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EXHIBIT 2.2
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
LUCENT TECHNOLOGIES INC.,
KOSU ACQUISITION INC.,
HERRMANN TECHNOLOGY, INC.,
HERRMANN HOLDINGS, LTD.
ANNEM INVESTMENTS, LTD.
AND
HERRMANN TECHNOLOGY TRUST
Dated as of June 16, 2000
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TABLE OF CONTENTS
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1. The Merger.................................................................................................... 2
1.1 General................................................................................................. 2
1.2 Articles of Incorporation............................................................................... 2
1.3 By-Laws................................................................................................. 2
1.4 Directors and Officers.................................................................................. 2
1.5 Conversion of Securities................................................................................ 3
1.6 Adjustment of the Exchange Ratio........................................................................ 3
1.7 No Fractional Shares.................................................................................... 3
1.8 Exchange Procedures; Stock Transfer Books............................................................... 4
1.9 No Further Ownership Rights in Company Common Stock..................................................... 5
1.10 Further Assurances..................................................................................... 5
2. Approval by Shareholders...................................................................................... 5
2.1 Approval by Shareholders................................................................................ 5
3. Representations and Warranties of the Company................................................................. 5
3.1 Organization............................................................................................ 6
3.2 Capitalization; Options and Other Rights................................................................ 6
3.3 Authority; Shareholder Vote............................................................................. 7
3.4 Charter Documents....................................................................................... 8
3.5 Financial Statements.................................................................................... 8
3.6 Absence of Undisclosed Liabilities; Indebtedness........................................................ 9
3.7 Operations and Obligations.............................................................................. 9
3.8 Properties.............................................................................................. 11
3.9 Contracts............................................................................................... 11
3.10 Absence of Default..................................................................................... 13
3.11 Litigation............................................................................................. 13
3.12 Compliance with Law.................................................................................... 13
3.13 Intellectual Property; Year 2000....................................................................... 14
3.14 Tax Matters............................................................................................ 15
3.15 Employee Benefit Plans................................................................................. 16
3.16 Executive Employees.................................................................................... 17
3.17 Employees.............................................................................................. 17
3.18 Environmental Laws..................................................................................... 18
3.19 Bank Accounts, Letters of Credit and Powers of Attorney................................................ 18
3.20 Subsidiaries........................................................................................... 18
3.21 Insurance.............................................................................................. 18
3.22 Leases................................................................................................. 19
3.23 Assets................................................................................................. 19
3.24 Accounts Receivable; Inventory......................................................................... 19
3.25 Export Control Laws.................................................................................... 20
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3.26 Customers and Suppliers................................................................................ 20
3.27 Minute Books........................................................................................... 20
3.28 Financial Forecasts.................................................................................... 20
3.29 Complete Copies of Materials........................................................................... 21
3.30 Disclosure............................................................................................. 21
3.31 Reorganization......................................................................................... 21
3.32 Information in Lucent Registration Statement........................................................... 21
3.33 Investment Matters..................................................................................... 21
3.34 Private Placement...................................................................................... 22
3.35 Hart-Scott-Rodino Compliance........................................................................... 23
4. Representations and Warranties of Acquisition and Lucent...................................................... 23
4.1 Organization............................................................................................ 23
4.2 Capital Structure....................................................................................... 23
4.3 Authority............................................................................................... 24
4.4 Litigation.............................................................................................. 25
4.5 SEC Filings; Lucent Financial Statements................................................................ 25
4.6 Information Supplied.................................................................................... 26
4.7 Operations and Obligations.............................................................................. 26
4.8 Interim Operations of Acquisition....................................................................... 26
4.9 Reorganization.......................................................................................... 26
5. Conduct Pending Closing....................................................................................... 27
5.1 Exemption from Registration; Other Actions.............................................................. 27
5.2 Company Stock Options................................................................................... 27
5.3 Company Stock Plan...................................................................................... 28
5.4 Stock Exchange Listing.................................................................................. 29
5.5 Notification of Certain Matters......................................................................... 29
5.6 Tax Returns; Cooperation................................................................................ 29
5.7 Reorganization.......................................................................................... 29
5.8 Actions by the Parties.................................................................................. 29
5.9 Employee Benefit Plans.................................................................................. 30
5.10 Indemnification........................................................................................ 30
5.11 Actions by the Shareholders............................................................................ 31
5.12 Securities Matters..................................................................................... 31
6. Conditions Precedent.......................................................................................... 31
6.1 Conditions Precedent to Each Party's Obligation to Effect the Merger.................................... 31
6.2 Conditions Precedent to Obligations of Acquisition and Lucent........................................... 32
6.3 Conditions Precedent to the Company's Obligations....................................................... 33
6.4 Frustration of Closing Conditions....................................................................... 34
7. Survival of Representation and Warranties..................................................................... 34
7.1 Representations and Warranties.......................................................................... 34
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8. Indemnification............................................................................................... 34
8.1 Escrow Shares........................................................................................... 34
8.2 General Indemnification................................................................................. 34
8.3 Claims Upon Escrow Fund................................................................................. 35
8.4 Objections to Claims.................................................................................... 36
8.5 Third-Party Claims...................................................................................... 36
9. Brokers' and Finders' Fees.................................................................................... 37
9.1 Company................................................................................................. 37
9.2 Acquisition and Lucent.................................................................................. 37
10. Expenses..................................................................................................... 37
11. Press Releases............................................................................................... 37
12. Contents of Agreement; Parties in Interest; etc.............................................................. 37
13. Assignment and Binding Effect................................................................................ 38
14. Definitions.................................................................................................. 38
15. Notices...................................................................................................... 40
16. Amendment.................................................................................................... 42
17. Governing Law................................................................................................ 42
18. No Benefit to Others......................................................................................... 42
19. Severability................................................................................................. 42
20. Section Headings............................................................................................. 42
21. Schedules and Exhibits....................................................................................... 42
22. Extensions................................................................................................... 42
23. Counterparts................................................................................................. 42
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AGREEMENT AND
PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of June 16,
2000, by and among LUCENT TECHNOLOGIES INC., a Delaware corporation ("Lucent"),
KOSU ACQUISITION INC., a Texas corporation ("Acquisition"), HERRMANN TECHNOLOGY,
INC., a Texas corporation (the "Company"), HERRMANN HOLDINGS, LTD., a Texas
limited partnership ("Holdings"), ANNEM INVESTMENTS, LTD., a Texas limited
partnership ("Annem"), and HERRMANN TECHNOLOGY TRUST, a complex trust
established under the laws of the State of Texas (the "Trust").
BACKGROUND
A. The Company is a Texas corporation with its registered office
located at 10410 Miller Road, Dallas Texas, 75238, and has authorized 10,000,000
shares of common stock, par value $0.01 per share (the "Company Common Stock").
The Company is engaged principally in the design, development, production,
marketing and distribution of thin film optical filters for the dense wavelength
division multiplexing market (the "Business").
B. Lucent is a Delaware corporation with its registered office located
at 1013 Centre Road, Wilmington, Delaware.
C. Acquisition is a wholly-owned subsidiary of Lucent and was formed to
merge with and into the Company so that, as a result of the merger, the Company
will survive and become a wholly-owned subsidiary of Lucent. Acquisition is a
Texas corporation with its registered office located at 201 Main Street, Suite
2500, Forth Worth, Texas, 76102, and has authorized an aggregate of 1,000 shares
of common stock, no par value per share ("Acquisition Common Stock").
D. The Board of Directors of each of Acquisition and the Company has
determined that the merger of Acquisition with and into the Company (the
"Merger") in accordance with the provisions of the Texas Business Corporation
Act, as amended (the "TBCA"), and subject to the terms and conditions of this
Agreement, is in the best interests of Acquisition and the Company and their
respective shareholders.
E. The Boards of Directors of Acquisition and the Company have approved
this Agreement and the transactions contemplated hereby.
F. Holdings, Annem and the Trust (each a "Shareholder" and
collectively, the "Shareholders") own directly or beneficially 100% of the
issued and outstanding shares of capital stock of the Company.
G. The parties intend that, for federal income tax purposes, the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Code and that this Agreement shall constitute a plan of reorganization.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein and other
good and valuable
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consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto intending to be legally bound do hereby agree as follows:
1. The Merger
1.1 General.
(a) Subject to the terms and conditions of this Agreement and in
accordance with the TBCA, at the Effective Time, (i) Acquisition shall be merged
with and into the Company, (ii) the separate corporate existence of Acquisition
shall cease and (iii) the Company shall be the surviving corporation (the
"Surviving Corporation") and shall continue its corporate existence under the
laws of the State of Texas.
(b) Subject to the terms and conditions of this Agreement, the Company
and Acquisition shall duly execute and file at the time of the Closing (as
defined below) Articles of Merger, substantially in the form of Exhibit A
attached hereto (the "Articles of Merger"), with the Secretary of State of the
State of Texas together with all fees due and payable in connection therewith,
in each case, in accordance with the provisions of Article 5.04 of the TBCA. The
Merger shall have become effective upon the issuance of a Certificate of Merger
by the Secretary of State of the State of Texas in accordance with the
provisions of Article 5.04 of the TBCA (the "Effective Time"). The closing of
the Merger (the "Closing") shall take place at the offices of Sidley & Austin,
875 Third Avenue, New York, New York, at 4:01 P.M. on the date hereof, or on
such other date, time and place as the parties may mutually agree (the "Closing
Date").
(c) At the Effective Time, the effect of the Merger shall be as
provided in the applicable provisions of the TBCA. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the
property, rights, privileges, powers and franchises of the Company and
Acquisition shall vest in the Surviving Corporation, and all debts, liabilities,
obligations, restrictions, disabilities and duties of the Company and
Acquisition shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation.
1.2 Articles of Incorporation. The Articles of Incorporation of
Acquisition, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided therein and by law except that Article I of such Articles of
Incorporation shall be amended to read as follows: "The name of the Corporation
is: "Herrmann Technology, Inc."
1.3 By-Laws. The By-laws of Acquisition, as in effect immediately prior
to the Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter amended as provided therein and by law.
1.4 Directors and Officers. From and after the Effective Time, (a) the
directors of Acquisition at the Effective Time shall be the initial directors of
the Surviving Corporation, each to hold office in accordance with the Articles
of Incorporation and By-laws of the Surviving Corporation, and (b) the officers
of Acquisition at the Effective Time shall be the initial officers of the
Surviving Corporation, in each case, until their respective successors are duly
elected or appointed and qualified.
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1.5 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of Acquisition, the Company or the
holders of any of the following securities:
(a) Each issued and outstanding share of common stock of Acquisition
shall be converted into one validly issued, fully paid and nonassessable share
of Common Stock, no par value per share, of the Surviving Corporation;
(b) Each share of Company Common Stock held in the treasury of the
Company and each share of Company Common Stock owned by Acquisition or Lucent
shall be canceled without any conversion thereof and no payment or distribution
shall be made with respect thereto; and
(c) Subject to the provisions of Sections 1.6 and 1.7, each share of
Company Common Stock issued and outstanding immediately prior to the Effective
Time (other than shares canceled in accordance with Section 1.5(b)) shall be
converted into 6.7702 (such number as adjusted in accordance with Section 1.6
(the "Exchange Ratio")) validly issued, fully paid and nonassessable shares of
Lucent Common Stock including the corresponding percentage right (the "Right")
to purchase shares of junior preferred stock, par value $1.00 per share,
pursuant to the Rights Agreement dated as of April 4, 1996, as amended, between
Lucent and The Bank of New York (successor to First Chicago Trust Company of New
York), as Rights Agent. All references in this Agreement to Lucent Common Stock
to be received in accordance with the Merger shall be deemed, from and after the
Effective Time, to include the Rights. As of the Effective Time, each share of
Company Common Stock shall no longer be outstanding and shall automatically be
canceled and retired, and each holder of a certificate representing any shares
of Company Common Stock shall cease to have any rights with respect thereto
other than (i) the right to receive shares of Lucent Common Stock to be issued
in consideration therefor upon the surrender of such certificate, and (ii) any
cash, without interest, to be paid in lieu of any fractional share of Lucent
Common Stock in accordance with Section 1.7.
1.6 Adjustment of the Exchange Ratio. In the event that, prior to the
Effective Time, any stock split, combination, reclassification or stock dividend
with respect to the Lucent Common Stock, any change or conversion of Lucent
Common Stock into other securities or any other dividend or distribution with
respect to the Lucent Common Stock (other than regular quarterly dividends)
should occur or, if a record date with respect to any of the foregoing should
occur, appropriate and proportionate adjustments shall be made to the Exchange
Ratio, and thereafter all references to the Exchange Ratio shall be deemed to be
to such Exchange Ratio as so adjusted.
1.7 No Fractional Shares. No certificates or scrip representing
fractional shares of Lucent Common Stock shall be issued upon the surrender for
exchange of Certificates and such fractional share shall not entitle the record
or beneficial owner thereof to vote or to any other rights as a stockholder of
Lucent. In lieu of receiving any such fractional share, the shareholder shall
receive cash (without interest) in an amount rounded to the nearest whole cent,
determined by multiplying (i) the per share closing price on the New York Stock
Exchange, Inc. (the "NYSE") of Lucent Common Stock (as reported on the NYSE
Composite Transactions Tape as such Tape is reported in the Wall Street Journal
or another recognized business
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publication) on the date immediately preceding the date on which the Effective
Time shall occur (or, if the Lucent Common Stock did not trade on the NYSE on
such prior date, the last day of trading in Lucent Common Stock on the NYSE
prior to the Effective Time) by (ii) the fractional share to which such holder
would otherwise be entitled. Lucent shall make available to the Exchange Agent
the cash necessary for this purpose.
1.8 Exchange Procedures; Stock Transfer Books. (a) On or promptly after
the Effective Time, Lucent shall deliver, or cause to be delivered, to each
Shareholder in exchange for certificates representing the shares of Company
Common Stock held by such Shareholder and surrendered to Lucent or the Surviving
Corporation at the Closing (the "Certificates") (i) a certificate representing
the number of whole shares of Lucent Common Stock into which such shares of the
Company Common Stock will be converted at the Effective Time pursuant to Section
1.5(c), and (ii) cash in lieu of any fractional share of Lucent Common Stock in
accordance with Section 1.7. As soon as practicable after the Effective Time and
subject to and in accordance with the provisions of Section 8, Lucent shall
cause to be distributed to the Escrow Agent pursuant to the Escrow Agreement
certificates representing 10% of the shares of Lucent Common Stock to be issued
in exchange for the Company Common Stock, which shares shall be registered in
the name of the Escrow Agent as nominee for the Shareholders. All shares in the
Escrow Fund shall be beneficially owned by the Shareholders, shall be held in
escrow and shall be available to compensate Indemnified Persons as provided in
Section 8. To the extent not used for such purposes, such shares shall be
released as provided in the Escrow Agreement.
