AGREEMENT AND PLAN OF MERGER
by and among
ASCEND COMMUNICATIONS, INC.,
a Delaware corporation,
WILDCARD MERGER CORPORATION,
a Delaware corporation and a wholly owned
subsidiary of Ascend,
and
STRATUS COMPUTER, INC.,
a Massachusetts corporation
Dated as of August 3, 1998
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of
August 3, 1998, by and among Ascend Communications, Inc., a Delaware
corporation ("Ascend"), Wildcard Merger Corporation, a Delaware corporation
and a wholly owned subsidiary of Ascend ("Sub"), and Stratus Computer,
Inc., a Massachusetts corporation ("Stratus").
Recitals
WHEREAS, the Boards of Directors of Ascend, Sub and Stratus deem
it advisable and in the best interests of each corporation and its
respective stockholders that Ascend and Stratus combine in order to advance
the long-term business interests of Ascend and Stratus, and have approved
this Agreement, the Merger (as defined below) and the other transactions
contemplated by this Agreement;
WHEREAS, the combination of Ascend and Stratus shall be effected
by the terms of this Agreement through a transaction in which Sub will
merge with and into Stratus, Stratus will become a wholly-owned subsidiary
of Ascend and the stockholders of Stratus will become stockholders of
Ascend; and
WHEREAS, for U.S. federal income tax purposes, it is intended
that the Merger shall qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code") and that this Agreement shall be, and hereby is, adopted as a plan
of reorganization for purposes of Section 368(a) of the Code.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
below, the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 Merger. Subject to the provisions of this Agreement
and in accordance with the Massachusetts Business Corporation Law (the
"MBCL"), Sub shall be merged with and into Stratus (the "Merger"). The
Merger shall become effective (the time of such effectiveness being
hereinafter referred to as the "Effective Time") upon the filing of the
Articles of Merger with the Secretary of State of the Commonwealth of
Massachusetts prepared and executed in accordance with the relevant
provisions of the MBCL and the filing of a Certificate of Merger with the
Secretary of State of the State of Delaware. As a result of the Merger,
the outstanding shares of capital stock of Sub and Stratus shall be
converted or canceled in the manner provided in Article II of this
Agreement; the separate corporate existence of Sub shall cease; and Stratus
shall be the surviving corporation in the Merger.
Section 1.2 Closing. The closing of the Merger (the "Closing")
will take place at 9:00 a.m., local time, on a date to be specified by
Ascend and Stratus, which shall be no later than the second business day
after satisfaction or waiver of the conditions set forth in Article VII
(the "Closing Date"), at the offices of Xxxx Xxxx Xxxx & Freidenrich, LLP,
000 Xxxxxxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx, unless another date or place is
agreed to in writing by Ascend and Stratus.
Section 1.3 Effects of the Merger. From and after the Effective
Time, (i) the separate existence of Sub shall cease and Sub shall be merged
with and into Stratus (Sub and Stratus are sometimes referred to below as
the "Constituent Corporations," and Stratus after the Effective Time is
sometimes referred to below as the Surviving Corporation"), (ii) the
Articles of Organization of Stratus as in effect immediately prior to the
Effective Time shall be the Articles of Organization of the Surviving
Corporation, with such amendments thereto as Ascend may reasonably request,
(iii) the Bylaws of Sub as in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation, (iv) the Surviving
Corporation shall be a Massachusetts corporation, and (v) the Merger shall
have the further effects set forth in Section 80 of the MBCL. Without
limiting the generality of the foregoing and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises
of Stratus and Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of Stratus and Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
Section 1.4 Directors and Officers. The directors of Sub
immediately prior to the Effective Time shall be the initial directors of
the Surviving Corporation and shall hold office until their respective
successors have been appointed or elected in accordance with the Articles
of Organization and Bylaws of the Surviving Corporation. The officers of
Sub immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As of the Effective Time,
by virtue of the Merger and without any action on the part of the holder of
any capital stock of Stratus or capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of
the capital stock of Sub shall be converted into and become one fully paid
and nonassessable share of common stock, $.01 par value per share, of the
Surviving Corporation ("Sub Common Stock"), which shares of Sub Common
Stock shall be the only shares of Sub capital stock outstanding immediately
following such conversion.
(b) Cancellation of Ascend-Owned Stock. All shares of common
stock, $.01 par value per share, of Stratus ("Stratus Common Stock"),
together with each associated right (a "Right") issued under the Rights
Agreement (as defined in Section 3.4(b)), owned by Ascend, Stratus, Sub or
any other wholly owned Subsidiary (as defined in Section 3.2(b)) of Ascend
or Stratus (if any), shall be canceled and retired and shall cease to
exist, and no stock of Ascend or other consideration shall be delivered in
exchange therefor.
(c) Exchange Ratio for Stratus Common Stock. Subject to
Section 2.2, each issued and outstanding share of Stratus Common Stock
(other than shares to be canceled in accordance with Section 2.1(b) and any
Dissenting Shares (as defined in and to the extent provided in Section 2.3
hereof)) together with each associated Right shall be converted into the
right to receive 0.75 (the "Exchange Ratio") of a fully paid and
nonassessable share of common stock, $.001 par value per share, of Ascend
("Ascend Common Stock") (which amount will be proportionately adjusted for
any stock split or stock dividend effected between the date of this
Agreement and the Effective Time). All such shares of Stratus Common
Stock, when so converted, shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such shares shall cease to have
any rights with respect thereto, except the right to receive the shares of
Ascend Common Stock and any cash in lieu of fractional shares of Ascend
Common Stock to be issued or paid in consideration therefor upon the
surrender of such certificate in accordance with Section 2.2, without
interest.
(d) Stratus Stock Options and Employee Stock Purchase Plan. At
the Effective Time, all then outstanding options to purchase Stratus Common
Stock issued under the Stratus Amended and Restated 1983 Stock Option Plan,
as amended, the Stratus Amended and Restated Employee Stock Purchase Plan,
the Stratus Restated Non-Qualified Stock Option Plan, and the Stratus 1997
Non-Qualified Stock Option Plan (collectively, including agreements entered
into under such plans, the "Stratus Stock Plans"), not exercised as of the
Effective Time will be assumed by Ascend in accordance with Section 6.11.
Section 2.2 Exchange of Certificates. The procedures for
exchanging outstanding shares of Stratus Common Stock for Ascend Common
Stock pursuant to the Merger are as follows:
(a) Exchange Agent. As of the Effective Time, Ascend shall
deposit with a bank or trust company designated by Ascend and reasonably
acceptable to Stratus (the "Exchange Agent"), for the benefit of the
holders of shares of Stratus Common Stock, for exchange in accordance with
this Section 2.2, through the Exchange Agent, certificates representing the
shares of Ascend Common Stock (such shares of Ascend Common Stock, together
with any dividends or distributions with respect thereto, being hereinafter
referred to as the "Exchange Fund") issuable pursuant to Section 2.1 in
exchange for outstanding shares of Stratus Common Stock.
(b) Exchange Procedures. Promptly after the Effective Time, the
Exchange Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Stratus Common Stock (each a "Stratus Certificate"
and collectively the "Stratus Certificates") whose shares were converted
pursuant to Section 2.1 into the right to receive shares of Ascend Common
Stock (i) a duly executed letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Stratus
Certificates shall pass, only upon delivery of the Stratus Certificates to
the Exchange Agent and shall be in such form and have such other provisions
as Ascend and Stratus may reasonably specify) and (ii) instructions for use
in effecting the surrender of the Stratus Certificates in exchange for
certificates representing shares of Ascend Common Stock. Upon surrender of
a Stratus Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Ascend, together with such
letter of transmittal, duly executed, the holder of such Stratus
Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of Ascend Common Stock which such
holder has the right to receive pursuant to the provisions of this
Article II, and the Stratus Certificate so surrendered shall immediately be
canceled. In the event of a transfer of ownership of Stratus Common Stock
which is not registered in the transfer records of Stratus, a certificate
representing the proper number of shares of Ascend Common Stock may be
issued to a transferee if the Stratus Certificate representing such Stratus
Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence
that any applicable stock transfer taxes have been paid. Until surrendered
as contemplated by this Section 2.2, each Stratus Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the certificate representing shares of Ascend
Common Stock and cash in lieu of any fractional shares of Ascend Common
Stock as contemplated by this Section 2.2.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions declared or made with respect to Ascend
Common Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Stratus Certificate with respect to the
shares of Ascend Common Stock represented thereby, and no cash payment in
lieu of fractional shares shall be paid to any such holder pursuant to
subsection (e) below, until the holder of record of such Stratus
Certificate shall surrender such Stratus Certificate. Subject to the
effect of applicable laws, following surrender of any such Stratus
Certificate, there shall promptly be paid to the record holder of the
certificates representing whole shares of Ascend Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of any cash payable in lieu of a fractional share of Ascend Common
Stock to which such holder is entitled pursuant to subsection (e) of this
Section 2.2 below and the amount of dividends or other distributions with a
record date after the Effective Time previously paid with respect to such
whole shares of Ascend Common Stock, and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole shares of Ascend
Common Stock.
(d) No Further Ownership Rights in Stratus Common Stock. All
shares of Ascend Common Stock issued upon the surrender for exchange of
shares of Stratus Common Stock in accordance with the terms hereof
(including any cash paid pursuant to subsection (c) and (e) of this
Section 2.2) shall be deemed to have been issued in full satisfaction of
all rights under the MBCL pertaining to such shares of Stratus Common
Stock. After the Effective Time, there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the
shares of Stratus Common Stock which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Stratus Certificates are
presented to the Surviving Corporation for any reason, they shall be
canceled and exchanged as provided in this Section 2.2.
(e) No Fractional Shares. No certificate or scrip representing
fractional shares of Ascend Common Stock shall be issued upon the surrender
for exchange of Stratus Certificates, and such fractional share interests
will not entitle the owner thereof to vote or to hold any other rights of a
stockholder of Ascend. Notwithstanding any other provision of this
Agreement, each holder of shares of Stratus Common Stock exchanged pursuant
to the Merger who would otherwise have been entitled to receive a fraction
of a share of Ascend Common Stock (after taking into account all Stratus
Certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part of a share of
Ascend Common Stock multiplied by the average of the last reported sale
prices of Ascend Common Stock on The Nasdaq National Market on the ten (10)
trading days immediately preceding the Effective Time.
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the stockholders of Stratus for one
year after the Effective Time shall be delivered to Ascend, upon demand,
and any stockholders of Stratus who have not previously complied with this
Section 2.2 shall thereafter look only to Ascend for payment of their claim
for Ascend Common Stock, cash in lieu of fractional shares of Ascend Common
Stock, and dividends or distributions with respect to Ascend Common Stock.
(g) No Liability. Neither Ascend nor Stratus, nor any of their
respective directors, officers, employees or agents, shall be liable to any
holder of shares of Stratus Common Stock or Ascend Common Stock, as the
case may be, for such shares (or dividends or distributions with respect
thereto) delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
Section 2.3 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, the shares of any holder of Stratus Common Stock who has demanded
and perfected appraisal rights for such shares in accordance with the MBCL
and who, as of the Effective Time, has not effectively withdrawn or lost
such appraisal rights ("Dissenting Shares"), shall not be converted into or
represent a right to receive Ascend Common Stock pursuant to Section 2.1,
but the holder thereof shall only be entitled to such rights as are granted
by the MBCL.
(b) Notwithstanding the foregoing, if any holder of shares of
Stratus Common Stock who demands appraisal of such shares under the MBCL
shall effectively withdraw the request for appraisal or lose the right to
appraisal, then, as of the later of the Effective Time and the occurrence
of such event, such holder's shares shall automatically be converted into
and represent only the right to receive Ascend Common Stock and cash in
lieu of fractional shares, without interest thereon, upon surrender of the
certificate representing such shares.
(c) Stratus shall give Ascend (i) prompt notice of any written
demands for appraisal of any shares of Stratus Common Stock, withdrawals of
such demands, and any other instruments served pursuant to the MBCL and
received by Stratus, which relate to any such demand for appraisal and
(ii) the opportunity to participate in all negotiations and proceedings
which take place prior to the Effective Time with respect to demands for
appraisal under the MBCL. Stratus shall not, except with the prior written
consent of Ascend or as may be required by applicable law, voluntarily make
any payment with respect to any demands for appraisal of Stratus Common
Stock or offer to settle or settle any such demands.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF STRATUS
Stratus represents and warrants to Ascend and Sub that the
statements contained in this Article III are true and correct, except as
set forth in the disclosure schedule delivered by Stratus to Ascend on or
before the date of this Agreement ("Stratus Disclosure Schedule") or except
to the extent disclosed in the Stratus SEC Reports (as defined herein)
filed with the SEC since January 1, 1998. The Stratus Disclosure Schedule
shall be arranged in sections corresponding to the numbered and lettered
sections contained in this Article III, and the disclosure in any such
numbered and lettered section of the Stratus Disclosure Schedule shall
qualify only the corresponding section in this Article III (except to the
extent disclosure in any numbered and lettered section of the Stratus
Disclosure Schedule is specifically cross-referenced in another numbered
and lettered section of the Stratus Disclosure Schedule). The term
"Stratus Material Adverse Effect" shall mean a material adverse effect on
the business, operations, properties, assets (including intangible assets),
financial condition, or results of operations of Stratus and its
Subsidiaries, with materiality determined in accordance with Section 9.3.
Section 3.1 Organization. Stratus and each of its Subsidiaries is
a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, has all requisite
corporate power to own, lease and operate its property and to carry on its
business as now being conducted and as proposed to be conducted (without
giving effect to the Merger), and is duly qualified to do business and is
in good standing as a foreign corporation in each jurisdiction in which it
is required by law to be so qualified, except where the failure to have
such power or the failure to be so qualified could not reasonably be
expected to have a Stratus Material Adverse Effect.
Section 3.2 Stratus Subsidiaries and Joint Ventures.
(a) Section 3.2(a) of the Stratus Disclosure Schedule sets forth
a list of all Subsidiaries and Joint Ventures (as defined in
Section 3.2(b)) of Stratus, including the name of each Subsidiary and Joint
Venture, the jurisdiction in which such Subsidiary or Joint Venture is
incorporated or organized and percentage ownership interests held by
Stratus or its Subsidiaries in each such Joint Venture. There are no
outstanding subscriptions, options, call, contracts, voting trusts, proxies
or other commitments, understandings, restrictions, arrangements, rights or
warrants with respect to any such Subsidiary's capital stock, including any
right obligating any such Subsidiary to issue, deliver, or sell additional
shares of its capital stock, and no obligations, contingent or otherwise,
of Stratus or any of its Subsidiaries to repurchase, redeem, or otherwise
acquire any shares of the capital stock of any Subsidiary of Stratus or
make any investment (in the form of a loan, capital contribution or
otherwise) in any such Subsidiary or any other entity other than guarantees
of bank obligations of such Subsidiaries entered into in the ordinary
course of business. All of the outstanding shares of capital stock of each
Subsidiary of Stratus are duly authorized, validly issued, fully paid and
nonassessable, and all such shares are owned by Stratus or another
Subsidiary of Stratus free and clear of all security interests, liens,
claims, pledges, agreements, limitations on Stratus's voting rights,
charges or other encumbrances of any nature. Neither Stratus nor any of
its Subsidiaries directly or indirectly owns any equity or similar interest
in, or any interest convertible into or exchangeable or exercisable for any
such equity or similar interest in, any corporation, limited liability
company, partnership, joint venture or other business association or entity
(other than Stratus or another Subsidiary of Stratus), excluding securities
of any publicly traded company held for investment and comprising less than
five percent (5%) of the outstanding stock or voting power of such company.
(b) As used in this Agreement, "Subsidiary" means, with respect
to any party, any corporation, limited liability company, partnership,
joint venture, or other business association or entity, at least a majority
of the voting securities or economic interests of which is directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries. As used in this Agreement, "Joint Venture" means, with
respect to any party, any corporation, limited liability company,
partnership, joint venture or other entity in which (i) such party,
directly or indirectly, owns or controls five percent (5%) or more but less
than a majority of any class of the outstanding voting securities or
economic interests, or (ii) such party or a Subsidiary of such party is a
general partner.
Section 3.3 Stratus Capital Structure.
