EXECUTION COPY
EXHIBIT 2(A)
STOCK PURCHASE AGREEMENT
among
PIRELLI CAVI E SISTEMI S.P.A.,
OPTICAL TECHNOLOGIES THE NETHERLANDS B.V.,
PIRELLI S.P.A.
and
CORNING INCORPORATED
DATED AS OF SEPTEMBER 26, 2000
TABLE OF CONTENTS
PAGE
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ARTICLE I SALE AND PURCHASE OF SHARES..............................1
1.1 Sale and Purchase of Shares................................1
ARTICLE II PURCHASE CONSIDERATION...................................1
2.1 Amount and Payment of Purchase Price.......................1
ARTICLE III CLOSING AND TERMINATION..................................2
3.1 Closing Date...............................................2
3.2 Termination of Agreement...................................2
3.3 Procedure Upon Termination.................................3
3.4 Effect of Termination......................................3
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE
SELLERS AND PARENT.......................................3
4.1 Organization and Good Standing.............................3
4.2 Authorization of Agreement.................................3
4.3 Capitalization.............................................4
4.4 Subsidiaries...............................................5
4.5 Corporate Records..........................................5
4.6 Conflicts; Consents of Third Parties.......................5
4.7 Ownership and Transfer of Shares...........................6
4.8 Balance Sheet..............................................6
4.9 Absence of Certain Changes.................................6
4.10 Litigation.................................................8
4.11 Title to Property..........................................8
4.12 Intellectual Property......................................8
4.13 Taxes.....................................................11
4.14 Employee Benefit Plans....................................12
4.15 Employee Matters..........................................13
4.16 Insurance.................................................14
4.17 Compliance with Laws......................................14
4.18 Brokers' Fees.............................................15
4.19 Material Contracts........................................15
4.20 Effect on Certain Agreements..............................16
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TABLE OF CONTENTS
(CONTINUED)
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4.21 Proprietary Information Agreements........................17
4.22 Related Party Transactions................................17
4.23 Banks; Powers of Attorney; Proxies........................17
4.24 Adequacy of Assets........................................17
4.25 Inventory.................................................18
4.26 Accounts Receivable.......................................18
4.27 Customers; Suppliers......................................18
4.28 Environmental.............................................19
4.29 Certain Business Practices................................20
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER.............20
5.1 Organization and Good Standing............................20
5.2 Authorization of Agreement................................20
5.3 Conflicts; Consents of Third Parties......................20
5.4 Investment Intention......................................21
5.5 Brokers' Fees.............................................21
5.6 Access to Information.....................................21
ARTICLE VI CLOSING CONDITIONS......................................21
6.1 Conditions to the Obligations of the Purchaser............21
6.2 Conditions to the Obligations of the Sellers..............24
ARTICLE VII COVENANTS...............................................25
7.1 Access to Information.....................................25
7.2 Conduct of the Business Pending the Closing...............25
7.3 Purchase of Series A Preferred Stock......................28
7.4 Filings with Governmental Bodies..........................28
7.5 No Solicitation...........................................28
7.6 Restrictive Covenants.....................................29
7.7 Preservation of Records...................................30
7.8 Commercially Reasonable Efforts...........................31
7.9 No Interference with Sellers' Employees...................31
7.10 Preparation of Financial Statements.......................31
7.11 Insurance.................................................32
7.12 Confidentiality...........................................32
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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7.13 Tax Authority Audits......................................32
7.14 Options...................................................32
7.15 Employees.................................................32
ARTICLE VIII INDEMNIFICATION.........................................33
8.7 Tax Straddle Periods......................................35
ARTICLE IX MISCELLANEOUS...........................................35
9.1 Certain Definitions.......................................35
9.2 Public Announcements......................................42
9.3 Payment of Sales, Use or Similar Taxes....................42
9.4 Expenses..................................................42
9.5 Survival of Representations and Warranties................43
9.6 Further Assurances........................................43
9.7 Entire Agreement; Amendments and Waivers;
Exclusive Remedies........................................43
9.8 Governing Law; Submission to Jurisdiction; Consent to
Service...................................................44
9.9 Table of Contents and Headings............................44
9.10 Notices...................................................44
9.11 Severability..............................................45
9.12 Binding Effect; Assignment................................46
9.13 Specific Performance......................................46
EXHIBITS TO STOCK PURCHASE AGREEMENT
EXHIBIT SECTION
------- -------
Exhibit A Proportional Shareholdings of Sellers 1.1
Exhibit B Balance Sheet 4.8
Exhibit C Parent Accounting Principles 4.8
Exhibit D Form of Director Resignation 6.1(a)(ii)
Exhibit E Certificate of Satisfaction of Purchaser
Conditions 6.1(a)(iii
Exhibit F Lease Agreement 6.1(h)
Exhibit G Transition Services Agreement 6.1(h)
Exhibit H Supply Contract 7.16
Exhibit I Certificate of Satisfaction of Seller
Conditions 6.2(a)(ii)
Exhibit J IP Agreements [7.6]
Exhibit K Sellers' Knowledge Persons 9.1
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INDEX OF DEFINITIONS
DEFINED TERM PAGE
------------ ----
AFFILIATE.........................................10, 13, 29, 33, 38, 49
AGREEMENT.................................................1, 2, 3, 4, 38
Applicable Percentage.............................................35, 38
BALANCE SHEET........................................7, 8, 9, 13, 19, 38
BALANCE SHEET DATE.......................................7, 8, 9, 20, 38
Business Day.......................................................2, 38
By-Laws......................................................5, 6, 8, 38
Certificate of Incorporation.............................5, 6, 8, 28, 38
Cisco...................4, 6, 17, 18, 19, 20, 23, 26, 30, 38, 39, 42, 43
Cisco Supply Agreement....................................17, 19, 20, 39
CLOSING...............................................................39
Closing Date........................ 2, 4, 7, 9, 11, 12, 14, 20, 22, 24,
25, 26, 27, 28, 29, 31, 32, 33, 34, 35, 36, 37, 39, 46
COMPANY...............................................................39
Competition Laws...........................6, 22, 24, 25, 26, 30, 39, 45
Components................................................19, 29, 39, 40
Components Business...................................................21
Confidentiality Agreement..............................3, 27, 34, 39, 46
Contract......................12, 14, 15, 16, 17, 18, 19, 20, 25, 29, 39
Co-Sale Rights.............................................6, 26, 30, 40
Devices...............................................19, 29, 39, 40, 44
Disclosure Schedule..................3, 7, 9, 10, 15, 16, 18, 19, 28, 40
Employee Plan.................................................13, 14, 40
ENVIRONMENTAL AND SAFETY LAWS.................................20, 21, 40
Exchange Act......................................................18, 40
FINANCIAL STATEMENTS..................................................40
Governmental Body...........2, 6, 12, 15, 17, 22, 25, 27, 30, 33, 40, 42
Hazardous Materials.......................................17, 20, 21, 40
HSR Act.......................................24, 25, 26, 30, 39, 41, 45
Intellectual Property.......................8, 9, 10, 11, 19, 25, 29, 41
IP Agreements.................................................24, 41, 47
IPR AGREEMENT.........................................................32
Law...................................................................15
Lease Agreement...................................................20, 41
LEGAL PROCEEDING......................................................41
Lien..................................................................29
LOSSES................................................................35
MATERIAL CONTRACTS............................................16, 17, 41
NON-COMPETE COMPONENTS................................................31
NYSE..............................................................22, 41
Order............................................................2, 6, 8
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OTI...............................................................15, 16
OTI Organizational Documents................................5, 8, 28, 41
Parent................................................................35
PARENT ACCOUNTING PRINCIPLES............................7, 9, 19, 20, 42
PERSON................................................................42
PURCHASE PRICE........................................................42
PURCHASER.............................................................42
Purchaser Material Adverse Effect.................................22, 42
Qualification......................................................2, 42
Registration Rights Agreement......................................5, 42
SEC...............................................................22, 42
Securities Act....................................................23, 42
Seller Material Adverse Effect.............................6, 15, 24, 43
SELLERS...............................................................43
Sellers' Knowledge...........6, 8, 9, 10, 11, 12, 15, 18, 20, 21, 24, 43
SERIES A PREFERRED STOCK.........................4, 5, 6, 26, 28, 30, 43
SHARES................................................................43
Stockholders' Agreement......................1, 5, 6, 23, 26, 30, 40, 43
SUBSEQUENT CONTRACT...............................................17, 43
SUBSIDIARIES..........................................................43
SUSPENSION PERIOD.....................................................43
System............................................................40, 44
TAX...................................................................44
Tax Authority.....................................................12, 44
TAX GROUP.........................................................12, 44
Tax Returns.......................................................12, 44
THIRD PARTY INTELLECTUAL PROPERTY RIGHTS..........................10, 44
TRANSACTION AGREEMENTS................4, 5, 6, 8, 10, 18, 22, 24, 26, 27,
33, 36, 37, 44, 45, 46, 47
Transition Services Agreement............................iii, 19, 25, 44
US GAAP...............................................................44
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of September 26, 2000 (the
"AGREEMENT"), among Pirelli Cavi e Sistemi S.p.A., a corporation organized and
existing under the laws of the Republic of Italy ("SELLER 1"), Optical
Technologies The Netherlands B.V., a corporation organized and existing under
the laws of the Kingdom of the Netherlands (collectively, the "SELLERS"),
Pirelli S.p.A., a corporation organized and existing under the laws of the
Republic of Italy and the direct or indirect parent of each Seller ("Parent"),
and Corning Incorporated, a corporation organized and existing under the laws of
the State of New York (the "PURCHASER").
W I T N E S S E T H:
WHEREAS, the Sellers own an aggregate of 4,500,000 shares of common
stock, $0.01 par value per share, (the "SHARES") of Optical Technologies USA
Corp., a Delaware corporation (the "COMPANY"), which Shares constitute all of
the issued and outstanding shares of common stock of the Company; and
WHEREAS, the Sellers desire to sell to Purchaser, and Purchaser
desires to purchase from the Sellers, the Shares for the consideration and upon
the terms and conditions hereinafter set forth; and
WHEREAS, certain terms used in this Agreement are defined in Section
9.1;
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements hereinafter contained, the parties hereby agree as
follows:
ARTICLE I
SALE AND PURCHASE OF SHARES
1.1 SALE AND PURCHASE OF SHARES. At the closing of the sale and
purchase of the Shares (the "CLOSING"), upon the terms and subject to the
conditions contained herein, each Seller shall sell, assign, transfer, convey
and deliver free and clear of all Liens (other than limitations on resale under
applicable securities Laws and restrictions on future sales imposed under the
Stockholders' Agreement) to the Purchaser, and the Purchaser shall purchase from
each Seller, the Shares owned by such Seller set forth opposite such Seller's
name on Exhibit A.
ARTICLE II
PURCHASE CONSIDERATION
2.1 AMOUNT AND PAYMENT OF PURCHASE PRICE. Subject to the terms and
conditions contained herein, in consideration for the sale and delivery of the
Shares, the
Purchaser shall deliver to the Sellers (allocated between them as set forth on
Exhibit A) the following (such amounts, the "PURCHASE PRICE"):
(a) At the Closing, an aggregate amount in cash
equal to $3,330,000,000 by wire transfer of immediately available funds to
accounts designated in writing to Purchaser by Sellers no later than 10 days
prior to the Closing.
(b) Upon Qualification, an aggregate amount in cash
equal to $180,000,000 by wire transfer of immediately available funds to the
accounts designated in writing to Purchaser by Sellers no later than 10 days
prior to the Closing. If Qualification occurs prior to the Closing Date, such
payments shall be made at the Closing. If Qualification occurs subsequent to the
Closing Date but on or before September 30, 2001, such payments shall be made
within three Business Days thereafter.
ARTICLE III
CLOSING AND TERMINATION
3.1 CLOSING DATE. The Closing shall take place at the offices of
Weil, Gotshal & ▇▇▇▇▇▇ LLP, located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ at 10:00 a.m., Eastern time, on the third Business Day after the
conditions to closing set forth in Section 6 hereof (other than those to be
satisfied at the Closing, which shall be satisfied or waived at the Closing)
have been satisfied or waived by the party entitled to waive such condition, or
on such other date after such satisfaction or waiver and at such other time and
place upon which the Sellers and the Purchaser shall agree; provided, however,
that, after the satisfaction or waiver of such conditions, unless the Purchaser
shall have otherwise notified Sellers of an earlier date, the Closing shall
occur on the first date on or after December 15, 2000 that does not fall within
a Suspension Period (which time and place are designated as the "CLOSING DATE").
3.2 TERMINATION OF AGREEMENT. This Agreement may be terminated prior
to the Closing as follows:
(a) at the election of the Sellers or the Purchaser after June 30,
2001 if the Closing shall not have occurred by the close of business on such
date, provided that the terminating party is not in default of any of its
obligations hereunder;
(b) by mutual written consent of the Sellers and the Purchaser;
or
(c) by the Sellers or the Purchaser if there shall be in effect a
final nonappealable Order of a Governmental Body of competent jurisdiction
enjoining or otherwise prohibiting the consummation of the transactions
contemplated hereby, it being agreed that the parties hereto shall promptly
appeal any adverse determination that is not nonappealable (and pursue such
appeal with reasonable diligence).
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3.3 PROCEDURE UPON TERMINATION. In the event of termination by the
Purchaser or the Sellers, or both, pursuant to Section 3.2 hereof, written
notice thereof shall forthwith be given to the other party or parties, and this
Agreement shall terminate immediately upon receipt of such notice and the
purchase of the Shares hereunder shall be abandoned, without further action by
the Purchaser or the Sellers. If this Agreement is terminated as provided herein
each party shall redeliver all documents, work papers and other written material
of any other party relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to the party furnishing the same
to the extent that such materials contain confidential information as defined in
the Confidentiality Agreement.
3.4 EFFECT OF TERMINATION. In the event that this Agreement is
validly terminated as provided herein, then each of the parties shall be
relieved of its duties and obligations arising under this Agreement after the
date of such termination, and such termination shall be without liability to the
Purchaser, the Company, OTI, either Seller or Parent; provided, however, that
the obligations of the parties set forth in Sections 7.12 and 9.4 hereof shall
survive any such termination and shall be enforceable hereunder; and provided
further, however, that nothing in this Section 3.4 shall relieve the Purchaser,
the Company, OTI, either Seller or Parent of any liability for a breach of this
Agreement prior to such termination.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND PARENT
Except as specifically listed or to the extent specifically
described in the Disclosure Schedule, the Sellers and Parent hereby jointly and
severally represent and warrant to the Purchaser that:
4.1 ORGANIZATION AND GOOD STANDING. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now conducted
and presently intended to be conducted. OTI is a corporation duly organized,
validly existing and in good standing under the laws of the Republic of Italy
and has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as now conducted and presently
intended to be conducted. The Company and OTI are not, and are not required to
be, qualified or authorized to do business as a foreign corporation in any other
jurisdiction. Each of the Sellers and Parent is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation.
