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EXECUTION VERSION
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
by and among
NORTEL NETWORKS CORPORATION,
NORTHERN CROWN SUBSIDIARY, INC.
and
CLARIFY INC.
Dated as of October 18, 1999
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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......................................................14
4.01. Forbearances of the Company.......................................................14
4.02. Forbearances of Nortel............................................................16
ARTICLE V REPRESENTATIONS AND WARRANTIES...............................................17
5.01. Disclosure Schedules..............................................................17
5.02. Standard..........................................................................17
5.03. Representations and Warranties of the Company.....................................18
5.04. Representations and Warranties of Nortel and Sub..................................30
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
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6.09. The Company Rights Agreement......................................................38
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...................................................42
6.16. Certain Tax Matters...............................................................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 Nortel and Sub........................................44
ARTICLE VIII TERMINATION...............................................................45
8.01. Termination.......................................................................45
8.02. Effect of Termination and Abandonment.............................................47
ARTICLE IX MISCELLANEOUS...............................................................48
9.01. Survival..........................................................................48
9.02. Amendment; Extension; Waiver......................................................48
9.03. Counterparts......................................................................49
9.04. Governing Law.....................................................................49
9.05. Expenses..........................................................................49
9.06. Notices...........................................................................49
9.07. Entire Understanding..............................................................50
9.08. Assignment; No Third Party Beneficiaries..........................................50
9.09. Interpretation....................................................................50
9.10. Severability......................................................................51
Exhibit A Form of Affiliate Letter
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AGREEMENT AND PLAN OF MERGER, dated as of October 18, 1999 (this
"Agreement"), by and among NORTEL NETWORKS CORPORATION, a corporation organized
under the laws of Canada ("Nortel"), NORTHERN CROWN SUBSIDIARY, INC., a
corporation organized under the laws of Delaware and a wholly owned subsidiary
of Nortel ("Sub"), and CLARIFY INC., 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, Sub will merge (the "Merger") with and into the
Company, so that the Company is the surviving corporation in the Merger;
WHEREAS, the parties intend that for U.S. federal income tax
purposes, the Merger qualify as a "reorganization" within the meaning of Section
368(a) of the Code;
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, certain substantial Company securityholders are
entering into an agreement with Nortel (the "Stockholders' Agreement");
WHEREAS, as a condition and as an inducement to Nortel's willingness
to enter into this Agreement, certain employees and directors of the Company who
are also holders of stock or options of the Company are entering into agreements
(the "Restrictive Covenant Agreements") with Nortel and the Company; 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:
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"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.
"1999 Company Stock Purchase Plan" shall have the meaning set forth
in Section 3.07(d).
"Agreement" shall have the meaning set forth in the first paragraph
of this Agreement.
"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
5.03(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 Amended and Restated
Certificate of Incorporation of the Company.
"Company Common Stock" shall have the meaning set forth in Section
3.01(b).
"Company Disclosure Schedule" shall have the meaning set forth in
Section 5.01.
"Company Employee" shall have the meaning set forth in Section
6.13(a).
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"Company Equity Interests" shall have the meaning set forth in
Section 5.03(b).
"Company Filed SEC Documents" shall have the meaning set forth in
Section 5.03(g).
"Company Financial Advisor" shall have the meaning set forth in
Section 5.03(k).
"Company Intellectual Property Rights" shall have the meaning set
forth in Section 5.03(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 5.03(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 5.03(b).
"Company SEC Documents" shall have the meaning set forth in Section
5.03(g).
"Company Series A Preferred Stock" shall have the meaning set forth
in Section 5.03(g).
"Company Stock Option Arrangements" shall have the meaning set forth
in Section 3.07(a).
"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 Plans" shall have the meaning set forth in
Section 3.07(d).
"Company Stockholder Protection Rights" shall have the meaning set
forth in Section 5.03(b).
"Confidentiality Agreement" shall mean that certain confidentiality
agreement, dated September 1, 1999, by and between the Company and Nortel.
"Copyrights" shall have the meaning set forth in the definition of
Intellectual Property Rights.
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"Costs" shall have the meaning set forth in Section 6.12(a).
"DGCL" shall mean the General Corporation Law of the State of
Delaware.
"Disclosure Schedule" shall have the meaning set forth in Section
5.01.
"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
5.03(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 1.3, subject to adjustment as set forth
in Section 3.06.
