Certain Employee Benefit Matters.......................................................................40
6.14. Accountants'Letters....................................................................................41
6.15. Notification of Certain Matters........................................................................41
6.16. Certain Tax Matters.....................................................................................41
6.17. Agreements with Respect to Assumption of Company Stock Options..........................................42
ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER.......................................................42
7.01. Conditions to Each Party's Obligation to Effect the Merger.............................................42
7.02. Conditions to Obligation of the Company................................................................43
7.03. Conditions to Obligation of Parent and Sub.............................................................44
ARTICLE VIII TERMINATION...................................................................................45
8.01. Termination............................................................................................45
8.02. Effect of Termination and Abandonment..................................................................47
ARTICLE IX MISCELLANEOUS...................................................................................49
9.01. Survival...............................................................................................49
9.02. Amendment; Extension; Waiver...........................................................................49
9.03. Counterparts...........................................................................................49
9.04. Governing Law..........................................................................................49
9.05. Expenses...............................................................................................49
9.06. Notices................................................................................................49
9.07. Entire Understanding...................................................................................51
9.08. Assignment; No Third Party Beneficiaries...............................................................51
9.09. Interpretation.........................................................................................51
9.10. Severability...........................................................................................51
9.11. Pre-Termination Equitable Remedies......................................................................51
Exhibit A ...Form of Affiliate Letter
AGREEMENT AND PLAN OF MERGER, dated as of August 24, 1999 (this
"Agreement"), by and among NORTEL NETWORKS CORPORATION, a corporation organized
under the laws of Canada ("Nortel"), NORTH SUBSIDIARY, INC., a corporation
organized under the laws of Delaware ("Sub"), and PERIPHONICS CORPORATION, a
corporation organized under the laws of Delaware (the "Company").
WITNESSETH:
WHEREAS, the Boards of Directors of each of Nortel, Sub and the Company
have determined that it is advisable and in the best interests of their
respective companies and their stockholders to consummate the strategic business
combination transaction provided for herein in which, subject to the terms and
conditions set forth herein, (x) Sub will merge (the "Reverse Merger") with and
into the Company, so that the Company is the surviving corporation in the Merger
or (y) if Nortel so elects, the Company will merge (the "Forward Merger") with
and into Sub, so that Sub is the surviving corporation in the Merger;
WHEREAS, the parties intend that for U.S. federal income tax purposes, the
Reverse Merger or the Forward Merger (either, the "Merger") qualify as a
"reorganization";
WHEREAS, as a condition and an inducement to Nortel's willingness to enter
into this Agreement, Nortel and the Company are simultaneously entering into a
Stock Option Agreement (the "Option Agreement"), pursuant to which the Company
is granting Nortel an option exercisable upon the occurrence of certain events;
WHEREAS, as a condition and as an inducement to Nortel's willingness to
enter into this Agreement, Nortel is entering into an agreement (the
"Stockholders' Agreement") with certain substantial Company stockholders (the
"Specified Stockholders"); and
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01. Certain Definitions. As used in this Agreement, the following terms
shall have the meanings set forth below:
"Acquisition Proposal" shall mean (a) a merger or consolidation, or any
similar transaction, involving the Company (other than mergers, consolidations
or similar transactions involving solely the Company and/or one or more
wholly-owned Subsidiaries of the Company), (b) a purchase or other acquisition
(including by way of merger, consolidation, share exchange, tender or exchange
offer involving any Subsidiary of the Company or securities issued by any
Subsidiary of the Company, as the case may be) of greater than 20% of the
consolidated assets of the Company and its Subsidiaries (other than transactions
involving the sale of inventory in the ordinary course of business, consistent
with past practice), (c) a purchase or other acquisition (including by way of
merger, consolidation, share exchange, tender or exchange offer or otherwise) of
beneficial ownership of securities representing more than 20% of the voting
power of the Company, (d) any substantially similar transaction, or (e) any
inquiry or indication of interest with respect to any of the foregoing; in each
case other than the transactions contemplated by this Agreement and the Option
Agreement.
"Agreement" shall have the meaning set forth in the first paragraph of this
Agreement.
"Average Nortel Trading Price" shall mean the average of the last sales
prices per share of Nortel Common Shares on the NYSE Composite Tape for the 10
consecutive trading days ending on the trading day which is two trading days
prior to the Effective Date.
"Business Day" shall mean each day on which banking institutions in both of
Toronto, Canada and New York, New York are not authorized or required to close.
"Canadian GAAP" shall mean Canadian generally accepted accounting
principles.
"Canadian Stock Exchanges" shall mean the Toronto and Montreal stock
exchanges.
"Capitalization Date" shall have the meaning set forth in Section
5.01(b)(i).
"Code" shall mean the U.S. Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning set forth in the first paragraph of this
Agreement.
"Company Affiliate" shall have the meaning set forth in Section 6.07(a).
"Company Board" shall mean the Board of Directors of the Company.
"Company Certificate" shall mean the Restated Certificate of Incorporation
of the Company, as amended.
"Company Common Stock" shall have the meaning set forth in Section 3.01(b).
"Company Disclosure Schedule" shall have the meaning set forth in the
opening paragraph of Section 5.01.
"Company Employee" shall have the meaning set forth in Section 6.13(a).
"Company Equity Interests" shall have the meaning set forth in Section
5.01(b).
"Company Filed SEC Documents" shall have the meaning set forth in Section
5.01(g).
"Company Financial Advisor" shall have the meaning set forth in Section
5.01(k).
"Company Intellectual Property Rights" shall have the meaning set forth in
Section 5.01(p).
"Company Meeting" shall have the meaning set forth in Section 6.02.
"Company Plan" shall mean any Plan entered into or currently maintained,
sponsored, or contributed to by the Company or any of its Subsidiaries or to
which the Company or any such Subsidiary has any obligation to contribute or
with respect to which the Company or any of its Subsidiaries may have any
material liability.
"Company Preferred Stock" shall have the meaning set forth in Section
5.01(b).
"Company Proxy Statement" shall have the meaning set forth in Section
6.03(a).
"Company Rights Agreement" shall have the meaning set forth in Section
5.01(b).
"Company SEC Documents" shall have the meaning set forth in Section
5.01(g).
"Company Series A Preferred Stock" shall have the meaning set forth in
Section 5.01(g).
"Company Stock Option Plans" shall have the meaning set forth in Section
3.07(a).
"Company Stock Options" shall have the meaning set forth in Section
3.07(a).
"Company Stock Purchase Plan" shall have the meaning set forth in Section
3.07(d).
"Company Stockholder Protection Rights" shall have the meaning set forth in
Section 5.01(b).
"Confidentiality Agreement" shall mean that certain confidentiality
agreement, dated October 27, 1998, by and between the Company and an affiliate
of Nortel, as amended by a letter agreement dated June 24, 1999.
"Copyrights" shall have the meaning set forth in the definition of
Intellectual Property Rights.
"Costs" shall have the meaning set forth in Section 6.12(a).
"DGCL" shall mean the General Corporation Law of the State of Delaware.
"Draft 1999 10-K" shall have the meaning set forth in Section 5.01(g)(iv).
"Effective Date" shall have the meaning set forth in Section 2.02.
"Effective Time" shall have the meaning set forth in Section 2.02.
"Environmental Laws" shall have the meaning set forth in Section 5.01(o).
"ERISA" shall mean the U.S. Employee Retirement Income Security Act of
1974, as amended, and the regulations promulgated thereunder and published
interpretations of any Governmental Authority with respect thereto.
"Exchange Act" shall mean the U.S. Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Exchange Agent" shall have the meaning set forth in Section 3.05(a).
"Exchange Fund" shall have the meaning set forth in Section 3.05(a).
"Exchange Ratio" shall mean the fraction obtained by dividing $29.23 by the
Average Nortel Trading Price and rounding the result to the nearest hundredth;
provided, however, that if such fraction is less than 0.62 then the Exchange
Ratio shall be 0.62, and if such fraction is more than 0.76 then the Exchange
Ratio shall be 0.76; and provided, further, that the Exchange Ratio shall in any
case be subject to adjustment as set forth in Section 3.06.
"Exon-Xxxxxx" shall have the meaning set forth in Section 5.01(r).
"Forward Merger" shall have the meaning set forth in the recitals to this
Agreement.
"Governmental Authority" means any court, administrative agency or
commission or other foreign or domestic federal, state, provincial or local
governmental authority or instrumentality.
"HSR Act" shall have the meaning set forth in Section 5.01(r).
"Indemnified Party" shall have the meaning set forth in Section 6.12(a).
"Insurance Amount" shall have the meaning set forth in Section 6.12(b).
"Intellectual Property Rights" shall mean all proprietary, license and
other rights in and to: (A) trademarks, service marks, brand names, trade dress,
trade names, words, symbols, color schemes and other indications of origin
("Trademarks"); (B) patents, patent applications (together, "Patents"),
inventors' certificates and invention disclosures; (C) trade secrets and other
confidential or non-public business information, including ideas, formulas,
compositions, discoveries and improvements, know-how, manufacturing and
production processes and techniques, and research and development information;
drawings, specifications, plans, proposals and technical data; analytical
models, investment and lending strategies and records, financial and other
products; financial, marketing and business data, pricing and cost information;
business and marketing plans and customer and supplier lists and information; in
each case whether patentable, copyrightable or not ("Trade Secrets"); (D)
computer programs and databases, in each case whether patentable, copyrightable
or not (collectively, "Software"), and all documentation therefor; (E) writings
and other works of authorship, including marketing materials, brochures,
training materials, including all copyrights and moral rights related to each of
the foregoing ("Copyrights"); (F) mask works; (G) rights to limit the use or
disclosure of confidential information by any Person; (H) registrations of, and
applications to register, any of the foregoing with any Governmental Authority
and any renewals or extensions thereof; (I) the goodwill associated with each of
the foregoing; and (J) any claims or causes of action arising out of or related
to any infringement or misappropriation of any of the foregoing; in each case in
any jurisdiction.
"Knowledge" with respect to a party shall mean to the knowledge of its
senior executive officers after reasonable inquiry.
"Liens" shall mean any charge, mortgage, pledge, security interest,
restriction, claim, lien, or encumbrance.
"Material Adverse Effect" shall mean with respect to any party, any change,
circumstance or effect that (i) is or is reasonably likely to be materially
adverse to the business, condition (financial or otherwise) or results of
operations of such party and its Subsidiaries taken as a whole, other than any
change, circumstance or effect that results from or arises out of (a) changes in
the economy in general or (b) changes or circumstances affecting the industries
in which such party operates, which change, circumstance or effect (in the case
of clause (b)) does not affect the Company or Nortel, as the case may be,
disproportionately relative to other entities operating in such industry;
provided, that any change, circumstance or effect that arises directly out of or
results directly from the announcement of this Agreement shall not by itself be
deemed to constitute a Material Adverse Effect; or (ii) would materially impair
the ability of either Nortel or the Company, respectively, to perform its
obligations under this Agreement.
"Material Suppliers" shall have the meaning set forth in Section
5.01(t)(ii).
"Material Systems" shall mean, with respect to any person, all internal
computer systems, communications systems, embedded manufacturing systems and
facilities infrastructure systems that are material to the business, finances
and operations of such person.
"Merger" shall have the meaning set forth in the recitals to this
Agreement.
"Merger Consideration" shall have the meaning set forth in Section 2.01(a).
"NASD" shall mean the National Association of Securities Dealers, Inc. or,
if the context so requires, the Nasdaq Stock Market, Inc.
"New Certificates" shall have the meaning set forth in Section 3.05(a).
"Nortel" shall have the meaning set forth in the first paragraph of this
Agreement.
"Nortel Board" shall mean the Board of Directors of Nortel.
"Nortel Certificate" shall mean the Certificate and Articles of
Amalgamation of Nortel dated January 4, 1982, as amended from time to time by
the Certificates and Articles of Amendment of Nortel.
"Nortel Common Shares" shall have the meaning set forth in Section 3.01(a).
"Nortel Disclosure Schedule" shall have the meaning set forth in the
opening paragraph of Section 5.02.
"Nortel SEC Documents" shall have the meaning set forth in Section 5.02(f).
"NYSE" shall mean the New York Stock Exchange, Inc.
"Old Certificates" shall have the meaning set forth in Section 3.05(a).
"Option Agreement" shall have the meaning set forth in the recitals hereof.
"Patents" shall have the meaning set forth in the definition of
Intellectual Property Rights.
"Person" or "person" shall mean any individual, bank, corporation, limited
liability company, partnership, association, joint-stock company, business trust
or unincorporated organization.
"Plan" shall mean any "employee benefit plan", within the meaning of
Section 3(3) of ERISA, whether or not subject to ERISA, and any employment,
consulting, termination, severance, retention, change in control, deferred or
incentive compensation, stock option or other equity based, vacation or other
fringe benefit plan, program, policy, arrangement, agreement or commitment.
"Previously Disclosed" by a party shall mean information disclosed in its
SEC Documents filed prior to the date of this Agreement or set forth in the
related section of its Disclosure Schedule or (with respect to the Company) set
forth in the Draft 1999 10-K.
"Registration Statement" shall have the meaning set forth in Section
6.03(a).
"Regulatory Law" shall mean the Xxxxxxx Act, as amended, the Xxxxxxx Act,
as amended, the HSR Act, the Federal Trade Commission Act, as amended, and all
other federal, state and foreign, if any, statutes, rules, regulations, orders,
decrees, administrative and judicial doctrines and other laws that are designed
or intended to prohibit, restrict or regulate actions having the purpose or
effect of monopolization or restraint of trade or lessening of competition
through merger or acquisition.
"Rights" shall mean, with respect to any person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any person any
right to subscribe for or acquire, or any options, calls or commitments relating
to, or any stock appreciation right or other instrument the value of which is
determined in whole or in part by reference to the market price or value of,
shares of capital stock of such person.
"SEC" shall mean the United States Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Severance Plan" shall have the meaning set forth in Section 6.13(a).
"Software" shall have the meaning set forth in the definition of
Intellectual Property Rights.
"Specified Stockholders" shall have the meaning set forth in the recitals
to this Agreement.
"Stockholders' Agreement" shall have the meaning set forth in the recitals
to this Agreement.
"Sub" shall have the meaning set forth in the first paragraph of this
Agreement.
"Sub Common Stock" shall have the meaning set forth in Section 3.01(a).
"Subsidiary" and "Significant Subsidiary" shall have the meanings ascribed
to them in Rule 1-02 of Regulation S-X of the SEC.
"Superior Proposal" shall have the meaning set forth in Section 6.06(a).
"Surviving Corporation" shall mean (i) in the case of the Reverse Merger,
the Company as the surviving corporation, or (ii) in the case of the Forward
Merger, Sub as the surviving corporation.
"Takeover Laws" shall have the meaning set forth in Section 5.01(m).
"Tax Returns" shall have the meaning set forth in Section 5.01(q).
"Taxes" shall mean all taxes, charges, fees, levies or other assessments,
however denominated, including, without limitation, all net income, gross
income, gross receipts, sales, use, ad valorem, goods and services, capital,
transfer, franchise, profits, license, withholding, payroll, employment,
employer health, excise, estimated, severance, stamp, occupation, property or
other taxes, custom duties, fees, assessments or charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or additional
amounts imposed by any taxing authority whether arising before, on or after the
Effective Date.
"Termination Fee" shall have the meaning set forth in Section 8.02(b).
"Trade Secrets" shall have the meaning set forth in the definition of
Intellectual Property Rights.
"Trademarks" shall have the meaning set forth in the definition of
Intellectual Property Rights.
"Treasury Shares" shall mean shares of the Company Common Stock held by the
Company or any of its Subsidiaries.
"U.S. GAAP" shall mean United States generally accepted accounting
principles.
"Year 2000 Compliant" shall have the meaning set forth in Section 5.01(t).
"$" shall mean United States Dollar.
ARTICLE II
THE MERGER; EFFECTS OF THE MERGER
2.01. The Merger. (a) The Reverse Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the DGCL, at the
Effective Time Sub will merge with and into the Company pursuant to the Reverse
Merger. Following the Effective Time of the Reverse Merger, the separate
corporate existence of Sub shall cease and the Company shall survive and
continue to exist as a Delaware corporation.