(a) The authorized capital stock of Stratus consists of
150,000,000 shares of Stratus Common Stock and 500,000 shares of Junior
Common Stock, $.01 par value per share ("Stratus Junior Common Stock"). As
of July 31, 1998: (i) 28,219,077 shares of Stratus Common Stock were
issued and outstanding, all of which are validly issued, fully paid and
nonassessable; (ii) no shares of Stratus Junior Common Stock are issued or
outstanding; (iii) 4,176,900 shares of Stratus Common Stock and no Stratus
Junior Common Stock were held in the treasury of Stratus or by Subsidiaries
of Stratus; (iv) 17,980,200 shares of Stratus Common Stock were reserved
for issuance under Stratus Stock Plans (including (A) 10,880,200 shares
reserved for issuance, as a maximum combined aggregate, under the Amended
and Restated 1983 Stock Option Plan and Stratus Restated Non-Qualified
Stock Option Plan, 4,014,041 of which were subject to outstanding options
and 3,644,066 of which were reserved for future option grants,
(B) 4,100,000 shares of Stratus Common Stock reserved for future issuance
pursuant to rights outstanding under the Stratus Amended and Restated
Employee Stock Purchase Plan, and (C) 3,000,000 shares reserved for
issuance under the Stratus 1997 Non-Qualified Stock Option Plan; and (v) no
shares of Stratus Common Stock were reserved for issuance pursuant to
incentive and non-qualified stock option agreements with certain officers
of Stratus. All shares of Stratus Common Stock subject to issuance as
specified above, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be duly authorized,
validly issued, fully paid and nonassessable. There are no obligations,
contingent or otherwise, of Stratus or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of Stratus Common Stock.
(b) Except as set forth in this Section 3.3 or as reserved for
future grants of rights or options under the Stratus Stock Plans, as
amended, and except for the Rights, there are no equity securities of any
class of Stratus, or any security exchangeable into or exercisable for such
equity securities, issued, reserved for issuance or outstanding. Except
(i) pursuant to the Stratus Stock Plans, (ii) as set forth in this
Section 3.3(b), and (iii) for the Rights, there are no options, warrants,
equity securities, calls, rights, commitments or agreements of any
character to which Stratus is a party or by which it is bound obligating
Stratus to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of Stratus or obligating Stratus
to grant, extend, accelerate the vesting of or enter into any such option,
warrant, equity security, call, right, commitment or agreement, and, to the
best knowledge of Stratus, there are no voting trusts, proxies or other
agreements or understandings with respect to the shares of capital stock of
Stratus to which Stratus or any of its Subsidiaries is a party.
Section 3.4 Authority; No Conflict; Required Filings and Consents.
(a) Stratus has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary corporate and stockholder action on the part of Stratus, subject
only to the approval of the Merger by Stratus's stockholders by the
affirmative vote of two-thirds of the shares of Stratus Common Stock
outstanding at the record date under the MBCL. This Agreement has been
duly executed and delivered by Stratus and, assuming this Agreement
constitutes valid and binding obligations of the other parties hereto, this
Agreement constitutes valid and binding obligations of Stratus, enforceable
in accordance with the terms hereof, except as such enforceability may be
limited by (i) bankruptcy laws and other similar laws affecting creditors'
rights generally and (ii) general principles of equity, regardless of
whether asserted in a proceeding in equity or at law.
(b) The execution and delivery of this Agreement by Stratus does
not, and the consummation of the transactions contemplated by this
Agreement will not, (i) conflict with, or result in any violation or breach
of any provision of the Articles of Organization or Bylaws of Stratus or
any of its Subsidiaries (in each case as heretofore amended), (ii) result
in any violation or breach of, or constitute (with or without notice or
lapse of time, or both) a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any material
benefit) or require the consent, waiver or agreement of any person or
entity (other than consents, waivers and agreements that have been or prior
to the Closing will be obtained) under any of the terms, conditions or
provisions of any material note, bond, mortgage, indenture, lease, contract
or other material agreement, instrument or obligation to which Stratus or
any of its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound, (iii) constitute a "Stock Acquisition
Date" or cause Ascend to become an "Acquiring Person" or an "Adverse
Person" as such terms are defined in that certain Rights Agreement dated as
of December 4, 1990 between Stratus and The First National Bank of Boston
(the "Rights Agreement"), or (iv) subject to the consents, approvals,
orders, authorizations, filings and registrations specified in
Section 3.4(c), conflict with or violate any judgment, order, decree,
statute, law, ordinance, rule or regulation or any material permit,
concession, franchise or license applicable to Stratus or any of its
Subsidiaries or any of their properties or assets, except in the cases of
clause (ii) and (iv) for such consents, waivers and agreements, the absence
of which, and such violations, breaches, defaults, terminations,
cancellations or accelerations which, in the aggregate could not reasonably
be expected to have a Stratus Material Adverse Effect or a material adverse
effect on the telecommunications (including SS7) business of Stratus or the
ability of Stratus to consummate the transactions contemplated by this
Agreement.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency,
commission or other governmental authority or instrumentality
("Governmental Entity") is required by or with respect to Stratus or any of
its Subsidiaries in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby,
except for (i) the filing of pre-merger notification reports under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act") and the antitrust laws of any foreign jurisdiction which is
applicable to the Merger and the expiration or early termination of any
waiting period(s) thereunder; (ii) the filing of the Registration Statement
(as defined in Section 3.18 with the Securities and Exchange Commission
(the "SEC") in accordance with the Securities Act of 1933, as amended (the
"Securities Act") and the entry of an order by the SEC permitting such
registration statement to become effective; (iii) the filing of the
Articles of Merger with the Secretary of State of the Commonwealth of
Massachusetts in accordance with the MBCL; (iv) the filing of the Proxy
Statement (as defined in Section 3.18 and related proxy materials with the
SEC in accordance with the Securities Exchange Act of 1934, as amended (the
"Exchange Act"); (v) such consents, approvals, orders, authorizations,
filings, registrations and declarations as may be required under applicable
federal and state securities laws and the laws of any foreign country; and
(vi) such other consents, approvals, orders, authorizations, filings,
approvals and registrations which, in the aggregate, if not obtained or
made, could not reasonably be expected to have a Stratus Material Adverse
Effect or have a material adverse effect on the ability of Stratus to
consummate the transactions contemplated by this Agreement.
Section 3.5 SEC Filings; Financial Statements.
(a) Stratus has filed and made available to Ascend all forms,
reports and documents required to be filed by Stratus with the SEC since
January 1, 1996 (collectively, the "Stratus SEC Reports"). The Stratus SEC
Reports (i) at the time filed, complied in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, as the
case may be, and (ii) did not at the time they were filed (or if amended or
superseded by a subsequent filing, then on the date of such filing) contain
any untrue statement of a material fact or omit to state a material fact
required to be stated in such Stratus SEC Reports or necessary in order to
make the statements in such Stratus SEC Reports, in the light of the
circumstances under which they were made, not misleading. None of
Stratus's Subsidiaries is required to file any forms, reports or other
documents as a result of their issuance (or the registration of such
securities on a national securities exchange) with the SEC, the National
Association of Securities Dealers, Inc. (the "NASD"), the New York Stock
Exchange, Inc., or any other stock exchange or any foreign securities
commission or stock exchange regulating issuers of securities.
(b) Each of the consolidated financial statements (including, in
each case, any related notes) contained in the Stratus SEC Reports,
including any Stratus SEC Reports filed after the date of this Agreement
until the Closing (the "Stratus Financial Statements"), complied or will
comply as to form in all material respects with the applicable published
rules and regulations of the SEC with respect thereto, was or will be
prepared in accordance with U.S. generally accepted accounting principles
("U.S. GAAP") applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes to such financial statements or,
in the case of unaudited statements, as permitted by Form 10-Q or 8-K
promulgated by the SEC), and fairly presented or will fairly present the
consolidated financial position of Stratus and its Subsidiaries as at the
respective dates and the consolidated results of its operations and cash
flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount.
The audited consolidated balance sheet of Stratus as of December 28, 1997
is referred to herein as the "Stratus Balance Sheet."
Section 3.6 Absence of Undisclosed Liabilities. Stratus and its
Subsidiaries do not have any liabilities, either accrued or contingent
(whether or not required to be reflected in financial statements in
accordance with U.S. GAAP), and whether due or to become due, other than
(i) liabilities reflected in the Stratus Balance Sheet, (ii) normal or
recurring liabilities incurred since December 28, 1997 in the ordinary
course of business consistent with past practices, or (iii) liabilities
arising out of the transactions contemplated hereby or permitted hereunder,
after the date hereof.
Section 3.7 Absence of Certain Changes or Events. Since the date
of the Stratus Balance Sheet (and in the case of clauses (a) and (e)
through the date hereof), Stratus and its Subsidiaries have conducted their
businesses only in the ordinary course in a manner consistent with past
practice, and since such date there has not been:
(a) any Stratus Material Adverse Effect;
(b) any material change by Stratus or any of its Subsidiaries in
its accounting methods, principles or practices;
(c) any revaluation by Stratus or any of its Subsidiaries of any
material asset or any writedown of the value of capitalized software or
inventory, or any write-off of notes or accounts receivable other than in
the ordinary course of business consistent with past practice;
(d) any increase in the compensation payable or to become
payable by Stratus or any of its Subsidiaries to its respective officers or
employees, except for compensation increases granted in the ordinary course
of business and in a manner consistent with past practices to the non-
officer employees of Stratus and its Subsidiaries;
(e) entered into any commitment or transaction outside the
ordinary course of Stratus's business involving the payment or receipt by
Stratus or its Subsidiaries of more than five million dollars ($5,000,000)
(including without limitation any borrowing or capital expenditure); or
(f) any other action or event that would have required the
consent of Ascend pursuant to Section 5.1 of this Agreement had such action
or event occurred after the date of this Agreement.
Section 3.8 Taxes.
(a) For purposes of this Agreement, a "Tax" or, collectively,
Taxes" means any and all federal, state, local and foreign taxes,
assessments and other similar governmental charges, duties and impositions,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or
arrangements with any other person with respect to such amounts and
including any liability for taxes of a predecessor entity.
(b) Each of Stratus and its Subsidiaries have accurately
prepared and timely filed (or will so file) all federal, state, local and
foreign returns, estimates, information statements and reports relating to
any and all Taxes concerning or attributable to Stratus or any of its
Subsidiaries or to their operations ("Returns") required to be filed at or
before the Effective Time, and such Returns are true and correct in all
material respects and have been completed in all material respects in
accordance with applicable law.
(c) Each of Stratus and its Subsidiaries as of the Effective
Time: (i) will have paid all Taxes it is required to pay prior to the
Effective Time and (ii) will have withheld with respect to its employees
all federal and state income taxes, FICA, FUTA and other Taxes required to
be withheld, except for Taxes contested in good faith by appropriate
proceedings for which adequate reserves have been taken.
(d) There is no Tax deficiency outstanding, proposed or assessed
against Stratus or any of its Subsidiaries that is not reflected as a
liability on the Stratus Balance Sheet nor has Stratus or any of its
Subsidiaries executed any waiver of any statute of limitations on or
extending the period for the assessment or collection of any Tax.
(e) Neither Stratus nor any of its Subsidiaries has any
liability for unpaid federal, state, local or foreign Taxes that has not
been accrued for or reserved on the Stratus Balance Sheet, whether asserted
or unasserted, contingent or otherwise.
(f) No audit or other examination of any Return of Stratus or
any of its Subsidiaries is presently in progress, nor has Stratus or any of
its Subsidiaries been notified of any request for such an audit or other
examination.
(g) Stratus has made available to Ascend or its legal counsel
copies of all foreign, federal and state income and all state sales and use
Returns for Stratus and all its Subsidiaries filed for all periods since
their respective inceptions.
(h) There are (and immediately following the Effective Time
there will be) no liens, pledges, charges, claims, restrictions on
transfer, mortgages, security interests or other encumbrances of any sort
(collectively, "Liens") on the assets of Stratus nor any of its
Subsidiaries relating to or attributable to Taxes other than Liens for
Taxes not yet due and payable.
(i) Neither Stratus nor any of its Subsidiaries has knowledge of
any basis for the assertion of any claim relating or attributable to Taxes
which, if adversely determined, would result in any Lien on the assets of
Stratus or any of its Subsidiaries.
(j) None of the assets of Stratus of any of its Subsidiaries are
treated as "tax-exempt use property" within the meaning of Section 168(h)
of the Code.
(k) As of the Effective Time, there will not be any contract,
agreement, plan or arrangement, including but not limited to the provisions
of this Agreement, covering any employee or former employee of Stratus or
any of its Subsidiaries that, individually or collectively, could give rise
to the payment of any amount that would not be deductible by Stratus or any
of its Subsidiaries as an expense under applicable law. None of Stratus
nor any of its Subsidiaries has, or will have as a result of the
transactions contemplated by this Agreement, any liabilities for Taxes (for
example under Section 280G of the Code) as a result of the amount of
remuneration paid or to be paid to its employees.
(l) Stratus nor any of its Subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have
Section 341(f)(4) of the Code apply to any disposition of a subsection (f)
asset (as defined in Section 341(f)(4) of the Code) owned by Stratus or any
of its Subsidiaries.
(m) Neither Stratus nor any of its Subsidiaries is a party to
any Tax sharing, indemnification or allocation agreement and neither owes
any amount under any such agreement, other than this Agreement.
(n) Each of Stratus's and its Subsidiaries' Tax basis in its
assets for purposes of determining its future amortization, depreciation
and other federal income Tax deductions is accurately reflected on its
respective Tax books and records.
(o) Neither Stratus nor any of its Subsidiaries is and has not
been at any time, a "United States real property holding corporation"
within the meaning of Section 897(c)(2) of the Code.
(p) Except as may be required as a result of the Merger, Stratus
and its Subsidiaries have not been and will not be required to include any
adjustment in taxable income for any Tax period (or portion thereof)
pursuant to Section 481 or Section 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of the transactions,
events or accounting methods employed prior to Closing.
(q) The operations of Stratus and its Subsidiaries in the
Republic of Ireland qualify for the ten percent (10%) effective rate (the
"Effective Rate") of Tax imposed by the Republic of Ireland on the sale of
goods manufactured in the Republic of Ireland. Stratus has made available
to Ascend or its legal counsel copies of all of its and its Subsidiaries'
files, books and records concerning Taxes imposed by the Republic of
Ireland on the operations of Stratus and its Subsidiaries for all periods
since the inception of such operations. Neither Stratus nor any of its
Subsidiaries has (i) knowledge of any basis for the assertion of any claim
which, if adversely determined, would result in any loss of qualification
for the Effective Rate or (ii) any plan or intention for the operations of
Stratus or its Subsidiaries in the Republic of Ireland which would result
in any loss of qualification for the Effective Rate.
Section 3.9 Properties. Stratus and its Subsidiaries own or have
valid leasehold interests in all real property necessary for the conduct of
their businesses as presently conducted. All material leases to which
Stratus or any of its Subsidiaries is a party are in good standing, valid
and effective in accordance with their respective terms, and neither
Stratus nor its Subsidiaries is in default under any of such leases, except
where the lack of such good standing, validity and effectiveness or the
existence of such default could not reasonably be expected to have a
Stratus Material Adverse Effect.
Section 3.10 Intellectual Property.
(a) Stratus and its Subsidiaries own, or are licensed or
otherwise possess, legally enforceable rights to use, all patents,
trademarks, trade names, service marks, copyrights and mask works, any
applications for and registrations of such patents, trademarks, trade
names, service marks, copyrights and mask works, and all processes,
formulae, methods, schematics, technology, know how, computer software
programs or applications programs and tangible or intangible proprietary
information or material that are used in and material to the business of
Stratus and its Subsidiaries as currently conducted by Stratus and its
Subsidiaries (without giving effect to the Merger) (the "Stratus
Intellectual Property Rights").
(b) Neither Stratus nor any of its Subsidiaries is, or will be
as a result of the execution and delivery of this Agreement or the
performance of any of its obligations hereunder, in breach of any license,
sublicense or other agreement relating to the Stratus Intellectual Property
Rights except for such breaches as would not, individually or in the
aggregate, be reasonably likely to have a Stratus Material Adverse Effect.
