<PAGE>
Filed by Alteon WebSystems, Inc.
Pursuant to Rule 425 under the Securities Act of 1933 and
Deemed filed pursuant to Rule 14a-12 of the Securities Exchange Act of 1934
Subject Company: Alteon WebSystems, Inc. -- Commission File No: 000-27247
Information Presented in Current Report on Form 8-K
Filed by Alteon WebSystems, Inc. on August 8, 2000
Regarding Alteon's Expected Merger with Nortel Networks Corporation
August 8, 2000
Information Contained in Item 5 of Form 8-K
On July 28, 2000, Alteon WebSystems, Inc. (the "Company") entered into an
Agreement and Plan of Merger (the "Merger Agreement") with Nortel Networks
Corporation, a corporation organized under the laws of Canada ("Nortel
Networks"), and Darius Corp., a Delaware corporation and a wholly-owned
subsidiary of Nortel Networks ("Merger Sub"). The Merger Agreement contemplates
that, subject to the satisfaction of certain conditions set forth therein,
including the adoption of the Merger Agreement by the requisite vote of the
Company's stockholders and the expiration or early termination of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, Merger Sub would be merged into the Company. As a result of the merger
of Merger Sub into the Company (the "Merger"), the Company would become a
wholly-owned subsidiary of Nortel Networks. Under the terms of the Merger
Agreement, each outstanding share of the Company's common stock would be
converted into 1.83148 shares of Nortel Networks common stock. The Merger is
intended to be a tax-free reorganization under the Internal Revenue Code of
1986, as amended, and is intended to be accounted for as a purchase. The
description contained in this Item 5 of the transactions contemplated by the
Merger Agreement is qualified in its entirety by reference to the full text of
the Merger Agreement, a copy of which is attached to this report.
In connection with the execution of the Merger Agreement, certain directors,
officers and other affiliates of the Company, who collectively own approximately
15.77% of the outstanding shares of common stock of the Company, entered into a
Stockholder Agreement pursuant to which such persons agreed, among other things,
to vote their shares in favor of the Merger and against alternative acquisition
proposals. The description contained in this Item 5 of the transactions
contemplated by the Stockholder Agreement is qualified in its entirety by
reference to the full text of the Stockholder Agreement, the form of which is
attached to this report.
A registration statement relating to the Nortel Networks common stock to be
issued in connection with the Merger has not yet been filed with the Securities
and Exchange Commission, nor has a proxy statement relating to a vote of the
Company's stockholders on the Merger been filed with the SEC. The Nortel
Networks common stock may not be offered, nor may offers to acquire such stock
be accepted, prior to the time such a registration statement becomes effective.
This Report shall not constitute an offer to sell or the solicitation of an
offer to buy any Nortel Networks common stock or any other security, and shall
not constitute the solicitation of any vote with respect to the Merger.
1.
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Execution Version
AGREEMENT AND PLAN OF MERGER
by and among
NORTEL NETWORKS CORPORATION,
DARIUS CORP.
and
ALTEON WEBSYSTEMS, INC.
Dated as of July 28, 2000
2.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I CERTAIN DEFINITIONS............................................. 4
1.01. Certain Definitions............................................... 4
ARTICLE II THE MERGER; EFFECTS OF THE MERGER.............................. 12
2.01. The Merger........................................................ 12
2.02. Effective Date and Effective Time................................. 12
2.03. Tax Consequences.................................................. 12
ARTICLE III CONVERSION OF SHARES; EXCHANGE PROCEDURES..................... 13
3.01. Conversion of Shares.............................................. 13
3.02. Issuance of Shares of the Surviving Corporation................... 13
3.03. Rights as Stockholders; Stock Transfers........................... 13
3.04. Fractional Shares................................................. 14
3.05. Exchange Procedures............................................... 14
3.06. Anti-Dilution Provisions.......................................... 15
3.07. Stock Options and Other Stock Plans............................... 16
ARTICLE IV ACTIONS PENDING MERGER......................................... 19
4.01. Forbearances of the Company....................................... 19
4.02. Forbearances of Nortel Networks................................... 22
ARTICLE V REPRESENTATIONS AND WARRANTIES.................................. 23
5.01. Representations and Warranties of the Company..................... 23
5.02. Representations and Warranties of Nortel Networks and Sub......... 35
ARTICLE VI COVENANTS...................................................... 38
6.01. Reasonable Efforts................................................ 38
6.02. Stockholder Approvals............................................. 39
6.03. Registration Statement............................................ 39
6.04. Press Releases.................................................... 40
6.05. Access; Information............................................... 40
6.06. Acquisition Proposals............................................. 41
6.07. Affiliate Agreements.............................................. 42
6.08. Takeover Laws..................................................... 42
6.09. Shares Listed..................................................... 42
6.10. Regulatory Applications........................................... 42
6.11. Indemnification................................................... 43
6.12. Certain Employee Benefit Matters.................................. 44
6.13. Accountants' Letters.............................................. 45
6.14. Notification of Certain Matters................................... 45
6.15. Certain Tax Matters............................................... 46
6.16. Company Annual Meeting............................................ 46
</TABLE>
3.
<PAGE>
<TABLE>
<S> <C>
ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER...................... 46
7.01. Conditions to Each Party's Obligation to Effect the Merger........ 46
7.02. Conditions to Obligation of the Company........................... 47
7.03. Conditions to Obligation of Nortel Networks and Sub............... 48
ARTICLE VIII TERMINATION.................................................. 49
8.01. Termination....................................................... 49
8.02. Effect of Termination and Abandonment............................. 50
ARTICLE IX MISCELLANEOUS.................................................. 51
9.01. Survival.......................................................... 51
9.02. Amendment; Extension; Waiver...................................... 51
9.03. Counterparts...................................................... 52
9.04. Governing Law..................................................... 52
9.05. Expenses.......................................................... 52
9.06. Notices........................................................... 52
9.07. Entire Understanding.............................................. 53
9.08. Assignment; No Third Party Beneficiaries.......................... 53
9.09. Interpretation.................................................... 53
9.10. Severability...................................................... 53
9.11. Specific Performance; Attorney's Fees; Waiver of Jury Trial....... 53
Exhibit A Form of Affiliate Letter.......................................... 55
</TABLE>
4.
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of July 28, 2000 (this
"Agreement"), by and among NORTEL NETWORKS CORPORATION, a corporation organized
under the laws of Canada ("Nortel Networks"), DARIUS CORP., a corporation
organized under the laws of Delaware ("Sub"), and ALTEON WEBSYSTEMS, INC., a
corporation organized under the laws of Delaware (the "Company").
WITNESSETH:
WHEREAS, the Boards of Directors of each of Nortel Networks, Sub and
the Company have determined that it is advisable and in the best interests of
their respective companies and their stockholders to consummate the strategic
business combination transaction provided for herein in which, subject to the
terms and conditions set forth herein, Sub will merge (the "Merger") with and
into the Company, so that the Company is the surviving corporation in the
Merger;
WHEREAS, the parties intend that for U.S. federal income tax purposes,
the Merger qualify as a "reorganization" within the meaning of Section 368(a) of
the Code;
WHEREAS, as a condition and as an inducement to Nortel Networks'
willingness to enter into this Agreement, Nortel Networks is entering into
agreements (the "Stockholder Agreements") with certain Company stockholders; and
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein, and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01. Certain Definitions. As used in this Agreement, the following
terms shall have the meanings set forth below:
"1999 Plan" shall have the meaning set forth in Section 3.07(c)(i).
"2000 Plan" shall have the meaning set forth in Section 3.07(c)(ii).
5.
<PAGE>
"Acquisition Proposal" shall mean any of the following (other than with
Nortel Networks or any Subsidiary or other affiliate of Nortel Networks) (a) a
merger or consolidation, or any similar transaction, involving the Company
(other than mergers, consolidations or similar transactions involving solely the
Company and/or one or more wholly owned Subsidiaries of the Company or mergers,
consolidations or similar transactions in connection with which holders of
Company Common Stock prior to such transactions continue to hold at least 80% of
the outstanding shares of Company Common Stock after such transaction), (b) a
direct or indirect purchase or other acquisition (including by way of merger,
consolidation, share exchange, tender or exchange offer involving any Subsidiary
of the Company or securities issued by any Subsidiary of the Company, as the
case may be) of assets having a fair market value of greater than 20% of the
fair market value of the consolidated assets of the Company and its
Subsidiaries, (c) a purchase or other acquisition (including by way of merger,
consolidation, share exchange, tender or exchange offer or otherwise) of
beneficial ownership of securities representing more than 20% of the voting
power of the Company, (d) any transaction substantially similar to the
transactions described in clauses "(a)" through "(c)" of this paragraph, or (e)
any offer, proposal or publicly announced bona fide intention to make an offer
with respect to any of the foregoing; in each case other than the transactions
contemplated by this Agreement.
"Agreement" shall have the meaning set forth in the first paragraph of
this Agreement.
"August 16 Offering" shall have the meaning set forth in Section
3.07(d).
"Business Day" shall mean each day on which banking institutions in
both of Toronto, Canada and New York, New York are not authorized or required to
close.
"Canadian GAAP" shall mean Canadian generally accepted accounting
principles.
"Capitalization Date" shall have the meaning set forth in Section
5.01(b).
"Code" shall mean the U.S. Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning set forth in the first paragraph of
this Agreement.
"Company Affiliate" shall have the meaning set forth in Section
6.07(a).
6.
<PAGE>
"Company Board" shall mean the Board of Directors of the Company.
"Company Certificate" shall mean the Amended and Restated Certificate
of Incorporation of the Company, as amended.
"Company Common Stock" shall have the meaning set forth in Section
3.01(b).
"Company Disclosure Schedule" shall have the meaning set forth in the
opening paragraph of Section 5.01.
"Company Employees" shall have the meaning set forth in Section
6.12(b).
"Company Equity Interests" shall have the meaning set forth in Section
5.01(c).
"Company Filed SEC Documents" shall have the meaning set forth in
Section 5.01(g).
"Company Financial Advisor" shall mean Lehman Brothers Inc.
"Company Intellectual Property Rights" shall have the meaning set forth
in Section 5.01(p).
"Company Meeting" shall have the meaning set forth in Section 6.02.
"Company Plan" shall mean any Plan entered into or currently
maintained, sponsored, or contributed to by the Company or any of its
Subsidiaries or to which the Company or any such Subsidiary has any obligation
to contribute or with respect to which the Company or any of its Subsidiaries
may have any material liability.
"Company Preferred Stock" shall have the meaning set forth in Section
5.01(b).
"Company Proxy Statement" shall have the meaning set forth in Section
6.03(a).
"Company Purchase Right" shall have the meaning set forth in Section
3.07(d).
"Company SEC Documents" shall have the meaning set forth in Section
5.01(g).
"Company Stock Option Arrangements" shall have the meaning set forth in
Section 3.07(a).
7.
<PAGE>
"Company Stock Option Plans" shall have the meaning set forth in
Section 3.07(a).
"Company Stock Options" shall have the meaning set forth in Section
3.07(a).
"Company Stock Purchase Plan" shall have the meaning set forth in
Section 3.07(d).
"Confidentiality Agreement" shall mean that certain confidentiality
agreement, dated May 26, 2000, by and between the Company and Nortel Networks.
"Continuation Period" shall have the meaning set forth in Section
6.12(a).
"Copyrights" shall have the meaning set forth in the definition of
Intellectual Property Rights.
"Costs" shall have the meaning set forth in Section 6.11(a).
"Deloitte" shall have the meaning set forth in Section 6.13.
"Deloitte San Jose" shall have the meaning set forth in Section 6.13.
"DGCL" shall mean the General Corporation Law of the State of Delaware.
"Effective Date" shall have the meaning set forth in Section 2.02.
"Effective Time" shall have the meaning set forth in Section 2.02.
"Employee Option Pool" shall have the meaning set forth in Section
3.07(c).
"Environmental Laws" shall have the meaning set forth in Section
5.01(o).
"ERISA" shall mean the U.S. Employee Retirement Income Security Act of
1974, as amended, and the regulations promulgated thereunder and published
interpretations of any Governmental Authority with respect thereto.
"Exchange Act" shall mean the U.S. Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
8.
<PAGE>
"Exchange Agent" shall have the meaning set forth in Section 3.05(a).
"Exchange Fund" shall have the meaning set forth in Section 3.05(a).
"Exchange Ratio" shall mean 1.83148, subject to adjustment as set forth
in Section 3.06.
"Executive Option Pool" shall have the meaning set forth in Section
3.07(c).
"Exon-Florio" shall have the meaning set forth in Section 5.01(r).
"February 16 Offering" shall have the meaning set forth in Section
3.07(d).
"Governmental Authority" means any court, administrative agency or
commission or other foreign or domestic federal, state, provincial or local
governmental authority or instrumentality.
"HSR Act" shall have the meaning set forth in Section 5.01(r).
"Indemnified Party" shall have the meaning set forth in Section
6.11(a).
"Insurance Amount" shall have the meaning set forth in Section 6.11(b).
"Intellectual Property Rights" shall mean all proprietary and
intellectual property rights, in any jurisdiction, whether owned or held for use
under license, including such rights in and to: (A) trademarks, service marks,
brand names, trade dress, trade names, words, symbols, color schemes, internet
domain names and other indications of origin ("Trademarks"); (B) patents and
pending and filed patent applications (including all provisional, divisional,
continuation in part and reissue patents) (together, "Patents"), inventors'
certificates and invention disclosures; (C) trade secrets and other confidential
or non-public business information, including ideas, formulas, compositions,
discoveries and improvements, know-how, manufacturing and production processes
and techniques, and research and development information; drawings,
specifications, plans, proposals and technical data; analytical models,
investment and lending strategies and records, financial and other products;
financial, marketing and business data, pricing and cost information; business
and marketing plans and customer and supplier lists and information; in each
case whether patentable, copyrightable or not ("Trade Secrets"); (D) computer
programs and databases, including all object code, source code, algorithms,
subroutines, specifications, and documentation in each case whether patentable,
copyrightable or not (collectively, "Software"), and all documentation therefor;
(E) writings and other works of authorship, including marketing materials,
brochures, training materials, including all copyrights and moral rights related
to each of the foregoing ("Copyrights"); (F) mask works; (G) rights to limit the
use or disclosure of confidential information by any Person; in each case
including all registrations of, and applications to register, any of the
foregoing with any Governmental Authority and any renewals or extensions
thereof; the goodwill associated with each of the foregoing; and any claims or
causes of action or defenses arising out of or related to any of the foregoing.
9.
<PAGE>
"Knowledge" with respect to a party shall mean to the actual knowledge
of its senior executive officers after reasonable inquiry.
"Liens" shall mean any charge, mortgage, pledge, security interest,
restriction, claim, lien, or encumbrance.
"Material Adverse Effect" shall mean with respect to any party, any
change, circumstance or effect that (i) is or is reasonably likely to be
materially adverse to the business, condition (financial or otherwise) or
results of operations of such party and its Subsidiaries taken as a whole, other
than any change, circumstance or effect that results from or arises out of (a)
changes in the economy in general or (b) changes or circumstances affecting the
industries in which such party operates, which change, circumstance or effect
(in the case of clause (b)) does not affect the Company or Nortel Networks, as
the case may be, disproportionately relative to other entities operating in such
industry; provided, that any change, circumstance or effect that arises directly
out of or results directly from (x) the announcement or pendency of this
Agreement (including delays or cancellations in customer orders, a reduction in
sales, a disruption in supplier, distribution or similar relationships or a loss
of employees) or (y) any action or inaction taken by the Company at the written
request of Nortel Networks shall not by itself be deemed to constitute a
Material Adverse Effect; and provided further, that a reduction in sales by the
Company or its Subsidiaries to Lucent Technologies, Inc. shall not be taken into
account in determining the existence of a Material Adverse Effect; or (ii) would
materially impair the ability of Nortel Networks or the Company, as the case may
be, to perform its obligations under this Agreement.
"Material Systems" shall mean, with respect to any person, all internal
computer systems, communications systems, embedded manufacturing systems and
facilities infrastructure systems that are material to the business, finances
and operations of such person.
"Merger" shall have the meaning set forth in the recitals to this
Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
or, if the context so requires, The Nasdaq Stock Market, Inc.
"New Certificates" shall have the meaning set forth in Section 3.05(a).
"Nortel Networks" shall have the meaning set forth in the first
paragraph of this Agreement.
"Nortel Networks Board" shall mean the Board of Directors of Nortel
Networks.
"Nortel Networks Common Shares" shall have the meaning set forth in
Section 3.01(b).
"Nortel Networks Plans" shall have the meaning set forth in Section
6.12(b).
10.
<PAGE>
"Nortel Networks SEC Documents" shall have the meaning set forth in
Section 5.02(f).
"NYSE" shall mean the New York Stock Exchange, Inc.
"Old Certificates" shall have the meaning set forth in Section 3.05(a).
"Other Company Option Agreements" shall have the meaning set forth in
Section 3.07(a).
"Outstanding Offerings" shall have the meaning set forth in Section
3.07(d).
"Patents" shall have the meaning set forth in the definition of
Intellectual Property Rights.
"Person" or "person" shall mean any individual, bank, corporation,
limited liability company, partnership, association, joint-stock company,
business trust or unincorporated organization.
"Plan" shall mean any "employee benefit plan", within the meaning of
Section 3(3) of ERISA, whether or not subject to ERISA, and any employment,
consulting, termination, severance, retention, change in control, deferred or
incentive compensation, bonus, stock option or other equity based, vacation or
other fringe benefit plan, program, policy, arrangement, agreement or
commitment.
"Registration Statement" shall have the meaning set forth in Section
6.03(a).
"Regulatory Law" shall mean the Sherman Act, as amended, the Clayton
Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, and
all other federal, state and foreign, if any, statutes, rules, regulations,
orders, decrees, administrative and judicial doctrines and other laws that are
designed or intended to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade or lessening of
competition through merger or acquisition.
"Rights" shall mean, with respect to any person, securities or
obligations convertible into or exercisable or exchangeable for, or giving any
person any right to subscribe for or acquire, or any options, calls or
commitments relating to, or any stock appreciation right or other instrument the
value of which is determined in whole or in part by reference to the market
price or value of, shares of capital stock of such person.
"SEC" shall mean the United States Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Software" shall have the meaning set forth in the definition of
Intellectual Property Rights.
11.
<PAGE>
"Stockholder Agreements" shall mean the agreements defined as such in
the recitals hereto, as such agreements may from time to time be amended.
"Sub" shall have the meaning set forth in the first paragraph of this
Agreement.
"Sub Common Stock" shall have the meaning set forth in Section 3.01(a).
"Subsidiary" and "Significant Subsidiary" shall have the meanings
ascribed to them in Rule 1-02 of Regulation S-X of the SEC.
"Superior Proposal" shall have the meaning set forth in Section
6.06(a).
"Surviving Corporation" shall mean the Company, as the surviving
corporation in the Merger.
"Takeover Laws" shall have the meaning set forth in Section 5.01(m).
"Tax Returns" shall have the meaning set forth in Section 5.01(q).
"Taxes" shall mean all taxes, charges, fees, levies or other
assessments, however denominated, including, without limitation, all net income,
gross income, gross receipts, sales, use, ad valorem, goods and services,
capital, transfer, franchise, profits, license, withholding, payroll,
employment, employer health, excise, estimated, severance, stamp, occupation,
property or other taxes, custom duties, fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority whether arising before, on or
after the Effective Date.
"Termination Fee" shall have the meaning set forth in Section 8.02(b).
"Trade Secrets" shall have the meaning set forth in the definition of
Intellectual Property Rights.
"Trademarks" shall have the meaning set forth in the definition of
Intellectual Property Rights.
"Trading Day" shall mean any day on which the NYSE is open for trading.
"Treasury Shares" shall mean shares of the Company Common Stock held by
the Company or any of its Subsidiaries.
"TSE" shall mean The Toronto Stock Exchange.
"U.S. GAAP" shall mean United States generally accepted accounting
principles.
"Year 2000 Compliant" shall have the meaning set forth in Section
5.01(t).
"$" shall mean United States Dollar.
12.
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ARTICLE II
THE MERGER; EFFECTS OF THE MERGER
2.01. The Merger. (a) Surviving Corporation. Upon the terms and subject
to the conditions set forth in this Agreement, and in accordance with the DGCL,
at the Effective Time, Sub will merge with and into the Company pursuant to the
Merger. Following the Effective Time, the separate corporate existence of Sub
shall cease and the Company shall survive and continue to exist as a Delaware
corporation.
