1
Exhibit 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
LUCENT TECHNOLOGIES INC.,
NEPTUNE ACQUISITION INC.
AND
NEXABIT NETWORKS, INC.
Dated as of June 24, 1999
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TABLE OF CONTENTS
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1. The Merger......................................................... 2
1.1 General................................................... 2
1.2 Certificate of Incorporation.............................. 2
1.3 By-Laws................................................... 3
1.4 Directors and Officers.................................... 3
1.5 Conversion of Securities.................................. 3
1.6 Adjustment of the Exchange Ratios......................... 4
1.7 Dissenting Shares......................................... 4
1.8 No Fractional Shares...................................... 4
1.9 Exchange Procedures; Distributions with Respect to
Unexchanged Shares; Stock Transfer Books.................. 5
1.10 Return of Exchange Fund................................... 7
1.11 No Further Ownership Rights in Company Capital Stock...... 7
1.12 Further Assurances........................................ 7
2. Approval by Stockholders........................................... 8
2.1 Approval by Stockholders.................................. 8
3. Representations and Warranties of the Company...................... 8
3.1 Organization.............................................. 8
3.2 Capitalization; Options and Other Rights.................. 8
3.3 Authority; Stockholder Vote............................... 9
3.4 Charter Documents......................................... 10
3.5 Financial Statements...................................... 11
3.6 Absence of Undisclosed Liabilities; Indebtedness.......... 11
3.7 Operations and Obligations................................ 11
3.8 Properties................................................ 13
3.9 Customers and Suppliers................................... 14
3.10 Contracts................................................. 14
3.11 Absence of Default........................................ 15
3.12 Litigation................................................ 15
3.13 Compliance with Law....................................... 16
3.14 Intellectual Property; Year 2000.......................... 16
3.15 Tax Matters............................................... 17
3.16 Employee Benefit Plans.................................... 18
3.17 Executive Employees....................................... 20
3.18 Employees................................................. 20
3.19 Environmental Laws........................................ 21
3.20 Bank Accounts, Letters of Credit and Powers of Attorney... 21
3.21 Subsidiaries.............................................. 21
3.22 Affiliate Transactions.................................... 21
3.23 Insurance................................................. 21
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3.24 Leases............................................................ 22
3.25 Assets............................................................ 22
3.26 Minute Books...................................................... 22
3.27 Financial Projections............................................. 22
3.28 Complete Copies of Materials...................................... 22
3.29 Disclosure........................................................ 22
3.30 Pooling of Interests; Reorganization.............................. 23
3.31 Xxxx-Xxxxx-Xxxxxx Compliance...................................... 23
4. Representations and Warranties of Acquisition and Lucent................... 23
4.1 Organization...................................................... 23
4.2 Capital Structure................................................. 23
4.3 Authority......................................................... 23
4.4 Litigation........................................................ 24
4.5 SEC Filings; Lucent Financial Statements.......................... 25
4.6 Information Supplied.............................................. 25
4.7 Operations and Obligations........................................ 26
4.8 Interim Operations of Acquisition................................. 26
4.9 Pooling of Interests; Reorganization.............................. 26
5. Conduct Pending Closing.................................................... 26
5.1 Conduct of Business Pending Closing............................... 26
5.2 Prohibited Actions Pending Closing................................ 27
5.3 Access; Documents; Supplemental Information....................... 28
5.4 No Solicitation................................................... 29
5.5 Exemption from Registration; Other Actions........................ 30
5.6 Company Stock Options; Equity Incentive Plan...................... 30
5.7 Company Stock Plan................................................ 32
5.8 Employee Benefit Plans; Existing Agreement........................ 32
5.9 Indemnification................................................... 32
5.10 Preparation of Information Statement ............................. 33
5.11 Stock Exchange Listing............................................ 34
5.12 Affiliates........................................................ 34
5.13 Notification of Certain Matters................................... 34
5.14 Tax Returns; Cooperation.......................................... 34
5.15 Pooling of Interests; Reorganization.............................. 35
5.16 Working Capital Financing......................................... 35
5.17 Actions by the Parties............................................ 35
6. Conditions Precedent....................................................... 35
6.1 Conditions Precedent to Each Party's Obligation to
Effect the Merger................................................. 35
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6.2 Conditions Precedent to Obligations of Acquisition and Lucent.. 36
6.3 Conditions Precedent to the Company's Obligations.............. 38
7. Survival of Representation and Warranties............................... 39
7.1 Representations and Warranties................................. 39
8. Indemnification......................................................... 40
8.1 Escrow Shares.................................................. 40
8.2 General Indemnification........................................ 40
8.3 Damages Threshold; Damages Cap................................. 40
8.4 Escrow Period; Release of Escrow Fund.......................... 40
8.5 Claims Upon Escrow Fund........................................ 41
8.6 Objections to Claims........................................... 41
8.7 Third-Party Claims............................................. 42
8.8 Company Stockholders' Representative........................... 42
9. Brokers' and Finders' Fees.............................................. 43
9.1 Company........................................................ 43
9.2 Acquisition and Lucent......................................... 43
10. Expenses................................................................ 43
11. Press Releases.......................................................... 44
12. Contents of Agreement; Parties in Interest; etc......................... 44
13. Assignment and Binding Effect........................................... 44
14. Termination............................................................. 44
15. Definitions............................................................. 45
16. Notices................................................................. 48
17. Amendment............................................................... 48
18. Governing Law........................................................... 49
19. No Benefit to Others.................................................... 49
20. Severability............................................................ 49
21. Section Headings........................................................ 49
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22. Schedules and Exhibits..................................... 49
23. Extensions................................................. 49
24. Counterparts............................................... 49
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AGREEMENT AND
PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of June 24, 1999 by
and among LUCENT TECHNOLOGIES INC., a Delaware corporation ("Lucent"), NEPTUNE
ACQUISITION INC., a Delaware corporation ("Acquisition"), and NEXABIT NETWORKS,
INC., a Delaware corporation (the "Company").
BACKGROUND
A. The Company is a Delaware corporation with its registered office
located at 0000 Xxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx and has authorized 124,000,000
shares of common stock, par value $.01 per share ("Company Common Stock"), and
1,000,000 shares of preferred stock, $.01 par value per share, of which 46,000
shares have been designated Series A Convertible Preferred Stock ("Series A
Preferred Stock"), 47,660 shares have been designated Series B Convertible
Preferred Stock ("Series B Preferred Stock"), 56,500 shares have been designated
Series C Convertible Preferred Stock ("Series C Preferred Stock") and 200,000
shares have been designated Series D Convertible Preferred Stock ("Series D
Preferred Stock"; the Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock and Series D Preferred Stock are collectively referred to
herein as the "Company Preferred Stock" and the Company Common Stock and the
Company Preferred Stock are collectively referred to herein as the "Company
Capital Stock"). The Company is engaged principally in the design, development,
production, marketing, distribution, maintenance and support of Internet
protocol switch/routers (the "Business").
B. Lucent is a Delaware corporation with its registered office located
at 0000 Xxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx.
C. Acquisition is a wholly-owned subsidiary of Lucent and was formed to
merge with and into the Company so that as a result of the merger the Company
will survive and become a wholly-owned subsidiary of Lucent. Acquisition is a
Delaware corporation with its registered office located at 0000 Xxxxxx Xxxx,
Xxxxxxxxxx, Xxxxxxxx, and has authorized an aggregate of 1,000 shares of common
stock, no par value per share ("Acquisition Common Stock").
D. The Board of Directors of each of Acquisition and the Company has
determined that the merger of Acquisition with and into the Company (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 and Plan of Merger, is in the best interests of Acquisition and the
Company and their respective stockholders.
E. The Boards of Directors of Acquisition and the Company have approved
this Agreement and the transactions contemplated hereby.
F. The parties intend that, for federal income tax purposes, the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Code and that this Agreement shall constitute a plan of reorganization.
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G. The parties intend that, for financial accounting purposes, the
Merger shall be accounted for as a pooling of interests transaction.
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:
1. The Merger
1.1 General.
(a) Subject to the terms and conditions of this Agreement and
in accordance with the DGCL, at the Effective Time, (i) Acquisition shall be
merged with and into the Company, (ii) the separate corporate existence of
Acquisition shall cease and (iii) the Company shall be the surviving corporation
(the "Surviving Corporation") and shall continue its corporate 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 251 of the DGCL, or at
such later time as may be stated in the Certificate of Merger or such later date
as the parties may mutually agree (the "Effective Time"). Subject to the terms
and conditions of this Agreement, the Company and Acquisition shall duly execute
and file the Certificate of Merger with the Secretary of State of the State of
Delaware at the time of the Closing. The closing of the Merger (the "Closing")
shall take place at the offices of Sidley & Austin, 000 Xxxxx Xxxxxx, Xxx Xxxx,
X.X. at 10:00 A.M. two business days after the date on which the last of the
conditions set forth in Section 6 shall have been satisfied or waived, or on
such other date, time and place as the parties may mutually agree (the "Closing
Date").
(c) At the Effective Time, the effect of the Merger shall be
as provided in the applicable provisions of the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the
property, rights, privileges, powers and franchises of the Company and
Acquisition shall vest in the Surviving Corporation, 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 Corporation.
1.2 Certificate of Incorporation. The Certificate of
Incorporation of Acquisition, as in effect immediately prior to the Effective
Time, shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter amended as provided therein and by law except that Article I of
such Certificate of Incorporation shall be amended to read as follows:
"The name of the Corporation is: Nexabit Networks, Inc."
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1.3 By-Laws. The By-laws of Acquisition, as in effect
immediately prior to the Effective Time, shall be the By-laws of the Surviving
Corporation until thereafter amended as provided therein and by law.
1.4 Directors and Officers. From and after the Effective Time,
(a) the directors of Acquisition at the Effective Time shall be the initial
directors of the Surviving Corporation, each to hold office in accordance with
the Certificate of Incorporation and By-laws of the Surviving Corporation, and
(b) the officers of Acquisition at the Effective Time shall be the initial
officers of the Surviving Corporation, in each case, until their respective
successors are duly elected or appointed and qualified.
1.5 Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of Acquisition, the Company or
the holders of any of the following securities:
(a) Each issued and outstanding share of common stock of
Acquisition shall be converted into one validly issued, fully paid and
nonassessable share of Common Stock, no par value per share, of the Surviving
Corporation;
(b) Each share of Company Capital Stock held in the treasury
of the Company and each share of Company Capital Stock owned by Acquisition or
Lucent shall be canceled without any conversion thereof and no payment or
distribution shall be made with respect thereto; and
(c) Subject to the provisions of Sections 1.6 and 1.8, each
share of Company Capital Stock issued and outstanding immediately prior to the
Effective Time (other than (i) shares canceled in accordance with Section 1.5(b)
and (ii) Dissenting Shares) shall be converted into (A) in the case of each
share of Common Stock, 0.1800 (such number as adjusted in accordance with
Section 1.6 (the "Common Stock Exchange Ratio")), (B) in the case of each share
of Series A Preferred Stock, 40.3633 (such number as adjusted in accordance with
Section 1.6 (the "Series A Exchange Ratio")), (C) in the case of each share of
Series B Preferred Stock, 40.3633 (such number as adjusted in accordance with
Section 1.6 (the "Series B Exchange Ratio")), (D) in the case of each share of
Series C Preferred Stock, 18.0000 (such number as adjusted in accordance with
Section 1.6 (the "Series C Exchange Ratio")) and (E) in the case of each share
of Series D Preferred Stock, 11.5385 (such number as adjusted in accordance with
Section 1.6 (the "Series D Exchange Ratio"); each of the Common Stock Exchange
Ratio, the Series A Exchange Ratio, the Series B Exchange Ratio, the Series C
Exchange Ratio and the Series D Exchange Ratio is referred to as an "Exchange
Ratio" and collectively referred to as the "Exchange Ratios") of a validly
issued, fully paid and nonassessable share of Lucent Common Stock, including the
corresponding percentage right (the "Right") to purchase shares of junior
preferred stock, par value $1.00 per share, pursuant to the Rights Agreement
dated as of April 4, 1996 between Lucent and First Chicago Trust Company of New
York, as Rights Agent. All references in this Agreement to Lucent Common Stock
to be received in accordance with the Merger shall be deemed, from and after the
Effective Time, to include the Rights. As of the Effective Time, each share of
Company Capital Stock shall no longer be outstanding and shall
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automatically be canceled and retired, and each holder of a certificate
representing any shares of Company Capital Stock shall cease to have any rights
with respect thereto other than (i) the right to receive shares of Lucent Common
Stock to be issued in consideration therefor upon the surrender of such
certificate, (ii) any dividends and other distributions in accordance with
Section 1.9(c) and (iii) any cash, without interest, to be paid in lieu of any
fractional share of Lucent Common Stock in accordance with Section 1.8.
1.6 Adjustment of the Exchange Ratios. In the event that,
prior to the Effective Time, any stock split, combination, reclassification or
stock dividend with respect to the Lucent Common Stock, any change or conversion
of Lucent Common Stock into other securities or any other dividend or
distribution with respect to the Lucent Common Stock (other than regular
quarterly dividends) should occur or, if a record date with respect to any of
the foregoing should occur, appropriate and proportionate adjustments shall be
made to each Exchange Ratio, and thereafter all references to an Exchange Ratio
shall be deemed to be to such Exchange Ratio as so adjusted.