"Exon-Xxxxxx" shall have the meaning set forth in Section 5.03(r).
"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 5.03(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
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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 the transactions
contemplated by this Agreement shall not by itself be deemed to constitute a
Material Adverse Effect; or (ii) would materially impair the ability of Nortel
or the Company, as the case may be, to perform its obligations under this
Agreement.
"Material Suppliers" shall have the meaning set forth in Section
5.03(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.
"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).
"New Purchase Date" shall have the meaning set forth in Section
3.07(d).
"Nortel" shall have the meaning set forth in the first paragraph of
this Agreement.
"Nortel Board" shall mean the Board of Directors of Nortel.
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"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
Section 5.01.
"Nortel SEC Documents" shall have the meaning set forth in Section
5.04(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.
"Other Company Option Agreements" shall have the meaning set forth
in Section 3.07(a).
"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, bonus, 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 set forth or disclosed
in (x) the Company Filed SEC Documents or the Nortel SEC Documents filed prior
to the date of this Agreement, as the case may be, or (y) the related section of
its Disclosure Schedule.
"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.
"Restrictive Covenant Agreements" shall have the meaning set forth
in the recitals to this Agreement.
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"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.
"Scheduled Expenditures" shall have the meaning set forth in Section
4.01(n).
"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.
"Software" shall have the meaning set forth in the definition of
Intellectual Property Rights.
"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 the Company, as the surviving
corporation in the Merger.
"Takeover Laws" shall have the meaning set forth in Section 5.03(m).
"Tax Returns" shall have the meaning set forth in Section 5.03(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.
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"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
5.03(t).
"$" shall mean United States Dollar.
ARTICLE II
THE MERGER; EFFECTS OF THE MERGER
2.01. The Merger. (a) Surviving Corporation. 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 Merger. Following the Effective Time of the Merger, the separate
corporate existence of Sub shall cease and the Company shall survive and
continue to exist as a Delaware corporation.
(b) 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.
(c) 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 Clarify Inc.," shall be those of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable law.
(d) Name. The name of the Surviving Corporation shall remain
"Clarify Inc."
(e) 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.
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2.02. Effective Date and Effective Time. Subject to the satisfaction
or waiver (subject to applicable law) of the conditions 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. The parties hereto hereby
adopt this Agreement as a "plan of reorganization" within the meaning of
Sections 1.368-2(g) and 1.368-3(a) of the U.S. Treasury Regulations.
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 $0.0001 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, $0.0001 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 $0.0001 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 number of common shares, 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,
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$0.0001 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 of the last sale prices of Nortel Common Shares, as reported by the
NYSE Composite Transactions Reporting System (as reported in The Wall Street
Journal or, if not reported therein, in another authoritative source), for the
five NYSE trading days immediately preceding the Effective Date. 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 $100,000,000
(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 or other indemnity reasonably satisfactory to Nortel and the Exchange
Agent, if any of such
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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 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
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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) 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 Clarify Inc. 1999 Non-Executive Stock Option/Stock
Issuance Plan, the Clarify Inc. 1995 Stock Option/Stock Issuance Plan, the
Clarify Inc. Non-Employee Directors' Stock Option Plan, the Clarify Inc. 1991
Stock Option/Stock Issuance Plan or the Objix Systems Development, Inc. Stock
Plan (collectively, the "Company Stock Option Plans") or granted to employees
pursuant to a separate stock option agreement listed on Schedule 3.07 hereto
(collectively, the "Other Company Option Agreements" and, together with the
Company Stock Option Plans, the "Company Stock Option Arrangements") 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 assumption) 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. The portion, if any, of the Company Stock Options
granted pursuant to the Other Company Option Agreements, Article IV (Automatic
Option Grant Program) of the 1995 Stock Option/Stock Issuance Plan prior to its
amendment on June 10, 1999 or the Non-Employee Directors' Stock Option Plan
which, pursuant to the terms of such Other Company Option Agreements, Article IV
of such 1995 Stock Option/Stock Issuance Plan or Non-Employee Directors' Stock
Option Plan, are to become vested in connection with the Merger shall become
vested at the Effective Time in accordance with their terms. 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 Arrangement pursuant to which the Company Stock Options were granted,
including such terms requiring acceleration of the vesting of Company Stock
Options in the event of certain
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terminations of the service of the holder thereof occurring within the eighteen
month period immediately following the Effective Date; 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 Arrangements. 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 Arrangements or making adjustments as permitted thereby) to (i)
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
Arrangements, (ii) preclude the grant of any additional Company Stock Options
under any of the Company Stock Option Arrangements or otherwise (except as
provided in Section 4.01(d)(iii)) and (iii) make such other amendments as Nortel
shall determine are necessary to comply with Canadian securities laws that will
become applicable to such Company Stock Option Arrangements at the Effective
Time or otherwise by reason of the Merger.