(b) Effectiveness and Effects of the Merger. Subject to the
satisfaction or waiver of the conditions set forth in Article VII in accordance
with this Agreement, the Merger shall become effective upon the occurrence of
the filing in the office of the Secretary of State of the State of Delaware of a
certificate of merger in accordance with Section 251 of the DGCL, or such later
date and time as may be set forth in such certificate with the consent of Nortel
Networks and the Company. The Merger shall have the effects prescribed in the
DGCL. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the property, rights, privileges, powers and franchises
of the Company and Sub shall be vested in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
(c) Certificate of Incorporation and By-Laws. The certificate of
incorporation and by-laws of Sub, as in effect immediately prior to the
Effective Time, but with Article 1 of the certificate of incorporation amended
to read: "The name of the Corporation is Alteon WebSystems, Inc.," shall be
those of the Surviving Corporation until thereafter changed or amended as
provided therein or by applicable law.
(d) Name. The name of the Surviving Corporation shall remain "Alteon
WebSystems, Inc."
(e) Officers and Directors of Surviving Corporation. The officers of
the Company as of the Effective Time shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or otherwise
ceasing to be an officer or until their respective successors are duly elected
and qualified, as the case may be. The directors of Sub as of the Effective Time
shall be the directors of the Surviving Corporation until the earlier of their
resignation or removal or otherwise ceasing to be a director or until their
respective successors are duly elected and qualified, as the case may be.
2.02. Effective Date and Effective Time. Subject to the satisfaction or
waiver (subject to applicable law) of the conditions set forth in Article VII in
accordance with this Agreement, the parties shall cause the effective date of
the Merger (the "Effective Date") to occur on (i) the second Business Day to
occur after the last of the conditions set forth in Section 7.01 shall have been
satisfied or waived in accordance with the terms of this Agreement or (ii) such
other date to which the parties may agree in writing. The time on the Effective
Date when the Merger shall become effective is referred to as the "Effective
Time."
2.03. Tax Consequences. It is intended that the Merger shall qualify as
a reorganization under Section 368(a) of the Code.
13.
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ARTICLE III
CONVERSION OF SHARES; EXCHANGE PROCEDURES
3.01. Conversion of Shares. Subject to the provisions of this
Agreement, at the Effective Time, automatically by virtue of the Merger and
without any action on the part of any party or stockholder:
(a) Conversion of Sub Common Stock. Each share of common stock
of Sub, par value $0.001 per share (the "Sub Common Stock"), issued and
outstanding immediately prior to the Effective Time, shall be converted
into one newly issued, fully-paid and non-assessable share of preferred
stock, $0.001 par value, of the Surviving Corporation, pursuant to a
Certificate of Designations proposed by Nortel Networks and approved by
the Company, such approval not to be unreasonably withheld or delayed.
(b) Conversion of Company Common Stock. Subject to Section
3.04, each share of common stock, par value $0.001 per share, of the
Company (the "Company Common Stock") issued and outstanding immediately
prior to the Effective Time (other than shares of Company Common Stock
to be canceled pursuant to Section 3.01(c)) shall become and be
converted into a number of common shares, without par value, of Nortel
Networks ("Nortel Networks Common Shares"), equal to the Exchange
Ratio. All of the shares of Company Common Stock converted into Nortel
Networks Common Shares (or cash pursuant to Section 3.04) pursuant to
this Article III shall no longer be outstanding and shall automatically
be canceled and shall cease to exist as of the Effective Time.
(c) Treasury Shares. Each share of Company Common Stock held
by the Company or any wholly owned Subsidiary of the Company as
Treasury Shares immediately prior to the Effective Time or owned by
Nortel Networks or any Subsidiary thereof shall no longer be
outstanding and shall automatically be canceled and retired at the
Effective Time and no consideration shall be issued in exchange
therefor.
3.02. Issuance of Shares of the Surviving Corporation. At the Effective
Time, in consideration of the issuance by Nortel Networks of Nortel Networks
Common Shares to the holders of Company Common Stock in accordance with Section
3.01(b), the Surviving Corporation shall issue to Nortel Networks a number of
shares of newly issued, fully-paid and non-assessable common stock, $0.001 par
value, of the Surviving Corporation, which number shall be equal to the number
of shares of Company Common Stock outstanding as of immediately prior to the
Effective Time.
3.03. Rights as Stockholders; Stock Transfers. At the Effective Time,
holders of Company Common Stock shall cease to be, and shall have no rights as,
stockholders of the Company, other than the right to receive any dividend or
other distribution with respect to such Company Common Stock with a record date
occurring prior to the Effective Time and the consideration provided under this
Article III. After the Effective Time, there shall be no transfers on the stock
transfer books of the Company or the Surviving Corporation of shares of Company
Common Stock.
14.
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3.04. Fractional Shares. Notwithstanding any other provision hereof, no
fractional Nortel Networks Common Shares and no certificates or scrip therefor,
or other evidence of ownership thereof, will be issued in the Merger; instead,
Nortel Networks shall pay to each holder of Company Common Stock who would
otherwise be entitled to a fractional share of Nortel Networks Common Shares
(after taking into account all Old Certificates delivered by such holder) an
amount (in U.S. dollars) in cash (without interest) determined by multiplying
such fraction by the volume weighted average of the last sale price of Nortel
Networks Common Shares on the NYSE (as reported in the three star New York City
edition of the Wall Street Journal (for trading during regular trading hours,
not extended trading)) for the five Trading Days immediately preceding the
Effective Date. As promptly as practicable after the determination of the amount
of cash, if any, to be paid to holders of fractional interests, Nortel Networks
shall so notify the Exchange Agent, and Nortel Networks shall cause the
Surviving Corporation to deposit such amount with the Exchange Agent and shall
cause the Exchange Agent to forward payments to such holders of fractional
interests subject to and in accordance with the terms hereof.
3.05. Exchange Procedures. (a) At or prior to the Effective Time,
Nortel Networks shall deposit, or shall cause to be deposited, with a bank or
trust company having (or whose parent has) net capital of not less than
$100,000,000 (the "Exchange Agent"), for the benefit of the holders of
certificates formerly representing shares of Company Common Stock ("Old
Certificates"), for exchange in accordance with this Article III, certificates
representing the Nortel Networks Common Shares ("New Certificates") and an
estimated amount of cash pursuant to Section 3.04 (such cash and New
Certificates (without any interest on any such cash), being hereinafter referred
to as the "Exchange Fund") to be paid pursuant to this Article III in exchange
for outstanding shares of Company Common Stock.
(b) As promptly as practicable after the Effective Date, Nortel
Networks shall send or cause the Exchange Agent to send or cause to be sent to
each former holder of record of shares (other than Treasury Shares) of Company
Common Stock immediately prior to the Effective Time transmittal materials for
use in exchanging such stockholder's Old Certificates for the consideration set
forth in this Article III. Nortel Networks shall cause the New Certificates
representing Nortel Networks Common Shares into which shares of a stockholder's
Company Common Stock are converted at the Effective Time and/or any check in
respect of any fractional share interests or dividends or distributions which
such person shall be entitled to receive pursuant to this Article III, to be
delivered to such stockholder upon delivery to the Exchange Agent of Old
Certificates representing such shares of Company Common Stock (or, pursuant to
Section 3.05(f), a surety bond reasonably satisfactory to Nortel Networks and
the Exchange Agent, if any of such certificates are lost, stolen or destroyed)
owned by such stockholder. No interest will be paid on any such cash to be paid
in lieu of fractional share interests or in respect of dividends or
distributions which any such person shall be entitled to receive pursuant to
this Article III upon such delivery.
(c) Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to any former holder of Company Common Stock for
any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
15.
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(d) No dividends or other distributions with respect to Nortel Networks
Common Shares with a record date occurring after the Effective Time shall be
paid to the holder of any unsurrendered Old Certificate representing shares of
Company Common Stock converted in the Merger into Nortel Networks Common Shares
and cash in lieu of fractional Nortel Networks Common Shares pursuant to Section
3.04, until the holder thereof shall be entitled to receive New Certificates and
such amount of cash in exchange therefor in accordance with this Article III.
After becoming so entitled in accordance with this Article III, the record
holder thereof also shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to Nortel Networks Common Shares such holder had the right
to receive upon surrender of the Old Certificate, and payment thereof shall be
made promptly following the later of (i) the date on which such holder shall
become entitled to receive New Certificates and (ii) the payment date with
respect to such dividend or other distribution.
(e) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of the Company for one year after the Effective Time shall, upon
demand by Nortel Networks, be paid or delivered to Nortel Networks. Any
stockholders of the Company who have not theretofore complied with this Article
III shall thereafter look only to Nortel Networks for payment of the Nortel
Networks Common Shares, cash in lieu of any fractional shares and unpaid
dividends and distributions on the Nortel Networks Common Shares deliverable in
respect of each share of Company Common Stock such stockholder holds, as
determined pursuant to this Agreement, in each case, without any interest
thereon.
(f) If any Old Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such Old
Certificate to be lost, stolen or destroyed and the posting by such person of a
bond in such reasonable amount as Nortel Networks may direct as indemnity
against any claim that may be made against it or the Surviving Corporation with
respect to such Old Certificate, Nortel Networks shall, in exchange for such
lost, stolen or destroyed Old Certificate, deliver or cause the Exchange Agent
to deliver a New Certificate in respect thereof pursuant to this Article III.
3.06. Anti-Dilution Provisions. In the event Nortel Networks or the
Company (with Nortel Networks' consent) changes (or establishes a record date
for changing) the number or classes of Nortel Networks Common Shares or the
number or classes of shares of Company Common Stock issued and outstanding prior
to the Effective Time as a result of a stock split, stock dividend,
recapitalization, subdivision, reclassification, combination, exchange of shares
or similar transaction with respect to the outstanding Nortel Networks Common
Shares or the outstanding Company Common Stock then (a) if the record and
payment dates therefor shall be prior to the Effective Time, the Exchange Ratio
shall be proportionately adjusted to reflect such stock split, stock dividend,
recapitalization, subdivision, reclassification, combination, exchange of shares
or similar transaction; and (b) if the record date therefor shall be prior to
the Effective Time but the payment date therefor shall be subsequent to the
Effective Time, Nortel Networks shall take such action as shall be required so
that on such payment date any former holder of Old Certificates who shall have
received or become entitled to receive New Certificates pursuant to this Article
III shall be entitled to receive such additional Nortel Networks Common Shares
as such holder would have received as a result of such event if the record date
therefor had been immediately after the Effective Time.
16.
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3.07. Stock Options and Other Stock Plans.
(a) Effective at the Effective Time, each option to purchase shares of
Company Common Stock (collectively, the "Company Stock Options") granted to
employees or directors of, or consultants or advisors to, the Company or any
Subsidiary thereof pursuant to the terms of the 1999 Equity Incentive Plan, the
2000 Nonstatutory Equity Incentive Plan and the 2000 Equity Incentive Plan of
Pharsalia Technologies, Inc. (collectively, the "Company Stock Option Plans") or
granted to employees pursuant to a separate stock option agreement listed on
Section 3.07 of the Company Disclosure Schedule (collectively, the "Other
Company Option Agreements" and, together with the Company Stock Option Plans,
the "Company Stock Option Arrangements") that is outstanding immediately prior
to the Effective Time shall be assumed by Nortel Networks and deemed to
constitute an option to acquire, on the same terms and conditions (including
such terms relating to the vesting and exercisability of the Company Stock
Options and terms relating to adjustments for any stock dividend, subdivision,
reclassification, recapitalization, split, combination, exchange of shares or
similar transaction following such assumption) as were applicable under such
Company Stock Option immediately prior to the Effective Time, the number of
Nortel Networks Common Shares (rounded down to the greatest number of whole
Nortel Networks Common Shares) that is equal to the product of (i) the number of
shares of Company Common Stock covered by such Company Stock Option immediately
prior to the Effective Time multiplied by (ii) the Exchange Ratio, at an option
exercise price per share of Nortel Networks Common Shares (rounded up to the
nearest whole cent) equal to the quotient of (iii) the option exercise price per
share of Company Common Stock covered by such Company Stock Option immediately
prior to the Effective Time divided by (iv) the Exchange Ratio. The date of
grant of each such Company Stock Option shall be the date on which such Company
Stock Option was originally granted. As soon as reasonably practicable following
the Effective Date, Nortel Networks shall cause to be delivered to each holder
of a Company Stock Option that has been assumed by Nortel Networks pursuant to
this Section 3.07 a notice (x) stating that such Company Stock Option has been
converted into an option to purchase Nortel Networks Common Shares, (y) stating
that such Company Stock Option has been assumed by Nortel Networks and shall
continue in effect subject to all of the terms and conditions applicable thereto
immediately prior to the Effective Time and (z) setting forth the number of
Nortel Networks Common Shares covered by such Company Stock Option and the per
share option exercise price for such Nortel Networks Common Shares. >From and
after the Effective Time, Nortel Networks and the Surviving Corporation shall
comply with the terms of each Company Stock Option Arrangement pursuant to which
the Company Stock Options were granted; provided, that (i) the board of
directors of Nortel Networks or an authorized committee thereof shall succeed to
the authorities and responsibilities of the Company Board or any committee
thereof under the Company Stock Option Arrangements and (ii) the terms of the
Company Stock Option Arrangements shall be amended as necessary to reflect the
assumption of the Company Stock Options contemplated hereunder. Notwithstanding
the foregoing, the adjustments provided herein with respect to any Company Stock
Options that are "incentive stock options" (as defined in Section 422 of the
Code) shall be effected in a manner consistent with Section 424(a) of the Code.
(b) Prior to the Effective Date, the Company shall take all necessary
or appropriate action (including amending any of the Company Stock Option
Arrangements or making adjustments as permitted thereby) to (i) effectuate the
assumption and conversion of the Company Stock Options by Nortel Networks and
the assignment to Nortel Networks of the authorities and responsibilities of the
Company Board or any committee thereof under the Company Stock Option
Arrangements, (ii) except as specifically provided in Section 3.07(c) herein,
preclude the grant of any additional Company Stock Options under any of the
Company Stock Option Arrangements or otherwise, (iii) accelerate the vesting of
the Company Stock Options granted to the Non-Employee Directors under the 1999
Equity Incentive Plan (it being understood that the Company shall not amend or
change in any way the acceleration of vesting of the Common Stock Options of any
other option holder under any of the Company Stock Option Arrangements without
the express consent of Nortel Networks) and (iv) make such other amendments as
Nortel Networks shall reasonably determine are necessary to comply with Canadian
securities laws or TSE rules or policies that will become applicable to such
Company Stock Option Arrangements at the Effective Time or otherwise by reason
of the Merger.
17.
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(c) As soon as practicable after the execution hereof, the Company
shall establish two option pools (the "Executive Option Pool" and the "Employee
Option Pool") in order to grant Company Stock Options to certain executives, key
employees and new hires during the period from the date hereof to the Effective
Time under the terms and conditions set forth in this Section 3.07(c). The
Executive Option Pool shall consist of an aggregate of 480,000 shares of Company
Common Stock and the Employee Option Pool shall consist of an aggregate of
500,000 shares of Company Common Stock. In no event shall the Company grant any
Company Stock Options that are reload options or which include the ability to
exercise through the use of promissory notes or any stock appreciation rights,
restricted stock, stock bonus or any type of synthetic stock option features nor
shall the Company grant any Company Stock Options in excess of the amounts
reserved in the two option pools described above without the express consent of
Nortel Networks. The Company shall promptly notify Nortel Networks of the grant
of Company Common Options hereunder and provide Nortel Networks with reasonable
details of each grant, including without limitation, name of employee, number of
shares granted, exercise price and confirmation of the appropriate vesting
schedule.
(i) Executive Option Pool. After the date hereof, but prior to
the Effective Time, the Company shall take all necessary actions to
grant Company Stock Options from the Executive Option Pool to the key
executives listed on Section 3.07(c)(i) of the Company Disclosure
Schedule for the number of shares of Company Common Stock listed
opposite each such executive's name on such disclosure schedule. All
Company Stock Options granted in respect of the Executive Option Pool
shall (A) be granted under and, except as provided herein, be subject
to the terms and conditions of, the Company 1999 Equity Incentive Plan
(the "1999 Plan"), (B) have an exercise price equal to the Fair Market
Value (as defined in the 1999 Plan) of the shares of Company Common
Stock on the date of grant, (C) vest in two equal installments on the
second and third anniversaries of the Effective Time, provided such
executive is employed with the Company or its successor on each such
anniversary and (D) not be subject to any acceleration of vesting upon
the consummation of the transactions contemplated hereunder.
(ii) Employee Option Pool. From the date hereof to the Effective
Time, the Company may grant Company Stock Options from the Employee
Option Pool to persons identified as key employees of the Company and
to newly-hired employees of the Company, in each case, who are not
officers of the Company. All Company Stock Options granted in respect
of the Employee Option Pool shall (A) be granted under, and except as
provided herein, be subject to the terms and conditions of, the
Company 2000 Nonstatutory Equity Incentive Plan (the "2000 Plan"), (B)
have an exercise price equal to the Fair Market Value (as defined in
the 2000 Plan) of the shares of Company Common Stock on the date of
grant and (C) vest as follows: twenty-five percent on the first
anniversary of the grant date and 1/48 on each one-month anniversary
thereafter, provided such employee is employed with the Company or its
successor on each such anniversary.
18.
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(d) Effective at the Effective Time, each right to purchase shares of
Company Common Stock ("Company Purchase Right") granted to employees of the
Company or any Subsidiary thereof pursuant to the Company's 1999 Employee Stock
Purchase Plan and the Company Employee Stock Purchase Plan Offering, as amended
effective February 16, 2000 (the "Company Stock Purchase Plan"), and the Initial
Offering (as defined in the Company Stock Purchase Plan) and the offering that
commenced on February 16, 2000, (the "February 16 Offering"), and one additional
six-month offering commencing on August 16, 2000 (the "August 16 Offering"
together with the Initial Offering and the February 16 Offering referred to
herein as the "Outstanding Offerings") shall be assumed by Nortel Networks. By
virtue of the Merger, each Company Purchase Right under the Outstanding
Offerings shall be automatically converted into and deemed to constitute a right
to acquire, on the same terms and conditions as were applicable under the
Company Stock Purchase Plan immediately prior to the Effective Time (except as
modified as specifically provided herein), the number of Nortel Networks Common
Shares (rounded down to the nearest whole share) equal to the amount of the
Participant's payroll deductions as of the relevant Purchase Date (as defined in
the Company Stock Purchase Plan) under the Company Stock Purchase Plan divided
by the lesser of (i) eighty-five percent of the fair market value of the Nortel
Networks Common Shares on the relevant Purchase Date under the Outstanding
Offerings (rounded up to the nearest whole cent), or (ii) eighty-five percent of
the fair market value of the Company Common Shares on the Offering Date of the
relevant Outstanding Offering divided by the Exchange Ratio (rounded up to the
nearest whole cent). The Company shall take all necessary actions, including
without limitation amending the Company Stock Purchase Plan, to limit the August
16 Offering to six months, to cancel all offerings other than the August 16
Offering scheduled, contemplated or otherwise required to commence after the
date hereof and to prohibit any employees to begin participation in the
Outstanding Offerings other than the August 16 Offering after the date hereof.
>From and after the Effective Time, Nortel Networks and the Surviving
Corporation shall comply with the terms of each Company Purchase Right granted
pursuant to the Company Stock Purchase Plan in respect of the Outstanding
Offerings; provided, that (i) the Board of Directors of Nortel Networks or an
authorized committee thereof shall succeed to the authorities and
responsibilities of the Company Board or any committee thereof under the Company
Stock Purchase Plan, (ii) the terms of the Company Stock Purchase Plan shall be
amended to reflect the assumption of rights and other provisions contemplated
hereunder and (iii) immediately after the final Purchase Date of the Outstanding
Offerings, the Company Stock Purchase Plan shall be terminated. Notwithstanding
the foregoing, the adjustments provided herein with respect to the Company
Purchase Rights granted pursuant to Section 423 of the Code shall be effected in
a manner consistent with Section 424(a) of the Code.
