Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ALCATEL,
APPLES ACQUISITION CORP.
AND
ASTRAL POINT COMMUNICATIONS, INC.
DATED AS OF JANUARY 18, 2002
TABLE OF CONTENTS
Page
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AGREEMENT AND PLAN OF MERGER.....................................................................................1
W I T N E S S E T H:.............................................................................................1
ARTICLE I. CERTAIN DEFINITIONS................................................................................2
SECTION 1.01 Certain Definitions...................................................................2
ARTICLE II. THE MERGER........................................................................................5
SECTION 2.01 The Merger............................................................................5
SECTION 2.02 Effective Time........................................................................6
SECTION 2.03 Effect of the Merger..................................................................6
SECTION 2.04 Certificate of Incorporation; By-Laws.................................................6
SECTION 2.05 Directors and Officers................................................................6
SECTION 2.06A Trust Arrangements....................................................................7
SECTION 2.06 Effect on Capital Stock...............................................................7
SECTION 2.07 Escrow Indemnity Account..............................................................9
SECTION 2.08 Exchange of Certificates..............................................................9
SECTION 2.09 Restricted Stock.....................................................................12
SECTION 2.10 Dissenting Shares....................................................................12
SECTION 2.11 Further Action.......................................................................13
SECTION 2.12 Transfer Taxes.......................................................................13
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................................13
SECTION 3.01 Organization and Qualification; Subsidiaries.........................................13
SECTION 3.02 Certificate of Incorporation and By-Laws.............................................14
SECTION 3.03 Capitalization.......................................................................14
SECTION 3.04 Authority Relative to This Agreement.................................................16
SECTION 3.05 No Conflict; Required Filings and Consents...........................................17
SECTION 3.06 Compliance, Permits..................................................................18
SECTION 3.07 Financial Statements.................................................................18
SECTION 3.08 Absence of Certain Changes or Events.................................................19
SECTION 3.09 No Undisclosed Liabilities...........................................................19
SECTION 3.10 Absence of Litigation................................................................19
SECTION 3.11 Employee Benefit Plans; Employment Agreements........................................20
SECTION 3.12 Employees; Labor Matters.............................................................22
SECTION 3.13 Restrictions on Business Activities..................................................22
SECTION 3.14 Taxes................................................................................23
SECTION 3.15 Environmental Matters................................................................24
SECTION 3.16 Brokers..............................................................................25
SECTION 3.17 Intellectual Property................................................................25
SECTION 3.18 Material Contracts...................................................................28
SECTION 3.19 Title to Properties; Absence of Encumbrances.........................................30
SECTION 3.20 Real and Personal Property...........................................................31
SECTION 3.21 Transactions with Affiliates; Management Relationships...............................31
SECTION 3.22 Insurance............................................................................32
SECTION 3.23 Books and Records....................................................................32
SECTION 3.24 Accounts Receivable..................................................................32
SECTION 3.25 Inventory............................................................................33
SECTION 3.26 Customers and Suppliers..............................................................33
SECTION 3.27 Employee Conflicts...................................................................33
SECTION 3.28 Certain Business Practices...........................................................33
SECTION 3.29 Tax Matters..........................................................................34
SECTION 3.30 Affiliate Letters....................................................................34
SECTION 3.31 Vote Required........................................................................34
SECTION 3.32 Warranties and Product Claims........................................................34
SECTION 3.33 Bank Accounts........................................................................34
SECTION 3.34 Costs and Expenses...................................................................35
SECTION 3.35 Product Development..................................................................35
ARTICLE IV. [RESERVED].......................................................................................35
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF ALCATEL.........................................................35
SECTION 5.01 Organization and Qualification.......................................................35
SECTION 5.02 Organizational Documents.............................................................35
SECTION 5.03 Issuance of Merger Consideration.....................................................35
SECTION 5.04 Authority Relative to this Agreement.................................................36
SECTION 5.05 No Conflict; Required Filings and Consents...........................................36
SECTION 5.06 SEC Filings; Financial Statements....................................................37
SECTION 5.07 Brokers..............................................................................37
SECTION 5.08 Pooling of Interests.................................................................37
SECTION 5.09 Interim Operations of Merger Sub.....................................................38
SECTION 5.10 Tax Matters..........................................................................38
SECTION 5.11 Record Date..........................................................................38
ARTICLE VI. COVENANTS........................................................................................39
SECTION 6.01 Conduct of Business by the Company...................................................39
SECTION 6.02 Registration Statement; Company Stockholder Approval.................................41
SECTION 6.03 Covenants Covering Competing Transactions for the Company; Related Matters...........43
SECTION 6.04 Access to Information; Confidentiality...............................................45
SECTION 6.05 Consents, Approvals; Taking of Necessary Action......................................45
SECTION 6.06 Stock Options........................................................................47
SECTION 6.07 Employee Matters.....................................................................47
SECTION 6.08 Notification of Certain Matters......................................................48
SECTION 6.09 Public Announcements.................................................................48
SECTION 6.10 Expenses.............................................................................49
SECTION 6.11 Listing of ADSs/Alcatel Shares.......................................................49
SECTION 6.12 Affiliate Agreements.................................................................50
SECTION 6.13 Warrants.............................................................................50
SECTION 6.14 Tax Treatment........................................................................50
SECTION 6.15 Compliance with New Jersey's ISRA....................................................50
SECTION 6.16 Product Development..................................................................51
SECTION 6.17 Stockholder Litigation...............................................................51
SECTION 6.18 Continuing Director and Officer Indemnification......................................51
SECTION 6.19 [Reserved]...........................................................................51
SECTION 6.20 Certain Tax Matters..................................................................51
SECTION 6.21 Update Schedule......................................................................52
SECTION 6.22 Pooling of Interests.................................................................52
SECTION 6.23 Issuance and Conversion of ORAs......................................................52
ARTICLE VII. CONDITIONS TO THE MERGER........................................................................53
SECTION 7.01 Conditions to Obligation of Each Party to Effect the Merger..........................53
SECTION 7.02 Additional Conditions to Obligations of Alcatel and Merger Sub.......................53
SECTION 7.03 Additional Conditions to Obligation of the Company...................................55
ARTICLE VIII. INDEMNIFICATION................................................................................57
SECTION 8.01 Indemnification of Alcatel...........................................................57
SECTION 8.02 Reliance not an Element..............................................................57
SECTION 8.03 General Indemnification Provisions...................................................57
SECTION 8.04 Certain Limits on Indemnification....................................................59
SECTION 8.05 Satisfaction of Indemnification Obligations..........................................59
SECTION 8.06 Exclusive Remedy.....................................................................59
ARTICLE IX. TERMINATION......................................................................................60
SECTION 9.01 Termination..........................................................................60
SECTION 9.02 Effect of Termination................................................................61
ARTICLE X. GENERAL PROVISIONS................................................................................62
SECTION 10.01 Survival of Representations, Warranties and Covenants................................62
SECTION 10.02 Notices..............................................................................62
SECTION 10.03 Waiver...............................................................................63
SECTION 10.04 Headings.............................................................................64
SECTION 10.05 Severability.........................................................................64
SECTION 10.06 Entire Agreement; Amendment..........................................................64
SECTION 10.07 Assignment...........................................................................64
SECTION 10.08 Parties in Interest..................................................................64
SECTION 10.09 Failure or Indulgence Not Waiver; Remedies Cumulative................................64
SECTION 10.10 Governing Law........................................................................65
SECTION 10.11 Counterparts.........................................................................65
SECTION 10.12 Waiver of Jury Trial.................................................................65
SECTION 10.13 Forum................................................................................65
SECTION 10.14 Definition of Knowledge..............................................................65
SECTION 10.15 Specific Performance and Injunctive Relief...........................................65
SECTION 10.16 Appointment of Stockholders' Representative..........................................66
CROSS REFERENCE SHEET OF DEFINED TERMS
Term Section of Agreement
---- --------------------
2001 Dividend....................................................................................2.06(e)(ii)
Agreement........................................................................................Introduction
Alcatel..........................................................................................Introduction
Alcatel Indemnitees..............................................................................8.01
Alcatel Plans....................................................................................6.07(b)
Alcatel SEC Reports..............................................................................5.06(a)
Antitrust Laws...................................................................................6.05(b)
Antitrust Order..................................................................................6.05(b)
Audited Financial Statements.....................................................................3.07
Basket Amount....................................................................................8.04(a)
Blue Sky Laws....................................................................................3.05(b)
CERCLA...........................................................................................3.15
Certificate of Merger............................................................................2.02
Certificate(s)...................................................................................2.08(b)
Closing..........................................................................................2.01
Closing Date.....................................................................................2.01
Code.............................................................................................Recitals
Common Stock Exchange Ratio......................................................................2.06(c)(i)
Company..........................................................................................Introduction
Company Affiliate Agreement......................................................................6.12
Company Balance Sheet............................................................................3.09
Company Board....................................................................................Recitals
Company By-Laws..................................................................................3.02
Company Certificate of Incorporation.............................................................3.02
Company Common Stock.............................................................................2.06(a)
Company Disclosure Schedule......................................................................Article III
Company Environmental Permits....................................................................3.15(c)
Company Intellectual Property....................................................................3.17(a)
Company Licensed Intellectual Property...........................................................3.17(c)
Company Option Plan..............................................................................2.06(d)(i)
Company Permits..................................................................................3.06(b)
Company Plan.....................................................................................3.11(a)
Company Proxy Material...........................................................................6.02(d)
Company Real Property............................................................................3.15(a)
Company Representatives..........................................................................6.03(a)
Company Restricted Stock.........................................................................2.09
Company Software Programs........................................................................3.17(h)
Company Stockholders' Meeting....................................................................6.02(b)
Company Stockholders' Vote Condition.............................................................3.31
Company Stockholders' Proposal...................................................................3.04(a)
Confidentiality Agreement........................................................................6.03(a)
Customers and Suppliers..........................................................................3.26
Delaware Law.....................................................................................Recitals
Dissenting Shares................................................................................2.10
Effective Time...................................................................................2.02
ERISA............................................................................................3.11(a)
ERISA Affiliate..................................................................................3.11(a)
Escrow Agent.....................................................................................2.07
Escrow Agreement.................................................................................2.07
Escrow Indemnity Account.........................................................................2.07
Escrow Shares....................................................................................2.07
Exchange Act.....................................................................................3.05(b)
Exchange Fund....................................................................................2.08(a)
Exchange Ratios..................................................................................2.06(e)(ii)
Financial Statements.............................................................................3.07
GAAP.............................................................................................Recitals
HSR Act..........................................................................................3.05(b)
Intellectual Property............................................................................3.17(a)
Interim Financial Statements.....................................................................3.07
IRS..............................................................................................3.11(c)
ISRA.............................................................................................6.15
Key Employees....................................................................................7.02(l)
Key Employee Agreements..........................................................................7.02(l)
Laws.............................................................................................3.06(a)
Losses...........................................................................................8.01
Material Contracts...............................................................................3.18
Merger...........................................................................................Recitals
Merger Consideration.............................................................................2.06(e)(i)
Merger Sub.......................................................................................Introduction
NJDEP............................................................................................6.15
Non-Compete Agreements...........................................................................7.02(m)
Option...........................................................................................2.06(d)(i)
Principal Stockholder............................................................................Recitals
Registration Statement...........................................................................6.02(a)
Rule 145.........................................................................................6.12
SEC..............................................................................................5.06(a)
Securities Act...................................................................................3.05(b)
Series A Exchange Ratio..........................................................................2.06(c)(ii)
Series A Preferred...............................................................................2.06(c)(ii)
Series B Exchange Ratio..........................................................................2.06(c)(iii)
Series B Preferred...............................................................................2.06(c)(iii)
Series C Exchange Ratio..........................................................................2.06(c)(iv)
Series C Preferred...............................................................................2.06(c)(iv)
Series D Exchange Ratio..........................................................................2.06(c)(v)
Series D Preferred...............................................................................2.06(c)(v)
Series D-1 Exchange Ratio........................................................................2.06(c)(vi)
Series D-1 Preferred.............................................................................2.06(c)(vi)
Stockholder Agreement............................................................................Recitals
Stockholders' Representative.....................................................................10.16(a)
Superior Proposal................................................................................6.03(b)
Surviving Corporation............................................................................2.01
Surviving Corporation Common Stock...............................................................2.06(b)
Takeover Proposal................................................................................6.03(b)
Takeover Proposal Interest.......................................................................6.03(a)
Terminating Breach...............................................................................9.01(d)
Third-Party Claims...............................................................................8.03(b)
Trust............................................................................................2.06A
Trust Agreement..................................................................................2.06A
Trustee..........................................................................................2.06A
Trust Notice.....................................................................................2.07
Update Schedule..................................................................................6.21
Warrants.........................................................................................6.13
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 18, 2002 (this
"Agreement"), by and among Alcatel, a French corporation ("Alcatel"), Apples
Acquisition Corp., a Delaware corporation and a subsidiary of Alcatel ("Merger
Sub"), and Apples, Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, each of Alcatel, Merger Sub and the Company has determined that it
is advisable and in the best interests of its stockholders for the parties to
enter into a business combination upon the terms and subject to the conditions
set forth herein;
WHEREAS, in furtherance of such combination, each of the boards of
directors of Merger Sub and the Company has approved, and the board of directors
of Alcatel has authorized, the merger (the "Merger") of Merger Sub with and into
the Company in accordance with the applicable provisions of the General
Corporation Law of the State of Delaware ("Delaware Law") and upon the terms and
subject to the conditions set forth herein;
WHEREAS, the board of directors of the Company (the "Company Board") has
unanimously recommended that the stockholders of the Company approve and adopt
this Agreement, the Merger and the other transactions contemplated hereby;
WHEREAS, for U.S. federal income tax purposes, it is intended that (a) the
Merger will qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), (b) this Agreement
shall be, and hereby is, adopted as a plan of reorganization for purposes of
Section 368 of the Code and (c) Alcatel, Merger Sub and Company will each be a
party to such reorganization within the meaning of Section 368(b) of the Code;
WHEREAS, for accounting purposes, it is intended that the Merger will be
accounted for as a pooling of interests under the Generally Accepted Accounting
Principles ("GAAP") of France;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to Alcatel's and Merger Sub's willingness to enter
into this Agreement, each of the stockholders of the Company set forth on
Exhibit A hereto (the "Principal Stockholders") is entering into an agreement
with Alcatel (each, a "Stockholder Agreement"), in the form attached as Exhibit
B hereto, pursuant to which, among other things, each of the Principal
Stockholders (i) is granting to Alcatel an irrevocable right to receive 90% of
the difference between the consideration which may be paid on the shares of
capital stock of the Company owned by such Principal Stockholder in connection
with a Superior Proposal (as defined below) and the consideration that would
have been paid on such shares pursuant to this Agreement and (ii) has agreed to
vote all of such shares of capital stock in favor of the Merger and the other
transactions contemplated hereby, in each case upon the terms and subject to the
conditions set forth therein;
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NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I.
CERTAIN DEFINITIONS
SECTION 1.01 Certain Definitions.
For purposes of this Agreement, the term:
(a) "ADS" means one Class A American Depositary Share of Alcatel, which
represents one Alcatel Share.
(b) "affiliate" means in relation to a person, a person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the first mentioned person; including, without
limitation, any person in which the first mentioned person (either alone or
through or together with any other subsidiary) has, directly or indirectly, an
interest of 10 percent or more.
(c) "Alcatel Share" means one Class A share of Alcatel, par value 2 Euros
per share.
(d) "Alcatel Material Adverse Effect" means a material adverse effect or
change to the business, operations, condition (financial or otherwise), assets,
properties (including intangible properties) or liabilities of Alcatel and its
subsidiaries, taken as a whole; provided, however, that "Alcatel Material
Adverse Effect" shall not include or take into account (i) any change, event or
effect that is caused by conditions affecting the U.S. or French economy
generally; (ii) any change, event or effect caused by conditions generally
affecting the telecommunications equipment industry; (iii) in and of itself, any
reduction in quarterly revenue as compared to prior quarters (although such
reduction can be coupled with other factors to determine an Alcatel Material
Adverse Effect); (iv) any adverse change or effect resulting from a change in
accounting rules or procedures announced by the applicable French or U.S.
accounting board or authority; and (v) in and of itself or in connection with
the announcement of the transactions contemplated by this Agreement, any
decrease in the market price of Alcatel capital stock on the NYSE or Euronext
(or on such exchange or quotation system where Alcatel capital stock is listed
or quoted).
(e) "Ancillary Agreements" means the Escrow Agreement, each of the
Stockholder Agreements and any certificates or supporting documents contemplated
or delivered pursuant thereto and pursuant to this Agreement (but excluding the
Non-Compete Agreements and the Key Employee Agreements).
(f) "business day" means any day other than a day on which banks in New
York City or Paris, France are required or authorized to be closed.
(g) "Company Capital Stock" means collectively, the Company Common Stock
and the Company Preferred Stock.
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(h) "Company Material Adverse Effect" means a material adverse effect or
change to the business, operations, condition (financial or otherwise), assets,
properties (including intangible properties), or liabilities of the Company and
its subsidiaries, taken as a whole; provided, however, that "Company Material
Adverse Effect" shall not include or take into account (i) any change, event or
effect that is caused by conditions affecting the U.S. economy generally; (ii)
any change, event or effect caused by conditions generally affecting the
telecommunications equipment industry; (iii) a reduction or delay in purchases
of products from, or the shipping of supplies to, the Company as a direct result
of the public announcement or pendency of the Merger; (iv) in and of itself, any
reduction in quarterly revenue as compared to prior quarters (although such
reduction can be coupled with other factors to determine a Company Material
Adverse Effect); (v) any adverse change or effect resulting from a change in
accounting rules or procedures announced by the Financial Accounting Standards
Board and (vi) the Company's failure to meet the revenue projections in its
business plan for 2002 (although such failure can be coupled with other factors
to determine a Company Material Adverse Effect); provided, however, that with
respect to clause (iii) of this paragraph, the Company shall bear the burden of
proof in a proceeding with regard to establishing that a reduction or delay in
purchases or supplies was attributable to or resulted from the direct effect of
the public announcement or pendency of the Merger.
(i) "Company Preferred Stock" means collectively, the Series A Preferred,
the Series B Preferred, the Series C Preferred, the Series D Preferred and the
Series D-1 Preferred.
(j) "Company Stockholders" means each of the holders of record (as of the
Effective Time) of the Company Capital Stock.
(k) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a person, whether
through the ownership of voting securities or debt which is convertible into
voting securities, by contract, credit arrangement or otherwise.
(l) "Convertible Promissory Notes" means the 10% subordinated convertible
promissory notes issued by the Company pursuant to that certain Note Purchase
Agreement dated October 18, 2001 between the Company and the purchasers stated
therein.
(m) "Encumbrances" means any lien (other than mechanics' liens), pledge,
hypothecation, claim, charge, mortgage, security interest, encumbrance, prior
assignment, infringement, interference, option, right of first refusal,
preemptive right, community property interest or restriction of any nature
whatsoever (including any restriction on the voting of any security, any
restriction on the transfer of any security or other asset, any restriction on
the receipt of any income derived from any asset, any restriction on the use of
any asset and any restriction on the possession, exercise or transfer of any
other attribute of ownership of any asset).
(n) "Environment" means any surface or subsurface physical medium or
natural resources, including air, land, soil, surface waters, ground waters,
stream and river sediments, biota and any indoor area, surface or physical
medium.
3
(o) "Environmental Laws" means any applicable federal, state, local or
common law, rule, regulation, ordinance, code, order or judgment (including any
written judicial or administrative interpretations, guidances, directives,
policy statements or opinions) relating to human health and safety or, injury
to, or the pollution or protection of, the Environment.
(p) "Environmental Liabilities" means any claims, judgments, damages
(including punitive damages), losses, penalties, fines, liabilities,
Encumbrances, violations, costs and expenses (including attorneys' and
consultants' fees) of investigation, remediation, monitoring or defense of any
matter relating to human health, safety or the Environment of whatever kind or
nature by any party, entity or authority, which arise under Environmental Laws
and which are incurred as a result of (i) the existence of Hazardous Substances
(as defined below) in, on, under, at or emanating from any Company Real Property
(as defined in Section 3.15) or in connection with the operation of the business
of the Company or any of its subsidiaries, (ii) the offsite transportation,
treatment, storage or disposal of Hazardous Substances generated by the Company
or any of its subsidiaries, (iii) the violation of or non-compliance with any
Environmental Laws or (iv) exposure to any Hazardous Substances, noises, odors
or vibrations.
(q) "Euronext" means Euronext Paris SA.
(r) "Governmental Entity" means any foreign governmental or United States
federal, state or local governmental, administrative or regulatory authority,
commission, body, agency, court or any judicial body or other authority.
(s) "Hazardous Substances" means petroleum, petroleum products,
petroleum-derived substances, radioactive materials, hazardous wastes,
polychlorinated biphenyls, lead-based paint, radon, urea, formaldehyde, asbestos
or any materials containing asbestos, and any chemicals, materials or substances
regulated, or defined as, or included in the definition of "hazardous
substances," "hazardous materials," "hazardous wastes," "hazardous
constituents," "toxic substances," "pollutants," "contaminants" or any similar
denomination intended to classify or regulate substances by reason of toxicity,
carcinogenicity, ignitability, corrosivity or reactivity, under any
Environmental Law.
(t) "Investor Rights Agreement" means that certain Third Amended and
Restated Investor Rights Agreement dated as of May 25, 2000 by and among the
Company and the various investors stated therein.
(u) "NYSE" means The New York Stock Exchange.
(v) "ORAs" means the unsecured bonds issued by a subsidiary of Alcatel that
are redeemable into Alcatel Shares.
(w) "person" means an individual, corporation, partnership, association,
trust, unincorporated organization or other entity or group (as defined in
Section 13(d)(3) of the Exchange Act).
(x) "Pro Rata Interest" means, with respect to a Company Stockholder (or a
person who becomes a Company Stockholder on or prior to the Effective Time), a
fraction, the numerator of which is the total number of ADSs that such Company
Stockholder is entitled to receive as its
4
portion of the Merger Consideration pursuant to Section 2.06(c) (and, to the
extent such Company Stockholder exercises Options or Warrants on or prior to the
Effective Time, the ADSs relating to the Company Capital Stock issued upon such
exercises) and the denominator of which is the aggregate number of ADSs issued
as Merger Consideration pursuant to Section 2.06(c) (and, to the extent that
Options or Warrants are exercised on or prior to the Effective Time, the ADSs
relating to the Company Capital Stock issued upon such exercises).
(y) "subsidiary" or "subsidiaries" of any person means any corporation,
partnership, joint venture or other legal entity of which such person (either
alone or through or together with any other subsidiary) owns, directly or
indirectly, more than 50% of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of such corporation or other legal entity.
(z) "Tax" or "Taxes" shall mean taxes, fees, levies, duties, tariffs,
imposts and governmental impositions or charges of any kind in the nature of (or
similar to) taxes, payable to any federal, state, provincial, local or foreign
taxing authority, including, without limitation, (i) income, franchise, profits,
gross receipts, ad valorem, net worth, value added, sales, use, service, real or
personal property, special assessments, capital stock, license, payroll,
withholding, employment, social security, workers' compensation, unemployment
compensation, utility, severance, production, excise, stamp, occupation,
premiums, windfall profits, transfer and gains taxes and (ii) interest,
penalties, additional taxes and additions to tax imposed with respect thereto.
(aa) "Tax Returns" shall mean returns, reports and information statements
with respect to Taxes required to be filed with the IRS or any other taxing
authority, domestic or foreign, including, without limitation, consolidated,
combined and unitary tax returns.
(bb) "Voting Agreement" means the Amended and Restated Voting Agreement,
dated as of October 27, 1998, by and among the Company, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇ and the other shareholders of the Company Capital Stock who have executed
a counterpart thereof.