4.2 AUTHORIZATION OF AGREEMENT. Each of the Sellers and Parent has
all requisite power, authority and legal capacity to execute and deliver this
Agreement and each other agreement, document, or instrument or certificate
contemplated by this Agreement or to be executed by such Seller or Parent in
connection with the consummation of the transactions contemplated by this
Agreement (this Agreement and
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such other agreements, documents, instruments and certificates, collectively,
the "TRANSACTION AGREEMENTS"), and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and each of the
Transaction Agreements and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of each Seller and Parent and no other corporate or shareholder
proceedings on the part of either Seller or Parent are necessary to authorize
this Agreement or any of the other Transaction Agreements or to consummate the
transactions contemplated hereby and thereby. This Agreement has been and each
of the other Transaction Agreements have been, or will have been as of the
Closing Date, duly and validly executed and delivered by each Seller and Parent,
as applicable, and (assuming the due authorization, execution and delivery by
the other parties hereto and thereto) this Agreement constitutes, and each of
the other Transaction Agreements when so executed and delivered will constitute,
legal, valid and binding obligations of each Seller and Parent, enforceable
against each Seller and Parent in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, reorganization and similar Laws
affecting creditors' rights and subject to the enforceability of equitable
remedies.
4.3 CAPITALIZATION. (a) The authorized capital stock of the Company
consists of 20,000,000 shares, of which 15,000,000 shares are common stock and
5,000,000 shares are preferred stock, of which 500,000 have been designated as
Series A Convertible Preferred Stock, $0.01 par value per share (the "SERIES A
PREFERRED STOCK"). There are 5,000,000 shares issued and outstanding, of which
4,500,000 are the Shares that were issued to the Sellers and are outstanding,
and 500,000 shares are Series A Preferred Stock that were issued to Cisco and
are outstanding (which shares of Series A Preferred Stock represent a ten
percent (10%) equity interest in the Company on a fully-diluted basis). All of
the issued and outstanding shares of the Company (being the Shares and the
Series A Preferred Stock) were duly authorized for issuance and are validly
issued, fully paid and non-assessable. The Shares being acquired by the
Purchaser hereunder constitute all of the issued and outstanding shares of
common stock or any other form of equity of the Company other than the Series A
Preferred Stock.
(b) The authorized capital stock of OTI consists of 183,125,000
shares (AZIONI ORDINARIE), euro 1.00 par value per share (the "OTI SHARES"). All
of the OTI Shares are issued and outstanding, were duly authorized for issuance,
validly issued, fully paid and non-assessable and are owned beneficially and of
record by the Company free and clear of any and all Liens (other than
limitations on resale under applicable United States securities Laws).
(c) Except for the Series A Preferred Stock (which is convertible
into 500,000 shares of the Company's common stock in accordance with the
Certificate of Designation relating thereto), neither the Company nor OTI has
any outstanding capital stock or securities convertible into or exchangeable for
any shares of its capital stock, or any outstanding rights (either preemptive or
other) to subscribe for or to purchase, or any outstanding options for the
purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any outstanding calls, commitments or claims of any
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character relating to, any capital stock or any stock or securities convertible
into or exchangeable for any capital stock of the Company or OTI. Except for the
retirement of the Series A Preferred Stock upon conversion as described in the
Certificate of Designation relating thereto, neither the Company nor OTI is
subject to any obligation (contingent or otherwise) to repurchase, redeem or
otherwise acquire or retire any shares of its capital stock or any convertible
or exchangeable securities, rights or options of the type described in the
preceding sentence. Other than the Stockholders' Agreement and the Registration
Rights Agreement, neither of the Sellers, the Company nor OTI is a party to any
agreement restricting the transfer of any shares of capital stock of the Company
or OTI or affecting the voting of any such shares of capital stock.
4.4 SUBSIDIARIES. Neither the Company (except with respect to OTI)
nor OTI owns or controls, directly or indirectly, any equity interest or other
investment in any other Person.
4.5 CORPORATE RECORDS. (a) True and complete copies of the
Certificate of Incorporation and By-Laws of the Company, each as in effect on
the date hereof, have heretofore been delivered to the Purchaser by the Sellers.
True and complete copies of the OTI Organizational Documents, each as in effect
on the date hereof, have heretofore been delivered to the Purchaser by the
Sellers.
(b) The minute books of the Company and OTI previously made
available to the Purchaser contain complete and accurate records of all meetings
and actions taken by written consent by the stockholders and board of directors
(including committees thereof) of the Company and OTI. The stock certificate
books and stock transfer ledgers of the Company and OTI previously made
available to the Purchaser are true, correct and complete.
4.6 CONFLICTS; CONSENTS OF THIRD PARTIES. (a) None of the execution
and delivery by either Seller or Parent of this Agreement and the other
Transaction Agreements, the consummation of the transactions contemplated hereby
or thereby, or compliance by either Seller or Parent with any of the provisions
hereof or thereof will (i) conflict with, or result in the breach of, any
provision of the Certificate of Incorporation, the By-Laws or any organizational
document of OTI, either Seller or Parent; (ii) conflict with, require the
consent of, violate, result in the breach or termination of, constitute a
default or give rise to any right of termination or acceleration or the right to
increase the obligations or otherwise modify the terms thereof under any
material note, bond, mortgage, indenture, license, agreement or other
instrument, commitment or obligation to which the Company, OTI, either Seller or
Parent is a party or by which any of them or any of their respective properties
or assets is bound; (iii) violate any Law, Order or Permit by which the Company,
OTI, either Seller or Parent is bound; or (iv) result in the creation of any
material Lien upon the properties or assets of the Company or OTI (except, in
the case of clause (iii), for such violations as would not, individually or in
the aggregate, have a Seller Material Adverse Effect).
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(b) Except for filings under the Competition Laws, no consent,
waiver, approval, Order, Permit or authorization of, or declaration or filing
with, or notification to, any Governmental Body is required on the part of
either Seller, Parent, the Company or OTI in connection with the execution and
delivery of this Agreement or the other Transaction Agreements, or the
compliance or performance by each Seller, Parent, the Company or OTI, as the
case may be, with any of the provisions hereof or thereof.
4.7 OWNERSHIP AND TRANSFER OF SHARES. Each Seller is the record and
beneficial owner of the Shares indicated as being owned by such Seller on
Exhibit A, free and clear of any and all Liens (other than limitations on resale
under applicable United States securities Laws and restrictions on future sales
imposed under the Stockholders' Agreement). As of the date hereof, Cisco is the
record and, to the Sellers' Knowledge, beneficial owner of all of the issued and
outstanding shares of Series A Preferred Stock, free and clear of any and all
Liens (other than limitations on resale under applicable United States
securities Laws and restrictions imposed under the Stockholders' Agreement).
Each Seller has the corporate power and authority to sell, transfer, assign and
deliver such Shares as provided in this Agreement, and such delivery will convey
to the Purchaser good and marketable title to such Shares, free and clear of any
and all Liens (other than limitations on resale under applicable United States
securities Laws and restrictions on future sales imposed under the Stockholders'
Agreement). Immediately after the Closing, the Purchaser will own all of the
issued and outstanding common stock of the Company, free and clear of any and
all Liens (other than limitations on resale under applicable United States
securities Laws and restrictions on future sales imposed under the Stockholders'
Agreement) and, if Cisco fails to exercise its Co-Sale Rights, the only other
issued and outstanding capital stock of the Company will be 500,000 shares of
Series A Preferred Stock.
4.8 BALANCE SHEET. (a) Attached as Exhibit B is the unaudited
consolidated interim balance sheet of the Company as of August 31, 2000 (the
"BALANCE SHEET"). The Balance Sheet has been prepared in accordance with the
Parent common accounting principles attached hereto as Exhibit C (the "PARENT
ACCOUNTING PRINCIPLES") applied on a consistent basis. The Balance Sheet fairly
presents the assets and liabilities of the Company as of the date, and for the
date, indicated therein within the limits used in the Parent internal monthly
management reporting.
(b) Neither the Company nor OTI has any indebtedness, liabilities or
obligations of a nature required by the Parent Accounting Principles to be
reflected on the Balance Sheet or in the notes thereto except for: (i)
liabilities reflected or reserved for in the Balance Sheet; (ii) those
liabilities identified on Section 4.8(b) of the Disclosure Schedule; and (iii)
liabilities or obligations incurred in the ordinary course (A) from the date of
the Balance Sheet until the date hereof, consistent with past practice or (B)
from and after the date hereof as contemplated by this Agreement.
4.9 ABSENCE OF CERTAIN CHANGES. Except for actions to be taken in
connection with the transactions contemplated hereby or permitted under Section
7.2, during the period from August 31, 2000 (the "BALANCE SHEET DATE") until the
Closing
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Date, the respective businesses of the Company and OTI have been conducted, and
will be conducted only in the ordinary course consistent with past practice and
there has not occurred, and will not occur, any:
(i) Seller Material Adverse Effect; or
(ii) damage, destruction or loss not covered by insurance with
respect to the property and assets of the Company or OTI having a replacement
cost of more than $500,000 which would impair the operations of the Company or
OTI.
(b) Except for actions to be taken in connection with the
transactions contemplated hereby, since the Balance Sheet Date and on or prior
to the date hereof, there has not occurred any:
(i) damage, destruction or loss, whether or not covered by
insurance, with respect to the property and assets of the Company or OTI having
a replacement cost of more than $100,000 for any single loss or $500,000 for all
such losses or which would, individually or in the aggregate, impair the
operations of the Company or OTI;
(ii) acquisition, sale, transfer or disposal of, or any
pledge or mortgage over, any asset of the Company or OTI having a value in
excess of $500,000;
(iii) sale, transfer or disposal of, or grant, modification,
waiver or termination of any license agreement, development agreement or any
other agreement with respect to any Intellectual Property of the Company or OTI;
(iv) revaluation by the Company, OTI or Parent of any
assets of the Company or OTI;
(v) declaration, setting aside, or payment of a dividend or
other distribution with respect to, or any direct or indirect redemption,
purchase or other acquisition of, any of the Company's capital stock or of any
of OTI's capital stock;
(vi) amendment or change to the Certificate of
Incorporation, By-Laws or OTI Organizational Documents;
(vii) material increase in or material modification of the
compensation or benefits payable, or to become payable, by the Company or OTI to
any of their respective directors, officers or employees;
(viii) entry into, termination of, or receipt of written
notice of termination of, any Order or Permit relevant to the conduct of the
business of the Company or OTI; or
(ix) material borrowings or guaranties, or repayment of
borrowings other than in the ordinary course of business, by the Company or
OTI; or
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(x) negotiation or agreement by the Company or OTI to do any
of the things described in the preceding clauses (i) through (ix) (other than as
expressly contemplated hereby).
4.10 LITIGATION. There is no action, suit, proceeding, claim,
arbitration or investigation pending or, to the Sellers' Knowledge, threatened,
against the Company or OTI or any of their respective properties or assets,
against any employee, officer or director (in each case, solely brought in their
capacity as such) of the Company or OTI, or that questions the validity of this
Agreement or any of the other Transaction Agreements or the right of the Sellers
and Parent to enter into this Agreement or the other Transaction Agreements.
There is no Order pending against the Company or OTI or any of their respective
properties or assets. There is no action, suit, proceeding, claim, arbitration
or investigation initiated by the Company or OTI pending as of the date hereof.
4.11 TITLE TO PROPERTY. The Company and OTI have good and marketable
title to all of their respective properties and assets (real, personal or mixed)
reflected in the Balance Sheet or acquired after the Balance Sheet Date except
inventory and other assets sold on an arm's-length basis since the Balance Sheet
Date in the ordinary course of business, or with respect to leased properties
and assets, valid leasehold interests in, free and clear of all Liens, except
(i) Liens for current taxes not yet due and payable, and (ii) such imperfections
of title and Liens as do not detract from or interfere with the use of the
properties subject thereto or affected thereby, or otherwise impair business
operations involving such properties. Notwithstanding the foregoing, none of the
manufacturing equipment used by the Company or OTI is leased, subject to any
sale/leaseback or title retention arrangement or subject to any other Lien. The
plant, property and equipment of the Company and OTI that are used in the
operations of their respective businesses are in good operating condition and
repair, subject to normal wear and tear. All properties used in the operations
of the Company and OTI are reflected in the Balance Sheet to the extent Parent
Accounting Principles require the same to be reflected. Section 4.11 of the
Disclosure Schedule identifies each real property owned or leased, or to be
owned or leased as of the Closing Date, by the Company and OTI. This Section
4.11 does not relate to matters with respect to Intellectual Property, which are
the subject of Section 4.12 hereof.
4.12 INTELLECTUAL PROPERTY.
(a) Each of the Company and OTI owns, or has been licensed, or has
been granted non-assertion rights, to use, patents, trademarks, trade names,
service marks, copyrights, and any applications therefor, maskworks, net lists,
schematics, technology, know-how, trade secrets, inventions, algorithms,
processes, computer software programs or applications (in source code and/or
object code form), and tangible or intangible proprietary information or
material ("INTELLECTUAL PROPERTY") that are substantially used in, currently
required for or material to the businesses of the Company and OTI as presently
conducted or presently planned to be conducted and either Parent or any Seller
owned, controlled or had the right to license or grant non-assertion rights on
or before February 15, 2000. Seller 1 or Parent (as appropriate) owned, and had
the right to
8
transfer ownership of, the Intellectual Property contributed to the Company and
OTI by Seller 1, free and clear of all Liens and any rights of any third party,
and had not previously granted any licenses relating thereto. Except for the
licenses identified in Section 4.12 of the Disclosure Schedule, neither the
Company nor OTI has (i) licensed any of its Intellectual Property to any party
or (ii) entered into any other Contracts relating to its Intellectual Property
with any party. The Intellectual Property owned by the Company or OTI is owned
free and clear of any and all Liens. Without limiting the generality of the
foregoing, Seller 1, and each of its Affiliates who have licensed the Company to
use any Intellectual Property, own, or are licensed or otherwise possess a
legally enforceable right to license, such Intellectual Property to the Company
or OTI free and clear of any and all Liens. To Sellers' Knowledge, all patents
and patent applications included in Intellectual Property and owned by the
Company or OTI are listed in Section 4.12 of the Disclosure Schedule. Should
after the date hereof any additional patents or patent applications come to the
attention of Purchaser or Seller that constitute Intellectual Property for the
purposes of this Agreement, Seller shall transfer such rights in such patents or
patent applications to Purchaser or its designee without any additional
consideration. To Sellers' Knowledge, for the period prior to May 15, 2000, the
inventions disclosed in the five patent applications and in the eight invention
disclosures listed in Section 4.12(a) of the Disclosure Schedule constitute the
patentable inventions made by Company or OTI employees relating to the business
of the Company or OTI and set forth in invention disclosures. Title to all
inventions made by the Company or OTI employees on or after May 16, 2000 reside
in the Company or OTI by assignment or operation of law.