(b) Lucent shall be entitled to deduct and withhold from the
consideration otherwise payable to the Shareholders pursuant to this Agreement
such amounts as Lucent is required to deduct and withhold with respect to the
making of such payment under the Code, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by Lucent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the Shareholders in respect of which such deduction and withholding
was made by Lucent. All amounts in respect of taxes received or withheld by
Lucent shall be disposed of by Lucent in accordance with the Code or such state,
local or foreign tax law, as applicable.
(c) If any Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the Person claiming such Certificate
to be lost, stolen or destroyed and subject to such other conditions as the
Board of Directors of the Surviving Corporation may impose, Lucent shall issue
in exchange for such lost, stolen or destroyed Certificate the shares of Lucent
Common Stock as determined under Section 1.5(c), as applicable, and pay any
cash, dividends or other distributions as determined in accordance with Section
1.7 in respect of such Certificate; provided that Lucent may, in its reasonable
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificate to deliver a bond in such
sum as it may reasonably require as indemnity against any claim that may be made
against Lucent or the Surviving Corporation with respect to the Certificate
alleged to have been lost, stolen or destroyed.
(d) At the close of business on the day on which the Effective Time
occurs, the stock transfer books of the Company shall be closed and thereafter
there shall be no further registration of transfers of shares of Company Common
Stock in the records of the Company.
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From and after the Effective Time, the Shareholders shall cease to have any
rights with respect to the shares of Company Common Stock except as otherwise
provided herein or by applicable law.
1.9 No Further Ownership Rights in Company Common Stock. All
certificates representing shares of Lucent Common Stock delivered upon the
surrender for exchange of any Certificate in accordance with the terms hereof
(including any cash paid pursuant to Section 1.7 or Section 1.8) shall be deemed
to have been delivered (and paid) in full satisfaction of all rights pertaining
to the Company Common Stock previously represented by such Certificate.
1.10 Further Assurances. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation, its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either the
Company or Acquisition or (b) otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either the Company or Acquisition, all such deeds, bills of sale,
assignments and assurances and do, in the name and on behalf of the Company or
Acquisition, all such other acts and things necessary, desirable or proper to
vest, perfect or confirm its right, title or interest in, to or under any of the
rights, privileges, powers, franchises, properties or assets of the Company or
Acquisition, as applicable, and otherwise to carry out the purposes of this
Agreement.
2. Approval by Shareholders
2.1 Approval by Shareholders. Each of Acquisition and the Company shall
(a) call a meeting of its respective shareholders to be held as promptly as
practicable after the date hereof or (b) solicit written consents of its
respective shareholders in lieu thereof for purposes of voting upon this
Agreement. Each of the Company and Acquisition will, through its board of
directors, recommend to its shareholders approval of this Agreement. The Company
shall provide Lucent with a copy of all materials to be distributed to its
shareholders describing the transactions contemplated hereby not later than
three business days prior to distribution. The Company, Acquisition and Lucent
each agree to execute and deliver such further documents and instruments and to
do such other acts and things as may be required to complete all requisite
corporate action in connection with the transactions contemplated by this
Agreement. All materials distributed to the shareholders of the Company with
respect to this Agreement, including any description of the transactions
contemplated hereunder, the recommendation of the Board of Directors of the
Company that such shareholders approve the Merger, the vote by such shareholders
to approve this Agreement and the Merger and any description of appraisal rights
available to such shareholders shall be in form and substance reasonably
acceptable to Lucent and the Company, and shall be in accordance with applicable
law.
3. Representations and Warranties of the Company. The Shareholders,
jointly and severally, represent and warrant to Lucent and Acquisition with
respect to the matters set forth in Sections 3.1(b) and 3.1(c), the last
sentence of Section 3.2(a) and Sections 3.32, 3.33 and 3.34 as such relate to
the Shareholders, and each of the Company and the Shareholders
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jointly and severally represent and warrant to Acquisition and Lucent with
respect to all other matters contained in this Section 3 as follows:
3.1 Organization. (a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority and all
necessary governmental approval to carry on its business as it has been and is
now being conducted. The Company is duly qualified or licensed as a foreign
corporation to do business and is in good standing in each jurisdiction where
the nature of its business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary, except where the
failure to be so qualified or licensed and in good standing could not reasonably
be expected to have a Material Adverse Effect on the Company.
(b) Each of Holdings and Annem is a limited partnership duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
formation. The general partner of each of Holdings and Annem has the sole voting
power to bind Holdings and Annem, as applicable.
(c) The Trust is duly and validly organized and existing under the laws
of the State of Texas as a complex trust under the Herrmann Technology Trust
Agreement dated April 16, 1999 (true and correct copies of which documents have
been separately delivered by the Shareholders to Lucent and are still in full
force and effect); Linda B. Herrmann is the authorized trustee of the Trust; and
the children of William L. Hart and Mary B. Hart and other issue are the owners
of the beneficial interest under the Trust with sole and unconditional power to
revoke and amend the Trust. The trustee of the Trust has the sole voting power
to bind the Trust.
3.2 Capitalization; Options and Other Rights. (a) The total authorized
shares of capital stock of the Company consists of 10,000,000 shares of Company
Common Stock, of which 1,000,000 shares are issued and outstanding (the
"Outstanding Common Shares"). All the Outstanding Common Shares have been duly
and validly authorized and issued and are fully paid and nonassessable. None of
the shares of Company Common Stock (the "Shares") has been issued in violation
of the preemptive rights of any shareholder of the Company. The Outstanding
Common Shares have been issued in compliance in all material respects with all
applicable laws, statutes, ordinances, rules, regulations, orders, writs,
injunctions, judgments or decrees entered, enacted, promulgated, enforced or
issued by any court or other governmental or regulatory authority, domestic or
foreign (collectively, "Laws"). The Shareholders own, directly or beneficially,
all the Shares and each Shareholder owns, directly or beneficially, such Shares
as are indicated opposite such Shareholder's name on Schedule 3.2(a).
(b) Except as set forth in Schedules 3.2(c), there are no existing
agreements, subscriptions, options, warrants, calls, commitments, trusts (voting
or otherwise), or rights of any kind whatsoever granting to any Person any
interest in or the right to purchase or otherwise acquire from the Company or
granting to the Company any interest in or the right to purchase or otherwise
acquire from any Person, at any time, or upon the occurrence of any stated
event, any securities of the Company, whether or not presently issued or
outstanding, nor are there any outstanding securities of the Company or any
other entity which are convertible into or exchangeable for other securities of
the Company, nor are there any agreements, subscriptions,
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options, warrants, calls, commitments or rights of any kind granting to any
Person any interest in or the right to purchase or otherwise acquire from the
Company or any other Person any securities so convertible or exchangeable, nor
are there any proxies, agreements or understandings with respect to the voting
of the Shares or the direction of the business operations or conduct of the
Company, except as contemplated by this Agreement.
(c) Schedule 3.2(c) lists all outstanding Company Stock Options,
showing for each such option: (i) the name of the optionee, (ii) the number of
shares issuable, (iii) the number of vested shares, (iv) the date of expiration
and (v) the exercise price. Except as set forth on Schedule 3.2(c), (i) each
Company Stock Option has been granted under the Company Stock Plan and (ii) the
per share exercise price of each Company Stock Option granted under the Company
Stock Plan is not less than the fair market value of a share of Company Common
Stock on the date of grant of the applicable Company Stock Option, as determined
in good faith by the Board of Directors of the Company. Each Company Stock
Option that has been granted under a stock plan other than the Company Stock
Plan has been granted on substantially similar terms as the Company Stock
Options granted under the Company Stock Plan.
3.3 Authority; Shareholder Vote. (a) Each of the Shareholders and the
Company has full power and authority to execute, deliver and perform this
Agreement, the Escrow Agreement and the transactions contemplated hereunder. The
execution, delivery and performance of this Agreement and the Escrow Agreement
by each of the Shareholders and the Company has been duly authorized and
approved by all necessary corporate or other action and, except for (i) the
approval of this Agreement by a vote of holders of at least two-thirds of the
Outstanding Common Shares and (ii) the filing and recordation of appropriate
merger documents as required by the TBCA, no other corporate or other
proceedings on the part of the Company or any Shareholder are necessary to
authorize this Agreement and the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by each of the
Shareholders and the Company and is the legal, valid and binding obligation of
each of the Shareholders and the Company enforceable in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors rights generally and by the effect of general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
(b) The execution, delivery and performance by each of the Shareholders
and the Company of this Agreement and the Escrow Agreement and the consummation
of the Merger do not, and will not (i) violate or conflict with any provision of
the Articles of Incorporation or By-laws of the Company, the respective limited
partnership agreements of Holdings or Annem, or the Trust Agreement of the
Trust, as applicable, (ii) violate any Law applicable to the Shareholders or the
Company, except for violations which, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect on the Company, or
(iii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any note, bond, indenture,
lien, mortgage, lease, permit, guaranty or other agreement, instrument or
obligation to which the Shareholders or the Company is a party or by which any
of their properties may be bound, except (A) as set forth on Schedule 3.3(b) and
(B) for violations, breaches or defaults which, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect on
the Shareholders or the Company.
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(c) The execution and delivery of this Agreement and the Escrow
Agreement by the Shareholders and the Company do not, and the performance by the
Shareholders and the Company of this Agreement and the Escrow Agreement will
not, require any consent, approval, authorization or permission of, or filing
with or notification to any governmental or regulatory authority, domestic or
foreign, or any other Person except (i) in the case of this Agreement, the
filing and recordation of appropriate merger documents as required by the TBCA
and (ii) any such consent, approval, authorization, permission, notice or filing
which if not obtained or made could not reasonably be expected to have a
Material Adverse Effect on the Company.
(d) The Board of Directors of the Company (i) has approved this
Agreement and the transactions contemplated hereby, (ii) has determined that the
terms of the Merger are in the best interests of the shareholders of the
Company, and (iii) has resolved to recommend the approval of the Merger and the
adoption of this Agreement and the consummation of the transactions contemplated
hereby to the shareholders of the Company.
(e) Pursuant to the provisions of the TBCA, the Articles of
Incorporation of the Company, the By-laws of the Company and any other
applicable law, the only approval of holders of Company Common Stock required to
approve the Merger and to approve and adopt the Agreement and the transactions
contemplated hereby is the approval of at least two-thirds of the outstanding
shares of Company Common Stock.
3.4 Charter Documents. The Company has previously furnished to Lucent a
true, complete and correct copy of the Articles of Incorporation and the By-laws
of the Company. The Articles of Incorporation and By-laws of the Company are in
full force and effect. The Company is not in violation of any provision of its
Articles of Incorporation or By-laws.
3.5 Financial Statements. (a) The Company has previously furnished to
Lucent true and complete copies of the following financial statements of the
Company (collectively, the "Financial Statements"):
(i) the unaudited balance sheet as of December 31, 1999 (the "1999
Balance Sheet") and the unaudited balance sheet as of December 31, 1998;
(ii) the unaudited statement of operations, shareholders' equity and
cash flows for the fiscal year ended December 31, 1999 and December 31
1998;
(iii) the unaudited balance sheet as of May 31, 2000 (the "Current
Balance Sheet"); and
(iv) the unaudited statement of operations, shareholders' equity and
cash flows for the 5-month period ended May 31, 2000 (the "Current
Statement of Operations").
(b) Except as disclosed on Schedule 3.5(b), the Financial Statements
were prepared in accordance with GAAP. The Financial Statements were prepared on
the basis of the books and records of the Company and present fairly, in all
material respects, the financial position of the Company as of the dates thereof
and the results of its operations, changes in shareholders' equity and cash
flows for each of the periods then ended in conformity with GAAP
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(except (i) for the omission of footnotes, (ii) in the case of the Current
Balance Sheet and the Current Statement of Operations, for normal and recurring
year-end adjustments and (iii) as set forth on Schedule 3.5(b)).
3.6 Absence of Undisclosed Liabilities; Indebtedness. Except as set
forth in the Financial Statements, the Company does not have any liability or
obligation of any nature (whether absolute, accrued or contingent or otherwise)
other than (i) liabilities or obligations not required under GAAP on a basis
consistent with that of preceding accounting periods to be reported on such
Financial Statements and (ii) liabilities or obligations incurred after the date
of the Current Balance Sheet incurred in the ordinary course of business and
consistent with past practice.
(a) Except as disclosed on Schedule 3.6(b), the Company has no
Indebtedness which in aggregate principal amount is greater than $100,000.
3.7 Operations and Obligations. Except as reflected in the Financial
Statements, and except as a result of the transactions contemplated by this
Agreement, since December 31, 1999,
(i) there has been no material adverse change in the assets, business,
condition (financial or otherwise), or operations of the Company and there
has been no event or condition that has had or could reasonably be expected
to have a Material Adverse Effect on the Company other than as a result of
(x) general economic conditions, (y) business and economic conditions
affecting the dense wavelength division multiplexing industry or (z) the
announcement of the transactions contemplated hereby; and
(ii) there has been no impairment, damage, destruction, loss or claim,
whether or not covered by insurance, or condemnation or other taking which
could reasonably be expected to have a Material Adverse Effect on the
Company.