ARTICLE II.
THE MERGER
SECTION 2.01 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with Delaware Law, at the Effective
Time (as defined below), Merger Sub shall be merged with and into the Company.
As a result of the Merger, the separate corporate existence of Merger Sub shall
cease and the Company shall continue as the surviving corporation of the Merger
(the "Surviving Corporation") and shall succeed to and assume all the rights and
obligations of Merger Sub in accordance with Delaware Law. Unless this Agreement
has been terminated and the transactions herein contemplated have been abandoned
pursuant to Article IX, and subject to the satisfaction or waiver of the
conditions set forth in Article VII, the consummation of the Merger (the
"Closing") will take place as promptly as practicable (and in any event within
two business days) after satisfaction or waiver of the conditions set forth in
Article VII, at the offices of Proskauer Rose LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, unless another date, time or place is agreed to in writing by
Alcatel and the Company (the "Closing Date").
5
SECTION 2.02 Effective Time. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VII, the parties
hereto shall file this Agreement or a certificate of merger (the "Certificate of
Merger") with the Secretary of State of the State of Delaware, in such form as
required by, and executed in accordance with the relevant provisions of,
Delaware Law and shall make all other filings or recordings required under
Delaware Law. The Merger shall become effective at such time as the Certificate
of Merger is duly filed with such Secretary of State, or at such other time as
Alcatel and the Company shall agree and specify in the Certificate of Merger
(the time the Merger becomes effective being the "Effective Time").
SECTION 2.03 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of Delaware Law. Without limiting the generality of the
foregoing, at the Effective Time all the property, rights, privileges, powers
and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
SECTION 2.04 Certificate of Incorporation; By-Laws. (a) At the Effective
Time, the Certificate of Incorporation of the Surviving Corporation shall be
amended and restated to read in its entirety as set forth on Exhibit C hereto,
until thereafter amended as provided by Delaware Law and such Certificate of
Incorporation.
(b) The Company By-Laws, as in effect immediately prior to the Effective Time,
shall be the By-Laws of the Surviving Corporation, until thereafter amended as
provided by Delaware Law, the Certificate of Incorporation of the Surviving
Corporation and such By-Laws.
SECTION 2.05 Directors and Officers. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the persons listed
on Annex 2.05 hereto shall be the initial officers of the Surviving Corporation,
in each case until their respective successors are duly elected or appointed and
qualified.
SECTION 2.06A Trust Arrangements. At the Effective Time, the following
actions shall take place simultaneously: (i) Merger Sub shall transfer such
amount of ORAs as is equal to only such number of ADSs that are issuable
pursuant to Section 2.06(c) hereof which are part of the Merger Consideration,
to a trust (the "Trust") to be established pursuant to the Trust Agreement by
and between the Company and the trustee named therein (the "Trustee"), in the
form attached as Exhibit D hereto (the "Trust Agreement"); and (ii) pursuant to
the Trust Agreement, the Trustee shall (A) request that Alcatel redeem such
ORAs, in whole, for ADSs, (B) direct Alcatel to deliver 1,000,000 of the ADSs
issued upon the redemption of the ORAs to the Escrow Agent pursuant to Section
2.07 hereof, which ADSs will be held in accordance with the terms of the Escrow
Agreement and (C) direct Alcatel to deliver to the Exchange Agent the ADSs
issued in accordance with the terms of the ORAs, net of the 1,000,000 ADSs
deposited with the Escrow Agent pursuant to clause (B) of this Section 2.06A.
6
SECTION 2.06 Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of any Company Stockholder or the
holder of any shares of the capital stock of Merger Sub:
(a) Cancellation of Shares of Company Common Stock and Company Preferred
Stock. Each share of common stock, par value $0.01 per share ("Company Common
Stock"), of the Company held by the Company as treasury stock (or by any
subsidiary of the Company) and each share of preferred stock of the Company of
any series or class held by the Company as treasury stock (or by any subsidiary
of the Company) immediately prior to the Effective Time shall automatically be
canceled and retired and cease to exist, and no consideration or payment shall
be delivered therefor or in respect thereof.
(b) Capital Stock of Merger Sub. Each share of capital stock of Merger Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into one share of common stock, par value $.01 per share of the
Surviving Corporation ("Surviving Corporation Common Stock"), with the same
rights, powers and privileges as the shares so converted and shall constitute
the only outstanding shares of capital stock of the Surviving Corporation. Each
stock certificate of Merger Sub evidencing ownership of any such shares shall
remain outstanding and evidence ownership of shares of Surviving Corporation
Common Stock.
(c) Conversion of Shares of Company Common Stock and Company Preferred
Stock. Subject to Section 2.06(e) and 2.08(e) hereof or as provided in Section
2.10 with respect to Company Capital Stock as to which appraisal rights have
been exercised:
(i) each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares referred to in
Section 2.06(a)) shall be cancelled and extinguished and thereafter shall
represent the right to receive 0.063351086 of an ADS (the "Common Stock Exchange
Ratio");
(ii) each share of Series A Convertible Preferred Stock, par value $0.01
per share, of the Company (the "Series A Preferred"), issued and outstanding
immediately prior to the Effective Time (other than shares referred to in
Section 2.06(a)) shall be cancelled and extinguished and thereafter shall
represent the right to receive 0.025991733 of an ADS (the "Series A Exchange
Ratio");
(iii) each share of Series B Convertible Preferred Stock, par value
$0.01 per share, of the Company (the "Series B Preferred"), issued and
outstanding immediately prior to the Effective Time (other than shares referred
to in Section 2.06(a)) shall be cancelled and extinguished and thereafter shall
represent the right to receive 0.042083424 of an ADS (the "Series B Exchange
Ratio");
(iv) each share of Series C Convertible Preferred Stock, par value $0.01
per share, of the Company (the "Series C Preferred"), issued and outstanding
immediately prior to the Effective Time (other than shares referred to in
Section 2.06(a)) shall be cancelled and extinguished and thereafter shall
represent the right to receive 0.099509615 of an ADS (the "Series C Exchange
Ratio");
7
(v) each share of Series D Convertible Preferred Stock, par value $0.01
per share, of the Company (the "Series D Preferred"), issued and outstanding
immediately prior to the Effective Time (other than shares referred to in
Section 2.06(a)) shall be cancelled and extinguished and thereafter shall
represent the right to receive 0.507161844 of an ADS (the "Series D Exchange
Ratio");
(vi) each share of Series D-1 Convertible Preferred Stock, par value
$0.01 per share, of the Company (the "Series D-1 Preferred"), issued and
outstanding immediately prior to the Effective Time (other than shares referred
to in Section 2.06(a)) shall be cancelled and extinguished and thereafter shall
represent the right to receive 0.590126224 of an ADS (the "Series D-1 Exchange
Ratio").
(vii) Fractional shares of Company Capital Stock, issued and outstanding
immediately prior to the Effective Time (other than shares referred to in
Section 2.06(a)) shall be cancelled and extinguished and thereafter shall
represent the right to receive ADSs determined by multiplying the applicable
Exchange Ratio by the fraction of a share of such Company Common Stock or series
of such Company Preferred Stock outstanding.
(d) Stock Options and Warrants.
(i) All options to purchase capital stock of the Company granted
pursuant to the Company's 1998 Stock Option Plan (the "Company Option Plan") or
pursuant to any other arrangement adopted by the Company Board to provide
options or other rights to purchase capital stock of the Company to directors,
officers, employees or consultants of the Company (in any such case, an
"Option") then outstanding shall be subject to the provisions of Section 6.06.
(ii) All Warrants outstanding immediately prior to the Effective Time
shall be subject to the provisions of Section 6.13.
(e) Merger Consideration; Adjustments to Exchange Ratio.
(i) The aggregate number of ADSs and Alcatel Shares (together with any
cash paid pursuant to Section 2.08(e)) issuable or reserved for issuance
pursuant to Sections 2.06(c) and (d) and Sections 6.06 and 6.13, including the
ADSs in the Escrow Indemnity Account, are referred to collectively as the
"Merger Consideration."
(ii) Each of the Exchange Ratios referred to in Sections 2.06(c), 6.06
and 6.13 (collectively, the "Exchange Ratios") shall be adjusted to reflect
fully the effect of any stock split, reverse split, stock dividend (including
any dividend or distribution of securities convertible into Company Common
Stock, ADSs or Alcatel Shares), reorganization, recapitalization or other like
change with respect to the Company Common Stock, the ADSs or the Alcatel Shares,
the record date for which shall occur after the date hereof and prior to the
Effective Time. The ADSs and the Alcatel Shares that shall be issuable as the
Merger Consideration shall not be entitled to receive any annual dividend for
2001 (the "2001 Dividend") declared at Alcatel's stockholders' meeting that is
scheduled to occur in April 2002 and paid thereafter.
8
(iii) The aggregate number of ADSs and Alcatel Shares issuable or
reserved for issuance that comprise the Merger Consideration (including those
fractional shares which shall be paid in cash pursuant to Section 2.08(e)),
shall be equal to, but not exceed 9,000,000. If, as a result of the application
of Sections 2.06(c) and (d) and Sections 6.06 and 6.13, the number of issued and
outstanding shares of Company Capital Stock, Options and Warrants as of the
Effective Time would cause the Merger Consideration issuable or reserved for
issuance to exceed an aggregate of 9,000,000 ADSs and Alcatel Shares, then each
of the Exchange Ratios shall be adjusted pro rata, so that the Merger
Consideration issued or reserved for issuance shall be equal to, but not exceed
an aggregate of 9,000,000 ADSs and Alcatel Shares.
(f) Convertible Promissory Notes. At or promptly following the Closing,
Alcatel shall pay, or cause to be paid, the aggregate amount of principal and
interest of the Convertible Promissory Notes outstanding at the Effective Time
in ADSs, such payment to be made by the issuance of such number of ADSs as is
equal to the result of (x) the aggregate amount of principal and interest of the
Convertible Promissory Notes outstanding at the Effective Time divided by (y)
the average of the last reported sales prices of the ADSs on the NYSE during the
twenty (20) consecutive trading days ending on and including the third trading
day prior to the Effective Time.
SECTION 2.07 Escrow Indemnity Account. At or as soon as practicable after
the Effective Time, Alcatel shall, upon receipt of a notice from the Trustee in
the form attached to the Trust Agreement (the "Trust Notice"), deliver to the
escrow agent (the "Escrow Agent"), under the escrow agreement dated the Closing
Date, substantially in the form of Exhibit E hereto (the "Escrow Agreement"), in
accordance with the Company Stockholders' respective Pro Rata Interests, an
American depositary receipt for 1,000,000 ADSs (the "Escrow Shares"), to be held
in an escrow account (the "Escrow Indemnity Account"), in accordance with the
terms of the Escrow Agreement. 900,000 ADSs of the Escrow Shares in the Escrow
Indemnity Account will be used to satisfy claims for (i) Losses made by the
Alcatel Indemnitees pursuant and subject to Article VIII hereof and Section 6 of
the Stockholder Agreements and (ii) by the Stockholders' Representative pursuant
and subject to Section 10.16 hereof but only for such number of ADSs as is equal
to $250,000. 100,000 ADSs of the Escrow Shares in the Escrow Indemnity Account
will be used to pay for expenses of the Company in excess of the amount set
forth in Annex 2.07 pursuant and subject to the terms of Section 6.10 hereof.
SECTION 2.08 Exchange of Certificates. The procedures for exchanging
outstanding shares of Company Capital Stock for ADSs pursuant to the Merger are
as follows:
(a) Exchange Agent. At or promptly following the Effective Time, Alcatel
shall, upon receipt of the Trust Notice, deposit with The Bank of New York (the
"Exchange Agent"), for the benefit of the Company Stockholders, for exchange in
accordance with this Section 2.08, through the Exchange Agent, (i) ADSs issuable
pursuant to Section 2.06(c) (and not Section 2.06(d)) less the number of ADSs
deposited pursuant to the Escrow Agreement as provided in Section 2.07, in
exchange for outstanding shares of Company Capital Stock, (ii) cash in an amount
sufficient to make payments required pursuant to Section 2.08(e), and (iii) any
dividends or distributions to which Company Stockholders may be entitled
pursuant to Section 2.08(c) (the ADSs described in clause (i), together with any
cash in lieu of fractional shares as provided in Section 2.08(e) and
9
dividends or distributions with respect thereto, being hereinafter referred to
as the "Exchange Fund").
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time and in any event no later than five (5) business days thereafter,
the Exchange Agent shall mail to each holder of record (as of the Effective
Time) of a certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of Company Capital Stock (each, a
"Certificate" and collectively, the "Certificates") whose shares were converted
pursuant to Section 2.06(c) into the right to receive ADSs (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Alcatel may reasonably specify) and (ii) instructions for
effecting the surrender of the Certificates in exchange for American depositary
receipts representing ADSs (plus cash in lieu of fractional shares, if any, of
ADSs as provided in Section 2.08(e) and any dividends or distributions as
provided in Section 2.08(c)). Upon surrender of a Certificate for cancellation
to the Exchange Agent or to such other agent or agents as may be appointed by
[the Surviving Corporation], together with such letter of transmittal, duly
executed, and such other documents as may reasonably be required by the Exchange
Agent, the holder of such Certificate shall be entitled to receive in exchange
therefor an American depositary receipt representing that number of whole ADSs
into which the shares of Company Capital Stock held by such holder were
converted pursuant to Section 2.06(c) (subject to such Company Stockholder's Pro
Rata Interest in the Escrow Shares being held in accordance with the Escrow
Agreement) plus cash in lieu of fractional shares pursuant to Section 2.08(e)
and any dividends or distributions pursuant to Section 2.08(c), and the
Certificate so surrendered shall immediately be cancelled. In the event of a
transfer of ownership of Company Capital Stock which is not registered in the
transfer records of the Company, an American depositary receipt representing
whole ADSs issued in exchange therefor pursuant to Section 2.06(c) (subject to
such Company Stockholder's Pro Rata Interest in the Escrow Shares being held in
accordance with the Escrow Agreement) plus cash in lieu of fractional shares
pursuant to Section 2.08(e) and any dividends or distributions pursuant to
Section 2.08(c) may be issued and paid to a person other than the person in
whose name the Certificate so surrendered is registered, if such Certificate is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
2.08(b), each Certificate shall be deemed at any time after the Effective Time
to represent only the right to receive upon such surrender an American
depositary receipt representing ADSs as contemplated in Section 2.06(c) (subject
to such Company Stockholder's Pro Rata Interest in the Escrow Shares being held
in accordance with the Escrow Agreement) plus cash in lieu of fractional shares
pursuant to Section 2.08(e) and any dividends or distributions pursuant to
Section 2.08(c), as contemplated by this Section 2.08.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions declared or made after the Effective Time with respect to ADSs
with a record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the ADSs represented thereby until the
holder of record of such Certificate shall surrender such Certificate. Subject
to applicable Law, following surrender of any such Certificate, there shall be
issued and paid to the record holder of the Certificate, (i) American depositary
receipts representing whole ADSs issued in exchange therefor (subject to such
Company Stockholder's
10
Pro Rata Interest in the Escrow Shares being held in accordance with the Escrow
Agreement), (ii) the amount of any cash payable in lieu of a fractional ADS to
which such holder is entitled pursuant to Section 2.08(e), without interest and
(iii) the amount of dividends or other distributions with a record date after
the Effective Time payable with respect to such whole ADSs.
(d) No Further Ownership Rights in Company Capital Stock. All ADSs issued
upon the surrender for exchange of Certificates in accordance with the terms
hereof (including any cash or other distributions paid pursuant to Sections
2.08(c) or 2.08(e)) shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of Company Capital Stock, and from and
after the Effective Time there shall be no further registration of transfers on
the stock transfer books of the Surviving Corporation of the shares of Company
Capital Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation or the Exchange Agent for any reason, they shall be cancelled and
exchanged as provided in this Article II.
(e) No Fractional Shares. No certificate or scrip representing fractional
ADSs shall be issued upon the surrender for exchange of Certificates, and such
fractional share interests will not entitle the owner thereof to vote or to any
other rights of a stockholder of Alcatel. Notwithstanding any other provision of
this Agreement, each holder of shares of Company Capital Stock exchanged
pursuant to the Merger who would otherwise have been entitled to receive a
fraction of an ADS (after taking into account all Certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount
equal to such fractional part of an ADS multiplied by the average of the last
reported sales prices of the ADSs on the NYSE during the twenty (20) consecutive
trading days ending on and including the third trading day prior to the
Effective Time.
(f) Termination of Exchange Fund. Subject to Section 2.08(g), any portion
of the Exchange Fund which remains undistributed to the Company Stockholders for
365 days after the Effective Time shall be delivered to Alcatel, upon demand,
and any Company Stockholder who has not previously complied with this Section
2.08 shall thereafter look only to Alcatel, as an unsecured creditor for payment
of its claim for ADSs (subject, in the case of each Company Stockholder, to such
Company Stockholder's Pro Rata Interest in the Escrow Shares being held in
accordance with the Escrow Agreement), any cash in lieu of fractional shares and
any dividends or distributions with respect thereto.
(g) No Liability. To the extent permitted by applicable Law, none of
Alcatel, Merger Sub, the Company, the Surviving Corporation or the Exchange
Agent shall be liable to any holder of shares of Company Capital Stock or ADSs,
as the case may be, for any Merger Consideration (or dividends or distributions
with respect thereto) delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(h) Withholding Rights. Each of Alcatel and the Surviving Corporation shall
be entitled to deduct and withhold from the Merger Consideration otherwise
payable pursuant to this Agreement to any holder of Company Capital Stock such
amounts as it is required to deduct and withhold with respect to the making of
such payment under the Code or any provision of state, local, provincial or
foreign tax law. To the extent that amounts are so withheld, such withheld
11
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of Company Capital Stock in respect of which such deduction and
withholding was made.
(i) Lost, Stolen or Destroyed Certificates. If any Certificate shall have
been lost, stolen or destroyed, the Exchange Agent shall issue in exchange for
such lost, stolen or destroyed Certificate, upon the making of an affidavit of
that fact by the holder thereof, such Merger Consideration as may be required
pursuant to Section 2.06(c) (subject to such Company Stockholder's Pro Rata
Interest in the Escrow Shares being held in accordance with the Escrow
Agreement); provided, however, that the Surviving Corporation may, in its sole
discretion and as a condition precedent to the issuance and delivery thereof,
require the owner of such lost, stolen or destroyed Certificate to deliver a
bond in such sum as it may reasonably direct as indemnity against any claim that
may be made against the Surviving Corporation with respect to the Certificate
alleged to have been lost, stolen or destroyed.
SECTION 2.09 Restricted Stock. If any shares of Company Capital Stock that
are outstanding immediately prior to the Effective Time are not vested or are
subject to a repurchase option, risk of forfeiture or other condition providing
that such shares may be forfeited or repurchased by the Company upon any
termination of the stockholder's employment, directorship or other relationship
with the Company (and/or any affiliate of the Company) under the terms of any
restricted stock agreement or other agreement with, or plan of, the Company
("Company Restricted Stock"), then the ADSs issued upon the conversion of such
shares of Company Restricted Stock in the Merger will (subject to any mandatory
acceleration of vesting as a result of the Merger provided in such restricted
stock or other agreement with, or plan of, the Company that is in effect on the
date hereof) continue to be unvested and subject to the same repurchase options,
risks of forfeiture or other conditions following the Effective Time, except
that the shares purchasable pursuant to such options, risks of forfeiture or
conditions and the purchase price payable per share shall be adjusted to reflect
the applicable Exchange Ratio. American depositary receipts representing such
ADSs issued for Company Restricted Stock may accordingly be marked with
appropriate legends noting such repurchase options, risks of forfeiture or other
conditions; provided, however that American depositary receipts evidencing ADSs
issued for shares of Company Capital Stock that are not Company Restricted Stock
shall be issued without a legend, unless such legend is otherwise required by
law or to note other restrictions. The Company shall take all actions that may
be necessary to ensure that, from and after the Effective Time, the Surviving
Corporation is entitled to exercise any such repurchase option or other right
set forth in any such restricted stock agreement or other agreement. A listing
of the holders of Company Restricted Stock, together with the number of shares
and the vesting schedule of Company Restricted Stock held by each (after giving
effect to any mandatory acceleration of vesting as a result of the Merger
provided in such restricted stock or other agreement with, or plan of, the
Company that is in effect on the date hereof), is set forth in Section 2.09 of
the Company Disclosure Schedule (as defined below).
SECTION 2.10 Dissenting Shares. Notwithstanding Section 2.06(c), Company
Capital Stock outstanding immediately prior to the Effective Time and held by a
Company Stockholder who has not voted in favor of the Merger or consented
thereto in writing and who has demanded appraisal for such shares in accordance
with Section 262 of the Delaware Law ("Dissenting Shares") shall not be
converted into a right to receive the applicable portion of the Merger
Consideration, unless such Company Stockholder fails to perfect or withdraws or
12
otherwise loses its right to appraisal. If after the Effective Time, any such
Company Stockholder fails to perfect or withdraws or loses its right to
appraisal, such Dissenting Shares shall be treated as if they had been converted
as of the Effective Time into the right to receive the Merger Consideration to
which such Company Stockholder is entitled, without interest thereon. The
Company shall give Alcatel prompt notice of any demands received by the Company
for appraisal of Company Capital Stock, and, prior to the Effective Time,
Alcatel shall have the right to participate in all negotiations and proceedings
with respect to such demands. Prior to the Effective Time, the Company shall
not, except with the prior written consent of Alcatel, make any payment with
respect to, or settle or offer to settle, any such demands.
SECTION 2.11 Further Action. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
the Company and Merger Sub, the officers and directors of the Company and Merger
Sub are fully authorized in the name of their respective corporations or
otherwise to take, and will take, all such lawful and necessary action.
SECTION 2.12 Transfer Taxes. Alcatel shall pay French capital duty, stamp
duty, issuance and capital taxes assessed (including, but not limited to, any
French registration tax (droits d'enregistrement)) upon or with respect to the
issuance of ADSs and the Alcatel Shares in accordance with Section 2.06, upon
the deposit of ADSs into the Escrow Indemnity Account in accordance with Section
2.07 and the release to any person of such ADSs pursuant to the terms of the
Escrow Agreement, upon the issuance of Alcatel Shares upon the exercise of
Options pursuant to Section 6.06 and upon the issuance of ADSs upon the exercise
of Warrants pursuant to Section 6.13.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Alcatel and Merger Sub that the
statements contained in this Article III are true and correct, except as set
forth herein or in the disclosure schedule delivered by the Company to Alcatel
concurrent herewith (the "Company Disclosure Schedule"), whether or not a
reference to the Company Disclosure Schedule appears in the representation or
warranty. The Company Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs in this Article III and
the disclosure in any paragraph shall qualify other paragraphs in this Article
III only to the extent that it is specifically indicated in such paragraph.
SECTION 3.01 Organization and Qualification; Subsidiaries. Each of the
Company and its subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has the requisite corporate power and authority necessary to own, lease and
operate the properties it purports to own, lease or operate and to carry on its
business as it is now being conducted. Each of the Company and its subsidiaries
is duly qualified or licensed as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of its properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that would not
13
have, individually or in the aggregate, a Company Material Adverse Effect. A
true and complete list of all of the Company's subsidiaries, together with the
jurisdiction of incorporation of each subsidiary and the percentage of each
subsidiary's outstanding capital stock owned by the Company or another
subsidiary, is set forth in Section 3.01 of the Company Disclosure Schedule.
Other than the Company's subsidiaries listed in Section 3.01 of the Company
Disclosure Schedule, neither the Company nor its subsidiaries owns, directly or
indirectly, any equity or similar interest in, or any interest convertible into
or exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, joint venture, limited liability company or other
business association or entity, whether incorporated or unincorporated.