1.7 Dissenting Shares. (a) Notwithstanding any provision of
this Agreement to the contrary, shares of Company Capital Stock that are
outstanding immediately prior to the Effective Time and which are held by
stockholders who shall not have voted in favor of the Merger or consented
thereto in writing and who shall have demanded properly in writing appraisal for
such shares in accordance with Section 262 of the DGCL (collectively, the
"Dissenting Shares") shall not be converted into or represent the right to
receive the consideration set forth in Section 1.5(c). Such stockholders shall
be entitled to receive such consideration as is determined to be due with
respect to such Dissenting Shares in accordance with the provisions of Section
262, except that all Dissenting Shares held by stockholders who shall have
failed to perfect or who effectively shall have withdrawn or lost their rights
to appraisal of such shares under Section 262 shall thereupon be deemed to have
been converted into and to have become exchangeable for, as of the Effective
Time, the right to receive the shares of Lucent Common Stock specified in
Section 1.5(c), without any interest thereon, upon surrender, in the manner
provided in Section 1.9, of the certificate or certificates that formerly
evidenced by such Dissenting Shares less the number of shares of Lucent Common
Stock allocable to such stockholder that have been deposited in the Escrow Fund
in respect of Company Capital Stock pursuant to Sections 1.9(b) and 8.1.
(b) The Company shall give Lucent (i) prompt notice of any
demands for appraisal received by the Company, withdrawals of such demands, and
any other instruments served pursuant to the DGCL and received by the Company
and (ii) the opportunity to direct all negotiations and proceedings with respect
to demands for appraisal under the DGCL. The Company shall not, except with the
prior written consent of Lucent, make any payment with respect to any demands
for appraisal or offer to settle or settle any such demands.
1.8 No Fractional Shares. No certificates or scrip
representing fractional shares of Lucent Common Stock shall be issued upon the
surrender for exchange of Certificates and such fractional share shall not
entitle the record or beneficial owner thereof to vote or to any other rights as
a stockholder of Lucent. In lieu of receiving any such fractional share, the
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stockholder shall receive 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 Lucent 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 (or, if
the Lucent Common Stock did not trade on the NYSE on such prior date, the last
day of trading in Lucent Common Stock on the NYSE prior to the Effective Time)
by (ii) the fractional share to which such holder would otherwise be entitled.
Lucent shall make available to the Exchange Agent the cash necessary for this
purpose.
1.9 Exchange Procedures; Distributions with Respect to
Unexchanged Shares; Stock Transfer Books. (a) As of the Effective Time, Lucent
shall deposit with the Exchange Agent for the benefit of the holders of shares
of Company Capital Stock, certificates representing shares of the Lucent Common
Stock to be issued pursuant to Section 1.5(c) in exchange for the shares of
Company Capital Stock less the number of shares of Lucent Common Stock to be
deposited in the Escrow Fund pursuant to Section 8.1. Such shares of Lucent
Common Stock, together with any dividends or distributions with respect thereto
pursuant to Sections 1.8 and 1.9(c), are referred to herein as the "Exchange
Fund".
(b) As soon as practicable after the Effective Time, Lucent
shall use its reasonable best efforts to cause the Exchange Agent to send to
each Person who was, at the Effective Time, a holder of record of certificates
which represented outstanding Company Capital Stock (the "Certificates") which
shares were converted into the right to receive Lucent Common Stock 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 shares
of Lucent Common Stock into which the Company Capital 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 shares of Lucent Common Stock to
be deposited in the Escrow Fund on such holder's behalf pursuant to Section 8.1,
(B) cash in lieu of any fractional share of Lucent Common Stock in accordance
with Section 1.8 and (C) certain dividends and distributions in accordance with
Section 1.9(c), and the Certificates so surrendered shall then be canceled.
Subject to Section 1.8 and Section 1.9(c), until surrendered as contemplated by
this Section 1.9(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 shares of Lucent Common Stock into which such Company Capital Stock
shall have been converted. As soon as practicable after the Effective Time, and
subject to and in accordance with the provisions of Section 8, Lucent shall
cause to be distributed to the Escrow Agent certificates representing 1,152,412
shares of Lucent Common Stock which shall be registered in the name of the
Escrow Agent as nominee for the holders of Certificates canceled pursuant to
this Section 1.9. Such shares shall be beneficially owned by such holders, shall
be held in escrow and shall be
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available to compensate Lucent as provided in Section 8. To the extent not used
for such purpose, such shares shall be released, as provided in Section 8.
(c) No dividends or other distributions declared or made after
the Effective Time with respect to the Lucent Common Stock with a record date
after the Effective Time shall be paid to any holder entitled by reason of the
Merger to receive certificates representing Lucent Common Stock and no cash
payment in lieu of a fractional share of Lucent Common Stock shall be paid to
any such holder pursuant to Section 1.8 until such holder shall have surrendered
its Certificates pursuant to this Section 1.9. 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 shares of Lucent Common Stock 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 shares of
Lucent Common Stock 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 shares of Lucent Common
Stock or any cash is to be issued or 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 of Lucent Common Stock 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. Lucent 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 Company Capital Stock such amounts as Lucent 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 state, local or foreign tax
law. To the extent that amounts are so withheld by Lucent 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 Company Capital Stock in respect
of which such deduction and withholding was made by Lucent or the Exchange
Agent. All amounts in respect of taxes received or withheld by Lucent shall be
disposed of by Lucent in accordance with the Code or such state, local or
foreign tax law, as applicable.
(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
conditions as the Board of Directors of the Surviving Corporation may impose,
the Exchange Agent shall issue in exchange for such lost, stolen or destroyed
Certificate the shares of Lucent Common Stock as determined under Section 1.5(c)
and pay any cash, dividends or other distributions as determined in accordance
with Sections 1.8 and 1.9(c) in respect of such Certificate; provided, that
Lucent 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 bond in such sum as it may reasonably require as
indemnity against any
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claim that may be made against Lucent, the Surviving Corporation 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. 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.
1.10 Return of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the former holders of Company Capital Stock for
six months after the Effective Time shall be delivered to Lucent, upon its
request, and any such former holders who have not theretofore surrendered to the
Exchange Agent their Certificates in compliance herewith shall thereafter look
only to Lucent for payment of their claim for shares of Lucent Common Stock, any
cash in lieu of fractional shares of Lucent Common Stock and any dividends or
distributions with respect to such shares of Lucent Common Stock, and Lucent
agrees to promptly pay any such claims. None of Lucent, Acquisition, the
Exchange Agent or the Company shall be liable to any former holder of Company
Capital Stock for any such shares of Lucent Common Stock 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.
1.11 No Further Ownership Rights in Company Capital Stock. All
certificates representing shares of Lucent Common Stock delivered upon the
surrender for exchange of any Certificate in accordance with the terms hereof
(including any cash paid pursuant to Section 1.8 or Section 1.9) shall be deemed
to have been delivered (and paid) in full satisfaction of all rights pertaining
to the Company Capital Stock previously represented by such Certificate.
1.12 Further Assurances. If at any time after the Effective
Time the Surviving Corporation 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 or confirm, of record or
otherwise, in the Surviving Corporation, 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) otherwise to carry out the purposes of
this Agreement, the Surviving Corporation and its proper officers and directors
or their designees 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 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.
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2. Approval by Stockholders
2.1 Approval by Stockholders. Each of Acquisition and the
Company shall either (i) call a meeting of its respective stockholders to be
held as promptly as practicable after the date hereof or (ii) solicit written
consents of its respective stockholders in lieu thereof for purposes of voting
upon this Agreement. Each of the Company and Acquisition will, through their
respective boards of directors, recommend to their respective stockholders
approval of this Agreement. The Company shall provide Lucent with a copy of all
materials to be distributed to its stockholders describing the transactions
contemplated hereby not later than one day prior to distribution. The Company,
Acquisition and Lucent 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 action in connection with the transactions
contemplated by this Agreement. All materials distributed to the stockholders of
the Company with respect to 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 shall be in form and
substance reasonably acceptable to Lucent and shall be in accordance with
applicable law.
3. Representations and Warranties of the Company. The Company
represents and warrants to Acquisition and Lucent as follows:
3.1 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority and all
necessary governmental approval to carry on its business as it has been and is
now being conducted. Except as set forth in Schedule 3.1, 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 could not reasonably be expected to have a Material Adverse Effect on
the Company.
3.2 Capitalization; Options and Other Rights. (a) The total
authorized shares of capital stock of the Company consists of (i) 124,000,000
shares of Company Common Stock, of which 37,022,900 shares are issued and
outstanding (the "Outstanding Common Shares") and 38,831,836 shares have been
reserved for the conversion of the Company Preferred Stock (the "Reserved Common
Shares" and collectively with the Outstanding Common Shares, the "Common
Shares"); and (ii) 1,000,000 shares of Company Preferred Stock, of which (A)
46,000 shares have been designated as Series A Preferred Stock and 46,000 shares
are issued and outstanding, (B) 47,660 shares have been designated as Series B
Preferred Stock and 47,660 shares are issued and outstanding, (C) 56,500 shares
have been designated as Series C Preferred Stock and 56,500 shares are issued
and outstanding and (D) 200,000 shares have been designated as Series D
Preferred Stock and 190,000 shares are issued and outstanding (collectively, the
"Preferred Shares"; the Common Shares and the Preferred Shares are collectively
referred to herein as the "Shares"). All the Outstanding Common Shares have been
duly and validly
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authorized and issued and are fully paid and nonassessable and all the Reserved
Common Shares, when issued upon the conversion of the Company Preferred Stock,
will be duly and validly authorized and issued and fully paid and nonassessable.
All the Preferred Shares have been duly and validly authorized and issued and
are fully paid and nonassessable. None of the Shares has been issued and none of
such Company Capital Stock will be issued in violation of the preemptive rights
of any stockholder of the Company. The Outstanding Common Shares and Preferred
Shares have been issued, and the shares of Company Common Stock to be issued
upon the conversion of the Company Preferred Stock will be issued, in compliance
in all material respects with all applicable Federal and state securities laws
and regulations.
(b) Except as set forth in Section 3.2(a) and in Schedule
3.2(b), 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,
to the Best Knowledge of the Company, are there any proxies, agreements or
understandings with respect to the voting of the Shares or the direction of the
business operations or conduct of the Company, except as contemplated by this
Agreement.
(c) Schedule 3.2(c) 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).
3.3 Authority; Stockholder Vote. (a) The Company has full
power and authority to execute, deliver and perform this Agreement and the
transactions contemplated hereunder. The execution, delivery and performance of
this Agreement by the Company has been duly authorized and approved by all
necessary corporate or other action and, except for (i) the approval of this
Agreement by the stockholders of the Company and (ii) 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 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,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors rights generally and by the effect of general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
(b) The execution, delivery and 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,
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rule, regulation, order, writ, injunction, judgment or decree of any court,
governmental authority or regulatory agency applicable to the Company, except
for violations which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Company, 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 to which the
Company is a party or by which any of its properties may be bound, except (A) as
set forth on Schedule 3.3(b) and (B) for violations, breaches or defaults which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on the Company.
(c) 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 (i) the filing and recordation of appropriate
merger documents as required by the DGCL and (ii) any such consent, approval,
authorization, permission, notice or filing which if not obtained or made could
not reasonably be expected to have a Material Adverse Effect on the Company.
(d) 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 resolved to recommend 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.
(e) 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 is the approval of (i) a majority of the
outstanding shares of Company Common Stock, Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock voting
together as a single class and (ii) 66.15% of the outstanding shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock voting together as a single class, and prior to Closing this
Agreement and the transactions contemplated hereby shall have been so approved.
3.4 Charter Documents. The Company has previously furnished to
Lucent a true, complete and correct copy of the Certificate of Incorporation and
the By-laws of the Company. 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.
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3.5 Financial Statements. (a) The Company has previously
furnished to Lucent (or will have furnished prior to July 10, 1999) true and
complete copies of the following financial statements of the Company (the
"Financial Statements"):
(i) audited balance sheets of the Company as of December 31,
1998 (the "Balance Sheet") and December 31, 1997, such balance sheets audited
with reports by PricewaterhouseCoopers LLP and Ernst & Young LLP, respectively;
and
(ii) audited statements of operations, stockholders' equity
and cash flows of the Company for the fiscal year ended December 31, 1998 and
the period from January 3, 1997 to December 31, 1997, such financial statements
audited with reports by PricewaterhouseCoopers LLP and Ernst & Young LLP,
respectively; and
(iii) the unaudited balance sheet of the Company as of April
30, 1999 (the "Unaudited Balance Sheet"); and
(iv) unaudited statements of operations and stockholders'
equity and cash flows of the Company for the four-month period ended April 30,
1999.
(b) The Financial Statements were prepared in accordance with
GAAP (except, in the case of the unaudited financial statements, for normal and
recurring year-end adjustments and the omission of footnotes). The Financial
Statements were prepared on the basis of the books and records of the Company
(in each case, as of the date of such Financial Statements) 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 changes in stockholders' equity
and cash flows for each of the periods then ended in conformity with GAAP.
3.6 Absence of Undisclosed Liabilities; Indebtedness. (a)
Except as disclosed on Schedule 3.6(a) or as set forth in the notes to the
Financial Statements, the Company has no liability or obligation of any nature
(whether absolute, accrued or contingent or otherwise) which is materially in
excess of amounts shown or reserved therefor in the Financial Statements other
than (a) liabilities or obligations not required under GAAP on a basis
consistent with that of preceding accounting periods to be reported on such
Financial Statements and (b) liabilities or obligations incurred after the date
of the Unaudited Balance Sheet incurred in the ordinary course of business and
consistent with past practice.
