EXHIBIT 2.1
AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS
by and between
LUCENT TECHNOLOGIES INC.
as Seller
and
ELCOTEL DIRECT, INC.
as Buyer
dated as of September 30, 1997
TABLE OF CONTENTS
1. Definitions 1
1.1 Defined Terms 1
1.2 Other Definitional and Interpretive Matters
2. Purchase and Sale of Assets 7
2.1 Purchased Assets 7
2.2 Excluded Assets 8
2.3 Purchase Price 9
2.4 Assumed Liabilities 11
2.5 Excluded Liabilities 11
2.6 Consent of Third Parties; Further Assurances 12
2.7 No Licenses 12
2.8 Bulk Sales Law 13
2.9 Taxes 13
2.10 Employees 13
3. Representations and Warranties of Seller 13
3.1 Organization and Authority 13
3.2 Authorization; Binding Obligations 13
3.3 No Violations 14
3.4 Assets 14
3.5 Personal Property 14
3.6 Permits, Licenses 15
3.7 Compliance With Laws and Litigation 15
3.8 Contracts 15
3.9 Brokers 15
3.10 Historical Financial Information 16
3.11 Products Liability 16
3.12 No Other Representations or Warranties 16
4. Representations and Warranties of Buyer 17
4.1 Organization and Authority 17
4.2 Authorization; Binding Obligations 17
4.3 No Violations 17
4.4 Brokers 18
4.5 Sufficiency of Funds 18
5. Certain Covenants 18
5.1 Information 18
5.2 Preservation of Assets 19
5.3 Sale by Buyer of Inventory Marked With Seller's Name 19
5.4 Collateral Agreements 20
5.5 Regulatory Compliance 20
5.6 Contacts with Suppliers, Employees and Customers 21
5.7 Negotiations 21
5.8 Transition Plan; Interim Operation 21
5.9 Customer Orders. 22
5.10 Non-Compete. 23
6. Confidential Nature of Information 24
6.1 Confidentiality Agreement 24
6.2 Seller's Proprietary Information 24
7. Closing 25
7.1 Documents to be Delivered by Seller 25
7.2 Documents to be Delivered by Buyer 26
7.3 Closing Date 27
7.4 Contemporaneous Effectiveness 27
8. Conditions Precedent to Closing 27
8.1 General Conditions 27
8.2 Conditions Precedent to Buyer's Obligations 27
8.3 Conditions Precedent to Seller's Obligations 28
9. Status of Agreements 29
9.1 Effect of Breach 29
9.2 Survival of Representations and Warranties 29
9.3 General Agreement to Indemnify 29
9.4 Procedures for Indemnification 31
9.5 Arbitration; Choice of Law 32
10. Miscellaneous Provisions 34
10.1 Notices 34
10.2 Expenses 34
10.3 Entire Agreement; Modification 34
10.4 Assignment; Binding Effect; Severability 35
10.5 Governing Law 35
10.6 Execution in Counterparts 35
10.7 Public Announcement 35
10.8 No Third-Party Beneficiaries 35
11. Termination and Waiver 36
11.1 Termination 36
11.2 Effect of Termination 36
11.3 Waiver of Agreement 36
11.4 Amendment of Agreement 37
Schedules
Schedule 1.1A Business Locations
Schedule 1.1C Supplier Locations
Schedule 1.2 Certain Persons
Schedule 2.1(a) Principal Equipment
Schedule 2.1(b) Inventory
Schedule 2.1(c) Contracts
Schedule 2.1(d) Licenses
Schedule 2.1(f) Governmental Permits
Schedule 2.1(h) Additional Excluded Assets
Schedule 3.3 Certain Violations
Schedule 3.4 Title to Assets; Location of Inventory
Schedule 3.5 Personal Property
Schedule 3.6 Permits, Licenses
Schedule 3.7(a) Compliance With Laws
Schedule 3.7(b) Litigation
Schedule 3.10 Financial Information
Schedule 3.11 Product Liability Claims
Schedule 4.3 Certain Violations; Buyer's Consents
Schedule 5.2 Seller's Exceptions to Covenant to Operate Business in
Ordinary Course
Exhibits
Exhibit A-1 Form of Technology Transfer Agreement
Exhibit A-2 Form of Patent License Agreement
Exhibit B Form of Assignment and Assumption Agreement
Exhibit C Form of ▇▇▇▇ of Sale
Exhibit D Use Guidelines
AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS
THIS AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS (this
"Agreement") is made as of September 30, 1997 by and between
Lucent Technologies Inc., a Delaware corporation, having a principal
office at ▇▇▇-▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ Hill, N.J. 07974-
0636 ("Seller"), and Elcotel Direct, Inc., a
Delaware corporation, having a principal office at ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Buyer").