(b) The Forward Merger. Notwithstanding paragraph (a) of this Section, if
Nortel so elects pursuant to notice to the Company at least three business days
prior to the Effective Time, upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the DGCL, at the Effective Time
the Company will merge with and into Sub pursuant to the Forward Merger;
provided, however, that Nortel may not so elect if such election would be
reasonably likely to cause non-satisfaction of any material condition to the
Merger that would have been reasonably likely to be satisfied in the absence of
such election. Following the Effective Time of the Forward Merger, the separate
corporate existence of the Company shall cease and Sub shall survive and
continue to exist as a Delaware corporation.
(c) Effectiveness and Effects of the Merger. Subject to the satisfaction or
waiver of the conditions set forth in Article VII in accordance with this
Agreement, the Merger shall become effective upon the occurrence of the filing
in the office of the Secretary of State of the State of Delaware of a
certificate of merger in accordance with Section 251 of the DGCL, or such later
date and time as may be set forth in such certificate. The Merger shall have the
effects prescribed in the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Sub shall be vested in the
Surviving Corporation, and all debt, liabilities and duties of the Company and
Sub shall become the debt, liabilities and duties of the Surviving Corporation.
(d) Certificate of Incorporation and By-Laws. The certificate of
incorporation and by-laws of Sub, as in effect immediately prior to the
Effective Time, but with Article 1 of the certificate of incorporation amended
to read: "The name of the Corporation is Periphonics Corporation," shall be
those of the Surviving Corporation until thereafter changed or amended as
provided therein or by applicable law.
(e) Name. The name of the Surviving Corporation shall remain (in the case
of the Reverse Merger) or be changed to (in the case of the Forward Merger)
"Periphonics Corporation."
(f) Officers and Directors of Surviving Corporation. The officers of the
Company as of the Effective Time shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or otherwise
ceasing to be an officer or until their respective successors are duly elected
and qualified, as the case may be. The directors of Sub as of the Effective Time
shall be the directors of the Surviving Corporation until the earlier of their
resignation or removal or otherwise ceasing to be a director or until their
respective successors are duly elected and qualified, as the case may be.
2.02. Effective Date and Effective Time. Subject to the satisfaction or
waiver (subject to applicable law) of the conditions as set forth in Article VII
in accordance with this Agreement, the parties shall cause the effective date of
the Merger (the "Effective Date") to occur on (i) the third Business Day to
occur after the last of the conditions set forth in Section 7.01 shall have been
satisfied or waived in accordance with the terms of this Agreement or (ii) such
other date to which the parties may agree in writing. The time on the Effective
Date when the Merger shall become effective is referred to as the "Effective
Time."
2.03. Tax Consequences. It is intended that the Merger shall qualify as a
reorganization under Section 368(a) of the Code.
ARTICLE III
CONVERSION OF SHARES; EXCHANGE PROCEDURES
3.01. Conversion of Shares. Subject to the provisions of this Agreement, at
the Effective Time, automatically by virtue of the Merger and without any action
on the part of any party or stockholder:
(a) Conversion of Sub Common Stock. Each share of common stock of Sub, par
value $0.01 per share (the "Sub Common Stock"), issued and outstanding
immediately prior to the Effective Time, shall be converted into one newly
issued, fully-paid and non-assessable share of preferred stock, $0.01 par value,
of the Surviving Corporation, pursuant to a Certificate of Designations proposed
by Nortel and approved by the Company, such approval not to be unreasonably
withheld or delayed.
(b) Conversion of Company Common Stock. Subject to Section 3.04, each share
of common stock, par value $0.01 per share, of the Company (the "Company Common
Stock") issued and outstanding immediately prior to the Effective Time (other
than shares of Company Common Stock to be canceled pursuant to Section 3.01(c))
shall become and be converted into the right to receive a fraction of a common
share, without par value, of Nortel ("Nortel Common Shares"), equal to the
Exchange Ratio. All of the shares of Company Common Stock converted into the
right to receive Nortel Common Shares (or cash pursuant to Section 3.04)
pursuant to this Article III shall no longer be outstanding and shall
automatically be canceled and shall cease to exist as of the Effective Time.
(c) Treasury Shares. Each share of Company Common Stock held by the Company
or any wholly owned Subsidiary of the Company as Treasury Shares immediately
prior to the Effective Time or owned by Nortel or any Subsidiary thereof shall
no longer be outstanding and shall automatically be canceled and retired at the
Effective Time and no consideration shall be issued in exchange therefor.
3.02. Issuance of Shares of the Surviving Corporation. At the Effective
Time, in consideration of the issuance by Nortel of Nortel Common Shares to the
holders of Company Common Stock in accordance with Section 3.01(b), the
Surviving Corporation shall issue to Nortel a number of shares of newly issued,
fully-paid and non-assessable common stock, $0.01 par value, of the Surviving
Corporation, which number shall be equal to the number of shares of Company
Common Stock outstanding as of immediately prior to the Effective Time.
3.03. Rights as Stockholders; Stock Transfers. At the Effective Time,
holders of Company Common Stock shall cease to be, and shall have no rights as,
stockholders of the Company, other than the right to receive any dividend or
other distribution with respect to such Company Common Stock with a record date
occurring prior to the Effective Time and the consideration provided under this
Article III. After the Effective Time, there shall be no transfers on the stock
transfer books of the Company or the Surviving Corporation of shares of Company
Common Stock.
3.04. Fractional Shares. Notwithstanding any other provision hereof, no
fractional Nortel Common Shares and no certificates or scrip therefor, or other
evidence of ownership thereof, will be issued in the Merger; instead, Nortel
shall pay to each holder of Company Common Stock who would otherwise be entitled
to a fractional share of Nortel Common Shares (after taking into account all Old
Certificates delivered by such holder) an amount (in U.S. dollars) in cash
(without interest) determined by multiplying such fraction by the Average Nortel
Trading Price. As promptly as practicable after the determination of the amount
of cash, if any, to be paid to holders of fractional interests, Nortel shall so
notify the Exchange Agent, and Nortel shall cause the Surviving Corporation to
deposit such amount with the Exchange Agent and shall cause the Exchange Agent
to forward payments to such holders of fractional interests subject to and in
accordance with the terms hereof.
3.05. Exchange Procedures. (a) At or prior to the Effective Time, Nortel
shall deposit, or shall cause to be deposited, with a bank or trust company
having (or whose parent has) net capital of not less than $10,000,000 (the
"Exchange Agent"), for the benefit of the holders of certificates formerly
representing shares of Company Common Stock ("Old Certificates"), for exchange
in accordance with this Article III, certificates representing the Nortel Common
Shares ("New Certificates") and an estimated amount of cash pursuant to Section
3.04 (such cash and New Certificates (without any interest on any such cash),
being hereinafter referred to as the "Exchange Fund") to be paid pursuant to
this Article III in exchange for outstanding shares of Company Common Stock.
(b) As promptly as practicable after the Effective Date, Nortel shall send
or cause the Exchange Agent to send or cause to be sent to each former holder of
record of shares (other than Treasury Shares) of Company Common Stock
immediately prior to the Effective Time transmittal materials for use in
exchanging such stockholder's Old Certificates for the consideration set forth
in this Article III. Nortel shall cause the New Certificates representing Nortel
Common Shares into which shares of a stockholder's Company Common Stock are
converted at the Effective Time and/or any check in respect of any fractional
share interests or dividends or distributions which such person shall be
entitled to receive pursuant to this Article III to be delivered to such
stockholder upon delivery to the Exchange Agent of Old Certificates representing
such shares of Company Common Stock (or, pursuant to Section 3.05(f), a surety
bond reasonably satisfactory to Nortel and the Exchange Agent, if any of such
certificates are lost, stolen or destroyed) owned by such stockholder. No
interest will be paid on any such cash to be paid in lieu of fractional share
interests or in respect of dividends or distributions which any such person
shall be entitled to receive pursuant to this Article III upon such delivery.
(c) Notwithstanding the foregoing, neither the Exchange Agent nor any party
hereto shall be liable to any former holder of Company Common Stock for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(d) No dividends or other distributions with respect to Nortel Common
Shares with a record date occurring after the Effective Time shall be paid to
the holder of any unsurrendered Old Certificate representing shares of Company
Common Stock converted in the Merger into the right to receive shares of such
Nortel Common Shares and cash in lieu of fractional Nortel Common Shares
pursuant to Section 3.04, until the holder thereof shall be entitled to receive
New Certificates and such amount of cash in exchange therefor in accordance with
this Article III. After becoming so entitled in accordance with this Article
III, the record holder thereof also shall be entitled to receive any such
dividends or other distributions, without any interest thereon, which
theretofore had become payable with respect to Nortel Common Shares such holder
had the right to receive upon surrender of the Old Certificate, and payment
thereof shall be made promptly following the later of (i) the date on which such
holder shall become entitled to receive New Certificates and (ii) the payment
date with respect to such dividend or other distribution.
(e) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of the Company for one year after the Effective Time shall, upon
demand by Nortel, be paid or delivered to Nortel. Any stockholders of the
Company who have not theretofore complied with this Article III shall thereafter
look only to Nortel for payment of the Nortel Common Shares, cash in lieu of any
fractional shares and unpaid dividends and distributions on the Nortel Common
Shares deliverable in respect of each share of Company Common Stock such
stockholder holds as determined pursuant to this Agreement, in each case,
without any interest thereon.
(f) If any Old Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming such Old
Certificate to be lost, stolen or destroyed and the posting by such person of a
bond in such reasonable amount as Nortel may direct as indemnity against any
claim that may be made against it or the Surviving Corporation with respect to
such Old Certificate, Nortel shall, in exchange for such lost, stolen or
destroyed Old Certificate, deliver or cause the Exchange Agent to deliver a New
Certificate in respect thereof pursuant to this Article III.
3.06. Anti-Dilution Provisions. In the event Nortel changes (or establishes
a record date for changing) the number of Nortel Common Shares issued and
outstanding prior to the Effective Time as a result of a stock split, stock
dividend, recapitalization, subdivision, reclassification, combination, exchange
of shares or similar transaction with respect to the outstanding Nortel Common
Shares then (a) if the record and payment dates therefor shall be prior to the
Effective Time, the Exchange Ratio shall be proportionately adjusted to reflect
such stock split, stock dividend, recapitalization, subdivision,
reclassification, combination, exchange of shares or similar transaction; and
(b) if the record date therefor shall be prior to the Effective Time but the
payment date therefor shall be subsequent to the Effective Time, Nortel shall
take such action as shall be required so that on such payment date any former
holder of Old Certificates who shall have received or become entitled to receive
New Certificates pursuant to this Article III shall be entitled to receive such
additional Nortel Common Shares as such holder would have received as a result
of such event if the record date therefor had been immediately after the
Effective Time.
3.07. Stock Options and Other Stock Plans. (a) Subject to Section 6.17:
Effective at the Effective Time, each option to purchase shares of Company
Common Stock (collectively, the "Company Stock Options") granted to employees or
directors of, or consultants or advisors to, the Company or any Subsidiary
thereof pursuant to the terms of the Periphonics Corporation 1995 Stock Option
Plan, the Periphonics Corporation 1995 Non-Employee Director Stock Option Plan
or the Periphonics Corporation 1986 Incentive Stock Option Plan (collectively,
the "Company Stock Option Plans") that is outstanding immediately prior to the
Effective Time shall be assumed by Nortel and deemed to constitute an option to
acquire, on the same terms and conditions (including adjustments for any stock
dividend, subdivision, reclassification, recapitalization, split, combination,
exchange of shares or similar transaction following such and the terms and
conditions approved by resolution of the Company Board adopted on April 15,
1999) as were applicable under such Company Stock Option immediately prior to
the Effective Time, the number of Nortel Common Shares (rounded down to the
greatest number of whole Nortel Common Shares) that is equal to the product of
(i) the number of shares of Company Common Stock covered by such Company Stock
Option immediately prior to the Effective Time multiplied by (ii) the Exchange
Ratio, at an option exercise price per share of Nortel Common Shares equal to
the quotient of (iii) the option exercise price per share of Company Common
Stock covered by such Company Stock Option immediately prior to the Effective
Time divided by (iv) the Exchange Ratio. The date of grant of each such Company
Stock Option shall be the date on which such Company Stock Option was originally
granted. Any Company Stock Option, the terms and conditions of which were
amended pursuant to the resolutions adopted by the Company Board on April 15,
1999 to provide for the acceleration of the vesting of such stock option as a
result of the Merger, shall become vested in accordance with such terms and
conditions as so amended. Within three Business Days following the Effective
Date, Nortel shall cause to be delivered to each holder of a Company Stock
Option that has been assumed by Nortel pursuant to this Section 3.07 a notice
stating that (x) such Company Stock Option has been converted into an option to
purchase Nortel Common Shares, (y) such Company Stock Option has been assumed by
Nortel and shall continue in effect subject to all of the terms and conditions
applicable thereto immediately prior to the Effective Time and (z) setting forth
the number of Nortel Common Shares covered by such Company Stock Option and the
per share option exercise price for such Nortel Common Shares. From and after
the Effective Time, Nortel and the Surviving Corporation shall comply with the
terms of each Company Stock Option Plan pursuant to which the Company Stock
Options were granted; provided, that the board of directors of Nortel or an
authorized committee thereof shall succeed to the authorities and
responsibilities of the Company Board or any committee thereof under the Company
Stock Option Plans. The adjustments provided herein with respect to any Company
Stock Options that are "incentive stock options" (as defined in Section 422 of
the Code) shall be effected in a manner consistent with Section 424(a) of the
Code.
(b) Prior to the Effective Date, the Company shall take all necessary or
appropriate action (including amending any of the Company Stock Option Plans or
making adjustments as permitted thereby) to (i) use its reasonable best efforts
to obtain as promptly as possible following the mailing of the Company Proxy
Statement, the written consent of each holder of a Company Stock Option (in a
form reasonably satisfactory to counsel to Nortel) to the assumption and
conversion of such individual's Company Stock Options as contemplated in Section
3.07(a), (ii) effectuate the assumption and conversion of the Company Stock
Options by Nortel and the assignment to Nortel of the authorities and
responsibilities of the Company Board or any committee thereof under the Company
Stock Option Plans and (iii) other than as expressly permitted pursuant to
Section 4.01(b), preclude the grant of any additional Company Stock Options
under any of the Company Stock Option Plans or otherwise.
(c) Nortel shall cause to be taken all corporate action necessary to
reserve for issuance a sufficient number of Nortel Common Shares for delivery
upon exercise of Company Stock Options in accordance with this Section 3.07.
Within five business days after the Effective Date, Nortel shall use its
reasonable best efforts to cause the Nortel Common Shares subject to Company
Stock Options to be registered under the Securities Act pursuant to a
registration statement on Form S-8 (or any successor or other appropriate forms)
and shall use its reasonable best efforts to cause the effectiveness of such
registration statement (and current status of the prospectus or prospectuses
contained therein) to be maintained for so long as Company Stock Options remain
outstanding.
(d) The Company shall take such action as is necessary to cause a "new
exercise date," within the meaning of the Periphonics Corporation 1995 Employee
Stock Purchase Plan (the "Company Stock Purchase Plan"), to be established that
will cause the offering period under such Company Stock Purchase Plan in effect
immediately prior to the Effective Date to terminate as of a date that is no
later than three Business Days prior to the Effective Date; provided that such
change in the offering period shall be conditioned upon the consummation of the
Merger. On such new exercise date, the Company shall apply the funds credited as
of such date under the Company Stock Purchase Plan within each participant's
payroll withholding account to the purchase of whole shares of Company Common
Stock in accordance with the terms of the Company Stock Purchase Plan.
Immediately prior to and effective as of the Effective Time and subject to the
consummation of the Merger, the Company shall terminate the Company Stock
Purchase Plan.