(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.
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) within five Business Days following the Effective Date, 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 (i)
a "new purchase date," within the meaning of the Clarify Inc. 1999 Employee
Stock Purchase Plan (the "1999 Company Stock Purchase Plan"), to be established
that will cause all offering periods under the 1999 Company Stock Purchase Plan
in effect immediately prior to the Effective Date to terminate as of the
Business Day immediately prior to the Effective Date (the "New Purchase Date")
and (ii) cause all offering periods in effect immediately prior to the Effective
Date under the Clarify Inc. Employee Stock Purchase Plan (together with the 1999
Company Stock Purchase Plan, the "Company Stock Purchase Plans") to terminate as
of the New Purchase Date; provided that such changes in the offering periods
shall be conditioned upon the consummation of the Merger. On the New Purchase
Date, the Company shall apply the funds credited as of such date under the
Company Stock Purchase Plans 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 Plans, with any remaining cash to
be returned to the respective employees. 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 Plans.
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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 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 (w) the issuance of
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 the Company Stock Option Arrangements as in
effect on the date of this Agreement, (x) the issuance of Company Common
Stock upon the exercise of stock options granted in accordance with
Section 4.01(d)(iii), (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 Plans.
(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
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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 or perquisite), except for
(i) 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) 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 Disclosure Schedule, (iii) grants of
stock options to purchase up to an aggregate of 150,000 shares of
Company Common Stock in accordance with the terms of the Clarify Inc.
1999 Non-Executive Stock Option/Stock Issuance Plan and the Clarify Inc.
1995 Stock Option/Stock Issuance Plan, in each case as 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, consistent with
past practice, and (iv) changes required by law.
(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. 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, enter
into or terminate any contract, agreement or lease (including any
licensing agreement) involving property, services or payments with a
value in excess of $2,000,000, or amend or modify in a material respect
any of its existing contracts, agreements or leases (including any
licensing agreements) originally involving property, services or
payments with a value in excess of $2,000,000.
(j) Claims. Except in the ordinary course of business, settle any
claim, action or proceeding involving money damages in excess of
$200,000 in the aggregate or involving any restrictions or limitations
on the Company or the Company's business.
(k) Adverse Actions. (i) Take any action while knowing 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
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satisfaction of 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 $2,000,000 of
short-term indebtedness 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 in General. Make any capital
expenditures in excess of $2,000,000 in the aggregate in any quarter of
the year, other than Scheduled Expenditures.
(n) Scheduled Expenditures. Make any capital expenditures in
connection with the construction of Building "A" on the Clarify
Corporate Center campus or the international PeopleSoft implementation
("Scheduled Expenditures") in excess of the amounts set forth in Section
4.01(n) of the Company Disclosure Schedule, which represents the
Company's best estimate of the amount and nature of all such
expenditures to be incurred through June 30, 2000.
(o) Tax Elections. Make any new or different material Tax
election, or revoke any material Tax election.
(p) Confidentiality Agreements. Waive any confidentiality or
"standstill" provisions entered into with any third party in connection
with its consideration of an Acquisition Proposal.
(q) Agreements. Agree or commit to do anything prohibited by the
above paragraphs (a) through (p).
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 the Nortel 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 while knowing 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 such
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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. Disclosure Schedules. At or prior to the execution hereof, the
Company has delivered to Nortel and Nortel has delivered to the Company a
schedule (each a "Disclosure Schedule" and, respectively, the "Company
Disclosure Schedule" and the "Nortel Disclosure Schedule") each section of which
sets forth items (x) the disclosure of which is necessary or appropriate in
response to an express disclosure requirement contained in a correspondingly
numbered provision hereof or (y) that qualify, to the extent specified therein,
a correspondingly numbered representation and warranty contained in Section 5.03
or 5.04 or covenant contained in Article IV; provided, that the mere inclusion
of an item in a Disclosure Schedule shall not be deemed an admission by a party
that such item represents a material exception to any representation, warranty
or covenant or is for any purpose relating to this Agreement a material fact,
event or circumstance or that such item is reasonably likely to result in a
Material Adverse Effect; and provided, further, that any item included in a
party's Disclosure Schedule pursuant to clause (y) above shall be deemed to
qualify each representation and warranty in Section 5.03 or 5.04, as the case
may be, and each covenant in Article IV if and only to the extent that it should
be reasonably obvious to the other party from the content of such item and the
context in which it appears in the Disclosure Schedule that such qualification
is appropriate.