(c) (i) Each patent, registered trademark, service xxxx and
copyright which is owned by Stratus or any of its Subsidiaries which is
material to the business of Stratus and its Subsidiaries is subsisting and,
to the best of Stratus's knowledge valid and enforceable; (ii) Stratus as
of the date hereof has not been sued in any suit, action or proceeding
which is currently pending which involves a claim of infringement of any
patent, trademark, service xxxx, copyright or violation of any trade secret
or other proprietary right of any third party, or received notice of any
such claim; (iii) to the best of Stratus's knowledge, the manufacturing,
marketing, licensing or sale of Stratus's products sold or licensed to
other than the telecommunications industry in the manner currently
manufactured, marketed, sold or licensed, does not infringe any patent,
trademark, service xxxx, copyright, trade secret or other proprietary right
of any third party which infringement, either individually or in the
aggregate, could reasonably be expected to have a Stratus Material Adverse
Effect; and (iv) to the best of Stratus's knowledge, the manufacturing,
marketing, licensing or sale of Stratus's material products sold or
licensed to the telecommunications industry in the manner currently
manufactured, marketed, sold or licensed, does not infringe any patent,
trademark, service xxxx, copyright, trade secret or other proprietary right
of any third party.
(d) Section 3.10(d) of the Stratus Disclosure Schedule lists all
patents and patent applications and all trademarks, registered copyrights,
trade names and service marks included in the Stratus Intellectual Property
Rights, including the jurisdictions in which each such Stratus Intellectual
Property Right has been issued or registered or in which any such
application for such issuance and registration has been filed. Stratus has
made available to Ascend (i) all material licenses, sublicenses,
distribution agreements and other agreements as to which Stratus or any of
its Subsidiaries is a party and pursuant to which any person has exclusive
rights to use any Stratus Intellectual Property Rights or has the exclusive
right to manufacture, reproduce, market or exploit any product of Stratus
or any of its Subsidiaries or any adaptation, translation or derivative
work based on a product of Stratus or any of its Subsidiaries or any
portion thereof; (ii) all material licenses, sublicenses and other
agreements as to which Stratus or any of its Subsidiaries is a party and
pursuant to which Stratus or any of its Subsidiaries is authorized to use
any third party patents, trademarks or copyrights, including software which
is used in the manufacture of, incorporated in, or forms a part of any
product of Stratus or any of its Subsidiaries, that limits such use by
geography or field of use; and (iii) all material joint development
agreements to which Stratus or any of its Subsidiaries is a party.
Section 3.11 Agreements, Contracts and Commitments. Neither Stratus
nor any of its Subsidiaries has breached, or received in writing any claim
or threat that it has breached, any of the terms or conditions of any
agreement, contract, license or commitment to which it is a party or by
which any of its assets and properties are bound ("Stratus Material
Contracts") in such a manner as would permit any other party to cancel or
terminate the same (within or without notice of passage of time) or would
provide a basis for any other party to claim money damages (either
individually or in the aggregate with all other such claims) from Stratus
or any of its Subsidiaries under any Stratus Material Contract, except such
breaches, cancellations or terminations which in the aggregate could not
reasonably be expected to have a Stratus Material Adverse Effect.
Section 3.12 Litigation. There is no action, suit, proceeding,
claim, arbitration or, to the knowledge of Stratus, investigation against
Stratus or any of its Subsidiaries pending or, to the knowledge of Stratus,
threatened, or as to which Stratus or any of its Subsidiaries has received
any written notice of assertion, which, if decided adversely to Stratus or
such Subsidiary, could reasonably be expected to have a Stratus Material
Adverse Effect or have a material adverse effect on the ability of Stratus
to consummate the transactions contemplated by this Agreement.
Section 3.13 Environmental Matters.
(a) As of the date hereof, neither Stratus nor any of its
Subsidiaries has any reason to believe that any Hazardous Material- (as
defined herein) related underground storage tanks, sumps, vaults, piping or
other underground Hazardous Material-related equipment (collectively,
"USTs"), are present at any property that Stratus or any of its
Subsidiaries has at any time owned, operated, occupied, or leased, where
the use, condition, or presence of such USTs would be reasonably likely to
give rise to any corrective, investigative, or remedial obligation or any
exposure to money damages under any Environmental Law (as defined herein)
that could reasonably be expected to have a Material Adverse Effect.
(b) Neither Stratus nor any of its Subsidiaries has disposed of,
emitted, discharged, handled, stored, transported, used or released any
Hazardous Material (collectively, "Hazardous Material Handling"), arranged
for any Hazardous Material Handling, or exposed any employee or other
individual to any Hazardous Material so as to give rise to any corrective,
investigative, or remedial obligation under any Environmental Law that
could reasonably be expected to have a Material Adverse Effect.
(c) Neither Stratus nor any of its Subsidiaries is aware of the
presence at any time of any Hazardous Material-related contamination at,
in, on, beneath, or relating to any property that Stratus or its
Subsidiaries has at any time owned, operated, occupied, or leased that
could reasonably be expected to have a Material Adverse Effect.
(d) Stratus and its Subsidiaries have performed or arranged
Hazardous Material Handling in compliance with all Environmental Laws
except where non-compliance would not reasonably be expected to have a
Material Adverse Effect. Without limiting the generality of the preceding
sentence, neither Stratus nor any of its subsidiaries has disposed of,
labeled, packaged, transported, sold, recycled, discarded, or manufactured
any product or component of a product containing a Hazardous Material (the
"Hazardous Material Product Activities") in violation of any Environmental
Laws where such violation would reasonably be expected to have a Material
Adverse Effect.
(e) Stratus and its Subsidiaries currently hold all governmental
environmental Hazardous Material-related approvals, permits, licenses,
clearances, consents, and orders (the "Environmental Permits") necessary
for the conduct of their respective Hazardous Material Handling and
Hazardous Material Product Activities and other businesses of Stratus and
its Subsidiaries as such activities are currently being conducted, except
where the failure to hold any such Environmental Permit would not
reasonably be expected to have a Material Adverse Effect.
(f) No action, proceeding, revocation proceeding, amendment
procedure, writ, injunction, or other governmental action is pending or, to
the knowledge of Stratus threatened, concerning any Environmental Permits,
or any Hazardous Material Handling or any Hazardous Material Product
Activities of Stratus or any of its Subsidiaries that could reasonably be
expected to have a Material Adverse Effect.
(g) Neither Stratus nor any of its Subsidiaries is aware of any
fact or circumstance which could involve Stratus or any of its Subsidiaries
in any litigation or in any administrative enforcement action, penalty or
sanction, or impose upon Stratus or any of its Subsidiaries any liability,
with respect to any Hazardous Materials Handling, any Hazardous Material
Product Activities, or any Hazardous Material-related contamination
relating to any business operation of Stratus or its Subsidiaries or
relating to a property that Stratus or any of its Subsidiaries at any time
has owned, operated, occupied, or leased that could reasonably be expected
to have a Material Adverse Effect.
(h) To the knowledge of Stratus, no property that Stratus or any
of its Subsidiaries has at any time owned, operated, occupied, or leased is
proposed for listing on the National Priorities List, CERCLIS, or any
similar state, local or foreign list of sites that potentially endanger
human health, ecology or environment or that require environmental
investigation or cleanup.
(i) To the knowledge of Stratus, any asbestos-containing
material which is on, in or a part of any property or structure thereon
currently owned, operated, occupied, or leased by Stratus or any of its
Subsidiaries complies with current applicable standards of Environmental
Law except where non-compliance would not have a Material Adverse Effect.
(j) To the knowledge of Stratus, no governmental notification,
approval, or consent, whether before or after the Closing, is required
under Environmental Laws in connection with the consummation of the
transaction contemplated by this Agreement.
(k) As used herein, "Hazardous Material" means any substance,
waste, material, chemical, compound or mixture which is harmful to the
environment, flora, fauna, or human health, or which is flammable,
ignitable, corrosive, reactive, radioactive, or explosive, or which is
defined, listed, designated, described or characterized under Environmental
Laws as hazardous, toxic, biohazardous, a contaminant, a pollutant, or
words of similar import, and includes without limitation asbestos,
polychlorinated biphenyls, petroleum (including crude oil or any fraction
or distillate thereof), and natural gas.
(l) As used herein, "Environmental Laws" means all applicable
civil, criminal, and administrative laws (including common law), statutes,
codes, rules, regulations, ordinances, and legally enforceable orders,
decrees, judgments, permits, licenses, approvals, authorizations, and other
requirements, directives, consents, and obligations imposed by local,
state, federal, foreign, or supranational governmental authority pertaining
to protection of the environment, flora, fauna, public health and safety.
Section 3.14 Employee Benefit Plans and Employee Matters.
(a) With the exception of the definition of "Affiliate" set
forth in Section 3.14(a)(i) below (which definition shall apply only to
this Section 3.14), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under
common control with Stratus within the meaning of Section 414(b), (c), (m)
or (o) of the Code and the regulations issued thereunder;
(ii) "Stratus Employee Plan" shall mean each plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether written or unwritten or otherwise, funded
or unfunded, including without limitation, each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA (as defined herein) which is
maintained, contributed to, or required to be contributed to, by Stratus or
any Affiliate for the benefit of any Employee (as defined in
Section 3.14(a)(iv) below);
(iii) "DOL" shall mean the Department of Labor;
(iv) "Employee" shall mean any current, former, or retired
employee, officer, or director of Stratus or any Affiliate;
(v) "Employee Agreement" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation
or similar agreement or contract between Stratus or any Affiliate and any
Employee or consultant;
(vi) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(vii) "International Employee Plan" shall mean each
Stratus Employee Plan that has been adopted or maintained by Stratus,
whether informally or formally, for the benefit of Employees outside the
United States;
(viii) "IRS" shall mean the Internal Revenue Service;
(ix) "Multiemployer Plan" shall mean any Pension Plan (as
defined in Section 3.14(a)(xi) below) which is a "multiemployer plan," as
defined in Section 3(37) of ERISA;
(x) "PBGC" shall mean the Pension Benefit Guaranty
Corporation; and
(xi) "Pension Plan" shall mean each Stratus Employee Plan
which is an "employee pension benefit plan," within the meaning of
Section 3(2) of ERISA.
(b) The Stratus Disclosure Schedule contains an accurate and
complete list of each material Stratus Employee Plan and each material
Employee Agreement other than Employee Agreements with former employees
where Stratus has performed substantially all of Stratus's obligations
thereunder) as of the date hereof. Stratus does not have any binding plan
or binding commitment to establish any new Stratus Employee Plan, to modify
any Stratus Employee Plan or Employee Agreement (except to the extent
required by law or to conform any such Stratus Employee Plan or Employee
Agreement to the requirements of any applicable law, or as required by this
Agreement), or to enter into any Stratus Employee Plan or material Employee
Agreement, nor does it have any commitment to do any of the foregoing.
(c) Stratus has provided to Ascend: (i) correct and complete
copies of all documents embodying each material Stratus Employee Plan and
each material Employee Agreement (other than Employee Agreements with
former employees where Stratus has performed substantially all of Stratus's
obligations thereunder), including all amendments thereto and written
interpretations thereof; (ii) the three most recent annual reports (Form
Series 5500 and all schedules and financial statements attached thereto),
if any, required under ERISA or the Code in connection with each Stratus
Employee Plan or related trust; (iii) if the Stratus Employee Plan is
funded, the most recent annual and periodic accounting of Stratus Employee
Plan assets; (iv) the most recent summary plan description together with
the summary of material modifications thereto, if any, required under ERISA
with respect to each Stratus Employee Plan; (v) all IRS determination,
opinion, notification and advisory letters, and rulings relating to Stratus
Employee Plans and copies of all applications and correspondence to or from
the IRS or the DOL with respect to any Stratus Employee Plan; (vi) all
material written agreements and contracts relating to each Stratus Employee
Plan, including, but not limited to, administrative service agreements,
group annuity contracts and group insurance contracts; and (vii) all
material communications to any Employee or Employees relating to any
Stratus Employee Plan and any proposed Stratus Employee Plan, in each case,
relating to any amendments, terminations, establishments, increases or
decreases in benefits, acceleration of payments or vesting schedules or
other events which would result in any material liability to Stratus.
(d) (i) Each Stratus Employee Plan has been established and
maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and
regulations, including but not limited to ERISA and the Code; (ii) each
Stratus Employee Plan intended to qualify under Section 401(a) of the Code
and each trust intended to qualify under Section 501(a) of the Code has
either received a favorable determination letter from the IRS with respect
to such plan as to its qualified status under the Code, including all
amendments to the Code effected by the Tax Reform Act of 1986 and
subsequent legislation, or has remaining a period of time under applicable
Treasury regulations or IRS pronouncements in which to apply for such a
determination letter and make any amendments necessary to obtain a
favorable determination; (iii) no material "prohibited transaction," within
the meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA,
and not otherwise exempt under Section 408 of ERISA, has occurred with
respect to any material Stratus Employee Plan; (iv) there are no material
actions, suits or claims pending, or, to Stratus's knowledge, threatened
(other than routine claims for benefits) against any Stratus Employee Plan
or against the assets of any Stratus Employee Plan; (v) each Stratus
Employee Plan can be amended, terminated or otherwise discontinued after
the Effective Time in accordance with its terms, without material liability
to Stratus or any of its Affiliates (other than ordinary administration
expenses typically incurred in a termination event); (vi) to Stratus's
knowledge, there are no material audits, inquiries or proceedings pending
or threatened by the IRS or DOL with respect to any Stratus Employee Plan;
and (vii) neither Stratus nor any Affiliate has been assessed any material
penalty or material tax with respect to any Stratus Employee Plan under
Section 402(i) of ERISA or Sections 4975 through 4980 of the Code.
(e) With respect to the Stratus Employee Plans, individually and
in the aggregate, there are no material funded benefit obligations for
which contributions have not been made or properly accrued and there are no
material unfunded benefit obligations which have not been accounted for by
reserves, or otherwise properly footnoted in accordance with U.S.GAAP, on
the Stratus Financial Statements.
(f) Stratus does not now, nor has it ever, maintained,
established, sponsored, participated in, or contributed to, any Pension
Plan which is subject to Title IV of ERISA or Section 412 of the Code.
(g) At no time has Stratus contributed to or been required to
contribute to any Multiemployer Plan.
(h) No Stratus Employee Plan or Employee Agreement provides, or
has any liability to provide, retiree life insurance, retiree health or
other retiree employee welfare benefits to any person for any reason,
except (i) coverage mandated by applicable law, (ii) death benefits under
any "pension plan" or (iii) benefits the full cost of which is borne by the
current or former employee (or his beneficiary).
(i) The execution of this Agreement and the announcement or the
consummation of the transactions contemplated hereby will not (either alone
or upon the occurrence of any additional or subsequent acts or events or
passage of time) result in, or constitute an event under any Stratus
Employee Plan, Employee Agreement, trust or loan that will or may result
in, the establishment, accrual or payment of any benefit or compensation
(whether of severance pay or otherwise), any acceleration, forgiveness of
indebtedness, vesting or distribution of or increase in any benefit or
obligation to fund any benefit with respect to any Employee. Neither
Stratus nor any of its Subsidiaries is a party to any management,
employment, deferred compensation, severance, bonus or other contract for
personal services with any Employee or any plan agreement or understanding
similar to any of the foregoing, in each case providing for compensation in
excess of two hundred thousand dollars ($200,000) per annum.
(j) Neither Stratus nor any of its Subsidiaries is a party to
any oral or written agreement with any officer of Stratus or any of its
Subsidiaries providing any term of employment or compensation guarantee
extending for a period of longer than one year from the date hereof or for
the payment of compensation in excess of two hundred thousand dollars
($200,000) per annum.
(k) No payment or benefit which will or may be made by Stratus
or its Affiliates with respect to any Employee as a result of the
transactions contemplated by this Agreement will be characterized as an
"excess parachute payment," within the meaning of Section 280G(B)(1) of the
Code.
(l) To its knowledge, Stratus: (i) is in compliance in all
material respects with all applicable federal, state, local and foreign
laws, rules and regulations respecting employment, employment practices,
terms and conditions of employment and wages and hours; (ii) has withheld
all amounts required by law or by agreement to be withheld from the wages,
salaries and other payments to Employees, which amounts are material
individually or in the aggregate; (iii) is not liable for any material
arrears of wages or any taxes or any penalty for failure to comply with any
of the foregoing; and (iv) is not liable for any material payment to any
trust or other fund or to any governmental or administrative authority,
with respect to unemployment compensation benefits, social security or
other benefits or obligations for Employees (other than routine payments to
be made in the normal course of business and consistent with past
practice). There are no pending or, to Stratus's knowledge, threatened
material claims or actions against Stratus under any worker's compensation
policy or long-term disability policy. To Stratus's knowledge, no employee
of Stratus has violated any employment contract, nondisclosure agreement or
noncompetition agreement by which such employee is bound due to such
employee being employed by Stratus and disclosing to Stratus or using trade
secrets or proprietary information of any other person or entity.