SECTION 3.02 Certificate of Incorporation and By-Laws. The Company has
heretofore furnished to Alcatel a complete and correct copy of its Certificate
of Incorporation (as amended and restated, the "Company Certificate of
Incorporation") and By-Laws (the "Company By-Laws"), and a complete and correct
copy of the equivalent organizational documents of each of the Company's
subsidiaries, each as amended to date. Such Company Certificate of Incorporation
and Company By-Laws, and such equivalent organizational documents of each of the
Company's subsidiaries, are in full force and effect. The Company is not in
violation of any of the provisions of the Company Certificate of Incorporation
or Company By-Laws and none of the Company's subsidiaries is in violation of any
of the provisions of its equivalent organizational documents.
SECTION 3.03 Capitalization.
(a) The authorized capital stock of the Company consists of 96,500,000
shares of Company Common Stock and 55,955,270 shares of Company Preferred Stock,
par value $0.01 per share, of which 6,499,998 shares are designated as Series A
Preferred, 22,944,015 shares are designated as Series B Preferred, 16,186,257
shares are designated as Series C Preferred, 8,775,000 shares are designated as
Series D Preferred and 1,550,000 shares are designated as Series D-1 Preferred.
As of the date hereof, (i) 19,022,598 shares of Company Common Stock are issued
and outstanding, (ii) no shares of Company Common Stock are held in the treasury
of the Company, (iii) 12,547,500 shares of Company Common Stock are reserved for
issuance pursuant to outstanding Options granted under the Company Option Plan,
(iv) 1,279,902 shares of Company Common Stock are reserved for issuance pursuant
to future grants of options or restricted stock under the Company Option Plan,
(v) 3,530,540 shares of Company Common Stock are Company Restricted Stock; (vi)
6,499,998 shares of Series A Preferred are issued and outstanding, (vii)
22,655,263.5 shares of Series B Preferred are issued and outstanding, (viii)
16,186,257 shares of Series C Preferred are issued and outstanding, (ix)
7,770,498 shares of Series D Preferred are issued and outstanding, (x) 487,452
shares of Series D-1 Preferred are issued and outstanding, (xi) no shares of
Company Preferred Stock are held in the treasury of the Company, (xii) 288,751.5
shares of Series B Preferred are reserved for issuance pursuant to outstanding
Warrants, (xiii) 20,097.05 shares of Series D Preferred are reserved for
issuance pursuant to outstanding Warrants, (xiv) 193,482 shares of Series D-1
Preferred are reserved for issuance pursuant to that certain Note Purchase
Agreement dated October 18, 2001 between the Company and the purchasers stated
therein, (xv) 6,499,998 shares of Company Common Stock are reserved for issuance
upon conversion of issued and outstanding shares of Series A Preferred, (xvi)
22,655,263.5 shares of Company Common Stock are reserved for issuance upon
conversion of issued and outstanding shares of Series B Preferred, (xvii)
16,186,257 shares of Company
14
Common Stock are reserved for issuance upon conversion of issued and outstanding
shares of Series C Preferred, (xviii) 7,928,084.7 shares of Company Common Stock
are reserved for issuance upon conversion of issued and outstanding shares of
Series D Preferred, (xix) 2,057,107.9 shares of Company Common Stock are
reserved for issuance upon conversion of issued and outstanding shares of Series
D-1 Preferred, (xx) 288,751.5 shares of Company Common Stock are reserved for
issuance upon conversion of Series B Preferred issuable upon exercise of
outstanding Warrants and (xxi) 20,504.6 shares of Company Common Stock are
reserved for issuance upon conversion of Series D Preferred issuable upon
exercise of outstanding Warrants. As of the date hereof, there are no other
shares of Company Capital Stock issued and outstanding or reserved for future
issuance. All of the issued and outstanding shares of Company Capital Stock are
duly authorized, validly issued, fully paid, non-assessable and free of
preemptive rights. None of the issued and outstanding shares of Company Capital
Stock has been issued in violation of any applicable federal or state Law or any
preemptive rights or rights to subscribe for or purchase securities. All shares
of Company Capital Stock subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid, non-assessable
and free of preemptive rights and, assuming such issuance prior to the Effective
Time, will not have been issued in violation of any applicable federal or state
Law or any preemptive rights or rights to subscribe for or purchase securities.
Except as set forth in this Section 3.03 or Section 3.11 hereof, there are no
options, warrants, calls or preemptive rights relating to the issued or unissued
capital stock of the Company or any of its subsidiaries or obligating the
Company or any of its subsidiaries to issue, transfer, deliver or sell, or cause
to be issued, transferred, delivered or sold, any shares of capital stock of, or
any securities directly or indirectly convertible into or exercisable or
exchangeable for any shares of capital stock of, the Company or any of its
subsidiaries. Neither the Company nor any of its subsidiaries has issued and
outstanding any stock appreciation rights, phantom stock, performance based
rights (other than provided in certain Option agreements) or similar rights or
obligations. There are no obligations, contingent or otherwise, of the Company
or any of its subsidiaries to repurchase, redeem or otherwise acquire any shares
of capital stock of the Company or capital stock of any subsidiary or to provide
funds to or make any investment (in the form of a loan, capital contribution or
otherwise) in the Company, any subsidiary or any other entity, other than
guarantees of bank obligations of subsidiaries entered into in the ordinary
course of business. Except for the Stockholder Agreements, agreements with
employees or consultants evidencing Options or Company Restricted Stock, the
Investor Rights Agreement and the Voting Agreement, there are no voting trusts,
proxies or other agreements or understandings with respect to any Company
Capital Stock to which the Company or, to the knowledge of the Company, any
other person is a party or by which the Company or any such other person is
bound. All of the outstanding shares of capital stock of each of the Company's
subsidiaries are duly authorized, validly issued, fully paid, non-assessable and
free of preemptive rights, and all such shares are owned of record and
beneficially by the Company or another subsidiary free and clear of any and all
Encumbrances.
(b) Section 3.03(b) of the Company Disclosure Schedule lists (i) all
holders of Company Capital Stock as of the date hereof, as well as the number,
class and series of shares of Company Capital Stock held by each such holder,
and (ii) all holders of Warrants as of the date hereof, as well as the number,
class and series of shares of Company Capital Stock subject thereto, the date
upon which each such Warrant is exercisable and the exercise price per share of
each such Warrant.
15
(c) Except as set forth in Section 3.03(c) of the Company Disclosure
Schedule, the Company has never declared, nor is there accrued, any cash
dividend or other distribution with respect to any Company Capital Stock. (d)
Upon payment of the Merger Consideration as provided for in this Agreement, the
stockholders, optionholders and warrantholders of the Company will have no
further right or claim against the Company, Alcatel, Merger Sub or the Surviving
Corporation or any of their respective directors, officers, employees, agents or
advisors, for any amount owing to such stockholders, optionholders and
warrantholders (i) in their capacity as stockholders, optionholders and
warrantholders of the Company or, after the Effective Time, as stockholders of
Alcatel (with respect to events that occur on or prior to the Effective Time),
(ii) pursuant to the Company Certificate of Incorporation or Company By-Laws or
Delaware Law or (iii) relating to or in connection with this Agreement, the
Merger or the other transactions contemplated hereby.
(e) Attached hereto as Exhibit F is a true and complete copy, certified by
the Company's secretary, of the minutes of a meeting of the Company Board
unanimously approving the grant of Options to purchase 5,200,000 shares of the
Company Common Stock on January 15, 2002, and of the written consent of the
holders of Company Capital Stock approving the increase in the number of shares
of Company Common Stock subject to the Company Option Plan, which consents are
in full force and effect and unmodified.
SECTION 3.04 Authority Relative to This Agreement.
(a) The Company has all necessary corporate power and authority to execute
and deliver this Agreement and each of the Ancillary Agreements (to which the
Company is a party), Non-Compete Agreements and the Key Employee Agreements and
to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby (other than the approval and
adoption of this Agreement, the Merger, the Ancillary Agreements and the other
transactions contemplated hereby and thereby by the stockholders of the Company
in accordance with Delaware Law and the Company Certificate of Incorporation
(the "Company Stockholders' Proposal")). The execution and delivery of this
Agreement and the Ancillary Agreements by the Company and the consummation by
the Company of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action on the part of the
Company, and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or any of the Ancillary Agreements or to
consummate the transactions so contemplated other than the Company Stockholders'
Proposal. This Agreement has been, and the Ancillary Agreements will be, duly
and validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery of this Agreement and the Ancillary
Agreements by each of the other parties hereto and thereto, constitutes, or, in
the case of the Ancillary Agreements, will constitute, legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except as enforceability may be limited by (i)
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other Laws of general application affecting the enforcement of
creditors' rights generally now or hereafter in effect and (ii) general
principles of equity, regardless of whether asserted in a proceeding in equity
or at law.
16
(b) The members of the Company Board present at the time that the vote was
taken (i) have unanimously declared that this Agreement, the Merger, the
Ancillary Agreements and the other transactions contemplated hereby and thereby
are advisable and in the best interests of the stockholders of the Company, (ii)
have unanimously authorized, approved and adopted this Agreement, the Ancillary
Agreements, the Merger and the other transactions contemplated hereby and
thereby and (iii) have recommended that the stockholders of the Company
authorize, approve and adopt this Agreement, the Merger, the Ancillary
Agreements and the other transactions contemplated hereby and thereby.
SECTION 3.05 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement and the Ancillary
Agreements by the Company do not, and the performance of this Agreement and the
Ancillary Agreements by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby will not, (i) conflict with or
violate the Company Certificate of Incorporation or Company By-Laws or the
equivalent organizational documents of any of the Company's subsidiaries, (ii)
conflict with or violate any Law applicable to the Company or any of its
subsidiaries or by which any of its or any of its subsidiaries' properties or
operations is bound or affected, (iii) conflict with, result in any breach of,
or constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair the Company's or any of its
subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of an Encumbrance on any of the
properties or assets of the Company or any of its subsidiaries pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries, or
any of its or any of its subsidiaries' properties, is bound or affected except,
in the case of clauses (ii) and (iii), for such conflicts, breaches, violations,
defaults, impairments or alterations that would not prevent or delay
consummation of the Merger, or otherwise prevent or delay the Company from
performing its obligations under this Agreement, or would not otherwise
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect or materially and adversely affect the Company's ability
to consummate the transactions contemplated by this Agreement.
(b) The execution and delivery of this Agreement and the Ancillary
Agreements by the Company do not, and the performance of this Agreement and the
Ancillary Agreements by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby will not, require any waiver,
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity or other third party, except (i) for applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), state
securities laws ("Blue Sky Laws"), and the pre-merger notification requirements
of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), (ii) for the filing of the Certificate of Merger as required by
Delaware Law, and (iii) such waivers, consents, approvals, authorizations,
permits, filings or notifications as may be required under the laws of any
foreign country and (iv) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay consummation of the Merger, or would not
17
otherwise reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect.
SECTION 3.06 Compliance, Permits.
(a) Each of the Company and its subsidiaries, and each of its and its
subsidiaries' properties and operations, are and have since inception been in
compliance with all foreign, federal, state and local statutes, laws, rules,
regulations, ordinances, orders, judgments, decrees and other authorizations and
approvals of Governmental Entities (collectively, "Laws"), applicable to the
Company or any of its subsidiaries or by which any of its or any of its
subsidiaries' properties or operations is bound or affected, except for such
failures to comply that have not had and would not have, individually or in the
aggregate, a Company Material Adverse Effect. Neither the Company nor any of its
subsidiaries has received any notice or other communication (whether written or
oral) from any Governmental Entity regarding any actual, alleged, possible or
potential violation of, or any failure to comply with, any Law.
(b) Each of the Company and its subsidiaries possesses all permits,
licenses, consents, franchises, orders, approvals, certifications, registrations
and authorizations from Governmental Entities necessary to enable it to continue
to own, lease, operate and use its assets and properties and conduct its
business as presently conducted (collectively, the "Company Permits"), except
for such Company Permits the absence of which have not had and would not have,
individually or in the aggregate, a Company Material Adverse Effect. All of the
Company Permits are valid and in full force and effect, and the Company has no
reason to believe that any Governmental Entity will revoke, cancel, rescind,
refuse to renew in the ordinary course or modify any of the Company Permits, nor
is any proceeding pending for any such purpose. Each of the Company and its
subsidiaries is in compliance in all material respects with the terms of the
Company Permits and with all material requirements, standards and procedures of
the Governmental Entities which issued them, and with any limitation or, to the
knowledge of the Company, proposed limitation on any Company Permit.
SECTION 3.07 Financial Statements. Attached as Section 3.07 of the Company
Disclosure Schedule are (i) the unaudited consolidated balance sheet of the
Company as of December 31, 2001 and the related consolidated statements of
income and cash flows for the year then ended (the "Interim Financial
Statements"), certified by the principal financial and accounting officer of the
Company as being in accordance with United States GAAP, subject to normal and
recurring year-end adjustments which are not expected to be material in amount
and that such Interim Financial Statements may not contain all notes required by
United States GAAP, and (ii) the audited consolidated balance sheets of the
Company as of December 31, 2000 and December 31, 1999 and the related
consolidated statements of income and cash flows for the years then ended,
accompanied by the report of the Company's independent public accountants
thereon (the "Audited Financial Statements" and, together with the Interim
Financial Statements, the "Financial Statements"). Each of the Financial
Statements (including, in each case, the related notes thereto) was prepared in
accordance with the books and records of the Company and its subsidiaries and in
accordance with United States GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated therein or in the notes thereto),
and each fairly presents the consolidated financial position of the Company and
its subsidiaries as at the respective dates thereof and the consolidated results
of its operations and
18
cash flows for the periods indicated consistent with the books and records of
the Company, except that the Interim Financial Statements are subject to normal
and recurring year-end adjustments which are not expected to be material in
amount and such Interim Financial Statements may not contain all notes required
by United States GAAP.
SECTION 3.08 Absence of Certain Changes or Events. Since December 31, 2001,
each of the Company and its subsidiaries has conducted its business in the
ordinary course consistent with past practice and there has not been: (i) any
Company Material Adverse Effect; (ii) any damage to, destruction or loss of any
material assets of the Company or any of its subsidiaries (whether or not
covered by insurance); (iii) any revaluation by the Company or any of its
subsidiaries of any of its assets, including, without limitation, writing down
the value of capitalized software or inventory or writing off notes or accounts
receivable, other than in the ordinary course of business; (iv) any transaction,
commitment, contract or agreement entered into by the Company or any of its
subsidiaries, or any relinquishment by the Company or any of its subsidiaries of
any contract or other right, in any case having a value of or involving
aggregate payments or value in excess of $100,000 other than in the ordinary
course of business; (v) any material adverse change in any customer, supplier,
licensee or licensor relationship, including any cancellation, termination or
adverse modification or threatened cancellation, termination or adverse
modification of any such relationship; or (vi) any action that, if it had been
in effect, would have been prohibited by Section 6.01.
SECTION 3.09 No Undisclosed Liabilities. Neither the Company nor any of its
subsidiaries has any liabilities (absolute, accrued, contingent or otherwise)
whether or not required to be disclosed in financial statements, including the
notes thereto, prepared in accordance with United States GAAP which are,
individually or in the aggregate, material to the business, operations or
financial condition of the Company and its subsidiaries, taken as a whole,
except liabilities (i) provided for in the Company's unaudited consolidated
balance sheet included in the Interim Financial Statements (the "Company Balance
Sheet"), (ii) incurred since the date of the Company Balance Sheet in the
ordinary course of business and consistent with past practice and which are not
material in amount or would be reasonably expected to have a Company Material
Adverse Effect or (iii) incurred in connection with this Agreement. The Company
knows of no basis for the assertion against the Company or any of its
subsidiaries of any other liability or loss contingency for which a reserve is
required to be disclosed in the Financial Statements in accordance with United
States GAAP that is not disclosed.
SECTION 3.10 Absence of Litigation. There are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries, or any properties or
rights of the Company or any of its subsidiaries, or, to the knowledge of the
Company, any officers, directors or employees of the Company or any of its
subsidiaries in their capacity as such, before any arbitrator or arbitral forum
or tribunal or Governmental Entity that have had or are reasonably likely to
have, individually or in the aggregate, a Company Material Adverse Effect or
that seek to prevent or challenge, or seek damages in connection with, the
transactions contemplated by this Agreement or otherwise arising out of or in
any way related to this Agreement or any of the transactions contemplated
hereby. None of the Company, any of its subsidiaries, any of its or its
subsidiaries' properties or, to the knowledge of the Company, any of the
Company's or its subsidiaries'
19
officers, directors or employees in their capacity as such is subject or party
to any judgment, order, decree or other direction of, or stipulation with, any
Governmental Entity.
SECTION 3.11 Employee Benefit Plans; Employment Agreements.
(a) Section 3.11(a) of the Company Disclosure Schedule sets forth a true
and complete list of all "employee benefit plans" within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and any other bonus, profit sharing, compensation, pension,
severance, deferred compensation, fringe benefit, insurance, welfare,
post-retirement, health, life, stock option, stock purchase, restricted stock,
tuition refund, service award, company car, scholarship, relocation, disability,
accident, sick, vacation, holiday, termination, unemployment, individual
employment, consulting, executive compensation, incentive, commission, payroll
practices, retention, change in control, noncompetition and other plans,
agreements, policies, trust funds or arrangements (whether written or unwritten,
insured or self-insured) (1) established, maintained, sponsored or contributed
to (or with respect to which any obligation to contribute has been undertaken)
by the Company or any entity that would be deemed a "single employer" with the
Company under Section 414(b), (c), (m) or (o) of the Code or Section 4001 of
ERISA (an "ERISA Affiliate") on behalf of any employee, officer, director,
consultant or stockholder of the Company or any of its subsidiaries (whether
current, former or retired) or their beneficiaries or (2) with respect to which
the Company or any ERISA Affiliate has or has had any obligation on behalf of
any such employee, officer, director, consultant, stockholder or beneficiary
(each a "Company Plan" and, collectively, the "Company Plans"). True and
complete copies of each of the Company Plans and related documents have been
made available or delivered to Alcatel.
(b) None of the Company (including any subsidiary thereof), any ERISA
Affiliate or any of their respective predecessors has ever contributed to,
contributes to, has ever been required to contribute to, or otherwise
participated in or participates in or in any way, directly or indirectly, has
any liability with respect to any plan subject to Section 412 of the Code,
Section 302 of ERISA or Title IV of ERISA, including, without limitation, any
"multiemployer plan" (within the meaning of Sections 3(37) or 4001(a)(3) of
ERISA or Section 414(f) of the Code) or any single employer pension plan (within
the meaning of Section 4001(a)(15) of ERISA) which is subject to Sections 4063
and 4064 of ERISA.
(c) With respect to each of the Company Plans: (1) each Company Plan
intended to qualify under Section 401(a) of the Code is qualified and has
received a determination letter from the United States Internal Revenue Service
(the "IRS") to the effect that the Company Plan is qualified under Section 401
of the Code and any trust maintained pursuant thereto is exempt from federal
income taxation under Section 501 of the Code and nothing has occurred or, to
the knowledge of the Company, is expected to occur through the date of the
Effective Time that caused or is reasonably expected to cause the loss of such
qualification or exemption or the imposition of any material penalty or material
tax liability; (2) all payments required by the Company Plan, any collective
bargaining agreement or other agreement, or by law (including, without
limitation, all contributions, insurance premiums or intercompany charges) with
respect to all prior periods have been made or provided for by the Company as
applicable, in accordance with the provisions of each of the Company Plans,
applicable law and United States GAAP; (3) no claim, lawsuit, arbitration or
other action has been threatened, asserted, instituted or, to the
20
knowledge of the Company, is anticipated against any of the Company Plans (other
than routine claims for benefits and appeals of such claims), any trustee or
fiduciaries thereof, the Company (including any subsidiary thereof), any ERISA
Affiliate, any director, officer or employee thereof, or any of the assets of
any trust of any of the Company Plans; (4) the Company Plan complies and has
been maintained and operated in all material respects in accordance with its
terms and applicable law, including, without limitation, ERISA and the Code; (5)
no non-exempt "prohibited transaction," within the meaning of Section 4975 of
the Code and Section 406 of ERISA, has occurred or is reasonably expected to
occur with respect to the Company Plan; (6) no Company Plan is under, and the
Company has not received any notice of, an audit or investigation by the IRS,
U.S. Department of Labor or any other Governmental Entity and no such completed
audit, if any, has resulted in the imposition of any tax or penalty; (7) with
respect to each Company Plan that is funded mostly or partially through an
insurance policy, neither the Company (including any subsidiary thereof) nor any
ERISA Affiliate has any liability in the nature of retroactive rate adjustment,
loss sharing arrangement or other actual or contingent liability arising wholly
or partially out of events occurring on or before the date of this Agreement or
is reasonably expected to have such liability with respect to periods through
the Effective Time.
(d) Except as set forth in Section 3.11(d) of the Company Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
alone, or in combination with a termination of any employee, director or
stockholder of the Company or any of its subsidiaries (whether current, former
or retired), will not give rise to any liability under any Company Plan,
including, without limitation, liability for severance pay, unemployment
compensation, termination pay or withdrawal liability, or accelerate the time of
payment or vesting or increase the amount of compensation or benefits due to any
employee, director or stockholder of the Company or any of its subsidiaries
(whether current, former or retired) or their beneficiaries. As of the Closing,
no amounts payable under any Company Plan will fail to be deductible for federal
income tax purposes by virtue of Section 280G of the Code. Neither the Company
(including any subsidiary thereof) nor any ERISA Affiliate maintains,
contributes to or in any way provides for any benefits of any kind whatsoever
(other than under Section 4980B of the Code, the Federal Social Security Act or
a plan qualified under Section 401(a) of the Code) to any current or future
retiree or terminee. None of the Company (including any subsidiary thereof), any
ERISA Affiliate, any officer or to the knowledge of the Company, employee
thereof has made any promises or commitments, whether legally binding or not, to
create any additional plan, agreement or arrangement, or to modify or change in
any material way any existing Company Plan. No event, condition or circumstance
exists that could reasonably be expected to result in a material increase of the
benefits provided under any Company Plan or the expense of maintaining any
Company Plan from the level of benefits or expense incurred for the most recent
fiscal year ended before the Effective Time. Neither the Company (including any
subsidiary thereof) nor any ERISA Affiliate has any unfunded liabilities
pursuant to any Company Plan that is not intended to be qualified under Section
401(a) of the Code and is an employee pension benefit plan within the meaning of
Section 3(2) of ERISA, a nonqualified deferred compensation plan or an excess
benefit plan. No event, condition or circumstance exists that would prevent the
amendment or termination of any Company Plan (excluding for this purpose any
agreements with individual employees disclosed in Section 3.11(d) of the Company
Disclosure Schedule). Any individual who performs services for the Company or
any of its subsidiaries and who is not treated as an employee for federal income
tax purposes by the
21
Company or any of its subsidiaries is not an employee under applicable Law or
for any purpose including, without limitation, for tax withholding purposes or
Company Plan purposes.
(e) Section 3.11(e) of the Company Disclosure Schedule sets forth a true
and complete list of each current or former employee, officer, director or
consultant of the Company or any of its subsidiaries who holds an Option as of
the date hereof, together with the number of shares of Company Common Stock
subject to such Option, the date of grant of such Option, the exercise price of
such Option, the expiration date of such Option, the vesting schedule for such
Option and whether or not such Option is intended to qualify as an "incentive
stock option" within the meaning of Section 422(b) of the Code. Section 3.11(e)
of the Company Disclosure Schedule also sets forth the total number of
outstanding Options.
SECTION 3.12 Employees; Labor Matters.
(a) No employee or former employee of the Company or any of its
subsidiaries is owed any wages, benefits or other compensation for past services
(other than wages, benefits and compensation accrued in the ordinary course of
business during the current pay period and accrued vacation).