(e) Nortel Networks shall cause to be taken all corporate action
necessary to reserve for issuance a sufficient number of Nortel Networks Common
Shares for delivery upon exercise of Company Stock Options in accordance with
this Section 3.07. Within 10 days following the Effective Date, Nortel Networks
shall file with the SEC a registration statement on Form S-8 (or any successor
or other appropriate forms) with respect to the Nortel Networks Common Shares
subject to Company Stock Options and Company Purchase Rights to be registered
under the Securities Act and shall use its reasonable efforts to cause the
effectiveness of such registration statement (and current status of the
prospectus or prospectuses contained therein) to be maintained for so long as
Company Stock Options and Company Purchase Rights remain outstanding.
19.
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(f) In consideration of Nortel Networks' agreement set forth in this
Section 3.07 to assume the Company's liabilities pursuant to Company Stock
Options outstanding at the Effective Time, the Company hereby agrees to pay
Nortel Networks, upon exercise of the Company's outstanding Company Stock
Options after the Effective Time, amounts sufficient to ensure that Nortel
Networks Common Shares are issued to the optionees on a fully-paid basis (i.e.,
for total consideration equal to the fair market value of the Nortel Networks
Common Shares issued to optionees on the date such shares are issued).
(g) Immediately prior to the Effective Time, the Company shall assign
to Nortel Networks any rights to repurchase (or similar rights) with respect to
those shares of Company Common Stock issued to former stockholders of Pharsalia
Technologies, Inc., pursuant to that Exchange Agreement, dated as of March 31,
2000, by and between the Company, Pharsalia Technologies, Inc., and the Key
Stockholder (as defined therein).
ARTICLE IV
ACTIONS PENDING MERGER
4.01. Forbearances of the Company. From the date hereof until the
Effective Time, except as expressly contemplated by this Agreement, or as set
forth in Section 4.01 of the Company's Disclosure Schedule, or except as
expressly consented to in writing by Nortel Networks, the Company will not, and
will cause each of its Subsidiaries not to:
(a) Ordinary Course. Conduct its business and the business of its
Subsidiaries other than in the ordinary and usual course in all
material respects and in material compliance with applicable laws and
regulations or, to the extent consistent therewith, fail to use
reasonable efforts to preserve intact their business organizations and
assets and maintain their rights, franchises and existing relations
with customers, suppliers, employees and business associates, or take
any action that would adversely affect its ability to perform any of
its material obligations under this Agreement in any material respect;
provided, however, that no action by the Company or its Subsidiaries
with respect to matters specifically addressed by any other provision
of this Section 4.01 shall be deemed a breach of this Section 4.01(a)
unless such action would constitute a breach of one or more of such
other provisions.
(b) Capital Stock. (i) Issue, sell, pledge, dispose of or
encumber, or authorize or propose the issuance, sale, pledge,
disposition or encumbrance of, any shares of its capital stock or any
Rights, (ii) enter into any agreement with respect to the foregoing or
(iii) permit any additional shares of capital stock to become subject
to new grants of employee or director stock options, other Rights or
similar stock-based employee rights, other than (x) the issuance of
Company Common Stock upon the exercise of stock options outstanding as
of the date hereof or granted in accordance with Section 3.07(c) in
accordance with the terms of the Company Stock Option Arrangements as
in effect on the date of this Agreement, (y) issuances by a wholly
owned Subsidiary of the Company of capital stock to such Subsidiary's
parent and (z) issuances to comply with the Company's obligation under
the Company Stock Purchase Plan.
20.
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(c) Dividends, Etc. (i) Make, declare, pay or set aside for
payment any dividend (other than dividends from the Company's
Subsidiaries to the Company or another Subsidiary of the Company) on
or in respect of, or declare or make any distribution on any shares of
its capital stock or (ii) except for any such transaction by a wholly
owned Subsidiary of the Company which remains a wholly owned
Subsidiary after consummation of such transaction and except for
repurchases from employees pursuant to restricted stock purchase or
similar agreements in effect as of the date of this Agreement,
directly or indirectly adjust, split, combine, redeem, reclassify,
purchase, repurchase or otherwise acquire, any shares of the capital
stock of the Company or any of its Subsidiaries.
(d) Compensation; Employment Agreements; Etc. Enter into or amend
any employment, consulting, severance, retention, change in control or
similar agreements or arrangements with any of its or its
Subsidiaries' directors, officers, employees or consultants or former
directors, officers, employees or consultants, or grant any salary,
wage or other compensation increase, make any award or grant under any
Plan or increase or modify any employee benefit (including any
incentive or bonus payments or perquisite), except for (i) increases
in annual salary or hourly wage rates granted to current employees
(other than officers) in the ordinary course of business, consistent
with past practice, (ii) the payment of bonuses to employees in an
aggregate amount not to exceed $50,000 per month, (iii) the retention
of consultants whose fees and expenses do not exceed $3,000,000 in the
aggregate per quarter (provided, that such consultants shall not be
issued any equity securities or the right to acquire equity securities
of the Company), (iv) the payment of signing bonuses to new employees
not in excess of $15,000 per employee and (v) changes required to be
implemented in accordance with the current terms of any Company Plan
set forth in Section 4.01 of the Company's Disclosure Schedule.
(e) Benefit Plans. Enter into, adopt, implement or amend in any
material respect (except to the extent required to comply with
applicable law) any Plan (other than routine Company policies that do
not involve the incurrence by the Company of any liability in excess
of $500,000 in the aggregate).
(f) Acquisitions and Dispositions. Acquire all or any portion of
the assets, business or properties of any other entity (other than the
acquisition of inventory, equipment, raw materials or other supplies
in the ordinary course of business, consistent with past practices)
or, other than the sale of products or equipment or the disposition of
financial instruments for purposes of cash management in the ordinary
course of business, consistent with past practices, sell, transfer,
mortgage, encumber or otherwise dispose of or discontinue any portion
of its assets, business or properties or agree to enter into any
merger, reorganization, share exchange, business combination or
similar transaction pursuant to which shareholders of the Company
would receive any consideration in exchange for or in addition to
their existing shares of Company Common Stock, it being understood, in
each case, that Nortel Networks shall have a reasonable opportunity to
consult with the Company in connection with the structuring,
negotiation and documentation of any such transaction.
(g) Amendments. Amend the Company Certificate or the Company's
by-laws.
(h) Accounting Methods. Implement or adopt any material change in
its accounting principles, practices or methods, other than as may be
required by U.S. GAAP or SEC regulation.
21.
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(i) Contracts. Except in the ordinary course of business or in
accordance with clause "(iii)" of Section 4.01(d), (A) enter into or
terminate any contract, agreement or lease potentially involving
payments or delivery of value thereunder by or to the Company or any
of its Subsidiaries in excess of $1,000,000, (B) amend or modify in a
material respect any of its existing contracts, agreements or leases
(including any licensing agreement) involving payments or delivery of
value in excess of $1,000,000 or (C) enter into or amend or modify in
a material respect any non-competition or similar obligation by the
Company or Company Affiliates.
(j) Claims. Except in the ordinary course of business, settle any
claim, action or proceeding to the extent the settlement involves the
payment of money damages in excess of $250,000 in the aggregate or
involving any restrictions or limitations on the Company or the
Company's business.
(k) Adverse Actions. (i) Take any action, or permit any action to
be taken while knowing that such action would, or is reasonably likely
to, prevent or impede the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code; or (ii) knowingly
take any action or permit any action to be taken that is intended or
is reasonably likely to result in (A) any of its representations and
warranties set forth in this Agreement being or becoming untrue in a
material respect at any time at or prior to the Effective Time such
that the conditions set forth in Section 7.03(a) would not be
satisfied, (B) except as otherwise permitted by Section 6.06, any of
the conditions to the Merger set forth in Article VII not being
satisfied or satisfaction of any such condition being materially
delayed or (C) a violation of any provision of this Agreement except,
in each case, as may be required by applicable federal, state, local
and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees.
(l) Incurrence of Indebtedness. Other than (i) short-term
indebtedness incurred in the ordinary course of business consistent
with past practice but in no event to exceed an aggregate of
$3,000,000 of short-term indebtedness and (ii) indebtedness of the
Company or any of its Subsidiaries to the Company or any of its
Subsidiaries, incur any indebtedness for borrowed money, assume,
guarantee, endorse or otherwise as an accommodation become responsible
for the obligations of any other individual, corporation or other
entity, or make any loan or advance other than loans or advances
(except for loans or advances to purchase Company Common Stock) to
employees, customers or other persons in the ordinary course of
business, consistent with past practices.
(m) Derivatives. Enter into (i) leveraged derivative contracts
(defined as contracts that use a factor to multiply the underlying
index exposure), or (ii) other derivative contracts except for the
purpose of hedging known interest rate and foreign exchange exposures
or otherwise reducing the Company's cost of financing.
(n) Capital Expenditures. Make any capital expenditures in excess
of $1,000,000 in the aggregate in any quarter of the year.
22.
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(o) Tax Elections. Make any new or different material Tax
election, or revoke any material Tax election, file any material
amended Tax Returns, settle any material Tax audits or other
proceedings, other than in connection with currently pending
proceedings or subsequent related proceedings, or change in any
material respect its method of tax accounting or tax practice.
(p) Confidentiality Agreements. Waive any confidentiality or
"standstill" provisions entered into with any third party in
connection with its consideration of an Acquisition Proposal.
(q) Agreements. Agree or commit to do anything prohibited by the
above paragraphs (a) through (p).
Within two business days after the execution of this Agreement, Nortel
Networks shall (i) designate a Person who will be solely responsible for
receiving any requests for consent with respect to the matters referred to in
this Section 4.01, and (ii) provide the name of such Person to the Chief
Financial Officer and General Counsel of the Company. Notwithstanding anything
to the contrary in this Section 4.01, if the Company makes a request in writing
to the Person referred to in the preceding sentence seeking Nortel Networks'
consent to any action or transaction that is otherwise prohibited by this
Section 4.01, and describing the material terms of such proposed action or
transaction, Nortel Networks shall respond to such request in a reasonably
timely fashion after such request is made.
4.02. Forbearances of Nortel Networks. From the date hereof until the
Effective Time, except as expressly contemplated by this Agreement, without the
prior written consent of the Company, Nortel Networks will not, and will cause
each of its Subsidiaries not to:
(a) Dividends, Etc. (i) Make, declare, pay or set aside for
payment any extraordinary cash dividend or make any other
extraordinary distribution (other than pro rata stock dividends, stock
splits or similar distributions) on or in respect of the Nortel
Networks Common Shares.
(b) Adverse Actions. (i) Take any action or permit any action to
be taken while knowing that such action would, or is reasonably likely
to, prevent or impede the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code; or (ii) knowingly
take any action or permit any action to be taken that is intended or
is reasonably likely to result in (A) any of its representations and
warranties set forth in this Agreement being or becoming untrue in a
material respect at any time at or prior to the Effective Time, (B)
subject to Section 6.10(d), any of the conditions to the Merger set
forth in Article VII not being satisfied or satisfaction of any such
condition being materially delayed or (C) a violation of any provision
of this Agreement except, in each case, as may be required by
applicable law.
(c) Agreements. Agree or commit to do anything prohibited by the
above paragraphs (a) and (b).
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. Representations and Warranties of the Company. Except as set
forth in the Company Filed SEC Documents or in the disclosure schedule delivered
by the Company to Nortel Networks prior to the execution of this Agreement (the
"Company Disclosure Schedule") (each section of which qualifies the
correspondingly numbered representation and warranty or covenant to the extent
specified therein), the Company hereby represents and warrants to each of Nortel
Networks and Sub as follows:
(a) Organization, Standing and Authority. The Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. It is duly qualified to do
business and is in good standing (in jurisdictions which recognize
such concept) in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or assets or
the conduct of its business requires it to be so qualified and it has
in effect all federal, state, local and foreign governmental
authorizations necessary for it to own or lease its properties and
assets and to carry on its business as it is now conducted, except
where the failure to be so duly qualified and in good standing or to
have in effect all federal, state, local, and foreign governmental
authorizations does not have, and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on
the Company. The Company has made available to Nortel Networks a
complete and correct copy of its certificate of incorporation and
by-laws, each as amended and in full force and effect as of the date
of this Agreement, and the Company is not in violation of any
provision thereof.
(b) Shares.
(i) The authorized capital stock of the Company consists of
(A) 300,000,000 shares of Company Common Stock of which
43,169,417 shares were outstanding as of July 25, 2000 (the
"Capitalization Date") and (B) 5,000,000 shares of preferred
stock, par value $.001 per share ("Company Preferred Stock"), of
which no shares were issued or outstanding as of the
Capitalization Date. Between the Capitalization Date and the date
of this Agreement, there have been no issuances of shares of the
capital stock of the Company or any other securities of the
Company other than issuances of shares pursuant to Company Stock
Options and other Rights outstanding on the Capitalization Date
as set forth in clause (iii) below.
(ii) All issued and outstanding shares of Company Common
Stock have been duly authorized and validly issued, and are fully
paid and nonassessable, and no class of capital stock of the
Company is entitled to preemptive rights.
(iii) There were outstanding at the Capitalization Date
except as set forth in Section 5.01(b)(iii) of the Company
Disclosure Schedule no Rights to acquire capital stock from the
Company other than (i) Company Stock Options representing in the
aggregate the right to purchase 10,592,707 shares of Company
Common Stock and (ii) Rights granted in connection with the
Company Stock Purchase Plan. Section 5.01(b)(iii) of the Company
Disclosure Schedule also sets forth for all Company Stock Options
outstanding at the Capitalization Date a true and complete list
of the following: their holders, their date of grant, the number
of shares of Company Common Stock for which they are exercisable,
their exercise price as currently in effect, their date of
vesting and the conditions, if any, under which such vesting may
accelerate. No Rights to acquire capital stock from the Company
have been issued or granted since the Capitalization Date.
24.
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(c) Subsidiaries.
(i) Section 5.01(c)(i) of the Company Disclosure Schedule
sets forth a list as of the date hereof of all of the Company's
Subsidiaries, together with their jurisdiction of organization.
Unless otherwise described therein, the Company owns, directly or
indirectly, beneficially and of record 100% of the issued and
outstanding voting securities of each such Subsidiary (other than
directors' qualifying shares, if any). No equity securities of
any of the Company's Subsidiaries are or may become required to
be issued (other than to the Company or its wholly owned
Subsidiaries) by reason of any Rights and there are no contracts,
commitments, understandings or arrangements by which any of such
Subsidiaries is bound to sell or otherwise transfer any shares of
capital stock of any such Subsidiaries (other than to the Company
or its wholly owned Subsidiaries). There is no corporation,
partnership, limited liability company or similar entity with
respect to which, as of the date of this Agreement, the Company
or any Subsidiary of the Company owns more than 5% but less than
a majority of the voting equity or similar voting interest or any
interest convertible into, or exchangeable or exercisable for,
more than 5% but less than a majority of the voting equity or
similar voting interest and which interest is carried on the
Company's most recent financial statements (or if not held as of
the date thereof, would be carried on the Company's financial
statements if prepared as of the date hereof) at a value in
excess of $500,000 (collectively, the "Company Equity
Interests"). All of the shares of capital stock of each of the
Significant Subsidiaries of the Company and all the Company
Equity Interests held by the Company and each Subsidiary of the
Company are fully paid and nonassessable and are owned by the
Company or such Subsidiary free and clear of any Liens (other
than Taxes not yet due and payable). As of the date of this
Agreement, except as set forth in Section 5.01(c)(i) of the
Company Disclosure Schedule there are no material outstanding
contractual obligations of the Company or any of its Subsidiaries
to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in, any entity in which
the Company or any Subsidiary of the Company owns a Company
Equity Interest.
(ii) Each of the Company's Subsidiaries has been duly
organized and is validly existing in good standing (in
jurisdictions which recognize such concept) under the laws of the
jurisdiction of its organization. Each of such Subsidiaries is
duly qualified to do business and in good standing (in
jurisdictions which recognize such concept) in the jurisdictions
where its ownership or leasing of property or the conduct of its
business requires it to be so qualified and each has in effect
all federal, state, local and foreign governmental authorizations
necessary for it to own or lease its properties and assets and to
carry on its business as it is now conducted, except where the
failure to be so duly qualified and in good standing or to have
in effect all federal, state, local, and foreign governmental
authorizations does not have, and would not reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
(d) Corporate Power. The Company and each of its Subsidiaries has the
corporate power and authority to carry on its business as it is now being
conducted and to own all its properties and assets; and it has the
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby.
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(e) Corporate Authority.
(i) Subject, in the case of the consummation of the Merger, to
receipt of the requisite approval and adoption of the "agreement of
merger" (as such term is used in Section 251 of the DGCL) contained in
this Agreement and the Merger by the holders of a majority of the
outstanding shares of Company Common Stock entitled to vote thereon,
the Company Board having unanimously adopted a resolution approving
such "agreement of merger" and declaring its advisability, this
Agreement and the transactions contemplated hereby have been
authorized by all necessary corporate action of the Company and the
Company Board (assuming that neither Nortel Networks nor Sub is an
"interested stockholder" of the Company under Section 203 of the DGCL
immediately before the execution and delivery of this Agreement and
the Stockholder Agreements).
(ii) This Agreement is a legal, valid and binding agreement of
the Company, enforceable in accordance with its terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of
general applicability relating to or affecting creditors' rights or by
general equity principles, whether considered at law or in equity).
(f) No Defaults. Subject to receipt of the regulatory approvals, and
expiration of the waiting periods, referred to in Section 5.01(r), required
filings under federal or state securities or other laws, the execution,
delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby by the Company do not
and will not (i) constitute a breach or violation of, or a default under,
any law, rule or regulation or any judgment, decree, order, governmental
permit or license, or agreement, indenture or instrument of the Company or
of any of its Subsidiaries or to which the Company or any of its
Subsidiaries or any of their respective properties or assets are subject or
bound, (ii) constitute a breach or violation of, or a default under, the
articles or certificate of incorporation or by-laws of the Company or any
of its Subsidiaries or (iii) require any consent or approval under any such
law, rule, regulation, judgment, decree, order, governmental permit or
license, agreement, indenture or instrument, except in the case of (i) and
(iii), where such breach, violation or default or the failure to obtain
such consents or approvals would not in the aggregate have a Material
Adverse Effect on the Company, the Surviving Corporation or Nortel Networks
and would not prevent or materially impair the Company's ability to
consummate the transactions contemplated by this Agreement. Section 5.01(f)
of the Company Disclosure Schedule contains a list of all consents of third
parties required under any material agreement to be obtained by the Company
or its Subsidiaries prior to, or as a result of, the consummation of the
Merger.
(g) Financial Reports and SEC Documents.
(i) With respect to the periods since September 23, 1999 the
Company and its Subsidiaries have filed all reports and statements,
together with any amendments required to be made thereto, that were
required to be filed with the SEC.
26.
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(ii) The Company's Quarterly Reports on Form 10-Q for the periods
ended December 31, 1999 and March 31, 2000, Registration Statements on
Form S-1 dated July 9, 1999 (no. 333-82605) and December 20, 1999 (no.
333-93123) and all amendments thereto and all other reports,
registration statements, definitive proxy statements or information
statements filed or to be filed by it or any of its Subsidiaries
subsequent to September 23, 1999 under the Securities Act, or under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, in the form
filed, or to be filed (collectively, the "Company SEC Documents"),
with the SEC, as of the date filed (or, with respect to a document
filed prior to the date of this Agreement and amended or superseded by
a subsequent filing prior to the date of this Agreement, then on the
date of such filing as so amended or superseded) (A) complied or will
comply in all material respects as to form with the applicable
requirements under the Securities Act or the Exchange Act, as the case
may be; and (B) did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and each of
the balance sheets contained in or incorporated by reference into any
such Company SEC Document (including the related notes and schedules
thereto) fairly presents and will fairly present the financial
position of the entity or entities to which it relates as of its date,
and each of the statements of income and changes in stockholders'
equity and cash flows or equivalent statements in such Company SEC
Documents (including any related notes and schedules thereto) fairly
presents and will fairly present the results of operations, changes in
stockholders' equity and changes in cash flows, as the case may be, of
the entity or entities to which it relates for the periods to which
they relate, in each case in accordance with U.S. GAAP consistently
applied during the periods involved and Regulation S-X of the SEC,
except in each case as may be noted therein, subject to normal
year-end audit adjustments and the absence of footnotes in the case of
unaudited statements.