(m) No work stoppage or labor strike against Stratus is pending
or, to the knowledge of Stratus, threatened. Stratus does not know of any
activities or proceedings of any labor union to organize any Employees.
There are no actions, suits, claims, labor disputes or grievances pending,
or, to Stratus's knowledge, threatened or relating to any labor, safety or
discrimination matters involving any Employee, including, without
limitation, charges of unfair labor practices or discrimination complaints,
which, if adversely determined, individually or in the aggregate, would be
reasonably likely to be a Stratus Material Adverse Effect. Neither Stratus
nor any of its Affiliates has been charged with or received notice of any
actual or alleged unfair labor practices within the meaning of the National
Labor Relations Act. Stratus is not presently, nor has it been in the
past, a party to, or bound by, any collective bargaining agreement or union
contract with respect to Employees and no collective bargaining agreement
is currently being negotiated by Stratus.
(n) Each International Employee Plan has been established,
maintained and administered in material compliance with its terms and
conditions and with the requirements prescribed by any and all statutory or
regulatory laws that are applicable to such International Employee Plan.
No International Employee Plan has unfunded liabilities, that as of the
Effective Time, will not be offset by insurance or fully accrued.
Section 3.15 Compliance with Laws. (a) Stratus and its Subsidiaries
have complied with, and have not received any notices of violations with
respect to, and (b) as of the date hereof, Stratus and its Subsidiaries are
not in violation of any U.S. federal, state, or local or foreign statute,
law or regulation, affecting the conduct of its business or the ownership
or operation of its business, including the U.S. Foreign Corrupt Practices
Act and all United States statutes, laws and regulations governing the
license and delivery of technology and products abroad by persons subject
to the jurisdiction of the United States, except for failures to comply or
violations which could not reasonably be expected to have a Stratus
Material Adverse Effect.
Section 3.16 Tax Matters. Neither Stratus nor any of its
Subsidiaries, nor to Stratus's knowledge, any of its other Affiliates (as
defined herein) has taken or agreed to take any action or failed to take
any action which could prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
Section 3.17 Interested Party Transactions. Since the date of
Stratus's last proxy statement to its stockholders, no event has occurred
that would be required to be reported by Stratus as a Certain Relationship
or Related Transaction pursuant to Item 404 of Regulation S-K promulgated
by the SEC.
Section 3.18 Registration Statement; Proxy Statement/Prospectus.
The information supplied to Ascend by Stratus for inclusion in the
registration statement of Ascend on Form S-4 pursuant to which shares of
Ascend Common Stock issued in the Merger will be registered with the SEC
(the "Registration Statement") shall not contain, at the time the
Registration Statement is first filed in publicly available form and at the
time the Registration Statement is declared effective by the SEC, any
untrue statement of a material fact or omit to state any material fact
required to be stated in the Registration Statement or necessary in order
to make the statements in the Registration Statement, in light of the
circumstances under which they were made, not misleading. The information
supplied by Stratus for inclusion in the proxy statement/prospectus (the
"Proxy Statement") to be sent to the stockholders of Stratus in connection
with the special meeting of Stratus stockholders to consider this Agreement
and the Merger (the "Stratus Stockholders Meeting") shall not, on the date
the Proxy Statement is first mailed to stockholders of Stratus, at the time
of the Stratus Stockholders Meeting or at the Effective Time, contain any
statement which, at such time and in light of the circumstances under which
it was made, is false or misleading with respect to any material fact, or
omit to state any material fact necessary in order to make the statements
made in the Proxy Statement not false or misleading or omit to state any
material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Stratus
Stockholders Meeting which has become false or misleading. If at any time
prior to the Effective Time any event relating to Stratus or any of its
Affiliates, officers or directors should be discovered by Stratus which
should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement, Stratus shall promptly inform Ascend.
Section 3.19 Opinion of Financial Advisor. The financial advisor to
Xxxxxxx, Xxxxxx Xxxxxxx & Company Incorporated, has delivered to Stratus an
opinion dated as of or immediately prior to the date of this Agreement to
the effect that the Exchange Ratio is fair from a financial point of view
to the holders of Stratus Common Stock.
Section 3.20 Applicability of Certain Massachusetts Laws. Neither
the control share acquisition provisions of Chapters 110D and 110E of the
MBCL nor any similar provisions of the Articles of Organization or Bylaws
of Stratus are applicable to the transactions contemplated by this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ASCEND AND SUB
Ascend and Sub represent and warrant to Stratus that the
statements contained in this Article IV are true and correct, except as set
forth in the disclosure schedule delivered by Ascend to Stratus on or
before the date of this Agreement ("Ascend Disclosure Schedule") or except
to the extent disclosed in the Ascend SEC Reports (as defined herein) filed
with the SEC since January 1, 1998. The Ascend Disclosure Schedule shall
be arranged in sections corresponding to the numbered and lettered sections
contained in this Article IV and the disclosure in any such numbered and
lettered section of the Ascend Disclosure Schedule shall qualify only the
corresponding section in this Article IV (except to the extent disclosure
in any numbered and lettered section of the Ascend Disclosure Schedule is
specifically cross-referenced in another numbered and lettered section of
the Ascend Disclosure Schedule). The term "Ascend Material Adverse Effect"
shall mean a material adverse effect on the business, operations,
properties, assets (including intangible assets), financial condition or
results of operations of Ascend and its Subsidiaries, with materiality
determined in accordance with Section 9.3.
Section 4.1 Organization. Ascend and each of its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, has all requisite corporate
power to own, lease and operate its property and to carry on its business
as now being conducted and as proposed to be conducted (without giving
effect to the Merger), and is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which if it is
required by law to be so qualified except where the failure to have such
power or the failure to be so qualified could not reasonably be expected to
have an Ascend Material Adverse Effect.
Section 4.2 Ascend Subsidiaries and Joint Ventures. Section 4.2 of
the Ascend Disclosure Schedule sets forth a list of all Subsidiaries and
Joint Ventures of Ascend, including the name of each Subsidiary and Joint
Venture and the jurisdiction in which such Subsidiary or Joint Venture is
incorporated or organized. There are no outstanding subscriptions,
options, call, contracts, voting trusts, proxies or other commitments,
understandings, restrictions, arrangements, rights or warrants with respect
to any such Subsidiary's capital stock, including any right obligating any
such Subsidiary to issue, deliver, or sell additional shares of its capital
stock, and no obligations, contingent or otherwise, of Ascend or any of its
Subsidiaries to repurchase, redeem, or otherwise acquire any shares of the
capital stock of any Subsidiary of Ascend or make any investment (in the
form of a loan, capital contribution or otherwise) in any such Subsidiary
or any other entity other than guarantees of bank obligations of such
Subsidiaries entered into in the ordinary course of business. All of the
outstanding shares of capital stock of each Subsidiary of Ascend are duly
authorized, validly issued, fully paid and nonassessable, and all such
shares are owned by Ascend or another Subsidiary of Ascend free and clear
of all security interests, liens, claims, pledges, agreements, limitations
on Ascend's voting rights, charges or other encumbrances of any nature.
Section 4.2 of the Ascend Disclosure Schedule sets forth the nature and
extent of the ownership and voting interests held by Ascend in each such
Joint Venture. Except as set forth in Section 4.2 of the Ascend Disclosure
Schedule, neither Ascend nor any of its Subsidiaries directly or indirectly
owns any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for any such equity or similar interest in, any
corporation, limited liability company, partnership, joint venture or other
business association or entity (other than Ascend or another Subsidiary of
Ascend), excluding securities of any publicly traded company held for
investment and comprising less than five percent (5%) of the outstanding
stock or voting power of such company.
Section 4.3 Ascend Capital Structure.
(a) The authorized capital stock of Ascend consists of
400,000,000 shares of Ascend Common Stock and 2,000,000 shares of preferred
stock, $.001 par value per share ("Ascend Preferred Stock"). As of July
31, 1998: (i) 198,001,540 shares of Ascend Common Stock were issued and
outstanding, all of which are validly issued, fully paid and nonassessable;
(ii) no shares of Ascend Preferred Stock are issued or outstanding;
(iii) no shares of Ascend Common Stock or Ascend Preferred Stock were held
in the treasury of Ascend or by Subsidiaries of Ascend; and (iv) 28,934,033
shares of Ascend Common Stock were reserved for issuance pursuant to stock
options granted and outstanding under Ascend's stock option plans (the
"Ascend Option Plans") and rights outstanding under Ascend's employee stock
purchase plan (the "Ascend Purchase Plan"). All shares of Ascend Common
Stock subject to issuance as specified above, upon issuance on the terms
and conditions specified in the instruments pursuant to which they are
issuable, shall be duly authorized, validly issued, fully paid and
nonassessable. There are no obligations, contingent or otherwise, of
Ascend or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any shares of Ascend Common Stock.
(b) Except as set forth in this Section 4.3 or as reserved for
future grants of rights or options under the Ascend Option Plans or the
Ascend Purchase Plan, there are no equity securities of any class of
Ascend, or any security exchangeable into or exercisable for such equity
securities, issued, reserved for issuance or outstanding. Except pursuant
to the Ascend Option Plans, the Ascend Purchase Plan or any related
agreement in effect as of the date of this Agreement, or as set forth in
this Section 4.3, there are no options, warrants, equity securities, calls,
rights, commitments or agreements of any character to which Ascend is a
party or by which it is bound obligating Ascend to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of capital
stock of Ascend obligating Ascend to grant, extend, accelerate the vesting
of or enter into any such option, warrant, equity security, call, right,
commitment or agreement, and, to the best knowledge of Ascend, there are no
voting trusts, proxies or other agreements or understandings with respect
to the shares of capital stock of Ascend to which Ascend is a party.
Section 4.4 Authority; No Conflict; Required Filings and Consents.
(a) Ascend has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate and stockholder action on the part of
Ascend. This Agreement has been duly executed and delivered by Ascend and,
assuming this Agreement constitutes valid and binding obligation of the
other parties hereto, this Agreement constitutes the valid and binding
obligations of Ascend, enforceable against Ascend in accordance with the
terms hereof, except as such enforceability may be limited by
(i) bankruptcy laws and other similar laws affecting creditors' rights
generally and (ii) general principles of equity, regardless of whether
asserted in a proceeding in equity or at law.
(b) The execution and delivery of this Agreement by Ascend does
not, and the consummation of the transactions contemplated by this
Agreement will not, (i) conflict with, or result in any violation or breach
of any provision of the Certificate of Incorporation or Bylaws of Ascend or
any of its Subsidiaries (in each case as heretofore amended), (ii) result
in any violation or breach of, or constitute (with or without notice or
lapse of time, or both) a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any material
benefit) or require the consent, waiver or agreement of any person or
entity (other than consents, waivers and agreements that have been or prior
to the Closing will be obtained) under any of the terms, conditions or
provisions of any material note, bond, mortgage, indenture, lease, contract
or other material agreement, instrument or obligation to which Ascend or
any of its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound, or (iii) subject to the consents,
approvals, orders, authorizations, filings and registrations specified in
Section 4.4(c), conflict with or violate any judgment, order, decree,
statute, law, ordinance, rule or regulation or any material permit,
concession, franchise or license applicable to Ascend or any of its
Subsidiaries or any of their properties or assets, except in the case of
clauses (ii) and (iii) for such consents, waivers and agreements, the
absence of which, and such violations, breaches, defaults, terminations,
cancellations or accelerations which, in the aggregate could not reasonably
be expected to have an Ascend Material Adverse Effect or a material adverse
effect on the ability of Ascend to consummate the transactions contemplated
by this Agreement.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by or with respect to Ascend or any of its Subsidiaries in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (i) the
filing of pre-merger notification reports under the HSR Act and the
antitrust laws of any foreign jurisdiction which is applicable to the
Merger and the expiration or early termination of any waiting periods
thereunder; (ii) the filing of the Registration Statement with the SEC in
accordance with the Securities Act and the entry of an order by the SEC
permitting such registration statement to become effective; (iii) the
filing of the Articles of Merger with the Secretary of State of the
Commonwealth of Massachusetts in accordance with the MBCL; (iv) the filing
of the Proxy Statement and related proxy materials with the SEC in
accordance with the Exchange Act; (v) such consents, approvals, orders,
authorizations, filings, registrations and declarations as may be required
under applicable federal and state securities laws and the laws of any
foreign country; and (vi) such other consents, approvals, orders,
authorizations, filings, approvals and registrations which, in the
aggregate, if not obtained or made, could not reasonably be expected to
have an Ascend Material Adverse Effect or a material adverse effect on the
ability of Ascend to consummate the transactions contemplated by this
Agreement.Section
4.5 SEC Filings; Financial Statements.
(a) Ascend has filed and made available to Stratus all forms,
reports and documents required to be filed by Ascend with the SEC since
January 1, 1996 (collectively, the "Ascend SEC Reports"). The Ascend SEC
Reports (i) at the time filed, complied in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, as the
case may be, and (ii) did not at the time they were filed (or if amended or
superseded by a subsequent filing, then on the date of such filing) contain
any untrue statement of a material fact or omit to state a material fact
required to be stated in such Ascend SEC Reports or necessary in order to
make the statements in such Ascend SEC Reports, in the light of the
circumstances under which they were made, not misleading. None of Ascend's
Subsidiaries is required to file any forms, reports or other documents as a
result of their issuance of securities (or the registration of such
securities on a national market system) with the SEC, the NASD, any other
stock exchange or any foreign securities commission or stock exchange
regulating issuers of securities.
(b) Each of the consolidated financial statements (including, in
each case, any related notes) contained in the Ascend SEC Reports,
including any Ascend SEC Reports filed after the date of this Agreement
until the Closing (the "Ascend Financial Statements"), complied or will
comply as to form in all material respects with the applicable published
rules and regulations of the SEC with respect thereto, was or will be
prepared in accordance with U.S. GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to
such financial statements or, in the case of unaudited statements, as
permitted by Form 10-Q or 8-K promulgated by the SEC), and fairly presented
or will fairly present the consolidated financial position of Ascend and
its Subsidiaries as at the respective dates and the consolidated results of
its operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be
material in amount. The audited consolidated balance sheet of Ascend as of
December 31, 1997 is referred to herein as the "Ascend Balance Sheet."
Section 4.6 Absence of Undisclosed Liabilities. Ascend and its
Subsidiaries do not have any liabilities, either accrued or contingent
(whether or not required to be reflected in financial statements in
accordance with U.S. GAAP), and whether due or to become due, other than
(i) liabilities reflected in the Ascend Balance Sheet, (ii) normal or
recurring liabilities incurred since December 31, 1997 in the ordinary
course of business consistent with past practices, or (iii) liabilities
arising out of the transaction contemplated hereby or permitted hereunder.
Section 4.7 Absence of Certain Changes or Events. Since the date
of the Ascend Balance Sheet, Ascend and its Subsidiaries have conducted
their businesses only in the ordinary course in a manner consistent with
past practice, and since such date there has not been: (a) any Ascend
Material Adverse Effect or any fact or circumstance that would be
reasonably likely to result in an Ascend Material Adverse Effect or (b) any
material change by Ascend or any of its Subsidiaries in its accounting
methods, principles or practices; (c) any revaluation by Ascend or any of
its Subsidiaries of any material asset or any writedown of the value of
capitalized software or inventory, or any write-off of notes or accounts
receivable other than in the ordinary course of business consistent with
past practice; or (d) any other action or event that would have required
the consent of Stratus pursuant to Section 5.2 of this Agreement had such
action or event occurred after the date of this Agreement and that could
reasonably be expected to result in an Ascend Material Adverse Effect.
Section 4.8 Litigation. There is no action, suit, proceeding,
claim, arbitration or, to the knowledge of Ascend, investigation against
Ascend or any of its Subsidiaries pending, or to the knowledge of Ascend,
threatened, or as to which Ascend or any of its Subsidiaries has received
any written notice of assertion, which, if decided adversely to Ascend or
such Subsidiary, could reasonably be expected to have an Ascend Material
Adverse Effect or a material adverse effect on the ability of Ascend to
consummate the transactions contemplated by this Agreement.
Section 4.9 Compliance with Laws. (a) Ascend and its Subsidiaries
have complied with, and have not received any notices of violations with
respect to and (b) as of the date hereof, Ascend and its Subsidiaries are
not in violation of any U.S. federal, state, or local or foreign statute,
law or regulation, affecting the conduct of its business or the ownership
or operation of its business, including the U.S. Foreign Corrupt Practices
Act and all United States statutes, laws and regulations governing the
license and delivery of technology and products abroad by persons subject
to the jurisdiction of the United States, except for failures to comply or
violations which could not reasonably be expected to have an Ascend
Material Adverse Effect.
Section 4.10 Tax Matters. Neither Ascend nor any of its
Subsidiaries, nor to Ascend's knowledge, any of its other Affiliates (as
defined herein) has taken or agreed to take any action or failed to take
any action which could prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
Section 4.11 Interested Party Transactions. Since the date of
Ascend's last proxy statement to its stockholders, no event has occurred
that would be required to be reported by Ascend as a Certain Relationship
or Related Transaction pursuant to Item 404 of Regulation S-K promulgated
by the SEC.
Section 4.12 Registration Statement; Proxy Statement/Prospectus.
The information supplied by Ascend for inclusion in the Registration
Statement shall not contain, at the time the Registration Statement is
first filed in publicly available form and at the time the Registration
Statement is declared effective by the SEC, any untrue statement of a
material fact or omit to state any material fact required to be stated in
the Registration Statement or necessary in order to make the statements in
the Registration Statement, in light of the circumstances under which they
were made, not misleading. The information supplied by Ascend for
inclusion in the Proxy Statement to be sent to the stockholders of Stratus
in connection with the Stratus Stockholders Meeting shall not, on the date
the Proxy Statement is first mailed to stockholders of Stratus, at the time
of the Stratus Stockholders Meeting or at the Effective Time, contain any
statement which, at such time and in light of the circumstances under which
it was made, is false or misleading with respect to any material fact, or
omit to state any material fact necessary in order to make the statements
made in the Proxy Statement not false or misleading or omit to state any
material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Stratus
Stockholders Meeting which has become false or misleading. If at any time
prior to the Effective Time any event relating to Ascend or any of its
Affiliates, officers or directors should be discovered by Ascend which
should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement, Ascend shall promptly inform Stratus.
Section 4.13 Opinion of Financial Advisor. The financial advisor to
Ascend, Xxxxxxx Xxxxx Xxxxxx, has delivered to Ascend an opinion dated as
of or immediately prior to the date of this Agreement to the effect that
the Exchange Ratio is fair to Ascend from a financial point of view.
Section 4.14 Taxes. (i) Ascend and each of its Subsidiaries has
filed all Tax Returns required to have been filed on or prior to the date
hereof, or appropriate extensions therefor have been properly obtained, and
such Tax Returns are true, correct and complete, except to the extent that
any failure to file such Tax Returns or to cause such Tax Returns to be
true, correct and complete would not, individually or in the aggregate, be
expected to have an Ascend Material Adverse Effect; (ii) all Taxes shown to
be due on such Tax Returns have been timely paid or extensions for payment
have been properly obtained, or such Taxes are being timely and properly
contested by Ascend, except for failures to make payment, properly obtain
extensions or timely and properly contest which could not reasonably be
expected to have an Ascend Material Adverse Effect; (iii) there is no
audit, examination, claimed deficiency, refund litigation, proposed
adjustment or matter in controversy regarding any Taxes due and owing by
Ascend or any of its Subsidiaries that would individually or in the
aggregate, have an Ascend Material Adverse Effect; (iv) neither Ascend nor
any of its Subsidiaries has waived any statutory period of limitations in
respect of any material Taxes or Tax Returns; (v) all assessments for Taxes
due and owing by Ascend or any of its Subsidiaries with respect to
completed and settled examinations or concluded litigation have been paid
(except where the nonpayment of such Taxes could not reasonably be expected
to have an Ascend Material Adverse Effect); and (vi) neither Ascend nor any
of its Subsidiaries is a party to, bound by, or has any obligation under
any Tax sharing, allocation, indemnity or similar contract or arrangement.
Section 4.15 Interim Operations of Sub. Sub was formed solely for
the purpose of engaging in the transactions contemplated by this Agreement,
has engaged in no other business activities and has conducted its
operations only as contemplated by this Agreement.
ARTICLE V
CONDUCT OF BUSINESS
Section 5.1 Covenants of Stratus. During the period from the date
of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, except as expressly contemplated by
this Agreement, Stratus agrees as to itself and its Subsidiaries (except to
the extent that Ascend shall otherwise consent in writing, which consent
shall not be unreasonably withheld), to carry on its business in the usual,
regular and ordinary course in substantially the same manner as previously
conducted, to pay its debts and Taxes when due subject to good faith
disputes over such debts or Taxes, to pay or perform its other obligations
when due, and, to the extent consistent with such business, except where
the failure to do so could not reasonably be expected to have a Stratus
Material Adverse Effect, to use all reasonable efforts consistent with past
practices and policies to (i) preserve intact its present business
organization, (ii) keep available the services of its present officers and
key employees, and (iii) preserve its relationships with customers,
suppliers, distributors, licensors, licensees and others having business
dealings with it. Stratus shall promptly after becoming aware thereof
notify Ascend of any events or occurrences not in the ordinary course of
business of Stratus that would, individually or in the aggregate, result in
a breach of any representation, warranty, covenant or agreement of Stratus
set forth in this Agreement which would cause any of the conditions to
Ascend's obligations to effect the Merger set forth in Article VII to not
be satisfied. Except as expressly contemplated by this Agreement or as set
forth in the Stratus Disclosure Schedule, Stratus shall not (and shall not
permit any of its Subsidiaries to), without the prior written consent of
Ascend, which consent shall not be unreasonably withheld:
(a) accelerate, amend or change the period of exercisability of
options or restricted stock granted under any Stratus Stock Plan or
authorize cash payments in exchange for any options granted under any of
such plans except as required by the terms of such plans or any related
agreements in effect as of the date of this Agreement;
(b) transfer or license to any person or entity or otherwise
extend, amend or modify any material rights to the Stratus Intellectual
Property Rights (as defined in Section 6.1(b)), other than non-exclusive
licenses in the ordinary course of business consistent with past practices,
provided that Stratus and its Subsidiaries shall be permitted to renew or
extend exclusive licenses existing as of the date hereof;
(c) declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock, or purchase or
otherwise acquire, directly or indirectly, any shares of its capital stock
except from former employees, directors and consultants, as and to the
extent required pursuant to agreements entered into prior to the date
hereof providing for the repurchase of shares in connection with any
termination of service by such party;
(d) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or
securities convertible into shares of its capital stock, or subscriptions,
rights, warrants or options to acquire, or other agreements or commitments
of any character obligating it to issue any such shares or other
convertible securities, other than (i) the issuances of Stratus Common
Stock or the grant of options or rights to acquire Stratus Common Stock
pursuant to the Stratus Stock Plans in the ordinary course of business
consistent as to amount, exercise price, vesting and other terms with past
practice not to exceed two hundred fifty thousand (250,000) shares in the
aggregate, and (ii) the issuance of shares of Stratus Common Stock upon the
exercise of options granted under the Stratus Stock Plans as and to the
extent required under the Stratus Stock Plans;
(e) acquire or agree to acquire, by merging or consolidating
with, by purchasing a substantial equity interest in or substantial portion
of the assets of, or by any other means, any business or any corporation,
partnership or other business organization or division, or otherwise
acquire or agree to acquire any material amount of assets;
(f) sell, lease, license or otherwise dispose of any of its
properties or assets which are material, individually or in the aggregate
to the business of Stratus and its Subsidiaries, taken as a whole, other
than in the ordinary course of business;
(g) take any action to: (i) increase or agree to increase the
compensation paid, payable or to become payable to its directors, officers,
employees, or consultants, except for increases in salary or wages of
employees in accordance with past practices and except as may be necessary
to satisfy contractual obligations existing as of the date hereof,
(ii) grant any additional severance or termination pay to, or enter into
any employment or severance agreements with, directors, officers or
employees, except as may be necessary to satisfy contractual obligations
existing as of the date hereof, (iii) grant any severance or termination
pay to, or enter into any employment or severance agreement with, any
employee, except in accordance with past practices and except as may be
necessary to satisfy contractual obligations existing as of the date
hereof, (iv) enter into any collective bargaining agreement, or (v) except
as required by applicable law establish, adopt, enter into or amend any
bonus, profit sharing, thrift, compensation, stock option, restricted
stock, pension, retirement, deferred compensation, employment, termination,
severance or other plan, trust, fund, policy or arrangement for the benefit
of any directors, officers or employees, except as may be necessary to
satisfy contractual obligations existing as of the date hereof; provided,
however, that nothing contained herein shall prohibit Stratus from
conclusively determining the earned amount of any bonuses under Stratus's
bonus plans in respect of calendar year 1998, based on Stratus's annualized
performance through the Effective Time (determined without regard to the
costs incurred in connection with the transactions contemplated by this
Agreement), such bonuses to be paid in accordance with the terms of such
plans and Stratus's past practices;
(h) revalue any of its assets, including writing down the value
of inventory or writing off notes or accounts receivable other than in the
ordinary course of business or pursuant to arm's length transactions on
commercially reasonable terms;
(i) incur or prepay any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or
warrants or rights to acquire any debt securities or guarantee any debt
securities of others, other than indebtedness incurred under outstanding
lines of credit and bank agreements consistent with past practice;
(j) amend or propose to amend its Bylaws;
(k) incur or commit to incur any individual capital expenditure
in excess of five million dollars ($5,000,000) or aggregate capital
expenditures in excess of forty million dollars ($40,000,000);
(l) enter into or amend any material OEM agreement or any
material agreements pursuant to which any third party is granted exclusive
marketing, manufacturing or other rights with respect to any Stratus
product, process or technology;
(m) amend or terminate any material contract, agreement or
license to which it is a party except in the ordinary course of business;
(n) waive or release any material right or claim, except in the
ordinary course of business;
(o) initiate any litigation or arbitration proceeding against
any person known to Stratus to be a customer or distributor of Ascend
without prior notice to the Chief Financial Officer of Ascend or settle any
litigation or arbitration proceeding involving out-of-pocket settlement
payments of greater than one million dollars ($1,000,000);
(p) make any loans to directors, officers or employees (other
than pursuant to contracts in existence prior to the date hereof);
(q) make any material changes in its Tax or (except as required
by law) accounting policies; or
(r) take, or agree in writing or otherwise to take, any of the
actions described in the foregoing clauses (a) through (q), or any action
which is reasonably likely to cause any of the conditions set forth in
Section 7.2(a) or Section 7.2(b) not to be satisfied.
Section 5.2 Covenants of Ascend. During the period from the date
of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, except as expressly contemplated by
this Agreement, Ascend agrees as to itself and its Subsidiaries (except to
the extent that Stratus shall otherwise consent in writing, which consent
shall not be unreasonably withheld), to carry on its business in the usual,
regular and ordinary course, in substantially the same manner as previously
conducted or as otherwise disclosed to Stratus prior to the date hereof, to
pay its debts and Taxes when due subject to good faith disputes over such
debts or Taxes, to pay or perform its other obligations when due and, to
the extent consistent with such business, except where the failure to do so
could not reasonably be expected to have an Ascend Material Adverse Effect,
to use all reasonable efforts consistent with past practices and policies
to (i) preserve intact its present business organization, (ii) keep
available the services of its present officers and key employees, and
(iii) preserve its relationships with customers, suppliers, distributors,
licensors, licensees and others having business dealings with it, in each
case. Ascend shall promptly after becoming aware thereof notify Stratus of
any events or occurrences not in the ordinary course of business of Ascend
that would individually or in the aggregate result in a breach of any
representation, warranty, covenant or agreement of Ascend set forth in this
Agreement, which would cause any of the conditions to Ascend's obligations
to effect the Merger set forth in Article VII not to be satisfied.
Except as expressly contemplated by this Agreement or as set forth in the
Ascend Disclosure Schedule, Ascend shall not (and shall not permit any of
its Subsidiaries to), without the prior written consent of Stratus which
consent shall not be unreasonably withheld:
(a) declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock or split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock, or purchase or
otherwise acquire, directly or indirectly, any shares of its capital stock
except from former employees, directors and consultants in accordance with
agreements entered into prior to the date hereof providing for the
repurchase of shares in connection with any termination of service by such
party;
(b) amend or propose to amend its Certificate of Incorporation
or Bylaws, except as contemplated by this Agreement; or
(c) take, or agree in writing or otherwise to take, any of the
actions described in the foregoing clauses (a) and (b), or any action which
is reasonably likely to cause any of the conditions set forth in Section
7.3(a) or Section 7.3(b) not to be satisfied.
Section 5.3 Cooperation. Subject to compliance with applicable
law, from the date hereof until the Effective Time, each of Ascend and
Stratus shall keep the other apprised of the status of matters relating to
the completion of the transactions contemplated hereby, including promptly
furnishing the other party or its counsel with copies of all filings made
by such party with any Governmental Entity in connection with this
Agreement, the Merger and the other transactions contemplated hereby.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 No Solicitation.
(a) Stratus agrees that, from and after the date of this
Agreement until the earlier of the Effective Time or the termination of
this Agreement in accordance with Section 8.1 it shall not, directly or
indirectly, through any officer, director, employee, representative, agent,
or affiliate, (i) solicit, initiate, or encourage any inquiries or
proposals that constitute, or could reasonably be expected to lead to, a
proposal or offer for a merger, consolidation, sale or purchase of
substantial assets or stock, tender or exchange offer, or other business
combination or change in control or similar transaction involving such
party, other than the transactions contemplated or permitted by this
Agreement (any of the foregoing inquiries or proposals being referred to in
this Agreement as a "Competing Offer"), (ii) engage in negotiations or
discussions concerning, or provide any non-public information to any person
or entity relating to, any Competing Offer, or (iii) agree to, accept,
approve, recommend or consummate a Competing Offer; provided, however, that
nothing in this Section 6.1 shall prevent Stratus or its Board of Directors
from (A) furnishing non-public information to, or entering into discussions
or negotiations with, any person or entity in connection with an
unsolicited bona fide written Competing Offer by such person or entity or
recommending such an unsolicited bona fide written Competing Offer to the
stockholders of Stratus, if and only to the extent that (1) such Competing
Offer would, if consummated, result in a transaction that would, in the
reasonable good faith judgment of Stratus's Board of Directors, after
consultation with its financial advisors, be more favorable to Stratus's
stockholders from a financial point of view than the Merger and, in the
reasonable good faith judgment of Stratus's Board of Directors after
consultation with its financial advisors, the person or entity making such
Competing Offer appears to have the financial means, or the ability to
obtain the necessary financing, to conclude such transaction (any such
Competing Offer meeting such criteria being referred to in this Agreement
as a "Superior Proposal"), (2) the failure to take such action would, in
the reasonable good faith judgment of Stratus's Board of Directors after
consultation with outside corporate counsel, be contrary to the fiduciary
duties of Stratus's directors to Stratus's stockholders under applicable
law, and (3) prior to furnishing non-public information to, or entering
into discussions or negotiations with, such person or entity, Stratus's
Board of Directors receives from such person or entity an executed
confidentiality agreement not materially less restrictive to such person or
entity than those contained in the Mutual Nondisclosure and Confidentiality
Agreement dated June 15, 1998 between Ascend and Stratus (the
"Confidentiality Agreement"); or (B) from accepting or agreeing to a
Superior Proposal or consummating a transaction contemplated by a Superior
Proposal (provided that Stratus has given notice as required by the last
sentence of Section 6.1(b);or (C) complying with Rule 14e-2 promulgated
under the Exchange Act with regard to a Competing Offer.