(b) Except as disclosed on Schedule 3.6(b), the Company does
not have any Indebtedness.
3.7 Operations and Obligations. (a) Except as set forth in
Schedule 3.7(a) or reflected on the Unaudited Balance Sheet, since December 31,
1998,
(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 (other than as a result of (i) general economic conditions,
(ii) business and economic conditions generally affecting the
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data networking industry or (iii) the announcement of the transactions
contemplated hereunder); and
(ii) there has been no impairment, damage, destruction, loss
or claim, whether or not covered by insurance, or condemnation or other
taking which could reasonably be expected to have a Material Adverse
Effect on the Company.
(b) Except (i) as set forth in Schedule 3.7(b) and (ii) for
actions required to be taken hereunder or approved in advance thereof by Lucent
in writing, since December 31, 1998, the Company has conducted its business only
in the ordinary course and consistent with past practice. Without limiting the
generality of the foregoing, since December 31, 1998, 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 generally
accepted accounting principles, would be capitalized;
(iii) paid any obligation or liability (absolute or
contingent) other than liabilities reflected or reserved against in the
Balance Sheet and liabilities incurred since December 31, 1998 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 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 3.10;
(vi) undertaken or committed to undertake capital expenditures
exceeding $100,000 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 Balance Sheet or any
assets acquired by the Company after December 31, 1998, 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;
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(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;
(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) allowed the levels of supplies or other materials
included in the inventory of the Company to vary materially from the
levels customarily maintained in accordance with past practice;
(xiii) 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;
(xiv) 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
(xv) taken any of the actions which, under Section 5.2, it is
prohibited from taking between the date hereof and the Closing Date.
(c) Except as set forth in Schedule 3.7(c), there are no
accrued and unpaid dividends or distributions with respect to the Company
Capital Stock.
3.8 Properties. (a) The Company has good and valid title to
all its properties and assets (other than Intellectual Property Rights and
Patents to the extent qualified by Section 3.14 ) reflected on the 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
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 to the operations of the business of the Company.
(b) The Company does not own any real property.
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3.9 Customers and Suppliers. None of the Company's customers
which individually account for more than 5% of the Company's gross revenues
during the 12-month period immediately preceding the date hereof has terminated
or indicated that it intends to terminate any agreement with the Company. During
the 12-month period immediately preceding the date hereof, no material supplier
of the Company has indicated that it will stop, or decrease the rate of,
supplying materials, products or services to the Company.
3.10 Contracts. Schedule 3.10 lists any of the following not
otherwise listed on any other Schedule:
(a) each written contract or commitment which creates an
obligation on the part of the Company in excess of $50,000;
(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 $50,000;
(c) each written contract or commitment restricting the
Company from engaging in any line of business;
(d) each written contract to which the Company is a party
which contains a change of control provision;
(e) each written contract or commitment in excess of $50,000
to which the Company is a party for any charitable contribution;
(f) each written joint venture or partnership agreement to
which the Company is a party;
(g) 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;
(h) each written agreement in excess of $50,000 to which the
Company is a party with respect to any assignment, discounting or reduction of
any receivables of the Company;
(i) 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 $50,000, except for
contracts for the sale of inventory, machinery or equipment in the ordinary
course of business;
(j) each written employment or consulting contract entered
into by the Company; and
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(k) each supply agreement to which the Company is a party that
the Company could not readily replace without a material impact on the Company.
Except as set forth on Schedule 3.10, (i) there are no oral
contracts or commitments of the types described in this Section 3.10 which
create an obligation on the part of the Company which are individually in excess
of $50,000 or in the aggregate in excess of $100,000, (ii) there are no
contracts or commitments between the Company and any Affiliate, (iii) there are
no contracts, commitments or arrangements between the Company and any employee
which require the payment of any compensation upon the occurrence of any
specified contingency, (iv) there are no contracts or arrangements to which the
Company is a party, except this Agreement, which require notice to, the consent
of, or any payment of any compensation (whether as a penalty, liquidated damages
or otherwise) to any party with respect to the Merger or any of the transactions
contemplated hereby or in the event of the termination of such contract or
arrangement on or following the Effective Time, and (v) there are no contracts
to which the Company is a party which would create rights to any Person against
Lucent or any of its Affiliates (other than rights against the Company as in
effect on the Closing Date).
3.11 Absence of Default. Except as set forth in Schedule 3.11,
(a) each of the agreements listed on Schedules 3.10, 3.14, 3.17 and 3.24 that
creates obligations of any Person in excess of $50,000 constitutes a valid and
binding obligation of the parties thereto and is in full force and effect and
will continue in full force and effect after giving effect to the Merger, in
each case, without breaching the terms thereof or resulting in the forfeiture or
impairment of any rights thereunder and without notice to, the consent, approval
or act of, or the making of any filing with, any other Person; (b) the Company
has fulfilled and performed in all material respects its obligations under each
such agreement to which it is a party to the extent such obligations are
required by the terms thereof to have been fulfilled or performed through the
date hereof; (c) the Company is not alleged in writing to be, and each other
party to any such agreement is not, to the Best Knowledge of the Company, in
default under, nor 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, by any such other party, and (e) the Company is not
currently renegotiating any such agreement or paying liquidated damages in lieu
of performance thereunder. Except as set forth in Schedule 3.28, the Company has
previously delivered complete and correct copies of all such agreements
(including all amendments) to Lucent.
3.12 Litigation. Except as set forth in Schedule 3.12, (i)
there are no actions, suits, arbitrations, legal or administrative proceedings
or investigations pending or, to the Best Knowledge of the Company, 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 3.12, the Company is not the plaintiff in any such proceeding
nor is the Company contemplating commencing legal action against any other
Person.
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3.13 Compliance with Law. Except as set forth in Schedule
3.13:
(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") which is material to the
business of the Company; and
(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 $20,000 in the aggregate ("Immaterial Authorizations"); and
(c) the Company has not received written notice of violation
of, or to the Best Knowledge of the Company, has not materially violated any
Laws to which it 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).
3.14 Intellectual Property; Year 2000. (a) The Company owns,
or is validly licensed or otherwise has the right to use, all trademarks, trade
secrets, trademark rights, trade names, trade name rights, service marks,
service xxxx rights and copyrights which are material to the conduct of the
Business (the "Intellectual Property Rights"). Schedule 3.14(a) contains a list
of (i) patents and patent applications ("Patents"), (ii) trademark registrations
and applications and (iii) copyright registrations and applications owned by the
Company.
(b) To the Best Knowledge of the Company, the Company has not
interfered with, infringed upon, misappropriated or otherwise come into conflict
with any Patent or Intellectual Property Rights of any other Person. Except as
disclosed on Schedule 3.14(b), the Company has not received any written 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 Patents or Intellectual Property Rights of any other
Person) which has not been settled or otherwise fully resolved. Except as
disclosed on Schedule 3.14(b), to the Best Knowledge of the Designated Group, no
other Person has interfered with, infringed upon, misappropriated or otherwise
come into conflict with any Patents or Intellectual Property Rights of the
Company.
(c) Except as disclosed on Schedule 3.14(c), assuming that
Lucent continues to operate the business of the Company as presently conducted
by the Company, then, to the Company's Best Knowledge, Lucent's use of the
Patents or Intellectual Property Rights which are material to the conduct of the
business by the Company will not interfere with, infringe upon, misappropriate
or otherwise come into conflict with the Patents or Intellectual Property Rights
of any other Person by virtue of any change of control or prohibition of
assignment provisions in agreements between the Company and any such Person.
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(d) Except as disclosed on Schedule 3.14(d), each employee,
agent, consultant, officer, director or contractor who has materially
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 Lucent.
(e) Except as disclosed on Schedule 3.14(e), the Company has
taken all reasonable steps with the intent of ensuring that its products
(including prior and current products and technology and products and technology
currently under development) will, when used in accordance with associated
documentation on a specified platform or platforms, be capable upon installation
of (i) operating in the same manner on dates in both the Twentieth and
Twenty-First centuries, (ii) accurately processing, providing and receiving date
data from, into and between the Twentieth and Twenty-First centuries, including
the years 1999 and 2000, and (iii) recognizing year 2000 as a leap year;
provided that all non-Company products (e.g., hardware, software and firmware)
used in or in combination with the Company's products, properly exchange data
with the Company's products in the same manner on dates in both the Twentieth
and Twenty-First centuries. Except as disclosed on Schedule 3.14(e), the Company
has taken all reasonable steps to assure that the year 2000 date change will not
adversely affect its operations or the systems and facilities that support the
operations of the Company, except as could not reasonably be expected to have a
Material Adverse Effect on the Company.
(f) Except as set forth on Schedule 3.14(f), (i) the Company
has not sold, assigned, transferred, licensed or sublicensed, or entered into
any contract to sell, assign, transfer or sublicense its Patents or Intellectual
Property Rights other than, in connection with the Company's assets, in the
ordinary course of business, permitting its customers to use any Patents or
Intellectual Property Rights embedded in its products and (ii) the Company has
not entered into any contract (oral or written) or other arrangement pursuant to
which the Company has agreed or is obligated to license, transfer or place in
escrow the source code for any of its products (prior or current) or restrict
the use of any of its Patents or Intellectual Property Rights.
(g) To the Best Knowledge of the Company, no Company
Stockholder or employee of the Company has any interest in any Intellectual
Property Rights or Patents (other than as a stockholder of the Company) that is
material to the business or operations of the Company.
3.15 Tax Matters. (a) Except as set forth on Schedule 3.15,
(i) the Company has filed all Tax Returns required to be filed; (ii) all such
Tax Returns are complete and accurate in all material respects 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 or the Company has established adequate reserves therefor; (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 or the appropriate
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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, to the Best Knowledge of the Company, 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) Tax indemnity arrangements, if
any, will terminate prior to Closing and the Surviving Corporation will not have
any liability thereunder on or after Closing; (ix) there are no liens for Taxes
upon the 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) the Company is not or has not been a member of any group of
corporations filing a consolidated tax return for United States federal income
tax purposes.
(b) No consent to the application of Section 341(f)(2) of the
Code has been filed with respect to any property or assets held or acquired or
to be acquired by the Company.
(c) The Company (i) has not agreed to and is not required to
make any adjustment pursuant to Section 481(a) of the Code, and, to the Best
Knowledge of the Company, the Internal Revenue Service ("IRS") has not proposed
any such adjustment or change in accounting method with respect to the Company.
The Company does not have any application pending with the IRS or any other tax
authority requesting permission for any change in accounting method.
(d) Except as set forth on Schedule 3.15, the Company does not
own an interest in any (i) domestic international sales corporation, (ii)
foreign sales corporation, (iii) controlled foreign corporation, or (iv) passive
foreign investment company.
(e) The Company is not a party (other than as an investor) to
any industrial development bond.
(f) 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.
(g) The Company has not constituted either a "distributing
corporation" or a "controlled corporation" in a distribution of stock qualifying
for tax-free treatment under Section 355 of the Code (i) in the two years prior
to the date of this Agreement or (ii) in a distribution which could otherwise
constitute part of a "plan" or "series of related transactions" (within the
meaning of Section 355(e) of the Code) in conjunction with the Merger.
3.16 Employee Benefit Plans. (a) Schedule 3.16(a) 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")) (sometimes referred to as "Pension Plans"), "employee welfare
benefit plans" (as defined in Section 3(1) of ERISA)
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(sometimes referred to as "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 Lucent 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 could not reasonably be expected to 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.
(b) All Pension Plans that are intended to be qualified under
Section 401(a) of the Code have been the subject of a determination opinion,
notification or advisory letter from the IRS to the effect that such Pension
Plans is so qualified and the trust thereunder is 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 has no 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) Schedule 3.16(e) lists all outstanding Company Stock
Options, showing for each such Option: (i) the name of the optionee, (ii) the
number of shares issuable, (iii) the number of vested shares as of the date
hereof and immediately after giving effect to the Merger, (iv) the date of
expiration and (v) the exercise price. Schedule 3.16(e) lists all outstanding
Award Interests under the Equity Incentive Plan, showing for each such Award
Interest: (i) the name of the holder, (ii) the shares of membership interests of
Incentive LLC and the number of shares of Company Common Stock represented by
such membership interests, (iii) the number of vested shares as of the date
hereof and immediately after giving effect to the Merger, (iv) the date of
expiration and (v) the exercise price.
(f) Except as set forth in Schedule 3.16(f) or 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.
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(g) 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.
(h) Except as set forth in Schedule 3.16(h), the Company has
not issued any Company Common Stock under any restricted stock purchase
arrangement and the Company is not a party to any restricted stock purchase
arrangement. After giving effect to the Merger, the Company shall be subject to
the restricted stock purchase arrangements set forth in Schedule 3.16(h), which
Schedule also lists (i) the number of shares of restricted stock issuable and
(ii) the vesting schedule for the shares of restricted stock.
3.17 Executive Employees. (a) Schedule 3.17 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 1998 annual base salary
exceeded $75,000 ("Executive Employees").