(iii) Between March 31, 2000 and the date of this Agreement, the
Company has not incurred any liabilities (whether absolute, accrued,
contingent or otherwise) that are of a nature that would be required
to be disclosed on a balance sheet of the Company or the footnotes
related thereto, all prepared in conformity with U.S. GAAP, except (x)
liabilities as set forth or reserved for in the Company SEC Documents
filed prior to the date of this Agreement (the "Company Filed SEC
Documents") and (y) other liabilities incurred in the ordinary course
of business consistent with past practice, which do not have, and
would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
(h) Litigation. No litigation, claim or other proceeding before any
court or governmental agency that is pending or, to the Company's
Knowledge, threatened against the Company or any of its Subsidiaries would
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company. No litigation, claim or other
proceeding before any court or governmental agency is pending or, to the
Company's Knowledge, threatened against the Company or any of its
Subsidiaries which would reasonably be expected to result in a loss of more
than $250,000 or the imposition of any material restrictions on the
business of the Company or any such Subsidiary.
(i) Compliance with Laws. The Company and each of its Subsidiaries:
(i) is in compliance with all applicable federal, state, local
and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable thereto or to the employees conducting
such businesses, except where failure to so comply does not have, and
would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company;
27.
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(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations
with, all Governmental Authorities that are required in order to
permit them to conduct their businesses substantially as presently
conducted, and all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect and, to its
Knowledge, no suspension or cancellation of any of them is threatened,
except for (x) failures to hold such permits, licenses,
authorizations, orders and approvals and (y) failures to make such
filings, applications, and registrations, which do not have, and would
not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on the Company; and
(iii) has received since January 25, 2000 no written notification
or communication from any Governmental Authority (A) asserting that
the Company or any of its Subsidiaries is not in compliance with any
of the statutes, regulations or ordinances which such Governmental
Authority enforces or (B) threatening to revoke any license,
franchise, permit or governmental authorization.
(j) Material Contracts; Defaults. Except for this Agreement and those
agreements and other documents filed as exhibits to the Company Filed SEC
Documents, as of the date of this Agreement, neither the Company nor any of
its Subsidiaries is a party to or bound by (i) any "material contract"
within the meaning of Item 601(b)(10) of the SEC's Regulation S-K or (ii)
any non-competition agreement or other agreement or arrangement that
materially restricts it or any of its Subsidiaries from competing in any
line of business. Neither the Company nor any of its Subsidiaries is in
default under any material contract, agreement, commitment, arrangement,
lease, insurance policy or other instrument to which it is a party, by
which its respective assets, business, or operations may be bound or
affected, and there has not occurred any event that, with the lapse of time
or the giving of notice or both, would constitute such a default, except
for such defaults that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on the Company.
(k) No Brokers. No action has been taken by the Company or its
officers, directors or employees that would give rise to any valid claim
against any party hereto for a brokerage commission, finder's fee or other
like payment with respect to the transactions contemplated by this
Agreement, excluding fees to be paid to the Company Financial Advisor
pursuant to the Company's written agreement with such firm, a true and
complete copy of which has been furnished to Nortel Networks prior to the
date of this Agreement.
(l) Employee Benefits; Employee Relations.
(i) Section 5.01(l) of the Company Disclosure Schedule contains a
complete and correct list of each Company Plan in effect as of the
date of this Agreement or for which the Company or any Company
Affiliates may have any liability as of the date of this Agreement.
With respect to each Company Plan, true and complete copies have been
provided or made available to Nortel Networks of: (i) the plan
document or agreement or, with respect to any Company Plan that is not
in writing, a written description of the terms thereof; (ii) the trust
agreement, insurance contract or other documentation of any related
funding arrangement; (iii) the summary plan description; (iv) the most
recent required Internal Revenue Service Form 5500, including all
schedules thereto, and actuarial report; (v) any material
communication to or from any Governmental Authority, including a
written description of any oral communication; and (vi) all amendments
or modifications to any such document.
28.
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(ii) Neither the Company nor any Subsidiary thereof has
disseminated in writing or otherwise broadly or generally notified
employees of any intent or commitment (whether or not legally binding)
to create or implement any additional Plan or to amend or terminate
any Company Plan, except for amendments to any Company Plan that will
not result in a material increase in the annual costs in respect of
such plan incurred or to be incurred by the Company or any of its
Subsidiaries.
(iii) Each Company Plan has been operated and administered, and
is, in compliance with its terms and all applicable laws, rules and
regulations (including ERISA and the Code and any regulations
thereunder). There are no actions, suits, claims or governmental
audits (other than routine claims for benefits in the ordinary course)
pending or, to the Knowledge of the Company, threatened with respect
to any Company Plan that would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the
Company.
(iv) No Company Plan is, and neither the Company nor any
Subsidiary thereof contributes to or has any material liability or
obligation with respect to any Plan that is, (A) a multiemployer plan
within the meaning of Section 4001(a)(3) of ERISA, (B) any single
employer plan or other pension plan subject to Title IV or Section 302
of ERISA or Section 412 of the Code or (C) a multiple employer plan
within the meaning of Section 4063 or 4064 of ERISA. Neither the
Company nor any Subsidiary thereof is or has been a party to any
collective bargaining or other collective labor agreement or
understanding.
(v) There is no pending or, to the Knowledge of the Company,
threatened labor dispute, strike, work stoppage or other concerted
labor activity against the Company or any Subsidiary thereof or
involving any of their respective employees. During the three year
period immediately preceding the date hereof, to the Knowledge of the
Company, there have been no organizing activities conducted by any
labor organization or work council or the like with respect to any
employee of the Company or any Subsidiary thereof. To the Knowledge of
the Company, neither the Company nor any Subsidiary thereof, nor their
respective businesses, has committed any unfair labor practices or
violated in any material respect any applicable employment laws,
regulations, ordinances, rules, orders or decrees in connection with
the operation of the respective businesses of the Company or any
Subsidiary thereof, and there is no pending or, to the Knowledge of
the Company, threatened charge, complaint, investigation or proceeding
against the Company or any of its Subsidiaries by or before the
National Labor Relations Board, the Department of Labor, the Equal
Employment Opportunity Commission, the Occupational Health and Safety
Administration or any comparable state or municipal agency, or by or
on behalf of any employee or class of employees or by or before any
governmental agency relating to a purported violation of any
applicable employment laws, regulations, ordinances, rules, orders or
decrees.
29.
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(vi) Each Company Plan that is intended to qualify under Section
401(a) and/or 401(k) of the Code so qualifies and its trust is exempt
from taxation under Section 501(a) of the Code. The Company and its
Subsidiaries have timely paid all contributions, premiums and expenses
payable to or in respect of each Company Plan under the terms thereof
and in accordance with applicable law, including ERISA and the Code,
and, to the extent any such contributions, premiums or expenses are
not yet due, the liability therefor (to the extent it arose before
March 31, 2000) has been properly and adequately accrued on the
Company's financial statements included in its Quarterly Report on
Form 10-Q for the period ended March 31, 2000.
(vii) Neither the Company nor any of its Subsidiaries has
incurred or will incur, either directly or indirectly (including as a
result of an indemnification obligation), any material liability under
or pursuant to any provision of Title I or IV of ERISA or the penalty,
excise tax or joint and several liability provisions of the Code
relating to employee benefit plans, and to the Knowledge of the
Company, no event, transaction or condition has occurred, exists or is
expected to occur which would reasonably be expected to result in any
such material liability to the Company, any of its Subsidiaries or,
after the Effective Time, Nortel Networks or any of its affiliates.
(viii) Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, either alone
or in combination with another event (whether contingent or otherwise)
will (A) entitle any current or former employee, consultant, officer
or director of the Company or any of its Subsidiaries to any increased
or modified benefit or payment; (B) increase the amount of
compensation due to any such employee, consultant, officer or
director; (C) accelerate the vesting, payment or funding of any
compensation, stock-based benefit, incentive or other benefit; (D)
result in any "parachute payment" under Section 280G of the Code
(whether or not such payment is considered to be reasonable
compensation for services rendered); or (E) cause any compensation to
fail to be deductible under Section 162(m), or any other provision of
the Code or any similar foreign Law.
(m) Takeover Laws. The Company Board has validly approved this
Agreement and the Stockholder Agreements and the transactions contemplated
hereby and thereby (including the Merger) for purposes of Section 203 of
the DGCL. Except for Section 203 of the DGCL (which has been rendered
inapplicable), to the Company's Knowledge, no "moratorium", "control
share", "fair price" or other antitakeover laws and regulations of any
state (collectively, "Takeover Laws") are applicable to the Merger or the
other transactions contemplated by this Agreement and the Stockholder
Agreements.
30.
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(n) Major Customers. Section 5.01(n) of the Company Disclosure
Schedule sets forth a list of the top ten direct sales customers (by sales
revenue) of the Company's web switch products during the fiscal year ended
June 30, 2000 and the volume of sales to each such customer for such
period. None of such customers (nor any of their respective affiliates)
has, to the Company's Knowledge, between March 31, 2000 and the date of
this Agreement, cancelled or otherwise terminated or indicated an intent to
cancel or otherwise terminate, its business relationship with the Company,
or has materially decreased, or indicated an intent to materially decrease
the volume of business it conducts with the Company.
(o) Environmental Matters.
(i) As used in this Agreement, "Environmental Laws" means all
applicable local, state, provincial and federal environmental, health
and safety laws (including common law) and regulations in effect on
the date of this Agreement, relating to the protection of human health
and safety as affected by exposure to pollutants, contaminants, or
hazardous or toxic wastes, substances or materials and to the
protection of the environment including, without limitation, the
Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation, and Liability Act, the Clean
Water Act, the Federal Clean Air Act, and the Occupational Safety and
Health Act, each as amended, regulations promulgated thereunder, and
state counterparts.
(ii) (x) Neither the conduct or operations of the Company or its
Subsidiaries nor any condition of any property presently or previously
owned, leased or operated by any of them violates or, within the
applicable statute or limitations period, violated Environmental Laws,
except for violations that are not material and (y) no condition has
existed or event has occurred with respect to any of them or any such
property that is reasonably likely to result in a Material Adverse
Effect on the Company. Neither the Company nor any of its Subsidiaries
has received any written notice from any Governmental Authority that
it or its Subsidiaries or the operation or condition of any property
ever owned, leased, operated, held as collateral or held as a
fiduciary by any of them are or were in material violation of or
otherwise are alleged to have material liability under any
Environmental Law, including, but not limited to, responsibility (or
potential responsibility) for the cleanup or other remediation of any
pollutants, contaminants, or hazardous or toxic wastes, substances or
materials at, on, beneath, or originating from any such property.
(iii) To the Company's Knowledge, none of the property currently
owned, leased or operated by the Company or by its Subsidiaries is
subject to, or as a result of this transaction would be subject to,
(i) any state or local Environmental Laws which would impose
restrictions, such as notice, disclosure or obtaining advance approval
prior to this transaction, or (ii) any liens under any Environmental
Laws.
(p) Intellectual Property.
(i) The Company and its Subsidiaries own or are licensed to use
all Intellectual Property Rights currently used in the business of the
Company or its Subsidiaries or necessary to conduct the business of
the Company and its Subsidiaries as currently conducted or currently
anticipated to be conducted (the "Company Intellectual Property
Rights").
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(ii) Section 5.01(p)(ii) of the Company Disclosure Schedule
contains an accurate and complete list as of the date of this
Agreement of the following categories of Company Intellectual Property
Rights: (A) Trademarks that are registered or for which an application
for registration is pending; (B) Patents; (C) Software (other than
commercial shrink-wrap, click-wrap or other similarly available
off-the-shelf type software); (D) Copyrights that are registered or
for which an application for registration is pending; (E) key Trade
Secrets; and (F) mask works that are registered or for which an
application for registration is pending. Where listed Intellectual
Property Rights are registered with a Governmental Authority or an
application for registration is pending, the jurisdiction,
registration or application number, date of registration or
application, named owner and/or assignee, and international classes of
registration are indicated, as applicable.
(iii) Section 5.01(p)(iii) of the Company Disclosure Schedule
contains an accurate and complete list as of the date of this
Agreement of (A) all licenses, sublicenses and other agreements under
which the Company or its Subsidiaries are licensed to use third party
Intellectual Property Rights (other than (1) shrink-wrap, click-wrap
or other similarly available off-the-shelf type software and any
related Trade Secrets and (2) customary rights included in
confidentiality, non-disclosure or similar agreements) and (B) all
licenses and sublicenses, except for rights granted specifically for
use with a hardware product sold by the Company, under which the
Company and its Subsidiaries have granted rights to third parties to
use the Company Intellectual Property Rights. The Company and its
Subsidiaries are not currently required to pay any royalties, fees or
other amounts to any Person in connection with the use of the Company
Intellectual Property Rights.
(iv) The Company and its Subsidiaries have good and valid title
to all Company Intellectual Property Rights owned by any of them and
valid and enforceable license rights to all Company Intellectual
Property Rights used under license, free and clear, to the Company's
Knowledge, of all Liens (other than Taxes not yet due and payable),
and to the Company's Knowledge, all Company Intellectual Property
Rights are in full force and effect and will remain in full force and
effect immediately following the Effective Time.
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(v) The Company and its Subsidiaries have a practice to secure,
and have secured, from all current and former employees, consultants
and independent contractors who contribute or have contributed to the
creation or development of Company Intellectual Property Rights valid
written assignments by such persons to the Company and its
Subsidiaries of the rights to such contributions the Company and its
Subsidiaries do not already own by operation of law. To the Knowledge
of the Company, no employee, independent contractor (excluding OEMs,
distributors, resellers and other purchasers) or consultant of the
Company is obligated under any agreement (including licenses,
covenants or commitments of any nature) or subject to any judgement,
decree or order of any civil or administrative agency, or any
restriction that would interfere with the use of his or her best
efforts to carry out his or her duties for the Company or to promote
the interests of the Company or that would conflict with the Company's
business as presently conducted and proposed to be conducted. The
carrying on of the Company's business by the employees, independent
contractors and consultants of the Company and the conduct of the
Company's business as presently conducted and proposed to be
conducted, will not, to the Knowledge of the Company, conflict with or
result in a breach of the terms, conditions or provisions of, or
constitute a default under, any contract, covenant or instrument under
which any of such employees, consultants or independent contractors of
the Company is now obligated. The Company and its Subsidiaries have
taken reasonable steps to protect and preserve the confidentiality of
all of their Trade Secrets, and to the Company's Knowledge (i) as of
the date of this Agreement, there are no unauthorized uses,
disclosures or infringements of any Company Intellectual Property
Rights, and (ii) as of the date of this Agreement, all use by, and
disclosure to, any Person of Trade Secrets that comprise any part of
the Company Intellectual Property Rights has been pursuant to the
terms of a written agreement with such Person, and (iii) all use by
the Company and its Subsidiaries of Trade Secrets owned by another
Person has been pursuant to the terms of a written agreement with such
Person or is otherwise lawful. If after the date of this Agreement the
Company has Knowledge of any of the foregoing conditions, the Company
shall take appropriate and prompt action to remedy such conditions. To
the Knowledge of the Company, at no time during the conception of or
reduction to practice of any of the Company Intellectual Property was
any developer, inventor or other contributor to such Intellectual
Property Right operating under any grants from any Governmental
Authority or private source, performing research sponsored by any
Governmental Authority or private source or subject to any employment
agreement or invention assignment or nondisclosure agreement or other
obligation with any other person that would adversely affect the
Company's rights in such Intellectual Property Right. To the Knowledge
of the Company, it is not utilizing nor will it be necessary to
utilize (A) any inventions of any independent contractors or
consultants, or confidential information (including Trade Secrets) of
another person to which any independent contractors or consultants
have been exposed, and (B) any inventions of any employees of the
Company (or persons the Company intends to hire) made, or any
confidential information (including Trade Secrets) of another person
to which such employees were exposed, prior to their employment by the
Company. Neither the Company Intellectual Property Rights owned by the
Company and its Subsidiaries or incorporated into any products or
services currently provided by the Company and its Subsidiaries nor
the use or other exploitation thereof by the Company and its
Subsidiaries in the conduct of their business, nor any product or
service currently provided by the Company and its Subsidiaries,
infringes on, misappropriates, breaches or violates any third party
Intellectual Property Rights. Without limiting the generality of the
foregoing, Section 5.01(p)(v) of the Company Disclosure Schedule
specifically identifies each inventor named in any patent application
filed by the Company (either individually or jointly with others) or
assigned or exclusively licensed to the Company in whole or in part.
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(vi) Neither the Company nor any of its Subsidiaries: (A) has
been notified or has Knowledge of any actual or threatened adverse
proceeding brought by any Person pertaining to any challenge to the
scope, validity or enforceability of (provided, however, no
representation or warranty is made regarding the scope, validity or
enforceability of any patent application), or the Company's ownership
of, any of the Company Intellectual Property Rights owned by the
Company and its Subsidiaries; (B) is the subject of any claim of
infringement or misappropriation by the Company or any of its
Subsidiaries of any third party Intellectual Property Rights; or (C)
to the Company's Knowledge, has any claim for infringement or
misappropriation of, or breach of any license or agreement involving,
any of the Company Intellectual Property Rights owned by the Company
and its Subsidiaries.
(vii) All of the Company Intellectual Property Rights are valid
and enforceable without any qualification, limitation, or restriction
thereon or on the use thereof (provided, however, no representation or
warranty is made regarding the validity or enforceability of any
patent application) and the Company has not received any notice or
claim (whether written, oral or otherwise) challenging or questioning
the validity or enforceability of any of the Company Intellectual
Property Rights or indicating an intention on the part of any person
to bring a claim that any of the Company Intellectual Property Rights
are invalid or unenforceable or has been misused, nor to the Knowledge
of the Company is there a reasonable basis for a claim that the
Company Intellectual Property Rights are invalid or unenforceable or
have been misused, and with respect to Patents owned by the Company,
there is no relevant prior art pertaining to any issued patents
thereof which the Company has become aware that was not disclosed
during the prosecution of the patent application(s) therefor, but
which if such prior art had been disclosed would have affected the
prosecution thereof or the scope of the patent claims ultimately
granted in respect thereof,
(viii) (A) The Company has not taken any action or failed to take
any action (including the manner in which it has conducted its
business, or used or enforced, or failed to use or enforce, any of the
Company Intellectual Property Rights) that would result in the
abandonment, cancellation, forfeiture, relinquishment, invalidation or
unenforceability of any of the Company Intellectual Property Rights
(including, with respect to Patents owned by the Company, failing to
disclose any known material prior art in connection with the
prosecution of patent applications, and with respect to the Company
registered copyrights, failing to disclosure required information to
the United States Copyright Office), (B) the Company has taken
reasonable steps (based on standard industry practices) to protect and
maintain the Company's rights in and to the Company Intellectual
Property Rights, (C) all registered Company trademarks and all Company
registered copyrights and Company registered mask works have been
registered and all Company owned Patents have been filed and obtained,
in accordance with all applicable legal requirements and are currently
in effect and in compliance with all applicable legal requirements
(including, in the case of registered Company trademarks, the timely
post-registration filing of affidavits of use and incontestability and
renewal applications), and without limiting the generality of any of
the foregoing, the Company has timely paid all filing, examination,
issuance, post-registration and maintenance fees, annuities and the
like associated or required with respect to any of the Company
Intellectual Property Rights.
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(q) Tax Matters.
(i)(A) All returns, declarations, reports, estimates, information
returns and statements required to be filed on or before the Effective
Time under federal, state, local or any foreign tax laws ("Tax
Returns") with respect to the Company or any of the Company's
Subsidiaries, have been or will be, as the case may be, timely filed,
or requests for extensions have been or will be, as the case may be,
timely filed and have not expired, except where a failure or failures
to so timely file would not, individually or in the aggregate, be
expected to be material; (B) all material Tax Returns filed by it are
complete and accurate in all material respects; (C) all Taxes shown to
be due and payable (without regard to whether such Taxes have been
assessed) on such Tax Returns have been paid or adequate reserves have
been established for the payment of such Taxes; (D) the proper and
accurate amounts have been or will be, as the case may be, withheld
from all employees (and timely paid to the appropriate Governmental
Authority or set aside in an account for such purposes) for all
periods through the Effective Time in compliance in all material
respects with all Tax withholding provisions of applicable federal,
state, local and foreign laws (including, without limitation, income,
social security, and employment tax withholding for all types of
compensation); (E) neither the Company nor any of the Company's
Subsidiaries is a party to any tax sharing or similar agreement or any
agreement pursuant to which it or any of its Subsidiaries has an
obligation to indemnify any party (other than it or one of its
Subsidiaries) with respect to Taxes; (F) all Taxes due with respect to
completed and settled examinations or concluded litigation relating to
the Company or any of the Company's Subsidiaries have been paid in
full or adequate reserves have been established for the payment
thereof; and (G) no material audit or examination or refund litigation
with respect to any Tax Return is pending.