ARTICLE IV
ACTIONS PENDING MERGER
4.01. Forbearances of the Company. From the date hereof until the Effective
Time, except as expressly contemplated by this Agreement, as required by a
Governmental Authority of competent jurisdiction or as set forth in Section 4.01
of the Company's Disclosure Schedule, without the prior written consent of
Nortel, the Company will not, and will cause each of its Subsidiaries not to:
(a) Ordinary Course. Conduct its business and the business of its
Subsidiaries other than in the ordinary and usual course in all material
respects and in material compliance with applicable laws and regulations or, to
the extent consistent therewith, fail to use reasonable best efforts to preserve
intact their business organizations and assets and maintain their rights,
franchises and existing relations with customers, suppliers, employees and
business associates, or take any action that would adversely affect its ability
to perform any of its material obligations under this Agreement in any material
respect; provided, however, that no action by the Company or its Subsidiaries
with respect to matters specifically addressed by any other provision of this
Section 4.01 shall be deemed a breach of this Section 4.01(a) unless such action
would constitute a breach of one or more of such other provisions.
(b) Capital Stock. (i) Issue, sell, pledge, dispose of or encumber, or
authorize or propose the issuance, sale, pledge, disposition or encumbrance of,
any shares of its capital stock or any Rights, (ii) enter into any agreement
with respect to the foregoing or (iii) permit any additional shares of capital
stock to become subject to new grants of employee or director stock options,
other Rights or similar stock-based employee rights, other than (v) automatic
grants, if any, of stock options to purchase Company Common Stock in accordance
with the terms of the Company 1995 Non-Employee Director Stock Option Plan as in
effect on the date hereof, (w) grants of stock options to purchase up to an
aggregate of 50,000 shares of the Company Common Stock in accordance with the
terms of the Company 1995 Stock Option Plan, as amended and in effect on the
date hereof, to new employees hired after the date hereof and/or to current
employees (other than current officers or other executives) in connection with
the promotion or retention of any such current employee, in any such case, in
the ordinary course of business, (x) the issuance of the Company Common Stock
upon the exercise of stock options outstanding as of the date hereof issued in
the ordinary course of business in accordance with the terms of any Company
Stock Option Plan as in effect on the date of this Agreement or granted as
permitted under clause (v) above, (y) issuances by a wholly owned Subsidiary of
the Company of capital stock to such Subsidiary's parent and (z) issuances to
comply with the Company's obligations under the Company Stock Purchase Plan.
(c) Dividends, Etc. (i) Make, declare, pay or set aside for payment any
dividend (other than dividends from the Company's Subsidiaries to the Company or
another Subsidiary of the Company) on or in respect of, or declare or make any
distribution on any shares of its capital stock or (ii) except for any such
transaction by a wholly owned Subsidiary of the Company which remains a wholly
owned Subsidiary after consummation of such transaction, directly or indirectly
adjust, split, combine, redeem, reclassify, purchase, repurchase or otherwise
acquire, any shares of the capital stock of the Company or any of its
Subsidiaries.
(d) Compensation; Employment Agreements; Etc. Enter into or amend any
employment, consulting, severance, retention, change in control or similar
agreements or arrangements with any of its or its Subsidiaries' directors,
officers, employees or consultants or former directors, officers, employees or
consultants, or grant any salary, wage or other compensation increase, make any
award or grant under any Plan or increase or modify any employee benefit
(including any incentive or bonus payments), except (i) for increases in annual
salary or hourly wage rates granted to current employees (other than officers)
in the ordinary course of business, consistent with past practice, (ii) for
changes required to be implemented in accordance with the current terms of any
Company Plan set forth in Section 4.01(d) of the Company's Disclosure Schedule
and (iii) grants of stock options permitted under Section 4.01(b).
(e) Benefit Plans. Enter into, adopt, implement or amend in any material
respect (except to the extent required to comply with applicable law) any Plan.
(f) Acquisitions and Dispositions. Except in the ordinary course of
business, consistent with past practice, acquire all or any portion of the
assets, business or properties of any other entity or sell, transfer, mortgage,
encumber or otherwise dispose of or discontinue any portion of its assets,
business or properties.
(g) Amendments. Amend the Company Certificate or the Company's by-laws.
(h) Accounting Methods. Implement or adopt any change in its accounting
principles, practices or methods, other than as may be required by U.S. GAAP or
SEC regulation.
(i) Contracts. Except in the ordinary course of business, (i) enter into or
terminate (x) any customer contract or agreement in excess of $3,000,000, (y)
any contract or agreement with a supplier that does not conform in size and
scope to similar contracts entered into by the Company or its Subsidiaries prior
to the date hereof or (z) any material lease or other agreement or (ii) amend or
modify in a material respect any of its existing material contracts, agreements
or leases (including any material licensing agreement).
(j) Claims. Except in the ordinary course of business, settle any claim,
action or proceeding involving money damages in excess of $100,000 in the
aggregate or involving any restrictions or limitations on the Company or the
Company's business.
(k) Adverse Actions. (i) Take any action with the Knowledge that such
action would, or is reasonably likely to, prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code;
or (ii) knowingly take any action that is intended or is reasonably likely to
result in (A) any of its representations and warranties set forth in this
Agreement being or becoming untrue at any time at or prior to the Effective
Time, (B) except as otherwise permitted by Section 6.06, any of the conditions
to the Merger set forth in Article VII not being satisfied or satisfaction of
any such condition being materially delayed or (C) a violation of any provision
of this Agreement except, in each case, as may be required by applicable law.
(l) Incurrence of Indebtedness. Other than (i) short-term indebtedness
incurred in the ordinary course of business consistent with past practice but in
no event to exceed an aggregate of $1,000,000 of short-term debt and (ii)
indebtedness of the Company or any of its Subsidiaries to the Company or any of
its Subsidiaries, incur any indebtedness for borrowed money, assume, guarantee,
endorse or otherwise as an accommodation become responsible for the obligations
of any other individual, corporation or other entity, or make any loan or
advance.
(m) Capital Expenditures. Make any capital expenditures in excess of
$2,000,000 in the aggregate in any quarter of the year.
(n) Tax Elections. Make any new or different material Tax election, or
revoke any material Tax election.
(o) Confidentiality Agreements. Waive any confidentiality or "standstill"
provisions entered into with any third party in connection with its
consideration of an Acquisition Proposal.
(p) Agreements. Agree or commit to do anything prohibited by the above
paragraphs (a) through (o).
4.02. Forbearances of Nortel. From the date hereof until the Effective
Time, except as expressly contemplated by this Agreement or as set forth in
Section 4.02 of Nortel's Disclosure Schedule, without the prior written consent
of the Company, Nortel will not, and will cause each of its Subsidiaries not to:
(a) Dividends, Etc. (i) Make, declare, pay or set aside for payment any
extraordinary cash dividend on or in respect of the Nortel Common Shares.
(b) Adverse Actions. (i) Take any action with the Knowledge that such
action would, or is reasonably likely to, prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code;
or (ii) knowingly take any action that is intended or is reasonably likely to
result in (A) any of its representations and warranties set forth in this
Agreement being or becoming untrue at any time at or prior to the Effective
Time, (B) subject to Section 6.11(d), any of the conditions to the Merger set
forth in Article VII not being satisfied or satisfaction of any such condition
being materially delayed or (C) a violation of any provision of this Agreement
except, in each case, as may be required by applicable law.
(c) Agreements. Agree or commit to do anything prohibited by the above
paragraphs (a) and (b).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. Representations and Warranties of the Company. Except as set forth in
the disclosure schedule delivered by the Company to Nortel prior to the
execution of this Agreement (the "Company Disclosure Schedule") (each section of
which qualifies the correspondingly numbered representation and warranty or
covenant to the extent specified therein), the Company hereby represents and
warrants to each of Nortel and Sub as follows:
(a) Organization, Standing and Authority. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. It is duly qualified to do business and is in
good standing in the states of the United States and foreign jurisdictions where
its ownership or leasing of property or assets or the conduct of its business
requires it to be so qualified and it has in effect all federal, state, local
and foreign governmental authorizations necessary for it to own or lease its
properties and assets and to carry on its business as it is now conducted,
except where the failure to be so duly qualified and in good standing or to have
in effect all federal, state, local, and foreign governmental authorizations
does not have, and would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company. The Company has made
available to Nortel a complete and correct copy of its certificate of
incorporation and by-laws, each as amended and in full force and effect as of
the date of this Agreement, and the Company is not in violation of any provision
thereof.
(b) Shares.
(i) The authorized capital stock of the Company consists of (A) 30,000,000
shares of Company Common Stock, par value $0.01 of which 13,236,840 shares were
outstanding as of August 20, 1999 (the "Capitalization Date") and (B) 1,000,000
shares of preferred stock, par value $0.01 per share ("Company Preferred
Stock"), of which no shares were issued or outstanding as of the Capitalization
Date and 750,000 shares of which have been designated Series A Junior
Participating Preferred Stock ("Company Series A Preferred Stock") and reserved
for issuance upon exercise of the rights (the "Company Stockholder Protection
Rights") distributed to the holders of Company Common Stock pursuant to a Rights
Agreement dated as of July 31, 1996, between the Company and the American Stock
Transfer & Trust Company, as Rights Agent, as amended (the "Company Rights
Agreement"). Since the Capitalization Date, there have been no issuances of
shares of the capital stock of the Company or any other securities of the
Company other than issuances of shares pursuant to Company Stock Options
outstanding on the Capitalization Date as set forth in clause (iii) below.
(ii) All issued and outstanding shares of Company Common Stock have been
duly authorized and validly issued, and are fully paid and nonassessable, and no
class of capital stock of the Company is entitled to preemptive rights.
(iii) There were outstanding at the Capitalization Date no Rights to
acquire capital stock from the Company other than (A) the Company Stockholder
Protection Rights, (B) Company Stock Options and (C) rights under the Company
Stock Purchase Plan, the Rights referred to in clauses (B) and (C) representing
in the aggregate the right to purchase 1,729,200 shares of Company Common Stock.
Section 5.01(b)(iii) of the Company's Disclosure Schedule sets forth for all
Company Stock Options outstanding at the Capitalization Date a true and complete
list of the following: their holders, their date of grant, the number of shares
of Company Common Stock for which they are exercisable, their exercise price as
currently in effect, their date of vesting and the conditions, if any, under
which such vesting may accelerate. Other than in connection with the Option
Agreement and other than the associated Company Stockholder Protection Rights
issued with the shares of Company Common Stock issued as described in clause (i)
above, no Rights to acquire capital stock from the Company have been issued or
granted since the Capitalization Date.
(c) Subsidiaries.
(i) Section 5.01(c)(i) of the Company Disclosure Schedule sets forth a list
as of the date hereof of all of the Company's Subsidiaries, together with their
jurisdiction of organization. Unless otherwise described therein, the Company
owns, directly or indirectly, beneficially and of record 100% of the issued and
outstanding voting securities of each such Subsidiary (other than directors'
qualifying shares, if any). No equity securities of any of the Company's
Subsidiaries are or may become required to be issued (other than to the Company
or its wholly owned Subsidiaries) by reason of any Rights and there are no
contracts, commitments, understandings or arrangements by which any of such
Subsidiaries is bound to sell or otherwise transfer any shares of capital stock
of any such Subsidiaries (other than to the Company or its wholly owned
Subsidiaries). In addition, Section 5.01(c)(i) of the Company Disclosure
Schedule lists as of the date of this Agreement each corporation, partnership,
limited liability company or similar entity with respect to which, as of the
date of this Agreement, the Company or any Subsidiary of the Company owns more
than 5% but less than a majority of the voting equity or similar voting interest
or any interest convertible into, or exchangeable or exercisable for, more than
5% but less than a majority of the voting equity or similar voting interest and
which interest is carried on the Company's most recent financial statements (or
if not held as of the date thereof, would be carried on the Company's financial
statements if prepared as of the date hereof) at a value in excess of $500,000
(collectively, the "Company Equity Interests"). All of the shares of capital
stock of each of the Significant Subsidiaries of the Company and all the Company
Equity Interests held by the Company and each Subsidiary of the Company are
fully paid and nonassessable and are owned by the Company or such Subsidiary
free and clear of any Liens. There are no material outstanding contractual
obligations of the Company or any of its Subsidiaries to provide funds to, or
make any investment (in the form of a loan, capital contribution or otherwise)
in any entity in which the Company or any Subsidiary of the Company owns a
Company Equity Interest.
(ii) Each of the Company's Subsidiaries has been duly organized and is
validly existing in good standing under the laws of the jurisdiction of its
organization. Each of such Subsidiaries is duly qualified to do business and in
good standing in the jurisdictions where its ownership or leasing of property or
the conduct of its business requires it to be so qualified and each has in
effect all federal, state, local and foreign governmental authorizations
necessary for it to own or lease its properties and assets and to carry on its
business as it is now conducted, except where the failure to be so duly
qualified and in good standing or to have in effect all federal, state, local,
and foreign governmental authorizations does not have, and would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company.
(d) Corporate Power. The Company and each of its Subsidiaries has the
corporate power and authority to carry on its business as it is now being
conducted and to own all its properties and assets; and it has the corporate
power and authority to execute, deliver and perform its obligations under this
Agreement and the Option Agreement and to consummate the transactions
contemplated hereby and thereby.
(e) Corporate Authority.
(i) Subject, in the case of the consummation of the Merger, to receipt of
the requisite approval and adoption of the "agreement of merger" (as such term
is used in Section 251 of the DGCL) contained in this Agreement and the Merger
by the holders of a majority of the outstanding shares of Company Common Stock
entitled to vote thereon, the Company Board having unanimously adopted a
resolution approving such "agreement of merger" and declaring its advisability,
this Agreement, the Option Agreement and the transactions contemplated hereby
and thereby have been authorized by all necessary corporate action of the
Company and the Company Board (assuming that neither Nortel or Sub is an
"interested stockholder" of the Company under Section 203 of the DGCL
immediately before the execution and delivery of this Agreement, the Option
Agreement, and the Stockholders' Agreement).
(ii) This Agreement and the Option Agreement are legal, valid and binding
agreements of the Company, enforceable in accordance with their terms (except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles, whether considered at law or in equity).
(f) No Defaults. Subject to receipt of the regulatory approvals, and
expiration of the waiting periods, referred to in Section 5.01(r) and required
filings under federal and state securities or other laws, the execution,
delivery and performance of this Agreement and the Option Agreement and the
consummation of the transactions contemplated hereby and thereby by the Company
do not and will not (i) constitute a breach or violation of, or a default under,
any law, rule or regulation or any judgment, decree, order, governmental permit
or license, or agreement, indenture or instrument of the Company or of any of
its Subsidiaries or to which the Company or any of its Subsidiaries or any of
their respective properties or assets are subject or bound, (ii) constitute a
breach or violation of, or a default under, the articles or certificate of
incorporation or by-laws of the Company or any of its Subsidiaries or (iii)
require any consent or approval under any such law, rule, regulation, judgment,
decree, order, governmental permit or license, agreement, indenture or
instrument, except in the case of (i) and (iii), where such breach, violation or
default or the failure to obtain such consents or approvals would not in the
aggregate have a Material Adverse Effect on the Company, the Surviving
Corporation or Nortel and would not prevent or materially impair the Company's
ability to consummate the transactions contemplated by this Agreement. Section
5.01(f) of the Company Disclosure Schedule contains a list of all consents of
third parties required under any material agreement to be obtained by it or its
subsidiaries prior to, or as a result of, the consummation of the Merger.
(g) Financial Reports and SEC Documents.
(i) With respect to the periods since May 31, 1996, the Company and its
Subsidiaries have filed all reports and statements, together with any amendments
required to be made thereto, that were required to be filed with the SEC.
(ii) The Company's Annual Reports on Form 10-K for the fiscal years ended
May 31, 1996, 1997, and 1998, its Quarterly Reports on Form 10-Q for the periods
ended August 31, 1998, November 30, 1998 and February 28, 1999, and all other
reports, registration statements, definitive proxy statements or information
statements filed or to be filed by it or any of its Subsidiaries subsequent to
May 31, 1996 under the Securities Act, or under Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act, in the form filed, or to be filed (collectively, the
"Company SEC Documents"), with the SEC, as of the date filed (or, with respect
to a document filed prior to the date of this Agreement and amended or
superseded by a subsequent filing prior to the date of this Agreement, then on
the date of such filing as so amended or superseded) (A) complied or will comply
in all material respects as to form with the applicable requirements under the
Securities Act or the Exchange Act, as the case may be; and (B) did not and will
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading; and
each of the balance sheets contained in or incorporated by reference into any
such Company SEC Document (including the related notes and schedules thereto)
fairly presents and will fairly present the financial position of the entity or
entities to which it relates as of its date, and each of the statements of
income and changes in stockholders' equity and cash flows or equivalent
statements in such Company SEC Documents (including any related notes and
schedules thereto) fairly presents and will fairly present the results of
operations, changes in stockholders' equity and changes in cash flows, as the
case may be, of the entity or entities to which it relates for the periods to
which they relate, in each case in accordance with U.S. GAAP consistently
applied during the periods involved and Regulation S-X of the SEC, except in
each case as may be noted therein, subject to normal year-end audit adjustments
in the case of unaudited statements.