(b) There are no labor disputes, including, without limitation, charges of
unfair labor practices within the meaning of the National Labor Relations Act,
pending or, to the knowledge of the Company, threatened against the Company or
any of its subsidiaries by any of its employees. Neither the Company nor any of
its subsidiaries has or is knowingly engaged in any unfair labor practices
within the meaning of the National Labor Relations Act. Neither the Company nor
any of its subsidiaries is presently a party to, or is bound by, any collective
bargaining agreement or union contract with respect to any persons employed by
the Company or any of its subsidiaries, and no collective bargaining agreement
is being negotiated by the Company or any of its subsidiaries. To the knowledge
of the Company, no organizing activities are presently being made or are
threatened by or on behalf of any labor union with respect to any employees of
the Company or any of its subsidiaries. The Company has no knowledge of any
strikes, slowdowns, work stoppages or lockouts, or threats thereof, by or with
respect to any employees of the Company or any of its subsidiaries, and there
have been no such strikes, slowdowns, work stoppages or lockouts within the past
three years. Each of the Company and its subsidiaries is in material compliance
with all applicable Laws, relating to employment and employment practices,
workers' compensation, terms and conditions of employment, worker safety, wages
and hours and the Worker Adjustment and Retraining Notification Act. There has
been no harassment, discrimination, retaliatory act or similar claim against any
officer, director or employee of the Company or any of its subsidiaries at any
time during the past three years.
SECTION 3.13 Restrictions on Business Activities. Other than this
Agreement, there is no non-competition or similar agreement, commitment,
judgment, injunction, order or decree binding upon the Company or any of its
subsidiaries which has or could reasonably be expected to have (after giving
effect to the consummation of the Merger) the effect of prohibiting or impairing
in any material respect any business operations of the Company or any of its
subsidiaries as currently conducted. Neither the Company nor any subsidiary has
entered into any agreement under which it is restricted in any material respect
from selling, licensing or otherwise distributing any of its technology or
products, or providing services to, customers or
22
potential customers of any class of customers, in any geographic area, during
any period of time or any segment of the market or line of business.
SECTION 3.14 Taxes.
(a) Each of the Company and its subsidiaries, and any consolidated,
combined, unitary or aggregate group for Tax purposes of which the Company or
any of its subsidiaries is a member, has timely filed all United States federal
income Tax Returns and all other material Tax Returns required to be filed by
them or any of them (taking into account applicable extensions), and have timely
paid and discharged all material Taxes shown therein to be due or otherwise
required to be paid, except Taxes with respect to which the Company is
maintaining reserves in accordance with United States GAAP in its financial
statements that are adequate for their payment. All federal income Tax Returns
and all other Tax Returns filed by each of the Company and its subsidiaries with
respect to Taxes were true and correct in all material respects as of the date
on which they were filed or as subsequently amended to the date hereof. Each of
the Company and its subsidiaries has disclosed to the relevant taxing authority
any position taken where the failure to make such disclosure would enable the
taxing authority to subject such person to any material penalties or additions
to Tax. As of the date hereof, neither the IRS nor any other taxing authority or
agency is now asserting or, to the Company's knowledge, threatening to assert
against the Company or any of its subsidiaries any deficiency or claim for
material additional Taxes. As of the date hereof, there are no requests for
information from the IRS or any other taxing authority or agency currently
outstanding. As of the date hereof, there are no pending audits of the Company
or any of its subsidiaries by any taxing authority nor, to the Company's
knowledge, are any proceedings (whether administrative or judicial) currently
being conducted with respect to any issues relating to Taxes. No material Tax
claim has become a lien on any assets of the Company or any of its subsidiaries.
Neither the Company nor any of its subsidiaries is required to include in income
(i) any material items in respect of any change in accounting methods or (ii)
any gain with respect to installment sales.
(b) (i) Neither the Company nor any of its subsidiaries has any liability
for any accumulated earnings tax or personal holding company tax; (ii) neither
the Company nor any of its subsidiaries is obligated under any agreement with
respect to industrial development bonds or other obligations with respect to
which the excludability from gross income of the holder for United States
federal or state income tax purposes could be affected by the transactions
contemplated hereby; (iii) as of the date hereof, there are no waivers or
extensions of any applicable statute of limitations for the assessment or
collection of Taxes with respect to any Tax Return that relates to the Company
or any of its subsidiaries which remain in effect; (iv) there are no Tax
rulings, closing agreements or changes of accounting method relating to the
Company or any of its subsidiaries which would materially affect its or any of
their liability for Taxes for any period after the Effective Time; (v) all
federal and all material state and local income Tax Returns of each of the
Company and its subsidiaries with respect to taxable periods through the year
ended December 31, 1995 have been examined and closed or are Tax Returns with
respect to which the applicable statute of limitations has expired; (vi) no
material property of the Company or any of its subsidiaries is "tax-exempt use
property" within the meaning of Section 168(h) of the Code; (vii) neither the
Company nor any of its subsidiaries is a party to any material lease made
pursuant to Section 168(f) of the Code; (viii) neither the Company nor any of
its subsidiaries has any liability under Treasury Regulation ss. 1.1502-6 or any
similar state,
23
local or foreign provision; and (ix) the Company has not filed a consent
pursuant to Section 341(f) of the Code.
(c) No power of attorney has been granted by the Company or any of its
subsidiaries with respect to any material matter relating to Taxes which is
currently in force.
(d) Neither the Company nor any of its subsidiaries is a party to any
agreement (written or oral) providing for the allocation or sharing of, or
indemnification from, Taxes with any party other than the Company and/or one or
more of its subsidiaries.
(e) Each of the Company and its subsidiaries has withheld from each payment
made to any of its past or present employees, officers or directors, or any
other person, the amount of all material Taxes and other material deductions
required to be withheld therefrom and paid the same to the proper Tax or other
receiving officers within the time required by law.
(f) The Company is not, nor was it any time during the five-year period
ending on the date on which the Effective Time occurs, a "United States real
property holding corporation" within the meaning of Section 897(c) of the Code.
SECTION 3.15 Environmental Matters.
Except as set forth in Section 3.15 of the Company Disclosure Schedule:
(a) All of the current and past operations of the Company and each of its
subsidiaries and their respective assets, businesses and real property,
including any operations at or from any real property presently, or formerly
used, leased, occupied, managed or operated by the Company or any of its
subsidiaries (collectively, the "Company Real Property"), comply and have at all
times complied with all applicable Environmental Laws. Except with respect to
such noncompliance as would not give rise to a Company Material Adverse Effect,
neither the Company, nor any of its subsidiaries or, to the knowledge of the
Company, any other person has engaged in, authorized, allowed or suffered any
operations or activities upon any of the Company Real Property in any way
involving the handling, manufacture, treatment, processing, storage, use,
generation, release, discharge, spilling, emission, dumping or disposal of any
Hazardous Substances at, on, under or from the Company Real Property, except in
compliance with all applicable Environmental Laws.
(b) None of the Company Real Property is listed or proposed for listing on
the National Priorities List pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. ss.9601 et seq.,
or any similar inventory of sites requiring investigation, monitoring or
remediation maintained by any state or locality. Neither the Company nor any of
its subsidiaries has received any notice, whether oral or written, from any
Governmental Entity or third party of any actual or threatened Environmental
Liabilities.
(c) Each of the Company and its subsidiaries has all the Company Permits
necessary for the conduct of its business and for the operations on, in or at
the Company Real Property which are required under applicable Environmental Laws
(the "Company Environmental Permits"). Except with respect to such noncompliance
as would not give rise to a Company Material Adverse Effect, each of the Company
and its subsidiaries is in full compliance with the terms
24
and conditions of all such Company Environmental Permits and, to the knowledge
of the Company, no reason exists why the Company and each of its subsidiaries
would not be capable of continued operation of their businesses as currently
conducted, in full compliance with the Company Environmental Permits and the
applicable Environmental Laws.
(d) Neither the Company nor any of its subsidiaries has contractually
assumed or succeeded to, or to the knowledge of the Company, by operation of
law, including the Environmental Laws and common law, has assumed or succeeded
to any Environmental Liabilities of any predecessors of the Company, any of its
subsidiaries or any other person.
(e) There are no underground storage tanks, asbestos or asbestos containing
materials, polychlorinated biphenyls, urea formaldehyde or other Hazardous
Substances (other than those Hazardous Substances maintained in small quantities
for use in the ordinary course of the business of each of the Company and its
subsidiaries, which Hazardous Substances are stored and maintained in full
compliance with all applicable Environmental Laws) in, on, over, under or at the
Company Real Property.
(f) To the knowledge of the Company, there are no conditions existing at
the Company Real Property or with respect to the Company's or any of its
subsidiaries' businesses that require, or which with the giving of notice or the
passage of time or both would reasonably likely require, remedial or corrective
action, removal, monitoring or closure pursuant to the Environmental Laws.
(g) The Company has provided to Alcatel all material environmental reports,
assessments, audits, studies, investigations, data, Company Environmental
Permits, ISRA related documents, and other written environmental information in
its custody, possession or control concerning the business of each of the
Company and its subsidiaries and the Company Real Property.
(h) None of the items set forth in Section 3.15 of the Company Disclosure
Schedule has had or would reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
SECTION 3.16 Brokers. No broker, finder or investment banker (other than
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, CIBC World Markets Corp. and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇) is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company. The Company has heretofore furnished to
Alcatel a complete and correct copy of all agreements between the Company and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, CIBC World Markets Corp. and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
pursuant to which such firm would be entitled to any payment relating to the
transactions contemplated hereby.
SECTION 3.17 Intellectual Property.
(a) All patents (including, without limitation, all U.S. and foreign
patents, patent applications (including provisional applications), patent
disclosures and any and all divisions, continuations, continuations-in-part,
reissues, re-examinations and extensions thereof), design rights, trademarks,
trademark applications (including intent to use filings), trade names and
25
service marks (whether or not registered), trade dress, logos, Internet domain
names, copyrights (whether or not registered) and any renewal rights therefor,
sui generis database rights, statistical models, technology, inventions,
supplier lists, trade secrets, know-how, computer software programs or
applications in both source and object code form, databases, technical
documentation of such software programs, "mask works" (as defined under 17
U.S.C. ss. 901), registrations and applications for any of the foregoing and all
other tangible or intangible proprietary information or materials ("Intellectual
Property") that are or have been used in (including in the development of) the
Company's or any of its subsidiaries' businesses and/or in any product,
technology or process (i) currently being or formerly manufactured, published or
marketed by the Company or any of its subsidiaries or (ii) currently under
development for possible future manufacturing, publication, marketing or other
use by the Company or any of its subsidiaries are hereinafter referred to as the
"Company Intellectual Property."
(b) Section 3.17(b) of the Company Disclosure Schedule contains a true and
complete list of each of the Company's and its subsidiaries' patents and patent
applications, mask works, registered trademarks and trademark applications,
trade names, registered service marks and service ▇▇▇▇ applications, Internet
domain names and Internet domain name applications, and registered copyrights
and copyright applications, and includes details of all due dates for further
filings, maintenance, payments or other actions falling due in respect of
Company Intellectual Property within 12 months after the date hereof, which are
accurate and complete. All of the Company's and its subsidiaries' patents,
patent applications, registered trademarks, trademark applications and
registered copyrights are in good standing and all of the fees and filings due
with respect thereto have been duly made.
(c) The Company Intellectual Property contains only those items and rights
which are: (i) owned by the Company or any of its subsidiaries; (ii) in the
public domain; or (iii) rightfully used by the Company or any of its
subsidiaries pursuant to a valid and enforceable license or other similar
agreement (the "Company Licensed Intellectual Property"). Each of the Company
and its subsidiaries has all rights in currently existing Company Intellectual
Property owned by the Company and, to the Company's knowledge, in currently
existing Company Licensed Intellectual Property, necessary to carry out its
current activities (and had all rights necessary to carry out its former
activities at the time such activities were being conducted), including, to the
extent required to carry out such activities, rights to make, use, reproduce,
modify, adopt, create derivative works based on, translate, distribute (directly
and indirectly), transmit, display and perform publicly, license, rent and lease
and, other than with respect to Company Licensed Intellectual Property, assign
and sell Company Intellectual Property.
(d) The reproduction, manufacturing, distribution, licensing, sublicensing,
sale or any other exercise of rights in any Company Intellectual Property,
product, work, technology or process as now used or offered for use, licensing
or sale by the Company or any of its subsidiaries does not, directly or
indirectly, infringe on any rights in any Intellectual Property or other
proprietary right of any person, anywhere in the world. Other than with respect
to Company Licensed Intellectual Property, as to which the Company has no
knowledge of any claims described in clause (i) and (ii) herein, no claims (i)
challenging the validity, effectiveness or ownership by the Company or any of
its subsidiaries of any Company Intellectual Property or (ii) to the effect that
the use, distribution, licensing, sublicensing, sale or any other exercise of
rights in any Company Intellectual Property, product, work, technology or
process as now used
26
by the Company or any of its subsidiaries or their respective agents or use by
their respective customers directly or indirectly infringes any Intellectual
Property or other proprietary right of any person, have been asserted or, to the
knowledge of the Company, are threatened by any person. All of the rights within
Company Intellectual Property (other than patent applications) are enforceable
and subsisting. To the knowledge of the Company, there is no unauthorized use,
infringement or misappropriation of any Company Intellectual Property by any
third party, employee, former employee or contract worker.
(e) All personnel, including employees, contract workers, agents,
consultants and contractors, who have contributed to or participated in the
conception and development of Company Intellectual Property on behalf of the
Company or any of its subsidiaries have executed proprietary inventions
agreements in substantially the forms attached to Section 3.17(e) of the Company
Disclosure Schedule and either (i) have been a party to an enforceable
"work-for-hire" or similar agreement with the Company or any of its subsidiaries
in accordance with applicable Law that has accorded the Company or such
subsidiary full, effective, exclusive and original ownership of all tangible and
intangible property thereby arising or (ii) have executed appropriate
instruments of assignment in favor of the Company or any of its subsidiaries as
assignee that have conveyed to the Company or such subsidiary effective and
exclusive ownership of all Company Intellectual Property thereby arising.
(f) Neither the Company nor any of its subsidiaries is or, as a result of
the execution or delivery of this Agreement, or the performance of the Company's
obligations hereunder, will be in material violation of any license, sublicense,
agreement or instrument involving Intellectual Property to which the Company or
any of its subsidiaries is a party or otherwise bound, nor will the execution or
delivery of this Agreement, or the performance of the Company's obligations
hereunder, cause the diminution, termination or forfeiture of the Company's or
any of its subsidiaries' rights in any Company Intellectual Property, which
would reasonably be expected to result in a Company Material Adverse Effect.
(g) The Company and its subsidiaries have taken commercially reasonable
measures to protect the proprietary nature of the Company Intellectual Property
and to maintain in confidence all trade secrets and confidential information
owned or used by the Company or any of its subsidiaries.
(h) Section 3.17(h) of the Company Disclosure Schedule contains a true and
complete list of all of the software programs included in or developed for
inclusion in the Company's or any of its subsidiaries' products by the Company
or any of its subsidiaries (including all software programs embedded or
incorporated in the Company's or any of its subsidiaries' products) (the
"Company Software Programs"). Each of the Company and its subsidiaries owns full
and unencumbered right and good, valid and marketable title or valid licenses to
such Company Software Programs, free and clear of all Encumbrances.
(i) The source code and system documentation relating to the Company
Software Programs (i) have at all times been maintained in confidence, (ii) have
been disclosed by the Company and its subsidiaries only to employees or third
parties who are bound by appropriate nondisclosure obligations, and (iii) are
not the subject of any escrow or similar agreement or
27
arrangement giving any third party rights in such source code and/or system
documentation upon the occurrence of certain events.
(j) Except as would not otherwise materially impair the Company's or any of
its subsidiaries' ability to account for, enforce its rights under, make use of,
understand or memorialize the Company Intellectual Property, each of the Company
and its subsidiaries has taken all commercially reasonable steps, in accordance
with normal industry practice, to preserve and maintain notes and records
relating to Company Intellectual Property and to cause the same to be readily
understood, identified and available.
(k) The Company Intellectual Property is free and clear of any and all
Encumbrances.
(l) Neither the Company nor any of its subsidiaries owes any present or
future royalties or other payments to third parties in respect of Company
Intellectual Property in excess of $10,000.
(m) Each of the Company and its subsidiaries employs commercially
reasonable measures to ensure that the Company Software Programs contain no
"viruses." For the purposes of this Agreement, "virus" means any computer code
intentionally designed to disrupt, disable or harm in any manner the operation
of any software or hardware. To the knowledge of the Company, none of the
Company Software Programs contains any worm, bomb, backdoor, clock, timer or
other disabling device, code, design or routine which causes the software to be
erased, inoperable or otherwise incapable of being used, either automatically or
upon command by any party.
(n) Each of the Company and its subsidiaries has implemented commercially
reasonable steps for the physical and electronic protection of its information
assets from unauthorized disclosure, use or modification. To the Company's
knowledge, there has been no breach of security involving any information
assets.
SECTION 3.18 Material Contracts. Section 3.18 of the Company Disclosure
Schedule contains a list of each of the following contracts (or, in the case of
oral contracts, summaries thereof) to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries, or
any of the Company's or its subsidiaries' assets or properties, is bound or
subject (collectively, the "Material Contracts"):
(a) any agreement or series of related agreements requiring aggregate
payments by or to the Company or any of its subsidiaries of more than $100,000;
(b) any agreement with or for the benefit of any current or former officer
or director, holder of any security, employee or consultant of the Company or
any of its subsidiaries under which the Company or any of its subsidiaries has
any obligations as of the date hereof and which (i) involves an obligation of
the Company or any of its subsidiaries to make payments exceeding $50,000 in any
year, (iii) contains non-competition provisions imposing restrictions on the
Company or a senior executive officer or key employee of the Company, or (ii)
involves any severance or termination payments or other similar obligation;
28
(c) any agreement with any labor union or association representing any
employee of the Company or any of its subsidiaries;
(d) any agreement for the purchase of any materials, supplies, equipment,
merchandise or services that contains an escalation clause or that obligates the
Company or any of its subsidiaries to purchase all or substantially all of its
requirements of a particular product or service from a supplier or to make
periodic minimum purchases of a particular product or service from a supplier,
which is not terminable on not more than 30 days notice (without penalty or
premium) and which involves future payments by the Company of more than $50,000;
(e) any agreement for the sale of any of the assets, properties or
securities of the Company or any of its subsidiaries other than in the ordinary
course of business or for the grant to any person of any option, right of first
refusal or preferential or similar right to purchase any such assets, properties
or securities;
(f) any agreement of surety, guarantee or indemnification, other than
agreements in the ordinary course of business with respect to obligations in an
aggregate amount not in excess of $50,000;
(g) any agreement with customers or suppliers for the sharing of fees, the
rebating of charges or other similar arrangements;
(h) any agreement obligating the Company or any of its subsidiaries to
deliver future product enhancements other than in the ordinary course of
business or containing a "most favored nation" pricing clause;
(i) any agreement relating to the acquisition by the Company or any of its
subsidiaries of any operating business or the capital stock of any other person;
(j) any agreement requiring the payment to any person of a brokerage or
sale commission or a finder's or referral fee (other than arrangements to pay
commissions or fees to employees or agents in the ordinary course of business or
as set forth in Section 3.16 of this Agreement);
(k) any agreement, note or other document relating to or evidencing
outstanding indebtedness of the Company or any of its subsidiaries for borrowed
money (including capitalized lease obligations) in excess of $100,000;
(l) any lease, sublease or other agreement under which the Company or any
of its subsidiaries is lessor or lessee of any real property or equipment or
other tangible property which involves the future payment by the Company of more
than $100,000;
(m) any agreement with a change of control provision or otherwise requiring
any consent, approval, waiver or other action by any person in connection with
the Merger (other than the agreements evidencing Options or Company Restricted
Stock that provide for mandatory acceleration of vesting as a result of the
Merger that are in effect on the date hereof);
29
(n) any phantom stock plan or bonus, incentive or similar agreement,
arrangement or understanding;
(o) any agreement involving the assignment, transfer, license (whether as
licensee or licensor), pledge or Encumbrance of any Company Intellectual
Property outside the ordinary course of business or which involves future
payments to or from the Company of more than $100,000;
(p) any distribution or sales representative agreement or agreement
appointing any agent; and
(q) any other material agreement whether or not made in the ordinary course
of business.
True and complete copies of all Material Contracts (and all amendments,
waivers or other modifications thereto) have been furnished or made available to
Alcatel. Each Material Contract is valid, subsisting, in full force and effect
and binding upon the Company or any of its subsidiaries that is party thereto
and, to the knowledge of the Company, the other parties thereto in accordance
with its terms. Neither the Company nor any of its subsidiaries is in default
(and no condition exists that, with notice or lapse of time or both, would
constitute a default by the Company or such subsidiary) under any Material
Contract, which default would give the other party the right to terminate or
modify such Material Contract or would accelerate any obligation or payment by
the Company, nor, to the knowledge of the Company, is any other party to any
Material Contract in default thereunder (or does any condition exist that, with
notice or lapse of time or both, would constitute a default by any such party).
None of the Material Contracts is currently being renegotiated, and the
validity, effectiveness and continuation of each of the Material Contracts will
not be materially adversely affected by the transactions contemplated by this
Agreement, except as otherwise listed in Section 3.18(m) of the Company
Disclosure Schedule. To the knowledge of the Company, no party to any of the
Material Contracts has made, asserted or has any defense, setoff or counterclaim
under its Material Contract or has exercised any option granted to it to cancel,
terminate or shorten the term of its Material Contract.
SECTION 3.19 Title to Properties; Absence of Encumbrances. Each of the
Company and its subsidiaries has good and marketable title to or, in the case of
leases and licenses, valid and subsisting leasehold interests or licenses in,
all of its properties and assets of whatever kind (whether real or personal,
tangible or intangible), including, without limitation, all properties and
assets that are shown on the Financial Statements (except for assets sold in the
ordinary course of business since the dates of such Financial Statements), and
which represent all such property and assets necessary for the conduct of its
businesses as presently conducted, in each case free and clear of any and all
Encumbrances, except (i) for those securing Taxes, assessments and other
governmental charges or levies not yet due and payable (excluding any imposed
pursuant to any of the provisions of ERISA), (ii) as listed in Section 3.19 of
the Company Disclosure Schedule, (iii) such imperfections in title, liens and
easements as do not materially detract from or interfere with the use of the
properties subject thereto or affected thereby or otherwise materially impair
business operations involving such properties, and (iv) Encumbrances securing
debt which is reflected in the Financial Statements. All assets, properties and
rights relating to each of the Company's and its subsidiaries' businesses are
held
30
by, and all agreements, obligations and transactions relating to each of the
Company's and its subsidiaries' businesses have been entered into, incurred and
conducted by, the Company and its subsidiaries rather than any of their
affiliates. The tangible assets of the Company and its subsidiaries, taken as a
whole, are free from material defects, have been maintained in accordance with
normal industry practice, are in good operating condition and repair (subject to
normal wear and tear) and are suitable for the purpose for which they are
presently used.
SECTION 3.20 Real and Personal Property. Section 3.20 of the Company
Disclosure Schedule contains a complete and correct list of all real property
(including buildings and structures) leased or subleased by the Company or any
of its subsidiaries and all interests therein (including a brief description of
the property and the location). The Company does not and has never owned any
real property. All material work required to be done by the Company or any of
its subsidiaries as landlord or tenant has been duly performed. No condemnation
or other proceeding is pending or, to the knowledge of the Company, threatened
which would affect the use of any such property by the Company or any of its
subsidiaries. Each of the Company and its subsidiaries enjoys peaceful and
undisturbed possession under all real property leases under which it is
operating in accordance with the terms of such leases, and all rents and
additional rents due to date from each of the Company and its subsidiaries under
such leases have been paid in full. Section 3.20 of the Company Disclosure
Schedule contains a complete and correct list and brief description of all
equipment, machinery, computers, furniture, leasehold improvements, vehicles and
other personal property owned by the Company or any of its subsidiaries with an
original cost in excess of $50,000 individually. Except as set forth in Section
3.20 of the Company Disclosure Schedule, none of the Company's or any of its
subsidiaries' personal property is held under any lease, security agreement,
conditional sales contract or other title retention or security arrangement.
SECTION 3.21 Transactions with Affiliates; Management Relationships.
(a) Neither the Company nor any of its subsidiaries has had any direct or
indirect dealings with any stockholder of the Company, other than as a board
member or pursuant to the Company's financing activities or (except for
employment arrangements with its employees) with any Key Employee (as defined
below) or, in either case, to the knowledge of the Company, with any of their
respective affiliates, associates or relatives. Except for (i) employment
arrangements with its employees, (ii) the Company Certificate of Incorporation,
(iii) the Company By-Laws, (iv) applicable Law and (v) the agreements evidencing
Options or Company Restricted Stock, neither the Company nor any of its
subsidiaries has any obligation to or claim against any stockholder of the
Company or any Key Employee or, to the knowledge of the Company, any of their
respective affiliates, associates or relatives, and no such person has any
obligation to or claim against the Company or any of its subsidiaries. Section
3.21 of the Company Disclosure Schedule describes the nature and extent of any
products, services or benefits provided to the Company or any of its
subsidiaries by any such person without a corresponding charge equal to the fair
market value of such products, services or benefits.
(b) No executive officer or director of the Company or any of its
subsidiaries owns any interest in any property or assets of the Company or any
of its subsidiaries (except as a stockholder of the Company) and, to the
knowledge of the Company, no executive officer of the Company or any of its
subsidiaries owns any interest in (i) any current competitor, customer or
31
supplier of the Company or any of its subsidiaries or (ii) any person which is
currently a party to any material contract or agreement with the Company or any
of its subsidiaries, other than holdings of less than 1% of a class of a
company's publicly traded securities.
SECTION 3.22 Insurance. Section 3.22 of the Company Disclosure Schedule
sets forth a complete and correct list of all insurance policies and bonds
currently maintained by or for the benefit of the Company or any of its
subsidiaries with respect to its operations or any incident, event or thing
arising therefrom or relating thereto, setting forth (i) the name of the
carrier, (ii) the name of the policyholder, (iii) the nature and dollar limits
of the coverage, (iv) the scheduled expiration date, (v) the premium rate and
date through which paid, (vi) the named insureds thereunder and (vii) the
extent, if any, to which the limits of liability thereunder have been exhausted.
Complete and correct copies of all such insurance policies and bonds have been
provided to Alcatel. All such insurance policies and bonds are of the type,
cover such risks and in such amounts, and have such deductibles and exclusions,
as are customary for persons conducting businesses or owning assets similar to
those of the Company and its subsidiaries. All such insurance policies and bonds
are in full force and effect and are valid and enforceable in accordance with
their terms. There is no outstanding unpaid claim under any such policy or bond.
All premiums due and payable on or prior to the date of this Agreement under all
such policies and bonds have been paid and each of the Company and its
subsidiaries is otherwise in material compliance with the terms of all such
policies and bonds. Neither the Company nor any of its subsidiaries has failed
to give any notice or present any material claim under any such policy or bond
in due and timely fashion. Neither the Company nor any of its subsidiaries has
received any notice of termination, cancellation or non-renewal of, or premium
increase or coverage limitation or reduction with respect to, any such policies
or bonds.
SECTION 3.23 Books and Records.
(a) The books of account of each of the Company and its subsidiaries are
complete and correct in all material respects and have been maintained in
accordance with sound business practices. Each of the Company and its
subsidiaries has made and kept books, records and accounts which, in reasonable
detail, accurately and fairly reflect its transactions and the dispositions of
its assets. Each of the Company and its subsidiaries maintains a system of
accounting controls sufficient to provide reasonable assurances that: (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary (A) to permit
preparation of financial statements in conformity with United States GAAP and
(B) to maintain accountability for assets; (iii) access to assets is permitted
only in accordance with management's general or specific authorization; and (iv)
the recorded accounting for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(b) The minute books of each of the Company and its subsidiaries, which
have been provided to Alcatel, contain complete and accurate records of all
meetings and accurately reflect all other corporate action of the stockholders
and board of directors of each of the Company and its subsidiaries through the
date of this Agreement.
SECTION 3.24 Accounts Receivable. All accounts receivable of the Company
and its subsidiaries, whether reflected in the Company Balance Sheet or
otherwise, represent sales
32
actually made in the ordinary course of business and have been reflected
properly in their books and records.
SECTION 3.25 Inventory. All of the inventories of the Company and its
subsidiaries consist of a quality and quantity usable and salable in the
ordinary and usual course of business, except for items of obsolete materials
and materials of below-standard quality, all of which items have been written
off or written down on the Financial Statements to fair market value or for
which adequate reserves have been provided therein. All inventories not written
off have been priced at the lower of cost (first in, first out) or market. The
quantities of each type of inventory (whether raw materials, work-in-process or
finished goods) after writeoffs are not excessive, but are reasonable and
warranted in the present circumstances of the Company and its subsidiaries. All
finished goods inventory held by the Company or any of its subsidiaries is free
of any material defect or other deficiency.
SECTION 3.26 Customers and Suppliers. Section 3.26 of the Company
Disclosure Schedule sets forth (a) the ten largest customers of the Company and
its subsidiaries, on the basis of revenues for goods sold or services provided
for the most recent fiscal year, and (b) the ten largest suppliers of Company
and its subsidiaries, on the basis of cost of goods or services purchased for
the most recent fiscal year (collectively, the "Customers and Suppliers"). The
Company knows of no plan or intention of any of the Customers or Suppliers to
terminate, cancel or otherwise adversely modify its relationship with the
Company or any of its subsidiaries or to decrease materially or limit any of its
products or services to the Company or any of its subsidiaries or its usage or
purchase of any of the services or products of the Company or any of its
subsidiaries. Neither the Company nor any of its subsidiaries offers or uses any
current customer incentive programs, whether written or oral and whether or not
deemed or considered to be legally enforceable, which involve the payment of
rebates or issuance of credits by the Company or any of its subsidiaries or the
sharing of marketing expenses by the Company or any of its subsidiaries.
SECTION 3.27 Employee Conflicts. Except as set forth in Section 3.27 of the
Company Disclosure Schedule, to knowledge of the Company, no employee of the
Company or any of its subsidiaries is in violation of (or has expressed any
intent to violate) any term of any employment contract, inventions disclosure
agreement, confidentiality agreement, non-competition agreement or restrictive
covenant to or with a former employer relating to the right of any such employee
to be employed by the Company or any of its subsidiaries because of the nature
of the business conducted or presently proposed to be conducted by the Company
or any of its subsidiaries or relating to the use of trade secrets or
proprietary information of others.
SECTION 3.28 Certain Business Practices. Neither the Company nor any of its
subsidiaries has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful payments related to a political activity, (ii)
made any unlawful payment to any foreign or domestic government official or
employee or to any foreign or domestic political party or campaign or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, (iii)
consummated any transaction or made any payment or entered into any agreement or
arrangement or taken any other action in violation of Section 1128B(b) of the
Social Security Act, as amended, or (iv) made any other unlawful payment.
33
SECTION 3.29 Tax Matters. None of the Company, any of its subsidiaries or
any of their respective affiliates, directors, officers, employees or agents has
knowingly taken, or knowingly agreed or knowingly failed to take, any action
that would prevent the Merger from constituting a reorganization within the
meaning of Section 368(a) of the Code.
SECTION 3.30 Affiliate Letters. Section 3.30 of the Company Disclosure
Schedule contains a true and complete list of all persons who, as of the date
hereof, may be deemed to be affiliates of the Company, excluding all of its
subsidiaries but including all directors and executive officers of the Company.
SECTION 3.31 Vote Required. The holders of the majority of (x) the shares
of Company Preferred Stock, voting separately as a single class, and (y) the
shares of Company Capital Stock shall be required to approve the Merger (the
"Company Stockholders' Vote Condition").
SECTION 3.32 Warranties and Product Claims.
(a) Each product manufactured, sold, leased, or delivered in commercial
release form by the Company or its subsidiaries either is and has been in
conformity with all applicable contractual commitments in all material respects
and all express and implied warranties related thereto in all material respects
or has been (or is in the process of being) repaired or replaced by the Company,
and neither the Company nor any of its subsidiaries has any liability (and, to
the knowledge of the Company, there is no basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against the Company or any of its subsidiaries giving rise to any
material liability) for replacement or repair thereof, except as contemplated by
applicable contractual commitments and warranties, or other damages in
connection therewith that is not fully covered by third-party insurance (with
commercially reasonable deductibles). No product manufactured, sold, leased, or
delivered by the Company or any of its subsidiaries is subject to any guaranty,
warranty, or other indemnity beyond the applicable standard terms and conditions
or contractual modifications set forth in the sale or lease contracts of the
Company and its subsidiaries. Complete and correct copies of the standard terms
and conditions or contractual modifications set forth in the sale or lease
contracts of the Company and its subsidiaries (containing applicable guaranty,
warranty, and indemnity provisions) have been delivered to Alcatel.
(b) Neither the Company nor any of its subsidiaries has any material
liability (and, to the knowledge of the Company, there is no basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against the Company giving rise to any material
liability) arising out of any injury to individuals or property as a result of
the ownership, possession, or use of any commercial release product
manufactured, sold, leased, or delivered by the Company that is not fully
covered by third-party insurance (with commercially reasonable deductibles).
SECTION 3.33 Bank Accounts. Schedule 3.33 of the Company Disclosure
Schedule sets forth a complete and correct list of each bank in which the
Company or any of its subsidiaries has an account or safe deposit or lockbox,
the account or box number, as the case may be, and the name of every person
authorized to draw thereon or having access thereto.
34
SECTION 3.34 Costs and Expenses. Section 3.34 of the Company Disclosure
Schedule contains a good faith estimate of all of the out-of-pocket costs and
expenses of the Company incurred or which may be incurred in connection with the
negotiation of this Agreement, the Ancillary Agreements, the Key Employee
Agreements, the Non-Compete Agreements, and all of the other agreements to be
executed and delivered pursuant hereto and thereto, the taking of all actions
contemplated hereby and thereby, and the consummation of the Merger, including,
without limitation, attorneys' and accountants' fees and fees of any brokers,
investment bankers, financial advisors or finders (including, but not limited
to, the persons described in Section 3.16).
SECTION 3.35 Product Development. As of the date hereof, the Company has
met, and currently believes that it will meet, all applicable targets with
respect to the release of the ON 7000 product as set forth in that certain
letter from the President of the Company to ▇▇. ▇▇▇▇▇ ▇▇▇▇▇ dated the date
hereof. The Company's estimates of the cash flow expenditures for the launch of
the ON 7000 product set forth in the letter from the President of the Company to
▇▇. ▇▇▇▇▇ ▇▇▇▇▇ dated the date hereof are reasonable and were made in good
faith.
ARTICLE IV.
[RESERVED]
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF ALCATEL
Alcatel and Merger Sub represent and warrant to the Company that the
statements contained in this Article V are true and correct.
SECTION 5.01 Organization and Qualification. Each of Alcatel and Merger Sub
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and has the requisite corporate
power and authority necessary to own, lease and operate the properties it
purports to own, lease or operate and to carry on its business as it is now
being conducted. Each of Alcatel and Merger Sub is duly qualified or licensed to
do business, and is in good standing, in each jurisdiction where the character
of its properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that would not
have an Alcatel Material Adverse Effect.
SECTION 5.02 Organizational Documents. Alcatel has heretofore furnished to
the Company a complete and correct copy of the organizational documents of each
of Alcatel and Merger Sub, each as amended to date. Such organizational
documents are in full force and effect. Neither Alcatel nor Merger Sub is in
violation of any of the provisions of its organizational documents.
SECTION 5.03 Issuance of Merger Consideration. The issuance of the ADSs and
Alcatel Shares pursuant to the Merger has been duly authorized by all necessary
corporate action and, when issued in accordance with the terms of this
Agreement, such ADSs and Alcatel Shares will be duly authorized, validly issued,
fully paid and non-assessable.
35
SECTION 5.04 Authority Relative to this Agreement.
(a) Each of Alcatel and Merger Sub has all necessary corporate power and
authority to execute and deliver this Agreement and each of the Ancillary
Agreements and (subject to the receipt of the consents described in Section
5.05(b) hereof) to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Ancillary Agreements by Alcatel and Merger
Sub and the consummation by Alcatel and Merger Sub of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action on the part of Alcatel and Merger Sub, as the case
may be, and no other corporate proceedings on the part of Alcatel or Merger Sub
are necessary to authorize this Agreement or any of the Ancillary Agreements or
to consummate the transactions so contemplated. This Agreement has been, and the
Ancillary Agreements will be, duly and validly executed and delivered by Alcatel
and Merger Sub and, assuming the due authorization, execution and delivery of
this Agreement and the Ancillary Agreements by each of the other parties hereto
and thereto, constitutes, or, in the case of the Ancillary Agreements, will
constitute, legal, valid and binding obligations of Alcatel and Merger Sub,
enforceable against Alcatel and Merger Sub in accordance with their respective
terms, except as enforceability may be limited by (i) applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other Laws of
general application affecting the enforcement of creditors' rights generally now
or hereafter in effect and (ii) general principles of equity, regardless of
whether asserted in a proceeding in equity or at law.
(b) The board of directors of Merger Sub (i) has declared that this
Agreement, the Merger, the Ancillary Agreements and the other transactions
contemplated hereby and thereby are advisable and in the best interests of its
stockholders and (ii) has authorized, approved and adopted this Agreement, the
Ancillary Agreements, the Merger and the other transactions contemplated hereby
and thereby.
(c) The board of directors of Alcatel has authorized this Agreement, the
Merger, the Ancillary Agreements and the other transactions contemplated hereby
and thereby.
SECTION 5.05 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement and the Ancillary
Agreements by Alcatel and Merger Sub do not, and the performance of this
Agreement and the Ancillary Agreements by Alcatel and Merger Sub and the
consummation by Alcatel and Merger Sub of the transactions contemplated hereby
and thereby will not, (i) conflict with or violate the organizational documents
of Alcatel or Merger Sub, (ii) conflict with or violate any Law applicable to
Alcatel or Merger Sub or by which any of their respective properties is bound or
affected or (iii) conflict with, result in any breach of, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or impair Alcatel's or Merger Sub's rights or alter the rights
or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of an Encumbrance on any of the properties or assets of Alcatel or
Merger Sub pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Alcatel or Merger Sub is a party or by which Alcatel or Merger Sub or
any of their respective properties is bound or affected except, in the case of
clauses (ii)
36
and (iii), for such conflicts, breaches, violations, defaults, impairments or
alterations that would not prevent or delay consummation of the Merger, or
otherwise prevent or delay Alcatel or Merger Sub from performing its obligations
under this Agreement.
(b) The execution and delivery of this Agreement and the Ancillary
Agreements by Alcatel and Merger Sub do not, and the performance of this
Agreement and the Ancillary Agreements by Alcatel and Merger Sub and the
consummation by Alcatel and Merger Sub of the transactions contemplated hereby
and thereby will not, require any waiver, consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Entity or other
third party, except (i) for applicable requirements of the Securities Act, the
Exchange Act, Blue Sky Laws, the HSR Act, any non-United States competition,
antitrust or investment laws and the rules and regulations of the NYSE, (ii) for
the filing of the Certificate of Merger as required by Delaware Law, (iii) for
applicable requirements of French Law and Euronext regulations and for approval
of the relevant documentation by the Commission des Operations de Bourse, and
(iv) where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or delay
consummation of the Merger, or otherwise prevent or delay Alcatel or Merger Sub
from performing its obligations under this Agreement.
SECTION 5.06 SEC Filings; Financial Statements.
(a) Alcatel has filed all forms, reports and documents required to be filed
by it pursuant to the Securities Act or the Exchange Act with the Securities and
Exchange Commission (the "SEC") since January 1, 2001 (collectively, the
"Alcatel SEC Reports"). The Alcatel SEC Reports (i) were prepared in compliance
in all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and (ii) did not at the time they were filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. None of Alcatel's subsidiaries is required
to file any forms, reports or other documents with the SEC.
(b) The consolidated financial statements (including, in each case, the
related notes thereto) contained in the Alcatel SEC Reports were prepared in
accordance with French GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated therein or in the notes thereto), and
fairly presents in all material respects the consolidated financial position of
Alcatel and its subsidiaries as at the respective dates thereof and the
consolidated results of its operations and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not, or are not expected to
be, material in amount and such statements do not contain notes required by
French GAAP.
SECTION 5.07 Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Alcatel or Merger Sub.
SECTION 5.08 Pooling of Interests. Neither Alcatel nor any of its
Affiliates has, through the date of this Agreement, knowingly taken or knowingly
agreed to take any action
37
which would prevent Alcatel from accounting for the business combination to be
effected by the Merger as a pooling of interests under French GAAP.
SECTION 5.09 Interim Operations of Merger Sub. Merger Sub was formed solely
for the purpose of engaging in the transactions contemplated by this Agreement,
has engaged in no other business activities and has conducted its operations
only as contemplated by this Agreement.
SECTION 5.10 Tax Matters.
(a) Not more than fifty percent (50%) of the total voting power and not
more than fifty percent (50%) of the total value of all outstanding Alcatel
Shares (and any other shares of Alcatel capital stock) will be received in the
Merger, in the aggregate, by the Company Stockholders.
(b) Not more than fifty percent (50%) of the total voting power and not
more than fifty percent (50%) of the total value of all outstanding Alcatel
Shares (and any other shares of Alcatel capital stock) immediately after the
Merger will be owned, in the aggregate and taking into account the attribution
and constructive ownership rules of Treasury Regulation section
1.367(a)-3(c)(4), by those persons identified by the Company to the best of its
knowledge on Section 5.10 of the Company Disclosure Schedule as United States
persons who were either officers or directors of the Company or as United States
persons who own stock representing five percent (5%) or more of the total voting
power or total value of all outstanding shares of Company Capital Stock
immediately prior to the Merger within the meaning of Treasury Regulations
section 1.367(a)-3(c)(1)(ii).
(c) Throughout the entire thirty-six (36) month period immediately before
the Effective Time, Alcatel will have been engaged in an active trade or
business outside of the United States within the meaning of Treasury Regulations
section 1.367(a)-3(c)(3)(i), and Alcatel does not have any intention to
substantially dispose of or discontinue such trade or business within the
meaning of Treasury Regulations section 1.367(a)-3(c)(3)(i).
(d) At the Effective Time, the fair market value of Alcatel (taking into
account assets acquired outside of the ordinary course of business only to the
extent permitted by Treasury Regulation section 1.367(a)-3(c)(3)(iii)) will be
at least equal to the fair market value of the Company.
(e) Alcatel is not a "passive foreign investment company," as defined in
Section 1297 of the Code.
(f) As of the date hereof and the Effective Time, Alcatel intends to
continue Company's historic business or use a significant portion of its
historic business assets in a business. For this purpose, Alcatel shall be
treated as conducting the business and holding the assets of related entities,
as described in Treasury Regulations section 1.368-1(d)(4).
SECTION 5.11 Record Date. During the period from December 12, 2001 through
and including the date of this Agreement, Alcatel has not set a record date for
any stock split, reverse split, stock dividend, reorganization, recapitalization
or other like change with respect to the ADSs or the Alcatel Shares.
38
ARTICLE VI.
COVENANTS
SECTION 6.01 Conduct of Business by the Company. Except as set forth in
Section 6.01 of the Company Disclosure Schedule, during the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to Article IX and the Effective Time, the Company covenants
and agrees that, unless Alcatel shall otherwise agree in writing and unless
otherwise expressly permitted hereunder, the Company and its subsidiaries shall
conduct their businesses, and the Company and its subsidiaries shall not take
any action except, in the ordinary course of business and in a manner consistent
with past practice; and the Company shall use commercially reasonable efforts to
preserve substantially intact the business organization of the Company and its
subsidiaries, to keep available the services of the present officers, employees
and consultants of the Company and its subsidiaries and to preserve the present
relationships of the Company and its subsidiaries with customers, suppliers and
other persons with which the Company or any of its subsidiaries has significant
business relations. By way of amplification and not limitation, except as set
forth in Section 6.01 of the Company Disclosure Schedule, during the period from
the date of this Agreement and continuing until the earlier to occur of the
termination of this Agreement and the Effective Time, the Company shall not and
shall cause its subsidiaries not to, directly or indirectly, do or propose to do
any of the following without the prior written consent of Alcatel, unless
otherwise expressly permitted hereunder:
(a) amend or otherwise change the Company Certificate of Incorporation or
Company By-Laws or any of the Company's subsidiaries' equivalent organizational
documents;
(b) issue, sell, pledge, dispose of or encumber, or authorize the issuance,
sale, pledge, disposition or encumbrance of, any shares of capital stock of any
class, or any options, warrants, convertible or exchangeable securities, or
other rights of any kind to acquire any shares of capital stock, or any other
ownership interest (including, without limitation, any phantom interest), of the
Company or any of its subsidiaries or affiliates (except for the issuance of
shares of Company Capital Stock issuable pursuant to the exercise of Options or
Warrants, which Options or Warrants are outstanding on the date hereof);
(c) sell, lease, license, pledge, dispose of or encumber any assets of the
Company or any of its subsidiaries (except (i) in the ordinary course of
business and in a manner consistent with past practice and (ii) dispositions of
obsolete or worthless assets);
(d) amend or change the period (or permit any acceleration, amendment or
change) of exercisability of any Options or Company Restricted Stock or
authorize cash payments in exchange for any such Options (except for those
Options or Company Restricted Stock which are subject to agreements existing on
the date hereof which provide for mandatory acceleration of vesting as a result
of the Merger);
(e) (i) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
any of its capital stock, except that a wholly owned subsidiary of the Company
may declare and pay a dividend to its parent, (ii) split, combine or reclassify
any of its capital stock or issue or authorize the issuance of any
39
other securities in respect of, in lieu of or in substitution for any shares of
its capital stock or (iii) amend the terms of, repurchase, redeem or otherwise
acquire any of its securities, or propose to do any of the foregoing, except for
amendments contemplated hereby and except for repurchases pursuant to agreements
in existence as of the date of this Agreement which provide for mandatory
repurchases;
(f) sell, transfer, license, sublicense or otherwise dispose of, or allow
any rights to lapse with respect to, any Company Intellectual Property other
than in the ordinary course of business or amend or modify any existing
agreements with respect to any Company Intellectual Property or Company Licensed
Intellectual Property other than in the ordinary course of business so long as
such action does not involve material Company Intellectual Property;
(g) (i) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof; (ii) incur any indebtedness for borrowed money or other obligation or
liability of any kind (other than indebtedness under existing credit facilities
or loan agreements, accounts payable incurred in the ordinary course of business
or for liabilities accrued in the Financial Statements), or issue any debt
securities (other than debt securities issued under existing credit facilities
or loan agreements and in the case of the note purchase agreement pursuant to
which the Convertible Promissory Notes are issued, so long as no more than
$7,276,750 in aggregate principal amount of Convertible Promissory Notes are
outstanding) or assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of any person, or make any loans or
advances to any person except to employees in the ordinary course consistent
with past practice; (iii) enter into or amend any contract or agreement other
than in the ordinary course of business; (iv) authorize or make any capital
expenditures or purchase of fixed assets that, individually exceed $100,000; (v)
terminate any Material Contract or amend any of its material terms (other than
amendments designed to remedy defaults thereunder); or (vi) enter into or amend
any contract, agreement, commitment or arrangement to effect any of the matters
prohibited by this Section 6.01(g);
(h) except as required by applicable Law or the terms of an agreement
existing on the date hereof, increase the compensation, bonus or other benefits
payable or to become payable to any of the Company's or its subsidiaries'
officers, directors or employees, grant any severance or termination pay or
rights to, or enter into any employment or severance agreement with, any of the
Company's or its subsidiaries' officers, directors or employees, increase any
benefits payable under existing severance or termination pay policies or
employment agreements or establish, adopt, enter into or, except as required by
law, terminate or amend, any Company Plan;
(i) take any action, other than as required by United States GAAP, to
change accounting policies, principles, methods or practices (including, without
limitation, procedures with respect to reserves, revenue recognition,
capitalization of development costs, payments of accounts payable and collection
of accounts receivable);
(j) make any material Tax election inconsistent with past practice or
settle or compromise any material Tax liability, except to the extent the amount
of any such settlement or compromise has been reserved for in the Financial
Statements;
40
(k) (i) commence, pay, discharge, settle or satisfy any lawsuits, claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction in
compliance with agreements existing on the date hereof or the ordinary course of
business and consistent with past practice of liabilities reflected or reserved
against in the Financial Statements or incurred in the ordinary course of
business and consistent with past practice or (ii) waive any material benefits
of any confidentiality, standstill or similar agreements to which the Company or
any of its subsidiaries is a party;
(l) permit any material increase in the number of employees employed by the
Company or any of its subsidiaries on the date hereof;
(m) terminate or fail to renew any Company Permit that is required for
continued operations;
(n) enter into any collective bargaining agreement or union contract with
any labor organization or union;
(o) amend any of the terms of any of the Non-Compete Agreements or Key
Employee Agreements; or
(p) take any further action in connection with the grant of Options or with
the setting of the Exchange Ratios (other than the filing of an amendment to the
Company Certificate of Incorporation as provided herein);
(q) take or fail to take, or agree in writing or otherwise to take or fail
to take, any of the actions described in Section 6.01(a) through (p) above, or
that would result in any of the conditions to the Merger set forth herein not
being satisfied.