(ii) The Company has no reason to believe that any conditions
exist that might prevent or impede the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(r) Regulatory Approvals. No consents or approvals of, or filings or
registrations with, any Governmental Authority or instrumentality are
required to be obtained or made by the Company or any of its Subsidiaries
to consummate the Merger except (i) as may be required under applicable
requirements of the Hart-Scott Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), the Competition Act (Canada) and antitrust or
other competition laws of other jurisdictions; (ii) applicable filings
under NASD rules, bylaws or regulations; (iii) the filing with the SEC of
the Company Proxy Statement and other applicable reports and documents;
(iv) the filing of a certificate of merger with the Secretary of State of
the State of Delaware pursuant to the DGCL; and (v) as may be required
under Section 721 of the U.S. Defense Production Act of 1950, as amended,
and the rules promulgated thereunder ("Exon-Florio") and the rules and
regulations promulgated by the U.S. Department of Defense.
(s) Fairness Opinion. On or before the date hereof, the Company
Financial Advisor has delivered its opinion to the Company Board that the
Exchange Ratio is fair, from a financial point of view, to the holders of
Company Common Stock and such opinion has not been withdrawn.
(t) Year 2000 Compliance.
(i) All Material Systems of the Company and its Subsidiaries have
been remediated through modification, upgrade or replacement so that
they are (A) able to receive, record, store, process, calculate,
manipulate and output dates from and after January 1, 2000, time
periods that include January 1, 2000 and information that is dependent
on or relates to such dates or time periods, in the same manner and
with the same accuracy, functionality, data integrity and performance
as when dates or time periods prior to January 1, 2000 are involved
and (B) able to store and output date information in a manner that is
unambiguous as to century ("Year 2000 Compliant").
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(ii) All Company products shipped to customers since June 1,
1999, are Year 2000 Compliant in all material respects and have been
tested by the Company (including custom testing of all third-party
manufactured content of such Company products) to confirm such status.
With respect to Company products shipped prior to such date, the
Company and its Subsidiaries have undertaken reasonable efforts to
notify all end-users of such products of the need to upgrade such
products to be Year 2000 Compliant and of the need to audit any custom
application products to identify any respects in which they are not
Year 2000 Compliant.
(iii) The Company has furnished to Nortel Networks copies of, or
copies of all documents relating to, (A) all complaints,
investigations or audits of any Governmental Authority, (B) all
unresolved customer complaints, demands or claims (excluding routine
requests for information regarding matters relating to the year 2000
turnover), (C) all attorney letters or demands and (D) all litigation,
arbitrations or similar proceedings, in each case insofar as they
relate to the Year 2000 Compliant status of Company products, the cost
of upgrading Company products to a Year 2000 Compliant status or
injuries and damages suffered as a result of the non-Year 2000
Compliant condition of Company products.
(u) No Material Adverse Effect. Between March 31, 2000 and the date
hereof, the Company and its Subsidiaries have conducted their respective
businesses each in the ordinary course (excluding the incurrence of
reasonable and customary liabilities related to this Agreement and the
transactions contemplated hereby). Between March 31, 2000 and the date
hereof, no event has occurred or circumstance arisen that, individually or
taken together with all other facts, circumstances and events (described in
any paragraph of Section 5.01 or otherwise), has had or is reasonably
likely to have a Material Adverse Effect with respect to the Company.
5.02. Representations and Warranties of Nortel Networks and Sub.
Except as set forth in the Nortel Networks SEC Documents filed prior to the date
of this Agreement, Nortel Networks and Sub hereby represent and warrant to the
Company as follows:
(a) Organization, Standing and Authority. Each of Nortel Networks and
Sub (x) is a corporation duly organized, validly existing and, in the case
of Sub, in good standing under the laws of the jurisdiction of its
organization and (y) is duly qualified to do business and, as applicable,
is in good standing (in jurisdictions which recognize such concept) in the
provinces of Canada and in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or assets or the
conduct of its business requires it to be so qualified, except where the
failure to be duly organized, validly existing, in good standing, or duly
qualified does not have and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Nortel
Networks. Each of Nortel Networks and Sub has in effect all federal,
provincial, state, local and foreign governmental authorizations necessary
for it to own or lease its properties and assets and to carry on its
business as it is now conducted, except where failure to have in effect
such authorizations does not have and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Nortel
Networks. Each of Nortel Networks and Sub has made available to the Company
a complete and correct copy of its constitutive documents, each as amended
to date and in full force and effect.
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(b) Shares.
(i) As of the date hereof, the authorized capital stock of Nortel
Networks consists solely of an unlimited number of Nortel Networks
Common Shares, of which 2,991,321,341 shares were outstanding as of
July 26, 2000 and an unlimited number of Class A Preferred Shares and
Class B Preferred Shares of which none were outstanding as of the date
of this Agreement. As of the date hereof, there are no outstanding
Rights to acquire capital stock from Nortel Networks other than
pursuant to the stock option and other employee compensation plans of
Nortel Networks and its subsidiaries, Nortel Networks' shareholder
dividend reinvestment and stock purchase plan, the rights issued under
the shareholder rights plan established pursuant to the shareholder
rights plan agreement made as of March 13, 2000, between Nortel
Networks (then known as "New Nortel Inc.") and Montreal Trust Company
of Canada as rights agent, and the exchange rights associated with
Nortel Networks Limited's Cumulative Redeemable Class A Preferred
Shares Series 4 that are described in the Nortel Networks SEC
Documents.
(ii) The authorized capital stock of Sub consists of 300,000,000
shares of Sub Common Stock, $0.001 par value per share, of which one
share is outstanding and is owned directly by Nortel Networks, and
shares of preferred stock, of which no shares are outstanding. Sub has
not conducted any business prior to the date hereof and has no
Subsidiaries and no assets, liabilities or obligations of any nature
other than incident to its formation and incident to this Agreement.
(iii) The outstanding shares of Nortel Networks' and Sub's
capital stock have been duly authorized and are validly issued and
outstanding, fully paid and nonassessable, and subject to no
preemptive rights (and were not issued in violation of any preemptive
rights). As of the date hereof, there are no shares of capital stock
of Sub authorized and reserved for issuance and Sub does not have any
Rights issued or outstanding with respect to its capital stock or any
commitment to authorize, issue or sell any such shares or Rights,
except pursuant to this Agreement.
(iv) The Nortel Networks Common Shares to be issued in exchange
for shares of Company Common Stock in the Merger or upon exercise of
Company Stock Options and Company Purchase Rights to be assumed by
Nortel Networks in connection with the Merger, when issued will be
duly authorized, validly issued, fully-paid and non-assessable and
will not have been issued in violation of any subscriptive or
preemptive rights.
(c) Corporate Power. Each of Nortel Networks and Sub has the
corporate power and authority to carry on its business as it is now being
conducted and to own all its properties and assets; and each of Nortel
Networks and Sub has the corporate power and authority to execute, deliver
and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby.
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(d) Corporate Authority. (i) This Agreement and the transactions
contemplated hereby, including the issuance of Nortel Networks Common
Shares in the Merger or upon the exercise of Company Stock Options and
Company Purchase Rights to be assumed by Nortel Networks in connection with
the Merger, have been authorized and approved by all necessary corporate
action of Nortel Networks (no shareholder approvals being required under
the Canada Business Corporations Act or otherwise), Sub, the Nortel
Networks Board and the Board of Directors of Sub prior to the date hereof
(which action has not been rescinded or modified in any way) and (ii) this
Agreement is a legal, valid and binding agreement of each of Nortel
Networks and Sub, enforceable in accordance with its terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general
equity principles, whether considered at law or in equity).
(e) No Defaults. Subject to receipt of the regulatory approvals, and
expiration of the waiting periods, referred to in Section 5.02(i), any
required filings under federal, state and provincial securities laws and
applicable TSE or NYSE rules, the execution, delivery and performance of
this Agreement and the consummation by Nortel Networks and Sub of the
transactions contemplated hereby do not and will not (i) constitute a
material breach or violation of, or a material default under, any law, rule
or regulation or any judgment, decree, order, governmental permit or
license, or agreement, indenture or instrument of Nortel Networks or of any
of Nortel Networks' Subsidiaries or to which it or any of its Subsidiaries
or any of their respective properties or assets are subject or bound, (ii)
constitute a breach or violation of, or a default under, the articles or
certificate of incorporation or by-laws of either Nortel Networks or Sub,
or (iii) require any consent or approval under any such material law, rule,
regulation, judgment, decree, order, governmental permit or license,
agreement, indenture or instrument, except in the case of (i) and (iii),
where such breach, violation or default or the failure to obtain such
consents or approvals would not in the aggregate have a Material Adverse
Effect on the Company, the Surviving Corporation or Nortel Networks and
would not prevent or materially impair Nortel Networks' ability to
consummate the transactions contemplated by this Agreement.
(f) Financial Reports and SEC Documents. With respect to the periods
since January 1, 1999, Nortel Networks, or its predecessor, and its
Subsidiaries have filed all reports and statements, together with any
amendments required to be made thereto, that were required to be filed with
the SEC. Nortel Networks' Annual Reports on Form 10-K for the fiscal years
ended December 31, 1997, 1998 and 1999, its Quarterly Report on Form 10-Q
for the period ended March 31, 2000 and all other reports or registration
statements, filed or to be filed by it or its predecessor, subsequent to
December 31, 1997 under the Securities Act, or under Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act, in the form filed, or to be filed
(collectively, the "Nortel Networks SEC Documents"), with the SEC, as of
the date filed (or, with respect to a document filed prior to the date of
this Agreement and amended or superseded by a subsequent filing prior to
the date of this Agreement, then on the date of such filing as so amended
or superseded) (A) complied or will comply in all material respects as to
form with the applicable requirements under the Securities Act or the
Exchange Act, as the case may be; and (B) did not and will not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
and each of the balance sheets contained in or incorporated by reference
into any such Nortel Networks SEC Document (including the related notes and
schedules thereto) fairly presents and will fairly present the financial
position of the entity or entities to which it relates as of its date, and
each of the statements of income and changes in stockholders' equity and
cash flows or equivalent statements in such Nortel Networks SEC Documents
(including any related notes and schedules thereto) fairly presents and
will fairly present the results of operations, changes in stockholders'
equity and changes in cash flows, as the case may be, of the entity or
entities to which it relates for the periods to which they relate, in each
case in accordance with Canadian GAAP in the case of the years ended
December 31, 1997, 1998, 1999 or U.S. GAAP in the case of the period ended
March 31, 2000 consistently applied during the periods involved and
Regulation S-X of the SEC, except in each case as may be noted therein,
subject to normal year-end audit adjustments in the case of unaudited
statements. The books and records of Nortel Networks and its Subsidiaries
have been, and are being, maintained in all material respects in accordance
with Canadian GAAP and any other applicable legal and accounting
requirements and reflect only actual transactions.
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(g) Litigation. No litigation, claim or other proceeding before any
court or governmental agency that is pending or, to Nortel Networks'
Knowledge, threatened against Nortel Networks or any of its Subsidiaries
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Nortel Networks.
(h) No Brokers. No action has been taken by Nortel Networks or its
officers, directors or employees that would give rise to any valid claim
against any party hereto for a brokerage commission, finder's fee or other
like payment with respect to the transactions contemplated by this
Agreement, excluding fees to be paid to Credit Suisse First Boston
Corporation.
(i) Regulatory Approvals. No consents or approvals of, or filings or
registrations with, any Governmental Authority or with any third party are
necessary to consummate the Merger except (i) as may be required under, and
other applicable requirements of, the HSR Act, the Investment Act (Canada)
and the Competition Act (Canada); (ii) as may be required by the by-laws,
rules, regulations or policies of the TSE in respect of the assumption by
Nortel Networks, and the exercisability by the holders, of the Company
Stock Options and Company Purchase Rights and of the NYSE and the TSE in
respect of the Nortel Networks Common Shares to be issued in the Merger and
upon the exercise of the Company Stock Options and the Company Purchase
Rights to be assumed by Nortel Networks in connection with the Merger and
the listing of such Nortel Networks Common Shares on such stock exchanges;
(iii) the filing with the SEC of the Company Proxy Statement in definitive
form and the filing and declaration of effectiveness of the Registration
Statement; (iv) the filing of a certificate of merger with the Secretary of
State of the State of Delaware pursuant to the DGCL; (v) such filings as
are required to be made or approvals as are required to be obtained under
the securities or "Blue Sky" laws of various states in connection with the
issuance of Nortel Networks Common Shares in the Merger; (vi) such filings
as are required to be made and exemption rulings or orders as are required
to be obtained under Canadian securities laws; and (vii) as may be required
under Exon-Florio and the rules and regulations promulgated by the U.S.
Department of Defense.
(j) No Material Adverse Effect. Since March 31, 2000, until the date
hereof, no event has occurred or circumstance arisen that, individually or
taken together with all other facts, circumstances and events (described in
any paragraph of Section 5.02 or otherwise), has had or is reasonably
likely to have a Material Adverse Effect with respect to Nortel Networks.
ARTICLE VI
COVENANTS
The Company hereby covenants to and agrees with Nortel Networks, and
each of Nortel Networks and Sub hereby covenants to and agrees with the Company,
that:
6.01. Reasonable Efforts. Subject to the terms and conditions of this
Agreement, it shall use its reasonable efforts in good faith to take, or cause
to be taken, all actions, and to do, or cause to be done, all things necessary,
proper or desirable (including obtaining any consents of third parties required
under any agreement to be obtained by it or its Subsidiaries prior to, or as a
result of, the consummation of the Merger so that such agreement is not
terminable as a result of the Merger), or advisable under applicable laws, so as
to permit consummation of the Merger as promptly as practicable and otherwise to
enable consummation of the transactions contemplated hereby and shall cooperate
fully with the other party hereto to that end. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purpose of this Agreement or to vest the Surviving Corporation with full title
to all properties, assets, rights, approvals, immunities and franchises of any
of the parties to the Merger, the proper officers and directors of each party to
this Agreement and their respective Subsidiaries shall take all such necessary
action as may be reasonably requested by, and at the sole expense of, Nortel
Networks.
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6.02. Stockholder Approvals. The Company shall take, in accordance with
this Agreement, applicable law, applicable NASD rules and the Company
Certificate and by-laws, all action necessary to convene an appropriate meeting
of stockholders of the Company to consider and vote upon the adoption of the
"agreement of merger" (as such term is used in Section 251 of the DGCL)
contained in this Agreement and approval of any other matters required to be
approved by the Company's stockholders for consummation of the Merger (including
any adjournment or postponement, the "Company Meeting") as promptly as
practicable after the Registration Statement is declared effective by the SEC.
The Company Board, subject to Section 6.06, shall at all times recommend such
adoption and approval and shall take all reasonable lawful action to solicit
such adoption and approval by its stockholders.
6.03. Registration Statement. (a) Each of Nortel Networks and the
Company agrees to cooperate in the preparation of a registration statement on
Form S-4 (the "Registration Statement") to be filed by Nortel Networks with the
SEC in connection with (and only in connection with) the issuance of Nortel
Networks Common Shares in the Merger (including the proxy statement and
prospectus and other proxy solicitation materials of the Company constituting a
part thereof (the "Company Proxy Statement") and all related documents). The
Registration Statement and the Company Proxy Statement shall comply as to form
in all material respects with the applicable provisions of the Securities Act
and the Exchange Act and the rules and regulations thereunder. Provided the
other party has cooperated as required above, Nortel Networks agrees to file the
Registration Statement with the SEC as promptly as practicable, after the date
of this Agreement. Each of Nortel Networks and the Company shall, as promptly as
practicable after receipt thereof, provide copies of any written comments
received from the SEC with respect to the Registration Statement and the Company
Proxy Statement, as the case may be, to the other party, and advise the other
party of any oral comments with respect to the Registration Statement received
from the SEC. Each of Nortel Networks and the Company agrees to use reasonable
efforts to cause the Registration Statement to be declared effective under the
Securities Act as promptly as practicable after filing thereof, and the Company
agrees to mail the Company Proxy Statement to its stockholders as promptly as
practicable after the Registration Statement is declared effective. Nortel
Networks also agrees to use reasonable efforts to obtain all necessary state
securities law or "Blue Sky" and all foreign permits and approvals required to
carry out the transactions contemplated by this Agreement. The Company agrees to
furnish to Nortel Networks all information concerning the Company and its
Subsidiaries, officers, directors and stockholders as may be reasonably
requested in connection with the foregoing, and Nortel Networks agrees to
furnish to the Company all information concerning Nortel Networks and its
Subsidiaries, officers, directors and stockholders as may be reasonably
requested in connection with the foregoing.
(b) Each of Nortel Networks and the Company agrees, as to itself and
its Subsidiaries, that none of the information supplied or to be supplied by it
for inclusion or incorporation by reference in (i) the Registration Statement
will, at the time the Registration Statement and each amendment or supplement
thereto, if any, becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading and
(ii) the Company Proxy Statement and any amendment or supplement thereto will,
at the date of mailing to stockholders and at the time of the Company Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading.
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(c) Nortel Networks agrees to advise the Company, promptly after Nortel
Networks receives notice thereof, of the time when the Registration Statement
has become effective or any supplement or amendment has been filed, of the
issuance of any stop order or the suspension of the qualification of the Nortel
Networks Common Shares for offering or sale in any jurisdiction, of the
initiation or threat of any proceeding for any such purpose, or of any request
by the SEC for the amendment or supplement of the Registration Statement or for
additional information.
(d) Nortel Networks will use its reasonable efforts to obtain, and will
provide evidence reasonably satisfactory to the Company of, all necessary
rulings or orders of Canadian securities regulatory authorities exempting the
distribution by Nortel Networks of the Nortel Networks Common Shares and options
and other Rights to purchase Nortel Networks Common Shares under the Merger and
the resale of Nortel Networks Common Shares issued under the Merger in Canada as
contemplated by this Agreement from the registration and prospectus requirements
under applicable Canadian securities laws on terms reasonably satisfactory to
Nortel Networks and the Company.
6.04. Press Releases. Nortel Networks and the Company shall jointly
agree on an initial press release with respect to the Merger. Neither the
Company nor Nortel Networks will, without the prior approval of the other, issue
any other press release or written statement for general circulation (including
any written statement circulated to employees, customers or other third parties)
relating to the transactions contemplated hereby, except, based on the advice of
counsel, as otherwise required by applicable law or regulation or rules or
policies of the TSE, the NYSE or the NASD and only after consulting, or using
its reasonable efforts to consult, with the other.
6.05. Access; Information. (a) Subject to applicable laws relating to
the exchange of information and procedures adopted by the Company and reasonably
agreed to by Nortel Networks, the Company shall afford to the officers,
employees, counsel, accountants and other authorized representatives of Nortel
Networks, reasonable access, during normal business hours throughout the period
prior to the Effective Date, to all of its properties, books, contracts,
commitments and records and, during such period, it shall furnish promptly to
Nortel Networks upon request (i) a copy of each material report, schedule and
other document filed by it pursuant to the requirements of federal or state
securities laws, and (ii) all other information concerning the business,
properties and personnel of it as Nortel Networks may reasonably request;
provided that such information may not be used for any purpose unrelated to the
consummation of the transactions contemplated by this Agreement. The Company
shall promptly inform Nortel Networks of any material litigation, claim or other
proceeding before any court or other governmental authority that arises
following the date of this Agreement and any material development in any such
existing material litigation, claim or other proceeding. The Company and its
Subsidiaries shall not be required to provide access to or to disclose
information where such access or disclosure would contravene any law, rule,
regulation, order, judgment, decree or agreement. Nortel Networks and the
Company shall make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply.
(b) Subject to the requirements of applicable law, pending consummation
of the Merger, all non-public information provided by or on behalf of the
Company to Nortel Networks or its employees, directors, agents or advisors and
Nortel Networks to the Company or its employees, directors, agents or advisors
pursuant to this Agreement or otherwise will remain subject to the obligations
of Nortel Networks and the Company under the Confidentiality Agreement.
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(c) No investigation by a party, pursuant to this Section 6.05 or
otherwise, shall affect or be deemed to modify any representation or warranty of
the other party contained herein.