(iii) Since February 28, 1999, the Company has not incurred any liabilities
(whether absolute, accrued, contingent or otherwise) that are of a nature that
would be required to be disclosed on a balance sheet of the Company or the
footnotes related thereto prepared in conformity with U.S. GAAP, except (x)
liabilities as set forth in the Company SEC Documents filed prior to the date of
this Agreement (the "Company Filed SEC Documents") and (y) other liabilities
incurred in the ordinary course of business consistent with past practice, which
do not have, and would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company.
(iv) The Company has furnished to Nortel a draft (dated August 17, 1999) of
its Annual Report on Form 10-K for the fiscal year ended May 31, 1999 (including
a draft of the consolidated financial statements to be included therein, with
accompanying footnote disclosure) (the "Draft 1999 10-K"). The Company's Annual
Report on Form 10-K for the fiscal year ended May 31, 1999 shall be filed with
the SEC on or before August 30, 1999 and shall not differ in any material
respect from the Draft 1999 10-K, except for the inclusion of disclosure
relating to this Agreement and the transactions contemplated hereby. The
consolidated balance sheet contained in the Draft 1999 10-K fairly presents the
financial position of the Company as of May 31, 1999, and the statement of
income and changes in stockholders' equity and cash flows for the fiscal year
ended May 31, 1999 contained in the Draft 1999 10-K fairly present the Company's
consolidated results of operations, changes in stockholders' equity and changes
in cash flows for such periods, in each case in accordance with U.S. GAAP
applied consistently with past periods and Regulation S-X of the SEC.
(h) Litigation. Except as disclosed on Section 5.01(h) of the Company
Disclosure Schedule, in the Company Filed SEC Documents or the Draft 1999 10-K,
(i) no litigation, claim or other proceeding before any court or governmental
agency that is pending or, to the Company's Knowledge, threatened against the
Company or any of its Subsidiaries would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company and
(ii) no litigation, claim or other proceeding before any court or governmental
agency is pending or, to the Company's Knowledge, threatened against the Company
or any of its Subsidiaries which, if determined adversely to the Company or any
such Subsidiary, would reasonably be expected to result in a loss of more than
$100,000 or the imposition of any material restrictions on the business of the
Company or any such Subsidiary.
(i) Compliance with Laws. The Company and each of its Subsidiaries:
(i) is in compliance with all applicable federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders or decrees
applicable thereto or to the employees conducting such businesses, except where
failure to so comply does not have, and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company;
(ii) has all permits, licenses, authorizations, orders and approvals of,
and has made all filings, applications and registrations with, all Governmental
Authorities that are required in order to permit them to conduct their
businesses substantially as presently conducted, and all such permits, licenses,
certificates of authority, orders and approvals are in full force and effect
and, to its Knowledge, no suspension or cancellation of any of them is
threatened, except for (x) failures to hold such permits, licenses,
authorizations, orders and approvals and (y) failures to make such filings,
applications, and registrations, which do not have, and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company; and
(iii) has received since May 31, 1998 no written notification or
communication from any Governmental Authority (A) asserting that the Company or
any of its Subsidiaries is not in compliance with any of the statutes,
regulations or ordinances which such Governmental Authority enforces or (B)
threatening to revoke any license, franchise, permit or governmental
authorization.
(j) Material Contracts; Defaults. Except for this Agreement, the Option
Agreement, and those agreements and other documents filed as exhibits to the
Company Filed SEC Documents, as of the date of this Agreement, neither the
Company nor any of its Subsidiaries is a party to or bound by (i) any "material
contract" within the meaning of Item 601(b)(10) of the SEC's Regulation S-K or
(ii) any non-competition agreement or other agreement or arrangement that
materially restricts it or any of its Subsidiaries from competing in any line of
business. Neither it nor any of its Subsidiaries is in default under any
material contract, agreement, commitment, arrangement, lease, insurance policy
or other instrument to which it is a party, by which its respective assets,
business, or operations may be bound or affected, and there has not occurred any
event that, with the lapse of time or the giving of notice or both, would
constitute such a default, except for such defaults that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
the Company.
(k) No Brokers. No action has been taken by the Company, its officers,
directors or employees that would give rise to any valid claim against any party
hereto for a brokerage commission, finder's fee or other like payment with
respect to the transactions contemplated by this Agreement, excluding fees to be
paid to Xxxxxxx Xxxxx & Company (the "Company Financial Advisor") and to Xxxx &
Co., Inc. pursuant to the Company's written agreements with such firms, true and
complete copies of which agreements have been furnished to Nortel prior to the
date of this Agreement.
(l) Employee Benefits; Employee Relations.
(i) Section 5.01(l) of the Company Disclosure Schedule contains a complete
and correct list of each Company Plan. With respect to each Company Plan, true
and complete copies have been provided to Nortel of: (i) the plan document or
agreement or, with respect to any Company Plan that is not in writing, a written
description of the terms thereof; (ii) the trust agreement, insurance contract
or other documentation of any related funding arrangement; (iii) the summary
plan description; (iv) the most recent required Internal Revenue Service Form
5500, including all schedules thereto; (v) any material communication to or from
any Governmental Authority, including a written description of any oral
communication; and (vi) all amendments or modifications to any such document.
(ii) Neither the Company nor any Subsidiary thereof has disseminated in
writing or otherwise broadly or generally notified employees of any intent or
commitment (whether or not legally binding) to create or implement any
additional Plan or to amend, modify or terminate any Company Plan, except for
immaterial amendments to any Company Plan that will not result in an increase in
the annual costs in respect of such plan incurred or to be incurred by the
Company or any of its Subsidiaries.
(iii) Except for any failures that would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company, each Company Plan has been operated and administered, and is, in
compliance with its terms and all applicable laws, rules and regulations
(including ERISA and the Code and any regulations thereunder). There are no
actions, suits, claims or governmental audits (other than routine claims for
benefits in the ordinary course) pending or, to the Knowledge of the Company,
threatened with respect to any Company Plan that would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company.
(iv) No Company Plan is, and neither the Company nor any Subsidiary thereof
contributes to or has any material liability or obligation with respect to any
Plan that is, (A) a multiemployer plan within the meaning of Section 4001(a)(3)
of ERISA, (B) any single employer plan or other pension plan subject to Title IV
or Section 302 of ERISA or Section 412 of the Code or (C) a multiple employer
plan within the meaning of Section 4063 or 4064 of ERISA. Neither the Company
nor any Subsidiary thereof is a party to any collective bargaining or other
collective labor agreement or understanding.
(v) There is no pending or, to the Knowledge of the Company, threatened
labor dispute, strike, work stoppage or other concerted labor activity against
the Company or any Subsidiary thereof or involving any of their respective
employees. To the Knowledge of the Company, neither the Company nor any
Subsidiary thereof, nor their respective businesses, has committed any unfair
labor practices or violated in any material respect any applicable employment
laws in connection with the operation of the respective businesses of the
Company or any Subsidiary thereof, and there is no pending or, to the Knowledge
of the Company, threatened charge or complaint against the Company or any of its
Subsidiaries by the National Labor Relations Board or any comparable state
agency, or by any employee or class of employees or governmental agency relating
to a purported violation of any applicable employment laws.
(vi) Each Company Plan that is intended to qualify under Section 401(a)
and/or 401(k) of the Code so qualifies and its trust is exempt from taxation
under Section 501(a) of the Code. The Company and its Subsidiaries have timely
paid all contributions, premiums and expenses payable to or in respect of each
Company Plan under the terms thereof and in accordance with applicable law,
including ERISA and the Code, and, to the extent any such contributions,
premiums or expenses are not yet due, the liability therefor has been properly
and adequately accrued on the Company's financial statements included in its
Quarterly Report on Form 10-Q for the period ended February 28, 1999.
(vii) Neither the Company nor any of its Subsidiaries has incurred or will
incur, either directly or indirectly (including as a result of an
indemnification obligation), any material liability under or pursuant to any
provision of Title I or IV of ERISA or the penalty, excise tax or joint and
several liability provisions of the Code relating to employee benefit plans, and
to the Knowledge of the Company, no event, transaction or condition has
occurred, exists or is expected to occur which could reasonably be expected to
result in any such material liability to the Company, any of its Subsidiaries
or, after the Effective Time , Nortel or any of its Affiliates.
(viii) Except as set forth in Section 5.01(l)(viii) of the Disclosure
Schedule, neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, either alone or in
combination with another event (whether contingent or otherwise) will (A)
entitle any current or former employee, consultant or director of the Company or
any of its Subsidiaries to any increased or modified benefit or payment; (B)
increase the amount of compensation due to any such employee, consultant or
director; (C) accelerate the vesting, payment or funding of any compensation,
stock-based benefit, incentive or other benefit; (D) result in any "parachute
payment" under Section 280G of the Code (whether or not such payment is
considered to be reasonable compensation for services rendered); or (E) cause
any compensation to fail to be deductible under Section 162(m), or any other
provision of the Code or any similar foreign Law.
(m) Takeover Laws. The Company Board (i) has validly approved this
Agreement, the Option Agreement and the Stockholders' Agreement and the
transactions contemplated hereby and thereby (including the Merger) for purposes
of Section 203 of the DGCL and (ii) has taken all steps necessary to render
Article Ninth of the Company Certificate inapplicable to the transactions
contemplated by this Agreement. Except for Section 203 of the DGCL (which has
been rendered inapplicable), to the Company's Knowledge, no "moratorium",
"control share", "fair price" or other antitakeover laws and regulations of any
state (collectively, "Takeover Laws") are applicable to the Merger or the other
transactions contemplated by this Agreement, the Option Agreement and the
Stockholders' Agreement.
(n) Rights Agreement. The Company Board, by a duly enacted resolution, has
determined in good faith that each of Nortel and Sub shall be an "Excluded
Person" for all purposes of the Company Rights Agreement (as contemplated by
Section 1(h) of such Agreement) and, in connection therewith, has approved an
amendment (in the form provided to Nortel prior to the date hereof) to the
Company Rights Agreement to the effect that none of Nortel, Sub or any of their
respective affiliates shall become an "Acquiring Person" and that no "Shares
Acquisition Date" or "Distribution Date" (as such terms are defined in the
Company Rights Agreement) will occur as a result of the approval, execution or
delivery of this Agreement, the Option Agreement, or the Stockholders' Agreement
or the consummation of the transactions contemplated hereby or thereby. The
Company Rights Agreement shall terminate and be of no further effect upon the
Effective Time, without any consideration being payable with respect to
outstanding Company Stockholder Protection Rights thereunder.
(o) Environmental Matters.
(i) As used in this Agreement, "Environmental Laws" means all applicable
local, state, provincial and federal environmental, health and safety laws
(including common law) and regulations in effect on the date of this Agreement,
relating to the protection of human health and safety as affected by exposure to
pollutants, contaminants, or hazardous or toxic wastes, substances or materials
and to the protection of the environment including, without limitation, the
Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation, and Liability Act, the Clean Water Act, the Federal
Clean Air Act, and the Occupational Safety and Health Act, each as amended,
regulations promulgated thereunder, and state counterparts.
(ii) (x) Neither the conduct or operations of the Company or its
Subsidiaries nor any condition of any property presently or previously owned,
leased or operated by any of them violates or, within the applicable statute or
limitations period, violated Environmental Laws, except for violations that are
not material and (y) no condition has existed or event has occurred with respect
to any of them or any such property that is reasonably likely to result in a
Material Adverse Effect on the Company. Neither the Company nor any of its
Subsidiaries has received any written notice from any Governmental Authority
that it or its Subsidiaries or the operation or condition of any property ever
owned, leased, operated, held as collateral or held as a fiduciary by any of
them are or were in material violation of or otherwise are alleged to have
material liability under any Environmental Law, including, but not limited to,
responsibility (or potential responsibility) for the cleanup or other
remediation of any pollutants, contaminants, or hazardous or toxic wastes,
substances or materials at, on, beneath, or originating from any such property.
(iii) To the Company's Knowledge, none of the property currently owned,
leased or operated by the Company or by its Subsidiaries is subject to, or as a
result of this transaction would be subject to, (i) the New Jersey Site Recovery
Act or any other state or local Environmental Laws which would impose
restrictions, such as notice, disclosure or obtaining advance approval prior to
this transaction, or (ii) any liens under any Environmental Laws.
(p) Intellectual Property.
(i) Except as set forth in Section 5.01(p)(i) of the Company Disclosure
Schedule, the Company and its Subsidiaries own or are licensed to use all
Intellectual Property Rights currently used in the business of the Company or
its Subsidiaries or necessary to conduct the business of the Company and its
Subsidiaries as currently conducted or currently anticipated to be conducted
(the "Company Intellectual Property Rights").
(ii) Section 5.01(p)(ii) of the Company Disclosure Schedule contains an
accurate and complete list as of the date of this Agreement of the following
categories of Company Intellectual Property Rights: (A) Trademarks that are
registered or for which an application for registration is pending; (B) Patents;
(C) Software; (D) Copyrights that are registered or for which an application for
registration is pending; and (E) mask works. Where listed Intellectual Property
Rights are registered with a governmental authority or an application for
registration is pending, the jurisdiction, registration or application number,
date of registration or application, named owner and/or assignee, and
international classes of registration are indicated, as applicable.
(iii) Section 5.01(p)(iii) of the Company Disclosure Schedule contains an
accurate and complete list as of the date of this Agreement of (A) all licenses
and agreements under which the Company and its Subsidiaries are licensed to use
third party Intellectual Property Rights and (B) all licenses and sublicenses
under which the Company and its Subsidiaries have granted rights to third
parties to use the Company Intellectual Property Rights. Except as set forth in
Section 5.01(p)(iii) of the Company Disclosure Schedule, the Company and its
Subsidiaries are not required to pay any royalties, fees or other amounts to any
Person in connection with the use of the Company Intellectual Property Rights.
(iv) The Company and its Subsidiaries have good and valid title to all
Company Intellectual Property Rights owned by any of them and valid and
enforceable license rights to all Company Intellectual Property Rights used
under license, free and clear, to the Company's Knowledge, of all Liens, and
other than as set forth in Section 5.01(p)(iv) of the Company Disclosure
Schedule, to the Company's Knowledge, all Company Intellectual Property Rights
are in full force and effect and will remain in full force and effect
immediately following the Effective Time.
(v) The Company and its Subsidiaries have a practice to secure, and have
secured, from all consultants and contractors who contribute or have contributed
to the creation or development of Company Intellectual Property Rights valid
written assignments by such persons to the Company and its Subsidiaries of the
rights to such contributions the Company and its Subsidiaries do not already own
by operation of law. The Company and its Subsidiaries have taken reasonable and
appropriate steps to protect and preserve the confidentiality of all of their
Trade Secrets, and to the Company's Knowledge there are no unauthorized uses,
disclosures or infringements of any Company Intellectual Property Rights, and
all use by, and disclosure to, any Person of Trade Secrets that comprise any
part of the Company Intellectual Property Rights has been pursuant to the terms
of a written agreement with such Person, and all use by the Company and its
Subsidiaries of Trade Secrets owned by another Person has been pursuant to the
terms of a written agreement with such Person or is otherwise lawful. Neither
the Company Intellectual Property Rights nor the use or other exploitation
thereof by the Company and its Subsidiaries (or any consultant, contractor or
employee of the Company and its Subsidiaries who contributes to or has
contributed to or participated in the creation or development of Company
Intellectual Property Rights ) in the conduct of their business, nor any product
or service provided by the Company and its Subsidiaries, infringes on,
misappropriates, breaches or violates any third party Intellectual Property
Rights.