(b) Except as set forth in Schedules 3.16 or 3.17, the Company
has no employment agreement with, or maintains 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
would obligate the Company to make any payment or provide any benefit the
deduction of which is limited by Section 280G of the Code or that could be
subject to tax under Section 4999 of the Code.
3.18 Employees. (a) The Company has complied with all
applicable laws, rules and regulations respecting employment and employment
practices, terms and conditions of employment, wages and hours, other than
instances of non-compliance which, individually or in the aggregate, could not
be reasonably expected to result in a Material Adverse Effect on the Company,
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 is satisfactory; (c)
there are no controversies pending or, to the Best Knowledge of the Company,
threatened between the Company and any of its employees, which controversies
have or could reasonably be expected to have a Material Adverse Effect on the
Company; (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, 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, 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
written 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, no such
investigation is in progress.
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3.19 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, 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
Best Knowledge of the Company, 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.
3.20 Bank Accounts, Letters of Credit and Powers of Attorney.
Schedule 3.20 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 Lucent true, correct and complete copies of each
letter of credit and each power of attorney described on Schedule 3.20.
3.21 Subsidiaries. The Company has no Subsidiaries.
3.22 Affiliate Transactions. Except for the individuals listed
on Schedule 3.22, (i) no officer or director of the Company has any significant
interest in any Person that is engaged in a business which is in competition
with the Business of the Company, and (ii) no officer or director of the Company
is a supplier to, or a customer of, the Company, or is a party to any contract
listed on Schedule 3.10, 3.14 or 3.24.
3.23 Insurance. Schedule 3.23 sets forth a list of all
policies of insurance maintained, owned or held by the Company as of the date
hereof and a brief description of any outstanding claims under any of such
insurance policies. The Company shall use all commercially reasonable efforts to
keep such insurance or comparable insurance in full force and effect through the
Closing Date. 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 any notice or
present any claim thereunder in a due and timely manner, other than instances
which, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on the Company. Except as disclosed in Schedule
3.23, to the Best Knowledge of the Company, the full policy limits (subject to
deductibles provided in such policies) are available and unimpaired under each
such policy and 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.
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3.24 Leases. Schedule 3.24 lists all outstanding leases, both
capital and operating, or licenses, pursuant to which the Company has (i)
obtained the right to use or occupy any real or personal property where the
value of such personal property exceeds $25,000 in the case of any single lease
or $50,000 in the aggregate, or (ii) granted to any other Person the right to
use any property described on Schedule 3.25.
3.25 Assets. (a) Schedule 3.25 lists each material item of
machinery, equipment, furniture, vehicles or other personal property owned by
the Company having an original cost of $50,000 or more.
(b) Except as set forth in Schedule 3.25, 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 but
excluding Intellectual Property Rights and Patents) 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
$50,000 in the aggregate; provided that the foregoing wear, tear and
obsolescence shall not materially disrupt the business of the Company as
presently being conducted) and are suitable for the uses for which intended.
3.26 Minute Books. The minute books of the Company made
available to Lucent contain, in all material respects, 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.
3.27 Financial Projections. The Company has made available to
Lucent 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 makes no representation or warranty regarding the
accuracy of such projections or as to whether such projections will be achieved
or otherwise, except that the Company represents and warrants that such
projections were prepared in good faith and are based on assumptions believed by
it at the time such projections were presented to Lucent to be reasonable and
accurate.
3.28 Complete Copies of Materials. Except as set forth in
Schedule 3.28, the Company has delivered or made available true and complete
copies of each document that has been requested by Lucent or its counsel in
connection with their legal and accounting review of the Company.
3.29 Disclosure. None of the representations or warranties of
the Company contained herein, none of 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 Lucent or Acquisition by the Company pursuant to
any provision of this Agreement, contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact herein or
therein necessary in order to make the statements contained herein or therein
not misleading in any material respect.
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3.30 Pooling of Interests; Reorganization. The Company has not
(i) taken any action or failed to take any action which action or failure would
jeopardize the treatment of the Merger as a pooling of interests in accordance
with GAAP and the regulations and interpretations of the Securities and Exchange
Commission (the "SEC") for accounting purposes or (ii) taken any action or
failed to take any action which action or failure would jeopardize the
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code.
3.31 Xxxx-Xxxxx-Xxxxxx Compliance. The Company is its own
"ultimate parent entity" (as defined in 16 CFR Section 801.1(a)(3)). The
"person" (as defined in 16 CFR Section 801.1(a)(1)) in which the Company is
included does not have annual net sales or "total assets" (as each such term is
defined in 16 CFR Section 801.11)) of $10,000,000 or more.
4. Representations and Warranties of Acquisition and Lucent. Each of
Acquisition and Lucent represents and warrants to the Company as follows:
4.1 Organization. Each of Lucent and Acquisition 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 and
all necessary governmental approvals to enter into and perform this Agreement
and the transactions contemplated hereby to be performed by it.
4.2 Capital Structure. The authorized capital stock of Lucent
consists of (i) 6,000,000,000 shares of common stock, par value $.01 per share
(the "Lucent Common Stock"), of which as of June 4, 1999 approximately
2,700,000,000 shares were issued and outstanding, and (ii) 250,000,000 shares of
preferred stock, par value $1.00 per share ("Lucent Authorized Preferred
Stock"), of which 15,000,000 shares have been designated Series A Junior
Participating Preferred Stock (the "Lucent Junior Preferred Stock") and no
shares are issued or outstanding. All the outstanding shares of Lucent Common
Stock have been duly and validly authorized and issued and are fully paid and
nonassessable. None of the outstanding shares of Lucent Common Stock has been
issued in violation of the preemptive rights of any stockholder of Lucent. The
shares of outstanding Lucent Common Stock were issued in compliance in all
material respects with all applicable federal and state securities laws and
regulations. The shares of Lucent Common Stock to be issued pursuant to the
Merger and upon exercise of the Adjusted Options will be duly and validly
authorized and issued, will be fully paid and non-assessable and will not be
issued in violation of the preemptive rights of any stockholder of Lucent.
4.3 Authority. (a) Each of Lucent and Acquisition has full
corporate power and authority to execute, deliver and perform this Agreement and
the transactions contemplated hereunder. The Board of Directors of Acquisition
has declared the Merger advisable and approved this Agreement and resolved to
recommend the approval of the Merger and adoption of this Agreement and the
consummation of the transactions contemplated hereby to the sole stockholder of
Acquisition. The execution, delivery and performance of this Agreement by each
of Lucent and Acquisition has been duly authorized and approved (i) in the case
of Acquisition, by its Board of Directors and (ii) in the case of Lucent, by all
necessary corporate action and, except for (A) the adoption of this Agreement by
the stockholders of Acquisition and (B) the filing of appropriate merger
documents as required by the DGCL, no other corporate proceedings other
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than actions previously taken on the part of either Lucent or Acquisition are
necessary to authorize this Agreement and the transactions contemplated hereby.
This Agreement has been duly authorized, executed and delivered by each of
Lucent and Acquisition and is the legal, valid and binding obligation of each of
Lucent and Acquisition, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors rights generally and by the effect of general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law). The filing of the Registration Statement has been duly authorized by
Lucent.
(b) The execution, delivery and performance by each of Lucent
and Acquisition 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 either Lucent or 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
Lucent and Acquisition 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 Lucent or
Acquisition is a party or by which any of the properties of Lucent 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
Lucent, its Subsidiaries and Acquisition taken as a whole.
(c) The execution and delivery of this Agreement by each of
Lucent and Acquisition does not, and the performance by each of Lucent 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
DGCL; (ii) any such consent, approval, authorization, permission, notice or
filing which is required under the Securities Act of 1933 (together with the
rules and regulations thereunder, 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
obtained or made would not have a Material Adverse Effect on Lucent, its
Subsidiaries and Acquisition taken as a whole.
4.4 Litigation. (a) Neither Lucent 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 Lucent or
Acquisition is subject which might
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adversely affect or restrict its ability to consummate the transactions
contemplated by this Agreement or to perform its obligations hereunder.
4.5 SEC Filings; Lucent Financial Statements. (a) Since
October 1, 1997, Lucent has filed with the SEC all required reports, schedules,
forms, statements and other documents (including exhibits and all other
information incorporated therein) required under the Securities Act and the
Exchange Act (the "Lucent SEC Documents"). As of their respective dates, the
Lucent SEC Documents complied in all material respects with the requirements of
the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Lucent SEC
Documents and, except to the extent that information contained in any Lucent SEC
Document has been revised or superseded by a later filed Lucent SEC Document,
none of the Lucent SEC Documents when filed contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of Lucent included in the Lucent SEC Documents comply as to form, as
of their respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial position of Lucent
and its consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal recurring year-end audit
adjustments) and are consistent in all material respects with the books and
records of Lucent.
(b) Except for liabilities (i) reflected in such financial
statements or in the notes thereto, (ii) incurred in the ordinary course of
business consistent with past practice since September 30, 1998, the date of the
most recent audited financial statements of Lucent included in the Lucent SEC
Documents, (iii) incurred in connection with this Agreement or the transactions
contemplated hereby, or (iv) disclosed in Schedule 4.5, neither Lucent nor any
of its Subsidiaries has any liabilities or obligations (whether absolute,
accrued, contingent or otherwise) of any nature which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on
Lucent and its Subsidiaries taken as a whole.
4.6 Information Supplied. None of the information supplied or
to be supplied by Lucent specifically for inclusion or incorporation by
reference in the Registration Statement, at the time the Registration Statement
becomes effective under the Securities Act, will 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 Lucent with
respect to statements made or incorporated by reference therein based on
information supplied by the Company specifically for inclusion or incorporation
by reference in the Registration Statement.
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4.7 Operations and Obligations. Except as described in the
Lucent SEC Documents, since September 30, 1998, the date of the most recent
audited balance sheet of Lucent contained in the Lucent SEC Documents, (i)
except as a result of the transactions contemplated by this Agreement or in
connection with the acquisition by Lucent or any of its Subsidiaries of all or
substantially all the capital stock or all or substantially all the assets of
another Person, there has not been any development that has had or reasonably
would be expected to have a Material Adverse Effect on Lucent and its
Subsidiaries taken as a whole; (ii) there has not been any material change by
Lucent in its accounting methods, principles or practices, except as required by
changes in GAAP or any other change provided such other change could not
reasonably be expected to have a Material Adverse Effect on Lucent and its
Subsidiaries; or (iii) except as a result of the transactions contemplated by
this Agreement or in connection with the acquisition by Lucent or any of its
Subsidiaries of all or substantially all the capital stock or all or
substantially all the assets of another Person, there has not been any material
revaluation by Lucent of any of its assets including, without limitation,
writing down the value of capitalized software or inventory or writing off notes
or accounts receivable which would have a Material Adverse Effect.
4.8 Interim Operations of Acquisition. Acquisition was formed
solely for the purpose of engaging in the transactions contemplated hereby, has
engaged in no other business activities and has conducted its operations only as
contemplated hereby.
4.9 Pooling of Interests; Reorganization. Neither Lucent nor
any of its Subsidiaries has (i) taken any action or failed to take any action
which action or failure would jeopardize the treatment of the Merger as a
pooling of interests in accordance with GAAP and the regulations and
interpretations of the SEC for accounting purposes or (ii) taken any action or
failed to take any action which action or failure would jeopardize the
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code.
5. Conduct Pending Closing.
5.1 Conduct of Business Pending Closing. From the date hereof
until the Closing, the Company will:
(a) maintain its existence in good standing;
(b) maintain the general character of its business and
properties and conduct its business in the ordinary and usual manner consistent
with past practices, except as expressly permitted by this Agreement;
(c) maintain business and accounting records consistent with
past practices; and
(d) use its reasonable best efforts (i) to preserve its
business intact, (ii) to keep available to the Company the services of its
present officers and employees, and (iii) to preserve
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for the Company the goodwill of its suppliers, customers and others having
business relations with the Company.