6.06. Acquisition Proposals. (a) The Company shall not, and shall cause
its Subsidiaries and the officers, directors, agents and advisors of the Company
and its Subsidiaries not to, initiate, solicit or knowingly encourage inquiries
or proposals with respect to, or engage in any negotiations concerning, or
provide any confidential information to, or have any discussions with, any
Person relating to, any Acquisition Proposal. Notwithstanding the foregoing, the
Company and its Subsidiaries and their officers, directors, agents and advisors
shall be permitted to engage in any discussions or negotiations with, or provide
any information to, any Person in response to a bona fide written Acquisition
Proposal by any such Person received by the Company, if and only to the extent
that in each such case such proposal was not solicited or encouraged in
violation of this Agreement and (i) the Company Meeting shall not have occurred;
(ii) the Company Board determines in good faith that such Acquisition Proposal
would, if consummated, constitute a Superior Proposal and is reasonably likely
to be consummated; (iii) the Company Board determines, in good faith after
consultation with outside counsel, that such action is legally required as a
matter of the fiduciary duties of the directors under applicable law; and (iv)
prior to providing any information or data to any Person or entering into
discussions or negotiations with any Person, the Company receives from such
Person an executed confidentiality agreement containing terms no less
restrictive with respect to such Person than the terms of the Confidentiality
Agreement with respect to Nortel Networks. The Company shall notify Nortel
Networks promptly, but in any event within 24 hours after any officer or
director of the Company becomes aware, of any such inquiries, proposals, or
offers received by, any such information requested from, or any such discussions
or negotiations sought to be initiated or continued with, any of its
representatives indicating, in connection with such notice, the name of such
Person and the material terms and conditions of any proposals or offers. For the
purposes of this Agreement, "Superior Proposal" shall mean any bona fide written
Acquisition Proposal made by a third party that was not solicited or encouraged
in violation of this Agreement and which the Company Board determines in its
good faith judgment (based on the written opinion to such effect by a financial
advisor of nationally recognized reputation) to be more favorable to the
stockholders of the Company than the transactions contemplated by this
Agreement. The Company shall immediately cease and cause to be terminated any
activities, discussions or negotiations conducted prior to the date of this
Agreement with any parties other than Nortel Networks with respect to any
Acquisition Proposal. The Company shall advise Nortel Networks of any material
developments with respect to any proposal as to which the Company is exercising
its rights pursuant to the second sentence of this Section 6.06 promptly upon
the occurrence thereof.
(b) Subject to Section 6.06(c) below, neither the Company Board nor any
committee thereof shall (i) withdraw or modify, or publicly propose to withdraw
or modify, in a manner adverse to Nortel Networks, the approval and declaration
of advisability by the Company Board of the "agreement of merger" (as such term
is used in Section 251 of the DGCL) contained in this Agreement, (ii) approve or
recommend, or publicly propose to approve or recommend, any Acquisition
Proposal, or (iii) cause the Company or any of its Subsidiaries to enter into
any letter of intent, agreement in principle, acquisition agreement, merger
agreement or other similar agreement with respect to any Acquisition Proposal.
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(c) Notwithstanding subsections (b)(i)-(iii) above, in the event (but
only in the event) that the Company Board determines in good faith, after
consultation with outside counsel, that such action is legally required as a
matter of the fiduciary duties of the directors under applicable law, the
Company Board may withdraw or modify its recommendation to Company stockholders
of the "agreement of merger" contained in this Agreement (or not recommend it in
the Company Proxy Statement), but only at a time that is after the fifth
Business Day following Nortel Networks' receipt of written notice advising
Nortel Networks that the Company Board has determined so to withdraw or modify
its recommendation as described above and stating the reasons therefor.
(d) Nothing in this Section 6.06 shall (i) prohibit the Company from
complying, to the extent applicable, with Rules 14d-9 and 14e-2(a) promulgated
under the Exchange Act with respect to an Acquisition Proposal or (ii) permit
the Company to violate its obligations under the first sentence of Section 6.02.
6.07. Affiliate Agreements. (a) Not later than the mailing of the
Company Proxy Statement, the Company shall deliver to Nortel Networks a schedule
of each person that, to the best of its knowledge, is or is reasonably likely to
be, as of the date of the Company Meeting, deemed to be an "affiliate" of it
(each, a "Company Affiliate") as that term is used in Rule 145 under the
Securities Act. Thereafter, the Company shall promptly notify Nortel Networks
upon becoming aware of any other person that is or is reasonably likely to be,
as of the date of the Company Meeting, deemed to be a Company Affiliate.
(b) The Company shall use its reasonable efforts to cause each person
who may be deemed to be a Company Affiliate to execute and deliver to Nortel
Networks on or before the date of mailing of the Company Proxy Statement (or, in
the case of any person identified as a possible Company Affiliate after such
date, as promptly thereafter as possible) an agreement in the form attached
hereto as Exhibit A.
6.08. Takeover Laws. Subject to Section 6.06, no party shall take any
action that would cause the transactions contemplated by this Agreement or the
Stockholder Agreements to be subject to requirements imposed by any Takeover Law
and each of Nortel Networks and the Company shall take all necessary steps
within its control to exempt (or ensure the continued exemption of), or minimize
the effect on, the transactions contemplated by this Agreement and the
Stockholder Agreements from, or if necessary challenge the validity or
applicability of, any applicable Takeover Law, as now or hereafter in effect,
including, without limitation, Section 203 of the DGCL or any other Takeover
Laws that purport to apply to this Agreement or the Stockholder Agreements or
the transactions contemplated hereby or thereby.
6.09. Shares Listed. Nortel Networks shall use its reasonable efforts
to list, prior to the Effective Date, on the NYSE and the TSE, subject to
official notice of issuance, the Nortel Networks Common Shares to be issued to
the holders of Company Common Stock in the Merger and upon exercise of Company
Stock Options and Company Purchase Rights to be assumed by Nortel Networks by
reason of the Merger.
6.10. Regulatory Applications. (a) Nortel Networks and the Company and
their respective Subsidiaries shall cooperate and use their respective
reasonable best efforts (i) to prepare all documentation, to effect all filings
(including, without limitation, filings under the HSR Act, the Investment Act
(Canada) and the Competition Act (Canada)) and to obtain all permits, consents,
approvals and authorizations of all third parties and Governmental Authorities
necessary to consummate the transactions contemplated by this Agreement and (ii)
to cause the Merger to be consummated as expeditiously as reasonably
practicable. Each of Nortel Networks and the Company shall have the right to
review in advance, and to the extent practicable each will consult with the
other, in each case subject to applicable laws relating to the exchange of
information, with respect to, all material written information submitted to any
third party or any Governmental Authority in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
parties hereto agrees to act reasonably and as promptly as practicable. Each
party hereto agrees that it will consult with the other party hereto with
respect to the obtaining of all material permits, consents, approvals and
authorizations of all third parties and Governmental Authorities necessary or
advisable to consummate the transactions contemplated by this Agreement and each
party will keep the other party apprised of the status of material matters
relating to completion of the transactions contemplated hereby.
43.
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(b) Each party agrees, upon request, to furnish the other party with
all information concerning itself, its Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or advisable
in connection with any filing, notice or application made by or on behalf of
such other party or any of its Subsidiaries to any third party or Governmental
Authority.
(c) In furtherance and not in limitation of the covenants of the
parties contained in Sections 6.10(a) and (b), if any objections are asserted
with respect to the transactions contemplated by this Agreement under any
Regulatory Law or if any suit is instituted or threatened by any Governmental
Authority or any private party challenging any of the transactions contemplated
by this Agreement as violative of any Regulatory Law, each of Nortel Networks
and the Company shall use its reasonable best efforts to resolve any such
objections or challenge as such Governmental Authority or private party may have
to such transactions under such Regulatory Law so as to permit consummation of
the transactions contemplated by this Agreement, and if any administrative or
judicial action or proceeding, including any proceeding by a private party, is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Regulatory Law, each of
Nortel Networks and the Company shall cooperate in all respects with each other
and use its respective reasonable best efforts to contest and resist any such
action or proceeding and to have vacated, lifted, reversed or overturned any
decree, judgment, injunction or other order, whether temporary, preliminary or
permanent, that is in effect and prohibits, prevents or restricts consummation
of the transactions contemplated by this Agreement. Notwithstanding the
foregoing or any other provision of this Agreement, nothing in this Section 6.10
shall limit a party's rights under Sections 7.01(b) and 8.01(d) so long as such
party has theretofore complied in all respects with its obligations under this
Section 6.10.
(d) Nothing contained in this Agreement shall require Nortel Networks
or any of its Subsidiaries to sell or otherwise dispose of, or to hold
separately, or permit the sale or other disposition of, any assets of Nortel
Networks, the Company or their respective Subsidiaries, or require Nortel
Networks to refrain from exercising full authority over the Company and its
Subsidiaries after the Effective Time, whether as a condition to obtaining any
approval from a Governmental Authority or any other Person or for any other
reason.
6.11. Indemnification. (a) Following the Effective Date and until the
expiration of any applicable statutory limitations period, the Surviving
Corporation shall indemnify, defend and hold harmless the present and former
directors and officers of the Company and its Subsidiaries, determined as of the
Effective Time (each, an "Indemnified Party") against all costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities (collectively, "Costs") incurred in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of actions or omissions occurring
at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement) to the fullest extent that the
Company is permitted to indemnify its directors and officers under the laws of
the State of Delaware, the Company Certificate and the Company's by-laws as in
effect on the date hereof (and the Surviving Corporation shall also advance
expenses as incurred to the fullest extent permitted under applicable law), and
shall fulfill and honor in all respects the obligations of the Company pursuant
to the Company Certificate and by-laws and any indemnification agreements
between the Company and any Indemnified Party in effect as of the date of this
Agreement.
44.
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(b) For a period of six years from the Effective Time, Nortel Networks
shall provide a "runoff" policy with respect to that portion of director's and
officer's liability insurance that serves to cover the Indemnified Parties with
respect to claims against such Indemnified Parties arising from facts or events
which existed or occurred at or before the Effective Time, which "runoff"
insurance shall contain at least the same maximum coverage and amounts to such
Indemnified Parties, and contain terms and conditions no less advantageous, as
that coverage currently provided by the Company; provided, however, that in no
event shall Nortel Networks be required to expend to maintain or obtain the
insurance called for by this Section 6.11(b) more than 200 percent of the
current annual amount expended by the Company to maintain or procure such
directors and officers insurance coverage for the current year (the "Insurance
Amount"); provided, further, that if Nortel Networks is unable to maintain or
obtain the insurance called for by this Section 6.11(b), Nortel Networks shall
use its reasonable efforts to obtain as much comparable insurance as is
available for the Insurance Amount; and provided, further, that the Indemnified
Parties may be required to make application and provide customary
representations and warranties to Nortel Networks' insurance carrier for the
purpose of obtaining such insurance.
(c) Any Indemnified Party wishing to claim indemnification under
Section 6.11(a), upon learning of any claim, action, suit, proceeding or
investigation described above, shall promptly notify the Surviving Corporation
thereof; provided, that the failure so to notify shall not affect the
obligations of the Surviving Corporation under Section 6.11(a) unless (and then
only to the extent) such failure materially increases the Surviving
Corporation's liability under such subsection (a).
(d) If Nortel Networks or any of its successors or assigns shall
consolidate with or merge into any other entity and shall not be the continuing
or surviving entity of such consolidation or merger or shall transfer all or
substantially all of its assets to any entity, then and in each case, proper
provision shall be made so that the successors and assigns of Nortel Networks
shall assume the obligations set forth in this Section 6.11.
(e) This Section 6.11 shall survive the consummation of the Merger and
the Effective Time. This Section 6.11 is intended to benefit, and may be
enforced by, the Indemnified Parties and their respective heirs,
representatives, successors and assigns, and shall be binding on all successors
and assigns of Nortel Networks and the Surviving Corporation.
6.12. Certain Employee Benefit Matters. (a) For the one year period
ending on the first anniversary of the Effective Date (the "Continuation
Period"), the Surviving Corporation shall, or shall cause its Subsidiaries to,
(i) pay to each of their respective employees, during any portion of the
Continuation Period that such employee is employed by the Surviving Corporation
or any such Subsidiary, an annual salary or hourly wage rate, as applicable,
that is no less than the annual salary or hourly wage rate payable to such
employee immediately prior to the Effective Time and (ii) provide such employees
(as a group) in the aggregate with employee benefits, during any portion of the
Continuation Period that such employees are employed by the Surviving
Corporation or any such Subsidiary, that are substantially similar in the
aggregate to either (i) the employee benefits provided to such employees
pursuant to the Company Plans (other than equity based benefits) immediately
prior to the Effective Time or (ii) the employee benefits provided to
similarly-situated employees of Nortel Networks and its Subsidiaries.
Notwithstanding any other provision herein, none of the Surviving Corporation,
any of its Subsidiaries or Nortel Networks will have any obligation to continue
the employment of any such employee for any period following the Effective Time.
45.
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(b) With respect to the Plans, if any, of Nortel Networks or Nortel
Networks' Subsidiaries in which employees of the Company or its Subsidiaries
("Company Employees") become eligible to participate after the Effective Time
(the "Nortel Networks Plans"), Nortel Networks shall, or shall cause its
Subsidiaries or the Surviving Corporation to: (i) with respect to each Nortel
Networks Plan that is a medical or health plan, (x) waive any exclusions for
pre-existing conditions under such Nortel Networks Plan that would result in a
lack of coverage for any condition for which the applicable Company Employee
would have been entitled to coverage under the corresponding Company Plan in
which such Company Employee was an active participant immediately prior to his
or her transfer to the Nortel Networks Plan; (y) waive any waiting period under
such Nortel Networks Plan to the extent that such period exceeds the
corresponding waiting period under the corresponding Company Plan in which such
Company Employee was an active participant immediately prior to his or her
transfer to the Nortel Networks Plan (after taking into account the service
credit provided for herein for purposes of satisfying such waiting period); and
(z) provide each Company Employee with credit for any co-payments and
deductibles paid by such Company Employee prior to his or her transfer to the
Nortel Networks Plan (to the same extent such credit was given under the
analogous Company Plan prior to such transfer) in satisfying any applicable
deductible or out-of-pocket requirements under such Nortel Networks Plan for the
plan year that includes such transfer; and (ii) recognize service of the Company
Employees with the Company or any of its Subsidiaries for purposes of
eligibility to participate and vesting credit, and, solely with respect to
vacation benefits, benefit accrual in any Nortel Networks Plan in which the
Company Employees are eligible to participate after the Effective Time to the
extent that such service was recognized for that purpose under the analogous
Company Plan prior to such transfer; provided that the foregoing shall not apply
to the extent it would result in duplication of benefits. Nothing in this
paragraph shall be interpreted to require Nortel Networks to provide for the
participation of any Company Employee in any Nortel Networks Plan.
(c) To the extent applicable, Nortel Networks and the Company shall
each take such reasonable steps as are required to cause the disposition and
acquisition of equity securities (including derivative securities) pursuant to
Article III of this Agreement in connection with the consummation of the Merger
by each individual who is an officer or director of the Company to qualify for
exemption from Section 16(b) of the Exchange Act pursuant to Rule 16b-3(d) and
(e) promulgated under the Exchange Act.
6.13. Accountants' Letters. The Company shall use its reasonable
efforts to cause to be delivered to Nortel Networks a letter of Deloitte &
Touche LLP, the Company's independent auditors ("Deloitte San Jose"), and Nortel
Networks shall use its reasonable efforts to cause to be delivered to the
Company a letter of Deloitte & Touche LLP, Nortel Networks' independent auditors
("Deloitte"), each dated a date within two Business Days of the date on which
the Registration Statement shall become effective and addressed to such other
party, and in form and substance customary for "comfort" letters delivered by
independent accountants (x) in the case of Deloitte San Jose, in accordance with
Statement of Accounting Standards No. 72 and (y) in the case of Deloitte, in
accordance with the Handbook of The Canadian Institute of Chartered Accountants.
6.14. Notification of Certain Matters. (a) Each of the Company and
Nortel Networks shall use all reasonable efforts to give prompt notice to the
other of any fact, event or circumstance known to it that would cause or
constitute a material breach of any of its representations, warranties,
covenants or agreements contained herein.
46.
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(b) Nortel Networks shall promptly notify the Company, and the Company
shall promptly notify Nortel Networks, in writing, of any notice or other
communication from any regulatory authority or self-regulatory organization in
connection with the transactions contemplated by this Agreement.
(c) Each of Nortel Networks and the Company shall promptly notify the
other of any fact, event or circumstance known to it that could reasonably be
expected to, individually or taken together with all other facts, events and
circumstances known to it, cause the Merger to fail to qualify as a
"reorganization" within the meaning of Section 368(a) of the Code.
6.15. Certain Tax Matters. (a) Each of Nortel Networks and the Company
will use its reasonable efforts to cause the Merger to constitute a
reorganization within the meaning of Section 368(a) of the Code, and to timely
satisfy, or cause to be timely satisfied, all applicable tax reporting and
filing requirements contained in the U.S. Code and Treasury Regulations with
respect to the Merger, including the reporting requirements contained in U.S.
Treasury Regulation Section 1.367(a)-3(c)(6).
(b) In connection with the filing of the Registration Statement, the
Company and Nortel Networks shall execute and deliver to Cleary, Gottlieb, Steen
& Hamilton and Cooley Godward LLP, tax representation letters in customary form,
dated as of the date of such filing. Following delivery of such tax
representation letters, each of Nortel Networks and the Company will use
reasonable efforts to cause Cleary, Gottlieb, Steen & Hamilton and Cooley
Godward LLP, respectively, to deliver a tax option satisfying the requirements
of Item 601 of Regulation S-K promulgated under the Securities Act and to obtain
the consent of Cleary, Gottlieb, Steen & Hamilton and Cooley Godward LLP to the
filing of such tax opinions as exhibits to the Registration Statement. In
rendering such opinions, each of such counsel shall be entitled to rely on the
tax representation letters referred to in this Section 6.15.
6.16. Company Annual Meeting. The Company shall cause to be called,
prior to the time a vote is taken with respect to the adoption of this
Agreement, the Company's 2000 annual meeting of stockholders. In connection
therewith, the Company shall use its reasonable efforts to prepare and file with
the SEC its annual report on Form 10-K for the fiscal year ended June 30, 2000
and a proxy statement with respect to such annual meeting as soon as reasonably
practicable.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.01. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each of Nortel Networks, Sub and the Company to
consummate the Merger is subject to the fulfillment or written waiver by Nortel
Networks, Sub and the Company prior to the Effective Time of each of the
following conditions:
(a) Stockholder Approval. This "agreement of merger" (as that term is
used in Section 251 of the DGCL) shall have been duly adopted by the
requisite vote of the stockholders of the Company.
(b) Regulatory Approvals. All material regulatory approvals required
to consummate the transactions contemplated hereby shall have been obtained
and shall remain in full force and effect and all statutory waiting periods
in respect thereof shall have expired or been terminated and (in the case
of Nortel Networks' obligation to consummate the Merger) no such approvals
shall contain any conditions, restrictions or requirements which would
reasonably be expected to (i) following the Effective Time, have a Material
Adverse Effect on Nortel Networks and its Subsidiaries taken as a whole or
on the Surviving Corporation or (ii) require Nortel Networks, in the case
of a required approval of a United States or Canadian Governmental
Authority, to take any action that it is not required to take under Section
6.10(d) hereof.
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(c) No Injunction. No U.S. or Canadian Governmental Authority of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, judgment, decree, injunction or
other order (whether temporary, preliminary or permanent) which is in
effect and enjoins or prohibits consummation of the Merger.
(d) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and be
in effect and no proceedings for that purpose shall have been initiated or
threatened by the SEC and not concluded or withdrawn.
(e) Listing. The Nortel Networks Common Shares to be issued in the
Merger and upon exercise of Company Stock Options and Company Purchase
Rights to be assumed by Nortel Networks in connection with the Merger shall
have received conditional approval for listing on the NYSE and the TSE,
subject to official notice of issuance.
7.02. Conditions to Obligation of the Company. The obligation of the
Company to consummate the Merger is also subject to the fulfillment or written
waiver by the Company prior to the Effective Time of each of the following
conditions:
(a) Representations and Warranties. All representations and warranties
of Nortel Networks set forth in this Agreement (without giving effect to
any standard, qualification or exception contained therein with respect to
materiality or Material Adverse Effect) shall be true and correct, as of
the date of this Agreement and as of the Effective Date as though made on
and as of the Effective Date (except that representations and warranties
that by their terms speak as of the date of this Agreement or some other
date shall be true and correct as of such date), except as would not have
or reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Nortel Networks; and the Company shall have
received a certificate, dated the Effective Date, signed on behalf of
Nortel Networks by the Chief Executive Officer or the Chief Financial
Officer of Nortel Networks to such effect.