(b) Except (i) as set forth in Schedule 3.7(b) and (ii) for actions
required to be taken hereunder or approved by Lucent, since December 31, 1999,
the Company has conducted its business only in the ordinary course and
consistent with past practice. Without limiting the generality of the foregoing,
since December 31, 1999, except as set forth in such Schedule, the Company has
not:
(i) issued, delivered or agreed (conditionally or unconditionally) to
issue or deliver, or granted any option, warrant or other right to
purchase, any of its capital stock or other equity interest or any security
convertible into its capital stock or other equity interest;
(ii) other than in the ordinary course of business consistent with past
practice, issued, delivered or agreed (conditionally or unconditionally) to
issue or deliver any bonds, notes or other debt securities, or borrowed or
agreed to borrow any funds or entered into any lease the obligations of
which, in accordance with generally accepted accounting principles, would
be capitalized;
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(iii) paid any obligation or liability (absolute or contingent) other
than current liabilities reflected or reserved against on the 1999 Balance
Sheet and current liabilities incurred thereafter in the ordinary course of
business consistent with past practice;
(iv) declared or made, or agreed to declare or make, any payment of
dividends or distributions to its shareholders or purchased or redeemed, or
agreed to purchase or redeem, any Company Common Stock;
(v) except in the ordinary course of business consistent with past
practice, made or permitted any material amendment or termination of any
agreement to which the Company is a party and is or should be set forth on
Schedule 3.9;
(vi) undertaken or committed to undertake capital expenditures
exceeding $100,000 for any single project or related series of projects;
(vii) sold, leased (as lessor), transferred or otherwise disposed of,
mortgaged or pledged, or imposed or suffered to be imposed any Lien on, any
of the assets reflected on the 1999 Balance Sheet or any assets thereafter
acquired by the Company, except for inventory and personal property sold or
otherwise disposed of for fair value in the ordinary course of its business
consistent with past practice and except for Permitted Liens;
(viii) canceled any debts owed to or claims held by the Company
(including the settlement of any claims or litigation) other than in the
ordinary course of its business consistent with past practice;
(ix) accelerated or delayed collection of accounts receivable in
advance of or beyond their regular due dates or the dates when the same
would have been collected except in the ordinary course of its business
consistent with past practice;
(x) delayed or accelerated payment of any account payable or other
liability beyond or in advance of its due date or the date when such
liability would have been paid except in the ordinary course of its
business consistent with past practice;
(xi) entered into or become committed to enter into any other material
transaction except in the ordinary course of business;
(xii) allowed the levels of supplies or other materials included in the
inventory of the Company to vary materially from the levels customarily
maintained in accordance with past practice;
(xiii) except for increases in the ordinary course of business
consistent with past practice, instituted any increase in any compensation
payable to any employee of the Company, amended any Plan or modified any
other benefits made available to any such employees;
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(xiv) made any change in the accounting principles or made any material
change in accounting practices used by the Company, in each case, from
those applied in the preparation of the Financial Statements;
(xv) reclassified, combined, split, subdivided or redeemed, purchased
or otherwise acquired, directly or indirectly, any of its capital stock;
(xvi) entered into or agreed to enter into or terminate (prior to the
expiration date thereof) any employment agreement;
(xvii) increased the compensation or benefits payable or to become
payable to its officers or employees, except for increases in accordance
with past practices in salaries, bonuses or wages of employees of the
Company who are not officers of the Company, or granted any severance or
termination pay to, or entered into any severance agreement with any
director, officer or other employee of the Company, or established,
adopted, entered into or amended any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or
other plan, agreement, trust, fund, policy or arrangement for the benefit
of any such director, officer or employee;
(xviii) made any material Tax election or settled or compromised any
material federal, state, local or foreign income Tax liability; or
(xix) except in connection with the sale of the Company's products in
the ordinary course of business and consistent with past practice, sold,
assigned, transferred, licensed, sublicensed, pledged or otherwise
encumbered any of the Intellectual Property Rights.
(c) There are no accrued and unpaid dividends or distributions with
respect to any capital stock of the Company.
3.8 Properties. (a) The Company has good and valid title to all its
properties and assets as reflected on the Current Balance Sheet or acquired
after the date thereof except for (i) properties and assets sold or otherwise
disposed of in the ordinary course of business since the date of such Current
Balance Sheet, (ii) leasehold interests, in which event the Company has a valid
leasehold interest and (iii) properties and assets which individually or in the
aggregate are not material either in value or to the operations of the business
of the Company.
(b) The Company does not own any real property.
3.9 Contracts. Schedule 3.9 lists any of the following not otherwise
listed on any other Schedule:
(a) each written contract or commitment which creates an obligation on
the part of the Company in excess of $100,000;
(b) each written debt instrument, including, without limitation, any
loan agreement, line of credit, promissory note, security agreement or other
evidence of indebtedness,
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where the Company is a lender, borrower or guarantor, in a principal amount in
excess of $50,000;
(c) each written contract or commitment restricting the Company from
engaging in any industry or in any line of business in any location;
(d) each written contract to which the Company is a party containing a
change of control provision;
(e) each written contract or commitment in excess of $10,000 to which
the Company is a party for any charitable contribution;
(f) each written joint venture or partnership agreement to which the
Company is a party;
(g) each written distributorship, sales agency, sales representative,
reseller or marketing, value added reseller and original equipment manufacturing
agreement, in each case, to which the Company is a party;
(h) any written agreement (including any technology transfer and source
code license agreement) to which the Company is a party containing rights of
third parties, or granting rights for the Company, to license or sublicense
software, technology, patents, know-how, copyrights, trademarks or any other
intellectual property of any kind (excluding licenses to operate software that
is generally available for purchase "off the shelf" by the public);
(i) each written agreement in excess of $50,000 to which the Company is
a party with respect to any assignment, discounting or reduction of any
receivables of the Company;
(j) each agreement, option or commitment or right with, or held by, any
third party to acquire any assets or properties, or any interest therein, of the
Company, having a value in excess of $50,000, except for contracts for the sale
of inventory, machinery or equipment in the ordinary course of business;
(k) each written employment or consulting contract entered into by the
Company which is currently in effect; and
(l) each supply agreement that the Company could not readily replace
without a material impact on the Company.
Except as set forth on Schedule 3.9, (i) there are no oral contracts or
commitments of the types described in this Section 3.9 which create an
obligation on the part of the Company which are individually in excess of
$50,000 or in the aggregate in excess of $100,000, (ii) there are no contracts
or commitments between the Company and any Affiliate, (iii) there are no
contracts, commitments or arrangements with any employee which require the
payment of any compensation upon the occurrence of any specified contingency,
(iv) there are no contracts or arrangements, except this Agreement, which
require notice to, the consent of, or any payment of any compensation (whether
as a penalty, liquidated damages or otherwise) to any party with
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<PAGE> 17
respect to the Merger or any of the transactions contemplated hereby or in the
event of the termination of such contract or arrangement on or following the
Effective Time, and (v) there are no contracts which would create rights to any
Person against Lucent or any of its Affiliates (other than rights against the
Company as in effect on the Closing Date).
3.10 Absence of Default. Except as set forth in Schedule 3.10, (a) each
of the agreements listed on Schedules 3.9, 3.13, 3.16 and 3.22 that creates
obligations of any person in excess of $50,000 or in the aggregate in excess of
$150,000 are, and after giving effect to the Merger will be, valid, binding and
in full force and effect; (b) the Company has fulfilled and performed in all
material respects its obligations required to be fulfilled or performed as of
the date hereof under each such agreement (in each case, to which the Company is
a party); (c) the Company is not and is not alleged in writing to be, and to the
best knowledge of the Company, each other party to any such agreement is not, in
default under, nor is there or is there alleged in writing to be any basis for
termination of, any such agreement; (d) no event has occurred and no condition
or state of facts exists which, with the passage of time or the giving of notice
or both, would constitute such a default or breach by the Company or, to the
best knowledge of the Company, by any such other party; and (e) the Company is
not currently renegotiating any such agreement or paying liquidated damages in
lieu of performance thereunder. The Company has previously delivered complete
and correct copies of all such agreements (including all amendments) to Lucent.
3.11 Litigation. Except as set forth in Schedule 3.11, there are no
actions, suits, arbitrations, legal or administrative proceedings or
investigations pending or, to the best knowledge of the Company, threatened
against the Company which if determined in a manner adverse to the Company could
reasonably be expected to have a Material Adverse Effect on the Company. Neither
the Company nor the assets, properties or business of the Company is subject to
any judgment, order, writ, injunction or decree of any court, arbitration
tribunal or other governmental or regulatory authority, domestic or foreign. The
Company is neither a plaintiff in any such proceeding nor contemplating
commencing legal action against any other Person.
3.12 Compliance with Law.
(a) The Company has complied in all material respects with, and is not
in violation of, in any material respect, any Law to which it or its business is
subject.
(b) The Company has obtained all licenses, permits, certificates or
other governmental authorizations (collectively "Authorizations") necessary for
the ownership or use of its assets and properties or the conduct of its business
other than Authorizations (i) which are ministerial in nature and which the
Company has no reason to believe would not be issued in due course and (ii)
which, the failure of the Company to possess, would not subject the Company to
penalties other than fines not to exceed $25,000 in the aggregate and would not
materially adversely affect the operations or the business of the Company
("Immaterial Authorizations").
(c) The Company has not received written notice of violation of, or, to
the best knowledge of the Company, know of any material violation of, any Laws
to which it or its business is subject or any Authorization necessary for the
ownership or use of its assets and properties or the conduct of its business
(other than Immaterial Authorizations).
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3.13 Intellectual Property; Year 2000. (a) The Company owns, or is
validly licensed or otherwise has the right to use, all patents, and patent
rights ("Patents") and all trademarks, trade secrets, trademark rights, trade
names, trade name rights, service marks, service mark rights, copyrights and
other proprietary intellectual property rights and computer programs (the
"Intellectual Property Rights"), in each case, which are material to the conduct
of the business of the Company. Schedule 3.13(a) contains a list of (i) Patents
and Patent applications, (ii) trademark registrations and applications and (iii)
copyright registrations and applications owned by the Company.
(b) The Company has not interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Intellectual Property
Rights of any other Person. To the best knowledge of the Company, the Company
has not interfered with, infringed upon, misappropriated or otherwise come into
conflict with any Patent of any other Person. The Company has not received any
charge, complaint, claim, demand or notice alleging any such interference,
infringement, misappropriation or violation (including any claim that the
Company must license or refrain from using any Patents or Intellectual Property
Rights of any other Person) which has not been settled or otherwise fully
resolved. To the best knowledge of the Company, no other Person has interfered
with, infringed upon, misappropriated or otherwise come into conflict with any
Patents or Intellectual Property Rights of the Company.
(c) Assuming that Lucent continues to operate the Business of the
Company as presently conducted, then, to the best knowledge of the Company,
Lucent's use of the Patents or Intellectual Property Rights which is material to
the conduct of the business by the Company will not interfere with, infringe
upon, misappropriate or otherwise come into conflict with the Patents or
Intellectual Property Rights of any other Person.
(d) Each employee, agent, consultant, officer, director or contractor
who has contributed to or participated in the creation or development of any
copyrightable, patentable or trade secret material on behalf of the Company or
any predecessor in interest thereto either: (i) is a party to a "work-for-hire"
agreement under which the Company is deemed to be the original owner/author of
all property rights therein; or (ii) has executed an assignment or an agreement
to assign in favor of the Company or such predecessor in interest, as
applicable, all right, title and interest in such material, a copy of which
assignment or agreement to assign has been made available to Lucent.
(e) The Company has taken all necessary steps directed at ensuring that
its products (including prior and current products and technology and products
and technology currently under development) will, when used in accordance with
associated documentation on a specified platform or platforms, be capable upon
installation of (i) operating in accordance with their specifications on dates
in both the Twentieth and Twenty-First centuries and (ii) accurately processing,
providing and receiving date data from, into and between the Twentieth and
Twenty-First centuries, including the years 1999 and 2000, and making leap-year
calculations; provided, that all non-Company products (e.g., hardware, software
or firmware) used in or in combination with the Company's products properly
exchange data with the Company's products in the same manner on dates in both
the Twentieth and Twenty-First centuries. Further, to the best knowledge of the
Company, the Company has taken all necessary steps to assure that the year 2000
date change will not adversely affect its operations or the systems and
facilities that support
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the operations of the Company, except as could not reasonably be expected to
have a Material Adverse Effect on the Company. Finally, in conjunction with the
Year 2000 date transition, the Company has not experienced any material
date-related failures of its systems and has no knowledge of any date related
issues experienced by its customers with respect to the Company's products.
(f) Except as set forth on Schedule 3.13(f), the Company has not sold,
assigned, transferred, licensed or sublicensed, or entered into any contract
(oral or written) or other arrangement to sell, assign, transfer, sublicense or
encumber its Patents or Intellectual Property Rights other than in the ordinary
course of business, and the Company has not entered into any contract (oral or
written) or other arrangement pursuant to which the Company has agreed or is
obligated to license, transfer, place in escrow or encumber the source code for
any of its products (prior or current) or restrict the use of any of its Patents
or Intellectual Property Rights.
(g) No shareholder of the Company, nor, to the best knowledge of the
Company, any past or present employee, agent, officer, director, consultant or
contractor of the Company, has any interest or right, or claims any interest or
right (other than as a shareholder of the Company) in any Patent or Intellectual
Property Right that is material to the business and operations as currently
conducted by the Company.
3.14 Tax Matters. (a) Except as set forth on Schedule 3.14(a), (i) the
Company has filed all Tax Returns required to be filed; (ii) all such Tax
Returns are complete and accurate in all material respects and all Taxes shown
to be due on such Tax Returns have been or will be timely paid; (iii) all Taxes
(whether or not shown on any Tax Return) owed by the Company have been timely
paid or the Company has established adequate reserves therefor; (iv) the Company
has not waived or been requested to waive any statute of limitations in respect
of Taxes; (v) the Tax Returns referred to in clause (i) have been examined by
the Internal Revenue Service (the "IRS") or the appropriate state, local or
foreign taxing authority or the period for assessment of the Taxes in respect of
which such Tax Returns were required to be filed has expired; (vi) there is no
action, suit, investigation, audit, claim or assessment pending or, to the best
knowledge of the Company, proposed or threatened with respect to Taxes of the
Company; (vii) all deficiencies asserted or assessments made as a result of any
examination of the Tax Returns referred to in clause (i) have been paid in full;
(viii) Tax indemnity arrangements, if any, will terminate prior to Closing and
the Surviving Corporation will not have any liability thereunder on or after
Closing; (ix) there are no liens for Taxes upon the assets of the Company except
liens relating to current Taxes not yet due; (x) all Taxes which the Company is
required by law to withhold or to collect for payment have been duly withheld
and collected, and have been paid or accrued, reserved against and entered on
the books of the Company in accordance with GAAP; (xi) except for the Merger,
since December 31, 1999, the Company has not taken any action that would, under
applicable law, materially adversely impact Lucent's or the Company's ability to
utilize any net operating carry forwards of the Company; and (xii) the Company
is not and has not been a member of any group of corporations filing a
consolidated tax return for United States federal income tax purposes.
(b) No consent to the application of Section 341(f)(2) of the Code has
been filed with respect to any property or assets held or acquired or to be
acquired by the Company.
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The Company has not made any election that could result in any adverse tax
consequences to the Company.
(c) The Company (i) has not agreed to and is not required to make any
adjustment pursuant to Section 481(a) of the Code; (ii) to the best knowledge of
the Company, the IRS has not proposed any such adjustment or change in
accounting method with respect to the Company; and (iii) does not have any
application pending with the IRS or any other tax authority requesting
permission for any change in accounting method.
(d) The Company does not own any interest in any (i) domestic
international sales corporation, (ii) foreign sales corporation, (iii)
controlled foreign corporation, or (iv) passive foreign investment company.
(e) The Company is not a party (other than as an investor) to any
industrial development bond.