5.02. Standard. Except as otherwise set forth in this Section 5.02,
no representation or warranty of the Company contained in Section 5.03 (other
than in Section 5.03(u)) or of Nortel contained in Section 5.04 (other than in
Section 5.04(j)) shall be deemed untrue or incorrect, and no party hereto shall
be deemed to have breached any such representation or warranty, unless there
exist facts, circumstances or events that are inconsistent with such
representation or warranty and that, individually or taken together with all
other facts, events or circumstances inconsistent with any representation or
warranty contained in Section 5.03 or Section 5.04, as the case may be, has had
or is reasonably likely to have a Material Adverse Effect. Notwithstanding the
foregoing, (x) any representation or warranty of the Company contained in
Sections 5.03(b), 5.03(e), 5.03(f)(ii), 5.03(m), 5.03(n), 5.03(s) and, solely as
of the date of this Agreement, Section 5.03(h) and (y) any representation or
warranty of Nortel contained in Sections 5.04(b), 5.04(d) and 5.04(e)(ii) shall
be deemed untrue and incorrect, and the Company or Nortel, as the case may be,
shall be deemed to have breached such representation or warranty, if such
representation or warranty is not true and correct in all material respects. In
determining whether a representation or warranty in Section 5.03 or Section 5.04
(other than the representations and warranties in Section 5.03(u) and Section
5.04(j)) is true and correct under the foregoing standards, such representation
or warranty shall be read without regard to any reference to materiality or
Material Adverse Effect set forth therein.
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5.03. Representations and Warranties of the Company. Subject to
Sections 5.01 and 5.02 and except as Previously Disclosed, 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. 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) 55,000,000 shares of Company Common Stock of which
23,654,944 shares were outstanding as of October 14, 1999 (the
"Capitalization Date") and (B) 5,000,000 shares of preferred
stock, par value $0.0001 per share ("Company Preferred Stock"),
of which no shares were issued or outstanding as of the
Capitalization Date and 50,000 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 June 13, 1997, between
the Company and Xxxxxx Trust Company of California, 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 Plans,
the Rights referred to in clauses (B) and (C) representing in the
aggregate the right to purchase 6,659,730 shares of Company
Common Stock. Section 5.03(b)(iii) of the Company 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
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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 5.03(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
5.03(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.
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(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 nor 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 5.03(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. Section 5.03(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.
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(g) Financial Reports and SEC Documents.
(i) With respect to the periods since December 31, 1995,
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 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, registration
statements, definitive proxy statements or information statements
filed or to be filed by it or any of its Subsidiaries subsequent
to December 31, 1995 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 June 30, 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.
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(h) Litigation. Except as disclosed on Section 5.03(h) of the
Company Disclosure Schedule, 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 or would materially impair the ability of
the Company to perform its obligations under this Agreement.
(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;
(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; and
(iii) has received since December 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.
(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 Xxxxxx Xxxxxxx Xxxx Xxxxxx (the
"Company Financial Advisor") pursuant to the Company's written agreement
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with such firm, a true and complete copy of which has been furnished to
Nortel prior to the date of this Agreement.
(l) Employee Benefits; Employee Relations.
(i) Section 5.03(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
amendments to any Company Plan that will not result in a material
increase in the annual costs in respect of such plan incurred or
to be incurred by the Company or any of its Subsidiaries.
(iii) 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.
(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 or has been 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. During
the three (3) year period immediately preceding the date hereof,
to the Knowledge of the Company, there have been no organizing
activities conducted by any labor organization or work council or
the like with
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respect to any employee of the Company or any subsidiary thereof.
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, regulations, ordinances,
rules, orders or decrees 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, complaint, investigation or proceeding against
the Company or any of its Subsidiaries by or before the National
Labor Relations Board, the Department of Labor, the Equal
Employment Opportunity Commission, the Occupational Health and
Safety Administration or any comparable state or municipal
agency, or by or on behalf of any employee or class of employees
or by or before any governmental agency relating to a purported
violation of any applicable employment laws, regulations,
ordinances, rules, orders or decrees.