(b) Stratus shall notify Ascend no later than twenty-four
(24) hours after receipt by Stratus (or its advisors), of any Competing
Offer or any request for nonpublic information in connection with a
Competing Offer or for access to the properties, books or records of
Stratus by any person or entity that informs such party that it is
considering making, or has made, a Competing Offer (the "Competing
Offeror"). Such notice to Ascend shall be made orally and in writing and
shall indicate in reasonable detail the identity of the Competing Offeror
and the terms and conditions of such proposal, inquiry or contact. Stratus
shall notify Ascend of the occurrence and substance of any discussions held
with any such Competing Offeror within twenty-four (24) hours of the
occurrence of such discussions. Stratus shall notify Ascend at least
forty-eight (48) hours prior to accepting or agreeing to a Superior
Proposal or making any public announcement of its intention to do so or to
recommend a Superior Proposal to its stockholders or to withdraw its
recommendation for approval of the Merger or to engage in a Superior
Proposal.
Section 6.2 Proxy Statement/Prospectus; Registration Statement.
(a) As promptly as practicable after the execution of this
Agreement, Ascend shall prepare and file with the SEC the Registration
Statement, and Stratus shall prepare and file with the SEC the Proxy
Statement. Ascend and Stratus shall use all reasonable efforts to cause
the Registration Statement to become effective as soon after such filing as
reasonably practicable. Unless the Stratus Board of Directors determines
in reasonable good faith after consultation with outside corporate counsel
that to do so would be contrary to the fiduciary duties of the Stratus
Board of Directors to Stratus's stockholders under applicable law, the
Proxy Statement shall include the recommendation of the Board of Directors
of Stratus in favor of approval and adoption of this Agreement and the
Merger.
(b) Ascend and Stratus shall each use all reasonable efforts to
make all necessary filings with respect to the Merger under the Securities
Act and the Exchange Act and applicable state securities laws and the rules
and regulations thereunder.
Section 6.3 Consents. Each of Ascend and Stratus shall use all
reasonable efforts to obtain all necessary consents, waivers and approvals
under its respective material agreements, contracts, licenses or leases
required for the consummation of the Merger and the other transactions
contemplated by this Agreement.
Section 6.4 Access to Information. Upon reasonable notice, Stratus
shall (and shall cause each of its Subsidiaries to) afford to the officers,
employees, accountants, financial advisors, counsel and other
representatives of Ascend, access, during normal business hours during the
period prior to the Effective Time, to all its properties, books,
contracts, commitments and records and all other information concerning its
business, properties and personnel as such other party may reasonably
request and, during such period, each of Stratus and Ascend shall (and
shall cause each of its Subsidiaries to) furnish promptly to the other a
copy of each report, schedule, registration statement and other document
filed or received by it during such period pursuant to the requirements of
federal securities laws. Upon reasonable notice, Ascend shall (and shall
cause each of its Subsidiaries to) provide to the officers, employees,
accountants, financial advisors, counsel of Stratus such information as may
be reasonably requested by Stratus in order for the Board of Directors of
Stratus to satisfy its fiduciary duties pertaining to this Agreement and
the transactions contemplated hereby. Unless otherwise required by law,
the parties will hold all such information which is non-public in
confidence and shall treat such information as "Proprietary Information" in
accordance with the Confidentiality Agreement. No information or knowledge
obtained in any investigation pursuant to this Section 6.4 shall affect or
be deemed to modify any representation or warranty contained in this
Agreement or the conditions to the obligations of the parties to consummate
the Merger.
Section 6.5 Stratus Stockholders Meeting. Stratus shall call and
hold the Stratus Stockholders Meeting as promptly as practicable after the
date hereof for the purpose of voting upon the adoption of this Agreement
and the approval of the Merger. Unless the Stratus Board of Directors
determines in reasonable good faith after consultation with outside
corporate counsel that to do so would be contrary to the fiduciary duties
of the Stratus Board of Directors to Stratus's stockholders under
applicable law, Stratus's Board of Directors shall recommend that Stratus
stockholders vote in favor of the adoption of this Agreement and the
approval of the Merger and Stratus shall otherwise use all reasonable
efforts, including but not limited to hiring a proxy solicitor and
participating in presentations to stockholders, to obtain the requisite
approval of Stratus stockholders.
Section 6.6 Legal Conditions to Merger. Each of Ascend and Stratus
shall take all reasonable actions necessary to comply promptly with all
legal requirements which may be imposed on such party with respect to the
Merger (which actions shall include, without limitation, furnishing all
information required under the HSR Act and any applicable foreign antitrust
laws and in connection with approvals of or filings with any other
Governmental Entity) and shall promptly cooperate with and furnish
information to each other in connection with any such requirements imposed
upon either of them or any of their Subsidiaries in connection with the
Merger. Each of Ascend and Stratus shall, and shall cause its Subsidiaries
to, take all reasonable actions necessary to obtain (and shall cooperate
with each other in obtaining) any consent, authorization, order or approval
of, or any exemption by, any Governmental Entity or other third party,
required to be obtained or made by Stratus, Ascend or any of their
Subsidiaries in connection with the Merger (any of the foregoing, an
"Approval") or the taking of any action required in furtherance thereof or
otherwise contemplated thereby or by this Agreement, (i) diligently oppose
or pursue any rehearing, appeal or other challenge which may be available
to it of any refusal to issue any Approval or of any order or ruling of any
Governmental Entity which may adversely affect the ability of the parties
hereto to consummate the Merger or to take any action contemplated by any
Approval or by this Agreement until such time as such refusal to issue any
Approval or any order or ruling has become final and non-appealable, and
(ii) diligently oppose any objections to, appeals from or petitions to
reconsider or reopen any Approval or the taking of any action contemplated
thereby or by this Agreement. Notwithstanding the foregoing, neither
Ascend nor Stratus shall be required to agree, as a condition to any
Approval, to divest itself or hold separate any Subsidiary, division or
business unit, the divestiture or holding separate of which would be
reasonably likely (A) to have an Ascend Material Adverse Effect, or (B) to
impair in any material way the benefits intended to be derived by Ascend
after the Effective Time as a result of the Merger
Section 6.7 Public Disclosure. Ascend and Stratus shall consult
with each other before issuing any press release or otherwise making any
public statement with respect to the Merger or this Agreement and shall not
issue any such press release or make any such public statement prior to
such consultation, except as may be required by law or by the rules of the
NASD or the stock exchanges on which their respective securities are
listed.
Section 6.8 Tax-Free Reorganization. Each of Ascend and Stratus
shall and shall cause its respective Subsidiaries to use its best efforts
to cause the Merger to be treated as a reorganization within the meaning of
Section 368(a) of the Code, and to obtain the opinion of its respective
counsel contemplated by Article VII. No party hereto, nor any Subsidiary
thereof, shall take any action that would cause the Merger not to qualify
under Section 368(a) of the Code, and the parties hereto shall, and shall
cause their respective Subsidiaries to take the position for all purposes
that the Merger qualifies as a reorganization under such Section of the
Code.
Section 6.9 Affiliate Legends. Between the date of this Agreement
and the Effective Time, Ascend and Stratus shall, if requested, promptly
provide each other such information and documents as Ascend or Stratus
shall reasonably request for purposes of reviewing a list of each of its
directors and executive officers who may, in the reasonable judgment of
Ascend and Stratus, be deemed to be an "affiliate" of Ascend within the
meaning of Rule 145 promulgated under the Securities Act ("Rule 145") (each
such person so judged to be an "affiliate" of Ascend or Stratus, is
referred to herein as an "Affiliate"). Ascend shall be entitled to place
appropriate legends on the certificates evidencing any Ascend Common Stock
to be received by such Affiliates of Stratus pursuant to this Agreement and
to issue appropriate stop transfer instructions to the transfer agent for
the Ascend Common Stock, consistent with the Securities Act and the rules
and regulations of the SEC thereunder.
Section 6.10 Nasdaq Quotation. Ascend shall use its best efforts to
cause the shares of Ascend Common Stock to be issued in the Merger to be
approved for quotation on The Nasdaq National Market, subject to official
notice of issuance, prior to the Effective Time.
Section 6.11 Stock Plans and Options.
(a) Stratus shall provide to each holder of an outstanding
option to purchase Stratus Common Stock (a "Stratus Option") under the
Stratus Stock Plans the notice (if any) required pursuant to such plans.
(b) From and after the Effective Time, each outstanding Stratus
Option shall be assumed by Ascend and shall be deemed to constitute an
option to acquire, on the same terms and conditions as were applicable
under such Stratus Option, the same number of shares of Ascend Common Stock
as the holder of such Stratus Option would have been entitled to receive in
the Merger pursuant to this Agreement had such holder exercised such option
in full immediately prior to the Effective Time (rounded down to the
nearest whole number), at a price per share (rounded up to the nearest
whole cent) equal to the quotient of (i) the exercise price per share of
Stratus Common Stock pursuant to such Stratus Option divided by (ii) the
Exchange Ratio.
(c) As soon as practicable after the Effective Time, Ascend
shall deliver to the participants in the Stratus Stock Plan an appropriate
notice setting forth such participants' rights pursuant thereto and the
grants pursuant to the Stratus Stock Plans shall continue in effect on the
same terms and conditions (subject to the adjustments required by this
Section 6.11 after giving effect to the Merger). Ascend shall comply with
the terms of the Stratus Stock Plans and ensure, to the extent required by,
and subject to the provisions of, such plan, that Stratus Options which
qualified as incentive stock options pursuant to Section 422 of the Code
prior to the Effective Time will continue to so qualify after the Effective
Time.
(d) Ascend shall take all corporate action necessary to reserve
and make available for issuance a sufficient number of shares of Ascend
Common Stock for delivery upon the exercise of the Stratus Options assumed
in accordance with this Section 6.11. As soon as practicable after the
Effective Time, and not more than ten (10) business days thereafter, Ascend
shall file a registration statement on Form S-8 (or any successor or other
appropriate form) with respect to the shares of Ascend Common Stock subject
to the Stratus Options assumed pursuant to this Section 6.11 and shall use
its best efforts to maintain the effectiveness of such registration
statement or registration statements (and maintain the current status of
the prospectus or prospectuses contained therein) for as long as the
Stratus Options remain outstanding. With respect to those individuals, if
any, who subsequent to the Merger will be subject to the reporting
requirements under Section 16(a) of the Exchange Act, where applicable,
Ascend shall administer Stratus Options assumed pursuant to this
Section 6.11 in a manner that complies with Rule 16b-3 promulgated under
the Exchange Act to the extent the Stratus Stock Plan complied with such
rule prior to the Merger.
Section 6.12 Brokers or Finders. Each of Ascend and Stratus
represents, as to itself, its Subsidiaries and its Affiliates, that no
agent, broker, investment banker, financial advisor or other firm or person
is or will be entitled to any broker's or finder's fee or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement except Xxxxxx Xxxxxxx & Co., Incorporated,
whose fees and expenses will be paid by Stratus in accordance with
Stratus's agreement with such firm, and Xxxxxxx Xxxxx Barney, whose fees
and expenses will be paid by Ascend in accordance with Ascend's agreement
with such firm, and each of Ascend and Stratus agrees to indemnify and hold
the other harmless from and against any and all claims, liabilities or
obligations with respect to any other fees, commissions or expenses
asserted by any person on the basis of any act or statement alleged to have
been made by such party or any of its directors, officers, employees or
affiliates.
Section 6.13 Indemnification.
(a) Stratus shall and, from and after the Effective Time, Ascend
and the Surviving Corporation shall, indemnify, defend and hold harmless
each person who is now, or has been at any time prior to the date of this
Agreement or who becomes prior to the Effective Time, an officer or
director of Stratus or any of its Subsidiaries (the "Indemnified Parties")
against all losses, claims, damages, costs, expenses, liabilities or
judgments or amounts that are paid in settlement (provided, in the case of
amounts paid in settlement, that such amounts shall have been approved by
the indemnifying party, which approval shall not be unreasonably withheld),
of or in connection with any claim, action, demand, suit, proceeding or
investigation based in whole or in part on or arising in whole or in part
out of the fact that such person is or was a director or officer of Stratus
or any of its Subsidiaries, whether pertaining to any matter existing or
occurring at or prior to the Effective Time and whether asserted or claimed
prior to, or at or after, the Effective Time ("Indemnified Liabilities")
including, without limitation, all losses, claims, damages, costs,
expenses, liabilities or judgments or settlement amounts based in whole or
in part on, or arising in whole or in part out of, or pertaining to this
Agreement or the transactions contemplated hereby, in each case to the full
extent a corporation is permitted under the MBCL to indemnify its own
directors and officers, as the case may be. Stratus, Ascend and the
Surviving Corporation, as the case may be, shall pay expenses in advance of
the final disposition of any such claim, demand, action suit, proceeding or
investigation to each Indemnified Party to the full extent permitted by law
upon receipt of any undertaking contemplated by Section 67 of the MBCL.
Without limiting the foregoing, in the event any such claim, action, suit,
proceeding or investigation is brought or asserted against any Indemnified
Party (whether arising before or after the Effective Time), (i) the
Indemnified Parties may retain counsel reasonably satisfactory to them and
Stratus (or them and Ascend and the Surviving Corporation after the
Effective Time), (ii) Stratus (or after the Effective Time, Ascend and the
Surviving Corporation) shall pay all reasonable fees and expenses of such
counsel for the Indemnified Parties promptly as statements therefor are
received upon receipt of an undertaking by such person to repay such
payment if it is determined that such person is not entitled to
indemnification hereunder, and (iii) Stratus (or after the Effective Time,
Ascend and the Surviving Corporation) shall use all reasonable efforts to
assist in the vigorous defense of any such matter, provided that none of
Stratus, Ascend or the Surviving Corporation shall be liable for any
settlement of any claim effected without its written consent, which
consent, however, shall not be unreasonably withheld. Any Indemnified
Party wishing to claim indemnification under this Section 6.13, upon
learning of any such claim, action, suit, proceeding or investigation,
shall promptly notify Stratus, Ascend or the Surviving Corporation (but the
failure so to notify an Indemnifying Party shall not relieve it from any
liability which it may have under this Section 6.13 except to the extent
such failure materially prejudices such party), and shall deliver to
Stratus (or after the Effective Time, Ascend and the Surviving Corporation)
the undertaking contemplated by Section 67 of the MBCL. The Indemnified
Parties as a group may retain only one law firm to represent them with
respect to each such matter unless there is, under applicable standards of
professional conduct, a conflict on any significant issue between the
positions of any two or more Indemnified Parties.
(b) From and after the Effective Time, the Surviving Corporation
and Ascend shall fulfill, assume and honor in all respects the obligations
of Stratus pursuant to Stratus's Bylaws and any indemnification agreement
between Stratus and any of Stratus's directors and officers existing and in
force as of the date of this Agreement and filed as an exhibit to the
Stratus SEC Reports. Ascend and Stratus agree that the indemnification
obligations set forth in Stratus's Articles of Organization and Bylaws, in
each case as of the date of this Agreement, shall survive the Merger (and,
as of or prior to the Effective Time, Ascend shall cause the Bylaws of Sub
to reflect such provisions) and shall not be amended, repealed or otherwise
modified for a period of six (6) years after the Effective Time in any
manner that would adversely affect the rights thereunder of the Indemnified
Parties.
(c) In the event Ascend or the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into
any other person and shall not be the continuing or surviving corporation
or entity in such consolidation or merger or (ii) transfers all or
substantially all its properties and assets to any person, then, and in
each case, proper provision shall be made so that the successors and
assigns of Ascend or the Surviving Corporation, as the case may be, honor
the indemnification obligations set forth in this Section 6.13.
(d) Ascend and the Surviving Corporation, shall, until the sixth
anniversary of the Effective Time or such earlier date as may be mutually
agreed upon by Ascend, the Surviving Corporation and the applicable
Indemnified Party, cause to be maintained in effect, to the extent
available, the policies of directors' and officers' liability insurance
maintained by Stratus and its Subsidiaries as of the date hereof (or
policies of at least the same coverage and amounts containing terms that
are not less advantageous to the insured parties) with respect to claims
arising from facts or events that occurred on or prior to the Effective
Time, including without limitation all claims based upon, arising out of,
directly or indirectly resulting from, in consequence of, or in any way
involving the Merger and any and all related events. In lieu of the
purchase of such insurance by Ascend or the Surviving Corporation, Stratus
may purchase a six (6) year extended reporting period endorsement
("reporting tail coverage") under its existing directors' and liability
insurance coverage, provided that such reporting tail coverage shall extend
the director and officer liability coverage in force as of the date hereof
for a period of at least six (6) years from the Effective Time for any
claims based upon, arising out of, directly or indirectly resulting from,
in consequence of, or in any way involving wrongful acts or omissions
occurring on or prior to the Effective Time, including without limitation
all claims based upon, arising out of, directly or indirectly resulting
from, in consequence of, or in any way involving the Merger and any and all
related transactions or related events. In no event shall Ascend or the
Surviving Corporation be obligated to expend in order to maintain or
procure insurance coverage pursuant to this paragraph (d) any amount per
year in excess of one hundred fifty percent (150%) of the aggregate
premiums paid by Stratus and its Subsidiaries in the fiscal year ended for
directors' and officers' liability insurance.