(vi) Neither the Company nor any of its Subsidiaries: (A) has been notified
or is otherwise aware of any actual or threatened adverse proceeding of any
Person pertaining to any challenge to the scope, validity or enforceability of,
or the Company's ownership of, any of the Company Intellectual Property Rights;
(B) is the subject of any claim of infringement or misappropriation by the
Company or any of its Subsidiaries of any third party Intellectual Property
Rights; or (C) has any claim for infringement or misappropriation of, or breach
of any license or agreement involving, any of the Company Intellectual Property
Rights.
(q) Tax Matters.
(i)(A) All returns, declarations, reports, estimates, information returns
and statements required to be filed on or before the Effective Date under
federal, state, local or any foreign tax laws ("Tax Returns") with respect to it
or any of its Subsidiaries, have been or will be timely filed, or requests for
extensions have been timely filed and have not expired, except where a failure
or failures to so timely file would not, individually or in the aggregate, be
expected to be material; (B) all material Tax Returns filed by it are complete
and accurate in all material respects; (C) all Taxes shown to be due and payable
(without regard to whether such Taxes have been assessed) on such Tax Returns
have been paid or adequate reserves have been established for the payment of
such Taxes; (D) the proper and accurate amounts have been withheld from all
employees (and timely paid to the appropriate Governmental Authority or set
aside in an account for such purposes) for all periods through the Closing date
in compliance in all material respects with all Tax withholding provisions of
applicable federal, state, local and foreign laws (including, without
limitation, income, social security, and employment tax withholding for all
types of compensation); (E) neither it nor any of its subsidiaries is a party to
any tax sharing or similar agreement or any agreement pursuant to which it or
any of its subsidiaries has an obligation to indemnify any party (other than it
or one of its subsidiaries) with respect to Taxes; (F) all Taxes due with
respect to completed and settled examinations or concluded litigation relating
to it or any of its subsidiaries have been paid in full or adequate reserves
have been established for the payment thereof; and (G) no material audit or
examination or refund litigation with respect to any Tax Return is pending.
(ii) The Company has no reason to believe that any conditions exist that
might prevent or impede the Merger from qualifying as a reorganization within
the meaning of Section 368(a) of the Code.
(r) Regulatory Approvals. No consents or approvals of, or filings or
registrations with, any Governmental Authority or instrumentality are necessary
to consummate the Merger except (i) as may be required under, and other
applicable requirements of, the Xxxx-Xxxxx Xxxxxx Antitrust Improvements Act of
1976, as amended (the "HSR Act"), the Competition Act (Canada) and antitrust or
other competition laws of other jurisdictions; (ii) as may be required by the
by-laws, rules, regulations or policies of the Canadian Stock Exchanges in
respect of the assumption by Nortel, and the exercisability by the holders, of
the Company Stock Options and of the NYSE and the Canadian Stock Exchanges in
respect of the Nortel Common Shares to be issued in the Merger and upon exercise
of the Company Stock Options to be assumed by Nortel by reason of the Merger and
the listing of such Nortel Common Shares on such stock exchanges; (iii) the
filing with the SEC of the Company Proxy Statement and the filing and
declaration of effectiveness of the Registration Statement; (iv) the filing of a
certificate of merger with the Secretary of State of the State of Delaware
pursuant to the DGCL; (v) such filings as are required to be made or approvals
as are required to be obtained under the securities or "Blue Sky" laws of
various states in connection with the issuance of Nortel Common Shares in the
Merger; (vi) such filings as are required to be made and exemption rulings or
orders as are required to be obtained under the Canada Business Corporations Act
and Canadian securities laws; and (vii) as may be required under Section 721 of
the U.S. Defense Production Act of 1950, as amended, and the rules promulgated
thereunder ("Exon-Xxxxxx") and the rules and regulations promulgated by the U.S.
Department of Defense.
(s) Fairness Opinion. On or before the date hereof, the Company Financial
Advisor has delivered its opinion to the Company Board that the Exchange Ratio
is fair, from a financial point of view, to the holders of Company Common Stock
and such opinion has not been withdrawn.
(t) Year 2000 Compliance.
(i) Except as set forth in Section 5.01(t)(i) of the Company Disclosure
Schedule, all Material Systems of the Company and its Subsidiaries have been
remediated through modification, upgrade or replacement so that they are (A)
able to receive, record, store, process, calculate, manipulate and output dates
from and after January 1, 2000, time periods that include January 1, 2000 and
information that is dependent on or relates to such dates or time periods, in
the same manner and with the same accuracy, functionality, data integrity and
performance as when dates or time periods prior to January 1, 2000 are involved
and (B) able to store and output date information in a manner that is
unambiguous as to century ("Year 2000 Compliant").
(ii) To the Company's Knowledge, the material suppliers and vendors of
goods and services to the Company and its Subsidiaries ("Material Suppliers")
are taking, or will in a timely manner take, such steps as are necessary to make
their respective Material Systems Year 2000 Compliant by December 31, 1999,
except to the extent that the failure of any such Material Systems of Material
Suppliers to be Year 2000 Compliant would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on the
Company.
(iii) All Company application products shipped to customers since August 1,
1998, and all other Company products shipped to customers since September 1,
1998, are Year 2000 Compliant in all material respects and have been tested by
the Company (including custom testing of all third-party manufactured content of
such Company products) to confirm such status. With respect to Company products
shipped prior to such dates, the Company and its Subsidiaries have undertaken
reasonable efforts to notify all end-users of such products of the need to
upgrade such products to be Year 2000 Compliant and of the need to audit any
custom application products to identify any respects in which they are not Year
2000 Compliant.
(iv) The Company has furnished to Nortel copies of, or copies of all
documents relating to, (A) all complaints, investigations or audits of any
Governmental Authority, (B) all unresolved customer complaints, demands or
claims (excluding routine requests for information regarding matters relating to
the year 2000 turnover), (C) all attorney letters or demands and (D) all
litigation, arbitrations or similar proceedings, in each case insofar as they
relate to the Year 2000 Compliant status of Company products, the cost of
upgrading Company products to a Year 2000 Compliant status or injuries and
damages suffered as a result of the non-Year 2000 Compliant condition of Company
products.
(v) The Company has provided to Nortel copies of its written contingency
plan relating to interruptions to its business or the functioning of Company
products caused by the year 2000 turnover, and the Company has no other
contingency plans relating thereto. (u) No Material Adverse Effect. Since May
31, 1999, and until the date hereof, the Company and its Subsidiaries have
conducted their respective businesses in the ordinary course (excluding the
incurrence of reasonable and customary liabilities related to this Agreement and
the transactions contemplated hereby). Since May 31, 1999, and until the date
hereof, no event has occurred or circumstance arisen that, individually or taken
together with all other facts, circumstances and events (described in any
paragraph of Section 5.01 or otherwise), has had or is reasonably likely to have
a Material Adverse Effect with respect to the Company.
5.02. Representations and Warranties of Nortel and Sub. Except as set forth
in the disclosure schedule delivered by Nortel to the Company prior to the
execution of this Agreement (the "Nortel Disclosure Schedule") (each section of
which qualifies the correspondingly numbered representation and warranty or
covenant to the extent specified therein), Nortel and Sub hereby represent and
warrant to the Company as follows:
(a) Organization, Standing and Authority. Each of Nortel and Sub (x) is a
corporation duly organized, validly existing and, in the case of Sub, in good
standing under the laws of the jurisdiction of its organization and (y) is duly
qualified to do business and, as applicable, is in good standing in the
provinces of Canada and in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or assets or the
conduct of its business requires it to be so qualified, except where the failure
to be duly organized, validly existing, in good standing, or duly qualified does
not have and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Nortel. Each of Nortel and Sub has in
effect all federal, provincial, state, local and foreign governmental
authorizations necessary for it to own or lease its properties and assets and to
carry on its business as it is now conducted, except where failure to have in
effect such authorizations does not have and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Nortel.
Each of Nortel and Sub has made available to the Company a complete and correct
copy of its constitutive documents, each as amended to date and in full force
and effect.
(b) Shares.
(i) As of the date hereof, the authorized capital stock of Nortel consists
solely of (A) an unlimited number of Nortel Common Shares, of which
1,358,418,380 shares were outstanding as of August 17, 1999 (giving effect to
the one-for-one stock dividend effected by Nortel as of such date); (B) an
unlimited number of Class A Preferred Shares issuable in series, without nominal
or par value, of which 200 Cumulative Redeemable Class A Preferred Shares Series
4 (which are exchangeable at certain times, and subject to certain conditions,
into Nortel Common Shares), 16,000,000 Cumulative Redeemable Class A Preferred
Shares Series 5 (which are convertible at certain times, and subject to certain
conditions, into an equal number of Cumulative Redeemable Class A Preferred
Shares Series 6) and 14,000,000 Non-cumulative Redeemable Class A Preferred
Shares Series 7 (which are convertible at certain times, and subject to certain
conditions, into an equal number of Non-cumulative Redeemable Class A Preferred
Shares Series 8) were outstanding as of August 17, 1999; and (C) an unlimited
number of Class B Preferred Shares, issuable in series, without nominal or par
value, of which no shares were outstanding as of August 17, 1999. As of the date
hereof, there are no outstanding Rights to acquire capital stock from Nortel
other than pursuant to Nortel's stock option and other employee compensation
plans, Nortel's shareholder dividend reinvestment and stock purchase plan and
the exchange rights associated with Nortel's Series 4 Preferred Shares that have
been Previously Disclosed.
(ii) The authorized capital stock of Sub consists of one share of common
stock, $0.01 per share, which one share is outstanding and is owned directly by
Nortel. Sub has not conducted any business prior to the date hereof and has no
Subsidiaries and no assets, liabilities or obligations of any nature other than
incident to its formation and incident to this Agreement.
(iii) The outstanding shares of Nortel's and Sub's capital stock have been
duly authorized and are validly issued and outstanding, fully paid and
nonassessable, and subject to no preemptive rights (and were not issued in
violation of any preemptive rights). As of the date hereof, there are no shares
of capital stock of Sub authorized and reserved for issuance and Sub does not
have any Rights issued or outstanding with respect to its capital stock or any
commitment to authorize, issue or sell any such shares or Rights, except
pursuant to this Agreement.
(iv) The Nortel Common Shares to be issued in exchange for shares of
Company Common Stock in the Merger or upon exercise of Company Stock Options to
be assumed by Nortel by reason of the Merger, when issued will be duly
authorized, validly issued, fully paid and nonassessable and will not have been
issued in violation of any subscriptive or preemptive rights.
(c) Corporate Power. Each of Nortel and Sub has the corporate power and
authority to carry on its business as it is now being conducted and to own all
its properties and assets; and each of Nortel and Sub has the corporate power
and authority to execute, deliver and perform its obligations under this
Agreement and, in the case of Nortel, the Option Agreement and to consummate the
transactions contemplated hereby and, in the case of Nortel, thereby.
(d) Corporate Authority. (i) This Agreement and the transactions
contemplated hereby, including the issuance of Nortel Common Shares in the
Merger or upon the exercise of Company Stock Options to be assumed by Nortel by
reason of the Merger, and the Option Agreement and the transactions contemplated
thereby, as applicable, have been authorized and approved by all necessary
corporate action of Nortel (no shareholder approvals being required), Sub, the
Nortel Board and the Board of Directors of Sub prior to the date hereof (which
action has not been rescinded or modified in any way) and (ii) each of this
Agreement and, in the case of Nortel, the Option Agreement, is a legal, valid
and binding agreement of each of Nortel and Sub, enforceable in accordance with
its terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditors' rights
or by general equity principles, whether considered at law or in equity).
(e) No Defaults. Subject to receipt of the regulatory approvals, and
expiration of the waiting periods, referred to in Section 5.02(i) and any
required filings under federal, state and provincial securities laws and the
Canada Business Corporations Act, the execution, delivery and performance of
this Agreement and, as applicable, the Option Agreement and the consummation of
the transactions contemplated hereby and, as applicable, thereby by Nortel and
Sub do not and will not (i) constitute a material breach or violation of, or a
material default under, any law, rule or regulation or any judgment, decree,
order, governmental permit or license, or agreement, indenture or instrument of
Nortel or of any of Nortel's Subsidiaries or to which it or any of its
Subsidiaries or any of their respective properties or assets are subject or
bound, (ii) constitute a breach or violation of, or a default under, the
articles or certificate of incorporation or by-laws of either Nortel or Sub, or
(iii) require any consent or approval under any such material law, rule,
regulation, judgment, decree, order, governmental permit or license, agreement,
indenture or instrument, except in the case of (i) and (iii), where such breach,
violation or default or the failure to obtain such consents or approvals would
not in the aggregate have a Material Adverse Effect on the Company, the
Surviving Corporation or Nortel and would not prevent or materially impair
Nortel's ability to consummate the transactions contemplated by this Agreement.
(f) Financial Reports and SEC Documents. Nortel's Annual Reports on Form
10-K for the fiscal years ended December 31, 1996, 1997 and 1998, its Quarterly
Reports on Form 10-Q for the periods ended March 31, 1999 and June 30, 1999, and
all other reports or registration statements, filed or to be filed by it or any
of its Subsidiaries subsequent to December 31, 1996 under the Securities Act, or
under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, in the form filed,
or to be filed (collectively, the "Nortel SEC Documents"), with the SEC, as of
the date filed (A) complied or will comply in all material respects as to form
with the applicable requirements under the Securities Act or the Exchange Act,
as the case may be; and (B) did not and will not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; and each of the balance sheets contained
in or incorporated by reference into any such Nortel SEC Document (including the
related notes and schedules thereto) fairly presents and will fairly present the
financial position of the entity or entities to which it relates as of its date,
and each of the statements of income and changes in stockholders' equity and
cash flows or equivalent statements in such Nortel SEC Documents (including any
related notes and schedules thereto) fairly presents and will fairly present the
results of operations, changes in stockholders' equity and changes in cash
flows, as the case may be, of the entity or entities to which it relates for the
periods to which they relate, in each case in accordance with Canadian GAAP
consistently applied during the periods involved and Regulation S-X of the SEC,
except in each case as may be noted therein, subject to normal year-end audit
adjustments in the case of unaudited statements. The books and records of Nortel
and its Subsidiaries have been, and are being, maintained in all material
respects in accordance with Canadian GAAP and any other applicable legal and
accounting requirements and reflect only actual transactions.
(g) Litigation. Except as Previously Disclosed, no litigation, claim or
other proceeding before any court or governmental agency that is pending or, to
Nortel's Knowledge, threatened against Nortel or any of its Subsidiaries would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Nortel.
(h) No Brokers. No action has been taken by it that would give rise to any
valid claim against any party hereto for a brokerage commission, finder's fee or
other like payment with respect to the transactions contemplated by this
Agreement, excluding fees to be paid to Credit Suisse First Boston.
(i) Regulatory Approvals. No consents or approvals of, or filings or
registrations with, any Governmental Authority or with any third party are
necessary to consummate the Merger except for (i) as may be required under, and
other applicable requirements of, the HSR Act and the Competition Act (Canada);
(ii) as may be required by the by-laws, rules, regulations or policies of the
Canadian Stock Exchanges in respect of the assumption by Nortel, and the
exercisability by the holders, of the Company Stock Options and of the NYSE and
the Canadian Stock Exchanges in respect of the Nortel Common Shares to be issued
in the Merger and upon the exercise of the Company Stock Options to be assumed
by Nortel by reason of the Merger and the listing of such Nortel Common Shares
on such stock exchanges; (iii) the filing with the SEC of the Company Proxy
Statement in definitive form and the filing and declaration of effectiveness of
the Registration Statement; (iv) the filing of a certificate of merger with the
Secretary of State of the State of Delaware pursuant to the DGCL; (v) such
filings as are required to be made or approvals as are required to be obtained
under the securities or "Blue Sky" laws of various states in connection with the
issuance of Nortel Common Shares in the Merger; (vi) such filings as are
required to be made and exemption rulings or orders as are required to be
obtained under the Canada Business Corporations Act and Canadian securities
laws; and (vii) as may be required under Exon-Xxxxxx and the rules and
regulations promulgated by the U.S. Department of Defense.
(j) No Material Adverse Effect. Since December 31, 1998, until the date
hereof, no event has occurred or circumstance arisen that, individually or taken
together with all other facts, circumstances and events (described in any
paragraph of Section 5.02 or otherwise), has had or is reasonably likely to have
a Material Adverse Effect with respect to Nortel.