(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 June 30, 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 5.03(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, officer 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, officer 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
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(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 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. 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 approved an amendment (in the form previously furnished
to Nortel) 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, the Stockholders' Agreement or
the Restrictive Covenant Agreements 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 and (y) to the Knowledge of the Company, 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
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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 5.03(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 5.03(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 5.03(p)(iii) of the Company Disclosure
Schedule contains an accurate and complete list as of the date of
this Agreement of all licenses and agreements under which the
Company and its Subsidiaries are licensed to use third party
Intellectual Property Rights. There are no licenses or
sublicenses under which the Company and its Subsidiaries have
granted rights to third parties to use the Company Intellectual
Property Rights other than licenses and sublicenses which have
been furnished to Nortel and licenses and sublicenses entered
into in the ordinary course of business that conform in all
material respects with the Company's standard form agreements,
correct and complete copies of which have been furnished to
Nortel. As soon as reasonably practicable following the date of
this Agreement, the Company will furnish to Nortel an accurate
and complete list as of the date thereof of all licenses and
sublicenses under which the Company and its Subsidiaries have
granted rights to third parties to use the Company Intellectual
Property Rights, other than licenses and
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sublicenses entered into in the ordinary course of business that
conform in all material respects with the Company's standard form
agreements. Except as set forth in Section 5.03(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 5.03(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.
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(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 Effective 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
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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 5.03(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.
(iii) All 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 date, 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
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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 June 30, 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 June 30, 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 5.03 or otherwise), has
had or is reasonably likely to have a Material Adverse Effect with
respect to the Company.
5.04. Representations and Warranties of Nortel and Sub. Subject
to Sections 5.01 and 5.02 and except as Previously Disclosed, 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. 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. 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 1,361,621,637 shares were outstanding as
of September 30, 1999; (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
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Redeemable Class A Preferred Shares Series 8) were outstanding as
of September 30, 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 September 30,
1999. As of the date hereof, there are no outstanding Rights to
acquire capital stock from Nortel other than pursuant to the
stock option and other employee compensation plans of Nortel and
its subsidiaries, Nortel's shareholder dividend reinvestment and
stock purchase plan, the exchange rights associated with Nortel's
Series 4 Preferred Shares that are described in the Nortel SEC
Documents and under the Agreement and Plan of Merger dated as of
August 24, 1999 by and among Nortel, a subsidiary of Nortel and
Periphonics Corporation.
(ii) The authorized capital stock of Sub consists of one
share of common stock, $0.0001 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 under the Canada Business Corporations Act),
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
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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 5.04(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.
(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.
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(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 5.04 or otherwise), has
had or is reasonably likely to have a Material Adverse Effect with
respect to Nortel.
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
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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
reasonably practicable, and Nortel agrees to file the Registration Statement
with the SEC as promptly as reasonably 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 reasonably
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.
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(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, and shall cooperate in connection with
any subsequent press releases or written statements for general circulation. 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
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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 received by the Company, 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 written
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 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.
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(b) Subject to Section 8.01 (e)(ii), neither the Company Board nor
any committee thereof shall (i) approve or recommend, or propose to approve or
recommend, any Acquisition Proposal, (ii) 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 (iii) 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)(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. Nothing in
this Section 6.06 shall affect the Company's obligations under the first
sentence of Section 6.02.
(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
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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 5.03(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
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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
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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 employees
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. 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 or Nortel's
Subsidiaries 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 its Subsidiaries or 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
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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 service of the
Company Employees with the Company or any of its Subsidiaries for purposes of
eligibility to participate and vesting credit, and, solely with respect to
vacation benefits, benefit accrual in any Nortel Plan in which the Company
Employees are eligible to participate after the Effective Time to the extent
that such service was recognized for that purpose under the analogous Company
Plan prior to such transfer; 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.
(d) For the one year period following the Effective Time, Company
Employees shall be eligible to participate in severance benefit plans that
provide severance benefits on substantially the same terms and conditions and in
substantially the same amounts as the severance benefits provided to similarly
situated employees of Nortel and its Subsidiaries. The service of the Company
Employees with the Company or any of its Subsidiaries completed prior to the
Effective Time shall be recognized for purposes of determining the severance
benefits, if any, payable to Company Employees at any time after the Effective
Time.
6.14. Accountants' Letters. The Company shall use its reasonable
best efforts to cause to be delivered to Nortel a letter or letters of
PricewaterhouseCoopers L.L.P. or Deloitte & Touche LLP, independent auditors
(the "Company's Accountants"), and Nortel shall use its reasonable best efforts
to cause to be delivered to the Company a letter of Deloitte & Touche LLP,
independent auditors ("Nortel's Accountants"), each 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
the Company's Accountants, in accordance with Statement of Accounting Standards
No. 72 and (y) in the case of Nortel's Accountants, 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
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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 qualify as, and will not
(either before or after the Effective Date) take any action that is reasonably
likely to prevent the Merger from qualifying as, a reorganization within the
meaning of Section 368(a) of the Code that is not subject to Section 367(a)(1)
of the Code pursuant to U.S. Treasury Regulation Section 1.367(a)-3(c) (other
than with respect to holders of Company Common Stock who are or will be "5%
transferee shareholders" within the meaning of U.S. Treasury Regulation Section
1.367(a)-3(c)(5)(ii)), and will use its reasonable best efforts to timely
satisfy, or cause to be timely satisfied, all applicable tax reporting and
filing requirements contained in the Code and U.S. Treasury Regulations with
respect to the Merger, including the reporting requirements contained in U.S.
Treasury Regulation Section 1.367(a)-3(c)(6).
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.
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(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 (giving effect to the
standard set forth in Section 5.02) 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); 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 Venture Law Group, A Professional Corporation,
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).
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(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 (giving effect to
the standard set forth in Section 5.02) 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); 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
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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 15 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 15 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 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
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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 the case of this clause
(B)) 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).
(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, within 45 days from the date hereof, 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 (nor any of their respective officers,
directors or agents) shall have any liability or further obligation to any other
party hereunder except as set forth in subsections (b) and (c)
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below and in Section 9.01, and except that termination shall not relieve a party
from liability for any willful breach of this Agreement.
(b) Nortel and the Company agree that the Company shall pay to
Nortel the sum of $60,000,000 (the "Termination Fee") solely as follows:
(i) if (x) the Company shall terminate this Agreement pursuant to
Section 8.01(c) due to the failure of the parties to consummate the
Merger by the relevant date (unless such failure 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) and (y) at any time after the date of this
Agreement and at or before 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;
(ii) if (x) 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 and (y) at any time
after the date of this Agreement and at or before the Company Meeting
there shall exist an Acquisition Proposal which has been publicly
announced or the existence of which is a matter of public knowledge 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;
(iii) 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
(y) at any time after the date of this Agreement and at or before 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;
(iv) if Nortel shall terminate this Agreement pursuant to
Section 8.01(e)(i); or
(v) if the Company shall terminate this Agreement pursuant to
Section 8.01(e)(ii).
(c) The Termination Fee required to be paid pursuant to subsection
(b)(i), (b)(ii) or (b)(iii) 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 Termination Fee required to be paid pursuant
to subsection (b)(iv) above shall be payable by the Company to Nortel not later
than two Business Days after the termination referred to therein. The
Termination Fee required to be paid pursuant to subsection (b)(v) shall be
payable as set forth in clause (z) of Section 8.01(e)(ii). Notwithstanding the
foregoing, (i) in no event shall more than one Termination Fee be payable, (ii)
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
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51
of twelve months after the date such fee would otherwise be payable and (iii)
the Termination Fee 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 Nortel.
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
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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:
Clarify Inc.
0000 Xxxxxxx Xxxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxx
Fax: (000) 000-0000
Phone: (000) 000-0000
With a copy to:
Venture Law Group
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
Phone: (000) 000-0000
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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.
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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.
* * *
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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:
NORTHERN CROWN SUBSIDIARY, INC.
By: /s/
-----------------------------
Name:
Title: President
CLARIFY INC.
By: /s/
-----------------------------
Name:
Title:
56
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 Clarify Inc., 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 October 18, 1999 (the "Agreement"), by
and between Nortel Networks Corporation, a Canadian corporation ("Nortel"),
Northern Crown Subsidiary, Inc., a Delaware corporation and a wholly owned
subsidiary of Nortel ("Sub"), and the Company, Sub will merge with and into the
Company (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 $0.0001 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
B-1
57
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:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
B-2