(b) Performance of Obligations. Nortel Networks shall have performed
in all material respects all obligations required to be performed by it
under this Agreement at or prior to the Effective Time, and the Company
shall have received a certificate, dated the Effective Date, signed on
behalf of Nortel Networks by the Chief Executive Officer or the Chief
Financial Officer of Nortel Networks to such effect.
(c) Opinion of the Company's Counsel. The Company shall have received
an opinion of Cooley Godward LLP, counsel to the Company, dated the
Effective Date, to the effect that, on the basis of facts, representations
and assumptions set forth in such opinion (including tax representation
letters in customary form from each of Nortel Networks and the Company),
(a) the Merger constitutes a reorganization within the meaning of Section
368(a) of the Code, (b) Nortel Networks shall be treated as a corporation
under Section 367(a)(1) of the Code with respect to each transfer of
property thereto pursuant to the Merger, and (c) that, accordingly, (i) no
gain or loss will be recognized by the Company as a result of the Merger
and (ii) no gain or loss will be recognized by a stockholder of the Company
who receives Nortel Networks Common Shares in exchange for shares of
Company Common Stock, except with respect to cash received in lieu of
fractional share interests. In rendering its opinion, such counsel may
require and rely upon representations contained in letters from the
Company, Nortel Networks, Sub and stockholders of the Company. Counsel's
opinion shall not address the tax consequences applicable to any
stockholder of the Company who, immediately after the Merger, will be a
"five percent transferee shareholder" with respect to Nortel Networks
within the meaning of U.S. Treasury Regulation Section 1.367(a)-3(c)(5).
48.
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(d) No Material Adverse Effect. From the date of this Agreement
through the Effective Date, no event shall have occurred or circumstance
arisen that, individually or taken together with all other such events and
circumstances, has had or would reasonably be expected to have a Material
Adverse Effect on Nortel Networks.
7.03. Conditions to Obligation of Nortel Networks and Sub. The
obligations of Nortel Networks and Sub to consummate the Merger are also subject
to the fulfillment or written waiver by Nortel Networks and Sub prior to the
Effective Time of each of the following conditions:
(a) Representations and Warranties. All representations and warranties
of the Company set forth in this Agreement (without giving effect to any
standard, qualification or exception contained therein with respect to
materiality or Material Adverse Effect) shall be true and correct, as of
the date of this Agreement and as of the Effective Date as though made on
and as of the Effective Date (except that representations and warranties
that by their terms speak as of the date of this Agreement or some other
date shall be true and correct as of such date), except as would not have
or reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company; and Nortel Networks and Sub shall
have received a certificate, dated the Effective Date, signed on behalf of
the Company by the Chief Executive Officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Effective Time, and Nortel
Networks and Sub shall have received a certificate, dated the Effective
Date, signed on behalf of the Company by the Chief Executive Officer of the
Company to such effect.
(c) No Material Adverse Effect. From the date of this Agreement
through the Effective Date, no event shall have occurred or circumstance
arisen that, individually or taken together with all such other such events
and circumstances, has had or would reasonably be expected to have a
Material Adverse Effect on the Company.
(d) Opinion of Nortel Networks and Sub's Counsel. Nortel Networks
shall have received an opinion of Cleary, Gottlieb, Steen & Hamilton,
special counsel to Nortel Networks and Sub dated the Effective Date, to the
effect that, on the basis of facts, representations and assumptions set
forth in such opinion (including tax representation letters in customary
form from each of Nortel Networks and the Company), (a) the Merger
constitutes a reorganization under Section 368(a) of the Code, (b) Nortel
Networks shall be treated as a corporation under Section 367(a)(1) of the
Code with respect to each transfer of property thereto pursuant to the
Merger and (c) that, accordingly, (i) no gain or loss will be recognized by
the Company as a result of the Merger and (ii) no gain or loss will be
recognized by a stockholder of the Company who receives Nortel Networks
Common Shares in exchange for shares of the Company Common Stock, except
with respect to cash received in lieu of fractional share interests. In
rendering its opinion, such counsel may require and rely upon
representations contained in letters from the Company, Nortel Networks, Sub
and stockholders of the Company. Counsel's opinion shall not address the
tax consequences applicable to any stockholder of the Company who,
immediately after the Merger, will be a "five percent transferee
shareholder" with respect to Nortel Networks within the meaning of U.S.
Treasury Regulation Section 1.367(a)-3(c)(5).
49.
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(e) No Action Seeking Injunction. No U.S. or Canadian Governmental
Authority of competent jurisdiction shall have brought, and there shall not
continue to be pending, an action or proceeding (which is still pending on
the Effective Date) seeking to enjoin or prohibit consummation of the
Merger, or to impose substantial penalties as a result of the Merger, which
action or proceeding is reasonably likely to succeed.
ARTICLE VIII
TERMINATION
8.01. Termination. This Agreement may be terminated, and the Merger
may be abandoned:
(a) Mutual Consent. At any time prior to the Effective Time, by the
mutual consent of Nortel Networks and the Company by action taken by their
respective Boards of Directors.
(b) Breach. At any time prior to the Effective Time, by Nortel
Networks or the Company, in the event of either: (i) a breach by the other
party of any representation or warranty contained herein which would result
in the non-satisfaction of the conditions set forth in Sections 7.02(a) or
7.03(a), as the case may be, which breach is not capable of being cured or
has not been cured within 30 calendar days after the giving of written
notice to the breaching party of the fact and principal details of such
breach; or (ii) a material breach by the other party of any of the
covenants or agreements contained herein, which breach is not capable of
being cured or has not been cured within 30 calendar days after the giving
of written notice to the breaching party of the fact and principal details
of such breach. Without limiting the foregoing, for all purposes of this
Agreement, any breach of the agreements contained in Section 6.06 shall
constitute a breach which is not capable of being cured.
(c) Delay. At any time prior to the Effective Time, by Nortel Networks
or the Company, if its Board of Directors so determines, in the event that
the Merger is not consummated by February 28, 2001, or, in the event that
an approval of any Governmental Authority required to be obtained for the
consummation of the transactions contemplated by this Agreement has not
been obtained, by April 30, 2001, except to the extent that the failure of
the Merger then to be consummated arises out of or results from the knowing
action or inaction of the party seeking to terminate pursuant to this
Section 8.01(c) which action or inaction is in violation of its obligations
under this Agreement.
(d) No Approval.
(i) By the Company or Nortel Networks, by action taken by its
Board of Directors, in the event the approval of any U.S. or Canadian
Governmental Authority required for consummation of the Merger and the
other transactions contemplated by this Agreement shall have been
denied by final nonappealable action of such Governmental Authority.
(ii) By Nortel Networks, by action taken by its Board of
Directors, in the event any required approval of a Governmental
Authority contains any final nonappealable conditions, restrictions or
requirements which would reasonably be expected to (A) following the
Effective Time, have a Material Adverse Effect on Nortel Networks and
its Subsidiaries taken as a whole or on the Surviving Corporation or
(B) require Nortel Networks, in the case of a required approval of a
United States or Canadian Governmental Authority, to take any action
that it is not required to take under Section 6.10(d) hereof.
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(iii) By the Company, by action taken by its Board of Directors,
in the event any required approval of a Governmental Authority
contains any final, nonappealable conditions, restrictions or
requirements which would reasonably be expected to (A) following the
Effective Time, have a Material Adverse Effect on Nortel Networks and
its Subsidiaries taken as a whole or (B) require Nortel Networks to
take any action that it is not required to take under Section 6.10(d)
hereof, unless (in either case) within 30 days following receipt by
Nortel Networks of written notice of the Company's intent to terminate
this Agreement under this clause (iii) Nortel Networks notifies the
Company that it waives its right to terminate this Agreement under
clause (ii) above.
(iv) By Nortel Networks or the Company, if its Board of Directors
so determines, in the event the approval of the Company's stockholders
required by Section 7.01(a) herein is not obtained at the Company
Meeting at which a vote was taken by reason of the failure to obtain
the requisite vote required by Section 7.01(a).
(e) Withdrawal of Recommendation. By Nortel Networks, if the Board of
Directors of the Company, prior to the Company Meeting, (A) shall withdraw
or modify in any adverse manner its recommendation of the "agreement of
merger" (as such term is used in Section 251 of the DGCL) contained in this
Agreement (whether or not such withdrawal or modification is permitted by
Section 6.06(c)), or (B) shall resolve to do so.
8.02. Effect of Termination and Abandonment. (a) In the event of
termination of this Agreement and the abandonment of the Merger pursuant to this
Article VIII, no party to this Agreement (nor any of their respective officers,
directors or agents) shall have any liability or further obligation to any other
party hereunder except as set forth in subsections (b) and (c) below and in
Section 9.01, except that termination shall not relieve a party from liability
for any willful breach of this Agreement.
(b) Nortel Networks and the Company agree that the Company shall pay to
Nortel Networks the sum of $225,000,000 (the "Termination Fee") solely as
follows:
(i) if (x) the Company shall terminate this Agreement pursuant to
Section 8.01(c) due to the failure of the parties to consummate the
Merger by the relevant date (unless such failure results primarily
from the action or inaction of Nortel Networks or any Subsidiary or
other affiliate of Nortel Networks or from Nortel Networks' or Sub's
inability to obtain consent or approval on a timely basis (in a manner
satisfying the conditions set forth in 7.01(b)) of, or make any filing
or registration with, any Governmental Authority) and (y) at any time
after the date of this Agreement and at or before such termination
there shall have been made to the Company or its stockholders an
Acquisition Proposal and (z) within 12 months of the termination of
this Agreement, the Company enters into a definitive agreement with
any third party providing for the consummation of an Acquisition
Proposal or an Acquisition Proposal is consummated (it being
understood that for the purposes of this Section 8.02(b)(i), all
references to "20%" in the definition of "Acquisition Proposal" shall
be replaced with "40%");
(ii) if (x) the Company or Nortel Networks shall terminate this
Agreement pursuant to Section 8.01(d)(iv) due to the failure of the
Company's stockholders to approve and adopt this Agreement and (y) at
any time after the date of this Agreement and at or before the Company
Meeting there shall exist an Acquisition Proposal which has been
publicly announced or the existence of which is a matter of public
knowledge and (z) within 12 months of the termination of this
Agreement, the Company enters into a definitive agreement with any
third party providing for the consummation of an Acquisition Proposal
or an Acquisition Proposal is consummated (it being understood that
for the purposes of this Section 8.02(b)(ii), all references to "20%"
in the definition of "Acquisition Proposal" shall be replaced with
"40%");
51.
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(iii) if Nortel Networks shall terminate this Agreement pursuant
to Section 8.01(b)(ii) following a willful breach by the Company of
(A) the covenants or agreements contained in Section 6.06, or (B)
following the making of an Acquisition Proposal to the Company or its
stockholders, any of the covenants or agreements contained in Sections
6.01, 6.02, 6.03, 6.08 or 6.10; or
(iv) if Nortel Networks shall terminate this Agreement pursuant
to Section 8.01(e).
(c) The Termination Fee required to be paid pursuant to subsection
(b)(i) or (b)(ii) above shall be payable by the Company to Nortel Networks not
later than two Business Days after the date the Company enters into a definitive
agreement providing for, or the date of consummation of, an Acquisition
Proposal, whichever is earlier. The Termination Fee required to be paid pursuant
to subsection (b)(iii) or (b)(iv) above shall be payable by the Company to
Nortel Networks not later than two Business Days after the termination referred
to therein. Notwithstanding the foregoing, (i) in no event shall more than one
Termination Fee be payable, and (ii) Nortel Networks may elect, by notice to the
Company, to defer the payment of the Termination Fee from time to time for a
period or periods of up to an aggregate of twelve months after the date such fee
would otherwise be payable. All payments under this Section 8.02 shall be made
by wire transfer of immediately available funds to an account designated by
Nortel Networks.
ARTICLE IX
MISCELLANEOUS
9.01. Survival. All representations, warranties, agreements and
covenants contained in this Agreement shall not survive the Effective Time or
termination of this Agreement if this Agreement is terminated prior to the
Effective Time; provided, however, that if the Effective Time occurs, the
agreements of the parties in Sections 6.01, 6.03, 6.04, 6.09, 6.11, 6.12 and
6.15 and this Article IX shall survive the Effective Time, and if this Agreement
is terminated prior to the Effective Time, the agreements of the parties in the
proviso to Section 6.05(a) with respect solely to the unauthorized use of
information, Sections 6.05(b) and 8.02 and this Article IX and the
Confidentiality Agreement shall survive such termination.
9.02. Amendment; Extension; Waiver. (a) Subject to compliance with
applicable law, this Agreement may be amended by the parties hereto, by action
taken or authorized by their respective Boards of Directors, at any time before
or after adoption of this Agreement and approval of any other matter by the
stockholders of the Company; provided, however, that after any such adoption and
approval of this Agreement by the stockholders of the Company, there may not be,
without further adoption or approval of such stockholders, any amendment of this
Agreement which by law requires such further approval by such stockholders. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
(b) Prior to the Effective Time, the parties hereto, by action taken or
authorized by their respective Boards of Directors, may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive with respect to the other
parties hereto any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
by the other parties hereto with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf
of such party, but such extension or waiver or failure to insist on strict
compliance with an obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
52.
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9.03. Counterparts. This Agreement may be executed in one or more
counterparts, each of which when executed shall be deemed to constitute an
original but all of which when taken together shall constitute one and the same
instrument.
9.04. Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of New York (except that
matters of corporate law and fiduciary duties of directors shall be governed by
the laws of the State of Delaware), without regard to the conflict of law
principles thereof.
9.05. Expenses. Subject to Section 8.02(b) and except as otherwise
provided herein, each party hereto will bear all expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby, except
that printing and mailing expenses and SEC registration and filing fees shall be
shared equally between the Company and Nortel Networks.
9.06. Notices. All notices, requests and other communications hereunder
to a party shall be in writing and shall be deemed given (a) upon delivery if
personally delivered or (b) three Business Days after being mailed by registered
or certified mail (return receipt requested) or (c) one Business Day after being
delivered by overnight courier or by facsimile (with confirmation) to such party
at its address or facsimile set forth below or such other address or facsimile
as such party may specify by notice to the parties hereto.
If to Nortel Networks or to Sub, to:
Nortel Networks Corporation
8200 Dixie Road, Suite 100
Brampton, Ontario
Canada L6T 5P6
Attention: Corporate Secretary
Fax: (905) 863-8386
Phone: (905) 863-0000
With a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Victor I. Lewkow, Esq.
Paul J. Shim, Esq.
Fax: (212) 225-3999
Phone: (212) 225-2000
If to the Company, to:
Alteon WebSystems, Inc.
50 Great Oaks Boulevard
San Jose, California 95119
Attention: Dominic P. Orr
Fax: (408) 360-5500
Phone: (408) 360-5501
With a copy to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, California 94306-2155
Attention: Eric Jensen, Esq.
Keith A. Flaum, Esq.
Fax: (650) 849-7400
Phone: (650) 843-5000
53.
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9.07. Entire Understanding. This Agreement (including the Company
Disclosure Schedule) and the Confidentiality Agreement represent the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and thereby and this Agreement supersedes any and all other
oral or written agreements (other than the Confidentiality Agreement) heretofore
made.
9.08. Assignment; No Third Party Beneficiaries. Neither this Agreement,
nor any of the rights, interests or obligations shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns. Except for Section
6.11, nothing in this Agreement expressed or implied, is intended to confer upon
any person, other than the parties hereto or their respective successors, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
9.09. Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or the Company Disclosure Schedule, such reference shall be
to a Section of, or Exhibit or Company Disclosure Schedule to, this Agreement
unless otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and are not part of this Agreement.
Whenever the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation". Any reference to "herein" or "hereof" or similar terms shall refer
to the agreement as a whole rather than to the individual paragraph, section or
article.
9.10. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as it is enforceable.
9.11. Specific Performance; Attorneys' Fees; Waiver of Jury Trial. (a)
The parties agree that: (i) in the event of any breach or threatened breach of
any covenant, obligation or other provision set forth in this Agreement, any
party shall be entitled (in addition to any other remedy that may be available
to it) to (A) a decree or order of specific performance or mandamus to enforce
the observance and performance of such covenant, obligation or other provision,
and (B) an injunction restraining such breach or threatened breach; and (ii) no
Person shall be required to provide any bond or other security in connection
with any such decree, order or injunction or in connection with any related
action or proceeding.
(b) In any action at law or suit in equity to enforce this Agreement or
the rights of any of the parties hereunder, the prevailing party in such action
or suit shall be entitled to receive a reasonable sum for its attorneys' fees
and all other reasonable costs and expenses incurred in such action or suit.
(c) Each of the parties hereto irrevocably waives the right to trial by
jury.
* * *
54.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
NORTEL NETWORKS CORPORATION
By: /s/ Clarence J. Chandran
--------------------------
Name:
Title:
By: /s/ William Kerr
-----------------------
Name:
Title:
DARIUS CORP.
By: /s/ Khush Dadyburjor
-----------------------
Name:
Title:
ALTEON WEBSYSTEMS, INC.
By: /s/ Dominic P. Orr
-----------------------
Name:
Title:
55.
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Exhibit A
---------
Form of Affiliate Letter
Nortel Networks Corporation
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Alteon WebSystems, Inc., a Delaware corporation (the
"Company"), as the term "affiliate" is defined for purposes of paragraphs (c)
and (d) of Rule 145 of the rules and regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"). Pursuant to the terms of the
Agreement and Plan of Merger dated as of July 28, 2000 (the "Agreement"), by and
among Nortel Networks Corporation, a Canadian corporation ("Nortel Networks"),
Darius Corp., a Delaware corporation and wholly owned subsidiary of Nortel
Networks ("Sub") and the Company, Sub will merge with and into the Company (the
"Merger") (capitalized terms used and not otherwise defined herein shall have
the respective meanings ascribed to them in the Agreement).
As a result of the Merger, I may receive common shares, without par
value, of Nortel Networks (the "Nortel Networks Common Shares") in exchange for
shares owned by me of common stock, par value $0.001 per share, of the Company.
I represent, warrant and covenant to Nortel Networks that in the event
I receive any Nortel Networks Common Shares as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of Nortel
Networks Common Shares I receive in the Merger in violation of the Act or the
Rules and Regulations.
B. I have carefully read this letter and the Agreement and discussed
the requirements of such documents and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of the Nortel Networks Common
Shares, to the extent I felt necessary, with my counsel or counsel for Nortel
Networks or the Company.
C. I have been advised that the issuance of Nortel Networks Common
Shares to me pursuant to the Merger has been registered with the Commission
under the Act on a Registration Statement on Form S-4. However, I have also been
advised that, since at the time the Merger was submitted for a vote of the
stockholders of the Company, I may be deemed to have been an affiliate of the
Company and the distribution by me of the Nortel Networks Common Shares has not
been registered under the Act, I may not sell, transfer or otherwise dispose of
the Nortel Networks Common Shares issued to me in the Merger unless (i) such
sale, transfer or other disposition has been registered under the Act, (ii) such
sale, transfer or other disposition is made in conformity with Rule 145
promulgated by the Commission under the Act, (iii) in the opinion of counsel
reasonably acceptable to Nortel Networks, such sale, transfer or other
disposition is otherwise exempt from registration under the Act, or (iv) an
authorized representative of the Commission takes a position in writing to the
effect that the Commission would take no action, or that the staff of the
Commission would not recommend that the Commission take action, with respect to
such sale, transfer or other disposition, and a copy of such written position is
delivered to Nortel Networks.
56.
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D. I understand that, except as may be provided in any registration
rights agreement entered into by Nortel Networks and the undersigned, Nortel
Networks is under no obligation to register the sale, transfer or other
disposition of the Nortel Networks Common Shares by me or on my behalf under the
Act or to take any other action necessary in order to make compliance with an
exemption from such registration available.
E. Notwithstanding any other provision contained herein, this letter
and all of my obligations hereunder shall terminate upon the termination of the
Agreement prior to the Effective Time.
Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of the Company as described in the first paragraph
of this letter or as a waiver of any rights I may have to object to any claim
that I am such an affiliate on or after the date of this letter.