SECTION 6.02 Registration Statement; Company Stockholder Approval.
(a) As promptly as practicable after the execution of this Agreement,
Alcatel and the Company shall prepare, and Alcatel shall file with the SEC, a
registration statement on Form F-4 pursuant to which the ADSs to be issued in
the Merger and in exchange for the convertible Promissory Notes will be
registered with the SEC (including any amendment or supplement thereto, the
"Registration Statement"). Alcatel and the Company shall use all commercially
reasonable efforts to respond to any comments of the SEC and to cause the
Registration Statement to become effective as soon after filing as practicable.
Except as required by applicable Law, Alcatel shall use its commercially
reasonable efforts not to withdraw the Registration Statement at any time prior
to the termination of this Agreement pursuant to Article IX. The Company shall
furnish Alcatel with all information concerning the Company, its subsidiaries
and the holders of Company Capital Stock and shall take all such other action as
Alcatel may reasonably request in connection with the Registration Statement. If
at any time prior to the Effective Time, any event or circumstance relating to
any of the parties hereto, or any of their respective affiliates, officers or
directors, should be discovered by such party which should be set forth in an
amendment or supplement to the Registration Statement, such party shall promptly
inform the other parties thereof and take appropriate action in respect thereof.
41
(b) The Company shall, in accordance with applicable Law and the Company
Certificate of Incorporation and Company By-Laws, hold a special meeting of the
stockholders of the Company (after having duly called and given notice of such
meeting) (the "Company's Stockholders' Meeting"), no later than ten business
days following the date on which the Registration Statement is declared
effective by the SEC (except to the extent that such time period cannot be met
in order to satisfy applicable Law, in which case such actions shall be taken as
soon as reasonably practicable to comply with applicable Law) to consider and
vote upon the approval and adoption of the Company Stockholders' Proposal, or,
if such action may be taken without a Company's Stockholders' Meeting and the
Company Board or any committee thereof has not withdrawn, qualified or modified
in any manner adverse to Alcatel its approval or recommendation of the Company
Stockholders' Proposal (or has not proposed to take such action) secure the
written consent of the stockholders of the Company approving and adopting the
Company Stockholders' Proposal in accordance with the Company Stockholders' Vote
Condition, and, in either case, the Company shall consult with Alcatel in
connection therewith. Subject to the provisions of Section 6.03(c), the Company
Board shall recommend the approval and adoption of the Company Stockholders'
Proposal by the stockholders of the Company and shall include such
recommendation in the notice of meeting or in its materials soliciting written
consents and in the Company Proxy Material, which shall be subject to the prior
approval of Alcatel. Subject to the provisions of Section 6.03(c), the Company
shall take all lawful action to solicit from the stockholders of the Company
proxies or written consents (in compliance with this Section 6.02(b)) in favor
of the approval and adoption of the Company Stockholders' Proposal and to secure
the vote, written consent (in compliance with this Section 6.02(b)) or other
written action of the stockholders of the Company required by Delaware Law and
the Company Certificate of Incorporation and Company By-Laws to approve and
adopt the Company Stockholders' Proposal in accordance with the Company
Stockholders' Vote Condition.
(c) [Reserved]
(d) Each of Alcatel and the Company agrees that none of the information
supplied or to be supplied by it for inclusion or incorporation by reference in
the Registration Statement or the proxy statement and related material to be
used in connection with any meeting of stockholders (or consent in lieu of
meeting) of the Company (the "Company Proxy Material"), will, (i) with respect
to the Registration Statement, at the time the Registration Statement or any
post effective amendment thereto becomes effective under the Securities Act, and
(ii) with respect to the Registration Statement and the Company Proxy Material,
at the time of the Company Stockholders' Meeting, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Alcatel covenants that
the Registration Statement shall comply in all material respects as to form with
the provisions of the Securities Act, and the rules and regulations thereunder.
In no event, however, shall any party hereto be liable for any untrue statement
of a material fact or omission to state a material fact in the Registration
Statement or the Company Proxy Material made in reliance upon, and in conformity
with, written information concerning any other party hereto furnished by such
other party specifically for use in the Registration Statement or the Company
Proxy Material. Each party shall advise the other parties hereto promptly of the
happening of any event which makes untrue any statement of a material fact
contained in the Registration Statement or the Company
42
Proxy Material. The parties shall cooperate to promptly prepare and file, if
necessary, with the SEC any amendment or supplement to the Registration
Statement in order to correct any material misstatement in such documents.
(e) The Company shall take all actions necessary to comply with Section
262(d) of the Delaware Law; provided, however, if the Company is required to
comply with Section 262(d)(2) of the Delaware Law, the Company shall provide the
notices required no later than five days after the receipt of the written
consent of stockholders of the Company in accordance with Section 228 of the
Delaware Law.
SECTION 6.03 Covenants Covering Competing Transactions for the Company;
Related Matters.
(a) From the date hereof until the earlier of the termination of this
Agreement pursuant to Article IX or the Effective Time the Company and its
subsidiaries will not, and the Company and its subsidiaries will not, permit or
cause any of their respective officers, directors, employees, investment
bankers, attorneys, affiliates, accountants or other agents (collectively, the
"Company Representatives") to, directly or indirectly: (i) initiate, solicit or
encourage, or take any action to facilitate any inquiries or the making of, any
offer or proposal which constitutes or is reasonably likely to lead to a
Takeover Proposal (as defined below), or (ii) engage in negotiations or
discussions with, or provide any non-public information or data concerning the
Company to, any person (other than Alcatel or any of its affiliates or
representatives) relating to any Takeover Proposal whether made before or after
the date of this Agreement; provided, however, that the Company may, in response
to an unsolicited bona fide written Takeover Proposal by any person, disclose
such non-public information or data or engage in negotiations or discussion with
such person, if, prior to taking such actions: (i) the proposal did not result
from a breach of this Section 6.03(a), (ii) the Company Board determines in good
faith, after consultation with legal counsel, that the failure to take such
action is reasonably likely to result in a breach of its fiduciary duties under
applicable Law, (iii) the Company Board determines in good faith (after
consultation with its financial advisor) that such Takeover Proposal is
reasonably likely to be or result in a Superior Proposal (as defined below),
(iv) the Company receives from such person an executed confidentiality agreement
with terms no less favorable to the Company than those contained in the Letter
Agreement, dated as of August 3, 2000, between the Company and Alcatel
("Confidentiality Agreement"), (v) the Company has previously notified Alcatel
of the Takeover Proposal Interest (as defined below) in accordance with the last
sentence of this Section 6.03(a) and (vi) the Company Stockholders' Proposal has
not been adopted and approved in satisfaction of the Company Stockholders' Vote
Condition. Subject to Section 6.03(c), neither the Company Board nor a committee
thereof may (i) withdraw, qualify or modify, or propose to withdraw, qualify or
modify, its position with respect to the Company Stockholders' Proposal, (ii)
approve or recommend, or propose to approve or recommend any Takeover Proposal
or (iii) cause the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement with respect to any
Takeover Proposal. The Company agrees that it will take the necessary steps to
promptly inform the Company Representatives of the obligations undertaken in
this Section 6.03. From the date hereof until the earlier of the termination of
this Agreement pursuant to Article IX and the Effective Time, the Company shall
notify Alcatel as promptly as practicable, and in any event not later than the
next day, of any inquiries, expressions of interest, requests for
43
information, proposals or offers received by the Company or any of the Company
Representatives relating to a Takeover Proposal (a "Takeover Proposal Interest")
indicating, in connection with such notice, the name of the person who made such
Takeover Proposal Interest and the material terms and conditions of any
proposals or offers, and thereafter shall keep Alcatel informed, on a current
basis, of any changes in the status and content of any such proposals or offers.
The Company and its subsidiaries shall, and the Company shall cause the Company
representatives to, immediately cease any and all existing activities,
discussions or negotiations conducted heretofore with respect to the Company's
equity fundraising efforts, except in connection with the issuance of
Convertible Promissory Notes in an amount as limited by Section 6.01 hereof.
(b) As used in this Agreement, "Takeover Proposal" shall mean (i) any
proposal for a merger, share exchange, consolidation or other business
combination concerning the Company or any of its subsidiaries, (ii) any proposal
or offer to the Company or any of its stockholders to acquire in any manner,
directly or indirectly, any part of the assets or more than 10% of any equity
securities of the Company or any of its subsidiaries, (iii) any proposal or
offer with respect to any recapitalization or restructuring concerning the
Company or any of its subsidiaries or (iv) any proposal or offer with respect to
any other transaction similar to any of the foregoing relating to the Company or
any of its subsidiaries. For purposes of this Agreement, "Superior Proposal"
means a Takeover Proposal that involves at least 80% of the Company Capital
Stock (or, if such Takeover Proposal involves a transfer of the assets of the
Company and its subsidiaries, taken as a whole, at least 80% of the fair market
value of such assets) which the Company Board determines in good faith (based on
consultation with its financial advisor, taking into account all of the terms
and conditions of the Takeover Proposal, including any conditions to
consummation) to be more favorable and the value of which exceeds the value of
the Merger Consideration (it being agreed that the Merger Consideration shall be
valued (A) for the portion that is comprised of ADSs, based on the average
closing prices for ADSs on the NYSE and (B) for the portion that is comprised of
Alcatel Shares, based on the average closing prices for Alcatel Shares on
Euronext, each for the twenty (20) trading days immediately preceding the date
on which the Company Board evaluates such Takeover Proposal).
(c) Neither the Company Board nor any committee thereof shall (i) withdraw,
qualify or modify or propose to withdraw, qualify or modify, in a manner adverse
to Alcatel, its approval or recommendation of the Company Stockholders' Proposal
by the Company Board, (ii) approve or recommend, or propose to approve or
recommend, a Superior Proposal, or (iii) cause the Company to enter into a
letter of intent, agreement in principle, acquisition agreement or other similar
agreement with respect to any Superior Proposal unless (A) an unsolicited,
written Superior Proposal has been made and has not been withdrawn, (B) the
Company Board has complied with its obligations in Section 6.03(a), (C) the
Company Board has concluded in good faith, after consultation with legal
counsel, that, in light of such Superior Proposal, the failure of the Company
Board to take any of the actions described in Section 6.03(c)(i), (ii) or (iii),
is reasonably likely to result in a breach of its fiduciary duties to the
Company's stockholders under applicable Law, (iv) the Company Stockholders'
Meeting has not occurred, and (v) the Company Board provides Alcatel with at
least five business days' prior notice of its proposal to take any of the
actions described in Section 6.03(c)(i), (ii) or (iii) during which time Alcatel
may make, and in such event the Company shall consider, a counterproposal to
such Superior Proposal, and the Company shall and shall cause its legal and
financial advisors to, negotiate with Alcatel with
44
respect to the terms and conditions of any such counterproposal. Neither the
Company Board's ability to take any of the actions described in Section
6.03(c)(i), (ii) or (iii) nor the commencement, disclosure, announcement or
submission to it of a Takeover Proposal shall relieve the Company of its
obligation to duly call, give notice of, convene and hold a Company's
Stockholders' Meeting to consider and vote upon the approval and adoption of the
Company Stockholders' Proposal, pursuant to Section 6.02(b).
SECTION 6.04 Access to Information; Confidentiality.
(a) Upon reasonable notice, the Company shall (and shall cause its
subsidiaries to) afford to the officers, employees, accountants, counsel and
other representatives of Alcatel reasonable access, during the period from the
date hereof and until the earlier of the termination of this Agreement and the
Effective Time, to all its properties, books, contracts, commitments and
records, and, during such period, the Company shall (and shall cause its
subsidiaries to) furnish promptly to Alcatel all information concerning its
business, properties and personnel as Alcatel may reasonably request, and shall
make available to Alcatel the appropriate individuals (including attorneys,
accountants and other professionals) for discussion of its business, properties
and personnel as Alcatel may reasonably request. Notwithstanding the foregoing,
no such review, inquiry or investigation shall affect any representations or
warranties of the Company contained herein or in any Ancillary Agreement or the
conditions to the obligations of Alcatel and Merger Sub.
(b) The parties acknowledge that Alcatel and the Company have previously
executed the Confidentiality Agreement which will continue in full force and
effect in accordance with its terms.
SECTION 6.05 Consents, Approvals; Taking of Necessary Action.
(a) Subject to the terms hereof, the Company and Alcatel shall each use its
commercially reasonable efforts to (i) take, or cause to be taken, all actions,
and do, or cause to be done, and to assist and cooperate with the other parties
in doing, all things necessary, proper or advisable to consummate and make
effective the transactions contemplated hereby as promptly as practicable
including, without limitation, the transfer, assignment or securing of
reissuance of any Company Environmental Permits and the provision of any
required notice, (ii) obtain from any Governmental Entity or any other third
party any consents, licenses, permits, waivers, approvals, authorizations or
orders required to be obtained or made by the Company or Alcatel or any of their
respective subsidiaries in connection with the authorization, execution and
delivery of this Agreement, the Ancillary Agreements and the consummation of the
Merger and transactions contemplated hereby and thereby, (iii) as promptly as
practicable, make all necessary filings, and thereafter make any other required
submissions, with respect to this Agreement and the Merger required under (A)
the Securities Act and the Exchange Act, and any other applicable U.S. federal
or state or foreign securities Laws, (B) the HSR Act and any related
governmental request thereunder, (C) NYSE and Euronext regulations, (D) the
regulations of the Commission des Operations de Bourse and (E) any other
applicable Law and (iv) execute or deliver any additional instruments necessary
to consummate the transactions contemplated by, and to fully carry out the
purposes of, this Agreement. The Company and Alcatel shall cooperate with each
other in connection with the making of all such filings, including providing
copies of all such
45
documents to the non-filing party and its advisors prior to filing and, if
requested, to accept all reasonable additions, deletions or changes suggested in
connection therewith. The Company and Alcatel shall use their respective
commercially reasonable efforts to furnish to each other all information
required for any application or other filing to be made pursuant to the rules
and regulations of any applicable Law (including all information required to be
included in the Registration Statement) in connection with the transactions
contemplated by this Agreement and the Ancillary Agreements.
(b) Subject to the terms hereof, Alcatel and the Company agree, and shall
cause each of their respective subsidiaries, to cooperate and to use their
respective commercially reasonable efforts to obtain any governmental clearances
or approvals required for Closing under the HSR Act and any other Law designed
to prohibit, restrict or regulate actions for the purpose or effect of
monopolization or restraint of trade (collectively "Antitrust Laws"), to respond
to any government requests for information under any Antitrust Law, and to
contest and resist any action, including any legislative, administrative or
judicial action, and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order (whether temporary, preliminary or
permanent) (an "Antitrust Order") that restricts, prevents or prohibits the
consummation of the Merger or any other transactions contemplated by this
Agreement or the Ancillary Agreements under any Antitrust Law. The parties
hereto will consult and cooperate with one another, and consider in good faith
the views of one another, in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with proceedings
under or relating to any Antitrust Law. Alcatel shall be entitled to direct any
proceedings or negotiations with any Governmental Entity relating to any of the
foregoing, provided that it shall afford the Company a reasonable opportunity to
participate therein. Notwithstanding anything to the contrary in this Section
6.05, neither Alcatel, the Company nor any of their respective subsidiaries
shall be required to divest any of their respective businesses, product lines or
assets, or to take or agree to take any other action or agree to any limitation,
other than in connection with the divestiture of assets or a limitation of its
business that Alcatel or the Company, as the case may be, reasonably determines
to be insignificant in amount and not meaningful in the operation of the other
aspects of the business. In addition, neither Alcatel, the Company nor any of
their respective subsidiaries shall take any action under this Section 6.05 if
the United States Department of Justice, the United States Federal Trade
Commission or any other Governmental Entity with jurisdiction to enforce
Antitrust Laws authorizes its staff to seek a preliminary injunction or
restraining order to enjoin consummation of the Merger.
(c) Each of the Company and Alcatel shall give (or shall cause their
respective subsidiaries to give) any notices to third parties, and use, and
cause their respective subsidiaries to use, their commercially reasonable
efforts to obtain any third party consents related to or required in connection
with the Merger that are (A) necessary to consummate the transactions
contemplated hereby, (B) disclosed or required to be disclosed in the Company
Disclosure Schedule, or (C) required to prevent a Company Material Adverse
Effect or Alcatel Material Adverse Effect from occurring prior to or after the
Effective Time.
(d) Alcatel and the Company shall use commercially reasonable efforts and
shall cooperate with each other in order to consummate the Merger as soon as
reasonably practicable on or before March 15, 2002.
46
(e) The Company and Alcatel shall work together to ensure that the
Company's existing insurance for pre-Closing periods shall be in effect
following the Closing.
SECTION 6.06 Stock Options.
(a) At the Effective Time, each outstanding Option, whether vested or
unvested, shall, by virtue of this Agreement and without any further action of
the Company, the Surviving Corporation, Alcatel or the holder of any Option, be
converted into a stock option to purchase Alcatel Shares in a manner consistent
with Section 424 of the Code and as provided by subsection (b) below, and, after
the Effective Time, all references to the Company in the Company Option Plan and
the applicable stock option agreements shall be deemed to refer to the Surviving
Corporation, which shall have retained the Company Option Plan as of the
Effective Time by virtue of this Agreement and the Merger and without any
further action, except that references to shares of Company Common Stock shall
be deemed to be to Alcatel Shares in accordance with subsection (b) below.
(b) Each Option so retained by the Surviving Corporation under this
Agreement shall continue to have, and be subject to, the same terms and
conditions set forth in the Company Option Plan and the applicable stock option
agreements as in effect immediately prior to the Effective Time, except that (i)
such Option will be exercisable for that number of Alcatel Shares equal to the
product of the number of shares of Company Common Stock that were purchasable
under such Option immediately prior to the Effective Time multiplied by
0.063351086, rounded down to the nearest whole number of Alcatel Shares and (ii)
the per share exercise price for the Alcatel Shares issuable upon exercise of
such assumed Option will be equal to the exercise price per share of Company
Common Stock at which such Option was exercisable immediately prior to the
Effective Time divided by 0.063351086 and rounding the resulting exercise price
up to the nearest whole cent. It is the intention of the parties that the
Options remaining outstanding following the Effective Time will qualify, to the
maximum extent permissible following the Effective Time, as incentive stock
options as defined in Section 422 of the Code solely to the extent such Options
qualified as incentive stock options prior to the Effective Time.
(c) As soon as reasonably practicable after the Effective Time, the Company
will deliver to Option holders appropriate notices setting forth such holders'
rights pursuant to the Company Option Plan and the applicable stock option
agreements evidencing the Options and confirming that the Company Option Plan
and the Options have been converted in accordance with the terms and conditions
required by this Section 6.06. Alcatel hereby agrees to register the Alcatel
Shares underlying such Options with the SEC on Form S-8 within five business
days subsequent to the Effective Time.
SECTION 6.07 Employee Matters.
(a) Following the Merger and in accordance with Alcatel's customary
practice in the United States for its non-manufacturing companies, Alcatel shall
use its commercially reasonable efforts to grant options to purchase Alcatel
Shares or ADSs to certain of those persons who are senior executives of the
Company and who are employed by the Surviving Corporation or any of its
affiliates at the time of such grants.
47
(b) As of the Effective Time, Alcatel shall provide, or shall cause the
Surviving Corporation to provide, employee benefits to the employees of the
Company (the "Company Employees") that are substantially comparable in the
aggregate to the benefits provided to such Company Employees immediately prior
to the Effective Time. For purposes of determining eligibility to participate
and the vesting of benefits under plans maintained or contributed to by the
Surviving Corporation or Alcatel for the benefit of the Company Employees (the
"Alcatel Plans") (including, but not limited to, any pension, severance, 401(k),
vacation and sick pay plan), and for purposes of calculating benefits under any
severance, sick leave or vacation plans, Alcatel shall give credit for years of
service with the Company solely to the extent recognized by the Company under
the applicable similar Company Plan, and solely to the extent such time period
is recognized under the terms of the Alcatel Plans, as if they were years of
service with Alcatel. Alcatel shall use its commercially reasonable efforts to
recognize such service for purposes of satisfying any waiting period, evidence
of insurability requirements, or the application of any preexisting condition
limitation. Alcatel shall also use its commercially reasonable efforts to give
Company Employees credit for amounts paid under a corresponding Company Employee
Plan during the same period for purposes of applying deductibles, copayments and
out-of-pocket maximums as though such amounts had been paid in accordance with
the terms and conditions of the benefit plan sponsored or maintained by Alcatel
or the Surviving Corporation. Alcatel shall assume and honor the obligations of
the Company under all employment, severance, consulting and other compensation
contracts, arrangements, commitments or understandings disclosed in Section
3.11(a) of the Company Disclosure Schedule. Nothing herein shall be construed to
require Alcatel or the Surviving Corporation to provide any duplicative
benefits.
SECTION 6.08 Notification of Certain Matters.
(a) The Company shall give prompt notice to Alcatel of (i) the occurrence,
or non-occurrence, of any event the occurrence, or non-occurrence, of which
would be likely to cause any representation or warranty of the Company contained
in this Agreement to be untrue or inaccurate and (ii) any failure of the Company
materially to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this Section shall not limit or otherwise affect the
remedies available hereunder to Alcatel or Merger Sub.
(b) Alcatel shall give prompt notice to the Company of (i) the occurrence,
or non- occurrence, of any event the occurrence, or non-occurrence, of which
would be likely to cause any representation or warranty of Alcatel contained in
this Agreement to be untrue or inaccurate and (ii) any failure of Alcatel or
Merger Sub materially to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section shall not limit or
otherwise affect the remedies available hereunder to the Company.