5.2 Prohibited Actions Pending Closing. Unless otherwise
provided for herein, approved by Lucent in writing or set forth in Schedule 5.2,
from the date hereof until the Closing, the Company shall not:
(a) amend or otherwise change its Certificate of Incorporation
or By-laws;
(b) issue or sell or authorize for issuance or sale, or grant
any options or make other agreements with respect to, any shares of its capital
stock or any other of its securities, except for the grant of stock options to
purchase up to 200,000 shares of Company Common Stock granted to employees of
the Company hired after the date hereof consistent with past practice and with
an exercise price reflecting such Company Common Stock's fair market value and
which were granted in the ordinary course of business and except for those
provisions of the agreement with the Exchange Agent which provisions are in
furtherance of this Agreement;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise with respect to any
of its capital stock;
(d) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation, partnership,
other business organization or any division thereof or any material amount of
assets; (ii) incur any indebtedness for borrowed money (other than as
contemplated by Section 5.16) or issue any debt securities or assume, guarantee
or endorse, or otherwise as an accommodation become responsible for, the
obligations of any Person, or make any loans or advances, except for interest
and fees on Indebtedness set forth on Schedule 3.6 incurred in the ordinary
course of business and consistent with past practice; (iii) enter into any
contract or agreement (or series of related contracts or agreements) in excess
of $100,000 other than in the ordinary course of business, consistent with past
practice; (iv) authorize any capital commitment which is in excess of $25,000 or
capital expenditures which are, in the aggregate, in excess of $100,000; or (v)
enter into or amend any contract, agreement, commitment or arrangement with
respect to any matter set forth in this Section 5.2(e);
(f) mortgage, pledge or subject to Lien, any of its assets or
properties or agree to do so except for Permitted Liens;
(g) assume, guarantee or otherwise become responsible for the
obligations of any other Person or agree to so do;
(h) enter into or agree to enter into or terminate (prior to
the expiration date thereof) any employment agreement;
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(i) increase the compensation or benefits payable or to become
payable to its officers or employees, except for increases to employees of the
Company who are not officers in the ordinary course of business and in
accordance with past practices in salaries or wages of employees of the Company
who are not officers of the Company, or grant any severance or termination pay
to, or enter into any severance agreement with any director, officer or other
employee of the Company, or establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any such director, officer or employee;
(j) take any action, other than in the ordinary course of
business and consistent with past practice, with respect to accounting policies
or procedures (including, without limitation, procedures with respect to the
payment of accounts payable and collection of accounts receivables);
(k) make any material Tax election or settle or compromise any
material federal, state, local or foreign income Tax liability;
(l) settle or compromise any pending or threatened suit,
action or claim which is material or which relates to any of the transactions
contemplated by this Agreement;
(m) pay, discharge or satisfy any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than (i) the payment, discharge or satisfaction, in the ordinary course of
business and consistent with past practice, of liabilities reflected or reserved
against in the Balance Sheet or subsequently incurred in the ordinary course of
business and consistent with past practice and (ii) other claims, liabilities or
obligations (qualified as aforesaid) that in the aggregate do not exceed $25,000
and as to which the Company's failure to so pay, discharge or satisfy could not
reasonably be expected to have a Material Adverse Effect on the Company;
(n) except in connection with the sale of the Company's
products in the ordinary course of business and consistent with past practice,
sell, assign, transfer, license, sublicense, pledge or otherwise encumber any of
the Intellectual Property Rights; or
(o) announce an intention, commit or agree to do any of the
foregoing.
5.3 Access; Documents; Supplemental Information. (a) From and
after the date hereof until the Closing, the Company shall afford and, with
respect to clause (ii) below, shall use its reasonable best efforts to cause the
independent certified public accountants for the Company to afford, (i) to the
officers, independent certified public accountants, counsel and other
representatives of Acquisition and Lucent, upon reasonable notice free and full
access at all reasonable times to the properties, books and records, including
tax returns filed and those in preparation of the Company, and the right to
consult with the officers, employees, accountants, counsel and other
representatives of the Company in order that Acquisition and Lucent may have
full opportunity to make such investigations as they shall reasonably desire to
make of the
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operations, properties, business, financial condition and prospects of the
Company, (ii) to the independent certified public accountants of Acquisition and
Lucent, free and full access at all reasonable times to the work papers and
other records of the accountants relating to the Company, and (iii) to
Acquisition and Lucent and their representatives, such additional financial and
operating data and other information as to the properties, operations, business,
financial condition and prospects of the Company as Acquisition and Lucent shall
from time to time reasonably require.
(b) From the date of this Agreement through and including the
Closing, Acquisition, Lucent and the Company agree to furnish to each other
copies of any notices, documents, requests, court papers, or other materials
received from any governmental agency or any other third party with respect to
the transactions contemplated by this Agreement, except where it is obvious from
such notice, document, request, court paper or other material that the other
party was already furnished with a copy thereof.
(c) The Company shall deliver to Lucent, without charge, the
following financial information (the "Supplemental Financial Information"): (i)
within 45 days after each fiscal quarter ending after the date hereof and prior
to the Effective Time, the unaudited balance sheet of the Company as of the end
of such quarter and the unaudited statements of income, stockholders' equity and
cash flows of the Company for such quarter and for the portion of the fiscal
year then completed, (ii) within 90 days after each fiscal year ending after the
date hereof and prior to the Effective Time, the audited balance sheet of the
Company as of the end of such year and the audited statements of income,
stockholders' equity and cash flows of the Company for such year, in each case
prepared in accordance with GAAP certified by PricewaterhouseCoopers LLP, and
(iii) promptly upon the reasonable request by Lucent, such additional financial
information as may be required in connection with any filing by Lucent pursuant
to the requirements of federal or state securities laws. Such Supplemental
Financial Information shall present fairly, in all material respects, the
financial position of the Company for the period covered, subject in the case of
unaudited financials to normal year-end adjustments.
(d) Lucent shall deliver to the Company, without charge a copy
of any filing made by Lucent with the SEC under the Exchange Act, including,
without limitation, any Form 10-Q, 8-K, 10-K or amendments thereto, not later
than five business days after the date of such filing with the SEC.
5.4 No Solicitation. The Company shall not, nor shall it
authorize or permit any of its Affiliates over which the Company exercises
control or any officer, director, employee, investment banker, attorney or other
adviser or representative of the Company or any of its Affiliates to (i)
solicit, initiate, or encourage the submission of, any Acquisition Proposal (as
hereinafter defined) or (ii) participate in any discussions or negotiations
regarding, or furnish to any Person any information for the purpose of
facilitating the making of, or take any other action to facilitate any inquiries
or the making of, any proposal that constitutes, or may reasonably be expected
to lead to, any Acquisition Proposal. Without limiting the foregoing, it is
understood that any violation, of which the Company or any of its Affiliates had
knowledge at the time of such violation, of the restrictions set forth in the
immediately preceding sentence by any officer,
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director, employee, investment banker, attorney, employee, or other adviser or
representative of the Company or any of its Affiliates, whether or not such
Person is purporting to act on behalf of the Company or any of its Affiliates or
otherwise, shall be deemed to be a breach of this Section 5.4 by the Company and
its Affiliates. The Company promptly shall advise Lucent of any Acquisition
Proposal and inquiries with respect to any Acquisition Proposal. "Acquisition
Proposal" means any proposal for a merger or other business combination
involving the Company or any of its Affiliates or any proposal or offer to
acquire in any manner, directly or indirectly, an equity interest in the Company
or any of its Affiliates, any voting securities of the Company or any of its
Affiliates or a substantial portion of the assets of the Company (other than
sales of the Company's products in the ordinary course of business consistent
with past practice).
5.5 Exemption from Registration; Other Actions. (a) The shares
of Lucent Common Stock to be issued in connection with the Merger will be issued
in a transaction exempt from registration under the Securities Act by reason of
Section 4(2) thereof. Lucent shall use its reasonable best efforts to prepare,
file and cause to become effective, on or as promptly as practicable after the
Pooling Date, a registration statement on Form S-3 or such other form as may be
appropriate to be filed with the SEC by Lucent under the Securities Act
(together with any amendments or supplements thereto, whether prior to or after
the effective date thereof, the "Registration Statement") covering the public
resale of such shares of Lucent Common Stock to be issued in connection with the
Merger, and Lucent shall use its reasonable best efforts to keep the
Registration Statement effective until the first anniversary of the Effective
Time (such anniversary date being referred to herein as the "Termination Date").
Any such registration shall be subject to the customary terms and conditions
used in connection with resale prospectuses; provided that if Lucent determines
that sales under the Registration Statement would require disclosure of
non-public information material to Lucent at a time when Lucent desires not to
disclose such information, Lucent may, upon written notice to the Company
Stockholders, suspend on one occasion only and for a period not to exceed 30
consecutive days the right of the Company Stockholders to effect resales,
pursuant to such Registration Statement, of such shares of Lucent Common Stock
issued in connection with the Merger, and Lucent agrees to promptly notify the
Company Stockholders prior to the expiration of such period of the date on which
they may again effect resales under the Registration Statement (it being
understood by the parties that in such event the Termination Date shall be
extended by the amount of time the Company Stockholders' ability to use the
Registration Statement was so suspended).
(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 (and memoranda setting forth the
substance of all oral 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 as in effect on the date hereof), 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.
5.6 Company Stock Options; Equity Incentive Plan. (a) As soon
as practicable following the date of this Agreement, the Board of Directors of
the Company (or, if appropriate, any committee administering the Nexabit 1998
Equity Incentive Plan (the "Company
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Stock Plan")) shall adopt such resolutions or take such other actions as may be
required to effect the following:
(i) adjust the terms of all outstanding options to
purchase shares of Company Capital Stock under the Company
Stock Plan (the "Company Stock Options"), whether vested or
unvested, as necessary to provide that, at the Effective Time,
each Company Stock Option outstanding immediately prior to the
Effective Time shall be amended and converted into an option
to acquire, on the same terms and conditions as were
applicable under such Company Stock Option, the number of
shares of Lucent Common Stock (rounded down to the nearest
whole share) equal to (A) the number of shares of Company
Common Stock subject to such Company Stock Option immediately
prior to the Effective Time multiplied by (B) the Common Stock
Exchange Ratio, at an exercise price per share of Lucent
Common Stock (rounded to the nearest 1/100th of a whole cent)
equal to (x) the exercise price per share of such Company
Common Stock immediately prior to the Effective Time divided
by (y) the Common Stock Exchange Ratio (each Company Stock
Option as so adjusted, an "Adjusted Option"); and
(ii) make such other changes to the Company Stock
Plan as the Company and Lucent may agree are appropriate to
give effect to the Merger, including as provided in Section
5.7.
(b) As soon as practicable after the Effective Time, Lucent
shall deliver to the holders of Company Stock Options appropriate notices (the
"Company Stock Option Notices") setting forth (i) such holders' rights pursuant
to the respective Company Stock Plan and the agreements evidencing the grants of
such Company Stock Options and that such Company Stock Options and agreements
shall be assumed by Lucent and shall continue in effect on the same terms and
conditions (subject to the adjustments required by this Section 5.6 after giving
effect to the Merger) and (ii) the procedures for the exercise of the Adjusted
Options. The term, exercisability, vesting schedule (including any acceleration
provisions therein), status as an "incentive stock option" under Section 422 of
the Code, if applicable, and all of the other terms of the Company Stock Options
shall otherwise remain unchanged.
(c) A holder of an Adjusted Option may exercise such Adjusted
Option in whole or in part by (i) following the exercise procedures to be
delivered by Lucent as set forth in the Company Stock Option Notice and (ii)
concurrently delivering to Lucent the consideration therefor and the federal
withholding tax information, if any, required in accordance with the related
Company Stock Plan.
(d) Except as otherwise contemplated by this Section 5.6 and
except to the extent required under the respective terms of the Company Stock
Options all restrictions or limitations on transfer and vesting with respect to
Company Stock Options awarded under the Company Stock Plan or any other plan,
program or arrangement of the Company, to the extent that such restrictions or
limitations shall not have already lapsed, shall remain in full force and
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effect with respect to such options after giving effect to the Merger and the
assumption by Lucent as set forth above.
(e) Effective as of two business days prior to the Effective
Date, the Company shall amend the Company Stock Plan to terminate all current
and future offering periods.
(f) No later than 30 days after the Effective Time, Lucent
shall prepare and file with the SEC a registration statement on Form S-8 (or
another appropriate form) registering a number of shares subject to the Adjusted
Options. Such registration statement shall be kept effective (and the current
status of the prospectus required thereby shall be maintained in accordance with
the relevant requirements of the Securities Act and the Exchange Act) at least
for so long as any Adjusted Options remain outstanding.
5.7 Company Stock Plan. At the Effective Time, by virtue of
the Merger, the Company Stock Plan and the Company Stock Options granted
thereunder shall be assumed by Lucent, with the result that all obligations of
the Company under the Company Stock Plan, including with respect to awards
outstanding at the Effective Time under the Company Stock Plan, shall be
obligations of Lucent following the Effective Time; provided, that in the case
of any Company Stock Option to which Section 421 of the Code applies by reason
of its qualification under Section 422 or Section 423 of the Code, the option
price, number of shares purchasable pursuant to such Company Stock Option and
the terms and conditions of exercise of such Company Stock Option shall be
determined in order to comply with Section 424 of the Code. Prior to the
Effective Time, Lucent shall take all necessary actions (including, if required
to comply with Section 162(m) of the Code (and the regulations thereunder) or
applicable law or rule of the NYSE, obtaining the approval of its shareholders
at the next regularly scheduled annual meeting of Lucent following the Effective
Time) for the assumption of the Company Stock Plan, including the reservation,
issuance and listing of Lucent Common Stock in a number at least equal to the
number of shares of Lucent Common Stock that will be subject to the Adjusted
Options.
5.8 Employee Benefit Plans; Existing Agreement. As soon as
practicable after the Effective Time (the "Benefits Date"), Lucent shall
provide, or cause to be provided, employee benefit plans, programs and
arrangements to employees of the Company that are the same as those made
generally available to similarly situated employees of Lucent's Internetworking
Systems Group who are hired by Lucent after July 1, 1999. From the Effective
Time to the Benefits Date (which the parties acknowledge may occur on different
dates with respect to different plans, programs or arrangements of the Company)
(the "Continuation Period"), Lucent shall provide, or cause to be provided, the
employee benefit plans, programs and arrangements of the Company provided to
employees of the Company as of the date hereof.
5.9 Indemnification. (a) From and after the Effective Time,
Lucent shall, or shall cause the Surviving Corporation to, fulfill and honor in
all respects the obligations of the Company to indemnify each Person who is or
was a director or officer (an "Indemnified Party") of the Company pursuant to
any indemnifications provision of the Company's Certificate of Incorporation or
By-laws as each is in effect on the date hereof.