(b) Section 4.12 of the Disclosure Schedule lists all registered
Intellectual Property owned by the Company and OTI and lists (i) all patents and
patent applications and all registered trademarks included in the Intellectual
Property, including the jurisdictions in which each such Intellectual Property
right has been issued or registered or in which any application for such
issuance and registration has been filed, (ii) all licenses, sublicenses and
other agreements pursuant to which any Person (whether or not an Affiliate of
Parent) is authorized to use any Intellectual Property, and (iii) all licenses,
sublicenses and other agreements pursuant to which the Company or OTI is
authorized to use any third party patents, trademarks or copyrights, including
software, with such patents, trademarks or copyrights identified therein ("THIRD
PARTY INTELLECTUAL PROPERTY RIGHTS") other than Commercial Software. "COMMERCIAL
SOFTWARE" means packaged commercially available software that has been licensed
to the Company or OTI pursuant to end-user licenses and that is used in the
Company's or OTI's business but is in no way a component of or incorporated in
or specifically required to develop or support any of the Company's or OTI's
products and related trademarks, technology and know how.
(c) To the Sellers' Knowledge, there is no unauthorized use,
disclosure, infringement or misappropriation of any Intellectual Property rights
by any third party, including any employee or former employee of the Company,
OTI and Seller. Neither the Company nor OTI has entered into any agreement to
indemnify any other person
9
against any charge of infringement of any Intellectual Property, other than
indemnification provisions contained in purchase orders, supply agreements or
license agreements arising in the ordinary course of business.
(d) The Company, OTI, the Sellers and Parent and their respective
Affiliates are not, as a result of the operation of the Company and OTI, and
will not be, as a result of the execution and delivery of this Agreement or the
other Transaction Agreements or the consummation of the transactions consummated
hereby or thereby, in breach of any license, sublicense or other agreement
relating to the Intellectual Property.
(e) To the Sellers' Knowledge, all registered patents, registered
trademarks, registered service marks and copyrights owned by the Company and OTI
are valid and subsisting. Neither the Company, OTI, either Seller or Parent has
been sued and served in, or to the Sellers' Knowledge, sued or threatened to be
sued in, any suit, action or proceeding that involves a claim of infringement of
any patents, or a material claim of infringement of any trademarks, service
marks, copyrights or violation of any trade secret or other proprietary right of
any third party relating in any way to the operation or planned operation of the
Company. To the Sellers' Knowledge, the manufacturing, marketing, or sale of the
products of the Company and OTI do not infringe any valid patent, copyright, or
trade secret of any third party as of the date hereof. Neither the Company, OTI,
either Seller or Parent has, or have, as the case may be, brought or is
reasonably likely to bring any action, suit or proceeding for infringement of
Intellectual Property or breach of any license or agreement involving
Intellectual Property against any third party.
(f) The Company, OTI and the Sellers have secured written
assignments from substantially all consultants, employees or other Persons who
invented or co-invented patents included within Intellectual Property owned by
Company and OTI or such assignments exist by operation of law. There are no
suits or proceedings which have been served or to the Sellers' Knowledge pending
or threatened suits or proceedings with consultants and employees involving
ownership of Intellectual Property.
(g) The Company, OTI and the Sellers have taken all reasonably
necessary and appropriate steps to protect and preserve the confidentiality of
all trade secrets included within Intellectual Property ("CONFIDENTIAL
INFORMATION"). To the Sellers' Knowledge, the use or disclosure of Confidential
Information not owned by the Company or OTI has been pursuant to the terms of a
written agreement between the Company or OTI and the owner of such Confidential
Information, or is otherwise lawful.
(h) The Sellers will disclose to the Purchaser all actions which,
to the Sellers' Knowledge, must be taken within sixty (60) days after the
Closing Date that, if not taken, would result in the loss of any of the
registered Intellectual Property, including the payment of any registration,
maintenance or renewal fees or the filing of any instruments, documents,
applications or certificates for the purposes of obtaining, maintaining,
perfecting or preserving or renewing any of such Intellectual Property.
10
(i) There is no restriction on the ability of OTI to assign the
ownership of Intellectual Property owned by OTI to entities located outside of
Italy.
4.13 TAXES. Each of the Company and OTI, and any consolidated,
combined, unitary or aggregate group for Tax (as defined below) purposes of
which either the Company or OTI is or has been a member ("TAX GROUP"), has
timely filed all Tax Returns required to be filed by it and has paid all Taxes
shown thereon to be due. Such Tax Returns are true, correct and complete in all
material respects. There is (i) no claim, or, to Sellers' Knowledge, no
threatened claim, for Taxes being asserted against the Company or OTI including
with respect to the contribution or transfer of assets to the Company or OTI,
(ii) no audit of any Tax Return of the Company, OTI or any Tax Group being
conducted by a Tax Authority or, to Sellers' Knowledge, threatened in writing by
a Tax Authority, (iii) no extension of the statute of limitations on the
assessment of any Taxes granted by the Company, OTI or any Tax Group currently
in effect, (iv) no agreement, Contract or arrangement to which the Company or
OTI is a party that would result in the payment of any amount that would not be
deductible by reason of Section 280G of the U.S. Internal Revenue Code of 1986,
as amended (the "CODE"), and (v) no unpaid Tax for which the Company or OTI
could be held liable as a transferee of the transferred or contributed assets or
successor in interest of Seller 1 or Parent. Neither the Company nor OTI is a
party to any Tax sharing or Tax allocation agreement nor does either of them
have any liability or potential liability to another party under any such
agreement. Neither the Company nor OTI has ever been a member of a consolidated,
combined or unitary group for United States or Dutch Tax purposes. The Sellers
(with respect to transfers made to and from the Company and OTI), the Company,
and OTI have not transferred or agreed to transfer any asset, nor rendered or
agreed to render any service or facility (including the benefit of any license
or agreement) inconsistent with the appropriate jurisdiction's transfer pricing
regulations governing such transfers. For purposes of this Agreement, the
following terms have the following meanings: "TAX" (and, with correlative
meaning, "TAXES" and "TAXABLE") means (x) any net income, alternative or add-on
minimum tax, gross income, gross receipts, sales, use, ad valorem, value added,
capital, transfer, franchise, profits, license, withholding, payroll,
employment, social security, social charges, registration, excise, severance,
stamp, occupation, Pension Benefit Guaranty Corporation, premiums, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
Governmental Body (a "TAX AUTHORITY") responsible for the imposition of any such
tax either in the United States or in any non-United States jurisdiction,
including Italy and The Netherlands, and shall include any transferee liability
in respect of Taxes, (y) any liability for the payment of any amounts of the
type described in (x) as a result of being a member of an affiliated,
consolidated, combined or unitary group for any Taxable period, and (z) any
liability for the payment of any amounts of the type described in (x) or (y) as
a result of being a transferee of or successor to any person or as a result of
any express or implied obligation to indemnify any other person. As used herein,
"TAX RETURN" shall mean any return, statement, report or form (including
estimated tax returns and reports, withholding tax
11
returns and reports and information reports and returns) required to be filed
with respect to Taxes. The Company and OTI have in their possession evidence of
any material amounts of Taxes paid to Tax Authorities. The Company and OTI are
not, and within the past five (5) years have not been and prior to the Closing
Date will not be, a "UNITED STATES REAL PROPERTY HOLDING CORPORATION" as defined
in Section 897(c)(2) of the Code.
4.14 EMPLOYEE BENEFIT PLANS.
(a) Schedule 4.14 of the Disclosure Schedule lists each (i) pension
or retirement plan, program or arrangement, (ii) stock option, stock purchase,
phantom stock, stock appreciation right, supplemental retirement, severance,
sabbatical, medical, dental, vision care, disability, dependent care,
apprenticeship, training, employee relocation, life insurance or accident
insurance plan, program or arrangement, (iii) bonus, pension, profit sharing,
savings, deferred compensation or incentive plan, program or arrangement, (iv)
loan to any employee, officer, director or consultant and (v) other fringe or
employee benefit plan, program or arrangement, in each case, which is or has
been maintained by the Company or OTI and in which any present or former
employee, officer, director or consultant of the Company or OTI participates or
is entitled to participate, whether written or unwritten (collectively, the
"EMPLOYEE PLANS") that is in effect as of the date hereof.
(b) The Sellers have furnished the Purchaser a copy of each of the
Employee Plans, or a summary of any unwritten Employee Plan, and related plan
documents (including trust documents, insurance policies or contracts, employee
booklets, summary plan descriptions and other authorizing documents, and any
material employee communications relating thereto). The Sellers have furnished
or made available to the Purchaser all registration statements and prospectuses
if any prepared in connection with each Employee Plan. Since February 11, 2000,
there has been no amendment to any Employee Plan, or written interpretation or
announcement by the Company, OTI, Parent or other Affiliate of Parent
maintaining the Employee Plan (the "PLAN OBLIGOR") relating to, or changing
participation or coverage under, any Employee Plan, in each case which would
materially increase the expense of maintaining such Plan above the level of
expense incurred with respect to that Plan prior to the date hereof.
(c) With respect to each Employee Plan, (i) such Employee Plan is in
material compliance with, and at all times has been administered and maintained
in material compliance with, the provisions of the terms of such Employee Plan
and the Laws of each jurisdiction in which such Employee Plan is operated or in
which the Company or OTI has employees to the extent those Laws are applicable
to such Employee Plan; (ii) all contributions to, and payments from, such
Employee Plan required to be made in accordance with the terms of such Employee
Plan applicable Laws have been timely made; (iii) amounts have been accrued in
the Balance Sheet for contributions due to such Employee Plan or adequate assets
are held in such Employee Plan or an associated trust to satisfy all benefit
obligations earned by participants under such Employee Plan in material
compliance with applicable accounting and actuarial standards; (iv) each Plan
Obligor has performed all material obligations required to be
12
performed by it under, and is not in any material respect in default under or
violation of, such Employee Plan and, to Sellers' Knowledge, there is no default
or violation by any other Person with respect to such Employee Plan; (v) each
Plan Obligor has complied in all material respects with all applicable reporting
and notice requirements with respect to such Employee Plan including with
respect to receipt of any required determinations that such Employee Plan is in
compliance with the Laws of the relevant jurisdiction; (vi) no material suit,
administrative proceeding, action or other litigation has been brought with
respect to such Employee Plan, and, to Sellers' Knowledge, there are no pending
investigations by any Governmental Body involving such Employee Plan, including
any audit or inquiry by any Tax Authority, and no pending claims (except for
claims for benefits payable in the normal operation of such Employee Plan),
suits or proceedings against such Employee Plan or asserting any rights or
claims to benefits under such Employee Plan; (vii) the consummation of the
transactions contemplated by this Agreement will not create, accelerate or
otherwise result in any liability to the Purchaser, the Company or OTI with
respect to such Employee Plan, including the triggering of any payment to
participants in such Employee Plan; (viii) such Employee Plan does not promise
or provide retiree medical or other retiree welfare benefits to any Person; and
(ix) such Employee Plan may be amended, terminated or otherwise discontinued
after the Closing Date in accordance with its terms, without liability to the
Company, OTI or Purchaser (except as to benefits accrued and vested thereunder
prior to such amendment, termination or discontinuance and the ordinary
administrative expenses incurred in relation to such event).
(d) OTI has established reserves for accrued TRATTAMENTO DI FINE
RAPPORTO indemnities in accordance with Italian Law. The Company or OTI has
provided the Purchaser accurate information concerning accrued vacation
obligations, incentive obligations and thirteenth month salary obligations.
(e) As of the date hereof, no consultant, temporary employee or
other individual who provides services to the Company or OTI who is not an
employee of the Company or OTI has asserted any written claim for employee
benefits.
4.15 EMPLOYEE MATTERS. The Sellers previously delivered to the
Purchaser accurate information regarding personnel employed by the Company or
OTI regarding regular temporary employees of the Company or OTI as of September
11, 2000, which included level and seniority of employment and relevant
compensation, including to the extent readily available, any fringe benefits for
all such employees. The Company and OTI are in compliance in all material
respects with all currently applicable Laws respecting employment,
discrimination in employment, terms and conditions of employment, wages, hours
and occupational safety and health and employment practices, and are not engaged
in any unfair labor practice. The Company and OTI have withheld all amounts
required by Law or by Contract to be withheld from the wages, salaries, and
other payments to employees; have filed all declarations, returns and reports to
be filed with respect to social security and welfare Laws and paid all relevant
social and welfare charges when due; and are not liable for any arrears of wages
or any Taxes or any penalty for failure to comply with any of the foregoing.
Neither the Company nor OTI is liable
13
for any payment to any trust or other fund or to any Governmental Body, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for employees (other than routine payments to be made in the
normal course of business and consistent with past practice). There are no
material pending claims against the Company or OTI under any workers
compensation plan or policy or for long-term disability. There are no
controversies pending or, to Sellers' Knowledge, threatened between the Company
or OTI and any of their respective employees, groups that represent employees or
labor organizations, which controversies have or could reasonably be expected to
result in an action, suit, proceeding, claim, arbitration or investigation
before any agency, court or tribunal, foreign or domestic. Neither the Company
nor OTI is bound by or subject to (and none of their respective assets or
properties is bound by or subject to) any written or oral, express or implied,
Contract, commitment or arrangement with any labor union, and no labor union has
requested or, to the Sellers' Knowledge, has sought to represent any of the
employees, representatives or agents of the Company or OTI. During the past 3
years none of the Company, OTI or their predecessors has suffered any material
strikes or work stoppages by their employees. There is no strike or other labor
dispute involving a material number of employees of the Company or OTI pending
or, to the Sellers' Knowledge, threatened.
4.16 INSURANCE. The Sellers have made available to the Purchaser
summaries of all material policies of insurance to which the Company or OTI is a
party or by which its assets or businesses are covered. There is no claim
pending as of the date hereof under any of such policies as to which coverage
has been questioned, denied or disputed by the underwriters of such policies.
All premiums due and payable under all such policies have been paid, and each of
the Company and OTI is otherwise in compliance in all material respects with the
terms of such policies. Each of the Company and OTI has insurance policies in
effect covering the risks associated with its respective businesses and
properties.
4.17 COMPLIANCE WITH LAWS. Each of the Company and OTI has complied
with, is not in violation of, and has not received any written notices since
January 1, 1999 of violation with respect to any Law, Permit or Order applicable
to the Company or OTI or governing the conduct of their respective businesses,
except for any such violation or failure to comply as would not be reasonably
likely to have a Seller Material Adverse Effect. Section 4.17 of the Disclosure
Schedule lists all material Permits and Orders of any Governmental Body
applicable to the Company or OTI. Such Permits and Orders have been validly
issued to the Company or OTI by the appropriate Governmental Body in accordance
with applicable Law and the Company or OTI, as applicable, has complied fully
with all material conditions applicable to it. All such Permits and Orders are
in full force and effect. Neither any Seller, Parent, the Company or OTI has
received any notice to the effect that there is lacking any such Permit or Order
required in connection with the current or contemplated operations of the
business of the Company or OTI or that any such Permit or Order may be revoked.