WHEREAS, Seller is, among other things, engaged through its
Network Systems Business Unit in the development, manufacture and sale of
Business Products (as hereinafter defined);
WHEREAS, Seller desires to sell to Buyer, and Buyer desires
to purchase from Seller, certain assets relating to the manufacture and sale
of Business Products on the terms and subject to the conditions set
forth herein;
WHEREAS, Seller wishes to transfer to Buyer, and Buyer is
willing to assume, specified Assumed Liabilities (as hereinafter defined) on
the terms and subject to the conditions set forth herein; and
WHEREAS, Seller and Buyer wish to enter into certain
collateral agreements as hereinafter specified, namely a Technology Transfer
Agreement and a Patent License Agreement.
NOW THEREFORE, in consideration of the mutual agreements and
covenants herein contained and intending to be legally bound hereby,
the parties agree as follows:
1. Definitions
1.1 Defined Terms
For the purposes of this Agreement, the following words and
phrases shall have the following meanings:
"Accounts Receivable" means all the accounts, notes and
finance receivables generated by the Business,
including all funds, refunds, receivables, credits, offsets,
or reimbursements, claims, debts, obligations and
such other rights, together with all accrued interest
thereon, in each case existing as of the close of business
on the Closing Date.
"Additional Excluded Assets" shall mean the assets and
equipment described on Schedule 2.1(h) .
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"Affiliate" of any Person means any Person, directly or
indirectly controlled by, controlling or under
common control with, such Person. For purposes of this
Agreement, "control" means the power to direct
the management and policies of a Person, whether through the
ownership of voting securities, by agreement or otherwise.
"Asset Acquisition Statement" has the meaning assigned in
Section 2.3(b).
"Assumed Liabilities" has the meaning assigned in Section 2.4.
"Assumption Agreement" has the meaning assigned by Section 2.4.
"Best Efforts" means that the obligated party is required to
make a diligent, reasonable and good faith effort to accomplish the applicable
objective. Such obligation, however, does not require an expenditure of
funds or the incurrence of a liability on the part of the obligated party, nor
does it require that the obligated party act in a manner that would be contrary
to normal commercial practices in order to accomplish the objective. The fact
that the objective is not actually accomplished is no indication that the
obligated party did not in fact utilize its Best Efforts in attempting to
accomplish the objective.
"Business" means the manufacturing, marketing, selling and
repairing Business Products as carried on by Seller immediately prior to the
date of this Agreement except for the activities of the Lucent Global
Provisioning Centers Public Terminals Refurbishment Operations as currently
conducted by Seller.
"Business Day" means a day that is not a Saturday, a Sunday
or a statutory or civic holiday in the state of New York or any other day on
which the principal offices of either Seller or Buyer are closed or become
closed prior to 2:00 p.m. local time whether in accordance with established
company policy or as a result of unanticipated events, including adverse
weather conditions.
"Business Locations" means the locations set forth on Schedule 1.1A.
"Business Product" means Public Terminals and related components of
the type set forth in Schedule 3 of the Technology Transfer Agreement as
amended or added to pursuant to the terms of the Technology Transfer
Agreement.
"Business Records" means all books, files (including customer and
supplier files), records, mailing lists, customer lists, vendor data,
equipment maintenance records, warranty information, manuals of operation or
business procedures, and other similar information, relating primarily to
the Business or the Purchased Assets but excludes any Proprietary Information
of Seller covered by the Technology Transfer Agreement or the Patent License
Agreement, which shall be governed by the terms of such agreements.
"Closing" means the closing of the transactions described in Article 7.
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"Closing Date" means the date of the Closing as determined pursuant
to Section 7.3.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Agreements" means the agreements to be entered
into between Buyer and/or its Affiliates and Seller that are listed in
Section 5.4.
"Contracts" means Third-Party contracts, agreements, leases,
supply contracts, purchase orders, sales orders and instruments relating
exclusively to the manufacture, marketing, sale or repair of the Business
Products, in effect on the Closing Date to which Seller is a party,
identified on Schedule 2.1(c), (i) for the lease of machinery and equipment
or furniture and office equipment, (ii) for the provision of goods or
services, (iii) for the sale of goods or performance of services and
(iv) for the sale and distribution of the Business Products but in each
case only to the extent assignable.
"Counsel for Buyer" means ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP.
"Counsel for Seller" means a Corporate Counsel of Seller.
"Encumbrance" means any lien, claim, charge, security
interest, mortgage, pledge, easement, conditional sale or other title
retention agreement, covenant or other similar restrictions affecting the
Purchased Assets.
"Environmental Law" means any local, county, state and/or federal
law or regulation that governs the existence of or provides a remedy for
release of Hazardous Substances, the protection of persons, natural resources
or the environment, the management of Hazardous Substances, or other
activities involving Hazardous Substances including federal, state, local
and/or county laws or regulations, in each case as in effect on or prior
to the Closing Date or, with respect to representations and warranties made
on the date hereof, on or prior to the date hereof.
"Excluded Assets" means the properties and assets of the Business
excluded from the Purchased Assets by Section 2.2.
"Excluded Liabilities" means the liabilities and obligations that are
not assumed by Buyer as provided in Section 2.5.
"Governmental Body" means any court, government (foreign, federal,
state or local), department, commission, board, agency, bureau, official or
other regulatory, administrative or governmental authority.
"Governmental Permits" means all the governmental permits and
licenses, certificates of inspection, approvals or other authorizations
issued to Seller that primarily relate to the Business.
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"Hazardous Substance" means any substance that is regulated
under any Environmental Law or is deemed by any Environmental Law to be
"hazardous," "toxic," a "contaminant," "waste," a source of contamination
or a pollutant.
"Inventory" means all inventory, wherever located, including
raw materials, work in process, recycled materials, finished products and
inventoriable supplies, and noncapital spare parts owned by Seller and
used or held for use exclusively in the conduct of the Business, but
specifically including those items of the type and nature of the materials
identified in the summary list set forth on Schedule 2.1(b).
"IRS" means the U.S. Internal Revenue Service.
"Licenses" means all licenses, agreements and other arrangements
identified on Schedule 2.1(d) under which Seller has the right to use any
Proprietary Information of a Third Party to the extent used or held for
use exclusively in the operation of the Principal Equipment or Inventory,
but not the Nonassignable Licenses.
"Lucent Global Provisioning Centers Public Terminals Refurbishment
Operations" means the refurbishment operations of Seller which is currently
conducted in Merriam, Kansas.
"Losses" has the meaning assigned by Section 9.3(a).
"Material Adverse Effect" means any material adverse change
or effect (or series of related changes or effects) on the Business or on
the use of the Purchased Assets taken as a whole; provided, however, that
events, circumstances or conditions resulting from changes, developments or
circumstances in worldwide or national political, economic or regulatory
conditions that adversely affect a broad group of industries generally,
in each case where such events, circumstances or conditions do not adversely
affect the Purchased Assets disproportionately, shall not constitute a
Material Adverse Effect; and provided further, that the effects of the
announcement of or the merger of Buyer and Technology Service Group, Inc.
shall not constitute a Material Adverse Effect.
"Nonassignable Assets" has the meaning assigned by Section 2.6(b).
"Nonassignable Licenses" means licenses of Proprietary Information
to which Seller or an Affiliate of Seller is the licensee and that are not
assignable to Buyer.