(f) The Company has never been and is not a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(g) The Company has not constituted either a "distributing corporation"
or a "controlled corporation" in a distribution of stock qualifying for tax-free
treatment under Section 355 of the Code (i) in the two years prior to the date
of this Agreement or (ii) in a distribution which could otherwise constitute
part of a "plan" or "series of related transactions" (within the meaning of
Section 355(e) of the Code) in conjunction with the Merger.
3.15 Employee Benefit Plans. (a) Schedule 3.15(a) contains a list of
all "employee pension benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) (the "Pension
Plans"), "employee welfare benefit plans" (as defined in Section 3(1) of ERISA)
(sometimes referred to as "Welfare Plans") and all other Benefit Plans (together
with the Pension Plans and Welfare Plans, the "Plans") maintained, or
contributed to, by the Company or any Person that, together with the Company, is
treated as a single employer under Section 414(b), (c), (m) or (o) of the Code
(the Company and each such other Person, a "Commonly Controlled Entity") for the
benefit of any current or any former employees, officers or directors of the
Company. The Company has made available to Lucent true, complete and correct
copies of (i) each Plan (or, in the case of any unwritten Benefit Plans,
descriptions thereof), (ii) the most recent annual report on Form 5500 filed
with the IRS with respect to each Plan (if any such report was required), (iii)
the most recent summary plan description for each Plan for which such summary
plan description is required, (iv) each trust agreement and group annuity
contract relating to any Plan and (v) all correspondence with the IRS or the
United States Department of Labor relating to any outstanding controversy or
audit. Except as could not reasonably be expected to have a Material Adverse
Effect on the Company, (x) each Plan has been administered in accordance with
its terms, and (y) the Company and all Plans are in compliance with applicable
provisions of ERISA and the Code.
(b) Except as set forth in Schedule 3.15(b), all Pension Plans that are
intended to be qualified under Section 401(a) of the Code have been the subject
of a determination
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opinion, notification or advisory letter from the IRS to the effect that such
Pension Plans is so qualified and the trust thereunder is exempt from Federal
income taxes under Section 501(a) of the Code, and no such determination letter
has been revoked nor has any event occurred since the date of such Plan's most
recent determination letter that would adversely affect its qualification or
materially increase its costs.
(c) Neither the Company nor any Commonly Controlled Entity has
maintained, contributed to or been obligated to contribute to any Plan that is
subject to Title IV of ERISA.
(d) The Company does not have any liability or obligation under any
Welfare Plan to provide life insurance or medical benefits after termination of
employment to any employee or dependent other than as required by Part 6 of
Title I of ERISA.
(e) Except as provided by this Agreement, no employee of the Company
will be entitled to any additional compensation or benefits or any acceleration
of the time of payment or vesting of any compensation or benefits under any Plan
as a result of the transactions contemplated by this Agreement.
(f) The deduction of any amount payable pursuant to the terms of the
Plans will not be subject to disallowance under Section 162 (m) of the Code.
(g) The Company has not issued any Company Common Stock under any
restricted stock purchase arrangement and the Company is not a party to any
restricted stock purchase arrangement.
3.16 Executive Employees. (a) Schedule 3.16(a) lists the names, titles
and current annual salary rates of and bonuses paid during the 1999 fiscal year
or payable to all present officers and employees of each of the Company whose
1999 annual base salary exceeded $75,000 ("Executive Employees").
(b) Except as set forth in Schedules 3.15(a) or 3.16(b), the Company
does not have any employment agreement with, or maintain any employee benefit
plan (within the meaning of Section 3(3) of ERISA) with respect to, any of its
Executive Employees. Except as set forth on Schedule 3.16(b), there are no
agreements with respect to Executive Employees which are subject to Section 280G
of the Code or which would obligate the Company to make any payment or provide
any benefit that could be subject to tax under Section 4999 of the Code.
3.17 Employees. (a) The Company has complied in all respects with all
applicable Laws respecting employment and employment practices, terms and
conditions of employment, wages and hours, other than instances of
non-compliance which, individually or in the aggregate, could not reasonably be
expected to result in penalties and fines in an amount not exceeding $75,000 in
the aggregate, and the Company is not liable for any arrears of wages or any
taxes or penalties for failure to comply with any such Laws; (b) the Company
believes that the Company's relations with its employees is satisfactory; (c)
there are no controversies pending or, to the best knowledge of the Company,
threatened between the Company and any of its employees, which controversies
have or could reasonably be expected to have a Material Adverse Effect on the
Company; (d) the Company is not a party to any collective bargaining
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agreement or other labor union contract applicable to persons employed by the
Company, nor, to the best knowledge of the Company, are there any activities or
proceedings of any labor union to organize any such employees; (e) there are no
unfair labor practice complaints pending against the Company before the National
Labor Relations Board or any current union representation questions involving
employees of the Company; (f) there is no strike, slowdown, work stoppage or
lockout existing, or, to the best knowledge of the Company, threatened, by or
with respect to any employees of the Company; (g) no charges are pending before
the Equal Employment Opportunity Commission or any state, local or foreign
agency responsible for the prevention of unlawful employment practices with
respect to the Company; (h) there are no claims pending against the Company
before any workers' compensation board; and (i) the Company has not received
notice that any Federal, state, local or foreign agency responsible for the
enforcement of labor or employment laws intends to conduct an investigation of
or relating to the Company and, to the best knowledge of the Company, no such
investigation is in progress.
3.18 Environmental Laws. The Company has not received any notice or
claim (and is not aware of any facts that would form a reasonable basis for any
claim), or entered into any negotiations or agreements with any other Person,
and, to the best knowledge of the Company, the Company is not the subject of any
investigation by any governmental or regulatory authority, domestic or foreign,
relating to any liability or remedial action under any Environmental Laws except
for such notice, claim, negotiation, agreement or investigation that will not
have a Material Adverse Effect on the Company. There are no pending or, to the
knowledge of the Company, threatened, actions, suits or proceedings against the
Company or any of its properties, assets or operations asserting any such
liability or seeking any remedial action in connection with any Environmental
Laws except for such actions, suits or proceedings that will not have a Material
Adverse Effect on the Company.
3.19 Bank Accounts, Letters of Credit and Powers of Attorney. Schedule
3.19 lists (a) all bank accounts, lock boxes and safe deposit boxes relating to
the business and operations of the Company (including the name of the Bank or
other institution where such account or box is located and the name of each
authorized signatory thereto), (b) all outstanding letters of credit issued by
financial institutions for the account of the Company (setting forth, in each
case, the financial institution issuing such letter of credit, the maximum
amount available under such letter of credit, the terms (including the
expiration date) of such letter of credit and the party or parties in whose
favor such letter of credit was issued), and (c) the name and address of each
Person who has a power of attorney to act on behalf of the Company. The Company
has heretofore delivered to Lucent true, correct and complete copies of each
letter of credit and each power of attorney described on Schedule 3.19.
3.20 Subsidiaries. The Company does not, directly or indirectly, have
any ownership or other interest in, or control of, any Person, nor is the
Company controlled by or under common control with any Person other than the
Shareholders.
3.21 Insurance. Schedule 3.21 sets forth a list and brief description
(including nature of coverage, limits, deductibles, premiums and the loss
experience) of all policies of insurance maintained, owned or held by the
Company, and, with respect to loss experience, a description of such loss
experience for the twenty-four month period up to and including the date hereof.
The Company shall use all commercially reasonable efforts to keep such insurance
or
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comparable insurance in full force and effect through the Closing Date. The
Company has complied with each such insurance policy to which it is a party and
has not failed to give any notice or present any claim thereunder in a due and
timely manner, except for non-compliance or failure that could not reasonably be
expected to have a Material Adverse Effect on the Company. Except as disclosed
in Schedule 3.21, to the best knowledge of the Company, the full policy limits
(subject to deductibles provided in such policies) are available and unimpaired
under each such policy and, to the best knowledge of the Company, no insurer
under any of such policies has a basis to void such policy on grounds of
non-disclosure on the part of the Company thereunder. Each such policy is in
full force and effect and will not in any way be affected by or terminate or
lapse by reason of the transactions contemplated by this Agreement.
3.22 Leases. Schedule 3.22 lists all outstanding leases, both capital
and operating, or licenses, pursuant to which the Company has (i) obtained the
right to use or occupy any real property or personal property where the value of
such personal property exceeds $50,000 in the case of any single lease or
$100,000 in the aggregate, or (ii) granted to any other Person the right to use
any property described on Schedule 3.23(a).
3.23 Assets. (a) Schedule 3.23(a) lists each material item of
machinery, equipment, furniture, vehicles or other personal property owned by
the Company having an original cost of $50,000 or more.
(b) Except as set forth in Schedule 3.23(b), the assets and properties
owned or leased by the Company constitute all the material assets and properties
used by the Company in the operation of its business (including all books,
records, computers and computer programs and data processing systems but
excluding Intellectual Property Rights and Patents) and are in good and
serviceable condition (subject, in each case, to normal wear and tear and
obsolescence and except for assets the book value of which does not exceed
$25,000 in the aggregate; provided that the foregoing wear, tear and
obsolescence shall not materially disrupt the Business of the Company as
presently being conducted) and are suitable for the uses for which intended.
3.24 Accounts Receivable; Inventory. (a) All accounts receivable of the
Company (i) have arisen from bona fide transactions by the Company in the
ordinary course of its business and represent bona fide claims against debtors
for sales and other charges and (ii) are not subject to discount except for
normal cash and immaterial trade discounts. To the best knowledge of the
Company, all accounts receivable reflected in the Current Balance Sheet are good
and collectible in the ordinary course of business at the aggregate recorded
amounts thereof, net of any applicable allowance for doubtful accounts reflected
in such balance sheet.
(b) The inventories (and any reserves with respect thereto that have
been established by the Company) of the Company as of May 31, 2000 are described
in Schedule 3.24. All such inventories (net of any such reserves) are properly
included in the Financial Statements in accordance with GAAP, and are of such
quality as to be useable and saleable in the ordinary course of business
(subject in the case of work-in-process inventory to completion in the ordinary
course of business) and (i) are properly included in the Financial Statements in
accordance with GAAP and (ii) are reflected in the books and records of the
Company at the lower of cost (determined under the first-in, first-out method)
or market value. The inventories of the Company are located at the locations set
forth in Schedule 3.24.
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3.25 Export Control Laws. The Company has conducted its export
transactions in accordance with applicable provisions of United States export
control laws and regulations, including but not limited to the Export
Administration Act and implementing Export Administration Regulations, except
for such violations which would not have a Material Adverse Effect on the
Company. Without limiting the foregoing:
(i) The Company has obtained all export licenses and other
approvals required for its exports of products, software and
technologies from the United States except where the failure to obtain
such export licenses and other approvals would not subject the Company
to penalties other than fines not to exceed $100,000 in the aggregate;
(ii) The Company is in compliance with the terms of all
applicable export licenses or other approvals;
(iii) There are no pending or, to the best knowledge of the
Company, threatened claims against the Company with respect to such
export licenses or other approvals;
(iv) There are no actions, conditions or circumstances
pertaining to the Company's export transactions that may give rise to
any future claims; and
(v) No consents or approvals for the transfer of export
licenses to Lucent are required, or such consents and approvals can be
obtained expeditiously without material cost.
3.26 Customers and Suppliers. None of the Company's customers which
individually accounted for more than 5% of the Company's gross revenues during
the five (5) months ended May 31, 2000 has terminated or indicated that it
intends to terminate any agreement with the Company. As of the date hereof, no
material supplier of the Company has indicated that it will stop, or decrease
the rate of, supplying materials, products or services to the Company.
3.27 Minute Books. The minute books of the Company made available to
Lucent contain a complete and accurate summary of all meetings of directors and
shareholders or actions by written resolutions since the time of incorporation
of the Company through the date of this Agreement, and reflect all transactions
referred to in such minutes and resolutions accurately, except for omissions
which are not material.
3.28 Financial Forecasts. The Company has made available to Lucent
certain financial forecasts with respect to the Company's business which
forecasts were prepared by the Company based upon the assumptions reflected
therein. The Company makes no representation or warranty regarding the accuracy
of such forecasts or as to whether such forecasts will be achieved or otherwise,
except that the Company represents and warrants that such forecasts were
prepared in good faith and are based on assumptions believed by the Company at
the time such forecasts were delivered to Lucent to be reasonable.
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3.29 Complete Copies of Materials. The Company has delivered or made
available true and complete copies of each document that has been requested by
Lucent or its counsel in connection with their legal and accounting review of
the Company.
3.30 Disclosure. None of the representations or warranties of the
Company contained herein, none of the information contained in the Schedules
referred to in this Section 3, and none of the other information or documents
furnished to Lucent or Acquisition by the Company or provided pursuant to the
terms of this Agreement, contains any untrue statement of a material fact or
omits to state a material fact herein or therein necessary in order to make the
statements contained herein or therein not misleading in any material respect.
3.31 Reorganization. The Company has not taken any action or failed to
take any action which action or failure would jeopardize the qualification of
the Merger as a reorganization within the meaning of Section 368(a) of the Code.
3.32 Information in Lucent Registration Statement. None of the
information to be supplied by the Company or any Shareholder specifically for
inclusion or incorporation by reference in the registration statement on Form
S-3 or such other form as may be appropriate to be filed with the SEC by Lucent
under the Securities Act of 1933 (together with the rules and regulations
thereunder, the "Securities Act"), for the purpose of registering the public
resale by the Shareholders of shares of Lucent Common Stock to be issued in the
Merger (together with any amendments or supplements thereto, whether prior to or
after the effective date thereof, the "Registration Statement") will, at the
time the Registration Statement is filed with the SEC or at the time the
Registration Statement becomes effective under the Securities Act, will contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
3.33 Investment Matters. (a) Each Shareholder agrees not to engage in
any hedging transactions with regard to the Consideration Shares unless in
compliance with the Securities Act.
(b) Each Shareholder acknowledges and agrees that the Consideration
Shares are being offered and sold to the Shareholders in reliance on specific
exemptions from the registration requirements of the United States federal and
state securities laws and that Lucent is relying upon the truth and accuracy of
the representations, warranties, agreements, acknowledgments and understandings
of the Shareholders set forth herein in order to determine the applicability of
such exemptions and the suitability of the Shareholders to acquire the
Consideration Shares.
(c) Each Shareholder has received and has had an opportunity to review
Lucent's Annual Report on Form 10-K for the fiscal years ended September 30,
1999 and September 30, 1998, Lucent's 1999 Annual Report to Shareowners for
fiscal 1999, Lucent's Proxy Statement for the 2000 annual meeting of
stockholders, Lucent's Quarterly Reports on Form 10-Q for the quarters ended
December 31, 1999 and March 31, 2000 and Lucent's Current Report on Form 8-K
dated May 5, 2000 and each Shareholder has had a reasonable opportunity to ask
questions of and receive answers from Lucent concerning Lucent, and to obtain
any
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additional information reasonably necessary to verify the accuracy of the
information furnished to the Shareholders concerning Lucent and all such
questions, if any, have been answered to the full satisfaction of the
Shareholders.