This Section 4.17 does not relate to matters with respect to the employee
benefit or ERISA matters, which are the subject of Section 4.14, to the
employment matters, which are the subject of Section 4.15, to the environmental
14
matters, which are the subject of Section 4.28, or to the business practices,
which are the subject of Section 4.29.
4.18 BROKERS' FEES. Neither the Company, OTI nor the Purchaser, as a
result of any action taken by Parent, the Sellers, the Company or OTI has
incurred or will incur, directly or indirectly, any liability for brokerage or
finders' fees or agents' commissions or investment bankers' fees or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
4.19 MATERIAL CONTRACTS. Except for the Contracts and agreements
described (or required to be described by this Agreement whether or not
described) in Sections 4.12 and 4.19 to the Disclosure Schedule (collectively,
the "MATERIAL CONTRACTS"), as of the date hereof, neither the Company nor OTI is
a party to or bound by:
(a) any distributor, agency or manufacturer's representative
Contract;
(b) any Contract that requires aggregate future payments by or to
the Company or OTI of more than $250,000 that are not terminable by the
respective company on less than ninety (90) days' notice without penalty;
(c) any Contract that expires, or may be renewed at the option of
any person other than the Company or OTI so as to expire, more than one year
after the date of this Agreement, which cannot be terminated by the respective
company without penalty on less than ninety (90) days' notice;
(d) any trust indenture, mortgage, promissory note, loan
agreement, conditional sale agreement, guarantee, subordination agreement,
letter of credit or other Contract for the borrowing of money, any currency
exchange, commodities or other hedging arrangement or any leasing transaction;
(e) any Contract relating to the acquisition, disposition or
lease of securities or businesses or production equipment for consideration
in excess of $100,000;
(f) any Contract requiring the Company or OTI to satisfy all or a
specified portion of its requirements for a particular supply, raw material or
component from one or more specified Persons or to supply to one or more
specified Persons all or a specified portion of the products manufactured by the
Company or OTI;
(g) any Contract for capital expenditures in excess of $250,000;
(h) any Contract limiting the freedom of the Company or OTI to
engage in any line of business or to compete with any other Person, or any
confidentiality, secrecy or non-disclosure Contract;
(i) any Contract pursuant to which the Company or OTI is a lessor
or lessee of any machinery, equipment, motor vehicles, office furniture,
fixtures or other
15
personal property involving, in the case of any such Contract, payments of more
than $250,000 annually;
(j) any Contract with any employee or consultant involving the
payment by the Company or OTI to such Person in excess of $75,000 or with any
director or officer;
(k) any material Contract of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment with respect to, the
obligations, liabilities (whether accrued, absolute, contingent or otherwise) or
indebtedness of any other Person;
(l) any Contract binding the Company or OTI in connection with any
corporate matters of the Company or OTI or matters related to any of the
Company's existing or future capital stock or OTI's existing or future capital
stock or with respect to any partnership, joint venture or strategic alliance;
(m) any Contract with any Governmental Body;
(n) any Contract with respect to the discharge, storage or
removal of Hazardous Materials; or
(o) any understanding, commitment or agreement to enter into
any of the foregoing.
Each of the Material Contracts, and each Contract entered into after
the date of this Agreement which, if it had existed as of the date hereof, would
be a Material Contract (each a "SUBSEQUENT CONTRACT"), is in writing and is
valid and enforceable in accordance with its terms. There is no material default
or alleged material default under any Material Contract or Subsequent Contract
by the Company or OTI, and no event has occurred that with the lapse of time or
the giving of notice or both would constitute a material default thereunder by
the Company or OTI. To Sellers' knowledge, Cisco is not in default or alleged
default under the Cisco Supply Agreement, and no event has occurred that with
the lapse of time or the giving of notice or both would constitute a material
default thereunder by Cisco. To Sellers' Knowledge, there is no material default
or alleged material default under any Material Contract or Subsequent Contract
by any counterparty thereto, and no event has occurred that with the lapse of
time or the giving of notice or both would constitute a material default
thereunder by any counterparty thereto.
4.20 EFFECT ON CERTAIN AGREEMENTS. Neither the execution and
delivery of this Agreement and the Transaction Agreements nor the consummation
of the transactions contemplated hereby and thereby, will (i) constitute a
termination event of any employment relationship with the Company or OTI, (ii)
result in any payment (including severance, unemployment compensation, golden
parachute, bonus or otherwise) becoming due by the Purchaser, the Company or OTI
to any director or employee of the
16
Company or OTI, (iii) materially increase any benefits otherwise payable by the
Company or OTI, (iv) result in the acceleration of the time of payment or
vesting of any such benefits or (v) otherwise trigger any specific right in
favor of any of the employees of the Company or OTI against the Purchaser, the
Company or OTI, in each case, except as provided by applicable Laws or national
collective bargaining agreements to which the Company or OTI is a party.
4.21 PROPRIETARY INFORMATION AGREEMENTS. Schedule 4.21 to the
Disclosure Schedule lists as of the date hereof each employee, officer or
consultant of the Company or OTI who has executed a non-compete and/or
non-disclosure agreement with the Company or OTI and attaches the forms of such
agreements, which forms conform to the executed versions thereof. To Sellers'
Knowledge, no such employees, officers or consultants are in violation of such
agreements.
4.22 RELATED PARTY TRANSACTIONS. Neither the Sellers nor any of
their respective Affiliates has borrowed any money from or has outstanding any
indebtedness or other similar obligations to the Company or OTI. Other than as
the holder of not more than ten percent (10%) of any class of securities of a
Person (which securities shall have been registered under Section 12 of the
Exchange Act or a similar Law), neither the Sellers, Parent, the Company nor OTI
owns any direct or indirect interest of any kind in, or controls or is a partner
of, or consultant to, or lender to or borrower from or has the right to
participate in the profits of, any Person that or who is (A) a competitor of the
Company or OTI, (B) engaged in a business related to the business of the Company
or OTI, or (C) a party to any Contract with the Company. To the Sellers'
Knowledge, no officer or employee of the Company or OTI (i) owns more than a ten
percent (10%) interest of any kind, whether directly or indirectly, in or (ii)
is a director, officer, employee or partner of, or consultant to, or lender to
or borrower from, any Person who is a competitor, customer or supplier of the
Company or OTI.
4.23 BANKS; POWERS OF ATTORNEY; PROXIES. Section 4.23 of the
Disclosure Schedule contains a complete and correct list as of the date hereof
of the names and locations of all banks in which the Company or OTI has accounts
or safe deposit boxes and the names of all persons authorized to draw thereon or
to have access thereto. No person holds a power of attorney or proxy to act on
behalf of the Company or OTI.
4.24 ADEQUACY OF ASSETS. Except for basic technological research
activities which relate to the business of the Company and OTI and other
businesses of Parent and its Affiliates and for Intellectual Property, which is
addressed in Section 4.12 hereof, all assets, properties and rights owned or
used by Parent or any of its Affiliates for use in the manufacturing,
development and sale of Components and Devices (other than individuals and those
services described in the Transition Services Agreement or identified in Section
4.24 of the Disclosure Schedule) are owned or held by the Company or OTI. The
assets owned, leased, licensed or used by the Company and OTI are sufficient and
adequate to enable the Company and OTI to conduct their respective businesses as
presently conducted. There is no Contract, Permit or Order binding upon the
Company or OTI that has had or reasonably would be expected to have the effect
of prohibiting the Company
17
or OTI from conducting, or materially impairing, any business conducted as of
the date hereof by the Company or OTI. Section 4.24 of the Disclosure Schedule
describes those services being provided as of the date hereof by Parent or any
of its Affiliates to the Company or OTI.
4.25 INVENTORY. The inventories of the Company and OTI are in good
and marketable condition and are saleable in the ordinary course of business.
Adequate reserves have been reflected in the Balance Sheet for obsolete or
otherwise unusable or slow moving inventory within the limits used in the
Parent's internal monthly management reporting, which reserves were calculated
in a manner consistent with past practice and in accordance with Parent
Accounting Principles consistently applied. With respect to the Cisco Supply
Agreement purchase orders and quarterly forecasts that have been confirmed by
the Company or OTI prior to the date hereof, the Company and OTI believe they
will have an adequate inventory of raw materials, work in process and finished
goods, taking into account the Company's and OTI's capacity to manufacture
products and their ability to obtain raw materials in the ordinary course of
business consistent with past practice, to satisfy their obligations in such
purchase orders and such quarterly forecasts in accordance with their terms.
4.26 ACCOUNTS RECEIVABLE. All accounts receivable of the Company and
OTI have arisen from bona fide transactions in the ordinary course of business
consistent with past practice. Subject to the rights of Cisco under the Cisco
Supply Agreement with respect to products delivered to it, all accounts
receivable of the Company and OTI reflected in the Balance Sheet are good and
collectible at the aggregate recorded amounts thereof, which are net of any
applicable reserve for returns or doubtful accounts reflected thereon. Such
reserves are adequate and were calculated in a manner consistent with past
practice and in accordance with Parent Accounting Principles consistently
applied. All accounts receivable arising after the Balance Sheet Date are good
and collectible at the aggregate recorded amounts thereof, net of any applicable
reserve for returns or doubtful accounts. Such reserves are adequate and were
calculated in a manner consistent with past practice and in accordance with
Parent Accounting Principles consistently applied.
4.27 CUSTOMERS; SUPPLIERS. The relationships of the Company and OTI
with their customers and suppliers have been entered into and are conducted
pursuant to arms' length transactions. No material customer or material supplier
of the Company or OTI has, between February 10, 2000 and the date hereof,
canceled or terminated or provided written notice of an intent to cancel or
terminate its Contract with the Company or OTI. The Sellers agree to notify the
Purchaser if, after the date hereof and prior to the Closing Date, a material
customer or material supplier cancels or terminates or provides written notice
to the Company or OTI of an intent to cancel or terminate its Contract. Without
limiting the generality of the foregoing, Cisco has not indicated to the Company
or OTI, prior to the date hereof, either verbally or in writing, any intention
to reduce or modify the nature of its relationship with the Company or OTI
following the expiration of the Cisco Supply Agreement. The Sellers agree to
notify the Purchaser if, after the date hereof and prior to the Closing Date,
Cisco indicates such an intention, either verbally or in writing, to the Company
or OTI.
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4.28 ENVIRONMENTAL.
(a) The following terms shall be defined as follows: (i)
"ENVIRONMENTAL AND SAFETY LAWS" shall mean all applicable and effective Laws or
Orders that (x) are intended to assure the protection of the environment or (y)
that classify, regulate, call for the remediation of, restrict the handling or
disposal of, require reporting with respect to, or list or define air, water,
groundwater, solid waste, hazardous or toxic substances, materials, wastes,
pollutants or contaminants, or which are intended to assure the safety of
employees, workers or other persons, including the public, (ii) "HAZARDOUS
MATERIALS" shall mean any toxic or hazardous substance, material or waste or any
pollutant or contaminant, or infectious or radioactive substance or material,
including those substances, materials and wastes defined in or regulated under
any Environmental and Safety Laws, (iii) "PROPERTY" shall mean all real property
leased or owned by, or otherwise used in the conduct of the business of, the
Company and OTI, either currently or in the past, and the real property to be
leased as contemplated in the Lease Agreement, and (iv) "FACILITIES" shall mean
all buildings and improvements on the Property.
(b) (i) No methylene chloride, asbestos or other Hazardous
Substance is contained in, has been used at or, to Sellers' Knowledge, has been
released from the Facilities except in material compliance with all applicable
Environmental and Safety Laws; (ii) all Hazardous Materials have been disposed
of in material compliance with all applicable Environmental and Safety Laws;
(iii) since 1990, none of the Company, OTI, either Seller, Parent or any of
their Affiliates has received any written notice of any noncompliance of the
Facilities or with respect to their past or present operations with
Environmental and Safety Laws relating to the Property, the Facilities or the
operation of the business of the Company or OTI or their predecessors; (iv) no
material administrative actions or suits are pending or, to Sellers' Knowledge,
threatened against the Company or OTI relating to a violation of any
Environmental and Safety Laws; (v) to Sellers' Knowledge, there have not been,
since 1990, and are not now, any Hazardous Materials on, under or migrating to
or from the Facilities or Property so as to give rise to any liability under
applicable Environmental and Safety Laws; (vi) to Sellers' Knowledge, there have
not been, since 1990, and are not now, any underground tanks or underground
improvements at, on or under the Property, including treatment or storage tanks,
sumps, or water, gas or oil ▇▇▇▇▇ except those placed and maintained in material
compliance with all applicable Environmental and Safety Laws; (vii) the
Facilities and the Company's and OTI's uses and activities therein and otherwise
have at all times complied in all material respects with all Environmental and
Safety Laws; (viii) to the Knowledge of the Sellers, the Properties are not
affected by any Hazardous Substance, pollution or other negative environmental
conditions that, regardless of the source, would reasonably be expected to
create the obligation for the Purchaser, the Company or OTI to assume any
obligation of remediation, clearance of the land or similar liability under
Environmental and Safety Laws or any other material liability towards third
parties under the same Laws; and (ix) the Company and OTI have all the material
Permits required to be issued under all applicable Environmental and Safety Laws
and are in material compliance with the terms and conditions of those permits
and licenses.
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4.29 CERTAIN BUSINESS PRACTICES. Neither the Company nor OTI nor any
director, officer, employee or agent thereof has (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful payments relating to any
political activity or (ii) made any unlawful payment to any foreign, domestic or
supranational government official or employee or to any foreign or domestic
political party or campaign or violated any provision of the U.S. Foreign
Corrupt Practices Act of 1977, as amended, or the OECD Convention on Combatting
Bribery of Foreign Public Officials in Business Transactions. To the Sellers'
Knowledge, neither the Company nor OTI has any supply Contracts with a company
located in, or the majority of whose equity is owned by nationals of, Libya,
Syria, Iran, Iraq, Sudan, Cuba or North Korea.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser hereby represents and warrants to the Sellers and
Parent that:
5.1 ORGANIZATION AND GOOD STANDING. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New York.
5.2 AUTHORIZATION OF AGREEMENT. The Purchaser has all requisite
power, authority and legal capacity to execute and deliver this Agreement and
each other agreement, document, or instrument or certificate contemplated by
this Agreement or to be executed by the Purchaser in connection with the
consummation of the transactions contemplated by this Agreement and each of the
other Transaction Agreements, and to consummate the transactions contemplated
hereby and thereby. This Agreement and each of the other Transaction Agreements
has been, or will have been as of the Closing Date, duly and validly executed
and delivered by the Purchaser, and (assuming the due authorization, execution
and delivery by the other parties hereto and thereto) this Agreement
constitutes, and each of the other Transaction Agreements when so executed and
delivered will constitute, legal, valid and binding obligations of the
Purchaser, enforceable against the Purchaser in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization and similar
Laws affecting creditors' rights and subject to the enforceability of equitable
remedies.
5.3 CONFLICTS; CONSENTS OF THIRD PARTIES.
(a) Neither the execution and delivery by the Purchaser of this
Agreement and of the Transaction Agreements, nor the compliance by the Purchaser
with any of the provisions hereof or thereof will (i) conflict with, or result
in the breach of, any provision of the certificate of incorporation or by-laws
of the Purchaser, (ii) conflict with, require the consent of, violate, result in
the breach of, or constitute a default under any
20
material note, bond, mortgage, indenture, license, agreement or other instrument
or obligation to which the Purchaser is a party or by which the Purchaser or its
properties or assets are bound to, or (iii) to the Purchaser's knowledge,
violate any Law or Order by which the Purchaser is bound, except, in the case of
clause (ii) or clause (iii), for such violations, breaches or defaults as would
not, individually or in the aggregate, have a Purchaser Material Adverse Effect.
(b) No consent, waiver, approval, Order, Permit or authorization
of, or declaration or filing with, or notification to, any Governmental Body is
required on the part of the Purchaser in connection with the execution and
delivery of this Agreement or the Transaction Agreements or the compliance by
Purchaser with any of the provisions hereof or thereof, except for (i) the
filing of any required report with the SEC and the NYSE and (ii) such filings as
may be required under applicable securities or Competition Laws.
5.4 INVESTMENT INTENTION. The Purchaser is acquiring the Shares for
its own account for investment purposes only and not with a present view to the
distribution (as such term is used in Section 2(11) of the Securities Act)
thereof. The Purchaser understands that the Shares have not been registered
under the Securities Act and cannot be sold unless subsequently registered under
the Securities Act or an exemption from such registration is available and, in
each case, subject to the terms of the Stockholders' Agreement.
5.5 BROKERS' FEES. None of the Company, OTI, the Parent or the
Sellers, as a result of any action taken by the Purchaser, has incurred or will
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
5.6 ACCESS TO INFORMATION. The Purchaser has been given access to
all documents, records and other information that the Purchaser has requested
and has had adequate opportunity to ask questions of, and receive answers from,
the Company's officers, employees, agents, accountants and representatives
concerning the Company's business, operations, financial condition, assets,
liabilities, and all other matters that it deemed relevant to its investment in
the Shares; provided, however, that none of the foregoing shall alter, diminish,
obviate or impair the Purchaser's right to rely upon all of the representations
and warranties of the Sellers and Parent contained in this Agreement.
ARTICLE VI
CLOSING CONDITIONS
6.1 CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER. The obligation
of the Purchaser to purchase the Shares at Closing shall be subject to the
receipt by the Sellers
21
of the Purchaser Price and the satisfaction (or waiver by the Purchaser) of each
of the following conditions at or before Closing:
(a) DELIVERY OF DOCUMENTS. The Sellers shall have delivered to the
Purchaser, in form and substance reasonably satisfactory to the Purchaser, the
following:
(i) stock certificates representing the Shares, duly
endorsed in blank or accompanied by duly executed stock transfer powers;
(ii) written resignations of each of the directors of the
Company and OTI, other than any designee of Cisco, substantially in the form of
Exhibit D;
(iii) a certificate, substantially in the form of Exhibit
E, of an officer of Parent and each of the Sellers, dated the
(iv) Closing Date, certifying as to the satisfaction of
the conditions specified in this Section 6.1; and
(v) a certificate of the secretary of Parent and each of the
Sellers dated the Closing Date certifying as to the accuracy of: (a) the
organizational documents of such party; and (b) excerpts of the resolutions of
the board of directors of such party authorizing the execution, delivery and
performance of this Agreement and each of other Transaction Agreements and the
consummation of the transactions contemplated hereby and thereby.
(b) COMPLIANCE WITH AGREEMENTS. The Sellers, Parent, the Company
and OTI shall have performed and complied in all material respects with all
agreements, covenants and conditions contained herein and in each of the other
Transaction Agreements that are required by the terms hereof or thereof to be
performed or complied with by the Sellers, Parent, the Company or OTI on or
before the Closing Date.
(c) DELIVERY OF OTHER TRANSACTION AGREEMENTS. Simultaneously with
or prior to the sale to the Purchaser of the Shares hereunder, Parent and the
Sellers shall have executed and delivered to the Purchaser each of the other
Transaction Agreements to which they are party, including the IP Agreements.
(d) REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties of the Sellers contained herein or in any of the other Transaction
Agreements shall be true and correct in all material respects (except for
representations and warranties that are qualified by Sellers' Knowledge or
materiality, which representations and warranties as so qualified shall be true
in all respects) on and as of the date hereof and the Closing Date, except those
representations and warranties of the Sellers that speak of a certain date,
which representations and warranties shall have been true and correct in all
material respects as of such date both before and after giving effect to the
transactions contemplated hereby and by the other Transaction Agreements;
provided, however, that
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if all other conditions set forth in this Article VI are satisfied, Purchaser
agrees to consummate the transactions described herein even if the
representations and warranties of the Sellers contained herein are untrue or
incorrect in any material respect as of the Closing Date, unless the failure of
the representations and warranties to be true as of the Closing Date would
reasonably be expected to cause a Seller Material Adverse Effect. The Sellers
and Parent acknowledge that the provisions of this Section 6.1(d) shall not
alter, diminish, obviate or impair any indemnification rights that may be
available to the Purchaser pursuant to Article 8 hereof.
(e) AUTHORIZATIONS. The Sellers shall have sent or made all
material registrations, declarations and filings as may be required pursuant to
any Law, including the HSR Act or Competition Laws of Germany or, if applicable,
the European Commission or pursuant to any other Contract or Order material to
the business of the Company or OTI or to which the Company or OTI is a party or
is subject, in connection with the transactions to be consummated on or prior to
the Closing Date as contemplated by this Agreement or any other Transaction
Agreement.
(f) HSR ACT AND OTHER COMPETITION LAWS; NO MATERIAL JUDGMENT OR
ORDER. The waiting period, if any, under the HSR Act shall have terminated, any
approvals required by the Competition Laws of Germany or such other Member
States of the European Union identified jointly by the Purchaser and Parent
within eight Business Days of the date hereof, or if applicable, the European
Commission, applicable to the transactions contemplated hereby shall have been
obtained, and on the Closing Date there shall not be any judgment or order of a
court of competent jurisdiction or any ruling of any Governmental Body that
would prohibit the sale of the Shares hereunder.
(g) TERMINATION OF CONTRACTS. Except (i) as otherwise consented to
by the Purchaser, (ii) for Contracts contemplated by this Agreement and (iii)
for Contracts relating to Intellectual Property as in effect on the date hereof
or contemplated hereby, all Contracts between the Company and OTI, on the one
hand, and Parent or any of its Affiliates (other than the Company or OTI), on
the other hand, shall have been terminated on or prior to the Closing Date
without further payment, liability or obligation on the part of the Company or
OTI, other than confidentiality obligations and payment obligations for services
identified in Section 4.24 to the Disclosure Schedule that accrued prior to such
termination.
(h) LEASE. Seller 1 and OTI shall have entered into the lease
agreement (the "LEASE AGREEMENT") attached as Exhibit F hereto or a replacement
lease as contemplated thereby.
(i) TRANSITION SERVICES AGREEMENT. The transition services
agreement, in the form attached hereto as Exhibit G (the "TRANSITION SERVICES
AGREEMENT"), with respect to the provision of administrative services by Parent
and its Affiliates to the OTI shall have been entered into among the Sellers,
the Purchaser and OTI.
23
(j) An Affiliate of Parent shall have entered into the supply
contract (the "Supply Contract") attached as Exhibit H hereto or a replacement
contract as contemplated thereby.
6.2 CONDITIONS TO THE OBLIGATIONS OF THE SELLERS. The obligations of the
Sellers to sell the Shares to the Purchaser at the Closing shall be subject to
the receipt by the Sellers of the Purchase Price and the satisfaction (or waiver
by the Sellers) of each of the following conditions at or before the Closing:
(a) DELIVERY OF DOCUMENTS. The Purchaser shall have delivered to
the Sellers, in form and substance reasonably satisfactory to the Sellers, the
following:
(i) a certificate of the Secretary of the Purchaser, dated the
Closing Date, certifying as to the accuracy of resolutions of the Board of
Directors of the Purchaser authorizing the execution, delivery and performance
of this Agreement and the other Transaction Agreements and the consummation of
the transactions contemplated hereby and thereby, or, if no such resolutions are
required, a statement to that effect and describing the actual authorization;
and
(ii) a certificate on behalf of the Purchaser, substantially
in the form of Exhibit I, of an officer of the Purchaser, dated the Closing
Date, certifying as to the satisfaction of the conditions specified in this
Section 6.2.
(b) COMPLIANCE WITH AGREEMENTS. The Purchaser shall have performed
and complied in all material respects with all agreements, covenants and
conditions contained herein and in each of the other Transaction Agreements that
are required by the terms hereof or thereof to be performed or complied with by
the Purchaser on or before the Closing Date.
(c) REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties of the Purchaser contained herein or in any of the other Transaction
Agreements shall be true and correct in all material respects on and as of the
Closing Date, except those representations and warranties of the Purchaser that
speak as of a certain date, which representations and warranties shall have been
true and correct in all material respects as of such date both before and after
giving effect to the transactions contemplated hereby and by the other
Transaction Agreements.
(d) PURCHASE OF SERIES A PREFERRED STOCK. In the event that Cisco
has exercised its Co-Sale Rights on or before the Closing Date, then the
Purchaser shall have purchased all of the Series A Preferred Stock from Cisco
upon the same terms and for the same consideration per share as the Purchaser is
purchasing the Shares from the Sellers, in accordance with Section 3.2 of the
Stockholders' Agreement.
(e) HSR ACT AND OTHER COMPETITION LAWS. The waiting period, if
any, under the HSR Act shall have terminated, any approvals required by the
Competition Laws of Germany or such other Member States of the European Union
identified jointly
24
by the Purchaser and Parent within eight Business Days of the date hereof or, if
applicable, the European Commission, applicable to the transactions contemplated
hereby shall have been obtained, and on the Closing Date there shall not be any
judgment or order of a court of competent jurisdiction or any ruling of any
Governmental Body that would prohibit the sale of the Shares hereunder.
ARTICLE VII
COVENANTS
7.1 ACCESS TO INFORMATION. The Sellers agree that, prior to the
Closing Date, the Purchaser shall be entitled, through its officers, employees
and representatives (including its legal advisors and accountants), to make such
investigation of the properties, businesses and operations of the Company and
OTI and such examination of the books, records and financial condition of the
Company and OTI and engage in such discussions with customers and vendors of and
to the Company or OTI as it reasonably requests and to make extracts and copies
of such books and records. Any such investigation and examination shall be
conducted during regular business hours and under reasonable circumstances and
pursuant to the Confidentiality Agreement, and the Sellers shall cooperate, and
shall cause the Company and OTI to cooperate, fully therein. No investigation by
Purchaser prior to or after the date of this Agreement shall alter, diminish,
obviate or impair any of the representations, warranties, covenants or
agreements of either Seller or Parent contained in this Agreement or any of the
other Transaction Agreements. In order that the Purchaser may have full
opportunity to make such physical, business, accounting and legal review,
examination or investigation as it may reasonably request of the affairs of the
Company and OTI, the Sellers and Parent shall cause the officers, employees,
consultants, agents, accountants, attorneys and other representatives of the
Sellers, Parent, the Company and OTI to cooperate fully with such
representatives in connection with such review and examination.
7.2 CONDUCT OF THE BUSINESS PENDING THE CLOSING.
(a) Except as otherwise expressly contemplated by this Agreement
(including under Section 7.2(b) below), or with the prior written consent of the
Purchaser, between the date hereof and the Closing Date, the Sellers and Parent
shall, and shall cause the Company and OTI to, conduct the respective businesses
of the Company and OTI only in the ordinary course consistent with past practice
and use their commercially reasonable efforts to preserve its present business
operations, organization (including management and the sales force) and goodwill
and act in a manner consistent with the business plan of the Company and OTI
previously provided to the Purchaser, including the product qualification
schedule contemplated by such business plan. Any new employees hired after the
date hereof by the Company or OTI will be recommended for hire by management of
the Company or OTI and the Sellers agree to consult with Purchaser regarding
significant hiring decisions; provided, however, that all hiring decisions will
be made by the Company or OTI.
25
(b) Except as set forth in Section 7.2(b) of the Disclosure
Schedule, as provided for in the business plan referred to in Section 7.2(a)
hereof, or as otherwise expressly contemplated by this Agreement or with the
prior written consent of the Purchaser (which consent will not be unreasonably
withheld), between the date hereof and the Closing Date, the Sellers and the
Parent shall not, and shall cause the Company and OTI not to:
(i) declare, set aside, make or pay any dividend or other
distribution in respect of the capital stock of the Company or OTI or
repurchase, redeem or otherwise acquire any outstanding shares of the capital
stock or other securities of, or other ownership interests in, the Company or
OTI;
(ii) transfer, issue, sell or dispose of any shares of capital
stock or other securities of the Company or OTI or grant options, warrants,
calls or other rights to purchase or otherwise acquire shares of the capital
stock or other securities of the Company or OTI, other than the conversion of
any Series A Preferred Stock into common stock of the Company;
(iii) effect any recapitalization, reclassification, stock
split or like change in the capitalization of the Company or OTI;
(iv) amend the Certificate of Incorporation, the By-Laws
or the OTI Organizational Documents;
(v) (A) materially increase the annual level of compensation
of any employee of the Company or OTI, (B) grant at Company or OTI cost any
unusual or extraordinary bonus, benefit or other direct or indirect compensation
to any employee, director or consultant, other than in the ordinary course, (C)
materially increase the coverage or benefits available under any (or create any
new) severance pay, termination pay, vacation pay, company awards, salary
continuation for disability, sick leave, deferred compensation, bonus or other
incentive compensation, insurance, pension or other employee benefit plan or
arrangement made to, for, or with any of the directors, officers, employees,
agents or representatives of the Company or OTI or otherwise modify or amend or
terminate any such plan or arrangement, or (D) other than those agreements
entered into or contemplated in Section 4.21, enter into any employment,
deferred compensation, severance, consulting, non-competition or similar
agreement (or amend any such agreement) to which the Company or OTI is a party
or involving a director, officer or employee of the Company or OTI in his or her
capacity as a director, officer or employee of the Company or OTI;
(vi) except for trade payables and intercompany investments
incurred in the ordinary course of business, borrow monies (from Affiliates or
third parties) for which the Company or OTI becomes liable to repay for any
reason or draw down on any line of credit or debt obligation, or become the
guarantor, surety, endorser or otherwise liable for any debt, obligation or
liability (contingent or otherwise) of any other Person;
26
(vii) subject to any Lien any of the properties or assets
(whether tangible or intangible) of the Company or OTI;
(viii) acquire any material properties or assets (other than
acquisitions of supplies in the ordinary course of business) or sell, assign,
transfer, convey, lease or otherwise dispose of any of the material properties
or assets (except for the sale of Company or OTI produced Components or Devices
for fair consideration in the ordinary course of business) of the Company and
OTI;
(ix) cancel or compromise any debt or claim or waive or
release any material right of the Company or OTI except in the ordinary course
of business;
(x) enter into any commitment for capital expenditures of
the Company or OTI that will not be satisfied on or before the Closing Date;
(xi) enter into, modify or terminate any labor or collective
bargaining agreement of the Company or OTI or, through negotiation or otherwise,
make any commitment or incur any liability to any labor organization with
respect to the Company or OTI;
(xii) introduce any material change with respect to the
operation of the Company or OTI, including any material change in the types,
nature, composition or quality of its products or services, experience any
material change in any contribution of its product lines to its revenues or net
income;
(xiii) permit the Company or OTI to enter into, or agree to
enter into, any merger or consolidation with any corporation or other entity;
(xiv) permit the Company or OTI to make any investments in or
loans to, or pay any fees or expenses to, or enter into or modify any Contract
with, either Seller or any Affiliate of either Seller (other than payments
obligating accrual prior to the Closing Date);
(xv) sell, transfer or dispose of, or grant, modify, waive or
terminate any license agreement, development agreement or any other agreement
with respect to Intellectual Property of the Company or OTI;
(xvi) revalue any assets of the Company or OTI;
(xvii) enter into any Contract, Permit or Order that would
have the effect of materially impairing or prohibiting the Company or OTI from
engaging in any line of business conducted as of the date hereof by the Company
or OTI; or
(xviii) negotiate or agree to do any of the things described
in the preceding clauses (i) through (xvii) (other than as expressly
contemplated hereby).
27
7.3 PURCHASE OF SERIES A PREFERRED STOCK. The Sellers agree to
comply with the notification provisions contemplated in Section 3.2 of the
Stockholders' Agreement. If Cisco exercises its Co-Sale Rights in accordance
with the Stockholders' Agreement, the Purchaser shall purchase all of the Series
A Preferred Stock from Cisco upon the same terms (including the same
consideration per share) as the Purchaser is purchasing the Shares from the
Sellers. In such event, Parent and the Sellers shall provide any required
consents and approvals required of Parent or Sellers under the Stockholders'
Agreement, Certificate of Incorporation or By-Laws in order for Cisco to
complete such sale. In the event that Cisco does not exercise its Co-Sale
Rights, Parent, the Sellers and the Purchaser shall use commercially reasonable
efforts to substitute the Purchaser for Parent for the purposes of the
Stockholders' Agreement. If they are unable to effect such substitution and
either Cisco exercises its "PUT" right pursuant to Section 3.4 of the
Stockholders' Agreement or the Purchaser requests that Parent exercise its
"CALL" Right as provided in Section 3.4 of the Stockholders' Agreement, then
Parent shall purchase all of the shares of the Series A Preferred Stock from
Cisco as provided in Section 3.4 of the Stockholders' Agreement and shall sell
them to the Purchaser, and the Purchaser shall purchase such shares upon the
same terms (including the same consideration) as Parent purchased such shares
from Cisco.
7.4 FILINGS WITH GOVERNMENTAL BODIES. As promptly as practicable
after the execution of this Agreement, each party shall, in cooperation with the
other, file or cause to be filed any reports, notifications or other information
that may be required under the HSR Act and other Competition Laws, shall furnish
or cause to be furnished to the other all such information in its possession as
may be reasonably necessary for the completion of the reports, notifications or
submissions to be filed by the other, and shall use commercially reasonable
efforts to respond as promptly as practicable to all inquiries received from the
appropriate Governmental Bodies for additional information or documentation.
Each party hereto agrees to use its best efforts to comply and cause its
Affiliates to comply in a full and timely manner with any request from a
Governmental Body for additional information relating to the HSR Act and other
Competition Laws. Subject to Section 7.8, the parties shall use their
respective, commercially reasonable efforts to resolve such objections, if any,
as may be asserted with respect to the transactions contemplated hereby under
the Laws of any Governmental Body.
7.5 NO SOLICITATION. Parent and the Sellers will not, and will cause
the Company and OTI to not, and will use commercially reasonable efforts to
cause their respective representatives and the Company's and OTI's respective
representatives to not, directly or indirectly, (i) discuss, negotiate,
undertake, authorize, recommend, propose or enter into, either as the proposed
surviving, merged, acquiring or acquired corporation, any transaction involving
a merger, consolidation, business combination, purchase or disposition of any
amount of the assets or capital stock or other equity interest in the Company or
OTI other than the transactions contemplated by this Agreement (an "ACQUISITION
TRANSACTION"), (ii) facilitate, encourage, solicit or initiate discussions,
negotiations or submissions of proposals or offers in respect of an Acquisition
Transaction, (iii) furnish or cause to be furnished, to any Person, any
28
information concerning the business, operations, properties, prospects or assets
of the Company or OTI in connection with an Acquisition Transaction, or (iv)
otherwise cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other Person to do or seek any of the
foregoing. The Sellers will inform the Purchaser following the receipt by
Parent, either Seller, the Company, OTI or any of their respective
representatives of any proposal or inquiry in respect of any Acquisition
Transaction.
7.6 RESTRICTIVE COVENANTS.
(a) During the period commencing on the Closing Date and ending on
the fifth anniversary (the "ANNIVERSARY DATE") thereof, Parent and the Sellers
shall not, and shall cause Parent's other Affiliates and their respective
successors and assigns (collectively, the "RESTRICTED PARTIES") not to, directly
or indirectly, make, assemble, sell (other than as a part of a Distribution
System) or develop the following components (collectively, the "NON-COMPETE
COMPONENTS"):
Fiber gratings
Fiber gratings based dispersion compensating devices
Erbium doped fiber optical gain blocks and Erbium doped fiber optical
amplifiers
Pump lasers
LiNb0(3) Modulators
Fiber grating-based multiplexers/demultiplexers
Fiber grating-based gain flattening filters
Erbium-doped fiber for amplification
Attenuating fiber specifically designed for enhanced attenuation
properties for use in lengths less than 10m
Polarization maintaining fiber specifically for use in lengths less
than 5m
Fiber, other than transmission fiber, specifically for use as pigtails
in lengths less than 5m
Fiber specifically designed for splicing dissimilar fibers
LiNb0(3) Optical switches
LiNb0(3) Attenuators
Fiber grating based Wavelength selective Filters
Fiber grating based Optical add/drop modules.
Any Restricted Party shall be relieved of its obligations under the
first paragraph of this Section 7.6(a) to the extent that such Restricted Party
asks in writing Purchaser to supply one of the foregoing for use in its
Distribution Systems business and, within 60 days after receipt of such written
request, Purchaser is unable to commit to or declines to provide such component
pursuant to Section 4.2 of the Intellectual Property Rights Agreement to be
entered into on the Closing Date ("IPR AGREEMENT") and, in each such instance,
such Restricted Party's relief shall extend only to the type and quantity of
such component which such Restricted Party asked Purchaser to supply to the
extent provided under Section 4.2 of the IPR Agreement.
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Notwithstanding the above provisions of this Section 7.6(a),
(i) The Restricted Parties shall have the right to design
Erbium doped fiber optical amplifiers, provided Restricted Parties hereby, as
set forth in the IPR Agreement, grant to Purchaser and its Affiliates a
royalty-free, non-exclusive license to make, use, offer for sale, lease, import
and sell Erbium doped fiber optical amplifiers under any patents and patent
applications based on inventions conceived or reduced to practice by one or more
of the Restricted Parties before the Anniversary Date; and
(ii) subject to the terms of licenses granted to it by the
Company, OTI, Sellers and Cisco, Pirelli Submarine Telecom Systems S.p.A. shall
be permitted to continue to compete only in the field of submarine Systems.
(b) Should any portion of the covenants set forth in this Section
7.6 hereinabove be unenforceable because of the scope thereof, or the period
covered thereby, or otherwise, the covenant shall be deemed to be reduced and
limited to enable it to be enforced to the extent permissible under the laws and
public policies applied in the jurisdiction in which enforcement is sought.
(c) Parent's, the Sellers' or Parent's other Affiliates' violation
of the covenants and agreements stated in this Section 7.6 would cause
irreparable damage to the Purchaser and the Purchaser will not have an adequate
remedy at law. Parent and Sellers therefore agree that, in addition to any other
remedies available to the Purchaser at law or in equity, the Purchaser shall be
entitled to an injunction, without posting any bond whatsoever, restraining such
conduct by Parent in the event of a breach or threatened breach by Parent.
7.7 PRESERVATION OF RECORDS. Parent, the Sellers and the Purchaser
agree that each of them shall preserve and keep the records held by it relating
to the respective businesses of the Company and OTI prior to the Closing Date
for a period of three (3) years (or up to ten (10) years if required under
Italian Law) from the Closing Date and, at the other party's reasonable and
documented expense, shall make such records and personnel available to the other
as may be reasonably required by such party in connection with, among other
things, any tax filings, insurance claims by, Legal Proceedings against or
governmental investigations of the Sellers or the Purchaser or any of their
Affiliates or in order to enable the Sellers or the Purchaser to comply with
their respective obligations under this Agreement, each of the other Transaction
Agreements and each other agreement, document or instrument contemplated hereby
or thereby. Upon Purchaser's reasonable request, Parent or Sellers shall deliver
to Purchaser such records relating to the business of the Company or OTI as may
be requested by Purchaser (and Parent or Sellers may retain a copy thereof if
required by Law, which copies would be subject to the Confidentiality
Agreement).
In the event that either the Sellers or the Purchaser wish to
destroy such records after that time, such party shall use commercially
reasonable efforts to provide ninety (90) days prior written notice to the other
or otherwise provide such reasonable
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prior written notice as is practicable, and such other party shall have the
right at its option and expense, upon prior written notice given to such party,
to take possession of the records within one hundred and eighty (180) days after
the date of such notice.
7.8 COMMERCIALLY REASONABLE EFFORTS. Upon the terms and subject to
the conditions herein provided, each of the parties hereto agrees to use its
commercially reasonable efforts to take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper or advisable under
applicable Laws to consummate and make effective the transactions contemplated
by this Agreement and the other Transaction Agreements, including using
commercially reasonable efforts to satisfy the conditions precedent to the
obligations of any of the parties hereto, to obtain all necessary Permits, to
effect all necessary registrations and filings and to deliver notices or
communications to employees or Governmental Bodies. Without limiting the
generality of the foregoing, each party shall take such action as the other
party shall reasonably request to cause the parties to obtain any material
Permits of Governmental Bodies and/or the expiration of applicable waiting
periods. Notwithstanding any provision to the contrary in this Agreement, the
Purchaser shall not be required to hold separate, and agree to sell or otherwise
dispose of, assets, categories of assets or businesses of the Purchaser, any of
its Subsidiaries, the Company or OTI (or to enter into agreements with the
relevant Governmental Body giving effect thereto). Except as required by Law, no
material notice or communication to Governmental Bodies with respect to this
Agreement or the transactions contemplated by this Agreement or any other
Transaction Agreement shall be made by Purchaser, on the one hand, and the
Sellers and the Company and the Subsidiary on the other hand, without the other
parties' prior written consent, which shall not be unreasonably withheld.
7.9 NO INTERFERENCE WITH SELLERS' EMPLOYEES. For a period of three
(3) years commencing on the Closing Date, the Purchaser and its Subsidiaries
shall not directly or indirectly solicit for employment any officer or employee
of the Sellers or any of their Affiliates to leave the employ of such Seller or
Sellers' Affiliate; provided, however, that the foregoing shall not restrict the
Purchaser and its Subsidiaries from hiring any such person if such person was
either terminated by such Seller or Sellers' Affiliate, or had ceased to be
employed by such Seller or Sellers' Affiliate for at least six months prior to
the date of being hired by the Purchaser or its Subsidiary, or was hired in
connection with a general employment search instituted by the Purchaser or its
Subsidiaries that did not, at the direction of the Purchaser or its
Subsidiaries, target employees of the Sellers or any of their Affiliates.
7.10 PREPARATION OF FINANCIAL STATEMENTS. The Sellers and Parent
agree, at their expense, to provide to the Purchaser, the financial information
described on Schedule 7.10 within the periods set forth therein. In connection
with the foregoing, the Sellers and Parent shall request the Sellers'
accountants to provide, at the request of the Purchaser, such cold comfort
letters from the Sellers' accountants as may be reasonably requested in
connection with any reports or registration statements filed by the Purchaser
with the SEC.
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7.11 INSURANCE. The Sellers and Parent shall continuously maintain
through the Closing Date all insurance policies which cover the Company or OTI
in any respect and shall not reduce the scope or amount of coverage of such
policies as they relate to the Company or OTI. The Sellers and Parent shall
arrange for such policies to cover any losses of a type covered by such policies
that arise, occur or otherwise accrue prior to the Closing Date even though the
claim with respect thereto is filed under such policies after the Closing Date.
Except for the previous two sentences, neither the Sellers, Parent nor their
Affiliates shall be obligated to maintain any insurance with respect to the
Company or OTI for periods on and after the Closing Date.
7.12 CONFIDENTIALITY. The parties acknowledge that the Purchaser and
Seller 1 previously executed a confidentiality agreement dated July 6, 2000 (the
"CONFIDENTIALITY AGREEMENT"), which Confidentiality Agreement shall continue in
full force and effect in accordance with its terms and shall survive the Closing
Date or termination of this Agreement. In addition, the parties agree that the
terms and conditions of the transactions contemplated hereby and information
exchanged in connection with the execution hereof shall be subject to the same
standard of confidentiality as set forth in the Confidentiality Agreement.
7.13 TAX AUTHORITY AUDITS. If, prior to the Closing Date, a
Governmental Body conducts a tax audit of the Company, OTI or an Affiliate of
the Company or OTI that results, or would reasonably be expected to result, in
any adjustment to the basis of either (i) any assets held or owned by the
Company or OTI or (ii) the stock of the Company or OTI, the Sellers will notify
the Purchaser within 60 days of the final determination of such audit or
examination; provided, however, that the existence of any such audit or
examination or the failure to so notify the Purchaser shall not constitute a
condition to the Purchaser's obligations to consummate the transactions
contemplated hereby.
7.14 OPTIONS. Parent and Sellers shall retain all liabilities in
respect of options to acquire any of their securities granted to employees or
consultants of the Company or OTI on or prior to the Closing Date. Parent and
Sellers will cause all of such options to become fully vested simultaneously
with the Closing and, notwithstanding any provision of such options to the
contrary, permit such employees and consultants to exercise such options during
the 180 day period following the Closing Date.
7.15 EMPLOYEES. For the period from the Closing Date until one year
following the Closing Date, the Purchaser shall, or shall cause the Company and
OTI to, continue to maintain all benefit plans and arrangements in effect at the
Closing Date that cover employees of the Company or OTI (other than plans
relating to the purchase of products or services from Parent or its Affiliates)
and shall, if any such benefit plan or arrangement cannot be maintained because
it is maintained or provided by Parent or one of its Affiliates or otherwise,
replace such benefit plan or arrangement with a benefit plan or arrangement that
provides benefits at least substantially similar to the benefits provided under
the benefit plan being replaced or provided by the Purchaser to its other
similarly situated employees. Notwithstanding the foregoing, the Purchaser may
replace any benefit plan or arrangement with a benefit plan or arrangement that
provides benefits at
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least substantially similar to the benefits provided under the benefit plan or
arrangement being replaced or under a comparable benefit plan or arrangement
generally provided by the Purchaser to its other similarly situated employees;
provided that such replacement is permitted by the terms of the benefit plan or
arrangement being replaced, applicable collective agreements and applicable
statutory schemes. Parent agrees to pay, from sources other than the Company and
OTI, all retention bonuses, non-compete payments and applicable Taxes payable to
employees of the Company and OTI identified in Section 7.15 of the Disclosure
Schedule and other retention bonuses, non-compete payments and applicable Taxes
relating to agreements entered into by Parent or its Affiliates expressly in
connection with the transactions contemplated hereby.
ARTICLE VIII
INDEMNIFICATION
8.1 The Sellers and Parent shall jointly and severally indemnify,
defend and hold harmless the Purchaser, its Affiliates, partners, officers,
employees and agents from and against the Applicable Percentage of any and all
losses, claims, liabilities, damages, settlements with respect to any
unaffiliated third party claims, judgments and expenses relating thereto
(including reasonable attorneys' fees and expenses incurred by the indemnified
party in the investigation or defense of any of the same or in asserting,
preserving or enforcing any of rights hereunder), net of the net present value
of any actual Tax benefits or insurance recoveries (less the cost of the
recovery and any increase in premium as a result of the recovery) received by
such indemnified party (collectively, "LOSSES"), (i) that arise out of any
breach by the Sellers or Parent of any of their representations, warranties,
covenants or agreements contained in this Agreement or any of the other
Transaction Agreements, (ii) that existed on, or arise from actions or inactions
of Parent, either Seller, the Company or OTI on or prior to February 10, 2000
and not actions or inactions thereafter, (iii) relating to violations of
Environmental and Safety Laws that existed on, or arise from actions or
inactions of Parent, either Seller, the Company or OTI after February 10, 2000
and on or prior to the Closing Date and (iv) relating to Taxes that may be
imposed on or assessed against the Company, OTI or any of the assets with
respect to or arising from transactions during any taxable period ending on or
prior to the Closing Date or any taxable period beginning before the Closing
Date and ending after the Closing Date (a "STRADDLE Period") but only with
respect to the portion of such Straddle Period ending at the end of business on
the Closing Date as contemplated by Section 8.7.
8.2 The Purchaser shall indemnify, defend and hold harmless Parent,
the Sellers, their Affiliates, partners, officers, employees and agents from and
against any Losses that arise out of any breach by the Purchaser of any of its
representations, warranties, covenants or agreements contained in this Agreement
or any of the other Transaction Agreements.
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8.3 Notwithstanding anything contained in this Agreement, no
indemnifying party shall be liable to an indemnified party unless and until the
Losses incurred by the indemnified party as the result of any breach of any
representation, warranty or covenant contained in this Agreement exceed $1
million (the "BASKET"), after which the indemnified party shall be entitled to
indemnification for all of its Losses, not just those in excess of the Basket;
PROVIDED, HOWEVER, that in no event shall the aggregate liability of any party
under this Agreement, whether for breaches of representations and warranties or
otherwise, exceed the Purchase Price, and provided further that, except with
respect to fraud or intentional misrepresentations, in no event shall the
aggregate liability of any party under this Agreement for (x) Losses
contemplated by Sections 8.1(ii), (iii) and (iv) exceed $500 million or (y)
Losses arising from a breach of any representations and warranties (except those
set forth in Sections 4.3, 4.4 and 4.7) exceed $700 million. Notwithstanding any
provision of this Agreement to the contrary, in no event shall the Basket apply
to Losses arising out of or relating to (a) any breach of any of the
representations and warranties set forth in Sections 4.3, 4.4, 4.7, the first
sentence of 4.11, 4.13, 4.14, 4.18, 4.28 and 5.5 or (b) fraud or intentional
misrepresentations.
8.4 An indemnified party shall give the indemnifying party prompt
notice of any third-party claim that may give rise to any indemnification
obligation under this Article VIII and the indemnifying party shall (except as
set forth below) have the right to assume and control the defense (at its
expense) and settlement of any such claim through the indemnifying party's own
counsel or through other counsel reasonably acceptable to the indemnified party;
provided, however, that no settlement shall be made without the prior written
consent of the indemnified party, which consent shall not be unreasonably
withheld, delayed or conditioned. The indemnified party, together with any other
indemnified parties, may retain one additional counsel to represent the
interests of all of such indemnified parties at their own expense if, under
applicable standards of professional conduct, a conflict with respect to any
significant issue between such indemnified parties and the indemnifying party
exists in respect of such third-party claim. In such event, the indemnifying
party shall not assume the defense of such claim and shall also pay the
reasonable fees and expenses of one counsel selected by such indemnified parties
in respect of such claim. Notwithstanding the foregoing, without such
indemnified parties' consent, the indemnifying party will not settle any action
or proceeding on terms that do not provide such indemnified parties a full,
unconditional release from all liability with respect to such claim by each
claimant or plaintiff in a form reasonably acceptable to such indemnified
parties' counsel, nor will the indemnifying party consent to any injunctive or
other non-monetary relief affecting any indemnified party. The failure of any
indemnified party to give prompt notice of any claim shall not release, waive or
otherwise affect the indemnifying party's obligations with respect thereto
except to the extent the indemnifying party can demonstrate actual loss and
prejudice as a result of such failure. The indemnified party shall not be deemed
to have been notified of any claim by virtue of knowledge acquired on or prior
to the Closing Date by a director, officer or employee of the Company or OTI.
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8.5 If any payment is made by Parent or either Seller under the
terms of this Agreement or otherwise relating to pre-Closing activities (except
with respect to those pre-Closing activities as to which Purchaser is not
indemnified by the Sellers and Parent under Section 8.1 hereof), such Person
shall have no rights against the Company or OTI or any director, officer,
employee or agent thereof, unless such claim involves bad faith on the part of
such director, officer or employee, whether by reason of contribution,
indemnification, subrogation or otherwise, in respect of any such payment, and
such Person shall take no action against the Company or OTI with respect
thereto.
8.6 Parent, on behalf of itself and each of its Affiliates, and the
Sellers hereby irrevocably release, effective as of the Closing Date, the
Company and OTI from any and all actions or causes of action, claims, demands,
liabilities, judgments, losses, damages, injuries, costs or expenses of every
kind, that Parent, either Seller or Parent's other Affiliates may have against
the Company or OTI arising at any time on or before the Closing Date, whether
known or unknown (collectively, "CLAIMS"); provided, however, that this release
does not in any way affect any causes of actions or claims that Parent and its
Affiliates or Seller may have against Purchaser arising out of this Agreement or
any of the other Transaction Agreements or any conduct by, or events relating
to, the Company or OTI subsequent to the Closing. This release applies to Claims
arising in any manner, whether such Claims are based on any tort, contract,
statutory provision or other law or theory of liability, including negligence,
gross negligence, recklessness, willful misconduct or products liability.
8.7 TAX STRADDLE PERIODS. For purposes of determining the amount of
Taxes for or which relate to a Straddle Period, the Closing Date shall be
treated as the last day of a taxable period, and the portion of any such Tax
that is allocable to the taxable period that is deemed to end on and including
the Closing Date: (i) in the case of Taxes that are either (x) based upon or
related to income or receipts, or (y) imposed in connection with any sale,
transfer, assignment or distribution of property, shall be deemed equal to the
amount which would be payable if the period for which such Tax is assessed ended
on and included the Closing Date, and (ii) in the case of Taxes other than Taxes
described in clause (i) hereof, shall be computed on a per diem basis.
ARTICLE IX
MISCELLANEOUS
9.1 CERTAIN DEFINITIONS. (a) For purposes of this Agreement, the
following terms shall have the following meanings:
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, directly or indirectly controlled by or
under direct or indirect common control with such Person.
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"AGREEMENT" shall have the meaning ascribed to such term in the
recitals hereof.
"APPLICABLE PERCENTAGE" means one hundred (100) percent, except that
it means ninety (90) percent with respect to Losses that arise out of any breach
by the Sellers or Parent of any of their representations or warranties set forth
in Sections 4.1, 4.3, 4.4, 4.5, 4.6 (as it relates to the Company or OTI), 4.7
(as it relates to Cisco), 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16,
4.17 (as it relates to the Company or OTI), 4.19, 4.20, 4.21, 4.22, 4.23, 4.24,
4.26, 4.27, 4.28 and 4.29.
"BALANCE SHEET" shall have the meaning ascribed to such term in
Section 4.8 hereof.
"BALANCE SHEET DATE" shall have the meaning ascribed to such term in
Section 4.9 hereof.
"BUSINESS DAY" means any day of the year on which national banking
institutions in New York are open to the public for conducting business and are
not required or authorized to close.
"BY-LAWS" means the By-Laws of the Company, as amended to date.
"CERTIFICATE OF INCORPORATION" means the Certificate of
Incorporation of the Company, as amended to date.
"CISCO" means Cisco Systems, Inc., a California corporation.
"CISCO SUPPLY AGREEMENT" means the Manufacturing and Component
Supply Agreement, made as of the effective date referred to therein, among
Cisco, OTI and Seller 1.
"CLOSING" shall have the meaning ascribed to such term in Section
1.1 hereof.
"CLOSING DATE" shall mean the date on which the Closing actually
occurs in accordance with Section 3.1 hereof.
"COMPANY" shall have the meaning ascribed to such term in the
recitals hereof.
"COMPETITION LAWS" means Laws that are designed or intended to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization, lessening of competition or restraint of trade and includes the
HSR Act and, to the extent applicable, equivalent Laws of the European Union or
the Member States thereof.
36
"COMPONENTS" shall mean optical components that are intended to be
part of Devices and perform a single optical function. Components include:
(a) passive components, such as, for example: fiber coupler,
optical switch, passive planar optic device (for example, on birefringent,
silicon or silica substrate), amplifying fiber, attenuating fiber, fiber
grating, dispersion compensating fiber, polarization maintaining fiber,
pigtailing, fiber optical connector, optical filter, wavelength selective filter
and attenuator;
(b) active components, such as, for example: planar optic
component (for example, on birefringent, silicon or silica substrate and with
acousto-, electro- or thermo-optic actuation), light detector, optical
modulator, pump laser and signal laser;
(c) packaging, such as, for example: amplifier packaging, pump
and signal laser packaging and packaging of fiber grating.
"CONFIDENTIALITY AGREEMENT" shall have the meaning ascribed to such
term in Section 7.12 hereof.
"CONTRACT" means any contract, agreement, indenture, note, bond,
loan, instrument, lease, conditional sale, mortgage, license, franchise,
insurance policy commitment or other arrangement or agreement.
"CO-SALE RIGHTS" means the rights of the Series A Stockholder (as
such term is defined in the Stockholders' Agreement) set forth in Section 3.2 of
the Stockholders' Agreement.
"DEVICES" shall mean any combination of Components intended to
perform a combination of single optical functions or a complex optical function
for the transmission of information in optical form via optical fiber or other
optical waveguide or for networking or other applications (including gain
modules, optical amplifiers, optical add/drop modules, WDM routers, dispersion
compensation modules, optical cross-connect modules, optical multiplexers,
optical demultiplexers, optical channel selectors, optical channel equalizers)
and any electronics/software for internal or external control and for external
connection purposes associated therewith, which are intended to be included
within a System, but which do not constitute a System.
"DISCLOSURE SCHEDULE" means those disclosure schedules delivered
contemporaneously with this Agreement.
"DISTRIBUTION SYSTEM" means a combination of (a) at least one of the
Non-Compete Components, (b) at least one optical component, and (c) software
code, intended to be networked together through optical transmission fiber to
operate as a unit for the purpose of transmission of information from a point to
multipoints (e.g., metropolitan, access, fiber-to-the-home, and local optical
transmission networks),
37
wherein the software code is capable of enabling or controlling the
interoperability of at least two networked optical components located remotely
from each other.
"EMPLOYEE PLAN" shall have the meaning ascribed to such term in
Section 4.14 hereof.
"ENVIRONMENTAL AND SAFETY LAWS" shall have the meaning ascribed to
such term in Section 4.28 hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FINANCIAL STATEMENTS" shall have the meaning ascribed to such term
in Section 4.8 hereof.
"GOVERNMENTAL BODY" means any government or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state, local, foreign or supranational, or any agency, instrumentality or
authority thereof, or any court or arbitrator (public or private).
"HAZARDOUS MATERIALS" shall have the meaning ascribed to such term
in Section 4.28 hereof.
"HSR ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder.
"INTELLECTUAL PROPERTY" shall have the meaning ascribed to such term
in Section 4.12(a) hereof.
"IP AGREEMENTS" means the Transaction Trademark License, the Option
for Patents in Dispute, the Southampton Option and the IPR Agreement, in the
forms attached hereto as Exhibits ▇-▇, ▇-▇, ▇-▇ ▇▇▇ ▇-▇, respectively, each of
which will be entered into at the Closing.
"LAW" means any federal, state, local, foreign or supranational law
(including common law), statute, code, ordinance, rule, regulation or other
requirement.
"LEASE AGREEMENT" shall have the meaning ascribed to such term in
Section 6.1(h) hereof.
"LEGAL PROCEEDING" means any judicial, administrative or arbitral
actions, suits, proceedings (public or private), claims or governmental
proceedings.
"LIEN" means any lien, pledge, mortgage, deed or trust, security
interest, claim, lease, charge, option, right of first refusal, easement,
servitude, transfer restriction under any applicable Law, shareholder or similar
agreement, encumbrance or any other restriction or limitation whatsoever.
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"LOSSES" shall have the meaning ascribed to such term in Section 8.1
hereof.
"MATERIAL CONTRACTS" shall have the meaning ascribed to such terms
in Section 4.19 hereof.
"NON-COMPETE COMPONENTS" means the components set forth in Section
7.6 of this Agreement.
"NYSE" means the New York Stock Exchange.
"ORDER" means any order, injunction, judgment, decree, ruling, writ,
assessment or arbitration award.
"OTI" means Optical Technologies Italia, S.p.A., a corporation
organized and existing under the laws of the Republic of Italy.
"OTI ORGANIZATIONAL DOCUMENTS" means the Articles of Association
(ATTO CONSTITUTIVO) and By-laws (STATUTO) of OTI.
"PARENT" means Pirelli S.p.A., a corporation organized and
existing under the laws of the Republic of Italy.
"PARENT ACCOUNTING PRINCIPLES" shall have the meaning ascribed to
such term in Section 4.8 hereof.
"PATENT" means any and all forms of patents issued or granted
anywhere in the world, including, without limitation, utility, model and design
patents, patents of addition, patents of importation, improvement patents,
reissued and reexamined patents, all renewals and extensions thereof, all
applications for such patents (including original, divisional, continuation and
continuation-in-part applications) pending before any national patent office,
and all rights of priority under International Conventions and which have not
been abandoned or expired.
"PERMITS" means any approvals, authorizations, consents, licenses,
permits or certificates of any Governmental Body.
"PERSON" means any individual, corporation, partnership, limited
liability company, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, Governmental Body or other entity.
"PURCHASE PRICE" shall have the meaning ascribed to such term in
Section 2.1 hereof.
"PURCHASER" shall have the meaning ascribed to such term in the
recitals hereof.
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"PURCHASER MATERIAL ADVERSE EFFECT" means a material adverse effect
on the business, properties, operations, assets or financial condition of the
Purchaser and its Subsidiaries, taken as a whole, or on the ability of the
Purchaser to perform its obligations under, or to consummate the transactions
contemplated by, this Agreement or any other Transaction Agreement.
"QUALIFICATION" shall have the meaning set forth in the letter, of
even date herewith, among the parties.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of August 2, 2000, by and among the Company and Cisco.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLER MATERIAL ADVERSE EFFECT" means a material adverse effect on
the business, properties, operations, assets or financial condition of the
Company and OTI, taken as a whole, or on the ability of the Sellers to perform
their obligations under, or to consummate the transactions contemplated by, this
Agreement or any other Transaction Agreement; provided, however, that a general
economic downturn , a general downturn in the industries in which the Company
and OTI compete and/or the loss of any one customer of the Company or OTI shall
not constitute a "SELLER MATERIAL ADVERSE EFFECT."
"SELLERS" shall have the meaning ascribed to such term in the
recitals hereto.
"SELLERS' KNOWLEDGE" means the actual knowledge, or the knowledge
that would be, and should have been under the circumstances, obtained by
conducting a reasonable inquiry, of the senior executive officers of Seller 1
and with respect to the relevant subject matter referred to in this Agreement,
such director or other person personally responsible for such matters.
"SERIES A PREFERRED STOCK" shall have the meaning ascribed to such
term in Section 4.3 hereof.
"SHARES" shall have the meaning ascribed to such term in the
recitals hereof.
"STOCKHOLDERS' AGREEMENT" means the Stockholders' Agreement, dated
as of August 2, 2000, by and among the Company, each of the Sellers, Parent and
Cisco.
"SUBSEQUENT CONTRACT" shall have the meaning ascribed to such term
in Section 4.19 hereof.
"SUBSIDIARIES" with respect to any Person means, any Person with
respect to which more than 50% of the outstanding shares of stock of each class
having ordinary
40
voting power (other than stock having such power only by reason of the happening
of a contingency) is at the time owned by such Person or by one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.
"SUPPLY CONTRACT" has the meaning ascribed thereto in Section
6.1(j).
"SUSPENSION PERIOD" means the time period commencing on the date any
of the following events shall have occurred and ending on the date that is five
Business Days after such event shall cease to occur or exist: (i) a suspension
or material limitation in trading in securities generally on the NYSE; (ii) a
suspension or material limitation in trading in the Company's securities on the
NYSE; (iii) a general moratorium on commercial banking activities declared by
either Federal or New York State authorities; or (iv) the outbreak or escalation
of hostilities involving the United States or the declaration by the United
States of a national emergency or war, if the effect of any such event specified
in this clause (iv) in the judgment of Purchaser's designated nationally
recognized financial advisors makes it impracticable or inadvisable to proceed
with a public offering of securities of Purchaser to finance the purchase of the
Shares.
"SYSTEM" shall mean a combination of Devices and other equipment
which could or does form a point to point optical telecommunication line, or a
combination of point to point optical telecommunication lines, inclusive or
exclusive of terminal equipment (e.g., transmitters and receivers) and
intervening equipment, for the communication (including within such Systems,
without limitation, regeneration, amplification, monitoring, routing, adding,
dropping, cross-connecting, reception, management, splitting and grooming) of
information in optical form via optical fiber or other optical waveguide,
inclusive or exclusive of the optical fiber or optical waveguide. Examples of a
System are T31, Wavemux 2400 and Wavemux 6400.
"TAX" and its correlative meanings "TAXES" and "TAXABLE" have the
meanings ascribed to such term in Section 4.13 hereof.
"TAX AUTHORITY" shall have the meaning ascribed to such term in
Section 4.13 hereof.
"TAX GROUP" shall have the meaning ascribed to such term in Section
4.13 hereof.
"TAX RETURNS" shall have the meaning ascribed to such term in
Section 4.13 hereof.
"THIRD PARTY INTELLECTUAL PROPERTY RIGHTS" shall have the meaning
ascribed to such term in Section 4.12(b) hereof.
"TRANSACTION AGREEMENTS" shall have the meaning ascribed to such
term in Section 4.2. hereof.
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"TRANSITION SERVICES AGREEMENT" shall have the meaning ascribed to
such term in Section 6.1.
"US GAAP" means generally accepted United States accounting
principles as of the date hereof.
(d) Other Rules of Construction.
(i) Unless the context otherwise requires, references in the
singular include references in the plural and vice versa. References to a party
to this Agreement or to other agreements described herein means those Persons
executing such agreements.
(ii) The words "INCLUDE," "INCLUDING" or "INCLUDES" shall be
deemed to be followed by the phrase "WITHOUT LIMITATION" or the phrase "BUT NOT
LIMITED TO" in all places where such words appear in this Agreement. The word
"OR" shall be deemed to be inclusive.
(iii) This Agreement is the joint drafting product of the
Sellers, Parent and the Purchaser, and each provision has been subject to
negotiation and agreement and neither this Agreement nor any provisions hereof
shall be construed for or against any party as drafter thereof.
9.2 PUBLIC ANNOUNCEMENTS. Except as required by law, and unless
otherwise agreed upon in writing by the parties, no party shall make a public
announcement regarding this Agreement or any of the other Transaction Agreements
or the transactions contemplated hereby or thereby.
9.3 PAYMENT OF SALES, USE OR SIMILAR TAXES. All sales, use,
transfer, intangible, recordation, documentary stamp or similar Taxes or
charges, of any nature whatsoever, applicable to, or resulting from, the
transactions contemplated by this Agreement shall be borne, with respect to the
first $1.3 million, by the Sellers, and with respect to any additional amounts,
equally by the Sellers, on the one hand, and the Purchaser, on the other hand;
provided, however, that the Purchaser shall have no liability for income or
similar Taxes of the Sellers or Parent.
9.4 EXPENSES. Except as expressly provided in Section 9.3(a), the
Purchaser will pay or cause to be paid all expenses incident to the performance
of its obligations under, and the consummation of the transactions contemplated
by, this Agreement, including the fees and disbursements of its counsel,
investment bankers and accountants;
(b) the Sellers will pay all expenses incident to the performance of
their obligations under this Agreement, including the fees and disbursements of
their respective counsel, investment bankers and accountants; and
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(c) notwithstanding anything to the contrary in this Agreement or
applicable Laws, the Purchaser shall pay one-half of the filing fees, dues or
other charges payable under the HSR Act and any other Competition Laws and the
Sellers shall pay the other half of such fees, dues or other charges.
9.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except with respect
to the representation and warranty contained in Section 4.9(a)(i), which shall
terminate on the Closing Date, the parties hereto hereby agree that the
representations and warranties contained in this Agreement or in any Transaction
Agreement shall survive the execution and delivery of this Agreement and the
Closing hereunder; provided, however, that any claims or actions with respect to
representations and warranties other than those contained in Sections 4.3, 4.4,
4.7, 4.12, 4.13, 4.14 and 4.28 shall terminate unless within twenty-four (24)
months after the Closing Date written notice of such claims is given to the
Sellers or the Purchaser, as the case may be, or such actions are commenced. Any
claims or actions with respect to the representations and warranties contained
in (i) Sections 4.13, 4.14 and 4.28 shall terminate unless within six (6) months
after the expiration of the relevant statute of limitations period written
notice of such claims is given to the Sellers or such actions are commenced,
(ii) Sections 4.3, 4.4 and 4.7 shall terminate on the twentieth (20th)
anniversary of the Closing Date unless prior to such date written notice of such
claim is given to the Sellers or such actions are commenced and (iii) Section
4.12 shall terminate on the third (3rd) anniversary of the Closing Date unless
prior to such date written notice of such claim is given to the Sellers or such
actions are commenced. The parties hereto further agree that the covenants of
the parties contained herein that by their terms survive the Closing shall
survive the Closing hereunder except that the covenant of the Sellers and Parent
contained in Sections 8.1(ii), (iii) and (iv) hereof shall terminate on the
tenth anniversary of the Closing Date unless prior to such date written notice
of such claims is given to the Sellers or such actions are commenced.
9.6 FURTHER ASSURANCES. The Sellers and the Purchaser at the other's
request and without cost to the other each agree to execute and deliver such
other documents or agreements and to take such other action as may be reasonably
necessary or desirable for the implementation of this Agreement and each of the
other Transaction Agreements and the consummation of the transactions
contemplated hereby or thereby.
9.7 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS; EXCLUSIVE REMEDIES.
(a) This Agreement (including the other Transaction Agreements and the schedules
and exhibits hereto and thereto) and the Confidentiality Agreement represent the
entire understanding and agreement between the parties hereto with respect to
the subject matter hereof and thereof and supersede all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties. Each party disclaims the existence or
completeness of, or reliance upon, any representation or warranty by the others,
except as to representations and warranties expressly set forth in this
Agreement or the other Transaction Agreements. This Agreement can be amended,
supplemented or changed, and any provision hereof can be waived, only by written
instrument making specific reference to the provision of this
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Agreement being amended, supplemented, changed or waived. No action taken
pursuant to this Agreement, including any investigation by or on behalf of any
party, shall be deemed to constitute a waiver by the party taking such action of
compliance with any representation, warranty, covenant or agreement contained
herein. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a further or continuing waiver of
such breach or as a waiver of any other then-existing or subsequent breach. No
failure on the part of any party to exercise, and no delay in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of such right, power or remedy by such party
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy.
(b) The parties agree that the indemnification provisions of this
Agreement and the other Transaction Agreements provide the sole and exclusive
remedies against any other party hereto for Losses resulting from or arising
under this Agreement or any of the other Transaction Agreements.
9.8 GOVERNING LAW; SUBMISSION TO JURISDICTION; CONSENT TO SERVICE.
(a) This Agreement shall be governed by and construed in accordance with the
laws of the State of New York without reference to its principles of conflicts
of law, which would require the application of any other law.
(b) The parties hereto hereby irrevocably submit to the
non-exclusive jurisdiction of any federal or state court located within the
State of New York over any dispute arising out of or relating to this Agreement,
the Supply Contract, the Transition Services Agreement and the IP Agreements or
any of the transactions contemplated hereby or thereby and each party hereby
irrevocably agrees that all claims in respect of such dispute or any suit,
action proceeding related thereto may be heard and determined in such courts.
The parties hereby irrevocably waive, to the fullest extent permitted by
applicable law, any objection which they may now or hereafter have to the laying
of venue of any such dispute brought in such court or any defense of
inconvenient forum for the maintenance of such dispute. Each of the parties
hereto agrees that a judgment in any such dispute may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(c) Each of the parties hereto hereby consents to process being
served by any party to this Agreement in any suit, action or proceeding by the
mailing of a copy thereof in accordance with the provisions of Section 9.10.
9.9 TABLE OF CONTENTS AND HEADINGS. The table of contents and section
headings of this Agreement are for reference purposes only and are to be given
no effect in the construction or interpretation of this Agreement.
9.10 NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be deemed given when delivered
personally or mailed by certified mail, return receipt requested, to the parties
(and shall also be transmitted by
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facsimile to the Persons receiving copies thereof) at the following addresses
(or to such other address as a party may have specified by notice given to the
other party pursuant to this provision):
If to either Seller or Parent:
c/o Pirelli S.p.A.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Chief Legal Officer
Fax: ▇▇▇-▇▇-▇▇-▇▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇-▇▇-▇▇▇▇-▇▇▇▇
With a copy to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Purchaser, to:
Corning Incorporated
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: General Counsel
With a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
9.11 SEVERABILITY. If any provision of this Agreement is invalid or
unenforceable, the balance of this Agreement shall remain in full force and
effect and this Agreement shall be construed as if such invalid or unenforceable
provision were omitted.
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9.12 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
permitted assigns. Nothing in this Agreement shall create or be deemed to create
any third-party beneficiary rights in any person or entity not a party to this
Agreement except as provided below. No assignment of this Agreement or of any
rights or obligations hereunder may be made by either the Sellers or the
Purchaser (by operation of law or otherwise) without the prior written consent
of the other parties hereto and any attempted assignment without the required
consents shall be void; provided, however, that the Purchaser may assign this
Agreement and any or all rights or obligations (provided that the Purchaser
shall remain primarily liable for all such obligations), hereunder (including
the Purchaser's rights to purchase the Shares and the Purchaser's rights to seek
indemnification hereunder) to any Affiliate of the Purchaser. Upon any such
permitted assignment, the references in this Agreement to the Purchaser shall
also apply to any such assignee unless the context otherwise requires.
9.13 SPECIFIC PERFORMANCE. The Sellers agree that their or its
breach of their obligations to sell the Shares to the Purchaser on the terms and
conditions of this Agreement would cause irreparable damage to the Purchaser and
that the Purchaser will not have an adequate remedy at law. The Sellers
therefore agree that if this Agreement is not consummated on the basis of the
preceding sentence, then the Purchaser shall be entitled to specific performance
of the Sellers' obligation to sell the Shares to the Purchaser.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first written above.
OPTICAL TECHNOLOGIES
THE NETHERLANDS B.V.
By: _________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Director
PIRELLI CAVI e SISTEMI S.p.A.
By: _________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Attorney-in-Fact
PIRELLI S.p.A.
By: ________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Provera
Title: Chairman and CEO
CORNING INCORPORATED
By: _________________________
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President,
Corporate Development