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(b) For a period of six years after the Effective Time, Lucent
shall cause to be maintained in effect the current officers' and directors'
liability insurance maintained by the Company with respect to the Indemnified
Parties (provided that Lucent may substitute therefor policies of at least the
same coverage and amounts containing terms and conditions which are no less
advantageous to the Indemnified Parties than such existing insurance) covering
acts or omissions occurring prior to the Effective Time; provided, that Lucent
shall not be required in order to maintain or procure such coverage to pay an
annual premium in excess of 200% of the current annual premium paid by the
Company for its existing coverage (the "Cap"); and provided, further, that if
existing coverage cannot be maintained or equivalent coverage cannot be
obtained, or can be obtained only by paying an annual premium in excess of the
Cap, Lucent shall only be required to obtain as much coverage as can be obtained
by paying an annual premium equal to the Cap. The current annual premium paid by
the Company for its existing coverage is set forth in Schedule 5.9.
(c) This Section 5.9 shall survive the closing of all the
transactions contemplated hereby, is intended to benefit the Indemnified Parties
and their respective heirs and personal representative (each of which shall be
entitled to enforce this Section 5.9 against Lucent and the Surviving
Corporation, as the case may be, as a third-party beneficiary of this
Agreement).
5.10 Preparation of Information Statement. As soon as
practicable after the date hereof, the Company shall prepare, with the
cooperation of Lucent, an information statement for the stockholders of the
Company (the "Information Statement") to approve this Agreement, the Merger and
the transactions contemplated hereby and thereby. The Information Statement
shall constitute a disclosure document for the offer and issuance of the shares
of Lucent Common Stock to be received by the Company Stockholders in the Merger.
Lucent and the Company shall each use its reasonable best efforts to cause the
Information Statement to comply with applicable federal and state securities
laws requirements. Each of Lucent and the Company agrees to provide promptly to
the other such information concerning its business and financial statements and
affairs as, in the reasonable judgment of the providing party or its counsel,
may be required or appropriate for inclusion in the Information Statement, or in
any amendments or supplements thereto, and to cause its counsel and auditors to
cooperate with the other's counsel and auditors in the preparation of the
Information Statement. The Company shall promptly advise Lucent, and Lucent
shall promptly advise the Company, in writing if at any time prior to the
Effective Time either the Company or Lucent shall obtain knowledge of any facts
that might make it necessary or appropriate to amend or supplement the
Information Statement in order to make the statements contained or incorporated
by reference therein not misleading or to comply with applicable law. The
Information Statement shall contain the recommendation of the Board of Directors
of the Company that the Company Stockholders approve the Merger and this
Agreement and the conclusion of the Board of Directors of the Company that the
Merger, this Agreement and the transactions contemplated hereby are advisable
and in the best interest of the Company Stockholders. Notwithstanding anything
to the contrary contained herein, the Company shall not include in the
Information Statement any information with respect to Lucent or its Affiliates
which information shall not have been approved by Lucent prior to such
inclusion.
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5.11 Stock Exchange Listing. Lucent shall use all reasonable
best efforts to list on the NYSE, upon official notice of issuance, the shares
of Lucent Common Stock to be issued in connection with the Merger and upon
exercise of Adjusted Options.
5.12 Affiliates. As soon as practicable after the date hereof,
the Company shall deliver to Lucent a letter identifying all Persons who are, at
the time this Agreement is submitted for adoption by the stockholders of the
Company, "affiliates" of the Company for purposes of qualifying the Merger for
pooling of interests accounting treatment under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations. The Company shall use
its reasonable best efforts to cause each such Person to deliver to Lucent as of
the Closing Date, a written agreement substantially in the form attached as
Exhibit B hereto. Lucent shall use its reasonable best efforts to cause all
Persons who are "affiliates" of Lucent for purposes of qualifying the Merger for
pooling of interests accounting treatment under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations to deliver to the
Company as of the Closing Date a written agreement substantially in the form
attached as Exhibit C hereto; provided that Lucent and its "affiliates" may
deliver a letter substantially in the form of Exhibit C hereto which covers the
same period even if such letter was previously executed.
5.13 Notification of Certain Matters. The Company shall give
prompt notice to Lucent, and Lucent shall give prompt notice to the Company, 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
(ii) any failure of the Company, Lucent or Acquisition, 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 5.13 shall not limit or otherwise affect the remedies available
to the party receiving such notice.
5.14 Tax Returns; Cooperation. The Company on the one hand and
Lucent on the other will cooperate with each other and provide such information
as any party may require in order to file any return to determine Tax liability
or a right to a Tax refund or to conduct a Tax audit or other Tax proceeding.
Such cooperation shall include, but not be limited to, making employees
available on a mutually convenient basis to explain any documents or information
provided hereunder or otherwise as required in the conduct of any audit or other
proceeding. The Company and Lucent will retain until the expiration of any
applicable statutes of limitations (including any extensions thereof) all Tax
Returns, schedules and workpapers and all other material records or documents
relating to the Company for all Tax periods through the first Tax period ending
after the Closing Date. At the expiration of such statutory period (including
any extensions thereof), each party shall have the right to dispose of any such
Returns and other documents or records on thirty (30) days written notice to the
other party. Any information, documents or records obtained under this Section
5.14 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.
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5.15 Pooling of Interests; Reorganization. Each of Lucent and
the Company shall cooperate and work together with its respective accountants,
with the objective that the Merger shall qualify as a pooling of interests under
Opinion 16 of the Accounting Principles Board and the applicable SEC rule and
regulations and Lucent's and the Company's conclusion that such accounting
treatment is appropriate for the Merger to be concurred with by each of the
Company's and Lucent's auditors and the SEC, respectively, and each of the
Company and Lucent agrees that it shall voluntarily take no action that would
cause such accounting treatment not to be obtained. Neither Lucent or any of its
Subsidiaries nor the Company shall take any action which could reasonably be
expected to jeopardize such qualification. Each of Lucent and the Company shall
use its reasonable best efforts to cause the business combination of the Merger
to be qualified as a reorganization under Section 368(a) of the Code.
5.16 Working Capital Financing. Lucent agrees, at the request
of the Company, to provide prior to the Closing Date up to $30,000,000 in
working capital financing to the Company for a term of one year on commercially
reasonable terms and conditions consistent with past practice and reasonably
acceptable to Lucent and the Company.
5.17 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. 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 Effect
the Merger. The respective obligations of each party hereto to effect the Merger
shall be subject to the fulfillment or satisfaction, prior to or on the Closing
Date of the following conditions:
(a) Stockholder Approval. The Merger shall have been duly
approved by the requisite vote of the outstanding shares of Company Capital
Stock and the common stock, $.01 par value per share, of Acquisition entitled to
vote thereon in accordance with the DGCL and the Certificate of Incorporation
and By-laws of each of the Company and Acquisition, respectively.
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Each holder of Company Preferred Stock shall have agreed to waive any rights to
receive any liquidation premium payable in cash in lieu of shares of Lucent
Common Stock.
(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 Merger or any of the transactions contemplated hereby illegal or
would have a Material Adverse Effect on Lucent or the Company (as Surviving
Corporation), 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 (collectively, "Restraints") shall be in effect
specifically referencing any of the parties hereto or the transactions
contemplated by this Agreement which (i) prevents or materially delays the
consummation of the Merger or (ii) otherwise would materially impair the ability
of the Company or Lucent to perform its obligations under this Agreement. No
action or proceeding shall have been commenced seeking any temporary restraining
order, preliminary or permanent injunction or other order from any court of
competent jurisdiction or seeking any other legal restraint or prohibition
preventing or materially delaying the consummation of the Merger or which would
materially impair the ability of the Company or Lucent to perform its
obligations under this Agreement other than any of the foregoing which shall
have been dismissed with prejudice.
(d) Escrow Agreement. Each of Lucent, the Company, the Escrow
Agent and the Company Stockholders' Representative shall have entered into the
Escrow Agreement substantially in the form of Exhibit D hereto (the "Escrow
Agreement").
(e) Representation Letters. Each of the Company and Lucent
shall have executed and delivered a letter of representation relating to certain
tax matters in form and substance reasonably acceptable to the other party.
(f) Affiliate Letters. Each of the Company and its Affiliates
and Lucent and its Affiliates shall have executed and delivered a letter
relating to pooling of interests substantially in the form of Exhibits B and C
hereto, respectively, and each such letter shall be true and correct in all
respects and in full force and effect; provided that Lucent and its Affiliates
may deliver a letter substantially in the form of Exhibit C hereto which covers
the same period even if such letter was previously executed.
(g) Stock Exchange Listing. The shares of Lucent Common Stock
issued in accordance with the Merger and issuable upon exercise of the Adjusted
Options shall have been authorized for listing on the NYSE, subject to official
notice of issuance.
6.2 Conditions Precedent to Obligations of Acquisition and
Lucent. All obligations of Acquisition and Lucent under this Agreement are
subject to the fulfillment or satisfaction, prior to or on the Closing Date, of
each of the following conditions precedent:
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(a) Performance of Obligations; Representations and
Warranties. The Company shall have performed and complied in all material
respects with all agreements and conditions contained in this Agreement that are
required to be performed or complied with by it prior to or at the Closing. Each
of the Company's representations and warranties contained in Section 3 of this
Agreement to the extent it is qualified by Material Adverse Effect or
materiality and the Company's representations and warranties contained in
Section 3.14 shall be true and correct and each of the Company's representations
and warranties to the extent it is not so qualified by Material Adverse Effect
or materiality, shall be true and correct in all material respects, in each
case, on and as of the Closing with the same effect as though such
representations and warranties were made on and as of the Closing, except for
changes permitted by this Agreement and except to the extent that any
representations and warranties expressly relate to an earlier date, in which
case such representations and warranties shall be as of such earlier date.
Lucent and Acquisition shall have received a certificate dated the Closing Date
and signed by the Chairman, President or a Vice-President of the Company,
certifying that, the conditions specified in this Section 6.2(a) have been
satisfied.
(b) Opinion of Counsel. Lucent and Acquisition shall have
received the favorable written opinions dated the Closing Date of Xxxx and Xxxx
LLP and Goulston & Storrs, PC, counsels to the Company, in forms satisfactory to
Lucent and Acquisition.
(c) Pooling Letter. Lucent shall have received a letter, dated
as of the Closing Date, from PricewaterhouseCoopers LLP, in form and substance
satisfactory to Lucent stating in substance that PricewaterhouseCoopers LLP
concurs with the conclusion of the Company's management that no condition exists
at the Company that would preclude accounting of the Merger as a pooling of
interests under Opinion 16 of the Accounting Principles Board and applicable SEC
rules and regulations.
(d) Officer and Director Terminations. In accordance with
Section 1.4, each director and officer of the Company shall cease to act in such
capacity.
(e) No Material Adverse Change. There shall have been no
material adverse change in the assets, business, financial condition or
operations of the Company and no event or events shall have occurred that could
reasonably be expected to have a Material Adverse Effect (other than (i)
conditions generally affecting the data networking industry or (ii) resulting
from the announcement of the Merger) on the Company, and Lucent shall have
received a certificate signed on behalf of the Company by its Chief Executive
Officer and Chief Financial Officer to such effect.
(f) Consents. The Company shall have received all necessary
consents, in form and substance satisfactory to Lucent and Acquisition, from the
other parties to each contract, lease or agreement to which the Company is a
party, except where the failure to receive such consent would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect on
the Company.
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(g) Non-Competition and Non-Disclosure Agreements. Each of
Xxxxxxxx Xxxxxx, Mukesh Chatter, Xxxxx Xxxxxxx and Xxxxxx Xxxxx shall have
entered into Non-Competition and Non-Disclosure Agreements with the Surviving
Corporation, each substantially in the form of Exhibit E hereto, and such
agreements shall be in full force and effect.
(h) Substitute Form W-9. Acquisition and Lucent shall have
received a substitute Form W-9 under the Code in form and substance acceptable
to Acquisition and Lucent executed by each stockholder.
(i) Real Property Certificate. Lucent shall have received a
certificate from the Company 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.
(j) Incentive LLC. Prior to the Effective Time, Nexabit
Networks Incentive LLC ("Incentive LLC"), to the extent necessary, (i) shall
have amended the Nexabit Networks LLC 1997 Equity Incentive Plan (the "Equity
Incentive Plan") to provide that (A) any awards under the Equity Incentive Plan
representing member interests in Incentive LLC (with respect to each individual,
an "Award Interest") shall be converted into the right to receive such number of
shares of Lucent Common Stock to which such individual would be entitled upon
exchange of the Company Common Stock held by Incentive LLC (such number of
shares of Lucent Common Stock to be calculated based on the Common Stock
Exchange Ratio multiplied by the applicable Award Interest) and (B) Incentive
LLC shall not distribute any shares of Lucent Common Stock until after the
Pooling Date and (ii) shall undertake to interpret and enforce the Equity
Incentive Plan as so amended in accordance with its terms and not to otherwise
amend the Equity Incentive Plan.
(k) Shareholder Agreement. Each of the shareholder agreements
entered into by the Company Stockholders shall have been terminated by the
Company and each of the other parties thereto.
(l) Registration Rights Agreement. Each of the registration
rights agreements entered into by the Company and other parties thereto shall
have been terminated by the Company and such parties.
(m) Stockholder Representation Letters. Lucent shall have
received a letter, dated as of the Closing Date, from each Company Stockholder
relating to certain securities matters in form and substance reasonably
acceptable to Lucent.