(k) Taxes. Nortel has not taken or agreed to take any action with the
Knowledge that such action would, or failed to take any action with the
Knowledge that the omission of such action would, prevent or impede the Merger
from qualifying as a reorganization within the meaning of Section 368(a) of the
Code. Nortel has no Knowledge of any facts or circumstances that would, with
respect to the Merger, prevent Nortel from being treated as a corporation
pursuant to Section 367 of the Code or the Treasury regulations promulgated
thereunder.
ARTICLE VI
COVENANTS
The Company hereby covenants to and agrees with Nortel, and
each of Nortel and Sub hereby covenants to and agrees with the Company, that:
6.01. Reasonable Best Efforts. Subject to the terms and conditions of this
Agreement, it shall use its reasonable best efforts in good faith to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or desirable (including obtaining any consents of third
parties required under any agreement to be obtained by it or its subsidiaries
prior to, or as a result of, the consummation of the Merger so that such
agreement is not terminable as a result of the Merger), or advisable under
applicable laws, so as to permit consummation of the Merger as promptly as
practicable and otherwise to enable consummation of the transactions
contemplated hereby and shall cooperate fully with the other party hereto to
that end. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purpose of this Agreement or to vest the
Surviving Corporation with full title to all properties, assets, rights,
approvals, immunities and franchises of any of the parties to the Merger, the
proper officers and directors of each party to this Agreement and their
respective Subsidiaries shall take all such necessary action as may be
reasonably requested by, and at the sole expense of, Nortel.
6.02. Stockholder Approvals. The Company shall take, in accordance with
this Agreement, applicable law, applicable NASD rules and its certificate of
incorporation and by-laws, all action necessary to convene an appropriate
meeting of stockholders of the Company to consider and vote upon the approval
and adoption of the "agreement of merger" (as such term is used in Section 251
of the DGCL) contained in this Agreement and the Merger and any other matters
required to be approved by the Company's stockholders for consummation of the
Merger (including any adjournment or postponement, the "Company Meeting") as
promptly as practicable. The Company Board, subject to Section 6.06, shall at
all times recommend such approval and shall take all reasonable lawful action to
solicit such approval by its stockholders.
6.03. Registration Statement. (a) Each of Nortel and the Company agrees to
cooperate in the preparation of a registration statement on Form S-4 (the
"Registration Statement") to be filed by Nortel with the SEC in connection with
the issuance of Nortel Common Shares in the Merger (including the proxy
statement and prospectus and other proxy solicitation materials of the Company
constituting a part thereof (the "Company Proxy Statement") and all related
documents). The Registration Statement and the Company Proxy Statement shall
comply as to form in all material respects with the applicable provisions of the
Securities Act and the Exchange Act and the rules and regulations thereunder.
Provided the other party has cooperated as required above, the Company agrees to
file the Company Proxy Statement in preliminary form with the SEC as promptly as
practicable, and Nortel agrees to file the Registration Statement with the SEC
as promptly as practicable after any SEC comments with respect to the
preliminary Proxy Statement are resolved or at such earlier time as Nortel may
elect. Each of Nortel and the Company shall, as promptly as practicable after
receipt thereof, provide copies of any written comments received from the SEC
with respect to the Registration Statement and the Company Proxy Statement, as
the case may be, to the other party, and advise the other party of any oral
comments with respect to the Registration Statement or the Company Proxy
Statement received from the SEC. Each of Nortel and the Company agrees to use
reasonable best efforts to cause the Registration Statement to be declared
effective under the Securities Act as promptly as practicable after filing
thereof, and the Company agrees to mail the Company Proxy Statement to its
shareholders as promptly as practicable after the Registration Statement is
declared effective. Nortel also agrees to use reasonable best efforts to obtain
all necessary state securities law or "Blue Sky" permits and approvals required
to carry out the transactions contemplated by this Agreement. The Company agrees
to furnish to Nortel all information concerning the Company, its Subsidiaries,
officers, directors and stockholders as may be reasonably requested in
connection with the foregoing.
(b) Each of Nortel and the Company agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it for
inclusion or incorporation by reference in (i) the Registration Statement will,
at the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and (ii) the
Company Proxy Statement and any amendment or supplement thereto will, at the
date of mailing to stockholders and at the time of the Company Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
(c) Nortel agrees to advise the Company, promptly after Nortel receives
notice thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, of the issuance of any stop order
or the suspension of the qualification of the Nortel Common Shares for offering
or sale in any jurisdiction, of the initiation or threat of any proceeding for
any such purpose, or of any request by the SEC for the amendment or supplement
of the Registration Statement or for additional information.
(d) Nortel will use its reasonable best efforts to obtain, and will provide
evidence reasonably satisfactory to the Company, of all necessary rulings or
orders of Canadian securities regulatory authorities exempting the distribution
by Nortel of the Nortel Common Shares and options to purchase Nortel Common
Shares under the Merger and the resale of Nortel Common Shares issued under the
Merger in Canada as contemplated by this Agreement from the registration and
prospectus requirements under applicable Canadian securities laws on terms
reasonably satisfactory to Nortel and the Company.
6.04. Press Releases. Nortel and the Company shall jointly agree on an
initial press release with respect to the transactions contemplated hereby and
in compliance with applicable law. The Company will not, without the prior
approval of Nortel, issue any other press release or written statement for
general circulation (including any written statement circulated to employees,
customers or other third parties) relating to the transactions contemplated
hereby, except, based on the advice of counsel, as otherwise required by
applicable law or regulation or NASD rules and only after consulting, or using
its reasonable best efforts to consult, with Nortel.
6.05. Access; Information. (a) Upon reasonable notice and subject to
applicable laws relating to the exchange of information, the Company shall
afford to the officers, employees, counsel, accountants and other authorized
representatives of Nortel, reasonable access, during normal business hours
throughout the period prior to the Effective Date, to all of its properties,
books, contracts, commitments and records and, during such period, it shall
furnish promptly to Nortel (i) a copy of each material report, schedule and
other document filed by it pursuant to the requirements of federal or state
securities laws, and (ii) all other information concerning the business,
properties and personnel of it as Nortel may reasonably request; provided that
such information may not be used for any purpose unrelated to the consummation
of the transactions contemplated by this Agreement. The Company shall promptly
inform Nortel of any material litigation, claim or other proceeding before any
court or other governmental authority that arises following the date of this
Agreement and any material development in any such existing material litigation,
claim or other proceeding. The Company and its Subsidiaries shall not be
required to provide access to or to disclose information where such access or
disclosure would contravene any law, rule, regulation, order, judgment, decree
or agreement. Nortel and the Company shall make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply.
(b) Subject to the requirements of applicable law, pending consummation of
the Merger, all non-public information provided by the Company to Nortel and
Nortel to the Company pursuant to this Agreement or otherwise will remain
subject to the obligations of Nortel and the Company under the Confidentiality
Agreement.
(c) No investigation by a party, pursuant to this Section 6.05 or
otherwise, shall affect or be deemed to modify any representation or warranty of
the other party contained herein.
6.06. Acquisition Proposals. (a) The Company shall not, and shall cause its
Subsidiaries and the officers, directors, agents and advisors of the Company and
its Subsidiaries not to, initiate, solicit or encourage inquiries or proposals
with respect to, or engage in any negotiations concerning, or provide any
confidential information to, or have any discussions with, any person relating
to, any Acquisition Proposal. Notwithstanding the foregoing, the Company shall
be permitted to engage in any discussions or negotiations with, or provide any
information to, any Person in response to a bona fide written Acquisition
Proposal by any such Person, if and only to the extent that in each such case
such proposal was not solicited or encouraged in violation of this Agreement and
(i) the Company Meeting shall not have occurred; (ii) the Company Board
determines in good faith that such Acquisition Proposal would, if consummated,
constitute a Superior Proposal and is reasonably likely to be consummated; (iii)
the Company Board determines, in good faith after consultation with outside
counsel, that such action is legally required as a matter of the fiduciary
duties of the directors under applicable law; and (iv) prior to providing any
information or data to any Person or entering into discussions or negotiations
with any Person, the Company receives from such Person an executed
confidentiality agreement containing terms no less restrictive with respect to
such Person than the terms of the Confidentiality Agreement with respect to
Nortel. The Company shall notify Nortel promptly, but in any event within 24
hours, of any such inquiries, proposals, or offers received by, any such
information requested from, or any such discussions or negotiations sought to be
initiated or continued with, any of its representatives indicating, in
connection with such notice, the name of such Person and the material terms and
conditions of any proposals or offers. For the purposes of this Agreement,
"Superior Proposal" shall mean any bona fide Acquisition Proposal made by a
third party that was not solicited or encouraged in violation of this Agreement
and which the Company Board determines in its good faith judgment (based on the
written opinion to such effect by a financial advisor of nationally recognized
reputation) to be materially more favorable to the stockholders of the Company
than the transactions contemplated by this Agreement. the Company shall
immediately cease and cause to be terminated any activities, discussions or
negotiations conducted prior to the date of this Agreement with any parties
other than Nortel with respect to any Acquisition Proposal. The Company shall
advise Nortel of any material developments with respect to any proposal as to
which the Company is exercising its rights pursuant to the second sentence of
this Section 6.06 promptly upon the occurrence thereof.
(b) Subject to Section 8.01 (e)(ii), neither the Company Board nor any
committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Nortel, the approval and declaration of
advisability by the Company Board of the "agreement of merger" (as such term is
used in Section 251 of the DGCL) contained in this Agreement notwithstanding any
withdrawal by the Company Board of its recommendation of such "agreement of
merger" (whether or not permitted by subsection (c) below), (ii) approve or
recommend, or propose to approve or recommend, any Acquisition Proposal, (iii)
cause the Company or any of its Subsidiaries to enter into any letter of intent,
agreement in principle, acquisition agreement, merger agreement or other similar
agreement with respect to any Acquisition Proposal or (iv) other than in
accordance with subsection (c) below, withdraw or modify, in a manner adverse to
Nortel, or fail to make, the recommendation to Company stockholders of such
"agreement of merger."
(c) Notwithstanding subsection (b)(iv) above, but subject to subsections
(b)(i)-(iii) above in the event (but only in the event) that the Company Board
determines in good faith, after consultation with outside counsel, that, having
received a Superior Proposal, such action is legally required as a matter of the
fiduciary duties of the directors under applicable law, the Company Board may
withdraw or modify its recommendation to Company stockholders of the "agreement
of merger" contained in this Agreement (or not recommend it in the Company Proxy
Statement), but only at a time that is after the third Business Day following
Nortel's receipt of written notice advising Nortel that the Company Board has
received a proposal which may be a Superior Proposal, specifying the material
terms and conditions of such proposal and identifying the Person making such
proposal.
(d) Nothing in this Section 6.06 shall (i) prohibit the Company from
complying, to the extent applicable, with Rules 14d-9 and 14e-2(a) promulgated
under the Exchange Act with respect to an Acquisition Proposal or (ii) permit
the Company to violate its obligations under the first sentence of Section 6.02.
6.07. Affiliate Agreements. (a) Not later than the mailing of the Company
Proxy Statement, the Company shall deliver to Nortel a schedule of each person
that, to the best of its knowledge, is or is reasonably likely to be, as of the
date of the Company Meeting, deemed to be an "affiliate" of it (each, a "Company
Affiliate") as that term is used in Rule 145 under the Securities Act.
Thereafter, the Company shall promptly notify Nortel upon becoming aware of any
other person that is or is reasonably likely to be, as of the date of the
Company Meeting, deemed to be a Company Affiliate.
(b) The Company shall use its reasonable best efforts to cause each person
who may be deemed to be a Company Affiliate to execute and deliver to Nortel on
or before the date of mailing of the Company Proxy Statement (or, in the case of
any person identified as a possible Company Affiliate after such date, as
promptly thereafter as possible) an agreement in the form attached hereto as
Exhibit A.
6.08. Takeover Laws. Subject to Section 6.06, no party shall take any
action that would cause the transactions contemplated by this Agreement, the
Option Agreement, and the Stockholders' Agreement to be subject to requirements
imposed by any Takeover Law and each of them shall take all necessary steps
within its control to exempt (or ensure the continued exemption of), or minimize
the effect on, the transactions contemplated by this Agreement and the Option
Agreement from, or if necessary challenge the validity or applicability of, any
applicable Takeover Law, as now or hereafter in effect, including, without
limitation, Section 203 of the DGCL or any other Takeover Laws that purport to
apply to this Agreement or the Option Agreement or the transactions contemplated
hereby or thereby.
6.09. The Company Rights Agreement. The Company Board shall take all
further action (in addition to that referred to in Section 5.01(n)) necessary
(including redeeming the Company Stockholder Protection Rights immediately prior
to the Effective Time or amending the Company Rights Agreement) in order to
render the Company Stockholder Protection Rights inapplicable to the Merger and
the other transactions contemplated by this Agreement, the Option Agreement, and
the Stockholders' Agreement. The Company Board shall take no action (including
redeeming the Company Stockholder Protection Rights or amending the Company
Rights Agreement) in order to render the Company Stockholder Protection Rights
inapplicable in connection with any Acquisition Proposal.
6.10. Shares Listed. Nortel shall use its reasonable best efforts to list,
prior to the Effective Date, on the NYSE and the Canadian Stock Exchanges,
subject to official notice of issuance, the Nortel Common Shares to be issued to
the holders of Company Common Stock in the Merger and upon exercise of Company
Stock Options to be assumed by Nortel by reason of the Merger.
6.11. Regulatory Applications. (a) Nortel and the Company and their
respective Subsidiaries shall cooperate and use their respective reasonable best
efforts (i) to prepare all documentation, to effect all filings (including,
without limitation, filings under the HSR Act and the Competition Act (Canada))
and to obtain all permits, consents, approvals and authorizations of all third
parties and Governmental Authorities necessary to consummate the transactions
contemplated by this Agreement and (ii) to cause the Merger to be consummated as
expeditiously as reasonably practicable. Each of Nortel and the Company shall
have the right to review in advance, and to the extent practicable each will
consult with the other, in each case subject to applicable laws relating to the
exchange of information, with respect to, all material written information
submitted to any third party or any Governmental Authority in connection with
the transactions contemplated by this Agreement. In exercising the foregoing
right, each of the parties hereto agrees to act reasonably and as promptly as
practicable. Each party hereto agrees that it will consult with the other party
hereto with respect to the obtaining of all material permits, consents,
approvals and authorizations of all third parties and Governmental Authorities
necessary or advisable to consummate the transactions contemplated by this
Agreement and each party will keep the other party apprised of the status of
material matters relating to completion of the transactions contemplated hereby.
(b) Each party agrees, upon request, to furnish the other party with all
information concerning itself, its Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or advisable
in connection with any filing, notice or application made by or on behalf of
such other party or any of its Subsidiaries to any third party or Governmental
Authority.
(c) In furtherance and not in limitation of the covenants of the parties
contained in Sections 6.11(a) and (b), if any objections are asserted with
respect to the transactions contemplated hereby under any Regulatory Law or if
any suit is instituted or threatened by any Governmental Authority or any
private party challenging any of the transactions contemplated hereby as
violative of any Regulatory Law, each of Nortel and the Company shall use its
reasonable best efforts to resolve any such objections or challenge as such
Governmental Authority or private party may have to such transactions under such
Regulatory Law so as to permit consummation of the transactions contemplated by
this Agreement, and if any administrative or judicial action or proceeding,
including any proceeding by a private party, is instituted (or threatened to be
instituted) challenging any transaction contemplated by this Agreement as
violative of any Regulatory Law, each of Nortel and the Company shall cooperate
in all respects with each other and use its respective reasonable best efforts
to contest and resist any such action or proceeding and to have vacated, lifted,
reversed or overturned any decree, judgment, injunction or other order, whether
temporary, preliminary or permanent, that is in effect and prohibits, prevents
or restricts consummation of the transactions contemplated by this Agreement.
Notwithstanding the foregoing or any other provision of this Agreement, nothing
in this Section 6.11 shall limit a party's right to terminate this Agreement
pursuant to Section 7.01(b) or 8.01(d) so long as such party has theretofore
complied in all respects with its obligations under this Section 6.11.