Very truly yours,
----------------------
Agreed to and Accepted this
____ day of _________, 2000
NORTEL NETWORKS CORPORATION
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
57.
<PAGE>
Execution Version
FORM OF STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT (this "Agreement"), dated as of
July 28, 2000, is entered into by and between the undersigned stockholder (the
"Stockholder Party") of Darius Corp., a corporation organized under the laws of
Delaware (the "Company"), and Nortel Networks Corporation, a corporation
organized under the laws of Canada ("Nortel Networks").
WHEREAS, simultaneously with the execution of this Agreement,
Nortel Networks, Darius Corp., a wholly owned subsidiary of Nortel Networks
("Sub"), and the Company, are entering into an Agreement and Plan of Merger,
dated as of the date hereof (as the same may be amended or supplemented, the
"Merger Agreement"), providing, among other things, for the merger of Sub with
and into the Company (the "Merger"); and
WHEREAS, as of the date hereof, the Stockholder Party is the
Beneficial Owner (as defined below) of the shares of common stock, par value
$0.001 per share, of the Company ("Common Stock") set forth in Schedule I hereto
(the "Owned Shares"); and
WHEREAS, as an inducement and a condition to its entering into
the Merger Agreement and incurring the obligations set forth therein, Nortel
Networks has required that the Stockholder Party enter into this Agreement;
58.
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NOW, THEREFORE, in consideration of the foregoing and the
mutual premises, representations, warranties, covenants and agreements contained
herein and in the Merger Agreement, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Certain Definitions. Capitalized terms used but not defined
in this Agreement are used in this Agreement with the meanings given to such
terms in the Merger Agreement. In addition, for purposes of this Agreement:
"Affiliate" means, with respect to any specified Person, any
Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the Person
specified. For purposes of this Agreement, with respect to the Stockholder
Party, "Affiliate" shall not include the Company and the Persons that directly,
or indirectly through one or more intermediaries, are controlled by the Company.
"Beneficially Owned" or "Beneficial Ownership" with respect to
any securities means having beneficial ownership of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act, disregarding the
phrase "within 60 days" in paragraph (d)(1)(i) thereof), including pursuant to
any agreement, arrangement or understanding, whether or not in writing. Without
duplicative counting of the same securities by the same holder, securities
Beneficially Owned by a Person shall include securities Beneficially Owned by
all Affiliates of such Person and all other Persons with whom such Person would
constitute a "Group" within the meaning of Section 13(d) of the Exchange Act and
the rules promulgated thereunder.
"Beneficial Owner" with respect to any securities means a
Person who has Beneficial Ownership of such securities.
"Shares" mean the Owned Shares and any shares of Common Stock
the Beneficial Ownership of which is acquired in any manner by the Stockholder
Party (including without limitation, pursuant to the exercise of existing stock
options or warrants) after the date hereof.
59.
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"Transfer" means, with respect to a security, the sale,
transfer, pledge, hypothecation, encumbrance, assignment or disposition of such
security or the Beneficial Ownership thereof, the offer to make such a sale,
transfer or other disposition, and each option, agreement, arrangement or
understanding, whether or not in writing, to effect any of the foregoing. As a
verb, "Transfer" shall have a correlative meaning.
2. No Disposition or Solicitation.
(a) The Stockholder Party agrees that from and after the date
hereof, except as contemplated by this Agreement, such party will not Transfer
or agree to Transfer any of the Shares other than with Nortel Networks' prior
written consent, or grant any proxy or power-of-attorney with respect to the
Shares other than pursuant to this Agreement; provided, that nothing in this
Agreement shall prohibit the Stockholder Party from (a) exercising any option to
purchase shares of Common Stock, or (b) effecting any Transfer of Shares (i) by
will or applicable laws of descent and distribution or (ii) to any member of the
immediate family of the Stockholder Party, or any trust, limited partnership or
other similar entity the Beneficial Ownership of which is held by the
Stockholder Party or such family members (each a "Permitted Transferee"), so
long as such Permitted Transferee agrees in writing, in form and substance
reasonably satisfactory to Nortel Networks, to be bound by the terms of this
Agreement to the same extent as the Stockholder Party is bound.
(b) The Stockholder Party agrees that from and after the date
hereof, except as contemplated by this Agreement or, solely in the Stockholder
Party's capacity as an officer or director of the Company to the extent
specifically permitted by the Merger Agreement, the Stockholder Party will not
directly or indirectly solicit, initiate, or knowingly encourage any inquiries
or proposals from, discuss or negotiate with, or provide any non-public
information to, any Person relating to, or otherwise facilitate, any Acquisition
Proposal.
60.
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(c) The Stockholder Party agrees that, except for
communications made in the course of such party's duties as an officer or
director of the Company or unless required by applicable law, neither the
Stockholder Party nor any of such party's Affiliates shall make any press
release or public announcement with respect to Nortel Networks or this Agreement
and the Merger Agreement and the transactions contemplated hereby and thereby,
without the prior written consent of Nortel Networks.
3. Stockholder Vote. The Stockholder Party agrees that (i) at
such time as the Company conducts a meeting of or otherwise seeks a vote or
consent of its stockholders for the purpose of adopting the Merger Agreement
(such meeting or any adjournment thereof, or such consent process, the "Company
Meeting"), the Stockholder Party will vote, or provide a consent with respect
to, all issued and outstanding shares of Common Stock over which the Stockholder
Party has voting power ("Voting Shares") in favor of the adoption of the Merger
Agreement, provided that the Stockholder Party shall not be required to vote
for, or provide a consent with respect to, any action that would reduce the
number of Nortel Networks Common Shares to be received by the Stockholder Party
in respect of such party's Common Stock in the Merger, and (ii) the Stockholder
Party will (at any meeting of stockholders) vote the Voting Shares against, and
will not consent to, any Acquisition Proposal or any action that would delay,
prevent or frustrate the transactions contemplated by the Merger Agreement.
Without limiting the foregoing, it is understood that the
obligations under clause (i) above shall remain applicable in respect of each
meeting of stockholders of the Company duly called for the purpose of adopting
the Merger Agreement regardless of the position of the Company Board as to the
Merger at the time of such meeting, and that the obligations under clause (ii)
above shall continue until the termination of this Agreement in accordance with
Section 9.
61.
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4. Reasonable Efforts to Cooperate. The Stockholder Party will
provide any information reasonably requested by the Company, Nortel Networks or
Sub for any regulatory application or filing made or approval sought for the
transactions contemplated by the Merger Agreement (including filings with the
SEC).
5. Irrevocable Proxy. (a) In furtherance of the agreements
contained in Section 3 of this Agreement, the Stockholder Party hereby
irrevocably grants to, and appoints, Nortel Networks and any designees of Nortel
Networks, and each of them individually, the Stockholder Party's proxy and
attorney-in-fact (with full power of substitution), for and in the name, place
and stead of the Stockholder Party, to vote all Voting Shares, or grant a
consent or approval in respect of the Voting Shares, or execute and deliver a
proxy to vote the Voting Shares, (x) subject to the proviso set forth in clause
(i) of the first paragraph of Section 3, in favor of the adoption of the Merger
Agreement and approval of the terms thereof and each of the other transactions
contemplated by the Merger Agreement and (y) against any Acquisition Proposal or
any other matter referred to in clause (ii) of the first sentence of Section 3
hereof.
(b) The Stockholder Party represents and warrants to Nortel
Networks that any proxies heretofore given in respect of the Voting Shares are
not irrevocable, and hereby revokes any such proxies.
(c) The Stockholder Party hereby affirms that the irrevocable
proxy set forth in this Section 5 is given in connection with, and in
consideration of, the execution of the Merger Agreement by Nortel Networks and
Sub, and that such irrevocable proxy is given to secure the performance of the
duties of such Stockholder Party under this Agreement. The Stockholder Party
hereby further affirms that the irrevocable proxy is coupled with an interest
and may under no circumstances be revoked. The Stockholder Party hereby ratifies
and confirms all that such irrevocable proxy may lawfully do or cause to be done
by virtue hereof. Such irrevocable proxy is executed and intended to be
62.
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irrevocable in accordance with the provisions of Section 218 of the DGCL. The
proxy granted in this Section 5 shall remain valid until terminated pursuant to
Section 9 hereof.
6. Covenant of Stockholder Party. The Stockholder Party agrees
to take all reasonable action to (i) permit (x) the Shares to be acquired in the
Merger and (y) the voting of the Voting Shares in accordance with the terms of
this Agreement and (ii) prevent creditors in respect of any pledge of the Shares
from exercising their rights under such pledge.
7. Representations, Warranties and Covenants of Stockholder
Party. The Stockholder Party hereby represents and warrants to, and agrees with,
Nortel Networks as follows:
(a) The Stockholder Party has all necessary power and
authority and legal capacity to execute and deliver this Agreement and perform
his obligations hereunder.
(b) This Agreement has been duly and validly executed and
delivered by the Stockholder Party and constitutes the valid and binding
agreement of the Stockholder Party, enforceable against the Stockholder Party in
accordance with its terms except to the extent limited by (i) applicable
bankruptcy, insolvency or similar laws affecting creditors' rights or (ii)
general equity principles, whether considered at law or in equity.
63.
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(c) Subject to applicable community property laws, the
Stockholder Party is the sole Beneficial Owner of the Owned Shares. The
Stockholder Party has good and marketable title (which may include holding in
nominee or "street" name) to all of the Owned Shares, free and clear of all
liens, claims, options, proxies, voting agreements and security interests (other
than as created by this Agreement and restrictions on Transfer under applicable
securities laws). The Owned Shares constitute all of the capital stock of the
Company Beneficially Owned by the Stockholder Party and neither the Stockholder
Party nor any of such party's Affiliates is the Beneficial Owner of, or has any
right to acquire (whether currently, upon lapse of time, following the
satisfaction of any conditions, upon the occurrence of any event or any
combination of the foregoing) any Common Stock or any securities convertible
into or exchangeable or exercisable for Common Stock.
(d) Neither the execution and delivery of this Agreement by
the Stockholder Party nor the consummation of the transactions contemplated
hereby will (i) conflict with, result in any violation of, require any consent
under or constitute a default (whether with notice or lapse of time or both) by
the Stockholder Party under any mortgage, bond, indenture, agreement, instrument
or obligation to which the Stockholder Party is a party or by which the
Stockholder Party or any of the Shares is bound; (ii) violate any judgment,
order, injunction, decree or award of any court, administrative agency or
governmental body that is binding on the Stockholder Party; or (iii) constitute
a violation by the Stockholder Party of any law or regulation of any
jurisdiction, in each case except for violations, conflicts or defaults that
would not have a material adverse effect on the ability of the Stockholder Party
to perform the party's obligations under this Agreement.
8. Representations and Warranties of Nortel Networks. Nortel
Networks represents and warrants to the Stockholder Party that Nortel Networks
has full corporate power and authority to execute and deliver this Agreement and
64.
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to perform its obligations hereunder. The execution, delivery and performance of
this Agreement by Nortel Networks will not constitute a violation of, conflict
with or result in a default under, (i) any contract, understanding or
arrangement to which Nortel Networks is a party or by which it is bound or
require the consent of any other Person or any party pursuant thereto, (ii) any
judgment, decree or order applicable to Nortel Networks, or (iii) any law, rule
or regulation of any governmental body, in each case except for violations,
conflicts or defaults that would not have a material adverse effect on the
ability of Nortel Networks to perform its obligations under this Agreement; and
this Agreement constitutes a legal, valid and binding agreement on the part of
Nortel Networks, enforceable against Nortel Networks in accordance with its
terms, except as such enforceability may be limited by principles applicable to
creditors' rights generally or governing the availability of equitable relief.
The execution and delivery by Nortel Networks of this Agreement and the
consummation by Nortel Networks of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of Nortel Networks
and no other corporate proceedings on the part of Nortel Networks are necessary
to authorize this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
Nortel Networks.
9. Termination. This Agreement (including the proxy referred
to herein) shall terminate upon the earliest to occur of (a) the Effective Time,
(b) the termination of the Merger Agreement (unless Nortel Networks is or may be
entitled to receive a Termination Fee under the Merger Agreement following such
termination), and (c) 30 days following the termination of the Merger Agreement
in the event that Nortel Networks is or may be entitled to receive a Termination
Fee under the Merger Agreement following such termination; provided that, during
such 30 day period, the Stockholder Party shall be permitted to make sales of
Shares in broker transactions effected through the Nasdaq Stock Market. No such
termination shall relieve any party from liability for any breach of this
Agreement prior to termination.
65.
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10. Miscellaneous.
(a) This Agreement represents the entire understanding of the
parties hereto with reference to the subject matter hereof and supersedes any
and all other oral or written agreements and understandings among the parties
heretofore made.
(b) The Stockholder Party agrees that this Agreement and the
respective rights and obligations of such Stockholder Party hereunder shall
attach to all Common Stock, and all securities convertible into such shares,
that become Beneficially Owned by the Stockholder Party.
(c) Except as otherwise provided in this Agreement, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses.
(d) This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties and their respective
successors, personal or legal representatives, executors, administrators, heirs,
distributees, devisees, legatees and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any party (whether by operation of law or otherwise) without the
prior written consent of the other party; provided, that Nortel Networks may
assign any or all rights under this Agreement to Sub or any other Subsidiary of
Nortel Networks. Nothing in this Agreement, express or implied, is intended to
or shall confer upon any other Person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement.
66.
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(e) This Agreement may not be amended, changed, supplemented,
or otherwise modified or terminated, except upon the execution and delivery of a
written agreement executed by the parties hereto; provided, that Nortel Networks
may waive compliance by the Stockholder Party with any representation, agreement
or condition otherwise required to be complied with by the Stockholder Party
under this Agreement or release the Stockholder Party from its obligations under
this Agreement, but any such waiver or release shall be effective only if in
writing executed by Nortel Networks.
(f) All notices, requests and other communications hereunder
to a party shall be in writing and shall be deemed given (a) upon delivery if
personally delivered or (b) three Business Days after being mailed by registered
or certified mail (return receipt requested) or (c) one Business Day after being
delivered by overnight courier or by facsimile (with confirmation) to such party
at its address or facsimile set forth below or such other address or facsimile
as such party may specify by notice to the parties hereto.
(i) In the case of the Stockholder Party, to the address
set forth beside his, her or its name on Schedule I hereto;
and
(ii) If to Nortel Networks, to:
Nortel Networks Corporation
8200 Dixie Road, Suite 100
Brampton, Ontario
Canada L6T 5P6
Attention: Corporate Secretary
Fax: (905) 863-8386
Phone: (905) 863-0000
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Victor I. Lewkow, Esq.
Paul J. Shim, Esq.
Fax: (212) 225-3999
Phone:(212) 225-2000
67.
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(g) If any term, provision, covenant or restriction contained
in this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated.
(h) The Stockholder Party acknowledges and agrees that in the
event of any breach of this Agreement, Nortel Networks would be irreparably and
immediately harmed and could not be made whole by monetary damages. It is
accordingly agreed that (i) the Stockholder Party will waive, in any action for
specific performance, the defense of adequacy of a remedy at law, and (ii)
Nortel Networks shall be entitled, in addition to any other remedy to which it
may be entitled at law or in equity, to compel specific performance of this
Agreement and (iii) specific performance of this Agreement shall be the
exclusive remedy for any breach by the Stockholder Party of such party's
obligations under Section 2 hereof (it being understood that this clause (iii)
shall in no way limit Nortel Networks' rights and remedies against the Company
under the Merger Agreement).
(i) All rights, powers and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity shall be
cumulative and not alternative, and the exercise of any thereof by any party
shall not preclude the simultaneous or later exercise of any other such right,
power or remedy by such party. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
68.
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(j) This Agreement shall be governed by, and interpreted in
accordance with, the laws of the State of New York (except that matters of
corporate law and fiduciary duties shall be governed by the laws of the State of
Delaware).
(k) The section and paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
(l) This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
(m) The spouse of the Stockholder Party, if any (the
"Spouse"), by executing the Spousal Consent attached hereto as Annex A, agrees
to be bound in all respects by the terms of this Agreement to the same extent as
the Stockholder Party. The Spouse further agrees that should he or she
predecease or become divorced from the Stockholder Party, any of the Common
Shares in which he or she may have an interest shall remain subject to all of
the restrictions and to all of the rights of the Company as contained in this
Agreement. Whenever reference is made in this agreement to "Shares", "Owned
Shares" or "Voting Shares", unless the context clearly requires otherwise, such
reference will include any community property or other interest of the Spouse,
if any, in such Shares, Owned Shares or Voting Shares.
11. Stockholder Capacity. The Stockholder Party, to the extent
such party is or becomes during the term hereof a director or officer of the
Company, does not make any agreement or understanding herein in such party's
capacity as such director or officer. The Stockholder Party signs solely in such
party's capacity as the record holder and/or beneficial owner of the Owned
Shares and Voting Shares, and nothing herein shall limit or affect any actions
taken or omitted to be taken by the Stockholder Party in such party's capacity
as an officer or director of the Company to the extent specifically permitted by
the Merger Agreement.
12. Further Assurances. From time to time, at Nortel Networks'
reasonable request and without further consideration, the Stockholder Party
shall execute and deliver such additional documents and take all such further
lawful action as may be necessary or desirable to consummate and make effective,
in the most expeditious manner practicable, the transactions contemplated by
this Agreement.
69.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
NORTEL NETWORKS CORPORATION
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
STOCKHOLDER PARTY
--------------------------
70.
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Caution Concerning Forward-Looking Statements
This filing contains certain statements that are based on Alteon's present
expectations of future events. These statements are "forward-looking statements"
within the meaning of the safe-harbor provisions of the U.S. federal securities
laws. These forward-looking statements are subject to risks and uncertainties
that could cause actual results or outcomes to differ materially from those
contemplated by present expectations. Factors that could cause or contribute to
such differences include, but are not limited to, risks relating to: the
consummation of the contemplated merger involving Alteon and Nortel Networks,
such as the risk that the companies may not obtain the required regulatory
clearances or stockholder approval in a timely manner or at all; the timing and
successful completion of technology and product development efforts; integration
of the technologies and businesses of Alteon and Nortel Networks; and changing
relationships with customers, suppliers and strategic partners.
These and other risks associated with the businesses of Alteon and Nortel
Networks that may affect their operating results are described in the most
recent Form 10-Q, most recent Form 10-K and other periodic reports filed by
Alteon and Nortel Networks with the Securities and Exchange Commission.
Additional Information About the Merger
Alteon expects to mail to its stockholders a proxy statement/prospectus
containing information about Alteon, Nortel Networks and the Merger. In
connection with the Merger, Nortel Networks plans to file a registration
statement on SEC Form S-4. Investors and security holders are urged to read the
registration statement and the proxy statement/prospectus carefully when they
become available.
Alteon will be, and certain other persons may be, soliciting proxies from
Alteon's stockholders in favor of the adoption of the merger agreement. The
directors and executive officers of Alteon and the directors and executive
officers of Nortel Networks may be deemed to be participants in Alteon's
solicitation of proxies. Information regarding the participants in the
solicitation and a description of certain interests the directors and executive
officers of Alteon have in the Merger is contained in the document filed with
the SEC by Alteon pursuant to Rule 425 on July 28, 2000.
How to Obtain Documents from the Securities and Exchange Commission
In addition to the registration statement and the proxy statement/prospectus,
Alteon and Nortel Networks file annual, quarterly and other periodic reports,
proxy statements and other information with the SEC. You may obtain free copies
of these documents, as they are filed, through the website maintained by the SEC
at http://www.sec.gov.
You may read and copy any reports, statements or other information filed by
Alteon or Nortel Networks with the SEC at the SEC public reference rooms at 450
Fifth Street, N.W., Washington, D.C. 20549 or at any of the SEC's other public
reference rooms in New York, New York and Chicago, Illinois. Please call the
SEC at 1-800-SEC-0330 for further information on the public reference rooms.
Alteon's and Nortel Networks' filings with the SEC are also available through
commercial document-retrieval services.
71.
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How to Obtain Documents from Alteon
Free copies of the proxy statement/prospectus and other documents, when they
become available, may also be obtained from Alteon by directing a request
through the Investors Relations portion of Alteon's website at
http://www.alteonwebsystems.com or by mail to Alteon WebSystems, Inc., 50 Great
Oaks Blvd., San Jose, CA 94119, attention: Investor Relations, telephone: (408)
360-5500.
72.