6.3 Conditions Precedent to the Company's Obligations. 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:
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(a) Performance of Obligations; Representations and
Warranties. Acquisition and Lucent shall have performed and complied in all
material respects with all agreements and conditions contained in this Agreement
that are required to be performed or complied with by them prior to or at the
Closing. Each of the representations and warranties of Acquisition and Lucent
contained in Section 4 of this Agreement to the extent it is qualified by
Material Adverse Effect shall be true and correct and each of the
representations and warranties of Acquisition and Lucent to the extent it is not
so qualified by Material Adverse Effect shall be true and correct in all
material respects, in each case, on and as of the Closing with the same effect
as though such representations and warranties were made on and as of the
Closing, except for changes permitted by this Agreement and except to the extent
that such representations and warranties expressly relate to an earlier date, in
which case such representations and warranties shall be as of such earlier date.
The Company shall have received certificates dated the Closing Date and signed
by the President or a Vice-President of Acquisition and an authorized signatory
of Lucent, certifying that the conditions specified in this Section 6.3(a) have
been satisfied.
(b) Opinion of Counsel. The Company shall have received the
favorable written opinion dated the Closing Date of Sidley & Austin, special
counsel to Acquisition and Lucent, and internal counsel to Acquisition and
Lucent, each in form satisfactory to the Company. The Company shall have
received a written opinion dated the Closing Date of Xxxx and Xxxx LLP, counsel
to the Company, that the Merger should be treated, for federal income tax
purposes, as a reorganization within the meaning of Section 368(a) of the Code.
(c) Pooling Letter. The Company shall have received a letter,
dated as of the Closing Date, from PricewaterhouseCoopers LLP, in form and
substance satisfactory to the Company, stating in substance that
PricewaterhouseCoopers LLP concurs with the conclusion of Lucent's management
that no condition exists at Lucent that would preclude accounting of the Merger
as a pooling of interests under Opinion 16 of the Accounting Principles Board
and applicable SEC rules and regulations.
(d) No Material Adverse Change. There shall have been no
material adverse change in the assets, business, financial condition or
operations of Lucent and no event or events shall have occurred that could
reasonably be expected to have a Material Adverse Effect (other than (i)
conditions generally affecting the data networking industry or (ii) resulting
from the announcement of the Merger) on Lucent and the Company shall have
received a certificate signed on behalf of Lucent by an authorized signatory
thereof.
7. Survival of Representation and Warranties.
7.1 Representations and Warranties. The representations and
warranties of the Company 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 12 months
following the Effective Time. This Section shall not limit any claim for fraud
or any covenant or agreement by the parties which contemplates performance after
the Effective Time.
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8. Indemnification.
8.1 Escrow Shares. As soon as practicable after the Closing
Date, a total of 1,152,412 shares of Lucent Common Stock (the "Escrow Fund")
shall be deposited with The Bank of New York (or another institution selected by
Lucent), 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 sole and exclusive source available to compensate Lucent for the
indemnification obligations of each holder of Company Capital Stock (each, a
"Company Stockholder" and collectively, the "Company Stockholders") under
Section 8.2 except that Lucent may elect not to have recourse to the Escrow Fund
for any claim of fraud.
8.2 General Indemnification. (a) Subject to the limitations
set forth in this Section 8, the Company Stockholders will indemnify and hold
harmless Lucent and each Person, if any, who controls, may control or is
controlled by Lucent within the meaning of the Securities Act 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, damages, liabilities, obligations,
impositions, inspections, assessments, fines, deficiencies and expenses arising
from claims, demands, actions, causes of action, including, without limitation,
reasonable legal fees (collectively, "Damages"), arising out of (i) any
inaccuracy in any representation or warranty made by the Company in this
Agreement or in any exhibit or schedule to this Agreement, and (ii) any breach
or default by the Company of any of the covenants or agreements given or made by
it in this Agreement or any exhibit or schedule to this Agreement.
(b) Lucent and the Company Stockholders each 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 Lucent would have agreed to pay in
connection with the transactions contemplated hereby.
8.3 Damages Threshold; Damages Cap. (a) Notwithstanding
anything to the contrary contained in this Agreement, solely with respect to any
claim by Lucent for indemnification under Section 8.2(a)(i), Lucent may not seek
indemnification with respect to any claim for Damages until the aggregate amount
of all Damages for which Lucent is seeking indemnification under Section
8.2(a)(i) equals or exceeds $1,000,000 (the "Threshold"), whereupon Lucent shall
be entitled to seek indemnification with respect to all such Damages that exceed
the Threshold.
(b) In determining the amount of any Damage for which Lucent
may seek indemnification under Section 8.2(a)(i) or Section 8.2(a)(ii), any
materiality standard contained in a representation, warranty or covenant shall
be disregarded.
(c) The liability of the Company Stockholders to Lucent for
all Damages for which indemnification is provided hereunder shall not exceed the
Escrow Fund.
8.4 Escrow Period; Release of Escrow Fund. The Escrow Fund
shall commence on the date hereof and terminate on the first anniversary of the
Closing Date (the
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"Escrow Period"). On such first anniversary, all shares of Lucent Common Stock
then remaining in the Escrow Fund shall be released; provided that the amount of
any claim made pursuant to Section 8.5 during the Escrow Period shall be
withheld and remain in the Escrow Fund pending resolution of such claim;
provided further that the number of shares of Lucent Common Stock in the Escrow
Fund which is necessary to satisfy any unsatisfied claims specified in any
Lucent Notice theretofore delivered to the Escrow Agent prior to the termination
of the Escrow Period with respect to facts and circumstances existing prior to
the expiration of the Escrow Period, shall remain in the Escrow Fund until such
claims have been resolved. Any portion of the Escrow Fund for which there is no
claim pursuant to this Section 8 shall be promptly distributed by the Escrow
Agent to the Company Stockholders' Representative for distribution by the Escrow
Agent to the Company Stockholders in accordance with each Company Stockholder's
percentage of the Escrow Fund as set forth in the Escrow Agreement.
8.5 Claims Upon Escrow Fund. Subject to the provisions of this
Section 8, Lucent shall make claims upon the Escrow Fund by delivering to the
Escrow Agent on or before the last day of the Escrow Period of a notice signed
by an authorized representative of Lucent (a "Lucent 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 and
the nature of the misrepresentation, breach of warranty or claim to which such
item is related. Lucent shall, concurrently with the sending of any Lucent
Notice to the Escrow Agent, provide a copy of such Lucent Notice to the Company
Stockholders' Representative. Within 20 days after the receipt of any Lucent
Notice, the Company Stockholders' Representative, on behalf of the Company
Stockholders, shall deliver a notice to Lucent and the Escrow Agent (a "Company
Stockholders' Representative Notice") certifying that the Company Stockholders
either agree with the Lucent Notice or object to the Lucent Notice. If the
Company Stockholders agree with the Lucent Notice, the Escrow Agent shall
deliver to Lucent out of the Escrow Fund, as promptly as practicable after
receipt of the Company Stockholders' Representative Notice, the number of Shares
held in the Escrow Fund having a fair market value on the Closing Date equal to
such Damages. If the Company Stockholders' Representative objects to the Lucent
Notice within the 20-day period after receipt of the Lucent Notice, Lucent and
the Company Stockholders' Representative shall resolve such dispute in
accordance with Section 8.6. If the Company Stockholders' Representative fails
to deliver a Company Stockholders' Representative Notice within such 20-day
period, the Company Stockholders' Representative shall be deemed to have
consented to the Lucent Notice and given a Company Stockholders' Representative
Notice to Lucent and the Escrow Agent, and the Escrow Agent shall deliver to
Lucent out of the Escrow Fund, as promptly as practicable after such 20-day
period, the number of Shares held in the Escrow Fund having a fair market value
on the Closing Date equal to such Damages.
8.6 Objections to Claims. (a) If the Company Stockholders'
Representative shall object to a Lucent Notice within the twenty-day period
after receipt thereof, then Lucent and the Company Stockholders' Representative
shall use their good faith efforts to resolve such dispute. If Lucent and the
Company Stockholders' Representative resolve such dispute, the parties shall
deliver a written notice to the Escrow Agent directing the delivery of the
Escrow Fund based upon such resolution.
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(b) If Lucent and the Company Stockholders' Representative are
unable to resolve such dispute within 30 days after the Company Stockholders'
Representative objects to such Lucent Notice, either Lucent or the Company
Stockholders' Representative may, by written notice to the other and the Escrow
Agent, demand arbitration of such dispute. Any such arbitration shall be
conducted by JAMS/Endispute, Inc. or such other alternative dispute service
("Arbitration Service") as shall be reasonably acceptable to Lucent and the
Company Stockholders' Representative. The Arbitration Service shall select one
arbitrator reasonably acceptable to Lucent and the Company Stockholders'
Representative who shall be expert in the area of development and production of
data networking products. The decision by the arbitrator shall be binding and
conclusive and, notwithstanding any other provisions of this Section 8, the
Escrow Agent shall be entitled to act in accordance with such decision and make
delivery of the Escrow Fund in accordance therewith.
(c) The arbitration shall be held in New York, New York. The
costs of any such arbitration shall be borne one-half for the account of Lucent
and one-half by the Company Stockholders. Judgment upon any award rendered by
the arbitrator may be entered in any court of competent jurisdiction.
8.7 Third-Party Claims. In the event Lucent becomes aware of a
third-party claim which Lucent believes may result in a demand pursuant to this
Section 8, Lucent shall promptly notify the Company Stockholders' Representative
of such claim, and the Company Stockholders' Representative shall be entitled,
at the Company Stockholders' expense (but not out of the Escrow Fund), to
participate in any defense of such claim; provided that Lucent shall control
such defense, and shall have the right with the consent of the Company
Stockholders' Representative (which consent shall not be unreasonably withheld)
to settle any such claim (it being understood that no such consent of the
Company Stockholders' Representative shall be required where the third-party
claim, which Lucent proposes to settle involves the business reputation of
Lucent or its Affiliates in any material adverse respect, or the possible
criminal liability of Lucent or its Affiliates or any of their respective
officers, directors or employees). In the event that the Company Stockholders'
Representative has consented to any such settlement, the Company Stockholders
shall have no power or authority to object under any provision of this Section 8
to the amount of any claim by Lucent for indemnity with respect to such
settlement.
8.8 Company Stockholders' Representative. (a) Mukesh Chatter
is hereby appointed as representatives (the "Company Stockholders'
Representative") for and on behalf of the Company Stockholders to take all
actions necessary or appropriate in the judgment of the Company Stockholders'
Representative for the accomplishment of the terms of this Agreement. The
holders of a majority in interest of the shares of Lucent Common Stock held in
the Escrow Fund may replace the Company Stockholders' Representative upon not
less than 10 days' prior written notice to Lucent. No bond shall be required of
the Company Stockholders' Representative and the Company Stockholders'
Representative shall receive no compensation for his services. Notices of
communications to or from the Company Stockholders' Representative shall
constitute notice to or from each of the Company Stockholders. If Mukesh Chatter
dies or is otherwise no longer able or willing to serve as the Company
Stockholders' Representative, a
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new Company Stockholders' Representative shall be chosen by Company Stockholders
holding a majority of the shares of Lucent Common Stock issued in connection
with the Merger.
(b) The Company 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
Company Stockholders shall severally indemnify the Company Stockholders'
Representative and hold him harmless against any loss, liability or expense
incurred without gross negligence or bad faith on the part of the Company
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 Company
Stockholders' Representative shall constitute a decision of all and shall be
final, binding and conclusive upon every Company Stockholder and the Escrow
Agent and Lucent may rely upon any decision, act, consent or instruction of each
and every Company Stockholder. The Escrow Agent and Lucent are hereby relieved
from any liability to any person for acts done by them in accordance with such
decision, act, consent or instruction of the Company Stockholders'
Representative.
9. Brokers' and Finders' Fees.
9.1 Company. The Company represents and warrants to
Acquisition and Lucent that, except as set forth in Schedule 9.1, no broker,
investment banker or financial advisor is entitled to receive a brokerage fee,
financing commission or other commission from the Company in respect of the
execution of this Agreement or the consummation of the transactions contemplated
hereby. The Company agrees that if the transactions contemplated by this
Agreement are not consummated (other than as a result of a breach or default by
Lucent or Acquisition), it shall indemnify and hold Acquisition and Lucent
harmless against any and all claims, losses, liabilities, costs or expenses
which may be asserted against them as a result of the Company's or any of its
Affiliates' dealings, arrangements or agreements with any such Person.
9.2 Acquisition and Lucent. Acquisition and Lucent represent
and warrant to the Company that no broker, investment banker or financial
advisor is entitled to receive any brokerage fee, financing commission or other
commission from Lucent in respect of the execution of this Agreement or the
consummation of the transactions contemplated hereby. Acquisition and Lucent
agree that if the transactions contemplated hereby are not consummated (other
than as a result of a breach or default by the Company), they shall jointly and
severally indemnify and hold the Company harmless against any and all claims,
losses, liabilities, costs or expenses which may be asserted against them, as a
result of Acquisition's or Lucent's or any of their respective Affiliates'
dealings, arrangements or agreements with any such Person.
10. Expenses. Lucent and the Company shall each 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, whether or not the Merger is consummated.
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11. Press Releases. Except as required by law or Lucent's listing
agreement with the New York Stock Exchange, Lucent, Acquisition and the Company
shall not 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.
12. Contents of Agreement; Parties in Interest; etc. This Agreement and
the agreements referred to or contemplated herein and the letter agreement
between Lucent and the Company concerning confidentiality (the "Confidentiality
Agreement") set forth the entire understanding of the parties hereto with
respect to the transactions contemplated hereby, and, except as set forth in
this Agreement, such other agreements and the Exhibits hereto and the
Confidentiality Agreement, 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 and the Confidentiality Agreement. Except for the
matters set forth in the Confidentiality 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. All statements contained in
schedules, exhibits, certificates and other instruments attached hereto shall be
deemed representations and warranties (or exceptions thereto) by the Company,
Acquisition or Lucent, as the case may be.
13. Assignment and Binding Effect. This Agreement may not be assigned
by either party hereto without the prior written consent of the other parties;
provided, that Acquisition may assign its rights and obligations under this
Agreement to any directly or indirectly wholly-owned Subsidiary of Lucent, upon
written notice to the Company if the assignee shall assume the obligations of
Acquisition hereunder and Lucent shall remain liable for its obligations
hereunder. 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.
14. Termination. This Agreement may be terminated, and the Merger may
be abandoned at any time prior to the Effective Time whether before or after the
approval and adoption of this Agreement and the transactions contemplated hereby
by the stockholders of the Company or the stockholders of Acquisition:
(a) by the mutual agreement of the Boards of Directors of
Acquisition and the Company and the appropriate corporate authority of Lucent;
(b) by Lucent, Acquisition or the Company if (i) the Effective
Time shall not have occurred by November 30, 1999; provided that the right to
terminate this Agreement under this Section 14(b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Effective Time to occur on or
before such date; or (ii) any court of competent jurisdiction in the United
States or other United States governmental authority shall have issued an order,
decree, ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall have
become final and nonappealable;
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(c) by the Company, in the event Lucent or Acquisition
materially breaches its obligations under this Agreement, unless such breach is
cured within 15 days after notice to Lucent by the Company; or
(d) by Lucent or Acquisition, in the event the Company
materially breaches its obligations under this Agreement unless such breach is
cured within 15 days after notice by Lucent or Acquisition.
15. Definitions. As used in this Agreement the terms set forth below
shall have the following meanings:
(a) "Affiliate" of a Person shall mean 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,
arrangement or understanding (whether or not legally binding) providing material
benefits to any current or former employee, officer or director of the Company.
(c) "Best Knowledge" in respect of (i) any representation and
warranty of the Company set forth in this Agreement (other than Section 3.14)
shall mean the actual and constructive knowledge of Mukesh Chatter, Xxxxxxxx
Xxxxxx, Xxxx Xxxxxxxx and Xxxxxxx Xxxxxx to the extent such knowledge would have
been obtained by due inquiry of the officers and directors of the Company and
employees charged with responsibility for the particular matter which is the
subject of such representation or warranty and (ii) the representations and
warranties of the Company set forth in Section 3.14 shall mean the actual and
constructive knowledge (to the extent such knowledge would have been obtained by
the reasonable exercise of due diligence in the ordinary course of business) of
the Designated Group; provided, that with respect to Patents, such term shall
only mean the actual knowledge of the Designated Group.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(e) "Designated Group" shall mean Mukesh Chatter, Xxxxxxxx
Xxxxxx, Xxxxx Xxxxxxx, Xxxxxx Xxxxx, Xxxxxxx Xxxxxxxx, Xxxx Xxxxxx, Xxxxx Xxxx,
Xxxxxxx Xxxxxx, Xxx Xxxxxx, Xxx Xxxxxx, Xxx Xxxxxxxx, Sub Pal, Xxxxx Xxx and
Xxxxx Merchessault.
(f) "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
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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.
(g) "Exchange Agent" shall mean a bank or trust company
designated as the exchange agent by Lucent (which designation shall be
reasonably acceptable to the Company).
(h) "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.
(i) "GAAP" shall mean United States generally accepted
accounting principles.
(j) "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.
(k) "Indebtedness" shall mean as at any date of determination,
the sum of the following items of the Company, without duplication: (i)
obligations created, issued or incurred for borrowed money, including all fees
and obligations thereunder (including, without limitation, any prepayment or
termination fees arising or which will arise out of the prepayment of such
Indebtedness prior to its maturity and termination), (ii) obligations to pay the
deferred purchase price or acquisition price of property or services, other than
trade or accounts payable arising, and accrued expenses incurred, in the
ordinary course of business consistent with past practice, (iii) the face amount
of all letters of credit issued for the account of the Company and all drafts
thereunder, (iv) capital lease obligations, if any, and (v) any obligation
guaranteeing any Indebtedness or other obligations of any other Person
(including any obligations under any keep well or support agreements).
(l) "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.
(m) "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,
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business, financial condition or operations of such Person and its Subsidiaries,
if any; (b) materially impair the ability of the such Person to perform its
obligations under this Agreement; or (c) prevent or delay the consummation of
the transactions contemplated under this Agreement.
(n) "Permitted Liens" shall mean (a) Liens for taxes,
assessments, or similar charges, incurred in the ordinary course of business
that are not yet due and payable or are being contested in good faith; (b)
pledges or deposits made in the ordinary course of business; (c) Liens of
mechanics, materialmen, warehousemen or other like Liens securing obligations
incurred in the ordinary course of business that are not yet due and payable or
are being contested in good faith; and (d) similar Liens and encumbrances which
are incurred in the ordinary course of business and which do not in the
aggregate materially detract from the value of such assets or properties or
materially impair the use thereof in the operation of such business.
(o) "Person" shall mean any individual, corporation,
partnership, limited partnership, limited liability company, trust, association
or entity or government agency or authority.
(p) "Pooling Date" shall mean the date on which Lucent
publishes in the form of a quarterly earnings report, an effective registration
statement flied with the SEC, a report to the SEC on Form 10-K, 10-Q, or 8-K, or
any other public filing or announcement, the combined results of
post-acquisition operations of Lucent and the Company for a period of not less
than 30 days, which publication, filing or announcement satisfies the
requirements of Accounting Series Release 135.
(q) "reasonable best efforts" shall mean prompt, substantial
and persistent efforts as a prudent Person desirous of achieving a result would
use in similar circumstances; provided that the Company, Lucent or Acquisition,
as applicable, shall be required to expend only such resources as are
commercially reasonable in the applicable circumstances.
(r) "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.
(s) "Tax" (and, with correlative meaning, "Taxes" and
"Taxable") shall mean any federal, state, local, municipal 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, tariff levy,
import, governmental fee or other like assessment or charge, together with any
interest or penalty, addition to tax or additional amount imposed by any
governmental authority.
(t) "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.
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16. 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 facsimile transmission (promptly
followed by a hard-copy delivered in accordance with this Section 16) 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 Acquisition or Lucent:
Lucent Technologies Inc.
c/o Data Networking Systems
000 Xxxxx Xxxx Xxxx
Xxxxxxx Xxxxx, Xxx Xxxxxx 00000-0000
Att: President - Data Networking
with copies to:
Lucent Technologies Inc.
c/o Data Networking Systems
000 Xxxxx Xxxx Xxxx
Xxxxxxx Xxxxx, Xxx Xxxxxx 00000-0000
Att: General Counsel - Data Networking
If to the Company:
Nexabit Networks, Inc.
000 Xxxxxxxxx Xxxx
Xxxxxxxxxxx, XX 00000
Att: Mukesh Chatter
with a copy to:
Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxxxx, Esq.
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.
17. Amendment. This Agreement may be amended, modified or supplemented
at any time prior to the Effective Time by the respective Boards of Directors of
the parties hereto notwithstanding the approval hereof by the stockholders of
the Company or the stockholders of
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Acquisition, as applicable, except as provided in Section 251(d) of the DGCL.
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.
18. Governing Law. This Agreement shall be governed by and interpreted
and enforced in accordance with the laws of the State of New York as applied to
contracts made and fully performed in such state, except insofar as the DGCL
shall be mandatorily applicable to the Merger and the rights of the stockholders
of the Company in connection therewith.
19. 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.
20. 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.
21. Section Headings. All section headings are for convenience only and
shall in no way modify or restrict any of the terms or provisions hereof.
22. Schedules and Exhibits. All Schedules and Exhibits referred to
herein are intended to be and hereby are specifically made a part of this
Agreement.
23. Extensions. At any time prior to the Effective Time, any party may
by corporate action, extend the time for compliance by or waive performance of
any representation, warranty, condition or obligation of any other party.
24. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and the Company,
Acquisition and Lucent 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.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound hereby, have duly executed this Agreement as of the date first
above written.
LUCENT TECHNOLOGIES INC.
By:/s/ Xxxxx X.Xxxx
----------------------------------
Name: Xxxxx X. Xxxx
Title: Vice President and COO,
Broadband Carrier Networks
NEPTUNE ACQUISITION INC.
By:/s/ Xxxxx X.Xxxx
----------------------------------
Name: Xxxxx X. Xxxx
Title: Vice President and COO,
Broadband Carrier Networks
NEXABIT NETWORKS, INC.
By:/s/ Mukesh Chatter
----------------------------------
Name: Mukesh Chatter
Title: CEO and President
56
GLOSSARY OF DEFINED TERMS
Defined Term Location of Definition
------------ ----------------------
Acquisition......................................................... Preamble
Acquisition Common Stock ........................................... Recitals
Acquisition Proposal................................................ Section 5.4
Adjusted Option..................................................... Section 5.6
Affiliate........................................................... Preamble
Agreement........................................................... Preamble
Authorizations...................................................... Section 3.13(b)
Award Interest...................................................... Section 6.2(j)
Balance Sheet....................................................... Section 3.5(a)
Benefit Plan........................................................ Section 15(b)
Best Knowledge...................................................... Section 15(c)
Certificate of Merger............................................... Section 1.1(b)
Certificates........................................................ Section 1.9(b)
Closing............................................................. Section 1.1(b)
Closing Date........................................................ Section 1.1(b)
Code................................................................ Section 15(d)
Common Shares....................................................... Section 3.2(a)
Common Stock Exchange Ratio......................................... Section 1.5(c)
Commonly Controlled Entity.......................................... Section 3.16(a)
Company............................................................. Preamble
Company Capital Stock............................................... Recitals
Company Common Stock................................................ Recitals
Company Preferred Stock............................................. Recitals
Company Stockholder Section 8.1
Company Stockholders' Representative Notice......................... Section 8.5
Company Stock Option................................................ Section 5.6(a)
Company Stock Plan.................................................. Section 5.6(a)
Confidentiality Agreement........................................... Section 12
DGCL................................................................ Recitals
Designated Group.................................................... Section 15(e)
Effective Time...................................................... Section 1.1(b)
Environmental Laws.................................................. Section 15(f)
Equity Incentive Plan............................................... Section 6.2(j)
ERISA............................................................... Section 3.16(a)
Exchange Act........................................................ Section 4.3(c)
Exchange Agent...................................................... Section 15(g)
Exchange Ratio...................................................... Section 1.5(c)
Executive Employees................................................. Section 3.17(a)
Final Determination................................................. Section 15(h)
Financial Statements................................................ Section 3.5(a)
GAAP................................................................ Section 15(i)
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Hazardous Substances................................................ Section 15(j)
Immaterial Authorizations........................................... Section 3.13(b)
Incentive LLC....................................................... Section 6.2(j)
Indebtedness........................................................ Section 15(k)
Intellectual Property Rights........................................ Section 3.14(a)
IRS................................................................. Section 3.15(c)
Laws................................................................ Section 3.13(a)
Liens............................................................... Section 15(l)
Lucent.............................................................. Preamble
Lucent Common Stock................................................. Section 4.2
Lucent Authorized Preferred Stock................................... Section 4.2
Lucent SEC Documents................................................ Section 4.5(a)
Material Adverse Effect............................................. Section 15(m)
Merger.............................................................. Recitals
NYSE................................................................ Section 1.8
Outstanding Common Shares........................................... Section 3.2(a)
Pension Plans....................................................... Section 3.16(a)
Permitted Liens..................................................... Section 15(n)
Person.............................................................. Section 15(o)
Plans............................................................... Section 3.16(a)
Preferred Shares.................................................... Section 3.2(a)
Reasonable Best Efforts............................................. Section 15(q)
Registration Statement.............................................. Section 5.5(a)
Reserved Common Shares.............................................. Section 3.2(a)
Right............................................................... Section 1.5(c)
SEC................................................................. Section 3.30
Securities Act...................................................... Section 4.3(c)
Series A Exchange Ratio............................................. Section 1.5(c)
Series A Preferred Stock............................................ Recitals
Series B Exchange Ratio............................................. Section 1.5(c)
Series B Preferred Stock............................................ Recitals
Series C Exchange Ratio............................................. Section 1.5(c)
Series C Preferred Stock............................................ Recitals
Series D Exchange Ratio............................................. Section 1.5(c)
Series D Preferred Stock............................................ Recitals
Shares.............................................................. Section 3.2(a)
Subsidiary.......................................................... Section 15(r)
Supplemental Financial Information.................................. Section 5.3(c)
Surviving Corporation............................................... Section 1.1(a)
Tax................................................................. Section 15(s)
Tax Return.......................................................... Section 15(t)
Welfare Plans....................................................... Section 3.16(a)
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