(e) The obligations of Stratus, the Surviving Corporation and
Ascend under this Section 6.13 shall not be terminated or modified in such
a manner as to adversely affect any of the Indemnified Parties without the
consent of such Indemnified Party (it being expressly agreed that each such
Indemnified Party shall be a third party beneficiary of this Section 6.13).
Section 6.14 Employees.
(a) Ascend will, or will cause Stratus or the appropriate
Subsidiary to give individuals who are employed by Stratus or any of its
Subsidiaries as of the Effective Time and who remain employees of Stratus
or such Subsidiary following the Effective Time (each such employee, an
"Affected Employee") full credit for purposes of eligibility, vesting,
benefit accrual and determination of the level of benefits under any
employee benefit plans or arrangements maintained by Ascend, Stratus or any
such Subsidiary for such Affected Employees' service with Stratus or any
affiliate thereof to the same extent recognized immediately prior to the
Effective Time.
(b) Ascend will, or will cause Stratus or the appropriate
Subsidiary to (i) waive all limitations as to pre-existing conditions
exclusions and waiting periods with respect to participation and coverage
requirements applicable to the Affected Employees under any welfare benefit
plans that such employees may be eligible to participate in after the
Effective Time, other than limitations or waiting periods that are already
in effect with respect to such employees and that have not been satisfied
as of the Effective Time under any welfare plan maintained for the Affected
Employees immediately prior to the Effective Time, and (ii) provide each
Affected Employee with credit for any co-payments and deductibles paid
prior to the Effective Time in satisfying any applicable deductible or out-
of-pocket requirements under any welfare plans that such employees are
eligible to participate in after the Effective Time.
(c) As of the Effective Time, Ascend shall expressly assume and
agree to perform in accordance with their terms, all employment, severance
and other compensation agreements then existing between Stratus or any
Subsidiary with any director, officer or employee thereof.
(d) Notwithstanding the foregoing, Ascend agrees to provide or
to cause the Surviving Corporation to provide Affected Employees, for a
period of one year following the Effective Time, with employee benefit
plans or arrangements, including the Stratus severance plan and policy,
that are, in the aggregate, not less favorable than those provided to
Affected Employees immediately prior to the Effective Time. Ascend agrees
to provide Affected Employees with a written description of such plans and
arrangements promptly following the Effective Time.
(e) Commencing on the first anniversary of the Effective Time
(unless Ascend consents to an earlier commencement date), the Affected
Employees shall be eligible to participate in Ascend's employee benefit
plans and arrangements in which similarly situated employees of Ascend or
affiliates of Ascend participate, to the same extent as such similarly
situated employees of Ascend or affiliates of Ascend.
Section 6.15 Additional Agreements; Reasonable Efforts. Subject to
the terms and conditions of this Agreement, each of the parties agrees to
use all reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, subject to the appropriate
vote of the stockholders of Stratus described in Section 3.4, including
cooperating fully with the other party, including by provision of
information and making all necessary filings under the HSR Act and any
foreign antitrust laws. If at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of either
of the Constituent Corporations, the proper officers and directors of each
party to this Agreement shall take all such necessary action.
Section 6.16 Certain Director and Officer Appointments. Ascend and
the Ascend Board of Directors of Ascend shall take all action required to
cause the election promptly after the Effective Time by the Ascend Board of
Xxxx Xxxxxxxx to the Ascend Board and the appointment of Xxxxx Xxxxx as
Executive Vice President of Carrier Signalling and Management of Ascend.
Section 6.17 Stratus's Rights Agreement. Stratus covenants and
agrees with Ascend that Stratus shall not (i) make any modifications to the
Rights Agreement, except such modifications made in furtherance of or in
connection with the transactions contemplated hereby, nor (ii) take any
action which would in either case cause Ascend to be deemed to be an
"Acquiring Person" or an "Adverse Person" under the Rights Agreement or
cause the Rights Agreement to apply to Ascend or the transactions
contemplated by this Agreement. Stratus agrees to take such actions as are
required to prevent the Rights Agreement and the provisions thereof from
applying to Ascend or the transactions contemplated by this Agreement and
to prevent Ascend from being treated as an "Acquiring Person" or an
"Adverse Person" under the Rights Agreement.
ARTICLE VII
CONDITIONS TO MERGER
Section 7.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to this Agreement to
effect the Merger shall be subject to the satisfaction prior to the Closing
Date of the following conditions:
(a) Stockholder Approvals. This Agreement and the Merger shall
have been adopted and approved by the requisite vote of holders of Stratus
Common Stock pursuant to the MBCL and the Articles of Organization of
Stratus.
(b) HSR Act. The waiting periods applicable to the consummation
of the Merger under the HSR Act and all applicable foreign laws (if any)
shall have expired or been terminated, and no action by the Department of
Justice or Federal Trade Commission or any foreign Governmental Entity
challenging or seeking to enjoin the consummation of the Merger shall have
been instituted and be pending.
(c) Approvals. All authorizations, consents, order or approvals
of, or declarations or filings with any Governmental Entity required to
consummate the transactions contemplated by this Agreement, the absence or
nonoccurrence of which would be reasonably likely to have an Ascend
Material Adverse Effect or a Stratus Material Adverse Effect, to impair the
benefits intended to be derived by Ascend after the Effective Time from the
Merger, or to limit or restrict the operation of the business of Ascend on
Stratus after the Effective Time.
(d) Registration Statement; State Securities Laws. The
Registration Statement shall have become effective under the Securities Act
and shall not be the subject of any stop order or proceedings seeking a
stop order, and Ascend shall have received all permits and other
authorizations required under applicable state securities laws for the
issuance of shares of Ascend Common Stock pursuant to the Merger.
(e) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint or prohibition preventing the consummation of the Merger or
limiting or restricting Ascend's conduct or operation of the business of
Ascend or Stratus after the Effective Time shall have been issued and be in
effect, nor shall any proceeding brought by a domestic administrative
agency or commission or other domestic Governmental Entity, seeking any of
the foregoing be pending; nor shall any action have been taken or any
statute, rule, regulation or order have been enacted, entered or enforced
or be deemed applicable to the Merger which makes the consummation of the
Merger illegal or prevents or prohibits the Merger.
(f) Nasdaq. The shares of Ascend Common Stock to be issued in
the Merger shall have been approved for quotation on The Nasdaq National
Market.
Section 7.2 Additional Conditions to Obligations of Ascend and Sub.
The obligations of Ascend and Sub to effect the Merger are subject to the
satisfaction or waiver of each of the following conditions, any of which
may be waived in writing exclusively by Ascend and Sub:
(a) Representations and Warranties. The representations and
warranties of Stratus set forth in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and (except to
the extent such representations and warranties expressly speak as of an
earlier date) as of the Closing Date as though made on and as of the
Closing Date, except (i) for changes contemplated by this Agreement or
(ii) where the failure to be true and correct could not reasonably be
expected to have a Stratus Material Adverse Effect or a material adverse
effect upon the parties' ability to consummate the Merger in accordance
with this Agreement, and Ascend shall have received a certificate signed
on behalf of Stratus by the chief executive officer or chief financial
officer of Stratus to such effect. For purposes of this Section 7.2(a), no
"Stratus Material Adverse Effect" shall be deemed to have occurred with
respect to breaches of the representations and warranties of Stratus in
Section 3.8 unless such breaches involve claims against or liability of
Stratus or any of its Subsidiaries for Taxes in an aggregate amount in
excess of the amount set forth in Schedule 7.2(a).
(b) Performance of Obligations. Stratus shall have performed in
all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date, and Ascend shall have
received a certificate signed on behalf of Stratus by the chief executive
officer or chief financial officer of Stratus to such effect.
(c) Rights Plan. The provisions of the Rights Plan shall not
apply to Ascend or the Merger and all rights issued thereunder shall have
been canceled or redeemed or shall be converted in accordance with
Article II of this Agreement.
(d) Tax Opinion. Ascend shall have received an opinion of Xxxx
Xxxx Xxxx & Freidenrich LLP, tax counsel to Ascend, dated as of the
Effective Time, to the effect that the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Code. The
issuance of such opinion shall be conditioned upon the receipt by such tax
counsel of representation letters from each of Stratus, Sub and Ascend, in
each case, in form and substance reasonably satisfactory to such tax
counsel. The specific provisions of each such representation letter shall
be in form and substance reasonably satisfactory to such tax counsel, and
each such representation letter shall be dated on or before the date of
such opinion and shall not have been withdrawn or modified in any material
respect.
Section 7.3 Additional Conditions to Obligations of Stratus. The
obligation of Stratus to effect the Merger is subject to the satisfaction
of each of the following conditions, any of which may be waived, in
writing, exclusively by Stratus:
(a) Representations and Warranties. The representations and
warranties of Ascend and Sub set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and
(except to the extent such representations and warranties expressly speak
as of an earlier date) as of the Closing Date as though made on and as of
the Closing Date, except (i) for changes contemplated by this Agreement or
(ii) where the failure to be true and correct could not reasonably be
expected to have an Ascend Material Adverse Effect or a material adverse
effect upon the parties' ability to consummate the Merger in accordance
with this Agreement, and Stratus shall have received a certificate signed
on behalf of Ascend by the chief executive officer or chief financial
officer of Ascend to such effect.
(b) Performance of Obligations. Ascend and Sub shall have
performed in all material respects all obligations required to be performed
by them under this Agreement at or prior to the Closing Date, and Stratus
shall have received a certificate signed on behalf of Ascend by the chief
executive officer or chief financial officer of Ascend to such effect.
(c) Tax Opinion. Stratus shall have received an opinion of
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, tax counsel to Stratus, dated as
of the Effective Time, to the effect that the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Code. The
issuance of such opinion shall be conditioned upon the receipt by such tax
counsel of representation letters from each of Ascend, Sub and Stratus, in
each case, in form and substance reasonably satisfactory to such tax
counsel. The specific provisions of each such representation letter shall
be in form and substance reasonably satisfactory to such tax counsel, and
each such representation letter shall be dated on or before the date of
such opinion and shall not have been withdrawn or modified in any material
respect.
ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.1 Termination. This Agreement may be terminated at any
time prior to the Effective Time (with respect to Section 8.1(b) through
Section 8.1(h), by written notice by the terminating party to the other
party), whether before or after approval of the matters presented in
connection with the Merger by the stockholders of Stratus:
(a) by mutual written consent of Ascend and Stratus; or
(b) by either Ascend or Stratus if the Merger shall not have
been consummated by January 31, 1999 (provided, however, that the right to
terminate this Agreement under this Section 8.1(b) shall not be available
to any party whose failure to fulfill any obligation under this Agreement
has been the cause of or resulted in the failure of the Merger to occur on
or before such date); or
(c) by either Ascend or Stratus if a court of competent
jurisdiction or other Governmental Entity shall have issued a final order,
decree or ruling, or taken any other action, having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger, and
all appeals with respect to such order, decree, ruling or action have been
exhausted or the time for appeal of such order, decree, ruling or action
shall have expired (provided, however, that the right to terminate this
Agreement under this Section 8.1(c) shall not be available to any party
which has not complied with its obligations under Section 6.6); or
(d) by either Ascend or Stratus if, at the Stratus Stockholders
Meeting (including any adjournment or postponement thereof), the requisite
vote of Stratus stockholders in favor of this Agreement and approval of the
Merger shall not have been obtained; or
(e) by Ascend if (i) the Board of Directors of Stratus shall
have withdrawn or modified its recommendation of this Agreement or the
Merger in a manner adverse to Ascend or shall have resolved or publicly
announced or disclosed its intention to do so; or (ii) the Board of
Directors of Stratus shall have recommended a Superior Proposal to the
stockholders of Stratus or shall have resolved or publicly announced its
intention to recommend or accept a Superior Proposal; or (iii) a tender
offer or exchange offer which if completed would result in the ownership by
any person and such person's affiliates of fifty percent (50%) or more of
the outstanding shares of Stratus Common Stock shall have been commenced
and the Board of Directors of Stratus shall have filed a Statement on Form
14D-9 recommending acceptance of such tender or exchange offer or shall
have resolved or publicly announced its intention to recommend acceptance
of such tender or exchange offer; or
(f) by Ascend if a breach of any representation, warranty,
covenant or agreement on the part of Stratus set forth in this Agreement
shall have occurred which if uncured would cause any condition set forth in
Section 7.2(a) or Section 7.2(b) not to be satisfied, and such breach is
incapable of being cured or, if capable of being cured, shall not have been
cured within twenty (20) business days following receipt by Stratus of
written notice of such breach from Ascend; or
(g) by Stratus if it shall have accepted, approved or resolved
to accept or approve a Superior Proposal in compliance with the terms of
Section 6.1; or
(h) by Stratus, if a breach of any representation, warranty,
covenant or agreement on the part of Ascend set forth in this Agreement
shall not have occurred which if uncured would cause any condition set
forth in Section 7.3(a) or Section 7.3(b) not to be satisfied, and such
breach is incapable of being cured or, if capable of being cured, shall not
have been cured within twenty (20) business days following receipt by
Ascend of written notice of such breach from Stratus.
Section 8.2 Effect of Termination. In the event of any termination
of this Agreement pursuant to Section 8.1, there shall be no liability or
obligation on the part of Ascend, Stratus, Sub, or any of their respective
officers, directors, stockholders or Affiliates, except as set forth in
Section 8.3. The foregoing limitations shall not apply to the extent that
such termination results from the willful breach by a party of any of its
representations, warranties, covenants or agreements in this Agreement.
The provisions of Section 6.15 and Section 8.3 of this Agreement and the
Confidentiality Agreement shall remain in full force and effect and survive
any termination of this Agreement.
Section 8.3 Fees and Expenses.
(a) Except as set forth in this Section 8.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses,
whether or not the Merger is consummated; provided, however, that Ascend
and Stratus shall share equally all fees and expenses, other than
attorneys' and accounting fees and expenses, incurred in relation to the
printing and filing of the Proxy Statement (including any related
preliminary materials) and the Registration Statement (including financial
statements and exhibits) and any amendments or supplements thereto and the
fee(s) required to be paid in connection with the filing(s) required under
the HSR Act and applicable foreign laws (if any) in connection with the
transactions contemplated by this Agreement.
(b) If this Agreement is terminated (i) by Ascend pursuant to
Section 8.1(e), or (ii) by Stratus pursuant to Section 8.1(g), or (iii) by
Stratus or Ascend pursuant to Section 8.1(d) as a result of the failure to
obtain the requisite vote for adoption of this Agreement and approval of
the Merger by the stockholders of Stratus and (in the case of clause (iii))
(x) at the time of such failure an Alternative Transaction involving
Stratus shall have been announced or publicly proposed and (y) within one
year of such failure Stratus or its Board of Directors accepts, recommends
or enters into or announces any definitive or preliminary agreement or
letter of intent with respect to an Alternative Transaction, amends or
otherwise takes action under the Rights Agreement which has the effect of
rendering the Rights Agreement inapplicable to an Alternative Transaction,
or redeems the Rights so as to facilitate an Alternative Transaction, or an
Alternative Transaction is consummated, Stratus shall pay to Ascend a
termination fee of $36,759,995 (the "Termination Fee"). The Termination Fee
shall be paid in cash by wire transfer of immediately available funds to an
account designated by Ascend and shall be payable: (x) in the case of
termination by Stratus pursuant to Section 8.1(g), prior to and as a
condition precedent to the effectiveness of such termination; (y) in the
case of termination by Ascend pursuant to Section 8.1(e), promptly after
such termination; and (z) in the case of termination by Stratus or Ascend
pursuant to Section 8.1(d) in the circumstances set forth in clause (iii)
of the preceding sentence, not later than the earliest such time as
(A) Stratus or its Board of Directors accepts, recommends or enters into or
announces any definitive or preliminary agreement or letter of intent with
respect to such Alternative Transaction, amends or otherwise takes action
under the Rights Agreement which has the effect of rendering the Rights
Agreement inapplicable to such Alternative Transaction, or redeems the
Rights so as to facilitate such Alternative Transaction, or (B) an
Alternative Transaction is consummated.