"Patent License Agreement" means the agreement between Seller, as
licensor, and Elcotel, Inc., as licensee, for the license of certain patents
of Seller, in substantially the form set forth as Exhibit A-2.
"Permitted Encumbrances" means the (i) statutory liens for
taxes not yet due and payable, (ii) statutory liens of landlords, liens of
carriers, warehouseman, mechanics and material men incurred in the ordinary
course of business, for sums not yet due and payable, and (iii) existing
licenses under Seller's Proprietary Information.
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"Person" means any individual, corporation, partnership, firm,
association, joint venture, joint stock company, trust, unincorporated
organization or other entity, or any government or regulatory, administrative
or political subdivision or agency, department or instrumentality thereof.
"Principal Equipment" means the machinery and equipment, fixtures,
improvements, motorized lifting or transporting equipment, tooling, supplies,
tools, dies and similar capital items identified on Schedule 2.1(a).
Principal Equipment includes rights to the warranties received from the
manufacturers and distributors of said items and to any related claims,
credits, rights of recovery and setoff with respect to said items, but only
to the extent such rights are assignable.
"Principal Manufacturing Location" means the facility of Taiwan
Telecommunications Industry Co., Ltd. located at ▇▇. ▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇, ROC and the various manufacturing
locations of its suppliers (the names and addresses of which are set forth
on Schedule 1.1C) at which certain of the Principal Equipment is located and
at which Business Products and/or components are manufactured for Seller.
"Proprietary Information" means all information (whether or
not protectable by patent, copyright, mask works or trade secret rights)
not generally known to the public (except in the case of patents), including,
but not limited to, works of authorship, inventions, discoveries, contract
terms and conditions (where protected by confidentiality obligations)
patentable subject matter, patents, patent applications, industrial
models, industrial designs, trade secrets, trade secret rights, software,
works, copyrightable subject matters, copyright rights and registrations,
mask works, know-how and show-how, trademarks, trade names, service marks,
emblems, logos, insignia and related marks and registrations, specifications,
technical manuals and data, libraries, blueprints, drawings, proprietary
processes, product information and development work-in-process.
"Purchased Assets" has the meaning assigned by Section 2.1.
"Purchase Price" means the payment to be made by Buyer in
consideration for the Purchased Assets as provided in Section 2.3.
"Senior Executives" means, in the case of Seller, ▇▇▇▇▇▇ ▇.▇▇▇ ▇▇▇▇,
and in the case of Buyer, ▇▇▇▇▇▇ ▇▇▇▇.
"Technology Transfer Agreement" means the agreement between
Seller, as transferor and licensor, and Elcotel, Inc., as transferee and
licensee, for the transfer and license of certain intellectual property of
Seller, in substantially the form set forth as Exhibit A-1.
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"Third Party" means any Person not an Affiliate of the other
referenced Person or Persons.
"Third-Party Claim" has the meaning assigned by Section 9.4(a).
1.2 Other Definitional and Interpretive Matters
Unless otherwise expressly provided, for purposes of this Agreement,
the following rules of interpretation shall apply:
Accounting Terms. All accounting terms not specifically defined in
this Agreement shall be construed in accordance with U.S. Generally
Accepted Accounting Principles.
Calculation of Time Period. When calculating the period of time
before which, within which or following which any act is to be done or step
taken pursuant to this Agreement, the date that is the reference date in
calculating such period shall be excluded. If the last day of such period
is a non-Business Day, the period in question shall end on the next
succeeding Business Day.
Gender and Number. Any reference in this Agreement to gender shall
include all genders, and words imparting the singular number only shall
include the plural and vice versa.
Headings. The provision of a Table of Contents, the division of this
Agreement into Articles, Sections and other subdivisions and the insertion
of headings are for convenience of reference only and shall not affect or
be utilized in construing or interpreting this Agreement. All references
in this Agreement to any "Section" are to the corresponding Section of this
Agreement unless otherwise specified.
Herein. The words such as "herein," "hereinafter," "hereof," and
"hereunder" refer to this Agreement as a whole and not merely to a
subdivision in which such words appear unless the context otherwise
requires.
Including. The word "including" or any variation thereof means
"including, without limitation" and shall not be construed to limit any
general statement that it follows to the specific or similar items or
matters immediately following it.
Knowledge and words of similar import shall mean, with respect to any
Person, actual knowledge of a particular fact or other matter being
possessed by an officer or other individual now or formerly having
principal responsibility for the Business or related administrative
function or any other individual principally involved in the events and
discussions leading up to this Agreement including the persons set forth on
Schedule 1.2.
6
Materiality. Any reference to "material" in relation to the
Business, irrespective of the context, shall mean material in relation to
the Business taken as a whole; any reference to "material" in relation to
Seller, irrespective of the context, shall mean material in relation to the
business operations of Seller, taken as a whole, and any reference to
"material" in relation to Buyer, irrespective of the context, shall
similarly mean material in relation to the business operations of Buyer,
taken as a whole.
Schedules and Exhibits. The Schedules and Exhibits attached to this
Agreement shall be construed with and as an integral part of this Agreement
to the same extent as if the same had been set forth verbatim herein.
2. Purchase and Sale of Assets
2.1 Purchased Assets
Upon the terms and subject to the conditions of this Agreement and in
reliance on the representations and warranties contained herein, on the
Closing Date, Seller shall sell, transfer, assign, convey and deliver to
Buyer, and Buyer shall purchase, acquire and accept from Seller, all of the
right, title and interest in, to and under the Purchased Assets that Seller
possesses and has the right to transfer as the same shall exist on the
Closing Date. For purposes of this Agreement, "Purchased Assets" shall
mean all the assets, properties and rights set forth or described in
Sections 2.1(a) through 2.1(g), inclusive (except in each case for the
Excluded Assets), whether or not any of such assets, properties or rights
have any value for accounting purposes or are carried or reflected on or
specifically referred to in Seller's books or financial statements:
(a) the Principal Equipment;
(b) all Inventory and any rights of Seller to the warranties
received from suppliers and any related claims, credits, rights of recovery
and setoff with respect to such Inventory, but only to the extent such
rights are assignable;
(c) all of Seller's rights under the Contracts;
(d) all of Seller's rights under the Licenses;
(e) the Business Records;
(f) the Governmental Permits, but only to the extent that such
Governmental Permits are assignable or transferable to the Buyer identified
on Schedule 2.1(f); and
(g) rights set forth in the Technology Transfer Agreement and
Patent License Agreement.
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The term "Purchased Assets" when used in this Article 2 with respect
to any date prior to the Closing Date shall be deemed to refer to the
properties and assets of Seller generally described as "Purchased Assets"
as the same shall exist at the Closing Date.
2.2 Excluded Assets
Notwithstanding the provisions of Section 2.1, it is hereby expressly
acknowledged and agreed that the Purchased Assets shall not include, and
Seller is not selling, transferring, assigning, conveying or delivering to
Buyer, and Buyer is not purchasing, acquiring or accepting from Seller, the
following (the rights, properties and assets expressly excluded by this
Section 2.2 or otherwise excluded by the terms of Section 2.1 from the
Purchased Assets being referred to herein as the "Excluded Assets"):
(a) any of Seller's cash, Accounts Receivable, bank deposits or
similar cash items;
(b) any Proprietary Information of Seller other than the Business
Records or as expressly provided under the Technology Transfer Agreement
and Patent License Agreement;
(c) (i) Seller's personnel records; (ii) any other books and
records that Seller is required by law to retain or that Seller determines
are necessary or advisable to retain; provided, however, that Buyer shall
have the right to make copies, at Seller's expense, of any portions of such
retained books and records that relate to the Purchased Assets; and (iii)
any information management system of Seller other than those used
exclusively with the Purchased Assets or the Business;
(d) any claim, right or interest of Seller in or to any refund,
rebate, abatement or other recovery for U.S. federal, state, local or
foreign net income, franchise, gross income, alternative or add-on minimum,
gross income, gross receipts, sales, use, ad valorem, transfer, profits,
license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, environmental, windfall profit, real or personal
property taxes, customs, duties or other taxes, governmental fees or other
like assessment or charges of any kind whatsoever, together with any
interest due Seller thereon, for any periods prior to the Closing Date;
(e) all "AT&T" or "Lucent Technologies" marked sales and marketing
or packaging materials, samples, prototypes, other similar AT&T or Lucent
Technologies-identified sales and marketing or packaging materials and any
marketing studies, except to the extent such materials are sold or used by
Buyer in the ordinary course of business in accordance with the terms of
Section 5.3;
(f) any machinery and equipment, fixtures, improvements, motorized
lifting or transporting equipment, tooling, supplies, tools, dies and any
other tools and equipment that is not Principal Equipment;
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(g) all of the Seller's rights, claims or causes of action against
Third Parties relating to the assets, properties, business or operations of
the Seller arising out of transactions occurring prior to the Closing Date
(other than with respect to the warranties described in the definition of
Principal Equipment);
(h) the Additional Excluded Assets; and
(i) all other assets, properties, interests and rights of Seller
not identified in Section 2.1.