(d) Nothing contained in this Agreement shall require Nortel or any of its
Subsidiaries to sell or otherwise dispose of, or to hold separately, or permit
the sale or other disposition of, any assets of Nortel, the Company or their
respective Subsidiaries, or require Nortel to refrain from exercising full
authority over the Company and its Subsidiaries after the Effective Time,
whether as a condition to obtaining any approval from a Governmental Authority
or any other Person or for any other reason. 6.12. Indemnification. (a)
Following the Effective Date and until the expiration of any applicable
statutory limitations period, the Surviving Corporation shall indemnify, defend
and hold harmless the present and former directors and officers of the Company
and its Subsidiaries (each, an "Indemnified Party") against all costs or
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages or liabilities (collectively, "Costs") incurred in connection
with any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of actions or omissions
occurring at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement and the Option Agreement) to the
fullest extent that the Company is permitted to indemnify its directors and
officers under the laws of the State of Delaware, the Company Certificate and
the Company's by-laws as in effect on the date hereof (and the Surviving
Corporation shall also advance expenses as incurred to the fullest extent
permitted under applicable law).
(b) For a period of six years from the Effective Time, Nortel shall provide
a "runoff" policy with respect to that portion of director's and officer's
liability insurance that serves to cover the present and former officers and
directors of the Company and its Subsidiaries (determined as of the Effective
Time) with respect to claims against such directors and officers arising from
facts or events which occurred at or before the Effective Time, which "runoff"
insurance shall contain at least the same maximum coverage and amounts to such
officers and directors, and contain terms and conditions no less advantageous,
as that coverage currently provided by the Company; provided, however, that in
no event shall Nortel be required to expend to maintain or obtain the insurance
called for by this Section 6.12(b) more than 200 percent of the current annual
amount expended by the Company to maintain or procure such directors and
officers insurance coverage for the current year (the "Insurance Amount");
provided, further, that if Nortel is unable to maintain or obtain the insurance
called for by this Section 6.12(b), Nortel shall use its reasonable best efforts
to obtain as much comparable insurance as is available for the Insurance Amount;
provided, further, that officers and directors of the Company or any Subsidiary
of the Company may be required to make application and provide customary
representations and warranties to Nortel's insurance carrier for the purpose of
obtaining such insurance.
(c) Any Indemnified Party wishing to claim indemnification under Section
6.12(a), upon learning of any claim, action, suit, proceeding or investigation
described above, shall promptly notify Nortel thereof; provided, that the
failure so to notify shall not affect the obligations of Nortel under Section
6.12(a) unless and to the extent such failure materially increases Nortel's
liability under such subsection (a).
(d) If Nortel or any of its successors or assigns shall consolidate with or
merge into any other entity and shall not be the continuing or surviving entity
of such consolidation or merger or shall transfer all or substantially all of
its assets to any entity, then and in each case, proper provision shall be made
so that the successors and assigns of Nortel shall assume the obligations set
forth in this Section 6.12.
6.13. Certain Employee Benefit Matters. (a) For the one year period ending
on the first anniversary of the Effective Date (the "Continuation Period"), the
Surviving Corporation shall, or shall cause its Subsidiaries to, (i) pay to each
of their respective employees, during any portion of the Continuation Period
that such employee is employed by the Surviving Corporation or any such
Subsidiary, an annual salary or hourly wage rate, as applicable, that is no less
than the annual salary or hourly wage rate payable to such employee immediately
prior to the Effective Time and (ii) provide such employee in the aggregate with
employee benefits, during any portion of the Continuation Period that such
employees are employed by the Surviving Corporation or any such Subsidiary, that
are substantially similar in the aggregate to the employee benefits provided to
such employees pursuant to the Company Plans (other than equity based benefits)
immediately prior to the Effective Time. Without limiting the foregoing, during
the Continuation Period, the Surviving Corporation and its Subsidiaries shall
continue to maintain without modification those Company Plans that provide
severance benefits and that are listed on Section 6.13(a) of the Company
Disclosure Schedule. Notwithstanding any other provision herein, none of the
Surviving Corporation, any of its Subsidiaries or Nortel will have any
obligation to continue the employment of any such employee for any period
following the Effective Time.
(b) With respect to the Plans, if any, of Nortel in which employees of the
Company or its Subsidiaries ("Company Employees") become eligible to participate
after the Effective Time (the "Nortel Plans"), Nortel shall, or shall cause the
Surviving Corporation to: (i) with respect to each Nortel Plan that is a medical
or health plan, (x) waive any exclusions for pre-existing conditions under such
Nortel Plan that would result in a lack of coverage for any condition for which
the applicable Company Employee would have been entitled to coverage under the
corresponding Company Plan in which such Company Employee was an active
participant immediately prior to his or her transfer to the Nortel Plan; (y)
waive any waiting period under such Nortel Plan to the extent that such period
exceeds the corresponding waiting period under the corresponding Company Plan in
which such Company Employee was an active participant immediately prior to his
or her transfer to the Nortel Plan (after taking into account the service credit
provided for herein for purposes of satisfying such waiting period); and (z)
provide each Company Employee with credit for any co-payments and deductibles
paid by such Company Employee prior to his or her transfer to the Nortel Plan
(to the same extent such credit was given under the analogous Company Plan prior
to such transfer) in satisfying any applicable deductible or out-of-pocket
requirements under such Nortel Plan for the plan year that includes such
transfer; and (ii) recognize all service of the Company Employees with the
Company or any of its Subsidiaries for purposes of eligibility to participate,
vesting credit, entitlement to benefits, and, solely with respect to vacation
and severance benefits, benefit accrual in any Nortel Plan in which the Company
Employees are eligible to participate after the Effective Time; provided that
the foregoing shall not apply to the extent it would result in duplication of
benefits. Nothing in this paragraph shall be interpreted to require Nortel to
provide for the participation of any Company Employee in any Nortel Plan.
(c) To the extent applicable, Nortel and the Company shall each take such
reasonable steps as are required to cause the disposition and acquisition of
equity securities (including derivative securities) pursuant to Article III of
this Agreement in connection with the consummation of the Merger by each
individual who is an officer or director of the Company to qualify for exemption
from Section 16(b) of the Exchange Act pursuant to Rule 16b-3(e) promulgated
under the Exchange Act.
6.14. Accountants' Letters. Each of the Company and Nortel shall use its
reasonable best efforts to cause to be delivered to the other party a letter of
Deloitte & Touche LLP ("Deloitte"), respectively, independent auditors, dated a
date within two Business Days of the date on which the Registration Statement
shall become effective and addressed to such other party, and in form and
substance customary for "comfort" letters delivered by independent accountants
(x) in the case of Deloitte in its capacity as independent auditors to the
Company, in accordance with Statement of Accounting Standards No. 72 and (y) in
the case of Deloitte in its capacity as independent auditors to Nortel, in
accordance with the Handbook of The Canadian Institute of Chartered Accountants.
6.15. Notification of Certain Matters. (a) Each of the Company and Nortel
shall give prompt notice to the other of any fact, event or circumstance known
to it that would cause or constitute a material breach of any of its
representations, warranties, covenants or agreements contained herein.
(b) Nortel shall promptly notify the Company, and the Company shall
promptly notify Nortel, in writing, of any notice or other communication from
any regulatory authority or self-regulatory organization in connection with the
transactions contemplated by this Agreement or the Option Agreement.
(c) Each of Nortel and the Company shall promptly notify the other of any
fact, event or circumstance known to it that could reasonably be expected to,
individually or taken together with all other facts, events and circumstances
known to it, cause the Merger to fail to qualify as a "reorganization" within
the meaning of Section 368(a) of the Code.
6.16. Certain Tax Matters. Each of Nortel and the Company will use its
reasonable best efforts to cause the Merger to constitute a reorganization
within the meaning of Section 368(a) of the Code, and to timely satisfy, or
cause to be timely satisfied, all applicable tax reporting and filing
requirements contained in the U.S. Code and Treasury Regulations with respect to
the Merger, including the reporting requirements contained in U.S. Treasury
Regulation Section 1.367(a)-3(c)(6).
6.17. Agreements with Respect to Assumption of Company Stock Options.
Nortel will use its reasonable best efforts to obtain any requisite approval of
the Canadian Stock Exchanges of Nortel's assumption of the Company Stock Options
and the exercisability thereof by the holders thereof to acquire Nortel Common
Shares. If the Canadian Stock Exchanges require, as a condition to granting any
such approval, that the holders of Nortel Common Shares approve such assumption
and exercisability, Nortel will, subject to the second succeeding sentence,
take, in accordance with this Agreement, applicable law, applicable rules of the
Canadian Stock Exchanges and its articles of incorporation and by-laws, all
action necessary to convene an appropriate meeting of its shareholders to
consider and vote upon the approval of such assumption and exercisability, such
meeting to be held no later than five business days after the Company Meeting.
Nortel shall at all times recommend such approval and shall take all reasonable
lawful action to solicit such approval by its shareholders. In lieu of seeking
such approval, Nortel may elect to permit the following (and, if such approval
of Nortel's shareholders is not obtained, the following shall apply): the
Company shall be permitted to take all necessary or appropriate actions to cause
the acceleration of the vesting of the Company Stock Options so that they may be
exercised by the holders thereof beginning three business days prior to the
Effective Time and the Company shall take all necessary or appropriate actions
so that any Company Stock Options remaining unexercised at the Effective Time
shall, without the necessity of any further action by the holders thereof, be
canceled and converted into the right of the holder thereof to receive, in lieu
of shares of Company Common Stock and subject to applicable income tax
withholding and employer taxes, for each share of Company Common Stock covered
thereby, an amount in cash equal to the difference obtained by subtracting the
exercise price per share of such Company Stock Option from $29.23. In the event
that Nortel makes the described election, or such Nortel shareholder approval
has not been obtained, from and after the Effective Time, all Company Stock
Options shall represent only the right of the holders thereof to receive payment
of the amount described above upon surrender thereof and all Company Stock
Option Plans shall terminate as of the Effective Time. In such event, the
Company shall take all permitted actions necessary to ensure that, following the
Effective Time, no participant in any Company Stock Option Plan shall have any
right thereunder to acquire equity securities or other ownership interests of
Nortel, the Company, the Surviving Corporation or any Subsidiary thereof and to
terminate all Company Stock Option Plans.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.01. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each of Nortel, Sub and the Company to consummate the
Merger is subject to the fulfillment or written waiver by Nortel, Sub and the
Company prior to the Effective Time of each of the following conditions:
(a) Stockholder Approvals. This "agreement of merger" (as that term is used
in Section 251 of the DGCL) and the Merger shall have been duly adopted by the
requisite vote of the stockholders of the Company.
(b) Regulatory Approvals. All regulatory approvals required to consummate
the transactions contemplated hereby shall have been obtained and shall remain
in full force and effect and all statutory waiting periods in respect thereof
shall have expired and (in the case of Nortel's obligation to consummate the
Merger) no such approvals shall contain any conditions, restrictions or
requirements which would reasonably be expected to (i) following the Effective
Time, have a Material Adverse Effect on Nortel and its Subsidiaries taken as a
whole or on the Surviving Corporation or (ii) require Nortel to take any action
that it is not required to take under Section 6.11(d) hereof.
(c) No Injunction. No Governmental Authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and enjoins or prohibits
consummation of the Merger.
(d) Registration Statement. The Registration Statement shall have become
effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and be in
effect and no proceedings for that purpose shall have been initiated or
threatened by the SEC and not concluded or withdrawn.
(e) Listing. The Nortel Common Shares to be issued in the Merger and upon
exercise of Company Stock Options to be assumed by Nortel by reason of the
Merger shall have received conditional approval for listing on the NYSE and the
Canadian Stock Exchanges, subject to official notice of issuance.
7.02. Conditions to Obligation of the Company. The obligation of the
Company to consummate the Merger is also subject to the fulfillment or written
waiver by the Company prior to the Effective Time of each of the following
conditions:
(a) Representations and Warranties. All representations and warranties of
Nortel set forth in this Agreement (without giving effect to any standard,
qualification or exception contained therein with respect to materiality or
Material Adverse Effect) shall be true and correct, as of the date of this
Agreement and as of the Effective Date as though made on and as of the Effective
Date (except that representations and warranties that by their terms speak as of
the date of this Agreement or some other date shall be true and correct as of
such date), except as would not have or reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Nortel; and the
Company shall have received a certificate, dated the Effective Date, signed on
behalf of Nortel by the Chief Executive Officer or the Chief Financial Officer
of Nortel to such effect.
(b) Performance of Obligations. Nortel shall have performed in all material
respects all obligations required to be performed by it under this Agreement at
or prior to the Effective Time, and the Company shall have received a
certificate, dated the Effective Date, signed on behalf of Nortel by the Chief
Executive Officer or the Chief Financial Officer of Nortel to such effect.
(c) Opinion of the Company's Counsel. The Company shall have received an
opinion of Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx, counsel to the Company,
dated the Effective Date, to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion, (a) the Merger
constitutes a reorganization within the meaning of Section 368 (a) of the Code,
(b) Nortel shall be treated as a corporation under Section 367(a)(1) of the Code
with respect to each transfer of property thereto pursuant to the Merger, and
(c) that, accordingly, (i) no gain or loss will be recognized by the Company as
a result of the Merger and (ii) no gain or loss will be recognized by a
stockholder of the Company who receives Nortel Common Shares in exchange for
shares of Company Common Stock, except with respect to cash received in lieu of
fractional share interests. In rendering its opinion, such counsel may require
and rely upon representations contained in letters from the Company, Nortel, Sub
and stockholders of the Company. Counsel's opinion shall not address the tax
consequences applicable to any stockholder of the Company who, immediately after
the Merger, will be a "five percent transferee shareholder" with respect to
Nortel within the meaning of U.S. Treasury Regulation Section 1.367(a)-3(c)(5).
(d) No Material Adverse Effect. From the date of this Agreement, no event
shall have occurred or circumstance arisen or been discovered that, individually
or taken together with all other such events and circumstances, has had or would
reasonably be expected to have a Material Adverse Effect on Nortel.
7.03. Conditions to Obligation of Nortel and Sub. The obligations of Nortel
and Sub to consummate the Merger are also subject to the fulfillment or written
waiver by Nortel and Sub prior to the Effective Time of each of the following
conditions:
(a) Representations and Warranties. All representations and warranties of
the Company set forth in this Agreement (without giving effect to any standard,
qualification or exception contained therein with respect to materiality or
Material Adverse Effect) shall be true and correct, as of the date of this
Agreement and as of the Effective Date as though made on and as of the Effective
Date (except that representations and warranties that by their terms speak as of
the date of this Agreement or some other date shall be true and correct as of
such date), except as would not have or reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company; and
Nortel and Sub shall have received a certificate, dated the Effective Date,
signed on behalf of the Company by the Chief Executive Officer and the Chief
Financial Officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Effective Time, and Nortel and Sub
shall have received a certificate, dated the Effective Date, signed on behalf of
the Company by the Chief Executive Officer and the Chief Financial Officer of
the Company to such effect.
(c) Material Adverse Effect. From the date of this Agreement, no event
shall have occurred or circumstance arisen or been discovered that, individually
or taken together with all other such events and circumstances has had or would
reasonably be expected to have a Material Adverse Effect on the Company.
(d) Opinion of Nortel and Sub's Counsel. Nortel shall have received an
opinion of Cleary, Gottlieb, Xxxxx & Xxxxxxxx, special counsel to Nortel and Sub
dated the Effective Date, to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion, (a) the Merger
constitutes a reorganization under Section 368(a) of the Code, (b) Nortel shall
be treated as a corporation under Section 367(a)(1) of the Code with respect to
each transfer of property thereto pursuant to the Merger and (c) that,
accordingly, (i) no gain or loss will be recognized by the Company as a result
of the Merger and (ii) no gain or loss will be recognized by a stockholder of
the Company who receives Nortel Common Shares in exchange for shares of the
Company Common Stock, except with respect to cash received in lieu of fractional
share interests. In rendering its opinion, such counsel may require and rely
upon representations contained in letters from the Company, Nortel, Sub and
stockholders of the Company. Counsel's opinion shall not address the tax
consequences applicable to any stockholder of the Company who, immediately after
the Merger, will be a "five percent transferee shareholder" with respect to
Nortel within the meaning of U.S. Treasury Regulation Section 1.367(a)-3(c)(5).