(c) As used in this Agreement, an "Alternative Transaction" with
respect to Stratus means (i) a transaction or series of transactions
pursuant to which any person or group (as such term is defined under the
Exchange Act), other than Ascend or Sub, or any affiliate thereof (a "Third
Party"), acquires (or would acquire upon completion of such transaction or
series of transactions) more than fifty percent (50%) of the equity
securities or voting power of Stratus or any of its material subsidiaries,
pursuant to a tender offer or exchange offer or otherwise, (ii) a merger,
consolidation, share exchange or other business combination involving
Stratus or any of its material Subsidiaries pursuant to which any Third
Party acquires ownership (or would acquire ownership upon consummation of
such merger, consolidation, share exchange or other business combination)
of more than fifty percent (50%) of the outstanding equity securities or
voting power of Stratus or any of its material Subsidiaries or of the
entity surviving such merger or business combination or resulting form such
consolidation, or (iii) any other transaction or series of transactions
pursuant to which any Third Party acquires (or would acquire upon
completion of such transaction or series of transactions) control of assets
of Stratus or any of its material Subsidiaries (including, for this
purpose, outstanding equity securities of Subsidiaries of Stratus) having a
fair market value equal to more than fifty percent (50%) of the fair market
value of all the consolidated assets of Stratus immediately prior to such
transaction or series of transactions.
(d) If any fee or expense due hereunder is not timely paid, the
defaulting party shall pay the costs and expenses (including reasonable
documented legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, taken to collect
payment, together with interest on the amount of any unpaid fee at the
publicly announced prime rate of Citibank, N.A. from the date such fee was
required to be paid.
Section 8.4 Amendment. 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 approval of the matters presented in
connection with the Merger by the stockholders of Stratus, but, after any
such approval, no amendment shall be made which by law requires further
approval by such stockholders without such further approval. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
Section 8.5 Extension; Waiver. At any time 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 any inaccuracies in the representations
and warranties contained herein or in any document delivered pursuant
hereto, and (iii) waive compliance 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.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Nonsurvival of Representations, Warranties and
Agreements. None of the representations, warranties and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Closing and the Effective Time, except for the agreements
contained in Section 1.3 (Effects of the Merger), Section 1.4 (Directors
and Officers), Section 2.1 (Conversion of Capital Stock), Section
2.2 (Exchange of Certificates), Section 6.11 (Stock Plans and Options),
Section 6.13 (Indemnification), Section 8.2 (Effect of Termination),
Section 8.3 (Fees and Expenses), this Article IX, and any other agreement
contemplated by this Agreement which, by its terms, does not terminate
until a later date. The Confidentiality Agreement shall survive the
execution and delivery of this Agreement.
Section 9.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, telecopied (which is confirmed) or mailed by registered or
certified mail (return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by
like notice):
(a) if to Ascend or Sub, to
Ascend Communications, Inc.
One Ascend Plaza
0000 Xxxxxx Xxx Xxxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Jewels, Esq.
Vice President & General Counsel
Facsimile No.: (000) 000-0000 and (000) 000-0000
with a copy to:
Xxxx Xxxx Xxxx & Freidenrich LLP
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
(b) if to Stratus, to
Stratus Computer, Inc.
00 Xxxxxxxxx Xxxx.
Xxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx Xxxxx, Esq.
Vice President & General Counsel
Facsimile No.: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Section 9.3 Interpretation. When a reference is made in this
Agreement to an Article or a Section, such reference shall be to an Article
or a Section of this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
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." The phrase "made available" in this Agreement shall
mean that the information referred to has been made available. The phrases
"the date of this Agreement," "the date hereof," and terms of similar
import, unless the context otherwise requires, shall be deemed to refer to
August 3, 1998. In determining whether a Stratus Material Adverse Effect
or an Ascend Material Adverse Effect exists: (a) materiality shall be
determined on the basis of the applicable party and all of its
Subsidiaries, taken together as a whole, and not on the basis of the party
or any single Subsidiary alone; and (b) none of the factors set forth on
Schedule 9.3.1 hereof shall be deemed by itself or by themselves, either
alone or in combination, to constitute a Stratus Material Adverse Effect
and none of the factors set forth on Schedule 9.3.2 hereof shall be deemed
by itself or by themselves, either alone or in combination, to constitute
an Ascend Material Adverse Effect. Reference to a party's "knowledge"
means (a) in the case of Stratus, the actual knowledge of the persons
identified in Schedule 9.3.3 and (b) in the case of Ascend, the actual
knowledge of the persons identified in Schedule 9.3.4.
Section 9.4 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have
been signed by each of the parties and delivered to the other parties, it
being understood that all parties need not sign the same counterpart.
Section 9.5 Entire Agreement; No Third Party Beneficiaries. This
Agreement (including the documents and the instruments referred to herein)
(a) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect
to the subject matter hereof, and (b) except as provided in Section 6.13 is
not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder.
Section 9.6 Governing Law. This Agreement shall be governed and
construed in accordance with the internal laws of the State of Delaware
without regard to conflicts of law rules thereof except that the MBCL
shall, to the extent applicable, govern the procedures to be taken
hereunder to effect the Merger. Each party hereto consents and submits to
the jurisdiction of the courts of the State of Delaware and the courts of
the United States located in such state for the adjudication of any action,
suit, proceeding, claim or dispute arising out of or otherwise relating to
this Agreement.
Section 9.7 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder 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, and any attempted assignment thereof
without such consent shall be null and void. 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.
IN WITNESS WHEREOF, Ascend, Sub and Stratus have caused this Agreement to
be signed under seal by their respective officers thereunto duly authorized
as of the date first written above.
STRATUS COMPUTER, INC. ASCEND COMMUNICATIONS, INC.
By: /s/ Xxxxx X. Xxxxx By: /s/ Xxxx Xxxxxx
------------------- --------------------------
Name: Xxxxx X. Xxxxx Name: Xxxx Xxxxxx
Title: President Title: Chief Executive Officer
By: /s/ Xxxxxxx X. Xxxxxxxxxx WILDCARD MERGER CORPORATION
-------------------------
Name: Xxxxxxx X. Xxxxxxxxxx By: /s/ Xxxx Xxxxxx
---------------------------
Title: Assistant Treasurer Name: Xxxx Xxxxxx
Title: President
By: /s/ Xxxxxxx X.X. Xxxxx
---------------------------
Name: Xxxxxxx X.X. Xxxxx
Title: Treasurer
TABLE OF DEFINED TERMS
Section
Affected Employee. . . . . . . . . . . . . . . . . . . . . . . . 6.14(a)
Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . 3.14(a) & 6.9
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Alternative Transaction . . . . . . . . . . . . . . . . . . . . . . 8.3(c)
Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.6
Ascend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Ascend Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . 4.5(a)
Ascend Common Stock . . . . . . . . . . . . . . . . . . . . . . . . 2.1(c)
Ascend Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . IV
Ascend Financial Statements . . . . . . . . . . . . . . . . . . . . 4.5(a)
Ascend Material Adverse Effect . . . . . . . . . . . . . . . . . . . . IV
Ascend Option Plans . . . . . . . . . . . . . . . . . . . . . . . . 4.3(a)
Ascend Preferred Stock . . . . . . . . . . . . . . . . . . . . . . 4.3(a)
Ascend Purchase Plan . . . . . . . . . . . . . . . . . . . . . . . 4.3(a)
Ascend SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . 4.5(a)
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Competing Offe . . . . . . . . . . . . . . . . . . . . . . . . . r6.1(a)
Competing Offero . . . . . . . . . . . . . . . . . . . . . . . . r6.1(b)
Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . . 6.1(a)
Constituent Corporations . . . . . . . . . . . . . . . . . . . . . . 1.3
Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(a)
DOL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.14(a)
Effective Rate . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9(q)
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.14(a)
Employee Agreement . . . . . . . . . . . . . . . . . . . . . . 3.14(a)
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . 3.13(l)
Environmental Permits . . . . . . . . . . . . . . . . . . . . . . 3.13(e)
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.14(a)
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4(c)
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
Exchange Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(c)
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . 3.4(c)
Hazardous Material . . . . . . . . . . . . . . . . . . . . . . . 3.13(k)
Hazardous Material Handling . . . . . . . . . . . . . . . . . . . 3.13(b)
Hazardous Material Product Activities . . . . . . . . . . . . . . 3.13(d)
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4(c)
Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . . 6.13(a)
Indemnified Liabilities . . . . . . . . . . . . . . . . . . . . . 6.13(a)
International Employee Plan . . . . . . . . . . . . . . . . . 3.14(a)
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.14(a)
Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . 3.14(a)
Joint Venture . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(b)
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8(h)
MBCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Multiemployer Plan . . . . . . . . . . . . . . . . . . . . . . . 3.14(a)
NASD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5(a)
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.14(a)
Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 3.14(a)
Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.18
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . 3.18
Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8(b)
Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(b)
Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 3.4(b)
Rule 145 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4(c)
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4(c)
Stratus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Stratus Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . 3.5(b)
Stratus Certificate . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
Stratus Certificates . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
Stratus Common Stock . . . . . . . . . . . . . . . . . . . . . . . 2.1(b)
Stratus Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . III
Stratus Employee Plan . . . . . . . . . . . . . . . . . . . . . . 3.14(a)
Stratus Financial Statements . . . . . . . . . . . . . . . . . . . 3.5(b)
Stratus Intellectual Property Rights . . . . . . . . . . . . . . 3.10(a)
Stratus Junior Common Stock . . . . . . . . . . . . . . . . . . . . 3.3(a)
Stratus Material Adverse Effect . . . . . . . . . . . . . . . . . . . III
Stratus Material Contracts . . . . . . . . . . . . . . . . . . . . . 3.11
Stratus Option . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
Stratus SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . 3.4(c)
Stratus Stockholders Meeting . . . . . . . . . . . . . . . . . . . . 3.18
Stratus Stock Plans . . . . . . . . . . . . . . . . . . . . . . . . 2.1(d)
Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Sub Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(a)
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(b)
Superior Proposal . . . . . . . . . . . . . . . . . . . . . . . . . 6.1(a)
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . 1.3
Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8(a)
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8(a)
Third Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.3(c)
U.S. GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5(b)
USTs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.13(a)
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Merger . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3 Effects of the Merger . . . . . . . . . . . . . . . . . . 2
Section 1.4 Directors and Officers . . . . . . . . . . . . . . . . . 2
ARTICLE II CONVERSION OF SECURITIES . . . . . . . . . . . . . . . . 4
Section 2.1 Conversion of Capital Stock . . . . . . . . . . . . . . . 4
Section 2.2 Exchange of Certificates . . . . . . . . . . . . . . . . 5
Section 2.3 Dissenting Shares . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF STRATUS . . . . . . . 8
Section 3.1 Organization . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.2 Stratus Subsidiaries and Joint Ventures . . . . . . . . . 10
Section 3.3 Stratus Capital Structure . . . . . . . . . . . . . . . . 11
Section 3.4 Authority; No Conflict; Required Filings and Consents . . 12
Section 3.5 SEC Filings; Financial Statements . . . . . . . . . . . . 13
Section 3.6 Absence of Undisclosed Liabilities . . . . . . . . . . . 14
Section 3.7 Absence of Certain Changes or Events . . . . . . . . . . 15
Section 3.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.9 Properties . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.10 Intellectual Property . . . . . . . . . . . . . . . . . 19
Section 3.11 Agreements, Contracts and Commitments . . . . . . . . . 20
Section 3.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.13 Environmental Matters . . . . . . . . . . . . . . . . . 21
Section 3.14 Employee Benefit Plans and Employee Matters . . . . . . 22
Section 3.15 Compliance with Laws . . . . . . . . . . . . . . . . . . 28
Section 3.16 Tax Matters . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.17 Interested Party Transactions . . . . . . . . . . . . . 28
Section 3.18 Registration Statement; Proxy Statement/Prospectus . . . 29
Section 3.19 Opinion of Financial Advisor . . . . . . . . . . . . . . 29
Section 3.20 Applicability of Certain Massachusetts Laws . . . . . . 29
ARTICLE IV REPRESENTATIONS AND
WARRANTIES OF ASCEND AND SUB . . . . . . . . . . . . . . . . . . . . 30
Section 4.1 Organization . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.2 Ascend Subsidiaries and Joint Ventures . . . . . . . . . 31
Section 4.3 Ascend Capital Structure . . . . . . . . . . . . . . . . 32
Section 4.4 Authority; No Conflict; Required Filings and Consents . . 33
Section 4.5 SEC Filings; Financial Statements . . . . . . . . . . . . 34
Section 4.6 Absence of Undisclosed Liabilities . . . . . . . . . . . 34
Section 4.7 Absence of Certain Changes or Events . . . . . . . . . . 25
Section 4.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.9 Compliance with Laws . . . . . . . . . . . . . . . . . . 35
Section 4.10 Tax Matter . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.11 Interested Party Transactions . . . . . . . . . . . . . 35
Section 4.12 Registration Statement; Proxy Statement/Prospectus . . . 36
Section 4.13 Opinion of Financial Advisor . . . . . . . . . . . . . . 36
Section 4.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 4.15 Interim Operations of Sub . . . . . . . . . . . . . . . 37
ARTICLE V CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . 37
Section 5.1 Covenants of Stratus . . . . . . . . . . . . . . . . . . 37
Section 5.2 Covenants of Ascend . . . . . . . . . . . . . . . . . . . 41
Section 5.3 Cooperation . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VI ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . 42
Section 6.1 No Solicitation . . . . . . . . . . . . . . . . . . . . . 42
Section 6.2 Proxy Statement/Prospectus; Registration Statement . . . 43
Section 6.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.4 Access to Information . . . . . . . . . . . . . . . . . . 44
Section 6.5 Stratus Stockholders Meeting . . . . . . . . . . . . . . 45
Section 6.6 Legal Conditions to Merger . . . . . . . . . . . . . . . 45
Section 6.7 Public Disclosure . . . . . . . . . . . . . . . . . . . . 46
Section 6.8 Tax-Free Reorganization . . . . . . . . . . . . . . . . . 46
Section 6.9 Affiliate Legends . . . . . . . . . . . . . . . . . . . . 46
Section 6.10 Nasdaq Quotation . . . . . . . . . . . . . . . . . . . . 46
Section 6.11 Stock Plans and Options . . . . . . . . . . . . . . . . 47
Section 6.12 Brokers or Finders . . . . . . . . . . . . . . . . . . . 48
Section 6.13 Indemnification . . . . . . . . . . . . . . . . . . . . 48
Section 6.14 Employees . . . . . . . . . . . . . . . . . . . . . . . 51
Section 6.15 Additional Agreements; Reasonable Efforts . . . . . . 52
Section 6.16 Certain Director and Officer Appointments . . . . . . . 52
Section 6.17 Stratus's Rights Agreement . . . . . . . . . . . . . . . 52
ARTICLE VII CONDITIONS TO MERGER . . . . . . . . . . . . . . . . . . 53
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger53
Section 7.2 Additional Conditions to Obligations of Ascend and Sub . 54
Section 7.3 Additional Conditions to Obligations of Stratus . . . . . 55
ARTICLE VIII TERMINATION AND AMENDMENT . . . . . . . . . . . . . . . 56
Section 8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . 56
Section 8.2 Effect of Termination . . . . . . . . . . . . . . . . . . 58
Section 8.3 Fees and Expenses . . . . . . . . . . . . . . . . . . . . 58
Section 8.4 Amendment . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 8.5 Extension; Waiver . . . . . . . . . . . . . . . . . . . . 60
ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 60
Section 9.1 Nonsurvival of Representations, Warranties
and Agreements . . . . . . . . . . . . . . . . . . . . . 60
Section 9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 9.3 Interpretation . . . . . . . . . . . . . . . . . . . . . 62
Section 9.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . 62
Section 9.5 Entire Agreement; No Third Party Beneficiaries . . . . . 62
Section 9.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . 63
Section 9.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . 63