(d) Each Shareholder acknowledges that no representations or warranties
have been made with respect to the Consideration Shares to such Shareholder by
Lucent or any agent, employee or Affiliate of Lucent other than those contained
in this Agreement, and in entering into the transactions contemplated hereunder
such Shareholder is not relying upon any information, other than that referred
to in the foregoing paragraph, contained in this Agreement, and the results of
independent investigations by such Shareholder and its representatives; provided
that each Shareholder acknowledges and agrees that the only representations or
warranties that Lucent has made with respect to such information are as set
forth in this Agreement.
3.34 Private Placement. (a) Each Shareholder acknowledges that each
certificate representing the Consideration Shares delivered to or on behalf of
such Shareholder and the Escrow Agent shall include the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE (THE "SHARES") HAVE
NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR WITH ANY SECURITIES
REGULATORY AUTHORITY OF ANY STATE OF THE UNITED STATES OR
OTHER JURISDICTION. NEITHER THE SHARES NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION, EXCEPT PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, SUCH
REGISTRATION REQUIREMENTS. BY THE ACQUISITION HEREOF, THE
HOLDER AGREES THAT SUCH HOLDER WILL GIVE EACH PERSON TO WHOM
THE SHARES ARE TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IN THE CASE OF ANY TRANSFER OR OTHER
DISPOSITION MADE OTHERWISE THAN PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, THE HOLDER HEREOF SHALL
BE REQUIRED TO PROVIDE TO THE COMPANY, PRIOR TO SUCH TRANSFER,
AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
TRANSFER IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION UNDER
THE ACT AND IN COMPLIANCE WITH ALL APPLICABLE STATE SECURITIES
LAWS.
(b) Each Shareholder understands that the Consideration Shares are
being issued to such Shareholder and the Escrow Agent in reliance on an
exemption from the
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registration requirements of the Securities Act for an offer and sale of
securities that does not involve a public offering and have not been registered
under the Securities Act or with any securities regulatory authority of any
state of the United States or other jurisdiction and, therefore, that such
Consideration Shares (and all securities issued in exchange therefor or in
substitution thereof) cannot be resold in the absence of such registration
except pursuant to an exemption from, or in a transaction not subject to, such
registration requirements. Each Shareholder agrees that he shall not transfer
any of the Consideration Shares except in a transaction registered under the
Securities Act or unless such Shareholder shall have delivered to Lucent an
opinion of United States counsel, which counsel and opinion shall be reasonably
satisfactory to Lucent, that such transfer is being effected in accordance with
an available exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act.
(c) Each Shareholder is either an Accredited Investor or, immediately
prior to receipt of any information regarding Lucent, had such knowledge and
experience (alone or with a Purchaser Representative) in financial and business
matters as to be able to evaluate the merits and risks of an investment in
Lucent.
(d) Each Shareholder will acquire the Consideration Shares for his own
account and not with a view to any distribution (within the meaning of the
Securities Act) thereof or with any present intention of offering or selling any
of the Consideration Shares in a transaction that would violate the Securities
Act or the securities Laws of any state of the United States or any other
applicable jurisdiction.
(e) No Shareholder is in the business of buying and selling securities.
(f) Each Shareholder acknowledges and agrees that any resale or other
transfer, or attempted resale or other transfer, which Lucent determines in good
faith was made other than in compliance with the restrictions stated herein
shall not be recognized by Lucent in respect of the Consideration Shares, and
that Lucent may deliver a corresponding stop-transfer order to Lucent's transfer
agent to that effect.
3.35 Hart-Scott-Rodino Compliance. The Company is its own "ultimate
parent entity" (as defined in 16 CFR Section 801.1(a)(3)). The "person" (as
defined in 16 CFR Section 801.1(a)(1)) in which the Company is included does not
have annual net sales or "total assets" (as each such term is defined in 16 CFR
Section 801.11)) of $10,000,000 or more.
4. Representations and Warranties of Acquisition and Lucent. Each of
Acquisition and Lucent represents and warrants to the Shareholders as follows:
4.1 Organization. Each of Lucent and Acquisition is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority and all necessary governmental approvals to enter into and perform
this Agreement and the transactions contemplated hereby to be performed by it.
4.2 Capital Structure. The authorized capital stock of Lucent as of the
date of this Agreement consists of (i) 10,000,000,000 shares of common stock,
par value $.01 per share
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(the "Lucent Common Stock"), of which approximately 3,200,000,000 shares of
common stock were outstanding as of March 31, 2000, and (ii) 250,000,000 shares
of preferred stock, par value $1.00 per share ("Lucent Authorized Preferred
Stock"), of which 15,000,000 shares have been designated Series A Junior
Participating Preferred Stock (the "Lucent Junior Preferred Stock"), none of
which are outstanding. All the outstanding shares of Lucent Common Stock have
been duly and validly authorized and issued and are fully paid and
nonassessable. None of the outstanding shares of Lucent Common Stock has been
issued in violation of the preemptive rights of any shareholder of Lucent. The
shares of outstanding Lucent Common Stock were issued in compliance in all
material respects with all Laws. The shares of Lucent Common Stock to be issued
pursuant to the Merger and upon exercise of the Adjusted Options will be duly
and validly authorized and issued, will be fully paid and non-assessable and
will not be issued in violation of the preemptive rights of any shareholder of
Lucent or in violation of any Laws.
4.3 Authority. (a) Each of Lucent and Acquisition has full corporate
power and authority to execute, deliver and perform this Agreement and the
transactions contemplated hereunder. The Board of Directors of Acquisition has
declared the Merger advisable and approved this Agreement and resolved to
recommend the approval of the Merger and adoption of this Agreement and the
consummation of the transactions contemplated hereby to the sole shareholder of
Acquisition. The execution, delivery and performance of this Agreement by each
of Lucent and Acquisition has been duly authorized and approved (i) in the case
of Acquisition, by its Board of Directors and sole shareholder and (ii) in the
case of Lucent, by all necessary corporate action and, except for (A) the
adoption of this Agreement by the shareholder of Acquisition and (B) the filing
of appropriate merger documents as required by the TBCA no other corporate
proceedings other than actions previously taken on the part of either Lucent or
Acquisition are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by each of Lucent and Acquisition and is the legal, valid and binding
obligation of each of Lucent and Acquisition enforceable in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors rights generally and by the effect of general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
(b) The execution, delivery and performance by each of Lucent and
Acquisition of this Agreement and the consummation of the Merger do not, and
will not, (i) violate or conflict with any provision of the Certificate of
Incorporation or By-laws of Lucent or the Articles of Incorporation or By-laws
of Acquisition, (ii) violate any Law, except for violations which, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect on Lucent and Acquisition taken as a whole, or (iii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, any note, bond, indenture, lien, mortgage, lease,
permit, guaranty or other agreement, instrument or obligation, oral or written,
to which Lucent or Acquisition is a party or by which any of the properties of
Lucent or Acquisition may be bound, except for violations, breaches or defaults
which, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on Lucent, its Subsidiaries and Acquisition taken
as a whole.
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(c) The execution and delivery of this Agreement by each of Lucent and
Acquisition does not, and the performance by each of Lucent and Acquisition of
this Agreement will not, require any consent, approval, authorization or permit
of, or filing with or notification to, any governmental or regulatory authority,
domestic or foreign, or any other Person except (i) the filing and recordation
of appropriate merger documents as required by the TBCA, (ii) any such consent,
approval, authorization, permission, notice or filing which is required under
the Securities Act, the Securities Exchange Act of 1934 (together with the rules
and regulations promulgated thereunder, the "Exchange Act") and applicable state
securities laws, and (iii) any such consent, approval, authorization,
permission, notice or filing which if not obtained or made could not reasonably
be expected to have a Material Adverse Effect on Lucent, its Subsidiaries and
Acquisition taken as a whole.
4.4 Litigation. (a) Neither Lucent nor Acquisition is a party to any
suit, action, arbitration or legal, administrative, governmental or other
proceeding or investigation pending or, to its knowledge threatened, which
reasonably could adversely affect or restrict its ability to consummate the
transactions contemplated by this Agreement or to perform its obligations
hereunder.
(b) There is no judgment, order, writ, injunction or decree of any
court, arbitration tribunal or other governmental or regulatory authority,
domestic or foreign, to which Lucent or Acquisition is subject which might
adversely affect or restrict its ability to consummate the transactions
contemplated by this Agreement or to perform its obligations hereunder.
4.5 SEC Filings; Lucent Financial Statements. (a) Since October 1,
1999, Lucent has filed with the Securities and Exchange Commission (the "SEC")
all reports, schedules, forms, statements and other documents (including
exhibits and all other information incorporated therein) required to be filed
under the Securities Act and the Exchange Act (the "Lucent SEC Documents"). As
of their respective dates, the Lucent SEC Documents have complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Lucent SEC Documents and, except to the extent
that information contained in any Lucent SEC Document has been revised or
superseded by a later filed Lucent SEC Document, none of the Lucent SEC
Documents when filed contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of Lucent included in
the Lucent SEC Documents comply as to form, as of their respective dates of
filing with the SEC, in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present in all material respects the consolidated
financial position of Lucent and its consolidated Subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
recurring year-end audit adjustments).
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(b) Except for liabilities (i) reflected in such financial statements
or in the notes thereto, (ii) incurred in the ordinary course of business
consistent with past practice since the date of the most recent audited
financial statements included in the Lucent SEC Documents, or (iii) incurred in
connection with this Agreement or the transactions contemplated hereby, neither
Lucent nor any of its Subsidiaries has any liabilities or obligations (whether
absolute, accrued, contingent or otherwise) of any nature which, individually or
in the aggregate, could reasonably be expected to have a Material Adverse Effect
on Lucent and its Subsidiaries taken as a whole.
4.6 Information Supplied. None of the information to be supplied by
Lucent specifically for inclusion or incorporation by reference in the
Registration Statement, at the time the Registration Statement becomes effective
under the Securities Act, will contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading. The Registration Statement will
comply as to form in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations thereunder,
except that no representation or warranty is made by Lucent with respect to
statements made or incorporated by reference therein based on information
supplied by the Company or any Shareholder specifically for inclusion or
incorporation by reference in the Registration Statement.
4.7 Operations and Obligations. Except as described in the Lucent SEC
Documents, since the date of the most recent audited balance sheet of Lucent
contained in the Lucent SEC Documents, (i) except as a result of the
transactions contemplated by this Agreement or in connection with the
acquisition by Lucent or any of its Subsidiaries of all or substantially all the
capital stock or all or substantially all the assets of another Person, there
has not been any development that has had or could reasonably be expected to
have a Material Adverse Effect on Lucent and its Subsidiaries taken as a whole;
(ii) there has not been any material change by Lucent in its accounting methods,
principles or practices, except as required by changes in GAAP or any other
change provided such other change could not reasonably be expected to have a
Material Adverse Effect on Lucent and its Subsidiaries; or (iii) except as a
result of the transactions contemplated by this Agreement or in connection with
the acquisition by Lucent or any of its Subsidiaries of all or substantially all
the capital stock or all or substantially all the assets of another Person,
there has not been any material revaluation by Lucent of any of its assets
including, without limitation, writing down the value of capitalized software or
inventory or writing off notes or accounts receivable which could reasonably be
expected to have a Material Adverse Effect.
4.8 Interim Operations of Acquisition. Acquisition was formed solely
for the purpose of engaging in the transactions contemplated hereby, has engaged
in no other business activities and has conducted its operations only as
contemplated hereby.
4.9 Reorganization. Neither Lucent nor any of its Subsidiaries has
taken any action or failed to take any action which action or failure would
jeopardize the qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code.
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5. Conduct Pending Closing.
5.1 Exemption from Registration; Other Actions. (a) The shares of
Lucent Common Stock to be issued in connection with the Merger will be issued in
a transaction exempt from registration under the Securities Act by reason of
Section 4(2) thereof. Lucent shall use its reasonable best efforts to prepare,
file and cause to become effective, as promptly as practicable after Lucent
shall have received all relevant information to be provided by the Company or
the Shareholders in connection with such filing, the Registration Statement
covering the public resale of such shares of Lucent Common Stock to be issued in
connection with the Merger, and Lucent shall use its reasonable best efforts to
keep the Registration Statement effective until the first anniversary of the
Effective Time (such anniversary date being referred to herein as the
"Termination Date"). Any such registration shall be subject to the customary
terms and conditions used in connection with resale prospectuses; provided that
if Lucent determines that sales under the Registration Statement would require
disclosure of non-public information material to Lucent at a time when Lucent
desires not to disclose such information, Lucent may, upon written notice to the
Shareholders, suspend on one occasion and for a period not to exceed 30
consecutive days the right of the Shareholders to effect resales, pursuant to
such Registration Statement, of such shares of Lucent Common Stock issued in
connection with the Merger, and Lucent agrees to promptly notify the
Shareholders prior to the expiration of such period of the date on which they
may again effect resales under the Registration Statement.
(b) Each party hereto agrees, subject to applicable laws relating to
the exchange of information, promptly to furnish the other parties hereto with
copies of written communications (and memoranda setting forth the substance of
all oral communications) received by such party, or any of its Subsidiaries,
affiliates or associates (as such terms are defined in Rule 12b-2 under the
Exchange Act as in effect on the date hereof), from, or delivered by any of the
foregoing to, any governmental or regulatory authority, domestic or foreign,
relating to or in respect of the transactions contemplated under this Agreement.
5.2 Company Stock Options. (a) Prior to the Closing Date, the Board of
Directors of the Company (or, if appropriate, any committee administering the
Herrmann Technology, Inc. 1999 Incentive Stock Option Plan (the "Company Stock
Plan")) shall adopt such resolutions or take such other actions as may be
required to effect the following:
(i) adjust the terms of all outstanding options to purchase
shares of Company Common Stock (the "Company Stock Options"), whether
vested or unvested, as necessary to provide that, at the Effective
Time, each Company Stock Option outstanding immediately prior to the
Effective Time shall be amended and converted into an option to
acquire, on the same terms and conditions as were applicable under such
Company Stock Option, the number of shares of Lucent Common Stock
(rounded down to the nearest whole share) equal to (A) the number of
shares of Company Common Stock subject to such Company Stock Option
immediately prior to the Effective Time multiplied by (B) the Exchange
Ratio, at an exercise price per share of Lucent Common Stock (rounded
to the nearest 1/100th of a whole cent) equal to (x) the exercise price
per share of such Company Common Stock immediately prior to the
Effective Time divided by (y) the Exchange Ratio (each Company Stock
Option as so adjusted, an "Adjusted Option"); and
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(ii) make such other changes to the Company Stock Plan as the
Company and Lucent may agree are appropriate to give effect to the
Merger, including as provided in Section 5.3.
(b) As soon as practicable after the Effective Time, Lucent shall
deliver to the holders of Company Stock Options appropriate notices (the
"Company Stock Option Notices") setting forth (i) such holders' rights pursuant
to the Company Stock Plan and the agreements evidencing the grants of such
Company Stock Options and that such Company Stock Options and agreements shall
be assumed by Lucent and shall continue in effect on the same terms and
conditions (subject to the adjustments required by this Section 5.2 after giving
effect to the Merger) and (ii) the procedures for the exercise of the Adjusted
Options. The term, exercisability, vesting schedule (including any acceleration
provisions therein as set forth in Schedule 3.2(c)), status as an "incentive
stock option" under Section 422 of the Code, if applicable, and all of the other
terms of the Company Stock Options shall otherwise remain unchanged.
(c) A holder of an Adjusted Option may exercise such Adjusted Option in
whole or in part by (i) following the exercise procedures to be delivered by
Lucent as set forth in the Company Stock Option Notice and (ii) concurrently
delivering to Lucent the consideration therefor and any applicable withholding
tax.
(d) Except as otherwise contemplated by this Section 5.2 and except to
the extent required under the terms of the Company Stock Options, all
restrictions or limitations on transfer and vesting with respect to Company
Stock Options awarded under the Company Stock Plan or any other plan, program or
arrangement of the Company, to the extent that such restrictions or limitations
shall not have already lapsed, shall remain in full force and effect with
respect to such options after giving effect to the Merger and the assumption by
Lucent as set forth above.
(e) The Company shall furnish all information concerning the Company
and the holders of Company Common Stock as may be reasonably requested in
connection with any of the foregoing. Within 30 days after the later to occur of
(x) the Effective Time, and (y) Lucent's receipt of the information necessary
therefor Lucent shall prepare and file with the SEC a registration statement on
Form S-8 (or another appropriate form) registering the number of shares subject
to the Adjusted Options. Such registration statement shall be kept effective
(and the current status of the prospectus required thereby shall be maintained
in accordance with the relevant requirements of the Securities Act and the
Exchange Act) at least for so long as any Adjusted Options remain outstanding.
5.3 Company Stock Plan. At the Effective Time, by virtue of the Merger,
the Company Stock Plan and the Company Stock Options granted thereunder shall be
assumed by Lucent, with the result that all obligations of the Company under the
Company Stock Plan, including with respect to awards outstanding at the
Effective Time under the Company Stock Plan, shall be obligations of Lucent
following the Effective Time; provided, that in the case of any Company Stock
Option to which Section 421 of the Code applies by reason of its qualification
under Section 422 or Section 423 of the Code, the option price, number of shares
purchasable pursuant to such Company Stock Option and the terms and conditions
of exercise of
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such Company Stock Option shall be determined in order to comply with Section
424 of the Code. Prior to the Effective Time, Lucent shall take all necessary
actions (including, if required to comply with Section 162(m) of the Code (and
the regulations thereunder) or applicable law or rule of the NYSE, obtaining the
approval of its shareholders at the next regularly scheduled annual meeting of
Lucent following the Effective Time) for the assumption of the Company Stock
Plans, including the reservation, issuance and listing of Lucent Common Stock in
a number at least equal to the number of shares of Lucent Common Stock that will
be subject to the Adjusted Options.
5.4 Stock Exchange Listing. Lucent shall use its reasonable best
efforts to list on the NYSE, upon official notice of issuance, the shares of
Lucent Common Stock to be issued in connection with the Merger and upon exercise
of Adjusted Options.
5.5 Notification of Certain Matters. The Company shall give prompt
notice to Lucent, and Lucent shall give prompt notice to the Company, of (a) the
occurrence, or non-occurrence, of any event which would be likely to cause (i)
any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect or (ii) any covenant, condition or agreement
contained in this Agreement not to be complied with or satisfied; and (b) any
failure of the Company, Lucent or Acquisition, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided that the delivery of any notice pursuant to
this Section 5.5 shall not limit or otherwise affect the remedies available to
the party receiving such notice.
5.6 Tax Returns; Cooperation. The Company on the one hand and Lucent on
the other will cooperate with each other and provide such information as any
party may require in order to file any return to determine Tax liability or a
right to a Tax refund or to conduct a Tax audit or other Tax proceeding. Such
cooperation shall include, but not be limited to, making employees available on
a mutually convenient basis to explain any documents or information provided
hereunder or otherwise as required in the conduct of any audit or other
proceeding. The Company and Lucent will retain until the expiration of any
applicable statute of limitations (including any extensions thereof) all Tax
Returns, schedules and workpapers and all other material records or documents
relating to the Company for all Tax periods through the first Tax period ending
after the Closing Date. At the expiration of such statutory period (including
any extensions thereof), each party shall have the right to dispose of any such
Tax Returns and other documents or records on thirty (30) days written notice to
the other party. Any information, documents or records obtained under this
Section 5.6 shall be kept confidential, except as may be otherwise necessary in
connection with the filing of Tax Returns or claims for refund or in conducting
an audit or other proceeding.
5.7 Reorganization. Each of Lucent and the Company shall use its
reasonable best efforts to cause the Merger to be qualified as a reorganization
under Section 368(a) of the Code.
5.8 Actions by the Parties. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties hereto will use its
reasonable best efforts to take or cause to be taken all actions, and to do, or
cause to be done, all things necessary, proper or advisable under applicable Law
to consummate and make effective in the most expeditious
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manner practicable, the transactions contemplated by this Agreement including
(i) the obtaining of all necessary actions and non-actions, waivers and
consents, if any, from any governmental or regulatory authority, domestic and
foreign, and the making of all necessary registrations and filings and the
taking of all reasonable steps as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by any governmental or
regulatory authority, domestic and foreign; (ii) the obtaining of all necessary
consents, approvals or waivers from any other Person; (iii) the defending of any
claim, investigation, action, suit or other legal proceeding, whether judicial
or administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby; and (iv) the execution of additional
instruments necessary to consummate the transactions contemplated by this
Agreement. Each party will promptly consult with the other and provide necessary
information (including copies thereof) with respect to all filings made by such
party with the any agency or authority in connection with this Agreement and the
transactions contemplated hereby.
5.9 Employee Benefit Plans. (a) As soon as practicable after the
Effective Time (the "Benefits Date"), Lucent shall provide, or cause to be
provided, employee benefit plans, programs and arrangements to employees of the
Company that are the same as those made generally available to similarly
situated employees of Lucent's Microelectronic Group who are hired by Lucent
after December 31, 1999. From the Effective Time to the Benefits Date (which the
parties acknowledge may occur on different dates with respect to different
plans, programs or arrangements of the Company), Lucent shall provide, or cause
to be provided, the employee benefit plans, programs and arrangements of the
Company provided to employees of the Company as of the date hereof.
(b) With respect to each benefit plan, program or arrangement
maintained by Lucent in which employees of the Company subsequently participate
(the "Lucent Plans"), for purposes of eligibility to participate, vesting and
vacation entitlement (but not for accrual of pension or post retirement health
benefits), service with the Company shall be treated as service with Lucent;
provided, that such service shall not be recognized to the extent that such
recognition would result in a duplication of benefits. Such service also shall
apply for purposes of satisfying any waiting periods, evidence of insurability
requirements, or the application of any pre-existing condition limitations. The
Company's employees shall be given credit for amounts paid under a corresponding
benefits plan during the same period for purposes of applying deductibles,
co-payments and out-of-pocket maximums as though such amounts had been paid in
accordance with the terms and conditions of the Lucent Plans.
5.10 Indemnification. (a) From and after the Effective Time, Lucent
shall, or shall cause the Surviving Corporation to, fulfill and honor in all
respects the obligations of the Company to indemnify each Person who is or was a
director or officer (an "Indemnified Party") of the Company pursuant to any
indemnification provision of the Articles of Incorporation or By-laws or
equivalent constituent documents of the Company as each is in effect on the date
hereof.
(b) For a period of six years after the Effective Time, Lucent shall
cause to be maintained in effect officers' and directors' liability insurance
with respect to each Indemnified Party of the Company covering acts or omissions
by such Person occurring prior to the Effective Time under customary terms and
conditions.
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5.11 Actions by the Shareholders. The Shareholders shall cause the
Company to fulfill its obligations under this Agreement.
5.12 Securities Matters. The Shareholders will not sell, assign,
transfer or otherwise dispose of any of the Consideration Shares other than in
accordance with applicable federal and state securities laws or an exemption
therefrom.
6. Conditions Precedent.
6.1 Conditions Precedent to Each Party's Obligation to Effect the
Merger. The respective obligations of each party hereto to effect the Merger
shall be subject to the fulfillment or satisfaction, prior to or on the Closing
Date, of the following conditions:
(a) Shareholder Approval. The Merger shall have been duly approved by
the requisite vote of the outstanding shares of Common Stock of the Company and
the common stock, no par value per share, of Acquisition entitled to vote
thereon in accordance with the TBCA and the Articles of Incorporation and
By-laws of each of the Company and Acquisition, respectively.
(b) Approvals. All authorizations, consents, orders, declarations or
approvals of, or filings with, or terminations or expirations of waiting periods
imposed by, any governmental or regulatory authority, domestic or foreign, which
the failure to obtain, make or occur would have the effect of making the Merger
or any of the transactions contemplated hereby illegal or could reasonably be
expected to have a Material Adverse Effect on Lucent or the Company (as
Surviving Corporation), assuming the Merger had taken place, shall have been
obtained, made or occurred.
(c) Other Approvals. All authorizations, consents, orders, declarations
or approvals of, or filings with, or terminations or expirations of waiting
periods imposed by, any governmental or regulatory authority, domestic or
foreign, which the failure to obtain, make or occur would have the effect of
making or any of the transactions contemplated hereby illegal or would have a
Material Adverse Effect on Lucent or the Company shall have been obtained, made
or occurred.
(d) No Litigation. No judgment, order, decree, statute, law, ordinance,
rule or regulation, entered, enacted, promulgated, enforced or issued by any
court or other Governmental Entity of competent jurisdiction or other legal
restraint or prohibition (collectively, "Restraints") shall be in effect against
any of the parties hereto with respect to the transactions contemplated hereby,
and there shall not be pending any suit, action or proceeding by any
Governmental Entity (i) preventing the consummation of the Merger or (ii) which
otherwise is reasonably likely to have a Material Adverse Effect on the Company
or Lucent, as applicable; provided, that each of the parties shall have used its
reasonable best efforts to prevent the entry of any such Restraints and to
appeal as promptly as possible any such Restraints that may be entered.
(e) Escrow Agreement. Each of Lucent, the Company, the Escrow Agent and
the Shareholders shall have entered into the Escrow Agreement substantially in
the form of Exhibit B hereto (the "Escrow Agreement").
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(f) Representation Letters. Each of the Company and Lucent shall have
executed and delivered a letter of representation relating to certain tax
matters substantially in the form of Exhibits C and D hereto.
(g) Stock Exchange Listing. The shares of Lucent Common Stock issued in
accordance with the Merger and upon exercise of the Adjusted Options shall have
been authorized for listing on the NYSE, subject to official notice of issuance.
6.2 Conditions Precedent to Obligations of Acquisition and Lucent. All
obligations of Acquisition and Lucent under this Agreement are subject to the
fulfillment or satisfaction, prior to or on the Closing Date, of each of the
following conditions precedent:
(a) Performance of Obligations; Representations and Warranties. The
Company and the Shareholders shall have performed and complied in all material
respects with all agreements and conditions contained in this Agreement that are
required to be performed or complied with by it prior to or at the Closing. Each
of the Company's and the Shareholders' representations and warranties contained
in Section 3 of this Agreement (i) to the extent it is qualified by Material
Adverse Effect or materiality and the Company's representations and warranties
contained in Section 3.13 shall be true and correct and (ii) to the extent it is
not so qualified by Material Adverse Effect or materiality or contained in
Section 3.13, shall be true and correct in all material respects, in each case,
on and as of the Closing with the same effect as though such representations and
warranties were made on and as of the Closing, except (A) for changes permitted
by this Agreement and (B) to the extent that any representations and warranties
expressly relate to an earlier date, in which case such representations and
warranties shall be as of such earlier date.
(b) Opinion of Counsel. Lucent and Acquisition shall have received the
favorable written opinion dated the Closing Date of Haynes and Boone, LLP,
counsel to the Company, in form satisfactory to Lucent and Acquisition.
(c) Resignations. The Company shall have delivered to Lucent and
Acquisition the written resignation of each director and officer of the Company
as shall be requested in writing by Lucent.
(d) No Material Adverse Change. There shall have been no material
adverse change in the assets, business, financial condition, or operations of
the Company and no event or events shall have occurred that could reasonably be
expected to have a Material Adverse Effect on the Company other than as a result
of (i) general economic conditions, (ii) business and economic conditions
affecting the dense wavelength division multiplexing industry, or (iii) the
announcement of the transactions contemplated hereby .
(e) Consents. The Company shall have received all necessary consents,
in form and substance reasonably satisfactory to Lucent and Acquisition, from
the other parties to each contract, lease or agreement to which the Company is a
party, except (i) where the failure to receive such consent could not reasonably
be expected, individually or in the aggregate, to have a Material Adverse Effect
on the Company and (ii) such consents as set forth on Schedule 6.2(e).
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(f) Non-Competition Agreements. Each of the individuals listed on
Schedule 6.2(f) shall have entered into Non-Competition Agreements with the
Surviving Corporation, each substantially in the form of Exhibit E hereto, and
such agreements shall be in full force and effect.
(g) Substitute Form W-9. Acquisition and Lucent shall have received
Substitute Forms W-9 under the Code in form and substance acceptable to
Acquisition and Lucent executed by each of the Shareholders.
(h) Real Property Certificate. Lucent shall have received a certificate
from the Company certifying that the Company has never been and is not a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code pursuant to Treas. Reg. Sec. 1.897-2(h) and Treas. Reg. Sec.
1.1445-2(c)(3)(i) at the Closing.
(i) Stock Option Agreement. Each holder of Company Stock Options shall
have entered into an amendment to the agreement regarding their Company Stock
Options, each substantially in the form of Exhibit F hereto.
(j) Shareholder Consent. The shareholder approval requirements of
Proposed Regulation sec. 1.280G-1, Q/A 7 shall have been met in respect of the
options granted under the Company Stock Plan.
6.3 Conditions Precedent to the Company's and Shareholders'
Obligations. All obligations of the Shareholders and the Company under this
Agreement are subject to the fulfillment or satisfaction, prior to or on the
Closing Date, of each of the following conditions precedent:
(a) Performance of Obligations; Representations and Warranties.
Acquisition and Lucent shall have performed and complied in all material
respects with all agreements and conditions contained in this Agreement that are
required to be performed or complied with by them prior to or at the Closing.
Each of the representations and warranties of Acquisition and Lucent contained
in Section 4 of this Agreement (i) to the extent it is qualified by Material
Adverse Effect shall be true and correct and (ii) to the extent it is not so
qualified by Material Adverse Effect shall be true and correct in all material
respects, in each case, on and as of the Closing with the same effect as though
such representations and warranties were made on and as of the Closing except
(A) for changes permitted by this Agreement and (B) to the extent that such
representations and warranties expressly relate to an earlier date, in which
case such representations and warranties shall be as of such earlier date.
(b) Opinion of Counsel. The Company shall have received the favorable
written opinion dated the Closing Date of Kelly, Hart & Hallman, special Texas
counsel to Acquisition and Lucent, and internal counsel to Acquisition and
Lucent, each in form satisfactory to the Company. The Company shall have
received a written opinion dated the Closing Date of Haynes and Boone, LLP,
counsel to the Company, addressing certain tax matters which opinion shall be in
form and substance reasonably satisfactory to the Company.
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(c) No Material Adverse Change. There shall have been no material
adverse change in the assets, business, financial condition or operations of
Lucent and no event or events shall have occurred that could reasonably be
expected to have a Material Adverse Effect on Lucent other than as a result of
(i) general economic conditions, (ii) business and economic conditions affecting
the dense wavelength division multiplexing industry or (iii) the announcement of
the transactions contemplated hereby.
(d) Employee Letter Agreement. Lucent shall have entered into a letter
agreement with the Company and the Shareholders regarding certain payments to
employees of the Company following the Closing Date, substantially in the form
of Exhibit G hereto.
6.4 Frustration of Closing Conditions. None of the Shareholders, the
Company, Lucent or Acquisition may rely on the failure of any condition set
forth in Section 6.1, 6.2 or 6.3, as the case may be, to be satisfied if such
failure was caused by such party's failure to use reasonable efforts to
consummate the Merger and the other transactions contemplated by this Agreement
and the Escrow Agreement, as required by and subject to Section 5.8.
7. Survival of Representation and Warranties.
7.1 Representations and Warranties. The representations and warranties
of the Shareholders and the Company contained in this Agreement (including the
schedules to the Agreement which are hereby incorporated by reference) or in any
instrument delivered pursuant to this Agreement shall survive for 12 months
following the Effective Time, except that the representations and warranties of
the Shareholders contained in Sections 3.1(b) and 3.1(c), the last sentence of
Section 3.2(a) and Sections 3.32, 3.33 and 3.34 shall survive until the
expiration of the applicable statute of limitations. This Section shall not
limit any claim for fraud or any covenant or agreement by the parties which
contemplates performance after the Effective Time.
8. Indemnification.
8.1 Escrow Shares. As soon as practicable after the Effective Time, 10%
of the total number of shares of Lucent Common Stock to be issued in exchange
for the Company Common Stock (such shares as adjusted for stock splits,
combinations, stock dividends and distributions and together with any other
property issued in respect of such shares as a result of any of the foregoing
being referred to herein as the "Escrow Fund") shall be deposited with The Bank
of New York (or any other institution selected by Lucent), as escrow agent (the
"Escrow Agent"), such deposit to be governed by the terms set forth herein and
in the Escrow Agreement. The Escrow Fund shall be the sole and exclusive source
available to compensate Lucent for the indemnification obligations of each
Stockholder under Section 8.2(a), except that Lucent may elect not to have
recourse to the Escrow Fund for any claim of fraud or any inaccuracy in any
representation or warranty of the Shareholders contained in Sections 3.1(b) and
3.1(c), the last sentence of Section 3.2(a) and Sections 3.32, 3.33 and 3.34.
8.2 General Indemnification. (a) Subject to the limitations set forth
in this Section 8, the Shareholders will jointly and severally indemnify and
hold harmless Lucent and each Person, if any, who controls, may control or is
controlled by Lucent within the meaning of the Securities Act and their
respective officers, directors, employees, agents and advisors (each
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such indemnitee being referred to herein as an "Indemnified Person"), from and
against any and all losses, costs, damages, liabilities, obligations,
impositions, inspections, assessments, fines, deficiencies and expenses arising
from claims, demands, actions, causes of action, including, without limitation,
reasonable legal fees (collectively, "Damages"), arising out of (i) any
inaccuracy in any representation or warranty made by the Company or any
Shareholder in this Agreement or in any exhibit or schedule to this Agreement,
(ii) any Damages relating to Taxes of the Company that pertain to periods (or
that portion of any period) up to and including the Closing Date other than any
Taxes accrued or reserved for on the Current Balance Sheet, and (iii) any breach
or default by the Company or any Shareholder of any of the covenants or
agreements given or made by any of them in this Agreement or any exhibit or
schedule to this Agreement.
(b) Lucent and the Shareholders acknowledge that such Damages, if any,
would relate to unresolved contingencies existing at the Closing Date, which if
resolved at the Closing Date would have led to a reduction in the total
consideration that Lucent would have agreed to pay in connection with the
transactions contemplated hereby.
(c) Notwithstanding anything to the contrary contained in this
Agreement, solely with respect to any claim by any Indemnified Person for
indemnification under Section 8.2(a)(i) or 8.2(a)(ii) (other than any claim for
any inaccuracy in Section 3.13 or in the last sentence of Section 3.2(a)), such
Indemnified Person may not seek indemnification with respect to any claim for
Damages until the aggregate amount of all Damages for which all Indemnified
Persons are seeking indemnification under Section 8.2(a)(i) or 8.2(a)(ii) equals
or exceeds $500,000 (the "Threshold"), whereupon such Indemnified Person shall
be entitled to seek indemnification with respect to all such Damages that exceed
the Threshold. All Damages for which indemnification may be sought pursuant to
Section 8.2(a) (other than claims of fraud) shall not exceed the then aggregate
value of the Escrow Fund on the Closing Date, or following the first anniversary
of the Closing Date, the then aggregate value of the Escrow Fund at the time
such claim for indemnification is satisfied.
(d) In determining the amount of any Damage for which any Indemnified
Person may seek indemnification under Section 8.2(a)(i) or Section 8.2(a)(iii),
any materiality standard shall be disregarded.
(e) The indemnification provisions of this Article 8 are the exclusive
remedy for any Damages suffered by any Indemnified Person in connection with
this Agreement, except for Damages arising from fraud or any inaccuracy in any
representation or warranty of the Shareholders contained in Sections 3.1(b) and
3.1(c), the last sentence of Section 3.2(a), and Sections 3.32, 3.33 and 3.34.
The liability of the Shareholders to all Indemnified Persons for all Damages for
which indemnification is provided hereunder shall not exceed the Escrow Fund.
8.3 Claims Upon Escrow Fund. Subject to the provisions of this Section
8, if any Indemnified Person elects to satisfy any claims for Damages against
the Escrow Fund, such Indemnified Person shall make claims upon the Escrow Fund
by delivering to the Escrow Agent on or before the last day of the escrow period
of the Escrow Fund a notice signed by a representative of Lucent (a "Lucent
Notice") specifying in reasonable detail the individual items of Damages for
which indemnification is being sought, the date each such item was paid or
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properly accrued or arose, the nature of the misrepresentation, breach of
warranty or claim to which such item is related. Upon receipt by the Escrow
Agent of a Lucent Notice, the Escrow Agent shall, subject to the provisions of
Section 8.4, deliver to Lucent, as promptly as practicable, the number of shares
of Lucent Common Stock held in the Escrow Fund having a fair market value on the
date of such distribution, equal to such Damages. Concurrent with the sending of
any Lucent Notice to the Escrow Agent, Lucent shall provide a copy of such
Lucent Notice to the Shareholders.
8.4 Objections to Claims. (a) If any Shareholder shall object to a
Lucent Notice within the ten-day period after receipt thereof, then Lucent and
such Shareholder shall use their good faith efforts to resolve such dispute. If
Lucent and such Shareholder resolve such dispute, the parties shall deliver a
written notice to the Escrow Agent directing the delivery of the shares and
other property, if any, in the Escrow Fund as agreed between Lucent and such
Shareholder. The number of shares of Lucent Common Stock necessary to satisfy
the Damages specified in the applicable Lucent Notice shall not be released by
the Escrow Agent and shall remain in the Escrow Fund pending the resolution in
accordance with this Section 8.4 of any such objection.
(b) If Lucent and such Shareholder are unable to resolve such dispute
within 30 days after such Shareholder objects to such Lucent Notice, either
Lucent or such Shareholder, by written notice to the other and the Escrow Agent
may demand arbitration of such dispute. Any such arbitration shall be conducted
by such alternative dispute service ("Arbitration Service") as shall be
reasonably acceptable to Lucent and such Shareholder. The Arbitration Service
shall select one arbitrator reasonably acceptable to Lucent and such Shareholder
who shall be expert in the area of development and production of
microelectronics products. The decision by the Arbitration Service shall be
binding and conclusive and, notwithstanding any other provisions of this Section
8, the Escrow Agent shall be entitled to act in accordance with such decision
and make delivery of the Escrow Fund in accordance therewith.
(c) The arbitration shall be held in New York, New York. The costs of
any such arbitration shall be borne one-half for the account of Lucent and
one-half by the Shareholders (out of the Escrow Fund to the extent available
after all claims have been satisfied). Judgment upon any award rendered by the
arbitrator may be entered in any court of competent jurisdiction.
8.5 Third-Party Claims. If Lucent becomes aware of a third-party claim
which Lucent believes may result in a demand pursuant to this Section 8, Lucent
shall promptly notify the Shareholders of such claim, and the Shareholders shall
be entitled, at the Shareholders' expense (out of the Escrow Fund to the extent
available after all claims have been satisfied), to participate in any defense
of such claim; provided that Lucent shall control such defense, and shall have
the right with the consent of the Shareholders (which consent shall not be
unreasonably withheld) to settle any such claim (it being understood that no
such consent of the Shareholders shall be required where the third-party claim,
which Lucent proposes to settle could reasonably be expected to adversely
affect, in any material respect, the business reputation of Lucent or its
Affiliates, or the possible criminal liability of Lucent or its Affiliates or
any of their respective officers, directors or employees). In the event that the
Shareholders have consented to any such settlement, the Shareholders shall have
no power or authority to object under any
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provision of this Section 8 to the amount of any claim by Lucent for indemnity
with respect to such settlement.
9. Brokers' and Finders' Fees.
9.1 Company. The Shareholders represent and warrant to Acquisition and
Lucent that no broker, investment banker or financial advisor other than Chase
Securities Inc. is entitled to receive a brokerage fee, financing commission or
other commission from the Shareholders in respect of the execution of this
Agreement or the consummation of the transactions contemplated hereby. The
Shareholders agree that if the transactions contemplated by this Agreement are
not consummated (other than as a result of a breach or default by Lucent or
Acquisition), they shall indemnify and hold Acquisition and Lucent harmless
against any and all claims, losses, liabilities, costs or expenses which may be
asserted against Acquisition or Lucent as a result of the Company's or any of
its Affiliates' dealings, arrangements or agreements with any such Person.
9.2 Acquisition and Lucent. Acquisition and Lucent represent and
warrant to the Shareholders that no broker, investment banker or financial
advisor is entitled to receive any brokerage fee, financing commission or other
commission from Lucent in respect of the execution of this Agreement or the
consummation of the transactions contemplated hereby. Acquisition and Lucent
agree that if the transactions contemplated hereby are not consummated (other
than as a result of a breach or default by the Company or the Shareholders),
they shall jointly and severally indemnify and hold the Shareholders and the
Company harmless against any and all claims, losses, liabilities, costs or
expenses which may be asserted against the Company or the Shareholders, as a
result of Acquisition's or Lucent's or any of their respective Affiliates'
dealings, arrangements or agreements with any such Person.
10. Expenses. Except as set forth on Schedule 10, each party hereto
shall pay its own expenses incidental to the preparation of this Agreement, the
carrying out of the provisions of this Agreement and the consummation of the
transactions contemplated hereby, whether or not the Merger is consummated. Any
tax, including, but not limited to sales, use, stamp or transfer taxes, and any
other filing or recording fees, if any, which may be payable with respect to the
consummation of the transactions contemplated hereby shall be payable as
prescribed by applicable law or regulation.
11. Press Releases. Except as required by law or SEC regulations or
Lucent's listing agreement with the New York Stock Exchange, Lucent, Acquisition
and the Company shall not issue any press release or otherwise make public any
information with respect to this Agreement nor the transactions contemplated
hereby, prior to the Closing, without the prior written consent of the other
parties to this Agreement. The Shareholders shall cause the Company to comply
with its obligations under this Section 11.
12. Contents of Agreement; Parties in Interest; etc. This Agreement and
the agreements, schedules and exhibits referred to or contemplated herein and
the letter agreement dated March 3, 2000 concerning confidentiality, as amended
(the "Confidentiality Agreement"), set forth the entire understanding of the
parties hereto with respect to the transactions contemplated hereby, and, except
as set forth in this Agreement, such other agreements and the
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Exhibits hereto and the Confidentiality Agreement, there are no representations
or warranties, express or implied, made by any party to this Agreement with
respect to the subject matter of this Agreement and the Confidentiality
Agreement. Except for the matters set forth in the Confidentiality Agreement,
any and all previous agreements and understandings between or among the parties
regarding the subject matter hereof, whether written or oral, are superseded by
this Agreement and the agreements referred to or contemplated herein. All
statements contained in schedules, exhibits, certificates and other instruments
attached hereto shall be deemed representations and warranties (or exceptions
thereto) by the Shareholders, the Company, Acquisition or Lucent, as the case
may be.
13. Assignment and Binding Effect. This Agreement may not be assigned
by any party hereto without the prior written consent of the other parties;
provided, that Acquisition may assign its rights and obligations under this
Agreement to any directly or indirectly wholly-owned Subsidiary of Lucent, upon
written notice to the Company if the assignee shall assume the obligations of
Acquisition hereunder and Lucent shall remain liable for its obligations
hereunder. All the terms and provisions of this Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto.
14. Definitions. As used in this Agreement the terms set forth below
shall have the following meanings:
(a) "Accredited Investor" shall have the meaning set forth in Rule 501
of Regulation D under the Securities Act.
(b) "Affiliate" of a Person shall mean any other Person who (i)
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, such Person or (ii) owns more
than 5% of the capital stock or equity interest in such Person. "Control" means
the possession of the power, directly or indirectly, to direct or cause the
direction of the management and policies of a Person whether through the
ownership of voting securities, by contract or otherwise.
(c) "Benefit Plan" shall mean any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other material plan, arrangement or
understanding (whether or not legally binding) providing material benefits to
any current or former employee, officer or director of the Company.
(d) "best knowledge" in respect of any representation and warranty of
the Company set forth in this Agreement shall mean the actual and constructive
knowledge of the executive officers of the Company and employees of the Company
charged with responsibility for the particular matter which is the subject of
such representation or warranty.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(f) "Consideration Shares" shall mean the shares of Lucent Common Stock
received by the Shareholders in exchange for all the shares of Company Common
Stock issued and outstanding pursuant to Section 1.5(c).
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(g) "Environmental Laws" shall mean all applicable federal, state,
local or foreign laws, rules and regulations, orders, decrees, judgments,
permits, filings and licenses relating (i) to protection and clean-up of the
environment and activities or conditions related thereto, including those
relating to the generation, handling, disposal, transportation or release of
Hazardous Substances and (ii) the health or safety of employees in the workplace
environment, all as amended from time to time, and shall also include any common
law theory based on nuisance, trespass, negligence or other tortuous conduct.
(h) "Final Determination" shall mean (i) a decision of the United
States Tax Court, or a decision, judgment, decree or other order by another
court of competent jurisdiction, which has become final and is either no longer
subject to appeal or for which a determination not to appeal has been made; (ii)
a closing agreement made under Section 7121 of the Code or any comparable
foreign, state, local or municipal Tax statute; (iii) any disallowance of a
claim for refund or credit in respect of an overpayment of Tax unless a suit
related thereto is filed on a timely basis; (iv) any final disposition by reason
of the expiration of the applicable statute of limitations; or (v) the actual
payment by the Company of Taxes.
(i) "GAAP" shall mean generally accepted accounting principles.
(j) "Hazardous Substances" shall mean any and all hazardous and toxic
substances, wastes or materials, any pollutants, contaminants, or dangerous
materials (including, but not limited to, polychlorinated biphenyls, PCBs,
friable asbestos, volatile and semi-volatile organic compounds, oil, petroleum
products and fractions, and any materials which include hazardous constituents
or become hazardous, toxic, or dangerous when their composition or state is
changed), or any other similar substances or materials which are included under
or regulated by any Environmental Law.
(k) "Indebtedness" shall mean as at any date of determination, the sum
of the following items of the Company, without duplication: (i) obligations of
the Company created, issued or incurred for borrowed money, including all fees
and obligations thereunder (including, without limitation, any prepayment or
termination fees arising or which will arise out of the prepayment of such
Indebtedness prior to its maturity and termination), (ii) obligations of the
Company to pay the deferred purchase price or acquisition price of property or
services, other than trade or accounts payable arising, and accrued expenses
incurred, in the ordinary course of business consistent with past practice,
(iii) the face amount of all letters of credit issued for the account of the
Company and all drafts thereunder, (iv) capital lease obligations of the
Company, and (v) any obligation guaranteeing any Indebtedness or other
obligations of any other Person (including any obligations under any keep well
or support agreements).
(l) "Liens" shall mean any mortgage, pledge, lien, security interest,
conditional or installment sale agreement, encumbrance, charge or other claims
of third parties of any kind.
(m) "Material Adverse Effect" on a Person shall mean (unless otherwise
specified) any condition or event that may: (i) have a material adverse effect
on the assets, business, condition (financial or otherwise) or operations of
such Person; (ii) materially impair
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the ability of the such Person to perform its obligations under this Agreement;
or (iii) prevent or delay the consummation of the transactions contemplated
under this Agreement.
(n) "Permitted Liens" shall mean (i) Liens for taxes, assessments, or
similar charges, incurred in the ordinary course of business that are not yet
due and payable or are being contested in good faith; (ii) pledges or deposits
made in the ordinary course of business; (iii) Liens of mechanics, materialmen,
warehousemen or other like Liens securing obligations incurred in the ordinary
course of business that are not yet due and payable or are being contested in
good faith; and (iv) similar Liens and encumbrances which are incurred in the
ordinary course of business and which do not in the aggregate materially detract
from the value of such assets or properties or materially impair the use thereof
in the operation of such business.
(o) "Person" shall mean any individual, corporation, partnership,
limited partnership, limited liability company, trust, association or entity or
government agency or authority.
(p) "Purchaser Representative" shall mean any Person who satisfies all
of the conditions set forth in Rule 501 of Regulation D under the Securities
Act.
(q) "reasonable best efforts" shall mean prompt, substantial and
persistent efforts as a prudent Person desirous of achieving a result would use
in similar circumstances; provided that the Company, the Shareholders, Lucent or
Acquisition, as applicable, shall be required to expend only such resources as
are commercially reasonable in the applicable circumstances.
(r) "Regulation D" shall mean Regulation D under the Securities Act.
(s) "Subsidiary" of a Person shall mean any corporation, partnership,
joint venture or other entity in which such Person (a) owns, directly or
indirectly, 50% or more of the outstanding voting securities or equity interests
or (b) is a general partner.
(t) "Tax" (and, with correlative meaning, "Taxes" and "Taxable") shall
mean any federal, state, local, municipal or foreign net income, gross income,
gross receipts, windfall profit, severance, property, production, sales, use,
license, excise, franchise, employment, payroll, withholding, alternative or
add-on minimum, ad valorem, value-added, transfer, stamp, or environmental tax,
or any other tax, custom, duty, tariff levy, import, governmental fee or other
like assessment or charge of any kind whatsoever, together with any interest or
penalty, addition to tax or additional amount imposed by any governmental or
regulatory authority, domestic and foreign.
(u) "Tax Return" shall mean any return, report or similar statement
required to be filed with respect to any Tax (including any attached schedules),
including, without limitation, any information return, claim for refund, amended
return or declaration of estimated Tax.
15. Notices. Any notice, request, demand, waiver, consent, approval, or
other communication which is required or permitted to be given to any party
hereunder shall be in writing and shall be deemed given only if delivered to the
party personally or sent to the party by telecopy (promptly followed by a
hard-copy delivered in accordance with this Section 16) or by
40
<PAGE> 45
registered or certified mail (return receipt requested), with postage and
registration or certification fees thereon prepaid, addressed to the party at
its address set forth below:
If to Acquisition or Lucent:
Lucent Technologies Inc.
Microelectronics Group
2 Oak Way
Berkley Heights, New Jersey 07920-2332
Attn.: President
Telecopy: (908) 508-8398
with copies to:
Lucent Technologies Inc.
Microelectronics Group
2 Oak Way
Berkley Heights, New Jersey 07920-2332
Attn: Corporate Counsel, Microelectronics
Telecopy: (908) 508-8398
If to the Company:
Herrmann Technology, Inc.
4916 St. James Court
Mesquite, TX 75150
Attn: William Herrmann, Jr.
Telecopy: (972) 270-1135
with a copy to:
Haynes and Boone, LLP
901 Main Street, Suite 3100
Dallas, TX 75202
Attn: Stephen M. Pezanosky, Esq.
Telecopy: (214) 651-5940
If to the Shareholders:
Herrmann Technology, Inc.
4916 St. James Court
Mesquite, TX 75150
Attn: William Herrmann, Jr.
Telecopy: (972) 270-1135
with a copy to:
Haynes and Boone, LLP
41
<PAGE> 46
901 Main Street, Suite 3100
Dallas, TX 75202
Attn: Stephen M. Pezanosky, Esq.
Telecopy: (214) 651-5940
or to such other address or Person as any party may have specified in a notice
duly given to the other party as provided herein. Such notice, request, demand,
waiver, consent, approval or other communication will be deemed to have been
given as of the date so delivered, telegraphed or mailed.
16. Amendment. This Agreement may be amended, modified or supplemented
at any time prior to the Effective Time by the respective Boards of Directors of
the parties hereto notwithstanding the approval hereof by the shareholders of
the Company or the shareholders of Acquisition, as applicable, except as
provided in Article 5.03(l) of the TBCA. Any amendment, modification or revision
of this Agreement and any waiver of compliance or consent with respect hereto
shall be effective only if in a written instrument executed by the parties
hereto.
17. Governing Law. This Agreement shall be governed by and interpreted
and enforced in accordance with the laws of the State of Texas as applied to
contracts made and fully performed in such state.
18. No Benefit to Others. Except to the extent expressly provided in
Sections 5.2, 5.3, 5.9 and 5.10, representations, warranties, covenants and
agreements contained in this Agreement are for the sole benefit of the parties
hereto, and their respective successors and assigns, and they shall not be
construed as conferring, and are not intended to confer, any rights on any other
Person.
19. Severability. If any term or other provision of this Agreement is
determined to be invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other terms and provisions of the Agreement shall
remain in full force and effect. Upon such determination, the parties hereto
shall negotiate in good faith to modify this Agreement so as to give effect to
the original intent of the parties to the fullest extent permitted by applicable
Law.
20. Section Headings. All section headings are for convenience only and
shall in no way modify or restrict any of the terms or provisions hereof.
21. Schedules and Exhibits. All Schedules and Exhibits referred to
herein are intended to be and hereby are specifically made a part of this
Agreement.
22. Extensions. At any time prior to the Effective Time, any party may
by corporate action, extend the time for compliance by or waive performance of
any representation, warranty, condition or obligation of any other party.
23. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and the Company, the
Shareholders,
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<PAGE> 47
Acquisition and Lucent may become a party hereto by executing a counterpart
hereof. This Agreement and any counterpart so executed shall be deemed to be one
and the same instrument.
43
<PAGE> 48
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed this Agreement as of the date first above written.
LUCENT TECHNOLOGIES INC.
By: /s/ John T. Dickson
________________________________
Name: John T. Dickson
Title: Executive Vice President
KOSU ACQUISITION INC.
By: /s/ Richard Bleicher
________________________________
Name: Richard Bleicher
Title: Vice President
HERRMANN TECHNOLOGY, INC.
By: /s/ William C. Herrmann
________________________________
Name: William C. Herrmann
Title: President
HERRMANN HOLDINGS, LTD.
By: /s/ William C. Herrmann
________________________________
Name: William C. Herrmann
Title: President of Herrmann
Management, Inc.,
General Partner
ANNEM INVESTMENTS, LTD.
By: /s/ William C. Herrmann
________________________________
Name: William C. Herrmann
Title: President of Herrmann
Management, Inc.,
General Partner
HERRMANN TECHNOLOGY TRUST
By: /s/ Linda Herrmann
________________________________
Name: Linda Herrmann
Title: Trustee
44
<PAGE> 49
Glossary of Defined Terms
<TABLE>
<CAPTION>
Defined Term Location of Definition
------------ ----------------------
<S> <C>
Accredited Investor................................... Section 14(a)
Acquisition........................................... Preamble
Acquisition Common Stock ............................. Recitals
Adjusted Option....................................... Section 5.2
Affiliate............................................. Section 14(b)
Agreement............................................. Preamble
Annem................................................. Preamble
Arbitration Service................................... Section 8.4(b)
Articles of Merger.................................... Section 1.1(b)
Authorizations........................................ Section 3.12(b)
Benefit Plan.......................................... Section 14(c)
Benefits Date......................................... Section 5.9(a)
best knowledge........................................ Section 14(d)
Business.............................................. Recitals
Certificates.......................................... Section 1.8(a)
Cap................................................... Section 5.10(b)
Closing............................................... Section 1.1(b)
Closing Date.......................................... Section 1.1(b)
Code.................................................. Section 14(e)
Commonly Controlled Entity............................ Section 3.15(a)
Company............................................... Preamble
Company Common Stock.................................. Recitals
Company Stock Options................................. Section 5.2
Company Stock Option Notices.......................... Section 5.2(b)
Company Stock Plan.................................... Section 5.2
Confidentiality Agreement............................. Section 12
Consideration Shares.................................. Section 14(f)
Damages............................................... Section 8.2(a)
Effective Time........................................ Section 1.1(b)
Environmental Laws.................................... Section 14(g)
Escrow Agent.......................................... Section 8.1
Escrow Agreement ..................................... Section 6.1(e)
Escrow Fund........................................... Section 8.1
ERISA................................................. Section 3.15(a)
Exchange Act.......................................... Section 4.3(c)
Exchange Ratio........................................ Section 1.5(c)
Executive Employees................................... Section 3.16(a)
Final Determination................................... Section 14(h)
Financial Statements.................................. Section 3.5(a)
GAAP.................................................. Section 14(i)
Hazardous Substances.................................. Section 14(j)
Holdings.............................................. Preamble
</TABLE>
45
<PAGE> 50
<TABLE>
<S> <C>
Immaterial Authorizations............................. Section 3.12(b)
Indemnified Party..................................... Section 5.10(a)
Indemnified Person.................................... Section 8.2(a)
Intellectual Property Rights.......................... Section 3.13(a)
Indebtedness.......................................... Section 14(k)
IRS................................................... Section 3.14
Laws.................................................. Section 3.2(a)
Liens................................................. Section 14(l)
Lucent................................................ Preamble
Lucent Common Stock................................... Section 4.2
Lucent Notice......................................... Section 8.4
Lucent Plans.......................................... Section 5.9(b)
Lucent Authorized Preferred Stock..................... Section 4.2
Lucent Junior Preferred Stock......................... Section 4.2
Lucent SEC Documents.................................. Section 4.5(a)
Material Adverse Effect............................... Section 14(m)
Merger................................................ Recitals
1999 Balance Sheet.................................... Section 3.5(a)
NYSE.................................................. Section 1.7
Outstanding Common Shares............................. Section 3.2.(a)
Patents............................................... Section 3.13(a)
Pension Plans......................................... Section 3.15(a)
Permitted Liens....................................... Section 14(n)
Person................................................ Section 14(o)
Plans................................................. Section 3.15(a)
Purchaser Representative.............................. Section 14(p)
reasonable best efforts............................... Section 14(q)
Registration Statement................................ Section 3.32
Regulation D.......................................... Section 14(r)
Restraints............................................ Section 6.1(d)
Right................................................. Section 1.5(c)
SEC................................................... Section 4.5(a)
Securities Act........................................ Section 3.32
Shares................................................ Section 3.2(a)
Shareholders.......................................... Recitals
Subsidiary............................................ Section 14(s)
Surviving Corporation................................. Section 1.1(a)
Tax................................................... Section 14(t)
Tax Return............................................ Section 14(u)
TBCA.................................................. Recitals
Threshold............................................. Section 8.2(c)
Trust................................................. Preamble
Welfare Plans......................................... Section 3.15(a)
</TABLE>
51