SECTION 6.09 Public Announcements. The initial press release with respect
to the execution of this Agreement shall be a joint press release acceptable to
Alcatel and the Company. Thereafter, so long as this Agreement is in effect,
Alcatel and the Company shall consult with each other before issuing any press
release or otherwise making any public statement with respect to the Merger or
this Agreement and shall not issue any such press release
48
or make any such public statement without the prior consent of the other party,
which consent shall not be unreasonably withheld or delayed; provided, however,
that Alcatel or the Company may, without the prior consent of the other party,
issue such press release or make such public statement as may upon the advice of
counsel be required by Law or applicable stock exchange regulation if it has
used all commercially reasonable efforts to consult with the other party.
SECTION 6.10 Expenses.
(a) Except as otherwise specifically provided in this Agreement, whether or
not the Merger is consummated, all costs and expenses incurred in connection
with the negotiation of this Agreement, the Ancillary Agreements, the
Non-Compete Agreements and the Key Employee Agreements, the taking of all
actions contemplated hereby and thereby, and the consummation of the Merger,
including, without limitation, attorneys' and accountants' fees and fees of any
brokers, financial advisors, investment bankers or finders (including the
persons described in Section 3.16), shall be paid by the party incurring such
expense, provided, however, that (i) if the Merger is consummated, such costs
and expenses of the Company may not exceed the amount set forth in Annex 2.07
(ii) all costs and expenses in connection with the negotiation (with respect to
the reasonable fees of counsel to the Escrow Agent), execution and
administration of the Escrow Agreement by the Escrow Agent shall be paid by
Alcatel and (iii) if the Merger is not consummated, each of Alcatel and the
Company shall pay half of the filing fee for the filing required pursuant to the
HSR Act. All costs and expenses of the Company in excess of the amount set forth
in Annex 2.07 shall be the obligation of the Company Stockholders and shall be
satisfied from the Escrow Indemnity Account directly and shall not be subject to
the provisions of Article VIII (other than Section 8.06).
(b) The Company shall use its commercially reasonably efforts to cause all
persons (including, without limitation, attorneys, accountants, brokers,
financial advisors, investment bankers, finders and the persons described in
Section 3.16, who have provided or will provide the Company with services in
connection with this Agreement, the Merger, the Ancillary Agreements, the
Non-Compete Agreements and the Key Employee Agreements, and the transactions
contemplated hereby and thereby, to submit to the Company, prior to the
Effective Time, invoices with respect to all such services.
SECTION 6.11 Listing of ADSs/Alcatel Shares.
(a) Alcatel shall use its commercially reasonable efforts to have
authorized for listing on the NYSE, upon official notice of issuance, the ADSs
and (for technical purposes only not involving trading privileges) the Alcatel
Shares to be issued in the Merger (including upon the exercise of any Warrant
assumed by Alcatel pursuant to Section 6.13 and as a result of the payment of
the Convertible Promissory Notes pursuant to Section 2.06(f) hereof).
(b) Following the consummation of the Merger, Alcatel shall use its
commercially reasonable efforts to have authorized for listing on the Euronext
the Alcatel Shares issuable upon exercise of the Options pursuant to Section
6.06 and underlying the ADSs issued pursuant to Section 2.06(c) and (f) hereof.
49
(c) The parties acknowledge that until the ADSs trade ex-dividend for the
2001 Dividend (if any) the ADSs receivable as Merger Consideration will have a
CUSIP number that is different from the CUSIP for the ADSs currently traded on
the NYSE to evidence that such shares will trade without entitlement to such
2001 Dividend. In addition, the parties acknowledge that if the Merger is
consummated prior to the record date for the 2001 Dividend, any Alcatel Shares
issued upon the exercise of Options will also not be entitled to the 2001
Dividend.
SECTION 6.12 Affiliate Agreements. The Company will cause each person who
is identified in Section 3.30 of the Company Disclosure Schedule and any other
person who, to the knowledge of the Company, is or becomes an "affiliate" of the
Company for purposes of Rule 145 under the Securities Act ("Rule 145") to
deliver to Alcatel, as soon as practicable but not later than 30 days after the
date hereof, a written agreement (a "Company Affiliate Agreement") in connection
with restrictions on affiliates under Rule 145, in a form reasonably acceptable
to Alcatel. The Company shall provide prompt notice to Alcatel of any such other
person who, to the knowledge of the Company, is or becomes an "affiliate" of the
Company who is not identified in Section 3.30 of the Company Disclosure
Schedule.
SECTION 6.13 Warrants. The Company will use commercially reasonable efforts
to cause all warrants to purchase capital stock of the Company (each, a
"Warrant" and collectively, the "Warrants") to be exercised immediately prior to
the Effective Time. In the event that the holder of any Warrant shall not have
elected to exercise such Warrant prior to the Effective Time, then, at the
Effective Time, by virtue of the Merger and without any action by the holders of
the Warrants, each Warrant outstanding immediately prior to the Effective Time
shall be automatically converted into a warrant to acquire, on the same terms
and conditions as were applicable under such Warrant, the same number of ADSs
(rounded down to the nearest whole ADS) as the holder of such Warrant would have
been entitled to receive pursuant to the Merger had such holder exercised such
Warrant in full immediately prior to the Effective Time, at a price per ADS
(rounded up to the nearest whole cent) equal to (A) the aggregate exercise price
for the shares of Company Capital Stock otherwise purchasable pursuant to such
Warrant divided by (B) the aggregate number of shares of ADSs deemed purchasable
pursuant to such Warrant.
SECTION 6.14 Tax Treatment. Each of the parties hereto shall use
commercially reasonable efforts to cause the Merger to qualify, and shall not
knowingly take actions or cause actions to be taken that could reasonably be
expected to prevent the Merger from qualifying, as a reorganization under
Section 368(a) of the Code.
SECTION 6.15 Compliance with New Jersey's ISRA. For each property owned,
leased or operated by the Company or any of its subsidiaries in the State of New
Jersey, on or prior to the Effective Time, the Company shall have secured from
the New Jersey Department of Environmental Protection ("NJDEP") and provided to
Alcatel either: (a) a Letter of Non-Applicability under New Jersey's Industrial
Site Recovery Act, N.J.S.A. 13:1K-6 et seq. ("ISRA"), or (b) a written approval
by the NJDEP of a negative declaration affidavit, which affidavit has been
submitted by the Company to the NJDEP based on the information contained in a
Preliminary Assessment for each property prepared pursuant to ISRA.
50
SECTION 6.16 Product Development. The Company will use its commercially
reasonable efforts to launch the ON 7000 product on the schedule described in
that certain letter from the President of the Company to ▇▇. ▇▇▇▇▇ ▇▇▇▇▇ dated
the date hereof. If the Company reasonably determines that it requires
additional finances to meet such launch targets, the Company shall notify
Alcatel of such funding needs. The parties shall negotiate in good faith the
terms pursuant to which Alcatel shall provide, or cause to be provided, such
funding, the amount of which shall be reasonable and consistent with the letter
mentioned above. No advances provided pursuant to this Section 6.16 shall reduce
the number of ADSs and Alcatel Shares issuable as Merger Consideration.
SECTION 6.17 Stockholder Litigation. Until the earlier of the termination
of this Agreement pursuant to Article IX or the Effective Time, the Company
shall give Alcatel the opportunity to participate in the defense or settlement
of any stockholder litigation against the Company or the Company Board relating
to this Agreement, the Ancillary Agreements or any of the transactions
contemplated hereby or thereby, and shall not settle any such litigation without
Alcatel's prior written consent, which will not be unreasonably withheld or
delayed.
SECTION 6.18 Continuing Director and Officer Indemnification.
(a) From and after the Effective Time, the Surviving Corporation (or its
successors or assigns) and Alcatel shall fulfill and honor the obligations of
the Company pursuant to the indemnification provisions in the Company's
Certificate of Incorporation and By-Laws existing as in effect on the date
hereof with respect to the Company's directors and officers.
(b) The provisions of this Section 6.18 are intended to be for the benefit
of, and shall be enforceable by each indemnified party, his or her heirs and
representative and may not be amended, altered or repealed without the prior
written consent of the affected indemnified party.
(c) For a period of six years after the Effective Time, Alcatel shall cause
the Surviving Corporation to maintain in effect a directors and officers
liability insurance policy covering those persons who are currently covered and,
prior to the Effective Time, who become covered by, the Company's directors and
officers liability insurance policy with coverage in amount and scope at least
as favorable to such persons as the Company's existing coverage; provided, that
in no event shall Alcatel or the Surviving Corporation be required to expend in
excess of 125% of the annual premium currently paid by the Company for such
coverage.
SECTION 6.19 [Reserved]
SECTION 6.20 Certain Tax Matters
(a) Each of the parties hereto covenants and agrees to report the Merger
for United States federal and applicable state income tax purposes in a manner
consistent with the characterization of the Merger as a tax-free reorganization
under Section 368 of the Code, including causing the Surviving Corporation to
file the statements required by Treasury Regulation sections 1.368-3 and
1.367(a)-3(c)(6) based on the information the parties have obtained pursuant to
Section 6.20(b); provided that, notwithstanding the foregoing, Alcatel will
cause the Surviving Corporation to state, on such statements that no "control
group" exists within the meaning of Treasury Regulation Section
1.367(a)-3(c)(1)(ii), assuming that actual knowledge of Alcatel is
51
not inconsistent with such statement. Alcatel and the Company covenant and agree
to cooperate, to the extent practicable, on the preparation of such statements
prior to the Effective Time.
(b) Alcatel and Merger Sub, on the one hand, and Company, on the other
hand, covenant and agree to cooperate in determining, prior to the Effective
Time, whether any of the Company Stockholders would be treated as a
"five-percent transferee shareholder," as such term is defined in Treasury
Regulation section 1.367(a)-3(c)(5)(ii) and the Company shall update the
information contained on Section 5.10 of the Company Disclosure Schedule, to the
extent appropriate, prior to the Effective Time (but the Company shall not be
deemed to have breached this Section 6.20(b) in the event that it is unable, for
any reason, after reasonable effort, to update the information contained in
Section 5.10 of the Company Disclosure Schedule).
(c) Prior to the Closing (or at such other times as requested by counsel),
Alcatel, Merger Sub and the Company shall execute and deliver to Proskauer Rose
LLP and to ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, tax representation letters (which
will be used in connection with the tax opinions contemplated by Sections
6.20(d) and 7.03(g)) substantially in the form of Exhibit I.
(d) Alcatel will use commercially reasonable efforts to cause Proskauer
Rose LLP to deliver to it a tax opinion satisfying the requirements of Item 601
of Regulation S-K promulgated under the Securities Act, which tax opinion will
be included as an exhibit to the Registration Statement.
SECTION 6.21 Update Schedule. The Company shall provide to Alcatel, three
business days prior to the Effective Time, a schedule (the "Update Schedule")
listing (i) all holders of Company Capital Stock as of such date, as well as the
number, class and series of shares of Company Capital Stock held by each such
holder, and (ii) all holders of Warrants as of the date thereof, as well as the
number, class and series of shares of Company Capital Stock subject thereto, the
date upon which each such Warrant is exercisable and the exercise price per
share of each such Warrant. In the event that any of the information contained
in the Update Schedule shall not be true and correct as of immediately prior to
the Effective Time, the Company shall provide to Alcatel, prior to the Effective
Time, a revised Update Schedule setting forth in reasonable detail all relevant
changes thereto.
SECTION 6.22 Pooling of Interests. Alcatel and the Company shall each use
commercially reasonable efforts to cause the business combination to be effected
by the Merger to be accounted for as a pooling of interests for French GAAP
purposes.
SECTION 6.23 Issuance and Conversion of ORAs. Alcatel covenants and agrees
to (i) provide Merger Sub with sufficient capital to purchase such aggregate
principal amount of ORAs as is described in Section 2.06A hereof, (ii) cause a
subsidiary to issue, at prior to the Effective Time, such principal amount of
ORAs as Merger Sub may request pursuant to Section 2.06A hereof (iii) upon
receipt of the Trust Notice, issue such number of ADSs in payment for the ORAs
held by the Trustee and (iv) promptly after the Effective Time, provide the
Surviving Corporation with sufficient capital to purchase such aggregate
principal amount of ORAs as is equal to the number of (A) ADSs issuable pursuant
to Section 6.13 for the exercise of Warrants, (B) Alcatel Shares issuable upon
conversion of Options pursuant to Section 2.06(d) and Section 6.06 and (C) ADSs
issuable pursuant to Section 2.06(f) for the payment of the Convertible
52
Promissory Notes and (v) cause a subsidiary to issue, following the Effective
Time, such principal amount of ORAs as the Surviving Corporation may request as
described in clause (iv) of this Section 6.23.
ARTICLE VII.
CONDITIONS TO THE MERGER
SECTION 7.01 Conditions to Obligation of Each Party to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of each of the following
conditions:
(a) The Registration Statement shall have been declared effective by the
SEC under the Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order;
(b) The Company Stockholders' Proposal shall have been approved and adopted
by the stockholders of the Company in satisfaction of the Company Stockholders'
Vote Condition at the Company Stockholders' Meeting or by written consent in
accordance with Delaware Law and the Company Certificate of Incorporation;
(c) [Reserved]
(d) Any waiting period applicable to the consummation of the Merger under
the HSR Act, or any other Antitrust Laws, shall have expired or been terminated
and all other consents, approvals, orders or authorizations of, or
registrations, declarations or filings with, any Governmental Entity required to
consummate the Merger shall have been filed, made or obtained, in each case on
terms reasonably satisfactory to Alcatel, except for such consents, approvals,
orders or authorizations which involve an insignificant amount of assets and
which do not provide for any penalties or fines due to the failure to receive
such consents, approvals, orders or authorizations (it being understood that the
parties shall use commercially reasonable efforts to put in place a structure in
order to provide Merger Sub and indirectly, Alcatel, with the benefit of such
assets);
(e) No judgment, order, injunction, decree or ruling issued by any
Governmental Entity restraining, enjoining or otherwise prohibiting the
consummation of the Merger shall have been issued and then be in effect
(provided that the parties hereto shall use their commercial reasonable efforts
to have any such judgment, order, injunction, decree or ruling vacated or
lifted), nor shall there have been any Law enacted, enforced or deemed
applicable to the Merger which makes the consummation of the Merger illegal; and
(f) Each of Alcatel, the Company and the Stockholders' Representative shall
have executed and delivered the Escrow Agreement in the form attached hereto as
Exhibit E.
(g) The ADSs and the Alcatel Shares to be issued as the Merger
Consideration shall be listed on the NYSE or on such national securities
exchange or quoted on such national market system as the ADSs and the Alcatel
Shares are listed or quoted as of the Effective Time.
SECTION 7.02 Additional Conditions to Obligations of Alcatel and Merger
Sub. The obligations of Alcatel and Merger Sub to effect the Merger are also
subject to the
53
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived by Alcatel:
(a) The representations and warranties of the Company contained in this
Agreement (without giving effect to any materiality qualifications or
limitations therein or any references therein to Company Material Adverse
Effect) shall be true and correct in all respects as of the date of this
Agreement and on and as of the Effective Time (or, to the extent such
representations and warranties speak as of an earlier date, as of such earlier
date), except for such failures to be true and correct that in the aggregate
would not reasonably be expected to have a Company Material Adverse Effect.
Alcatel shall have received a certificate signed on behalf of the Company by an
executive officer of the Company to such effect;
(b) The Company shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement and by each
Ancillary Agreement to be performed or complied with by them on or prior to the
Effective Time, and Alcatel shall have received a certificate signed on behalf
of the Company by an executive officer of the Company to such effect;
(c) Company Stockholders entitled to receive, in the aggregate, not more
than 7% of the ADSs issuable pursuant to Section 2.06(c) hereof shall have
demanded appraisal for such shares in accordance with Section 262 of the
Delaware Law;
(d) Alcatel shall have received from ▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇, LLP,
counsel to the Company, an opinion in a form reasonably agreed by the parties;
(e) There shall not have been any action taken, or any Law enacted,
promulgated, issued or deemed applicable to the Merger by any Governmental
Entity, which would (i) prohibit the Surviving Corporation's ownership or
operation of all or a material portion of the Company's business or assets, or
compel the Surviving Corporation or Alcatel to dispose of or hold separate all
or a material portion of the Company's business or assets, as a result of the
Merger; (ii) render Alcatel unable to consummate the Merger; or (iii) impose or
confirm material limitations on the ability of Alcatel effectively to exercise
full rights of ownership of shares of the capital stock of the Surviving
Corporation, including without limitation, the right to vote any such shares on
all matters properly presented to the stockholders of the Surviving Corporation,
and no such action shall have been taken or any such Law enacted, promulgated,
issued or deemed applicable to the Merger which in the reasonable judgment of
Alcatel will produce such a result;
(f) All officers and directors of the Company who Alcatel has requested to
resign shall have resigned or otherwise been removed from office;
(g) All notices to, and consents, approvals or waivers of, all persons
under the agreements, instruments or documents listed in Annex 7.02(g) shall
have been given or obtained in a form and manner acceptable to Alcatel;
(h) No Company Material Adverse Effect shall have occurred between the date
hereof and the Effective Time.
54
(i) Alcatel shall be reasonably satisfied that the business combination to
be effected by the Merger will qualify as a pooling of interests transaction for
accounting purposes under French GAAP;
(j) Alcatel shall have received from each person who is identified in
Section 3.30 of the Company Disclosure Schedule, or in any notice delivered by
the Company to Alcatel pursuant to Section 6.12, as an "affiliate" of the
Company a Company Affiliate Agreement, and each such Company Affiliate Agreement
shall be in full force and effect;
(k) At or prior to the Effective Time, the Voting Agreement and the
Investor Rights Agreement shall have terminated and the Company shall have
obtained a waiver and release from Comdisco, Inc. ("Comdisco") with respect to
Comdisco's rights pursuant to Sections 14.1, 14.2 and 14.4 of the Master Lease
Agreement dated June 15, 1999 (the "Master Lease Agreement") entered into
between Comdisco and the Company, and Alcatel shall have received evidence of
such termination or waiver and release;
(l) The agreements from the Company employees listed in Annex 7.02(l) (the
"Key Employees"), that were executed on the date hereof in the form approved by
Alcatel (the "Key Employee Agreements") in favor of the Company shall be in full
force and effect;
(m) The non-competition agreements with the persons listed in Annex 7.02(m)
that were executed on the date hereof in the form approved by Alcatel in favor
of the Company (the "Non-Compete Agreements") shall be in full force and effect;
(n) The Company and the Trustee shall have entered into the Trust Agreement
in the form attached as Exhibit D;
(o) The Company shall have filed an amendment to the Company Certificate of
Incorporation which amends the liquidation preference for each series of Company
Preferred Stock in accordance with the Exchange Ratios.
(p) All corporate actions, proceedings, instruments, and documents required
to carry out the transactions contemplated hereby or incidental hereto and all
other related legal matters shall have been reasonably satisfactory to and
approved by counsel for Alcatel and such counsel shall have been furnished with
such certified copies of such corporate actions and proceedings and such other
instruments and documents as it shall have reasonably requested.
SECTION 7.03 Additional Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is also subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived by the Company:
(a) The representations and warranties of Alcatel contained in this
Agreement (without giving effect to any materiality qualifications or
limitations therein or any references therein to Alcatel Material Adverse
Effect) shall be true and correct in all respects as of the date of this
Agreement and on and as of the Effective Time (or, to the extent such
representations and warranties speak as of an earlier date, as of such earlier
date), except for such failures to be true and correct which in the aggregate
would not reasonably be expected to have an Alcatel Material
55
Adverse Effect. The Company shall have received a certificate signed on behalf
of Alcatel by an executive officer of Alcatel to such effect; notwithstanding
anything to the contrary in this Agreement, if and to the extent there are
purchases of Alcatel Shares between the date of this Agreement and the Effective
Time that cause the representation in Section 5.10(b) to be untrue, then the
sole and exclusive remedy of the Company shall be to determine that the closing
condition set forth in this Section 7.03(a) has not been satisfied and to decide
not to effect the Merger, and Alcatel shall have no liability as a result of the
inaccuracy of the representation in Section 5.10(b).
(b) Each of Alcatel and Merger Sub shall have performed or complied in all
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by it on or prior to the Effective Time, and
the Company shall have received a certificate signed on behalf of Alcatel by an
executive officer of Alcatel to such effect;
(c) The Company shall have received from Proskauer Rose LLP, counsel to
Alcatel and Merger Sub, an opinion in a form reasonably agreed by the parties;
(d) No Alcatel Material Adverse Effect shall have occurred between the date
hereof and the Effective Time.
(e) The Company shall have received from Alcatel's general counsel an
opinion in a form reasonably agreed by the parties;
(f) All corporate actions, proceedings, instruments, and documents required
to carry out the transactions contemplated hereby or incidental hereto and all
other related legal matters shall have been reasonably satisfactory to and
approved by counsel for the Company and such counsel shall have been furnished
with such certified copies of such corporate actions and proceedings and such
other instruments and documents as it shall have reasonably requested; and
(g) The Company shall have received a legal opinion of ▇▇▇▇▇, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇ LLP dated as of the Closing Date, in form and substance reasonably
acceptable to the Company, substantially to the effect that on the basis of
facts, representations and assumptions set forth in such opinion which are
consistent with the state of facts existing at the Effective Time, the Merger
should be treated for United States federal income tax purposes as a
reorganization within the meaning of Section 368 of the Code. In rendering such
opinion, ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP may (i) require and rely upon (and may
incorporate by reference) representations and covenants, including those
contained in the certificates of the officers of Alcatel, Merger Sub, the
Company and others referred to in Section 6.20 and (ii) make such assumptions
(including but not limited to the proper characterization of certain instruments
for United States federal income tax purposes and the status of Alcatel Shares
as "voting stock" for purposes of Section 368 of the Code) as it may determine
to be necessary. The Company shall have received executed copies of the
certificates of officers and directors of Alcatel, Merger Sub, the Company and
others referred to in Section 6.20 that may be required by counsel in connection
with the opinion referred to in this Section.
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ARTICLE VIII.
INDEMNIFICATION
SECTION 8.01 Indemnification of Alcatel. Alcatel, Merger Sub, the Surviving
Corporation and their respective officers, directors, employees, agents and
affiliates (collectively, the "Alcatel Indemnitees") shall be indemnified and
held harmless from and against any and all liabilities, Environmental
Liabilities, obligations, losses, assessments, damages, deficiencies, demands,
claims, actions, causes of action, costs and expenses (including, without
limitation, interest, penalties, court costs and reasonable attorneys' fees and
expenses and any reasonable amounts paid in investigation, defense or settlement
of any of the foregoing) of any kind, manner or nature whatsoever, whether
arising out of third-party claims or claims by one or more parties hereto
against any other party(ies) hereto (collectively, "Losses"), as and when
incurred, based upon, arising out of or otherwise in respect of:
(a) any misrepresentation or breach of warranty by the Company contained
herein, in any Ancillary Agreement or in any document or agreement delivered
pursuant hereto or thereto; or any claim by a third party which would constitute
such a misrepresentation or breach; or any claim resulting from the matter
disclosed to Proskauer Rose LLP by the President of the Company in a letter
dated the date hereof;
(b) any breach of or failure to perform any covenant or agreement by the
Company contained herein, in any Ancillary Agreement or in any document or
agreement delivered pursuant hereto or thereto, or any claim by a third party
which would constitute such a breach or failure.
SECTION 8.02 Reliance not an Element. The parties hereto acknowledge that
reliance shall not be an element of any claim by any party hereto for breach of
warranty or misrepresentation under this Agreement.
SECTION 8.03 General Indemnification Provisions.
(a) For the purposes of this Section 8.03, the term "Indemnitee" shall
refer to the Alcatel Indemnitee indemnified or entitled, or claiming to be
entitled, to be indemnified pursuant to the provisions of Section 8.01, and the
term "Indemnitors" shall refer to the Company Stockholders.
(b) The Indemnitee shall promptly give the Stockholders' Representative
notice of any matter which the Indemnitee has determined has given or could give
rise to a right of indemnification under this Agreement, stating the amount of
the Losses (whether actual or reasonably estimated), the method of computation
thereof and the basis for the claim, all with reasonable particularity. Failure
to give timely notice of a matter which may give rise to an indemnification
claim shall not affect the rights of the Indemnitee to collect such claim from
the Indemnitors so long as such failure to so notify does not materially
adversely affect the Indemnitor's ability to defend such claim against a third
party. The obligations and liabilities of the Indemnitors under this Article
VIII with respect to Losses arising from claims of any third party that are
subject to the indemnification provided for in this Article VIII ("Third-Party
Claims") shall be governed by and contingent upon the following additional terms
and conditions:
57
(i) if the Indemnitee shall receive notice of any Third-Party Claim, the
Indemnitee shall give the Stockholders' Representative prompt notice of such
Third-Party Claim and shall permit the Stockholders' Representative, at its
option, to assume and control the defense and/or management of such Third-Party
Claim at the Indemnitors' expense and through counsel of its choice if the
Stockholders' Representative gives prompt notice of its intention to do so to
the Indemnitee and does so promptly thereafter;
(ii) if the Stockholders' Representative exercises its right to
undertake the defense and/or management of any such Third-Party Claim, the
Indemnitee shall cooperate with the Stockholders' Representative in such defense
and/or management and make available to the Stockholders' Representative all
witnesses, pertinent records, materials and information in the Indemnitee's
possession or under its control relating thereto as is reasonably required by
the Stockholders' Representative;
(iii) if the Stockholders' Representative does not exercise its right to
undertake the defense and/or management of any Third-Party Claim as provided
above, the Indemnitee may, directly or indirectly, conduct the defense and/or
management of any such Third-Party Claim in any manner it reasonably may deem
appropriate and at the expense of the Indemnitors which shall be paid from the
Escrow Indemnity Account, and the Stockholders' Representative shall cooperate
with the Indemnitee in such defense and/or management and make available to the
Indemnitee all witnesses, pertinent records, materials and information in the
Stockholders' Representative's possession or under its control relating thereto
as is reasonably required by the Indemnitee;
(iv) the Stockholders' Representative will not consent to the entry of
any judgment or enter into any settlement with respect to a Third-Party Claim
(x) without the prior written consent of the Indemnitee (not to be unreasonably
withheld), unless the judgment or proposed settlement involves only the payment
of money damages, does not impose an injunction or other equitable relief upon
the Indemnitee and could not otherwise reasonably be expected to have a material
adverse effect on the Indemnitee and (y) unless the consent or settlement
includes as an unconditional term thereof the giving by the claimant or
plaintiff to the Indemnitee of an unconditional release from all liability in
respect of the Third-Party Claim;
(v) the Indemnitee will not consent to the entry of any judgment or
enter into any settlement with respect to a Third-Party Claim without the prior
written consent of the Stockholders' Representative (not to be unreasonably
withheld), unless the Stockholders' Representative fails to assume the defense
and/or management of the Third-Party Claim in accordance with this Section 8.03
and then only if such consent or settlement includes as an unconditional term
thereof the giving by the claimant or plaintiff to the Company Stockholders and
the Stockholders' Representative of an unconditional release from all liability
in respect of the Third-Party Claim; and
(vi) if there is a reasonable probability that a Third-Party Claim may
materially and adversely affect the Indemnitee other than as a result of money
damages or other monetary payments, the Indemnitee shall have the right, at its
own cost and expense, to participate in the defense of the Third-Party Claim.
58
SECTION 8.04 Certain Limits on Indemnification.
(a) Notwithstanding anything to the contrary in this Agreement, the Alcatel
Indemnitees shall not be entitled to satisfy their claims for Losses under
Section 8.01 from the Escrow Indemnity Account unless the aggregate amount of
Losses for which any one or more of the Alcatel Indemnitees would be entitled to
indemnification under Section 8.01 equals or exceeds $1,000,000 (the "Basket
Amount"), in which case the Alcatel Indemnitees shall be entitled to the entire
amount of such Losses, including Losses covered by the Basket Amount.
(b) For purposes of this Article VIII, the amount of any Losses shall be
determined (A) without giving effect to any Company Material Adverse Effect
standard or any other materiality or similar qualification contained in any
representation, warranty or covenant herein and (B) net of any tax benefits
realized by the Alcatel Indemnitees as a direct result of such Loss.
(c) Each Alcatel Indemnitee shall have the obligation to take commercially
reasonable efforts to mitigate the Losses.
(d) Subject to the proviso of this Section 8.04(d), no claim under this
Article VIII shall be made after the expiration of the Survival Period,
provided, however, that if written notice of a claim is made prior to the
expiration of the Survival Period , then the relevant representation, warranty
or covenant shall survive as to such claim only until the claim has been finally
resolved.
(e) If there is a final determination that an indemnity payment made
pursuant to this Article VIII is taxable to the Alcatel Indemnitee, the Alcatel
Indemnitee shall be entitled to such additional amounts as will result in the
Alcatel Indemnitee receiving on an after-tax basis the amount of indemnity to
which it is entitled.
SECTION 8.05 Satisfaction of Indemnification Obligations. Subject to
Section 8.04 and in compliance with the terms of the Escrow Agreement, the
Alcatel Indemnitees shall, in satisfaction of any claims for indemnification
arising under Section 8.01 above, be entitled to receive from the Escrow
Indemnity Account (and delivered by the Escrow Agent) such number of ADSs as is
equal to the value of the Losses as to which the Alcatel Indemnitees are
entitled to indemnification, as determined pursuant to the terms of the Escrow
Agreement. The sole recourse and exclusive remedy that the Alcatel Indemnitees
shall have to satisfy any claims for indemnification pursuant to this Article
VIII shall be the Escrow Indemnity Account established pursuant to the Escrow
Agreement.
SECTION 8.06 Exclusive Remedy. The indemnification provided in this Article
and in Section 6 of each Stockholder Agreement and the obligations in Sections
2.07 and 6.10 shall be the sole and exclusive post-Closing remedy available to
the Alcatel Indemnitees against the Company, the Company Stockholders, the
holders of Options and Warrants, or any of their respective affiliates, for any
claim under this Agreement or any Ancillary Agreement other than in connection
with (i) claims for fraud or intentional misrepresentation or (ii) claims
related to a Title Breach (as defined in the Stockholder Agreements).
59
ARTICLE IX.
TERMINATION
SECTION 9.01 Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (with respect to
Section 9.01(b) through (h), by written notice by the terminating party to the
other party):
(a) by mutual written consent duly authorized by the Company Board and an
officer of Alcatel; or
(b) by either Alcatel or the Company if the Merger shall not have been
consummated on or prior to June 30, 2002 (provided that the right to terminate
this Agreement under this Section 9.01(b) shall not be available to any party
whose failure to fulfill (and, in the case of Alcatel, if Merger Sub's failure
to fulfill) any obligation under this Agreement has been the cause of or
resulted in the failure of the Merger to occur on or before such date); or
(c) by either Alcatel or the Company if a Governmental Entity shall have
(i) issued a non-appealable final judgment, order, injunction, decree or ruling
or taken any other action or (ii) enacted, enforced or deemed applicable to the
Merger a Law in final form, in each case having the effect of permanently
restraining, enjoining, prohibiting or making illegal the consummation of the
Merger (provided that the party seeking to terminate pursuant to this Section
9.01(c) shall have used commercially reasonable efforts to have any such
judgment, order, injunction, decree, ruling or other action vacated or lifted);
or
(d) by either Alcatel or the Company, upon a breach of any representation,
warranty, covenant or agreement on the part of the Company (in the case of
termination by Alcatel) or on the part of Alcatel or Merger Sub (in the case of
termination by the Company) set forth in this Agreement such that the conditions
set forth in Section 7.02(a) or 7.02(b) (in the case of termination by Alcatel)
or Section 7.03(a) or 7.03(b) (in the case of termination by the Company) would
not be satisfied (a "Terminating Breach"), provided that, if such Terminating
Breach is curable prior to the expiration of 30 days from notice to the
breaching party of its occurrence through the exercise of the breaching party's
commercially reasonable efforts, and for so long as the breaching party
continues to exercise such commercially reasonable efforts, neither Alcatel nor
the Company, as the case may be, may terminate this Agreement under this Section
9.01(d) until the expiration of such period without such Terminating Breach
having been cured (but in no event shall the preceding proviso be deemed to
extend the date set forth in Section 9.01(b)); or
(e) by the Company (subject to the Company's compliance with Section
9.02(b)(i)) or Alcatel, if the Company Stockholders' Proposal is not adopted or
approved at the Company Stockholders' Meeting in satisfaction of the Company
Stockholders' Vote Condition; or
(f) by Alcatel, if the Company does not duly call, give notice of and hold
the Company's Stockholders' Meeting to vote upon the Company Stockholders'
Proposal by the date set forth in Section 6.02(b) of this Agreement, unless the
delay was reasonably necessary in order to comply with applicable Law, or the
written consent of the Company's stockholders approving and adopting the Company
Stockholders' Proposal was previously received in satisfaction of the Company
Stockholders' Vote Condition; or
60
(g) [Reserved]
(h) by Alcatel under the circumstances where (i) the Company Board or any
committee thereof withdraws, qualifies or modifies, or proposes to withdraw,
qualify or modify, in a manner adverse to Alcatel, its approval or
recommendation of the Company Stockholders' Proposal, (ii) the Company Board
shall have failed to include in its notice of meeting or materials soliciting
written consents and in its Proxy Material the recommendation of the Company
Board in favor of the approval and adoption of the Company Stockholders'
Proposal, (iii) the Company Board or any committee thereof shall have approved
or recommended, or proposed to approve or recommend, a Superior Proposal, or
(iv) the Company or any of its affiliates have entered into a letter of intent,
agreement in principle, acquisition agreement or other similar agreement with
respect to a Superior Proposal; or
(i) by the Company, if an Alcatel Material Adverse Effect has occurred,
provided that, if such Alcatel Material Adverse Effect is curable prior to the
expiration of 30 days from the Company's notice to Alcatel that the Company
intends to terminate the Agreement pursuant to this Section 9.01(i) through
Alcatel's exercise of commercially reasonable efforts, and for so long as
Alcatel continues to exercise such commercially reasonable efforts, the Company
may not terminate this Agreement under this Section 9.01(i) until the expiration
of such period without such Alcatel Material Adverse Effect having been cured
(but in no event shall the preceding proviso be deemed to extend the date set
forth in Section 9.01(b)).
SECTION 9.02 Effect of Termination
(a) Subject to Sections 9.02(b) and 9.02(c) below, upon the termination of
this Agreement pursuant to Section 9.01, each party's right of termination under
Section 9.01 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 9.01, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Sections 6.10, 9.02(b), 9.02(c) and 9.02(d) will
survive; provided, however, that if this Agreement is terminated by a party
because of the breach of this Agreement by the other party, or because one or
more of the conditions to the terminating party's obligations under this
Agreement is not satisfied as a result of the other party's failure to comply
with its obligations under this Agreement, the terminating party's right to
pursue all legal remedies will survive such termination unimpaired.
(b) If this Agreement shall be terminated:
(i) by either the Company or Alcatel, pursuant to clause (e) of Section
9.01, the Company shall, within one business day after the Company Stockholder's
Meeting, pay to Alcatel a termination fee of $6,142,500 payable in same day
funds, if on or before the date of the Company Stockholders' Meeting a Takeover
Proposal shall have been disclosed, announced, commenced, submitted or made and
either (A) such Takeover Proposal shall not have been affirmatively rejected by
the Company Board or (B) a majority of the Company Board shall have failed to
recommend to the Company's stockholders the approval and adoption of the Company
Stockholders' Proposal or withdrew, adversely modified or qualified any such
recommendation previously given; or
61
(ii) by Alcatel, pursuant to clause (f) of Section 9.01, the Company
shall, within one business day following termination after such action or
inaction specified therein, as the case may be, pay to Alcatel a termination fee
of $6,142,500 payable in same day funds.
(iii) by Alcatel, pursuant to clause (h) of Section 9.01, the Company
shall, within 90 days following the date on which Alcatel terminates this
Agreement pursuant to Section 9.01(h), pay to Alcatel a termination fee of
$6,142,500 payable in same day funds.
(c) Any payment made pursuant to clause (i), (ii) or (iii) of Section
9.02(b) shall serve as liquidated damages and shall obviate any obligation to
make a payment under any other clause of Section 9.02(b). It is expressly agreed
that the remedies of Alcatel set forth in Section 9.02(b) shall be its exclusive
remedies for any termination of this Agreement pursuant to Sections 9.01(e), (f)
or (h) hereof (and there shall be no other remedy for any other basis for
termination hereunder) and only after any payment called for by this Section
9.02 is made, shall all other obligations of the Company (except as provided in
Section 9.02(a)) terminate.
(d) Notwithstanding the occurrence of any termination pursuant to Section
9.01 hereof, no such termination shall have any effect upon the Confidentiality
Agreement, which shall remain in full force and effect following any such
termination.
ARTICLE X.
GENERAL PROVISIONS
SECTION 10.01 Survival of Representations, Warranties and Covenants. The
representations and warranties made by the Company in this Agreement, any
Ancillary Agreement or any document or agreement delivered pursuant hereto or
thereto shall survive the Effective Time until the later of (i) 60 days from the
date on which Alcatel receives a signed opinion from Alcatel's outside auditors
of Alcatel's first year-end audit following the Effective Time and (ii) the
first anniversary of the Effective Time (the "Survival Period"), in each case
notwithstanding any investigation made by or on behalf of any party. The
representations and warranties made by Alcatel in this Agreement and in any
Ancillary Agreement or in any document or agreement delivered pursuant hereto or
thereto shall terminate upon the Effective Time, except the representations and
warranties contained in Sections 5.03 and 5.10 shall survive the Effective Time
until the expiration of the Survival Period. The covenants included in Sections
6.06, 6.07, 6.10, 6.11(b), 6.18, 6.23 and Articles II, VIII and X of this
Agreement shall survive the Effective Time until the end of the Survival Period
unless the covenant provides otherwise and the covenants in Sections 6.14 and
6.20 shall survive the Effective Time until the end of the Survival Period.
SECTION 10.02 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date received if delivered personally, sent by nationally
recognized overnight courier or mailed by registered or certified mail (postage
prepaid, return receipt requested) to the parties at the following addresses (or
at such other address for a party as shall be specified by like changes of
address, which shall be effective upon receipt), or sent by electronic
transmission, with confirmation received, to the telecopy numbers specified
below:
62
(a) If to Alcatel or Merger Sub:
Alcatel
▇▇, ▇▇▇ ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇-▇▇▇▇
Attention: General Counsel
With a copy to:
Proskauer Rose LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
If to the Company:
Astral Point Communications, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
President & Chief Executive Officer
With a copy to:
▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
If to the Stockholders' Representative:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
New Enterprise Associates
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 10.03 Waiver. Alcatel may, with respect to the Company or any
Stockholder, and the Company or the Stockholders' Representative may, with
respect to Alcatel or Merger Sub, (a) extend the time for the performance of any
of its obligations or other acts, (b) waive any inaccuracies in its
representations and warranties contained herein or in any document delivered
pursuant hereto or (c) waive compliance with any of its agreements or conditions
contained herein. Any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party or parties to be bound thereby.
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SECTION 10.04 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 10.05 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
SECTION 10.06 Entire Agreement; Amendment. This Agreement (including any
exhibits and schedules hereto), the Company Disclosure Schedule, the Stockholder
Disclosure Schedule, the Ancillary Agreements and the Confidentiality Agreement
constitute the entire agreement among the parties hereto and supersede all prior
and contemporaneous agreements and undertakings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof. This
Agreement may be amended prior to the Company Stockholder Proposal being adopted
only by an instrument in writing signed by Alcatel and the Company stating that
it constitutes an amendment to this Agreement and after the Company Stockholder
Proposal being adopted, by Alcatel, the Company and the Stockholders'
Representative stating that it constitutes an amendment to this Agreement,
except that the provisions of Section 6.18 shall not be amended except as
provided therein.
SECTION 10.07 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise by any of the parties hereto
without the prior written consent of the other parties, and any such assignment
without such prior written consent shall be null and void, except that Alcatel
and/or Merger Sub may assign this Agreement to any direct or indirect wholly
owned subsidiary of Alcatel without consent of the Company, provided that (1)
Alcatel shall remain liable for all of its obligations under this Agreement,
including the obligation to issue ADSs as contemplated herein, and (2) such
assignment does not cause the Merger to fail to be treated as a reorganization
within the meaning of Section 368 of the Code. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and permitted
assigns.
SECTION 10.08 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its successors, and nothing
in this Agreement, express or implied, is intended to or shall confer upon any
other person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement, other than Sections 5.03, 5.10, 6.06, 6.07(a), 6.10,
6.11(b), 6.14, 6.18, 6.20, 6.23 and Articles II, VIII and X of this Agreement.
SECTION 10.09 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair
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such right or be construed to be a waiver of, or acquiescence in, any breach of
any representation, warranty or agreement herein, nor shall any single or
partial exercise of any such right preclude other or further exercise thereof or
of any other right. All rights and remedies existing under this Agreement are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
SECTION 10.10 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF DELAWARE.
SECTION 10.11 Counterparts. This Agreement may be executed in two or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 10.12 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT,
TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 10.13 Forum. Each of the parties hereto (i) consents to submit
itself to the non-exclusive personal jurisdiction of any federal court located
in the State of New York in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement and (ii) agrees that
it will not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court.
SECTION 10.14 Definition of Knowledge. As used herein, the words
"knowledge" or "known" shall (i) with respect to the Company, mean the actual
knowledge of the executive officers and directors of the Company, in each case
after such individuals have made due and diligent inquiry as to the matters
which are the subject of the statements which are "known" by the Company or made
to the "knowledge" of the Company, and (ii) with respect to any Stockholder,
mean the actual knowledge of such Stockholder, or, in the case of an Entity
Stockholder, such Stockholder's executive officers or other persons acting in a
similar capacity, in each case after such Stockholder, or, in the case of an
Entity Stockholder, such Stockholder's executive officers or other persons
acting in a similar capacity, has or have made due and diligent inquiry as to
the matters which are the subject of the statements which are "known" by such
Stockholder or made to the "knowledge" of such Stockholder.
SECTION 10.15 Specific Performance and Injunctive Relief. The parties
hereto agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached or threatened to be breached. It is
accordingly agreed that the parties shall be entitled to a preliminary and
permanent injunction or injunctions to prevent breaches, or threatened breaches,
of this Agreement and to enforce specifically the terms and provisions hereof in
any
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court of the United States or any state having jurisdiction, without the need to
post bond or other security, this being in addition to any other remedy to which
they are entitled at law or in equity.
SECTION 10.16 Appointment of Stockholders' Representative.
(a) Each Company Stockholder that accepts payment of Merger Consideration
as contemplated herein shall be deemed, by such acceptance of payment or by the
approval of this Agreement in satisfaction of the Company Stockholders' Vote
Condition, as the case may be, to have thereby irrevocably constituted and
appointed ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (the "Stockholders' Representative") as such Company
Stockholder's true and lawful agent, proxy and attorney-in-fact pursuant to this
Section 10.16. The Stockholders' Representative shall have full power and
authority to act for each Company Stockholder and in each Company Stockholder's
name, place and stead, and in any and all capacities to do and perform every act
and thing required or permitted to be done in connection with the transactions
contemplated by this Agreement and each Ancillary Agreement following the
Effective Time, as fully to all intents and purposes as such Company Stockholder
might or could do in person, including, without limitation, all decisions
relating to the defense and/or settlement of any claims for which any Alcatel
Indemnitee may claim to be entitled to indemnity pursuant to Article VIII
hereof, the amendment or termination of this Agreement, the receipt of all
payments and notices and the giving of all consents and waivers. All decisions
and actions by the Stockholders' Representative shall be binding upon all of the
Company Stockholders, and no Company Stockholder shall have the right to object
to, dissent from, protest or otherwise contest the same.
(b) Each Company Stockholder that accepts payment of Merger Consideration
as contemplated herein shall be deemed, by such acceptance of payment or by the
approval of this Agreement in satisfaction of the Company Stockholders' Vote
Condition, as the case may be, to have agreed that (i) the provisions of this
Section 10.16 are independent and severable, are irrevocable and coupled with an
interest and shall be enforceable notwithstanding any rights or remedies any
Company Stockholder may have in connection with the transactions contemplated by
this Agreement, (ii) the remedy at law for any breach of the provisions of this
Section 10.16 would be inadequate, (iii) Alcatel shall be entitled to temporary
and permanent injunctive relief without the necessity of proving damages if
Alcatel brings an action to enforce the provisions of this Section 10.16 and
(iv) the provisions of this Section 10.16 shall be binding upon the successors
and assigns of each Company Stockholder.
(c) By their approval of this Agreement, the Company Stockholders shall be
deemed to have waived any claims they may have or assert, including those that
may arise in the future, against the Stockholders' Representative, and any of
its affiliates, for any action or inaction taken or not taken by the
Stockholders' Representative in connection herewith.
(d) Any notice or communication delivered by Alcatel, Merger Sub or the
Surviving Corporation to the Stockholders' Representative shall, as between
Alcatel, Merger Sub and the Surviving Corporation, on the one hand, and the
Company Stockholders, on the other, be deemed to have been delivered to all
Company Stockholders. Alcatel, Merger Sub and the Surviving Corporation shall be
entitled to rely exclusively upon any communications or writings given or
executed by the Stockholders' Representative and shall not be liable in any
manner whatsoever for any action taken or not taken in reliance upon the actions
taken or not taken or
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communications or writings given or executed by the Stockholders'
Representative. Alcatel, Merger Sub and the Surviving Corporation shall be
entitled to disregard any notices or communications given or made by the Company
Stockholders unless given or made through the Stockholders' Representative. In
addition, each Company Stockholder agrees to indemnify and hold harmless the
Stockholders' Representative against any claim or expense incurred by the
Stockholders' Representative relating in any way to the Stockholders'
Representative's capacity as such.
(e) Subject to the terms of the Escrow Agreement, each Company Stockholder
agrees that the Stockholders' Representative shall be entitled to receive such
number of ADSs as shall have an aggregate value of up to $250,000, as reasonably
determined by the Stockholders' Representative, in accordance with the
methodology set forth in Section I.3(d) of the Escrow Agreement, to satisfy the
Company Stockholders' obligation to indemnify the Stockholders' Representative
under Section 10.16(d) hereof. Notwithstanding the foregoing, the Stockholders'
Representative shall not be limited to such ADSs to satisfy such indemnification
obligations, and, at the Stockholders' Representative's election, the
Stockholders' Representative may seek cash from the Company Stockholders in
satisfaction of any such indemnification obligations.
(f) In the case of the death, disability, unwillingness to serve or other
unavailability of the Stockholders' Representative, the Company Stockholders who
own a majority in interest of ADSs issued as part of the Merger Consideration
shall have the right, exercisable by written notice to Alcatel and the Escrow
Agent, to designate a replacement Stockholders' Representative.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed as of the date first written above by a duly authorized officer or
other person.
ALCATEL
By:
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Name:
Title:
APPLES ACQUISITION CORP.
By:
-----------------------------
Name:
Title:
ASTRAL POINT COMMUNICATIONS, INC.
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Title: President & C.E.O.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed as of the date first written above by a duly authorized officer or
other person.
ALCATEL
By: /s/ ▇▇▇▇-▇▇▇▇ Scaillierez
-----------------------------
Name: ▇▇▇▇-▇▇▇▇ Scaillierez
Title: Attorney-in-Fact
APPLES ACQUISITION CORP.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
ASTRAL POINT COMMUNICATIONS, INC.
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Title: President and CEO