(e) No Action Seeking Injunction. No Governmental Authority of competent
jurisdiction shall have brought an action or proceeding seeking to enjoin or
prohibit consummation, or require the unwinding, of the Merger, or to impose
substantial penalties as a result of the Merger, which action or proceeding is
reasonably likely to succeed.
ARTICLE VIII
TERMINATION
8.01. Termination. This Agreement may be terminated, and the
Merger may be abandoned:
(a) Mutual Consent. At any time prior to the Effective Time, by the mutual
consent of Nortel and the Company by action taken by their respective Boards of
Directors.
(b) Breach. At any time prior to the Effective Time, by Nortel or the
Company, in the event of either: (i) a breach by the other party of any
representation or warranty contained herein which would result in the
non-satisfaction of the conditions set forth in Sections 7.02(a) and 7.03(a), as
the case may be, which breach is not capable of being cured or has not been
cured within 10 calendar days after the giving of written notice to the
breaching party of such breach; or (ii) a material breach by the other party of
any of the covenants or agreements contained herein, which breach is not capable
of being cured or has not been cured within 10 calendar days after the giving of
written notice to the breaching party of such breach. Without limiting the
foregoing, for all purposes of this Agreement, any breach of the agreements
contained in Section 6.06 or in the first sentence of Section 6.02 shall
constitute a breach which is not capable of being cured.
(c) Delay. At any time prior to the Effective Time, by Nortel or the
Company, if its Board of Directors so determines, in the event that the Merger
is not consummated by March 31, 2000, or, in the event that an approval of any
Governmental Authority required to be obtained for the consummation of the
transactions contemplated by this Agreement has not been obtained, June 30,
2000, except to the extent that the failure of the Merger then to be consummated
arises out of or results from the knowing action or inaction of the party
seeking to terminate pursuant to this Section 8.01(c) which action or inaction
is in violation of its obligations under this Agreement.
(d) No Approval.
(i) By the Company or Nortel, by action taken by its Board of Directors, in
the event the approval of any Governmental Authority required for consummation
of the Merger and the other transactions contemplated by this Agreement shall
have been denied by final nonappealable action of such Governmental Authority.
(ii) By Nortel, by action taken by its Board of Directors, in the event any
required approval of a Governmental Authority contains any final, nonappealable
conditions, restrictions or requirements which would reasonably be expected to
(A) following the Effective Time, have a Material Adverse Effect on Nortel and
its Subsidiaries taken as a whole or on the Surviving Corporation or (B) require
Nortel to take any action that it is not required to take under Section 6.11(d)
hereof.
(iii) By the Company, by action taken by its Board of Directors, in the
event any required approval of a Governmental Authority contains any final,
nonappealable conditions, restrictions or requirements which would reasonably be
expected to (A) following the Effective Time, have a Material Adverse Effect on
Nortel and its Subsidiaries taken as a whole or (B) require Nortel to take any
action that it is not required to take under Section 6.11(d) hereof, unless (in
either case) within 30 days following receipt by Nortel of written notice of the
Company's intent to terminate this Agreement under this clause (iii) Nortel
notifies the Company that it waives its right to terminate this Agreement under
clause (ii) above.
(iv) By Nortel or the Company, if its Board of Directors so determines, in
the event the approval of the Company's stockholders required by Section 7.01(a)
herein is not obtained at the Company Meeting by reason of the failure to obtain
the requisite vote required by Section 7.01(a) at a duly held meeting or an
adjournment thereof.
(e) Board Action.
(i) By Nortel if the Board of Directors of the Company, prior to the
Company Meeting (A) shall withdraw or modify in any adverse manner its
recommendation of the "agreement of merger" (as such term is used in Section 251
of the DGCL) contained in this Agreement (whether or not such withdrawal or
modification is permitted by Section 6.06(c)), or (B) shall resolve to do so.
(ii) By the Company if the Board of Directors of the Company, prior to the
Company Meeting shall elect to terminate this Agreement, in order to recommend
or approve a Superior Proposal; provided that (x) the Company has notified
Nortel in writing that it intends to recommend or approve a Superior Proposal,
attaching the most current version of such proposal to such notice, and (y) at
any time after the third Business Day following written notification by the
Company to Nortel of the Company's intention to enter into a binding agreement
with respect to such proposal, after taking into account any modifications to
the transactions contemplated by the Agreement that Nortel has then proposed in
writing and not withdrawn, the Company Board has determined that such proposal
is and continues to be a Superior Proposal, and (z) concurrently with the giving
of notice of such termination, pays to Nortel the Termination Fee due under
Section 8.02(b) (unless Nortel has previously notified the Company of its
election to defer such payment pursuant to Section 8.02(c)).
8.02. Effect of Termination and Abandonment. (a) In the event of
termination of this Agreement and the abandonment of the Merger pursuant to this
Article VIII, no party to this Agreement shall have any liability or further
obligation to any other party hereunder except as set forth in subsections (b),
(c) and (d) below and in Section 9.01.
(b) Nortel and the Company agree that the Company shall pay to Nortel the
sums described below (the "Termination Fee") solely as follows:
(i) the sum of $15,000,000 either if (x) the Company shall terminate this
Agreement pursuant to Section 8.01(c) (unless the failure to consummate the
Merger by the relevant date results primarily from the action or inaction of
Nortel or from Nortel's or Sub's inability to obtain consent or approval of, or
make any filing or registration with, any Governmental Authority), (y) at any
time after the date of this Agreement and at or before the time of the event
giving rise to such termination there shall exist an Acquisition Proposal and
(z) within 12 months of the termination of this Agreement, the Company enters
into a definitive agreement with any third party with respect to an Acquisition
Proposal or an Acquisition Proposal is consummated, or if (A) the Company or
Nortel shall terminate this Agreement pursuant to Section 8.01(d)(iv) due to the
failure of the Company's stockholders to approve and adopt this Agreement, (B)
at any time after the date of this Agreement and at or before the time of the
event giving rise to such termination there shall exist an Acquisition Proposal
which has been publicly announced or the existence of which is a matter of
public knowledge and (C) within 12 months of the termination of this Agreement,
the Company enters into a definitive agreement with any third party with respect
to an Acquisition Proposal or an Acquisition Proposal is consummated;
(ii) the sum of $4,000,000 if Nortel shall terminate this Agreement
pursuant to Section 8.01(b)(i) or Section 8.01(b)(ii) following a willful breach
of any of the representations, covenants or agreements contained herein, and an
additional sum of $11,000,000 if (x) at any time after the date of this
Agreement and at or before the time of the event giving rise to such termination
there shall exist an Acquisition Proposal and (y) within 12 months of the
termination of this Agreement, the Company enters into a definitive agreement
with any third party with respect to an Acquisition Proposal or an Acquisition
Proposal is consummated;
(iii) the sum of $15,000,000 if Nortel shall terminate this Agreement
pursuant to Section 8.01(e)(i); or
(iv) the sum of $15,000,000 if the Company shall terminate this Agreement
pursuant to Section 8.01(e)(ii).
(c) Any Termination Fee required to be paid pursuant to subsection (b)(i)
above shall be payable by the Company to Nortel not later than two Business Days
after the date the Company enters into a definitive agreement with respect to,
or the date of consummation of, an Acquisition Proposal, whichever is earlier.
The sum of $4,000,000 required to be paid upon termination pursuant to
subsection (b)(ii) above shall be payable by the Company to Nortel not later
than two Business Days after the termination referred to therein, and any
additional sum of $11,000,000 required to be paid thereafter pursuant to
subsection (b)(ii) above shall be payable by the Company to Nortel not later
than two Business Days after the date the Company enters into a definitive
agreement with respect to, or the date of consummation of, an Acquisition
Proposal, whichever is earlier. Any Termination Fee required to be paid pursuant
to subsection (b)(iii) above shall be payable by the Company to Nortel not later
than two Business Days after the termination referred to therein. Any
Termination Fee required to be paid pursuant to subsection (b)(iv) shall be
payable as set forth in clause (z) of Section 8.01(e)(ii). In no event shall
more than $15,000,000 be payable in respect of the Termination Fee.
Notwithstanding the foregoing, (i) Nortel may elect, by notice to the Company,
to defer the payment of the Termination Fee from time to time for a period or
periods of up to an aggregate of twelve months after the date such fee would
otherwise be payable and (ii) the Termination Fee (including any portion thereof
pursuant to Section 8.02(b)(ii)) shall cease to be payable immediately following
any exercise by Nortel of the Option under the Option Agreement. All payments
under this Section 8.02 shall be made by wire transfer of immediately available
funds to an account designated by the party entitled to receive payment.
(d) If the Company shall terminate this Agreement pursuant to Section
8.01(b)(i) or Section 8.01(b)(ii) following a willful breach of any of the
representations, covenants or agreements contained herein, Nortel shall pay to
the Company the sum of $4,000,000 (the "Company Termination Fee"). The Company
Termination Fee shall be payable by Nortel to the Company not later than two
Business Days after the termination by the Company pursuant to Section
8.01(b)(i) or Section 8.01(b)(ii); provided that in no event shall more than one
Company Termination Fee be payable. All payments under this Section 8.02(d)
shall be made by wire transfer of immediately available funds to an account
designated by the Company.
ARTICLE IX
MISCELLANEOUS
9.01. Survival. All representations, warranties, agreements and covenants
contained in this Agreement shall not survive the Effective Time or termination
of this Agreement if this Agreement is terminated prior to the Effective Time;
provided, however, if the Effective Time occurs, the agreements of the parties
in Sections 6.01, 6.03, 6.10, 6.12, 6.13 and 6.16 and this Article IX shall
survive the Effective Time, and if this Agreement is terminated prior to the
Effective Time, the agreements of the parties in the proviso to Section 6.05(a),
Sections 6.05(b) and 8.02 and Article IX and in the Confidentiality Agreement
shall survive such termination and the Option Agreement shall survive to the
extent provided therein.
9.02. Amendment; Extension; Waiver. (a) Subject to compliance with
applicable law, this Agreement may be amended by the parties hereto, by action
taken or authorized by their respective Boards of Directors, at any time before
or after approval of the matters presented in connection with the Merger by the
stockholders of the Company; provided, however, that after any approval of the
transactions contemplated by this Agreement by the stockholders of the Company,
there may not be, without further approval of such stockholders, any amendment
of this Agreement which by law requires further approval by such stockholders
without such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
(b) Prior to the Effective Time, the parties hereto, by action taken or
authorized by their respective Boards of Directors, 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 contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions 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 a written
instrument signed on behalf of such party, but such extension or waiver or
failure to insist on strict compliance with an obligation, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
9.03. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
9.04. Governing Law. This Agreement shall be governed by, and interpreted
in accordance with, the laws of the State of New York (except insofar as
mandatory provisions of Delaware law are applicable), without regard to the
conflict of law principles thereof.
9.05. Expenses. Subject to Section 8.02(b), each party hereto will bear all
expenses incurred by it in connection with this Agreement and the transactions
contemplated hereby, except that printing and mailing expenses and SEC
registration and filing fees shall be shared equally between the Company and
Nortel.
9.06. Notices. All notices, requests and other communications hereunder to
a party shall be in writing and shall be deemed given if personally delivered,
telecopied (with confirmation) or three Business Days after being mailed by
registered or certified mail (return receipt requested) or one Business Day
after being delivered by overnight courier to such party at its address set
forth below or such other address as such party may specify by notice to the
parties hereto.
If to Nortel or to Sub, to:
Nortel Networks Corporation
0000 Xxxxx Xxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Attention: Corporate Secretary
Fax: (000) 000-0000
Phone: (000) 000-0000
With a copy to:
Cleary, Gottlieb, Xxxxx & Xxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
Phone: (000) 000-0000
If to the Company, to:
Periphonics Corporation
0000 Xxxxxxxx Xxxxxxxx Xxxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx
Fax: (000) 000-0000
Phone: (000) 000-0000
With a copy to:
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
0000 Xxxxxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
Phone: (000) 000-0000
and another copy to:
Ruskin, Moscou, Xxxxx & Faltischek, P.C.
000 Xxx Xxxxxxx Xxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxxx, Esq.
Fax: (000) 000-0000
Phone: (000) 000-0000
9.07. Entire Understanding. This Agreement (including the Disclosure
Schedules), the Option Agreement and the Confidentiality Agreement represent the
entire understanding of the parties hereto with reference to the transactions
contemplated hereby and thereby and this Agreement supersedes any and all other
oral or written agreements (other than the Option Agreement and the
Confidentiality Agreement) heretofore made.
9.08. Assignment; No Third Party Beneficiaries. Neither this Agreement, nor
any of the rights, interests or obligations shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns. Except for Section
6.12, nothing in this Agreement expressed or implied, is intended to confer upon
any person, other than the parties hereto or their respective successors, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
9.09. Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Disclosure Schedules, such reference shall be to a Section
of, or Exhibit or Disclosure Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and are not part of this Agreement. Whenever the
words "include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation". Any reference
to "herein" or "hereof" or similar terms shall refer to the agreement as a whole
rather than to the individual paragraph, section or article.
9.10. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as it is enforceable.
9.11. Pre-Termination Equitable Remedies. Prior to any termination of this
Agreement, each party hereto shall retain all rights to equitable remedies to
which it is entitled under applicable law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
NORTEL NETWORKS CORPORATION
By: /s/
--------------------------
Name:
Title:
By: /s/
--------------------------
Name:
Title:
NORTH SUBSIDIARY, INC.
By: /s/
--------------------------
Name:
Title: President
PERIPHONICS CORPORATION
By: /s/
--------------------------
Name:
Title:
Exhibit A
Form of Affiliate Letter
Nortel Networks Corporation
0000 Xxxxx Xxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx, Xxxxxx
X0X 0X0
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of Periphonics Corporation, a Delaware corporation (the
"Company"), as the term "affiliate" is defined for purposes of paragraphs (c)
and (d) of Rule 145 of the rules and regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"). Pursuant to the terms of the
Agreement and Plan of Merger dated as of August 23, 1999 (the "Agreement"), by
and between Nortel Networks Corporation, a Canadian corporation ("Nortel"),
North Subsidiary, Inc., a Delaware corporation and wholly owned subsidiary of
Nortel ("Sub") and the Company, Sub will merge into the Company or the Company
will merge with and into Sub (the "Merger").
As a result of the Merger, I may receive common shares, without par value,
of Nortel (the "Nortel Common Shares") in exchange for shares owned by me of
common stock, par value $0.01 per share, of the Company.
I represent, warrant and covenant to Nortel that in the event I receive any
Nortel Common Shares as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of Nortel
Common Shares in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement and discussed the
requirements of such documents and other applicable limitations upon my ability
to sell, transfer or otherwise dispose of the Nortel Common Shares, to the
extent I felt necessary, with my counsel or counsel for Nortel.
C. I have been advised that the issuance of Nortel Common Shares to me
pursuant to the Merger has been registered with the Commission under the Act on
a Registration Statement on Form S-4. However, I have also been advised that,
since at the time the Merger was submitted for a vote of the stockholders of the
Company, I may be deemed to have been an affiliate of the Company and the
distribution by me of the Nortel Common Shares has not been registered under the
Act, I may not sell, transfer or otherwise dispose of the Nortel Common Shares
issued to me in the Merger unless (i) such sale, transfer or other disposition
has been registered under the Act, (ii) such sale, transfer or other disposition
is made in conformity with Rule 145 promulgated by the Commission under the Act
or (iii) in the opinion of counsel reasonably acceptable to Nortel, or pursuant
to a "no action" letter obtained by the undersigned from the staff of the
Commission, such sale, transfer or other disposition is otherwise exempt from
registration under the Act.
D. I understand that, except as may be provided in any registration rights
agreement entered into by Nortel and the undersigned, Nortel is under no
obligation to register the sale, transfer or other disposition of the Nortel
Common Shares by me or on my behalf under the Act or to take any other action
necessary in order to make compliance with an exemption from such registration
available.
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of the Company as described in the first paragraph of
this letter or as a waiver of any rights I may have to object to any claim that
I am such an affiliate on or after the date of this letter.
Very truly yours,
-----------------
Agreed to and Accepted this
____ day of _________, 1999
NORTEL NETWORKS CORPORATION
By: /s/
-----------------------
Name:
Title:
By: /s/
-----------------------
Name:
Title:
