Exhibit 2
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Execution Copy
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
AGERE SYSTEMS INC.,
AGERE SYSTEMS ACQUISITION LLC,
TERABLAZE, INC.
AND
EACH OF THE STOCKHOLDERS SIGNATORY HERETO
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Dated as of December 31, 2003
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TABLE OF CONTENTS
AGREEMENT AND PLAN OF MERGER
Page
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1. The Merger.............................................................2
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1.1 General.............................................................2
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1.2 Certificate of Formation............................................2
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1.3 Limited Liability Company Agreement.................................2
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1.4 Management of Surviving Entity......................................2
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1.5 Conversion of Securities............................................2
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1.6 Dissenting Shares...................................................3
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1.7 No Fractional Shares................................................4
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1.8 Exchange Procedures; Distributions with Respect to Unexchanged
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Shares; Stock Transfer Books........................................4
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1.9 Return of Shares Held by Exchange Agent.............................6
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1.10 No Further Ownership Rights in Series B Preferred Stock.............6
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1.11 Further Assurances..................................................6
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2. Approval by Stockholders...............................................6
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3. Representations and Warranties of the Company and the Preferred
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Stockholders...........................................................7
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3.1 Organization........................................................7
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3.2 Capitalization; Options and Other Rights............................7
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3.3 Authority; No Conflicts; Stockholder Vote...........................8
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3.4 Charter Documents..................................................10
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3.5 Financial Statements...............................................10
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3.6 Absence of Undisclosed Liabilities.................................10
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3.7 Operations and Obligations.........................................10
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3.8 Properties.........................................................12
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3.9 Contracts..........................................................12
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3.10 Absence of Default.................................................13
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3.11 Litigation.........................................................14
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3.12 Compliance with Law................................................14
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3.13 Intellectual Property; Software....................................14
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3.14 Tax Matters........................................................15
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3.15 Employee Benefit Plans.............................................16
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3.16 Executive Employees................................................17
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3.17 Employees..........................................................17
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3.18 Environmental Laws.................................................18
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3.19 Bank Accounts, Letters of Credit and Powers of Attorney............18
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3.20 Subsidiaries.......................................................18
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3.21 Insurance..........................................................18
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3.22 Leases.............................................................19
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(i)
3.23 Assets.............................................................19
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3.24 Minute Books.......................................................19
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3.25 Financial Projections..............................................19
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3.26 Reorganization.....................................................19
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3.27 Complete Copies of Materials.......................................19
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3.28 Disclosure.........................................................20
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3.29 Information in Agere Registration Statement........................20
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3.30 Investment Matters.................................................20
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3.31 Private Placement..................................................21
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4. Representations and Warranties of Agere...............................22
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4.1 Organization.......................................................22
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4.2 Capitalization.....................................................22
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4.3 Authority; No Conflicts............................................23
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4.4 Litigation.........................................................24
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4.5 Information Supplied...............................................24
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4.6 Reorganization.....................................................24
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5. Covenants.............................................................24
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5.1 Notification of Certain Matters....................................24
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5.2 Access to Information..............................................24
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5.3 Actions by the Parties.............................................25
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6. Conditions Precedent..................................................25
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6.1 Conditions Precedent to Each Party's Obligation to Close...........25
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6.2 Conditions Precedent to Obligations of Agere and Acquisition.......26
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6.3 Conditions Precedent to Obligations of the Company.................28
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7. Certain Agreements....................................................28
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7.1 Registration Rights................................................28
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7.2 Stock Exchange Listing.............................................29
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7.3 Tax Returns........................................................29
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7.4 Cooperation........................................................29
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7.5 Reorganization.....................................................30
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8. Survival of Representations and Warranties............................30
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9. Indemnification.......................................................30
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9.1 Escrow Shares......................................................30
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9.2 General Indemnification............................................30
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9.3 Damage Threshold; Cap..............................................31
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9.4 Preferred Stockholders' Tax Indemnity..............................32
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9.5 Release of Escrow Fund.............................................33
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9.6 Claims Upon Escrow Fund............................................34
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9.7 Objections to Claims...............................................34
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9.8 Third-Party Claims.................................................34
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(ii)
9.9 Stockholders' Representative.......................................35
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10. Brokers' and Finders' Fees............................................35
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10.1 Company............................................................35
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10.2 Agere; Acquisition.................................................35
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11. Expenses; Taxes.......................................................35
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12. Press Releases........................................................35
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13. Contents of Agreement; Parties in Interest; etc.......................36
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14. Assignment and Binding Effect.........................................36
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15. Waiver................................................................36
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16. Definitions...........................................................36
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17. Notices...............................................................38
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18. Amendment.............................................................39
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19. Governing Law.........................................................39
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20. No Benefit to Others..................................................40
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21. Severability..........................................................40
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22. Section Headings......................................................40
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23. Schedules and Exhibits................................................40
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24. Counterparts..........................................................40
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EXHIBITS
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EXHIBIT A Certificate of Merger
EXHIBIT B Escrow Agreement
EXHIBIT C Form of Indemnity Agreement
EXHIBIT D Form of Non-Competition and Non-Disclosure Agreement
EXHIBIT E Form of Employee Bonus Retention Plan Letter Agreement
(iii)
Glossary of Defined Terms
Defined Term Location of Definition
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2003 Balance Sheet.......................................Section 3.5(a)(i)
Acquisition..............................................Preamble
Affiliate................................................Section 16
Agere....................................................Preamble
Agere Notice.............................................Section 9.6
Agere Common Stock.......................................Section 1.5(c)
Agere Shares.............................................Section 1.5(c)
Agreement................................................Preamble
Authorizations...........................................Section 3.12(b)
Benefit Plan.............................................Section 16
Cap......................................................Section 9.3(c)
Certificate of Merger....................................Section 1.1(b)
Certificates.............................................Section 1.8(b)
Closing..................................................Section 1.1(c)
Closing Date.............................................Section 1.1(c)
Code.....................................................Section 16
Common Stock.............................................Recitals
Common Stock Option......................................Section 6.2(f)
Commonly Controlled Entity...............................Section 3.15(a)
Company..................................................Preamble
Company Capital Stock....................................Recitals
Company Options..........................................Section 3.2(c)
Control..................................................Section 16
CRCO.....................................................Section 3.14(a)
Current Balance Sheet....................................Section 3.5(a)(iii)
Current Financial Statements.............................Section 3.5(a)(iii)
Current Per Share Market Price...........................Section 16
Damages..................................................Section 9.2(a)
Depositors...............................................Section 16
Designated Group.........................................Section 16
Designated Officers......................................Section 16
DGCL.....................................................Recitals
Dissenting Shares........................................Section 1.6(a)
DLLCA....................................................Recitals
Documents................................................Section 5.2
Effective Time...........................................Section 1.1(b)
Environmental Laws.......................................Section 16
ERISA....................................................Section 3.15(a)
Escrow Agent.............................................Section 9.1
Escrow Agreement.........................................Section 6.1(d)
Escrow Fund..............................................Section 9.1
(iv)
Escrow Fund Value........................................Section 16
Escrow Period............................................Section 9.5
Escrow Shares............................................Section 9.1
Exchange Act.............................................Section 4.3(c)
Exchange Agent...........................................Section 16
Exchange Fund............................................Section 1.8(a)
Executive Employees......................................Section 3.16(a)
Final Determination......................................Section 16
Financial Statements.....................................Section 3.5(a)
GAAP.....................................................Section 16
Hazardous Substances.....................................Section 16
Immaterial Authorizations................................Section 3.12(b)
Indebtedness.............................................Section 16
Indemnified Person.......................................Section 9.2(a)
Indemnified Tax Liability................................Section 9.4(b)(i)
Indemnity Agreement......................................Section 6.2(e)
Intellectual Property Rights.............................Section 3.13(b)
IRS......................................................Section 3.14(a)
Laws.....................................................Section 3.12(a)
Liens....................................................Section 16
Material Adverse Effect..................................Section 16
Member...................................................Recitals
Merger...................................................Recitals
NOLs.....................................................Section 3.14(a)
NYSE.....................................................Section 1.7
Outstanding Common Shares................................Section 3.2(a)
Outstanding Preferred Shares.............................Section 3.2(a)
Outstanding Series A Shares..............................Section 3.2(a)
Outstanding Series B Shares..............................Section 3.2(a)
Pension Plans............................................Section 3.15(a)
Person...................................................Section 16
Plans....................................................Section 3.15(a)
Pre-Closing Tax Period...................................Section 9.4(a)(i)
Preferred Stock..........................................Recitals
Preferred Stockholder....................................Preamble
Ratable Share............................................Section 16
reasonable best efforts..................................Section 16
Registration Statement...................................Section 3.29
Representatives..........................................Section 5.2
Reserved Common Shares...................................Section 3.2(a)
SEC......................................................Section 3.29
Securities Act...........................................Section 3.29
Selling Stockholders.....................................Section 7.1(a)
Series A Preferred Stock.................................Recitals
Series B Preferred Stock.................................Recitals
SRLY.....................................................Section 3.14(a)
(v)
Stockholders' Representative.............................Section 9.9(a)
Subsidiary...............................................Section 16
Surviving Entity.........................................Section 1.1(a)
Tax......................................................Section 16
Tax Return...............................................Section 16
Taxable..................................................Section 16
Taxes....................................................Section 16
Trading Day..............................................Section 16
Threshold................................................Section 9.3(a)
Warrants.................................................Section 16
Welfare Plans............................................Section 3.15(a)
(vi)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of December 31, 2003 (this
"Agreement") by and among AGERE SYSTEMS INC., a Delaware corporation
("Agere"), AGERE SYSTEMS ACQUISITION LLC, a Delaware limited liability company
and a wholly-owned subsidiary of Agere ("Acquisition"), TERABLAZE, INC., a
Delaware corporation (the "Company"), and each of the stockholders of the
Company signatory hereto (each, a "Preferred Stockholder").
BACKGROUND
A. The Company has its principal executive office located at 0000
Xxxxxxxx Xxxxxx, Xxxxx 000, Xxx Xxxx, Xxxxxxxxxx, and is engaged principally
in the design and development of gigabit ethernet switching solutions. The
Company has authorized for issuance 90,000,000 shares of common stock, par
value $0.0001 per share ("Common Stock"), and 67,653,067 shares of preferred
stock, par value $0.0001 per share, of which 9,853,067 shares are designated
Series A Preferred Stock ("Series A Preferred Stock") and 57,800,000 shares
are designated Series B Preferred Stock ("Series B Preferred Stock"; the
Series A Preferred Stock and Series B Preferred Stock are hereinafter
collectively referred to as "Preferred Stock", and the Preferred Stock and
Common Stock are referred to collectively as the "Company Capital Stock").
B. The Board of Directors of the Company has determined that the merger
of the Company with and into Acquisition (hereinafter referred to as the
"Merger") in accordance with the provisions of the Delaware General
Corporation Law, as amended (the "DGCL"), and subject to the terms and
conditions of this Agreement, is advisable and in the best interests of the
Company and its stockholders.
C. The Board of Directors and stockholders of the Company have approved
this Agreement and the transactions contemplated hereby.
D. Agere has its principal executive office located at 0000 Xxxxxxxx
Xxxxxxx XX, Xxxxxxxxx, Xxxxxxxxxxxx.
E. Acquisition is a wholly-owned subsidiary of Agere and was formed for
the Company to merge with and into Acquisition so that, as a result of the
Merger, Acquisition will survive and remain a wholly-owned subsidiary of
Agere. Acquisition has its principal executive office located at 0000 Xxxxxxxx
Xxxxxxx XX, Xxxxxxxxx, Xxxxxxxxxxxx.
F. The sole member of Acquisition (the "Member") has determined that the
Merger in accordance with the provisions of the Delaware Limited Liability
Company Act, as amended (the "DLLCA"), and subject to the terms and conditions
of this Agreement, is advisable and in the best interests of Acquisition and
the Member.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto intending to be legally bound do
hereby agree as follows:
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1. The Merger
1.1 General.
(a) Upon the terms and subject to the conditions of this Agreement
and in accordance with the DGCL and the DLLCA, at the Effective Time, (i) the
Company shall be merged with and into Acquisition, (ii) the separate existence
of the Company shall cease and (iii) Acquisition shall be the surviving entity
(the "Surviving Entity") and shall continue its organizational existence under
the laws of the State of Delaware.
(b) The Merger shall become effective at the time of filing of a
certificate of merger, substantially in the form of Exhibit A attached hereto
(the "Certificate of Merger"), with the Secretary of State of the State of
Delaware in accordance with the provisions of Section 264 of the DGCL and
Section 18-209 of the DLLCA, or at such later time as may be stated in the
Certificate of Merger (the "Effective Time").
(c) Subject to the terms and conditions of this Agreement,
Acquisition shall duly execute and file the Certificate of Merger with the
Secretary of State of the State of Delaware on the date hereof. The closing of
the Merger (the "Closing") shall take place at the offices of Sidley Xxxxxx
Xxxxx & Xxxx LLP, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx at 10:00 a.m. on the
date hereof (the "Closing Date").
(d) At the Effective Time, the effect of the Merger shall be as
provided in the applicable provisions of the DGCL and the DLLCA. 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 Acquisition shall vest in the Surviving Entity, and all debts,
liabilities, obligations, restrictions, disabilities and duties of the Company
and Acquisition shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Entity.
1.2 Certificate of Formation. The Certificate of Formation of the
Surviving Entity shall be as provided in the Certificate of Merger until
thereafter amended as provided therein or by applicable law.
1.3 Limited Liability Company Agreement. The Limited Liability Company
Agreement of Acquisition, as in effect immediately prior to the Effective
Time, shall be the Limited Liability Company Agreement of the Surviving Entity
until thereafter amended as provided therein or by applicable law.
1.4 Management of Surviving Entity. The business and affairs of the
Surviving Entity shall be managed by the Member in accordance with the Limited
Liability Company Agreement of the Surviving Entity.
1.5 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of Agere, Acquisition, the Company
or the holders of any of the following securities:
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(a) the equity interests in Acquisition shall remain the equity
interests of the Surviving Entity;
(b) (i) each share of Company Common Stock and Series A Preferred
Stock, whether issued and outstanding and owned by any Person (including any
Preferred Stockholder, Agere or Acquisition) or owned or held in treasury by
the Company, shall be canceled and retired without any conversion thereof and
no payment or distribution shall be made with respect thereto; and
(ii) each Company Option, whether issued and outstanding and
owned by any Person (including Agere or Acquisition) or owned by the Company,
shall be canceled and extinguished without any conversion or exercise thereof,
and no payment or distribution shall be made with respect thereto;
(c) subject to the provisions of Section 1.7, each share of Series
B Preferred Stock issued and outstanding immediately prior to the Effective
Time (other than any Dissenting Shares) shall be converted into 0.2271 of a
validly issued, fully paid and nonassessable share of Class A common stock,
par value $.01 per share, of Agere, including the associated Class A right to
purchase Series A Junior Participating Preferred Stock (the "Agere Common
Stock"). The shares of Agere Common Stock to be distributed in exchange for
the Series B Preferred Stock are referred to herein collectively as the "Agere
Shares"; and
(d) each share of Company Capital Stock shall no longer be
outstanding and shall automatically be canceled and retired, and each holder
of record of a certificate representing any shares of Company Capital Stock
shall cease to have any rights with respect thereto other than, solely with
respect to the Series B Preferred Stock, (i) the right to receive the Agere
Shares to be issued in consideration therefor upon the surrender of such
certificate, (ii) any dividends and other distributions in accordance with
Section 1.8(c) and (iii) any cash, without interest, to be paid in lieu of any
fractional share of Agere Common Stock in accordance with Section 1.7.
1.6 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, a stockholder who holds shares of the Company Capital Stock on the
date of the making of a demand pursuant to Section 262(d) of the DGCL with
respect to such shares (collectively, the "Dissenting Shares"), who has
otherwise complied with the applicable provisions of the DGCL, and who shall
not have voted in favor of the Merger or consented thereto in writing, shall
have the rights and remedies provided in Section 262 of the DGCL, including
but not limited to an appraisal by the Delaware Court of Chancery of the fair
value of such stockholder's shares of the Company Capital Stock.
(b) The Company shall give Agere (i) prompt notice of any demands
for appraisal received by the Company, withdrawals of such demands, and any
other instruments served pursuant to Section 262 of the DGCL and received by
the Company and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under Section 262(d) of the
DGCL. The Company shall not, except with the prior written
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consent of Agere, make any payment with respect to any demands for appraisal
or offer to settle or settle any such demands.
1.7 No Fractional Shares. No certificates or scrip representing
fractional shares of Agere Common Stock shall be issued upon the surrender for
exchange of Certificates and such fractional shares shall not entitle the
record or beneficial owners thereof to voting rights or to any other rights as
a stockholder of Agere. In lieu of receiving any such fractional share, the
record holder of a Certificate shall be entitled to receive either, at Agere's
sole option, (a) a whole share of Agere Common Stock or (b) cash (without
interest) in an amount rounded to the nearest whole cent, determined by
multiplying (i) the per share closing price on the New York Stock Exchange,
Inc. (the "NYSE") of Agere Common Stock (as reported on the NYSE Composite
Transactions Tape as such Tape is reported in the Wall Street Journal or
another recognized business publication) on the date immediately preceding the
date on which the Effective Time shall occur by (ii) the fraction of a share
to which such holder would otherwise be entitled. Agere shall make available
to the Exchange Agent the cash necessary for this purpose.
1.8 Exchange Procedures; Distributions with Respect to Unexchanged
Shares; Stock Transfer Books.
(a) As of the Effective Time, Agere shall deposit with the
Exchange Agent certificates representing the aggregate number of Agere Shares
to be issued pursuant to Section 1.5(c) in exchange for the shares of Series B
Preferred Stock, less the Escrow Shares to be deposited in the Escrow Fund
pursuant to Section 9.1. The Agere Shares to be deposited with the Exchange
Agent, together with any dividends or distributions with respect thereto
pursuant to Section 1.7 and Section 1.8(c), are referred to herein as the
"Exchange Fund".
(b) As soon as practicable after the Effective Time, Agere shall
deliver an instruction letter to the Exchange Agent directing the Exchange
Agent to send to each Person who was, at the Effective Time, a holder of
record of certificates which represented outstanding Series B Preferred Stock
(the "Certificates") which shares were converted into the right to receive
Agere Shares pursuant to Section 1.5(c), a letter of transmittal which (i)
shall specify that delivery shall be effected, and risk of loss and title to
such Certificates shall pass, only upon actual delivery thereof to the
Exchange Agent and (ii) shall contain instructions for use in effecting the
surrender of the Certificates. Upon surrender to the Exchange Agent of
Certificates for cancellation, together with such letter of transmittal duly
executed and such other documents as the Exchange Agent may reasonably
require, such holder shall be entitled to receive in exchange therefor (A) a
certificate representing the number of whole Agere Shares into which the
Series B Preferred Stock represented by the surrendered Certificate shall have
been converted at the Effective Time less such holder's pro rata portion of
the number of Escrow Shares to be deposited in the Escrow Fund on such
holder's behalf pursuant to Section 9.1, (B) if elected by Agere pursuant to
clause (b) of the second sentence of Section 1.7, cash in lieu of any
fractional share of Agere Common Stock in accordance with Section 1.7 and (C)
certain dividends and distributions in accordance with Section 1.8(c), and the
Certificates so surrendered shall then be canceled. Subject to Section 1.7 and
Section 1.8(c), until surrendered as contemplated by this Section 1.8(b), each
Certificate from and after the Effective Time shall be deemed to represent
only the right to receive, upon such surrender, the number of Agere Shares
into which such Series B Preferred Stock shall have been converted. As soon as
practicable after the Effective
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Time, and subject to and in accordance with the provisions of Section 9, Agere
shall cause to be distributed to the Escrow Agent certificates representing
the Escrow Shares which shall be registered in the name of the Escrow Agent as
nominee for the holders of Certificates canceled pursuant to this Section 1.8.
Such shares shall be beneficially owned by such holders, shall be held in
escrow and shall be available to compensate Agere as provided in Section 9. To
the extent not used for such purpose, such shares shall be released, as
provided in Section 9.
(c) No dividends or other distributions declared or made after the
Effective Time with respect to the Agere Shares with a record date after the
Effective Time shall be paid to any holder entitled by reason of the Merger to
receive certificates representing Agere Shares and no cash payment in lieu of
a fractional share of Agere Common Stock shall be paid to any such holder
pursuant to Section 1.7 until such holder shall have surrendered its
Certificates pursuant to this Section 1.8. Subject to applicable law,
following surrender of any such Certificate, such holder shall be paid, in
each case, without interest, (i) the amount of any dividends or other
distributions theretofore paid with respect to the Agere Shares represented by
the certificate received by such holder and having a record date on or after
the Effective Time and a payment date prior to such surrender and (ii) at the
appropriate payment date or as promptly as practicable thereafter, the amount
of any dividends or other distributions payable with respect to such Agere
Shares and having a record date on or after the Effective Time but prior to
such surrender and a payment date on or after such surrender.
(d) If any certificate representing Agere Shares is to be issued
or any cash is to be paid to any Person other than the registered holder of
the Certificate surrendered in exchange therefor, it shall be a condition to
such exchange that such surrendered Certificate shall be properly endorsed and
otherwise in proper form for transfer and such Person either (i) shall pay to
the Exchange Agent any transfer or other taxes required as a result of the
issuance of such certificates for the Agere Shares and the distribution of
such cash payment to such Person or (ii) shall establish to the satisfaction
of the Exchange Agent that such tax has been paid or is not applicable. Agere
or the Exchange Agent shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
shares of Series B Preferred Stock such amounts as Agere or the Exchange Agent
is required to deduct and withhold with respect to the making of such payment
under the Code, or any provision of any other applicable tax law. To the
extent that amounts are so withheld by Agere or the Exchange Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Series B Preferred Stock in respect
of which such deduction and withholding was made by Agere or the Exchange
Agent. All amounts in respect of taxes received or withheld by Agere shall be
disposed of by Agere in accordance with the Code or such other applicable tax
law.
(e) If any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed and subject to such other
customary conditions as the Member may impose, the Exchange Agent shall issue
in exchange for such lost, stolen or destroyed Certificate the Agere Shares as
determined under Sections 1.5(c) and 1.7 and pay any cash, dividends or other
distributions as determined in accordance with Sections 1.7 and 1.8(c) in
respect of such Certificate; provided, that Agere may, in its reasonable
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificate to deliver a
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bond in such sum as it may reasonably require as indemnity against any claim
that may be made against Agere, the Surviving Entity or the Exchange Agent
with respect to the Certificate alleged to have been lost, stolen or
destroyed.
(f) At the close of business on the day on which the Effective
Time occurs, the stock transfer books of the Company shall be closed and
thereafter there shall be no further registration of transfers of shares of
Company Capital Stock on the records of the Company or the Surviving Entity.
From and after the Effective Time, the holders of shares of Company Capital
Stock outstanding immediately prior to the Effective Time shall cease to have
any rights with respect to such shares except as otherwise provided herein or
by applicable law.
1.9 Return of Shares Held by Exchange Agent. Any portion of the Agere
Shares deposited with the Exchange Agent which remains undistributed to the
former holders of Series B Preferred Stock for six months after the Effective
Time shall be delivered to Agere, upon its request, and any such former
holders who have not theretofore surrendered to the Exchange Agent their
Certificates shall thereafter look only to Agere for payment of their claim
for Agere Shares, any cash in lieu of fractional shares of Agere Common Stock
and any dividends or distributions with respect to such Agere Shares, and
Agere agrees to promptly pay any such claims. None of Agere, the Surviving
Entity or the Exchange Agent shall be liable to any former holder of Company
Capital Stock for any unclaimed Agere Shares held in the Exchange Fund (and
any cash, dividends and distributions payable in respect thereof) which are
delivered to a public official pursuant to an official request under any
applicable abandoned property, escheat or similar law.
1.10 No Further Ownership Rights in Series B Preferred Stock. All
certificates representing Agere Shares delivered upon the surrender for
exchange of any Certificate in accordance with the terms hereof (including any
cash paid pursuant to Section 1.7 or Section 1.8) shall be deemed to have been
delivered (and paid) in full satisfaction of all rights pertaining to the
Series B Preferred Stock previously represented by such Certificate.
1.11 Further Assurances. If at any time after the Effective Time the
Surviving Entity shall consider or be advised that any deeds, bills of sale,
assignments or assurances or any other acts or things are necessary, desirable
or proper (a) to vest, perfect, confirm or record in the Surviving Entity its
right, title or interest in, to or under any of the rights, privileges,
powers, franchises, properties or assets of either the Company or Acquisition
or (b) to otherwise to carry out the purposes of this Agreement, the Surviving
Entity, its member, its proper officers and any designee of such member or
officers shall be authorized to execute and deliver, in the name and on behalf
of either the Company or Acquisition, all such deeds, bills of sale,
assignments and assurances and to do, in the name and on behalf of the Company
or Acquisition, all such other acts and things necessary, desirable or proper
to vest, perfect or confirm its right, title or interest in, to or under any
of the rights, privileges, powers, franchises, properties or assets of the
Company or Acquisition, as applicable, and otherwise to carry out the purposes
of this Agreement.
2. Approval by Stockholders. The Company has solicited the written
consent of its stockholders in lieu of a meeting for purposes of voting upon
this Agreement and approving the Merger. The Company has, through its board of
directors, recommended to its stockholders
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approval of this Agreement. The Company, Acquisition and Agere each agree to
execute and deliver such further documents and instruments and to do such
other acts and things as may be required to complete all requisite corporate
or company action in connection with the transactions contemplated by this
Agreement. All materials distributed to the stockholders of the Company with
respect to the Merger and this Agreement, including any description of the
transactions contemplated hereunder, the recommendation of the Board of
Directors of the Company that such stockholders approve the Merger, the vote
by such stockholders to approve this Agreement and the Merger and any
description of appraisal rights available to such stockholders (i) have been
distributed to Agere prior to the date hereof and (ii) are in accordance with
applicable law.
3. Representations and Warranties of the Company and the Preferred
Stockholders. Each of the Preferred Stockholders severally represents and
warrants to Agere with respect to the matters set forth in Section 3.1(b), the
second sentence of Section 3.2(b), Section 3.3(a), Section 3.29, Section 3.30
and Section 3.31, and the Company represents and warrants to Agere with
respect to all other matters contained in this Section 3 as follows:
3.1 Organization.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation.
The Company has all requisite power and authority and all necessary
governmental approval to carry on its business as it has been and is now being
conducted. The Company is duly qualified or licensed as a foreign corporation
to do business and is in good standing in each jurisdiction where the nature
of its business or the ownership, leasing or operation of its properties makes
such qualification or licensing necessary, except where the failure to be so
qualified or licensed and in good standing would not have a Material Adverse
Effect.
(b) Each Preferred Stockholder (to the extent that it is an
entity) is a corporation, limited liability company or limited partnership
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization.
3.2 Capitalization; Options and Other Rights.
(a) The total authorized shares of capital stock of the Company
consists of (i) 90,000,000 shares of Common Stock, of which (A) 8,390,651
shares are issued and outstanding (the "Outstanding Common Shares"), and (B)
41,798,054 shares have been reserved for the conversion of the Preferred Stock
(the "Reserved Common Shares"), and (ii) 67,653,067 shares of Preferred Stock,
of which (A) 9,853,067 shares have been designated as Series A Preferred
Stock, and 8,414,675 are issued and outstanding (the "Outstanding Series A
Shares"), and (B) 57,800,000 shares have been designated as Series B Preferred
Stock, and 30,471,193 are issued and outstanding (the "Outstanding Series B
Shares"; and together with the Outstanding Series A Shares, the "Outstanding
Preferred Shares").
(b) All the Outstanding Common Shares and Outstanding Preferred
Shares have been duly and validly authorized and issued and are fully paid and
nonassessable. None of the Outstanding Common Shares or Outstanding Preferred
Shares has been issued in violation of
7
the preemptive rights of any stockholder of the Company. The Outstanding
Common Shares and Outstanding Preferred Shares have been issued in compliance
in all material respects with all applicable Federal and state securities laws
and regulations. Schedule 3.2(b) sets forth a true and complete list of all
holders of Company Capital Stock (including the amount and type of security
held by such holder).
(c) Except as set forth in Schedule 3.2(c), there are no existing
agreements, subscriptions, options, warrants, calls, commitments, trusts
(voting or otherwise) or rights of any kind whatsoever granting to any Person
any interest in or the right to purchase or otherwise acquire from the Company
or granting to the Company any interest in or the right to purchase or
otherwise acquire from any Person, at any time, or upon the occurrence of any
stated event, any securities of the Company, whether or not presently issued
or outstanding, nor are there any outstanding securities of the Company or any
other entity which are convertible into or exchangeable for other securities
of the Company, nor are there any agreements, subscriptions, options,
warrants, calls, commitments or rights of any kind granting to any Person any
interest in or the right to purchase or otherwise acquire from the Company or
any other Person any securities so convertible or exchangeable, nor are there
any proxies, agreements or understandings with respect to the voting of the
Company Capital Stock or the direction of the business operations or conduct
of the Company (collectively, "Company Options").
3.3 Authority; No Conflicts; Stockholder Vote.
(a) Preferred Stockholder Authority.
(i) Each Preferred Stockholder has full power and authority
to enter into this Agreement. The execution, delivery and performance of this
Agreement by such Preferred Stockholder has been duly authorized and approved
by all necessary action on the part of such Preferred Stockholder, and no
other proceedings on the part of such Preferred Stockholder are necessary to
authorize this Agreement and the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by such Preferred
Stockholder and is the legal, valid and binding obligation of such Preferred
Stockholder enforceable in accordance with its terms.
(ii) The execution, delivery, performance by such Preferred
Stockholder of this Agreement and the consummation of the Merger do not, and
will not, (i) violate or conflict with any provision of the organizational
documents of such Preferred Stockholder (if any), (ii) violate any law, rule,
regulation, order, writ, injunction, judgment or decree of any court,
governmental authority or regulatory agency, except for violations which,
individually or in the aggregate, will not have a Material Adverse Effect,
(iii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any note, bond, indenture,
lien, mortgage, lease, permit, guaranty or other agreement, instrument or
obligation to which such Preferred Stockholder is a party or by which any of
the properties of the Company may be bound, except for violations, breaches or
defaults which, individually or in the aggregate, will not have a Material
Adverse Effect, or (iv) result in the creation or imposition of any Lien on
any asset of the Company.
8
(iii) Except as set forth on Schedule 3.3(b)(iii), the
execution and delivery of this Agreement by such Preferred Stockholder do not,
and the performance by such Preferred Stockholder of this Agreement will not,
require any consent, approval, authorization or permission of, or filing with
or notification to, any governmental or regulatory authority, domestic or
foreign, or any other Person.
(b) Company Authority.
(i) The Company has full corporate power and authority to
enter into this Agreement. The execution, delivery and performance of this
Agreement by the Company has been duly authorized and approved by the
Company's Board of Directors, and, except for the filing and recordation of
appropriate merger documents as required by the DGCL, no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement and to perform the transactions contemplated hereby. This Agreement
has been duly authorized, executed and delivered by the Company and is the
legal, valid and binding obligation of the Company enforceable in accordance
with its terms.
(ii) The execution, delivery, performance by the Company of
this Agreement and the consummation of the Merger do not, and will not, (i)
violate or conflict with any provision of the Certificate of Incorporation or
By-laws of the Company, (ii) violate any law, rule, regulation, order, writ,
injunction, judgment or decree of any court, governmental authority or
regulatory agency, except for violations which, individually or in the
aggregate, will not have a Material Adverse Effect, (iii) except as set forth
in Schedule 3.3(b)(ii), result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise
to any right of termination, cancellation or acceleration) under, any note,
bond, indenture, lien, mortgage, lease, permit, guaranty or other agreement,
instrument or obligation to which the Company is a party or by which any of
its properties may be bound, except for violations, breaches or defaults
which, individually or in the aggregate, will not have a Material Adverse
Effect, or (iv) result in the creation or imposition of any Lien on any asset
of the Company.
(iii) The execution and delivery of this Agreement by the
Company do not, and the performance by the Company of this Agreement will not,
require any consent, approval, authorization or permission of, or filing with
or notification to, any governmental or regulatory authority, domestic or
foreign, or any other Person, except for the filing and recordation of
appropriate merger documents as required by the DGCL.
(c) The Board of Directors of the Company (i) has approved this
Agreement and the transactions contemplated hereby, (ii) has determined that
the terms of the Merger are in the best interests of the stockholders of the
Company, and (iii) has recommended the approval of the Merger and the adoption
of this Agreement and the consummation of the transactions contemplated hereby
to the stockholders of the Company.
(d) Pursuant to the provisions of the DGCL, the Certificate of
Incorporation of the Company, the By-laws of the Company and any other
applicable law, the only approval of holders of Company Capital Stock required
to approve the Merger and to approve and adopt this Agreement and the
transactions contemplated hereby are the approval of (i) a majority of the
outstanding shares of Company Common Stock, Series A Preferred Stock and
Series B Preferred
9
Stock voting together as a single class, (ii) a majority of the outstanding
shares of Company Common Stock voting together as a single class, (iii) a
majority of the outstanding shares of Series A Preferred Stock and Series B
Preferred Stock voting together as a single class, and (iv) a majority of the
Series B Preferred Stock voting together as a single class, and prior to the
date hereof, such transactions have been so approved.
3.4 Charter Documents. A true, complete and correct copy of the
Certificate of Incorporation, as amended, and the By-laws of the Company are
attached hereto as Schedule 3.4. The Certificate of Incorporation and By-laws
of the Company are in full force and effect. The Company is not in violation
of any provision of its Certificate of Incorporation or By-laws.
3.5 Financial Statements.
(a) True and complete copies of the following financial statements
of the Company (the "Financial Statements") are attached hereto as Schedule
3.5:
(i) unaudited balance sheets of the Company as of June 30,
2003 (the "2003 Balance Sheet"), June 30, 2002 and June 30, 2001;
(ii) unaudited statements of operations and cash flows of
the Company for the fiscal years ended June 30, 2003, June 30, 2002 and June
30, 2001; and
(iii) unaudited balance sheet of the Company as of November
30, 2003 (the "Current Balance Sheet") and the unaudited statements of
operations and cash flows of the Company for the five-month period ended
November 30, 2003 (together with the Current Balance Sheet, the "Current
Financial Statements"),
each certified by the Chief Executive Officer of the Company.
(b) The Financial Statements were prepared in accordance with
GAAP. The Financial Statements were prepared on the basis of the books and
records of the Company and present fairly, in all material respects, the
financial position of the Company as of the dates thereof and the results of
its operations and cash flow for each of the periods then ended in conformity
with GAAP (applied as aforesaid).
3.6 Absence of Undisclosed Liabilities. Except as disclosed on Schedule
3.6, the Company does not have any liability or obligation of any nature
(whether absolute, accrued, contingent or otherwise).
3.7 Operations and Obligations.
(a) Except as set forth in Schedule 3.7(a), since November 30,
2003,
(i) there has been no event or condition that has had or
reasonably could be expected to have a Material Adverse Effect on the Company;
and
10
(ii) there has been no impairment, damage, destruction, loss
or claim, whether or not covered by insurance, or condemnation or other taking
adversely affecting in any respect any of the Company's material assets.
(b) Except as set forth in Schedule 3.7(b), since June 30, 2003,
the Company has conducted its business only in the ordinary course and
consistent with past practice. Without limiting the generality of the
foregoing, since June 30, 2003, except as set forth in such Schedule, the
Company has not:
(i) issued, delivered or agreed (conditionally or
unconditionally) to issue or deliver, or granted any option, warrant or other
right to purchase, any of its capital stock or other equity interest or any
security convertible into its capital stock or other equity interest;
(ii) other than in the ordinary course of business
consistent with past practice, issued, delivered or agreed (conditionally or
unconditionally) to issue or deliver any bonds, notes or other debt
securities, or borrowed or agreed to borrow any funds, or entered into any
lease the obligations of which, in accordance with GAAP, would be capitalized;
(iii) paid any obligation or liability (absolute or
contingent) other than current liabilities reflected on the 2003 Balance Sheet
and current liabilities incurred since June 30, 2003 in the ordinary course of
business consistent with past practice;
(iv) declared or made, or agreed to declare or make, any
payment of dividends or distributions to its stockholders or purchased or
redeemed, or agreed to purchase or redeem, any shares of Company Capital
Stock;
(v) except in the ordinary course of business consistent
with past practice, made or permitted any material amendment or termination of
any agreement to which the Company is a party and is or should be set forth on
Schedule 3.9;
(vi) undertaken or committed to undertake capital
expenditures exceeding $25,000 for any single project or related series of
projects;
(vii) sold, leased (as lessor), transferred or otherwise
disposed of, mortgaged or pledged, or imposed or suffered to be imposed any
Lien on, any of the assets reflected on the 2003 Balance Sheet or any assets
acquired by the Company after June 30, 2003, except for inventory and personal
property sold or otherwise disposed of for fair value in the ordinary course
of its business consistent with past practice and except for Permitted Liens;
(viii) canceled any debts owed to or claims held by the
Company (including the settlement of any claims or litigation) other than in
the ordinary course of its business consistent with past practice;
(ix) accelerated or delayed collection of accounts
receivable in advance of or beyond their regular due dates or the dates when
the same would have been collected except in the ordinary course of its
business consistent with past practice;
11
(x) delayed or accelerated payment of any account payable or
other liability beyond or in advance of its due date or the date when such
liability would have been paid except in the ordinary course of its business
consistent with past practice;
(xi) entered into or become committed to enter into any
other material transaction except in the ordinary course of business;
(xii) except for increases in the ordinary course of
business consistent with past practice, instituted any increase in any
compensation payable to any employee of the Company, amended any Benefit Plan
or modified any other benefits made available to any such employees;
(xiii) made any change in the accounting principles or made
any material change in accounting practices used by the Company, in each case,
from those applied in the preparation of the Financial Statements; or
(xiv) resolved or entered into any agreement or
understanding to take any action set forth in the foregoing clauses
(i)-(xiii).
(c) Except as set forth in Schedule 3.7(c), there are no accrued
and unpaid dividends or distributions with respect to the shares of Company
Capital Stock.
3.8 Properties.
(a) The Company has good and valid title to all its properties and
assets reflected on the 2003 Balance Sheet or acquired after the date thereof
except for (i) properties and assets sold or otherwise disposed of in the
ordinary course of business since the date of such 2003 Balance Sheet, (ii)
leasehold interests, in which event the Company has a valid leasehold interest
and (iii) properties and assets which individually or in the aggregate are not
material.
(b) The Company owns no real property.
3.9 Contracts. Schedule 3.9 lists any of the following not otherwise
listed and identified as such on any other Schedule:
(a) each written contract or commitment which creates an
obligation on the part of the Company in excess of $10,000;
(b) each written debt instrument, including, without limitation,
any loan agreement, line of credit, promissory note, security agreement or
other evidence of indebtedness, where the Company is a lender, borrower or
guarantor, in a principal amount in excess of $10,000;
(c) each written contract or commitment restricting the Company
from engaging in any line of business and each written contract containing any
provisions that alter the Company's contractual rights thereunder in the event
that there is a merger of or other change of control with respect to the
Company;
12
(d) each written joint venture or partnership agreement to which
the Company is a party;
(e) each written distributorship, sales agency, sales
representative, reseller or marketing, value added reseller, original
equipment manufacturing, technology transfer, source code license or other
license or other agreement containing the right to sublicense software and/or
technology, in each case, to which the Company is a party;
(f) each written agreement in excess of $10,000 to which the
Company is a party with respect to any assignment, discounting or reduction of
any receivables of the Company;
(g) each agreement, option or commitment or right with, or held
by, any third party to acquire any assets or properties, or any interest
therein, of the Company, having a value in excess of $10,000, except for
contracts for the sale of inventory, machinery or equipment in the ordinary
course of business;
(h) each written employment or consulting contract entered into by
the Company, and any other agreement between the Company and any founder or
employee; and
(i) each supply agreement that the Company could not readily
replace without a material impact on the Company.
Except as set forth on Schedule 3.9, (i) there are no oral
contracts or commitments of the types described in this Section 3.9 which
create an obligation on the part of the Company in excess of $10,000, (ii)
there are no contracts or commitments between the Company and any Affiliate,
(iii) there are no contracts, commitments or arrangements with any employee
which require the payment of any compensation upon the occurrence of any
specified contingency, (iv) there are no contracts or arrangements, except
this Agreement, which require notice to, or the consent of, any party with
respect to any of the transactions contemplated hereby, and (v) there are no
contracts or arrangements with any third party which require a penalty,
compensation or other payment by the Company due to the transactions
contemplated hereby or in the event of the termination of such contract or
arrangement on or following the Closing Date.
3.10 Absence of Default. Except as set forth in Schedule 3.10, (a) the
agreements listed on Schedules 3.9, 3.13, 3.16 and 3.22 are, and after giving
effect to the transactions contemplated hereby will be, valid, binding and in
full force and effect; (b) the Company has fulfilled and performed in all
material respects its obligations under each such agreement to the extent that
such fulfillment and performance were due on or before the date hereof (in
each case, to which the Company is a party); (c) the Company is not, and is
not alleged in writing to be, and each other party to any such agreement is
not, in default under, nor is there or is there alleged in writing to be any
basis for termination of, any such agreement; (d) no event has occurred and no
condition or state of facts exists which, with the passage of time or the
giving of notice or both, would constitute such a default or breach by the
Company or, to the best knowledge of the Company and the Designated Group, by
any such other party, and (e) the Company is not currently renegotiating any
such agreement or paying liquidated damages in lieu of performance
13
thereunder. The Company has previously delivered complete and correct copies
of all such agreements (including all amendments) to Agere.
3.11 Litigation.
(a) Except as set forth in Schedule 3.11, (i) there are no
actions, suits, arbitrations, legal or administrative proceedings or
investigations pending or, to the best knowledge of the Company and the
Designated Group, threatened against the Company; and (ii) neither the
Company, nor the assets, properties or business of the Company, is subject to
any judgment, order, writ, injunction or decree of any court, governmental
agency or arbitration tribunal. Except as set forth in Schedule 3.11, the
Company is not the plaintiff in any such proceeding nor is the Company
contemplating commencing legal action against any other Person.
(b) The Company is not a party to any suit, action, arbitration or
legal, administrative, governmental or other proceeding or the subject of any
investigation pending or, to the knowledge of the Company and the Designated
Group, threatened, which reasonably could have a Material Adverse Effect.
(c) There is no judgment, order, writ, injunction or decree of any
court, governmental agency or arbitration tribunal to which the Company is
subject which reasonably could have a Material Adverse Effect.
3.12 Compliance with Law. Except as set forth in Schedule 3.12:
(a) the Company has complied in all material respects with, and is
not in violation of, in any material respect, any law, ordinance or
governmental rule or regulation (collectively, "Laws") to which it or its
business is subject;
(b) the Company has obtained all licenses, permits, certificates
or other governmental authorizations (collectively "Authorizations") necessary
for the ownership or use of its assets and properties or the conduct of its
business other than Authorizations (i) which are ministerial in nature and
which the Company has no reason to believe would not be issued in due course
and (ii) which, the failure of the Company to possess, would not subject the
Company to penalties other than fines not to exceed $10,000 in the aggregate
("Immaterial Authorizations"); and
(c) the Company has not received notice of any violation of, and
neither the Company nor the Designated Group has knowledge of any material
violation of, any Laws to which the Company or its business is subject or any
Authorization necessary for the ownership or use of its assets and properties
or the conduct of its business (other than Immaterial Authorizations).
3.13 Intellectual Property; Software.
(a) Schedule 3.13(a) contains a list and brief description of all
Intellectual Property Rights.
14
(b) The Company owns, or is validly licensed or otherwise has the
right to use, (i) all trademarks, trade secrets, trademark rights, trade
names, trade name rights, service marks, service xxxx rights, copyrights and
other proprietary intellectual property rights and computer programs and (ii)
to the best knowledge of the Company and the Designated Group, all patents and
patent rights, which are, in each case, material to the conduct of the
business of the Company (the "Intellectual Property Rights").
(c) The Company has not interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Intellectual Property
Rights or other proprietary information of any other Person. The Company has
not received any charge, complaint, claim, demand or notice alleging any such
interference, infringement, misappropriation or violation (including any claim
that the Company must license or refrain from using any Intellectual Property
Rights or other proprietary information of any other Person) which has not
been settled or otherwise fully resolved. To the best knowledge of the Company
and the Designated Group, no other Person has interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Intellectual Property
Rights or other proprietary information of the Company.
(d) Each employee, agent, consultant, officer, director or
contractor who has contributed to or participated in the creation or
development of any copyrightable, patentable or trade secret material on
behalf of the Company or any predecessor in interest thereto either: (i) is a
party to a "work-for-hire" agreement under which the Company is deemed to be
the original owner/author of all property rights therein; or (ii) has executed
an assignment or an agreement to assign in favor of the Company (or such
predecessor in interest, as applicable) all right, title and interest in such
material, a copy of which assignment or agreement to assign has been made
available to Agere.
(e) Except as set forth on Schedule 3.13(e), the Company has not
sold, assigned, transferred, licensed or sublicensed, or entered into any
agreement to sell, assign, transfer or sublicense, its Intellectual Property
other than, in connection with the Company's assets, in the ordinary course of
business, permitting its customers to use any Intellectual Property embedded
in its products.
3.14 Tax Matters.
(a) Except as set forth on Schedule 3.14, (i) the Company has
filed all Tax Returns required to be filed; (ii) all such Tax Returns are
complete and accurate and all Taxes shown to be due on such Tax Returns have
been timely paid; (iii) all Taxes (whether or not shown on any Tax Return)
owed by the Company have been timely paid; (iv) the Company has not waived or
been requested to waive any statute of limitations in respect of Taxes; (v)
the Tax Returns referred to in clause (i) have been examined by the Internal
Revenue Service (the "IRS") or the appropriate state, local or foreign taxing
authority or the period for assessment of the Taxes in respect of which such
Tax Returns were required to be filed has expired; (vi) there is no action,
suit, investigation, audit, claim or assessment pending or proposed or
threatened with respect to Taxes of the Company; (vii) all deficiencies
asserted or assessments made as a result of any examination of the Tax Returns
referred to in clause (i) have been paid in full; (viii) all Tax indemnity
arrangements, if any, will terminate prior to Closing and the Surviving Entity
will not have any liability thereunder on or after Closing; (ix) there are no
Liens for Taxes upon the
15
assets of the Company except Liens relating to current Taxes not yet due; (x)
all Taxes which the Company is required by law to withhold or to collect for
payment have been duly withheld and collected, and have been paid or accrued,
reserved against and entered on the books of the Company in accordance with
GAAP; and (xi) except as may be limited as a result of the transactions
contemplated by this Agreement, none of the net operating carryforwards
("NOLs") of the Company constitute separate return limitation year ("SRLY") or
consolidated return change of ownership ("CRCO") losses immediately prior to
the Closing, none of the NOLs will be limited immediately prior to the Closing
by Section 382 or 384 of the Code and the regulations thereunder, and none of
the NOLs constitutes "dual consolidated losses" immediately prior to the
Closing (as defined in Section 1503 of the Code and the regulations
thereunder).
(b) Except as set forth in Schedule 3.14(b), no stock transfer
Taxes, sales Taxes, use Taxes, real estate transfer Taxes, or other similar
Taxes will be imposed on the transactions contemplated by this Agreement.
(c) The Company (i) has not agreed to and is not required to make
any adjustment pursuant to Section 481(a) of the Code due to changes in method
of accounting or otherwise prior to the Effective Time; (ii) has no knowledge
that the IRS has proposed any such adjustment or change in accounting method
with respect to the Company; and (iii) does not have any application pending
with the IRS or any other tax authority requesting permission for any change
in accounting method.
(d) The Company has never been and is not a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code.
3.15 Employee Benefit Plans.
(a) Schedule 3.15 contains a list and brief description of all
"employee pension benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) (the "Pension
Plans"), "employee welfare benefit plans" (as defined in Section 3(1) of
ERISA) (the "Welfare Plans") and all other Benefit Plans (together with the
Pension Plans and Welfare Plans, the "Plans") maintained, or contributed to,
by the Company or any Person that, together with the Company, is treated as a
single employer under Section 414(b), (c), (m) or (o) of the Code (the Company
and each such other Person, a "Commonly Controlled Entity") for the benefit of
any current or any former employees, officers or directors of the Company. The
Company has made available to Agere true, complete and correct copies of (i)
each Plan (or, in the case of any unwritten Benefit Plans, descriptions
thereof), (ii) the most recent annual report on Form 5500 filed with the IRS
with respect to each Plan (if any such report was required), (iii) the most
recent summary plan description for each Plan for which such summary plan
description is required, (iv) each trust agreement and group annuity contract
relating to any Plan and (v) all correspondence with the IRS or the United
States Department of Labor relating to any outstanding controversy or audit.
Except as would not have a Material Adverse Effect on the Company, (i) each
Plan has been administered in accordance with its terms, and (ii) the Company
and all Plans are in compliance with applicable provisions of ERISA and the
Code.
16
(b) All Pension Plans that are intended to be qualified under
Section 401(a) of the Code have been the subject of determination letters from
the IRS to the effect that such Pension Plans are so qualified and the trusts
thereunder are exempt from Federal income taxes under Section 501(a) of the
Code, and no such determination letter has been revoked nor has any event
occurred since the date of such Plan's most recent determination letter that
would adversely affect its qualification or materially increase its costs.
(c) Neither the Company, nor any Commonly Controlled Entity, has
maintained, contributed to or been obligated to contribute to any Plan that is
subject to Title IV of ERISA.
(d) The Company does not have any liability or obligation under
any Welfare Plan to provide life insurance or medical benefits after
termination of employment to any employee or dependent other than as required
by Part 6 of Title I of ERISA.
(e) Except as provided by this Agreement, no employee of the
Company will be entitled to any additional compensation or benefits or any
acceleration of the time of payment or vesting of any compensation or benefits
under any Plan as a result of the transactions contemplated by this Agreement.
(f) The deduction of any amount payable pursuant to the terms of
the Plans will not be subject to disallowance under Section 162 (m) of the
Code.
(g) All restricted stock purchase agreements relating to the
issuance of Company Capital Stock are for the purchase of Common Stock only
and do not entitle any Person to receive the Agere Shares or any other
consideration in connection with the transactions contemplated by this
Agreement.
3.16 Executive Employees.
(a) Schedule 3.16 lists the names, titles and current annual
salary rates of, and bonuses paid or payable to, all present officers and
employees of the Company whose 2003 annual base salary exceeded $75,000
("Executive Employees").
(b) Except as set forth in Schedules 3.15 or 3.16, the Company
does not have any employment agreement with, or maintain any employee benefit
plan (within the meaning of Section 3(3) of ERISA) with respect to, any of its
Executive Employees. There are no agreements with respect to Executive
Employees which are subject to Section 280G of the Code or which would
obligate the Company to make any payment or provide any benefit that could be
subject to tax under Section 4999 of the Code.
3.17 Employees. (a) The Company has complied in all material respects
with all applicable laws, rules and regulations respecting employment and
employment practices, terms and conditions of employment, wages and hours, and
the Company is not liable for any arrears of wages or any taxes or penalties
for failure to comply with any such laws, rules or regulations; (b) the
Company believes that the Company's relations with its employees are
satisfactory; (c) there are no controversies pending or, to the best knowledge
of the Company and the Designated Group, threatened between the Company and
any of its employees, which
17
controversies have or could have a Material Adverse Effect; (d) the Company is
not a party to any collective bargaining agreement or other labor union
contract applicable to persons employed by the Company, nor, to the best
knowledge of the Company and the Designated Group, are there any activities or
proceedings of any labor union to organize any such employees; (e) there are
no unfair labor practice complaints pending against the Company before the
National Labor Relations Board or any current union representation questions
involving employees of the Company; (f) there is no strike, slowdown, work
stoppage or lockout existing, or, to the best knowledge of the Company and the
Designated Group, threatened, by or with respect to any employees of the
Company; (g) no charges are pending before the Equal Employment Opportunity
Commission or any state, local or foreign agency responsible for the
prevention of unlawful employment practices with respect to the Company; (h)
there are no claims pending against the Company before any workers'
compensation board; and (i) the Company has not received notice that any
federal, state, local or foreign agency responsible for the enforcement of
labor or employment laws intends to conduct an investigation of or relating to
the Company and, to the best knowledge of the Company and the Designated
Group, no such investigation is in progress.
3.18 Environmental Laws. The Company has not received any notice or
claim (and is not aware of any facts that would form a reasonable basis for
any claim), or entered into any negotiations or agreements with any other
Person, and, to the best knowledge of the Company and the Designated Group,
the Company is not the subject of any investigation by any governmental or
regulatory authority, domestic or foreign, relating to any material or
potentially material liability or remedial action under any Environmental
Laws. There are no pending or, to the knowledge of the Company and the
Designated Group, threatened, actions, suits or proceedings against the
Company or any of its properties, assets or operations asserting any such
material liability or seeking any material remedial action in connection with
any Environmental Laws.
3.19 Bank Accounts, Letters of Credit and Powers of Attorney. Schedule
3.19 lists (a) all bank accounts, lock boxes and safe deposit boxes relating
to the business and operations of the Company (including the name of the bank
or other institution where such account or box is located and the name of each
authorized signatory thereto), (b) all outstanding letters of credit issued by
financial institutions for the account of the Company (setting forth, in each
case, the financial institution issuing such letter of credit, the maximum
amount available under such letter of credit, the terms (including the
expiration date) of such letter of credit and the party or parties in whose
favor such letter of credit was issued), and (c) the name and address of each
Person who has a power of attorney to act on behalf of the Company. The
Company has heretofore delivered to Agere true, correct and complete copies of
each letter of credit and each power of attorney described on Schedule 3.19.
3.20 Subsidiaries. The Company has no Subsidiaries.
3.21 Insurance. Schedule 3.21 sets forth a list and brief description
(including nature of coverage, limits, deductibles, premiums and the loss
experience with respect to each type of coverage) of all policies of insurance
maintained, owned or held by the Company during the period from its inception
up to and including the date hereof. The Company has complied in all material
respects with each such insurance policy to which it is a party and has not
failed to give
18
any notice or present any claim thereunder in a due and timely manner. Except
as disclosed in Schedule 3.21, the full policy limits (subject to deductibles
provided in such policies) are available and unimpaired under each such policy
and, to the best knowledge of the Company and the Designated Group, no insurer
under any of such policies has a basis to void such policy on grounds of
non-disclosure on the part of the Company thereunder. Each such policy is in
full force and effect and will not in any way be affected by or terminate or
lapse by reason of the transactions contemplated by this Agreement.
3.22 Leases. Schedule 3.22 lists all outstanding leases, both capital
and operating, and licenses, pursuant to which the Company has (i) obtained
the right to use or occupy any real or personal property, or (ii) granted to
any other Person the right to use any property described on Schedule 3.23.
3.23 Assets.
(a) Schedule 3.23 lists each vehicle and material item of
machinery, equipment, furniture or other personal property owned by the
Company having an original cost of $10,000 or more.
(b) Except as set forth in Schedule 3.23(b), the assets and
properties owned or leased by the Company constitute all the material assets
and properties used by the Company in the operation of its business (including
all books, records, computers and computer programs and data processing
systems) and are in good and serviceable condition (subject, in each case, to
normal wear and tear and obsolescence and except for assets the book value of
which does not exceed $10,000 in the aggregate) and are suitable for the uses
for which intended.
3.24 Minute Books. The minute books of the Company made available to
Agere contain a complete and accurate summary of all meetings of directors and
stockholders or actions by written resolutions since the time of incorporation
of the Company through the date of this Agreement, and reflect all
transactions referred to in such minutes and resolutions accurately, except
for omissions which are not material.
3.25 Financial Projections. The Company has made available to Agere
certain financial projections with respect to the Company's business which
projections were prepared by the Company based upon the assumptions reflected
therein. The Company does not make any representation or warranty regarding
the accuracy of such projections or as to whether such projections will be
achieved or otherwise, other than that such projections were prepared in good
faith and are based on assumptions believed by it to be reasonable and
accurate.
3.26 Reorganization. The Company has not taken any action or failed to
take any action which action or failure would reasonably be expected to
jeopardize the qualification of the transactions contemplated hereby as a
reorganization within the meaning of Section 368(a) of the Code.
3.27 Complete Copies of Materials. The Company has delivered or made
available true and complete copies of each document that has been requested by
Agere or its counsel in connection with their legal and accounting review of
the Company.
19
3.28 Disclosure. None of the representations or warranties of the
Company contained herein (including the information contained in the Schedules
referred to in this Section 3) and none of the other information or documents
furnished or to be furnished to Agere by the Company or pursuant to the terms
of this Agreement, is false or misleading in any material respect or omits to
state a fact herein or therein necessary to make the statements herein or
therein not misleading in any material respect. There is no fact known to the
Company or the Designated Group which adversely affects or in the future is
likely to adversely affect the assets or business of the Company in any
material respect which has not been set forth or referred to in this Agreement
(including the Schedules hereto) or in other written materials previously
delivered to Agere in connection with the transactions contemplated under this
Agreement.
3.29 Information in Agere Registration Statement. None of the
information to be supplied by the Company or any Selling Stockholder
specifically for inclusion or incorporation by reference in the registration
statement on Form S-3 or such other form as may be appropriate to be filed
with the Securities and Exchange Commission (the "SEC") by Agere under the
Securities Act of 1933 (together with the rules and regulations thereunder,
the "Securities Act"), for the purpose of registering the public resale by the
Selling Stockholders of the Agere Shares (together with any amendments or
supplements thereto, whether prior to or after the effective date thereof, the
"Registration Statement") will, at the time the Registration Statement is
filed with the SEC or at the time the Registration Statement 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 necessary to
maker the statements therein, in light of the circumstances under which they
were made, not misleading.
3.30 Investment Matters.
(a) Each Preferred Stockholder agrees not to engage in any hedging
transaction with regard to the Agere Shares unless in compliance with the
Securities Act.
(b) Each Preferred Stockholder acknowledges and agrees that the
Agere Shares are being offered and sold to the Preferred Stockholders in
reliance on specific exemptions from the registration requirements of the
United States federal and state securities Laws and that Agere is relying upon
the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of Agere set forth herein in order to
determine the applicability of such exemptions and the suitability of the
Preferred Stockholders to acquire the Agere Shares.
(c) Each Preferred Stockholder has received and has had an
opportunity to review Agere's Annual Report on Form 10-K for the fiscal years
ended September 30, 2003 and September 30, 2002, Agere's Annual Report to
Stockholders for fiscal 2002, Agere's Proxy Statement for the 2002 annual
meeting of stockholders, and each Preferred Stockholder has had a reasonable
opportunity to ask questions of and receive answers from Agere concerning
Agere, and to obtain any additional information reasonably necessary to verify
the accuracy of the information furnished to the Preferred Stockholders
concerning Agere and all such questions, if any, have been answered to the
full satisfaction of the Preferred Stockholders.
20
(d) Each Preferred Stockholder acknowledges that no
representations or warranties have been made with respect to the Agere Shares
to such Preferred Stockholder by Agere or any agent, employee or Affiliate of
Agere other than those contained in this Agreement, and in entering into the
transactions contemplated hereunder such Preferred Stockholder is not relying
upon any information, other than that referred to in the foregoing paragraph,
contained in this Agreement, and the results of the independent investigations
by such Preferred Stockholder and its representatives; provided that each
Preferred Stockholder acknowledges and agrees that the only representations or
warranties that Agere has made with respect to such information are as set
forth in the Agreement.
3.31 Private Placement.
(a) Each Preferred Stockholder acknowledges that each certificate
representing the Agere Shares delivered to or on behalf of such Preferred
Stockholder and the Escrow Agent shall include the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE (THE
"SHARES") HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933 (THE "ACT") OR WITH ANY
SECURITIES REGULATORY AUTHORITY OF ANY STATE OF THE
UNITED STATES OR OTHER JURISDICTION. NEITHER THE
SHARES NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION, EXCEPT PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, SUCH
REGISTRATION REQUIREMENTS. BY THE ACQUISITION HEREOF,
THE HOLDER AGREES THAT SUCH HOLDER WILL GIVE EACH
PERSON TO WHOM THE SHARES ARE TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN THE
CASE OF ANY TRANSFER OR OTHER DISPOSITION MADE
OTHERWISE THAN PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT, THE HOLDER HEREOF SHALL BE
REQUIRED TO PROVIDE TO THE COMPANY, PRIOR TO SUCH
TRANSFER, AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH TRANSFER IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION UNDER THE ACT AND IS IN
COMPLIANCE WITH ALL APPLICABLE STATE SECURITIES LAWS.
(b) Each Preferred Stockholder understands that the Agere Shares
are being issued to such Preferred Stockholder and the Escrow Agent in
reliance on an exemption from the
21
registration requirements of the Securities Act for an offer and sale of
securities that does not involve a public offering and have not been
registered under the Securities Act or with any securities regulatory
authority of any state of the United States or other jurisdiction and,
therefore, that such Agere Shares (and all securities issued in exchange
therefor or in substitution thereof) cannot be resold in the absence of such
registration except pursuant to an exemption from, or in a transaction not
subject to, such registration requirements. Each Preferred Stockholder agrees
that Agere shall not transfer any of the Agere Shares except in a transaction
registered under the Securities Act or unless such Preferred Stockholder shall
have delivered to Agere an opinion of United States counsel, which counsel and
opinion shall be reasonably satisfactory to Agere, that such transfer is being
effected in accordance with an available exemption from, or in a transaction
not subject to, the registration requirements of the Securities Act.
(c) Each Preferred Stockholder is either an "accredited investor"
(as such term is defined in Rule 501 of Regulation D under the Securities Act)
or, immediately prior to receipt of any information regarding Agere, had such
knowledge and experience (alone or with a "purchaser representative" (as such
term is defined in Rule 501 of Regulation D under the Securities Act)) in
financial and business matters as to be able to evaluate the merits and risks
of an investment in Agere.
(d) Each Preferred Stockholder will acquire the Agere Shares for
its own account and not with a view to any distribution (within the meaning of
the Securities Act) thereof or with any present intention of offering or
selling any of the Agere Shares in a transaction that would violate the
Securities Act or the securities Laws of any state of the United States or any
other applicable jurisdiction.
(e) Each Preferred Stockholder acknowledges and agrees that any
resale or other transfer, or attempted resale or other transfer, which Agere
determines in good faith was made other than in compliance with the
restrictions stated in this Section 3.31 shall not be recognized by Agere in
respect of the Agere Shares, and that Agere may deliver a corresponding
stop-transfer order to Agere's transfer agent to that effect.
4. Representations and Warranties of Agere. Each of Agere and
Acquisition represents and warrants to the Company as follows:
4.1 Organization. Agere is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to enter into and perform this
Agreement and the transactions contemplated hereby to be performed by it.
Acquisition is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of Delaware and has all
requisite power and authority to enter into and perform this Agreement and the
transactions contemplated hereby to be performed by it.
4.2 Capitalization. The authorized capital stock of Agere consists of
(i) 5,000,000,000 shares of Class A common stock, par value $.01 per share, of
which 791,038,216 shares are issued and outstanding as of December 1, 2003,
(ii) 5,000,000,000 shares of Class B common stock, par value $.01 per share,
of which 907,994,888 shares are issued and
22
outstanding as of December 1, 2003, and (iii) 250,000,000 shares of preferred
stock, par value $1.00 per share, of which no shares are issued and
outstanding. Except as disclosed in public filings made with the SEC, as of
the date of this Agreement, no bonds, debentures, notes or other indebtedness
of Agere having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which stockholders of
Agere may vote are issued or outstanding. All outstanding shares of capital
stock of Agere are, and all shares which may be issued in connection with the
transactions contemplated hereby will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights.
4.3 Authority; No Conflicts.
(a) Agere has full corporate power and authority to execute,
deliver and perform this Agreement. Acquisition has full limited liability
company power and authority to execute, deliver and perform this Agreement.
The execution, delivery and performance of this Agreement by each of Agere and
Acquisition has been duly authorized and approved by all necessary corporate
or limited liability company, as the case may be, action, and, except for the
filing of appropriate merger documents as required by the DLLCA, no other
corporate or limited liability company, as the case may be, proceedings are
necessary to authorize this Agreement and to perform the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by each of Agere and Acquisition and is the legal, valid and binding
obligation of each of Agere and Acquisition, enforceable in accordance with
its terms.
(b) The execution, delivery, performance by each of Agere and
Acquisition of this Agreement and the consummation of the transactions
contemplated hereby do not, and will not, (i) violate or conflict with any
provision of the Certificate of Incorporation or By-laws of Agere, or the
Certificate of Formation or Limited Liability Company Agreement of
Acquisition, (ii) violate any law, rule, regulation, order, writ, injunction,
judgement or decree of any court, governmental authority, or regulatory
agency, except for violations which, individually or in the aggregate, will
not have a Material Adverse Effect on Agere and its Subsidiaries taken as a
whole, or (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any note, bond,
indenture, lien, mortgage, lease, permit, guaranty or other agreement,
instrument or obligation, oral or written, to which Agere or Acquisition is a
party or by which any of the properties of Agere or Acquisition may be bound,
except for violations, breaches or defaults which, individually or in the
aggregate, will not have a Material Adverse Effect on Agere and its
Subsidiaries, taken as a whole, or Acquisition.
(c) The execution and delivery of this Agreement by each of Agere
and Acquisition do not, and the performance by each of Agere and Acquisition
of this Agreement will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority, domestic or foreign, or any other Person except for (i) the filing
and recordation of appropriate merger documents as required by the DLLCA; (ii)
any such consent, approval, authorization, permission, notice or filing which
is required under the Securities Act, the Securities Exchange Act of 1934
(together with the rules and regulations promulgated thereunder, the "Exchange
Act") and applicable state securities Laws; and (iii) any such consent,
approval, authorization, permission, notice or filing which if not
23
obtained or made would not have a Material Adverse Effect on Agere and its
Subsidiaries taken as a whole.
4.4 Litigation.
(a) Neither Agere nor Acquisition is a party to any suit, action,
arbitration or legal, administrative, governmental or other proceeding or
investigation pending or, to its knowledge threatened, which reasonably could
adversely affect or restrict its ability to consummate the transactions
contemplated by this Agreement or to perform its obligations hereunder.
(b) There is no judgment, order, writ, injunction or decree of any
court, governmental agency or arbitration tribunal to which Agere or
Acquisition is subject which might adversely affect or restrict its ability to
consummate the transactions contemplated by this Agreement or to perform its
obligations hereunder.
4.5 Information Supplied. None of the information supplied or to be
supplied by Agere specifically for inclusion or incorporation by reference in
the Registration Statement will, at the time the Registration Statement
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. The Registration
Statement will comply as to form in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations thereunder, except that no representation or warranty is made by
Agere with respect to statements made or incorporated by reference therein
based on information supplied by the Company or any Selling Stockholder
specifically for inclusion or incorporation by reference in the Registration
Statement.
4.6 Reorganization. Neither Agere nor any of its Subsidiaries has
taken any action or failed to take any action which action or failure would
reasonably be expected to jeopardize the qualification of the transactions
contemplated hereby as a reorganization within the meaning of Section 368(a)
of the Code.
5. Covenants.
5.1 Notification of Certain Matters. The Stockholders' Representative
promptly shall advise Agere, and Agere shall give prompt notice to the
Stockholders' Representative, of (a) the occurrence, or non-occurrence, of any
event which would be likely to cause (i) any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
or (ii) any covenant, condition or agreement contained in this Agreement not
to be complied with or satisfied; and (b) any failure of the Company or Agere,
as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided that the
delivery of any notice pursuant to this Section 5.1 shall not limit or
otherwise affect the remedies available to the party receiving such notice.
5.2 Access to Information. After the Closing Date and until the sixth
annual anniversary thereof, Agere shall cause the Surviving Entity to afford
to the Stockholders' Representative and its authorized accountants, counsel
and other designated representatives (collectively, the "Representatives")
reasonable access without charge (including using
24
reasonable efforts to give access to the person on firms possessing
information) and duplicating rights (at the expense of the Stockholders'
Representative) during normal business hours to all administrative records,
books, contracts and instruments of the Company in existence on the Closing
Date (collectively, the "Documents"), which are within Agere's or the
Surviving Entity's possession or control, insofar as such access is reasonably
required by the Stockholders' Representative; provided, that solely with
respect to Tax Returns and work papers related thereto, Agere shall be
required to retain and afford the Representatives these rights until the
expiration of the applicable statute of limitations (including any extensions,
whether automatic or voluntary) to the extent such documents are necessary to
permit the Preferred Stockholders to file or defend their Tax Returns. The
Documents may be requested under this Section 5.2 for audit, accounting,
claim, litigation and tax purposes, as well as for purposes of fulfilling
disclosure and reporting obligations. The Stockholders' Representative shall
promptly notify Agere when the Preferred Stockholders no longer require access
to the Documents. Except as expressly set forth herein, nothing contained
herein shall restrict the ability of Agere and the Surviving Entity to utilize
its standard document retention policies with respect to the Documents.
5.3 Actions by the Parties. Upon the terms and subject to the conditions
set forth in this Agreement, each of the parties hereto will use its
reasonable best efforts to take or cause to be taken all actions, and to do,
or cause to be done, all things necessary, proper or advisable under
applicable law and regulations to consummate and make effective in the most
expeditious manner practicable, the transactions contemplated by this
Agreement including (i) the obtaining of all necessary actions and
non-actions, waivers and consents, if any, from any governmental agency or
authority and the making of all necessary registrations and filings and the
taking of all reasonable steps as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by, any governmental agency
or authority; (ii) the obtaining of all necessary consents, approvals or
waivers from any other Person; (iii) the defending of any claim,
investigation, action, suit or other legal proceeding, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby; and (iv) the execution of additional
instruments necessary to consummate the transactions contemplated by this
Agreement, provided, that nothing contained herein shall expand or be deemed
to expand Agere's obligations under Section 7.1. Each party will promptly
consult with the other and provide necessary information (including copies
thereof) with respect to all filings made by such party with the any agency or
authority in connection with this Agreement and the transactions contemplated
hereby.
6. Conditions Precedent.
6.1 Conditions Precedent to Each Party's Obligation to Close. The
respective obligations of each party hereto to effect the transactions
contemplated by this Agreement shall be subject to the fulfillment or
satisfaction, prior to or on the Closing Date, of the following conditions:
(a) Stockholder and Member Approval. The Merger shall have been
duly approved (i) by the requisite vote of the outstanding shares of Company
Capital Stock entitled to vote thereon in accordance with the DGCL and the
Certificate of Incorporation and By-laws of
25
the Company and (ii) by the Member in accordance with the DLLCA and the
organizational documents of Acquisition.
(b) Approvals. All authorizations, consents, orders, declarations
or approvals of, or filings with, or terminations or expirations of waiting
periods imposed by, any governmental or regulatory authority, domestic or
foreign, which the failure to obtain, make or occur would have the effect of
making the Closing or any of the transactions contemplated hereby illegal or
would have a Material Adverse Effect on Agere or Acquisition (as the Surviving
Entity), assuming the Merger had taken place, shall have been obtained, made
or occurred.
(c) No Litigation. No judgment, order, decree, statute, law,
ordinance, rule or regulation, entered, enacted, promulgated, enforced or
issued by any court or other governmental entity of competent jurisdiction or
other legal restraint or prohibition shall be in effect with respect to the
transactions contemplated hereby, and there shall not be pending any suit,
action or proceeding by any governmental entity, (i) preventing the Merger or
(ii) which otherwise is reasonably likely to have a Material Adverse Effect on
Agere or Acquisition (as the Surviving Entity).
(d) Escrow Agreement. Each of Agere, the Company, the Escrow
Agent, the Stockholders' Representative and the Depositors shall have entered
into the Escrow Agreement substantially in the form of Exhibit B hereto (the
"Escrow Agreement").
6.2 Conditions Precedent to Obligations of Agere and Acquisition. All
obligations of Agere and Acquisition under this Agreement are subject to the
fulfillment or satisfaction, prior to or on the Closing Date, of each of the
following conditions precedent:
(a) Good Standing. The Company shall have delivered a certificate
of good standing of the Company issued as of a recent date by the Secretary of
State of the State of Delaware.
(b) Company Certificate. Agere and Acquisition shall have received
a certificate of the Company, dated the Closing Date, in form and substance
reasonably satisfactory to Agere, certifying (A) that a true and correct copy
of the Certificate of Incorporation of the Company is attached hereto as
Schedule 3.4 and that there have been no amendments to the Certificate of
Incorporation of the Company since the date of the certificate specified in
clause (a) above, (B) that a true and correct copy of the By-laws of the
Company is attached hereto as Schedule 3.4, (C) that a true and correct copy
of the resolutions of the Board of Directors of the Company authorizing the
execution, delivery and performance of this Agreement, the Merger and the
transactions contemplated hereby is attached and (D) as to incumbency and
signature of the officer of the Company executing this Agreement.
(c) Preferred Stockholder Certificates. Agere and Acquisition
shall have received one or more certificates of the Preferred Stockholders,
dated the Closing Date, in form and substance reasonably satisfactory to
Agere, certifying (A) that all stockholder actions necessary to approve the
Merger and the other transactions contemplated hereby, including the
allocation of the Agere Shares as set forth herein, have been duly completed
and (B) as to the
26
incumbency and signature of each officer of such Preferred Stockholder
executing this Agreement.
(d) Director Letters. Each member of the Board of Directors of the
Company, other than Xxxxxxx Xxxxxxxxx, shall have delivered to Agere and
Acquisition letters, reasonably satisfactory to Agere and Acquisition, (i)
modifying the Indemnity Agreement between such person and the Company and (ii)
waiving any rights under the Certificate of Incorporation or By-laws of the
Company or any other agreement of the Company for indemnification with respect
to the transactions contemplated herein.
(e) Indemnity Agreement. The Preferred Stockholders shall have
entered into the Indemnity Agreement in the form of Exhibit C hereto (the
"Indemnity Agreement").
(f) Company Stock Options; Stock Plan. The Company shall have
delivered evidence satisfactory to Agere and Acquisition that upon the Closing
(i) all outstanding options to purchase shares of Common Stock, whether or not
exercisable (each, a "Common Stock Option"), shall have been either exercised
or duly terminated in accordance with their respective terms, and (ii) all
outstanding plans to issue Common Stock Options shall have been duly canceled
by the Company.
(g) Warrants. The Company shall have delivered evidence
satisfactory to Agere and Acquisition that upon the Closing all of the
Warrants shall have been duly exercised or terminated in accordance with their
terms or shall have been cancelled by the holders thereof.
(h) Real Property Certificate. The Company shall have delivered to
Agere and Acquisition a certificate certifying that the Company has never been
and is not a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code pursuant to Treas. Reg. Sec.
1.897-2(h) and Treas. Reg. Sec. 1.1445-2(c)(3)(i) at the Closing.
(i) Non-Competition and Non-Disclosure Agreements. Each of the
persons on Schedule 6.2(i) shall have entered into Non-Competition and
Non-Disclosure Agreements with the Surviving Entity, each substantially in the
form of Exhibit D hereto, and such agreements shall be in full force and
effect.
(j) Secured Notes. The Company shall have delivered evidence
satisfactory to Agere that the secured notes have been duly converted by the
holders thereof or extinguished and UCC termination statements have been filed
(or prepared for filing) duly terminating the security interests for such
secured notes.
(k) Terminated Agreements. The Company shall have delivered
evidence satisfactory to Agere that the following agreements have been
terminated: (i) the security agreements relating to the secured notes
reference in Section 6.2(j); (ii) the Amended and Restated Investor Rights
Agreement; (iii) the Amended and Restated Right of First Refusal and Co-Sale
Agreement; (iv) the Amended and Restated Voting Agreement; and (v) each of the
items identified on Schedule 3.9(h) or any other Schedule and identified as
being responsive to Section 3.9(h) other than the items identified on Schedule
6.2(k).
27
(l) Consents. The Company shall have delivered to Agere all
consents, waivers, approvals, filings and registrations obtained by the
Company with respect to the consummation of the transactions contemplated by
this Agreement.
(m) Employee Agreements. The Company shall have delivered to Agere
executed employment agreements and invention assignment agreements from each
Person who is an employee of the Company on the date hereof.
6.3 Conditions Precedent to Obligations of the Company. All obligations
of the Company under this Agreement are subject to the fulfillment or
satisfaction, prior to or on the Closing Date, of each of the following
conditions precedent:
(a) Good Standing. Agere and Acquisition shall have delivered a
certificate of good standing of Agere and Acquisition, respectively, issued as
of a recent date by the Secretary of State of the State of Delaware.
(b) Officer's Certificate. The Company shall have received a
certificate of an officer of Agere and Acquisition, dated the Closing Date, in
form and substance reasonably satisfactory to the Company, certifying (A) that
a true and correct copy of the Certificate of Incorporation or Certificate of
Formation, respectively, is attached and that there have been no amendments to
such Certificate since the date of the respective certificate specified in
clause (a) above, (B) that a true and correct copy of the By-laws or Limited
Liability Company Agreement, respectively, is attached and (C) as to the
incumbency and signatures of the officers (or other authorized persons)
executing this Agreement on behalf Agere and Acquisition, respectively.
(c) Retention Plan. Agere shall have entered into the employee
bonus retention plan letter agreement in substantially the form of Exhibit E
hereto.
7. Certain Agreements.
7.1 Registration Rights.
(a) The Agere Shares to be issued in connection with this
Agreement will be issued in a transaction exempt from registration under the
Securities Act by reason of Section 4(2) thereof. Agere shall use its
reasonable efforts to prepare, file and cause to become effective, as promptly
as reasonably practicable after Agere shall have received all relevant
information to be provided by the Company and each stockholder wishing to
register such Agere Shares (each a "Selling Stockholder" and collectively the
"Selling Stockholders") in connection with such filing, but in any event not
later than 90 days following the receipt of all such information, a
Registration Statement covering the public resale of the Agere Shares, and
Agere shall use its reasonable efforts to keep the Registration Statement
effective until the first anniversary of the Closing Date; provided, that
Agere may delay such filing beyond such 90-day period, upon notice to the
Selling Stockholders, if such filing would require the distribution of
non-public information at such time prior to Agere being prepared to
distribute such information, but in no event shall such delay be greater than
an additional 30 days. Agere will notify the Selling Stockholders of the
Registration Statement becoming effective within five business days of such
event. Any such registration shall be subject to the customary terms and
conditions used in connection with resale prospectuses; provided that if the
Agere determines that sales under the
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Registration Statement would require disclosure of non-public information
material to Agere at a time when Agere desires not to disclose such
information, Agere may, upon notice to the Selling Stockholders, suspend on
one or more occasions and for a period not to exceed 30 consecutive days at
any one time and 120 days in the aggregate the right of the Selling
Stockholders to effect resales, pursuant to such Registration Statement, of
the Agere Shares issued in connection with this Agreement, and Agere agrees to
promptly notify the Selling Stockholders prior to the expiration of such
period of the date on which the Selling Stockholders may again effect resales
under the Registration Statement. All fees, disbursements and out-of-pocket
expenses and costs incurred by Agere in connection with the preparation and
filing of the Registration Statement and in complying with applicable
securities and blue sky laws (including, without limitation, all attorneys'
fees of the Surviving Entity) shall be borne by Agere. The Selling
Stockholders shall bear the cost of underwriting and/or brokerage discounts,
fees and commissions, if any, applicable to the registration of the Agere
Shares and the fees and expenses of its counsel.
(b) Each party hereto agrees, subject to applicable laws relating
to the exchange of information, promptly to furnish the other parties hereto
with copies of written communications received by such party, or any of its
Subsidiaries, affiliates or associates (as such terms are defined in Rule
12b-2 under the Exchange Act), from, or delivered by any of the foregoing to,
any governmental or regulatory authority, domestic or foreign, relating to or
in respect of the transactions contemplated under this Agreement.
(c) Each Preferred Stockholder agrees not to engage in any hedging
transactions with regard to the Agere Shares other than in compliance with the
Securities Act.
7.2 Stock Exchange Listing. Agere shall use all reasonable best
efforts to list the Agere Shares on the NYSE, upon official notice of issuance.
7.3 Tax Returns. The Preferred Stockholders shall prepare or cause to
be prepared and file or cause to be filed, in each case, as promptly as
practicable, all Tax Returns for the Company for all periods ending on or
prior to the Closing Date which are filed after the Closing Date. The
Preferred Stockholders shall permit Agere to review and approve each such Tax
Return described in the preceding sentence prior to filing. To the extent not
reflected on Schedule 3.6, the Preferred Stockholders shall reimburse Agere
for any Taxes of the Company with respect to all periods ending on or prior to
the Closing Date within fifteen (15) days after payment by Agere or the
Surviving Entity of such Taxes. Agere shall prepare or cause to be prepared
all other Tax Returns. The Preferred Stockholders agrees to provide Agere with
all information available to the Preferred Stockholders and not otherwise
available to Agere to the extent reasonably necessary for Agere to fulfill its
obligations under this Section 7.3.
7.4 Cooperation. The Preferred Stockholders and Agere will provide each
other with such cooperation and information as they may request of the other
in filing any return determining a liability for Taxes or a right to a refund
of Taxes or in conducting an audit or other proceeding in respect of Taxes.
Such cooperation shall include, but not be limited to, making employees
available on a mutually convenient basis to provide explanation of any
documents or information provided hereunder or otherwise as required in the
conduct of any audit or other proceeding. The Preferred Stockholders will, and
Agere shall cause the Surviving Entity to, retain all Tax Returns, schedules
and work papers and all other material records or documents
29
relating to matters of the Company relating to Taxes for the Tax period first
ending after the Closing Date and for all prior Tax periods until the
expiration of the statute of limitations of the Tax periods to which such Tax
Returns and other documents relate (including any extensions thereof). At the
expiration of such period, each party shall have the right to dispose of any
such Tax Returns or other documents or records after providing thirty (30)
days in written notice to the other party, with notice to the Preferred
Stockholders deemed given if received by the Stockholders' Representative. Any
information, documents or records obtained under this Section 7.4 shall be
kept confidential, except as may be otherwise necessary in connection with the
filing of Tax Returns or claims for refund or in conducting an audit or other
proceeding.
7.5 Reorganization. Each of Agere, Acquisition, the Company, the
Surviving Entity and each Preferred Stockholder shall, both before and after
the Closing Date (to the extent applicable), use its reasonable best efforts
to cause the business combination of the transactions contemplated hereby to
be qualified as a reorganization under Section 368(a) of the Code.
8. Survival of Representations and Warranties. The representations
and warranties contained in this Agreement (including the Schedules to the
Agreement which are hereby incorporated by reference) or in any instrument
delivered pursuant to this Agreement shall survive for twenty-four (24) months
following the Closing Date, except that the representations and warranties set
forth in Sections 3.1, 3.2, 3.3, 3.14, 4.2 and 4.3 shall survive until
expiration of the applicable statute of limitations. This Section shall not
limit any claim for fraud or any covenant or agreement by the parties which
contemplates performance after the Closing Date.
9. Indemnification.
9.1 Escrow Shares. As soon as practicable after the Closing Date,
certificates representing 10% of the Agere Shares (the "Escrow Shares"; the
Escrow Shares and any proceeds thereof shall be collectively referred to as
the "Escrow Fund") shall be deposited with The Bank of New York (or another
institution selected by Agere), as escrow agent (the "Escrow Agent"), such
deposit to be governed by the terms set forth herein and in the Escrow
Agreement. The Escrow Fund shall be the first (but not the sole or exclusive)
source available to compensate Agere for the indemnification obligations of
the Preferred Stockholders under Section 9.2, provided, that Agere shall not
be obligated to first seek recourse from the Escrow Fund for any claim of
fraud or with respect to the warranties of the Preferred Stockholders under
Section 3.1(b), the second sentence of Section 3.2(b), Section 3.3(a), Section
3.29, Section 3.30 and Section 3.31.
9.2 General Indemnification.
(a) Subject to the limitations set forth in this Section 9, the
Preferred Stockholders will, jointly and severally with respect to the
Company's representations, warranties, covenants and agreements and severally
with respect to their own representations, warranties, covenants and
agreements, indemnify and hold harmless Agere, the Surviving Entity and each
Person, if any, who controls, may control or is controlled by Agere or the
Surviving Entity within the meaning of the Securities Act (and the rules and
regulations thereunder), and their respective officers, directors, employees,
agents and advisors (each such indemnitee being referred to herein as an
"Indemnified Person"), from and against any and all losses, costs,
30
damages, liabilities, obligations, impositions, inspections, assessments,
fines, deficiencies and expenses, including, without limitation, reasonable
legal fees (collectively, "Damages"), which such Indemnified Person may incur
or suffer resulting from, based upon or relating to (i) any inaccuracy in any
representation or warranty made by the Company or the Preferred Stockholders
in this Agreement (including in any Exhibit or Schedule to this Agreement) or
(ii) any breach or default by the Company or the Preferred Stockholders of any
of the covenants or agreements given or made by any of them in this Agreement
(including in any Exhibit or Schedule to this Agreement); provided that any
indemnification sought by an Indemnified Person in respect of Taxes (or any
representation or warranty made in respect thereof) will be governed by the
Tax indemnity set forth in Section 9.4 and will not be subject to the
provisions of this Section 9.2, Section 9.3 or Section 9.8.
(b) Agere, the Company and the Preferred Stockholders acknowledge
that such Damages, if any, would relate to unresolved contingencies existing
at the Closing Date, which if resolved at the Closing Date would have led to a
reduction in the total consideration that Agere would have agreed to pay in
connection with the transactions contemplated hereby.
9.3 Damage Threshold; Cap.
(a) Subject to Section 9.3(d), the Indemnified Persons shall not
be entitled to indemnification for Damages in respect of claims under Section
9.2(a)(i) until the aggregate amount of all Damages for which such Indemnified
Persons are seeking indemnification equals or exceeds $50,000 (the
"Threshold"), whereupon the Indemnified Persons shall be entitled to
indemnification with respect to all such Damages including the Threshold.
(b) In determining the amount (but not the existence) of any
Damage for which an Indemnified Person may seek indemnification under Section
9.2(a)(i) or Section 9.2(a)(ii), any materiality standard contained in a
representation, warranty or covenant shall be disregarded.
(c) Subject to Section 9.3(e), (i) in no event shall the total
indemnification to be paid by the Preferred Stockholders pursuant to Section
9.2(a)(i) exceed the lesser of (x) $11,000,000 and (y) the difference equal to
(I) $22,000,000 minus (II) the aggregate Damages actually paid by the
Preferred Stockholders under the Indemnity Agreement (the "Cap") and (ii) the
aggregate liability of each Preferred Stockholder for Damages pursuant to
Section 9.2(a)(i) shall not exceed an amount equal to the product of (x) the
Cap and (y) the Ratable Share of such Preferred Stockholder and its
Affiliates.
(d) Notwithstanding the foregoing, in no event shall the Threshold
apply for any claim by an Indemnified Person for indemnification (i) with
respect to a breach of the representations and warranties set forth in Section
3.6 or Section 3.13, (ii) with respect to the Tax indemnity set forth in
Section 9.4, (iii) with respect to a breach of a covenant or an agreement,
(iv) with respect to any claim of fraud or (v) pursuant to the Indemnity
Agreement.
(e) Notwithstanding the foregoing, in no event shall Section
9.3(c) (including the Cap) apply for any claim by an Indemnified Person for
indemnification (i) with respect to a breach of the representations and
warranties set forth in Section 3.6, (ii) with respect to the Tax
31
indemnity set forth in Section 9.4, (iii) with respect to a breach of a
covenant or an agreement, (iv) with respect to any claim of fraud or (v)
pursuant to the Indemnity Agreement.
9.4 Preferred Stockholders' Tax Indemnity.
(a) Preferred Stockholders' Tax Indemnity.
(i) The Preferred Stockholders will jointly and severally
indemnify, defend and hold harmless the Indemnified Persons from and against
any and all Damages (including any Damages with respect to such Taxes for
which the Company or the Surviving Entity is liable under joint and several
liability concepts) with respect to all Taxes of the Company pertaining to any
taxable period or portion thereof that ends on or before the Closing Date (a
"Pre-Closing Tax Period"); provided that no Preferred Stockholder shall be
liable under this Section 9.4(a) for an amount in excess of the product of (i)
$22,000,000 and (ii) the Ratable Share of such Preferred Stockholder and its
Affiliates. In the case of Taxes pertaining to any taxable period that does
not end on or prior to the Closing Date, the Tax apportionable to the
Pre-Closing Tax Period shall be determined in accordance with Section
9.4(a)(ii).
(ii) The Preferred Stockholders and Agere will, to the
extent permitted by applicable law, elect with the relevant taxing authority
to close the taxable year of the Company on the Closing Date. In any case
where applicable law does not permit the Company to close its taxable year on
the Closing Date, in the case of any Taxes that are imposed on a periodic
basis and that are payable for a taxable period that begins before the Closing
Date and ends after the Closing Date, the portion of such Tax that is payable
for the Pre-Closing Tax Period shall (x) in the case of any such Taxes not
based upon or related to income or receipts, be deemed to be the amount of
such Taxes for the entire taxable period multiplied by a fraction, the
numerator of which is the number of days in the period ending on the Closing
Date and the denominator of which is the number of days in the entire taxable
period; and (y) in the case of any such Taxes based upon or related to income
or receipts, be determined on the basis of an interim closing of the books of
the Company at the close of business on the Closing Date in accordance with
paragraph (iv) of this Section 9.4(a).
(iii) For purposes of clause (x) of paragraph (ii) of this
Section 9.4(a), any credits against any Tax (other than credits for payments
of estimated taxes and foreign tax credits or credits carried forward from
prior tax periods) shall be prorated based on the fraction employed in such
clause (x).
(iv) For purposes of clause (y) of paragraph (ii) of this
Section 9.4(a), a liability for any Tax with respect to a Pre-Closing Tax
Period shall be the product of (x) the Tax for the entire taxable period
multiplied by (y) a fraction, the numerator of which is the hypothetical Tax
for the Pre-Closing Tax Period (determined on the basis of an interim closing
of the books, without annualization) and the denominator of which is the sum
of such numerator plus the hypothetical Tax for the balance of the taxable
period (determined on the basis of such interim closing of the books, without
annualization). The hypothetical Tax for any period shall in no case be less
than zero.
32
(v) Any claim for indemnification under Section 9.4(a) shall
be paid by the Preferred Stockholders in cash. Such payment by the Preferred
Stockholders of any amount due under this Section 9.4(a) shall be made within
ten (10) business days following written notice by Agere that payment of such
amount to the appropriate taxing authority is due or will be due within ten
(10) days. In the case of a Tax that is contested in accordance with the
provisions of Section 9.4(b), payment of that Tax to the appropriate taxing
authority will not be considered to be due earlier than the time of a Final
Determination with respect to such Tax.
(b) Contest Rights.
(i) Agere shall promptly notify the Stockholders'
Representative in writing upon receipt by Agere or the Surviving Entity or any
Affiliate of each thereof of each written communication with respect to any
pending or threatened audit of, assessment against or court or other
proceeding against the Surviving Entity for any taxable period which could
give rise to a claim for indemnity under Section 9.4(a) (an "Indemnified Tax
Liability"). The Stockholders' Representative shall have the sole right to
represent the interests of the Company in any audit, administrative, court or
other proceeding relating to an Indemnified Tax Liability, to employ counsel
or other representatives of its choice and to otherwise control the conduct of
such audit or proceeding in such manner as it deems fit in its sole discretion
including, without limitation, to contest, litigate, compromise and settle any
adjustment or assessment made or proposed therein. The Preferred Stockholders
agree to keep Agere informed of the progress of any such audits or proceedings
and to consult in good faith with Agere in connection therewith. If the
Preferred Stockholders elect to so represent the Company's interests, they
shall within thirty (30) days of delivery of the notice by Agere (or sooner,
if the nature of the Indemnified Tax Liability so requires) notify Agere in
writing of its intent to do so, and Agere agrees, and shall cause the
Surviving Entity to agree, to cooperate, at the Preferred Stockholders' sole
expense, with the Preferred Stockholders and their counsel or other
representatives in the defense against or compromise of any adjustment or
assessment made or proposed in any such audit or proceeding. If the Preferred
Stockholders elect not to represent the Company's interests, Agere may pay,
compromise or contest such Indemnified Tax Liability in such manner as it
deems appropriate (in its sole discretion); and the Preferred Stockholders
shall be deemed to have conceded Agere's rights to indemnification from the
Preferred Stockholders pursuant to Section 9.6(a) with respect to such
Indemnified Tax Liability.
(ii) Notwithstanding paragraph (i), in respect of any
Indemnified Tax Liability, the Preferred Stockholders may not settle,
compromise or otherwise dispose of any such liability without the consent of
Agere, if such settlement, compromise or other disposition would have a
material adverse effect on Agere or the Surviving Entity for taxable periods
beginning on or after the Closing Date. In that event, the Preferred
Stockholders shall permit Agere and the Surviving Entity, through counsel of
their own choosing and at their sole expense, to participate in the
settlement, compromise or other disposition of such Indemnified Tax Liability.
9.5 Release of Escrow Fund. The Escrow Fund shall commence on the
Closing Date and terminate on the second anniversary of the Closing Date (the
"Escrow Period"). On the first anniversary of the Closing Date, Agere shall
deliver to the Escrow Agent (with a copy to the Stockholders' Representative)
a written notice directing the Escrow Agent to release from the
33
Escrow Fund a number of Agere Shares (rounded down to the nearest whole share)
equal to the excess, if any, of (i) the quotient obtained from (x) the excess
of (1) the Escrow Fund Value on such anniversary over (2) the aggregate amount
necessary to satisfy claims for indemnification made by Agere as of such
anniversary and which have not been definitively resolved, divided by (y) the
Current Per Share Market Price on such anniversary, over (ii) 5% of the Agere
Shares (after giving effect to any stock splits, stock combinations or stock
dividends with respect to such Agere Shares that occur after the date hereof).
On the second anniversary of the Closing Date, Agere shall deliver to the
Escrow Agent (with a copy to the Stockholders' Representative) a written
notice directing the Escrow Agent to release all assets then remaining in the
Escrow Fund (other than assets equal in value at such time to the aggregate
amount necessary to satisfy any claim for indemnification which Agere has
submitted and which remains unresolved). Any portion of the Escrow Fund which
is not owed to Agere under this Article 9 shall be delivered by the Escrow
Agent to the Stockholders' Representative and shall be distributed to the
former holders of Company Capital Stock entitled thereto in accordance with
each such holder's Ratable Share.
9.6 Claims Upon Escrow Fund. Upon receipt by the Escrow Agent on or
before the last day of the Escrow Period of a certificate signed by a
representative of Agere (an "Agere Notice") specifying in reasonable detail
the individual items of Damages for which indemnification is being sought, the
date each such item was paid, or properly accrued or arose, the nature of the
misrepresentation, breach of warranty or claim to which such item is related,
the Escrow Agent shall, subject to the provisions of Section 9.7, deliver to
Agere out of the Escrow Fund, as promptly as practicable following the
ten-business day period referenced in Section 9.7, a number of Escrow Shares
held in the Escrow Fund which when multiplied by the Current Per Share Market
Price on the date of such release has an aggregate value equal to such Damages
or claim pursuant to Section 9.3. Agere shall, concurrent with the sending of
any Agere Notice to the Escrow Agent, provide a copy of such Agere Notice to
the Stockholders' Representative.
9.7 Objections to Claims. If the Stockholders' Representative shall
object to an Agere Notice within the ten-business day period after Agere's
delivery thereof, then Agere and the Stockholders' Representative shall use
their good faith efforts to resolve such dispute for a period of 30 days after
the Stockholders' Representative objects to such Agere Notice.
9.8 Third-Party Claims. In the event Agere becomes aware of a
third-party claim which Agere believes may result in a demand pursuant to this
Section 9 or the Indemnity Agreement, Agere shall promptly notify the
Stockholders' Representative of such claim, and the Stockholders'
Representative shall be entitled, at the Preferred Stockholders' expense, to
participate in any defense of such claim; provided that Agere shall control
such defense, and shall have the right with the consent of the Stockholders'
Representative (which consent shall not be unreasonably withheld) to settle
any such claim (it being understood that no such consent of the Stockholders'
Representative shall be required where the third-party claim, which Agere
proposes to settle, involves the business reputation of Agere or its
Affiliates, or the possible criminal liability of Agere or its Affiliates or
any of their respective officers, directors or employees). In the event that
the Stockholders' Representative has consented to any such settlement, the
Preferred Stockholders shall have no power or authority to object under any
provision of this Section 9 or the Indemnity Agreement to the amount of any
claim by Agere for indemnity with respect to such settlement.
34
9.9 Stockholders' Representative.
(a) Xxxxxx Xxxxxxxxx is hereby appointed as representative (the
"Stockholders' Representative") for and on behalf of the holders of Company
Capital Stock to take all actions necessary or appropriate in the judgment of
the Stockholders' Representative for the accomplishment of the terms of this
Agreement. No bond shall be required of the Stockholders' Representative and
the Stockholders' Representative shall receive no compensation for his
services. Notices of communications to or from the Stockholders'
Representative shall constitute notice to or from each of the holders of the
Company Capital Stock.
(b) The Stockholders' Representative shall not be liable for any
act done or omitted in such capacity while acting in good faith and in the
exercise of reasonable judgment, and any act done or omitted pursuant to the
advise of counsel shall be conclusive evidence of such good faith. The
Preferred Stockholders shall severally indemnify the Stockholders'
Representative and hold him harmless against any loss, liability or expense
incurred without gross negligence or bad faith on the part of the
Stockholders' Representative and arising out of or in connection with the
acceptance or administration of his duties hereunder.
(c) Any decision, act, consent or instruction of the Stockholders'
Representative shall constitute a decision of all and shall be final, binding
and conclusive upon every holder of Company Capital Stock and Agere may rely
upon any such decision, act, consent or instruction. Agere is hereby relieved
from any liability to any Person for acts done by it in accordance with such
decision, act, consent or instruction of the Stockholders' Representative.
10. Brokers' and Finders' Fees.
10.1 Company. Each of the Preferred Stockholders and the Company
represents and warrants to Agere that no broker, investment banker or
financial advisor is entitled to a brokerage fee, financing commission or
other commission in respect of the execution of this Agreement or the
consummation of the transactions contemplated hereby.
10.2 Agere; Acquisition. Each of Agere and Acquisition represents and
warrants to the Company that no broker, investment banker or financial advisor
is entitled to any brokerage fee, financing commission or other commission in
respect of the execution of this Agreement or the consummation of the
transactions contemplated hereby.
11. Expenses; Taxes. Each party hereto shall pay its own expenses
incidental to the preparation of this Agreement, the carrying out of the
provisions of this Agreement and the consummation of the transactions
contemplated hereby. Any sales, use, stamp or transfer taxes, and any other
filing or recording fees, if any, which may be payable with respect to the
consummation of the transactions contemplated hereby shall be payable as
prescribed by applicable law or regulation.
12. Press Releases. Except as required by law or Agere's listing
agreement with the NYSE, no party shall issue any press release or otherwise
make public any information with respect to this Agreement nor the
transactions contemplated hereby, prior to the Closing, without the prior
written consent of the other parties to this Agreement.
35
13. Contents of Agreement; Parties in Interest; etc. This Agreement
and the agreements referred to or contemplated herein set forth the entire
understanding of the parties hereto with respect to the transactions
contemplated hereby, and, except as set forth in this Agreement and such other
agreements, there are no representations or warranties, express or implied,
made by any party to this Agreement with respect to the subject matter of this
Agreement. Any and all previous agreements and understandings between or among
the parties regarding the subject matter hereof, whether written or oral, are
superseded by this Agreement and the agreements referred to or contemplated
herein.
14. Assignment and Binding Effect. This Agreement may not be assigned by
either party hereto without the prior written consent of the other party. All
the terms and provisions of this Agreement shall be binding upon and inure to
the benefit of and be enforceable by the respective successors and assigns of
the parties hereto.
15. Waiver. Any term or provision of this Agreement may be waived at any
time by the party entitled to the benefit thereof only by a written instrument
duly executed by such party.
16. Definitions. As used in this Agreement the terms set forth below
shall have the following meanings:
(a) "Affiliate" of a Person means any other Person who (i)
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, such Person or (ii) owns more
than 5% of the capital stock or equity interest in such Person. "Control"
means the possession of the power, directly or indirectly, to direct or cause
the direction of the management and policies of a Person whether through the
ownership of voting securities, by contract or otherwise.
(b) "Benefit Plan" shall mean any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical or other material plan,
program, arrangement or understanding (whether or not legally binding)
providing material benefits or compensation to any current or former employee,
officer or director of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Current Per Share Market Price" shall mean on any date the
average of the daily closing price per share of Agere Common Stock for the ten
consecutive Trading Days immediately prior to such date. The Closing Price for
each day shall be the last sale price, regular way, or if no such sale takes
place on such day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading in
the NYSE.
(e) "Depositors" shall have the meaning set forth in the Escrow
Agreement.
(f) "Designated Group" shall mean the Company, the Preferred
Stockholders and the Designated Officers.
36
(g) "Designated Officers" shall mean the Chief Executive Officer
of the Company, Xxxxxx Xxxxx (the financial services consultant to the
Company) and the Chief Technology Officer (if any) of the Company.
(h) "Environmental Laws" shall mean all applicable federal, state,
local or foreign laws, rules and regulations, orders, decrees, judgments,
permits, filings and licenses relating (i) to protection and clean-up of the
environment and activities or conditions related thereto, including those
relating to the generation, handling, disposal, transportation or release of
Hazardous Substances and (ii) the health or safety of employees in the
workplace environment, all as amended from time to time, and shall also
include any common law theory based on nuisance, trespass, negligence or other
tortious conduct.
(i) "Escrow Fund Value" shall mean on any date the product
obtained by multiplying (i) the number of Escrow Shares in the Escrow Fund on
such date by (ii) the Current Per Share Market Price for such date.
(j) "Exchange Agent" shall mean The Bank of New York or another
bank or trust company designated as the exchange agent by Agere (which
designation shall be reasonably acceptable to the Company).
(k) "Final Determination" shall mean (i) a decision of the United
States Tax Court, or a decision, judgment, decree or other order by another
court of competent jurisdiction, which has become final and is either no
longer subject to appeal or for which a determination not to appeal has been
made; (ii) a closing agreement made under Section 7121 of the Code or any
comparable foreign, state, local or municipal Tax statute; (iii) any
disallowance of a claim for refund or credit in respect of an overpayment of
Tax unless a suit related thereto is filed on a timely basis; (iv) any final
disposition by reason of the expiration of the applicable statute of
limitations; or (v) the actual payment by the Company of Taxes.
(l) "GAAP" shall mean generally accepted accounting principles in
the United States, consistently applied.
(m) "Hazardous Substances" shall mean any and all hazardous and
toxic substances, wastes or materials, any pollutants, contaminants, or
dangerous materials (including, but not limited to, polychlorinated biphenyls,
PCBs, friable asbestos, volatile and semi-volatile organic compounds, oil,
petroleum products and fractions, and any materials which include hazardous
constituents or become hazardous, toxic, or dangerous when their composition
or state is changed), or any other similar substances or materials which are
included under or regulated by any Environmental Laws.
(n) "Liens" shall mean any mortgage, pledge, lien, security
interest, conditional or installment sale agreement, encumbrance, charge or
other claims of third parties of any kind.
(o) "Material Adverse Effect" on a Person shall mean (unless
otherwise specified) any condition or event that may: (a) have a material
adverse effect on the assets, business, condition (financial or otherwise),
operations or prospects of such Person and its Subsidiaries, if any; (b)
materially impair the ability of the such Person to perform its obligations
37
under this Agreement; or (c) prevent or delay the consummation of the
transactions contemplated under this Agreement.
(p) "Person" shall mean any individual, corporation, partnership,
limited partnership, limited liability company, trust, association or entity
or government agency or authority.
(q) "Ratable Share" of any Preferred Stockholder shall mean a
fraction the numerator of which is the aggregate number of Agere Shares
received by such Preferred Stockholder in respect of its shares of Preferred
Stock and the denominator of which is the aggregate number of Agere Shares
received by all Preferred Stockholders.
(r) "reasonable best efforts" shall mean efforts which are
reasonably within the contemplation of the parties at the time of entering
into this Agreement and which do not require the performing party to perform
any act, expend funds or incur obligations other than actions, expenditures or
incurrences which are customary and reasonable for transactions of the kind
and nature contemplated by this Agreement in order for the performing party to
satisfy its obligations hereunder.
(s) "Subsidiary" of a Person shall mean any corporation,
partnership, joint venture or other entity in which such Person (a) owns,
directly or indirectly, 50% or more of the outstanding voting securities or
equity interests or (b) is a general partner.
(t) "Tax" (and, with correlative meaning, "Taxes" and "Taxable")
shall mean any federal, state, local or foreign net income, gross income,
gross receipts, windfall profit, severance, property, production, sales, use,
license, excise, franchise, employment, payroll, withholding, alternative or
add-on minimum, ad valorem, value-added, transfer, stamp, or environmental
tax, or any other tax, custom, duty, governmental fee or other like assessment
or charge of any kind whatsoever, together with any interest or penalty,
addition to tax or additional amount imposed by any governmental authority and
(ii) any liability of the Company for the payment of amounts with respect to
payments of a type described in clause (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group, or as a result of any
obligations of the Company under any Tax sharing agreement, Tax indemnity
agreement or similar agreement.
(u) "Tax Return" shall mean any return, report or similar
statement required to be filed with respect to any Tax (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.
(v) "Trading Day" shall mean a day on which the NYSE is open for
the transaction of business.
(w) "Warrants" shall mean the Series A Warrant, the Series B
Warrants and the Common Stock Warrants of the Company.
17. Notices. Any notice, request, demand, waiver, consent, approval,
or other communication which is required or permitted to be given to any party
hereunder shall be in writing and shall be deemed given only if delivered to
the party personally or sent to the party by
38
facsimile transmission (promptly followed by a hard-copy delivered in
accordance with this Section 17) or by registered or certified mail (return
receipt requested), with postage and registration or certification fees
thereon prepaid, addressed to the party at its address set forth below:
If to Agere or Acquisition:
---------------------------
Agere Systems Inc.
0000 Xxxxxxxx Xxxxxxx XX
Xxxxxxxxx, Xxxxxxxxxxxx 00000
Attn: Vice President--Law
Facsimile: 000-000-0000
If to the Company:
TeraBlaze, Inc.
00000 Xxxxxxx Xxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: President
Facsimile: (000) 000-0000
If to the Stockholders' Representative or the Preferred
-------------------------------------------------------
Stockholders:
-------------
Xxxxxx Xxxxxxxxx
c/o Bay Management Company 2000, LLC
00000 Xxxxx Xx Xxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
or to such other address or Person as any party may have specified in a notice
duly given to the other party as provided herein. Such notice, request,
demand, waiver, consent, approval or other communication will be deemed to
have been given as of the date so delivered, telegraphed or mailed.
18. Amendment. This Agreement may be amended, modified or supplemented
at any time prior to the Effective Time by mutual agreement of the parties
hereto and upon the approval of the Board of Directors of the Company
notwithstanding the approval hereof by the stockholders of the Company, except
as provided in Section 251(d) of the DGCL. Notwithstanding the foregoing, any
amendment, modification or revision of this Agreement and any waiver of
compliance or consent with respect hereto shall be effective only if in a
written instrument executed by the parties hereto.
19. Governing Law. This Agreement shall be governed by and interpreted
and enforced in accordance with the laws of the State of New York without
regard to conflicts of law doctrines (other than Section 5-1401 of the General
Obligations Law of the State of New York) as applied to contracts made and
fully performed in such state, except insofar as the DGCL or the
39
DLLCA shall be mandatorily applicable to the Merger and the rights of the
stockholders of the Company and the Member in connection therewith.
20. No Benefit to Others. The representations, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
parties hereto, and their respective successors and assigns, and they shall
not be construed as conferring, and are not intended to confer, any rights on
any other Person.
21. Severability. If any term or other provision of this Agreement is
determined to be invalid, illegal or incapable of being enforced by any rule
of law or public policy, all other terms and provisions of the Agreement shall
remain in full force and effect. Upon such determination, the parties hereto
shall negotiate in good faith to modify this Agreement so as to give effect to
the original intent of the parties to the fullest extent permitted by
applicable law.
22. Section Headings. All section headings are for convenience only
and shall in no way modify or restrict any of the terms or provisions hereof.
23. Schedules and Exhibits. All Schedules and Exhibits referred to
herein are intended to be and hereby are specifically made a part of this
Agreement and any reference to this Agreement shall include such Schedules and
Exhibits.
24. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and the Company,
Acquisition, Agere or any person listed on the signature pages at the foot of
this Agreement may become a party hereto by executing a counterpart hereof.
This Agreement and any counterpart so executed shall be deemed to be one and
the same instrument.
[signature page follows]
40
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound hereby, have duly executed this Agreement as of the date first above
written.
AGERE SYSTEMS INC.
By: /s/ Xxxx Xxxxx
-----------------------------------
Name: Xxxx Xxxxx
Title: Vice President
AGERE SYSTEMS ACQUISITION LLC
By: Agere Systems Inc.,
its sole member
By: /s/ Xxxx Xxxxx
-----------------------------------
Name: Xxxx Xxxxx
Title: Vice President
TERABLAZE, INC.
By: /s/ Shankar X. Xxxxxxxxx
-----------------------------------
Name: Shankar X. Xxxxxxxxx
Title: President
XXXXXX XXXXXXXXX,
as Stockholders' Representative
/s/ Xxxxxx Xxxxxxxxx
--------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: General Partner, Bay Partners
[Signature Page to Merger Agreement]
Preferred Stockholders
----------------------
BAY III, L.P.
By: Bay Management Company 2000, LLC,
its General Partner
By: /s/ Xxxxxx Xxxxxxxxx
-----------------------------------
Name:
Title:
BAY III ENTREPRENEURS FUND, L.P.
By: Bay Management Company 2000, LLC,
its General Partner
By: /s/ Xxxxxx Xxxxxxxxx
-----------------------------------
Name:
Title:
THE XXXXXXX SACHS GROUP, INC.
By: /s/ Xxxx X. Xxxxxx
-----------------------------------
Name: Xxxx X. Xxxxxx
Title: Attorney-in-Fact
[Signature Page to Merger Agreement]
STONE STREET FUND 2000, L.P.
By: Stone Street 2000, L.L.C.,
its General Partner
By: /s/ Xxxx X. Xxxxxx
-----------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President
XXXXXXX XXXXX DIRECT INVESTMENT
FUND 2000, L.P.
By: GS Employee Funds 2000 GP, L.L.C.,
its General Partner
By: /s/ Xxxx X. Xxxxxx
-----------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President
[Signature Page to Merger Agreement]