2.3 Purchase Price
(a) In consideration of the sale, transfer, assignment, conveyance
and delivery by Seller of the Purchased Assets to Buyer, and in addition to
assuming the Assumed Liabilities, Buyer shall pay to Seller: (i) at the
Closing two million forty one thousand seventy five Dollars ($2,041,075) in
cash (the "Purchase Price") by wire transfer of immediately available funds
to the account of Seller designated by Seller's written instructions; and
(ii) [ * ] of the Final Inventory Amount (as defined
in Section 2.3(c)). With respect to item (ii), Buyer shall pay at the
Closing [ * ] of the Estimated Inventory Amount (as
defined in Section 2.3(c)) (the "Closing Inventory Payment") by wire
transfer of immediately available funds to the account of Seller designated
by Seller's written instructions.
(b) Buyer and Seller recognize their mutual obligations pursuant to
Section 1060 of the Code to timely file IRS Form 8594 (the "Asset
Acquisition Statement") with each of their respective federal income tax
returns. Accordingly, within 30 days after the Closing Date, Buyer and
Seller agree to attempt in good faith to (i) enter into a Purchase Price
Allocation Agreement providing for the allocation of the Tax Purchase
Price (as defined therein) among the Purchased Assets consistent with the
provisions of Section 1060 of the Code and the Treasury Regulations
thereunder and (ii) cooperate in the preparation of the Asset Acquisition
Statement for timely filing in each of their respective federal income tax
returns.
(c) Prior to the Closing Date, Seller shall provide Buyer with a
good faith estimate of the dollar amount of the Inventory (the "Estimated
Inventory Amount"). Within five (5) Business Days after the Closing Date,
Seller shall perform a physical inventory of the Inventory in order to
determine the total quantity thereof. Seller shall provide Buyer full
access to the Inventory in order for Buyer to monitor Seller's physical
inventory thereof. Within five (5) Business Days after the end of the
aforesaid period of five (5) Business Days (the "Inventory Count Period"),
Seller and Buyer shall attempt to agree upon the total quantity of the
Inventory. Following the Inventory Count Period, Seller shall have fifteen
(15) Business Days to calculate the value of the Inventory and shall within
such time period prepare and deliver to Buyer a computation of the value of
the Inventory (the "Inventory Value") and either deliver or make available
-----------
* The text within the brackets has been omitted and separately filed with the
Securities and Exchange Commission pursuant to a Rule 24b-2 request for
confidential treatment.
9
to Buyer supporting documentation in sufficient detail to enable Buyer to
prepare its own computation of the Inventory Value (the "Inventory Value
Calculation"). "Inventory Value" shall mean the quantity of each Inventory
item (excluding defective items) multiplied by Seller's standard cost (as
determined in accordance with GAAP) for such item. Buyer shall then review
Seller's Inventory Value Calculation, and Seller and Buyer shall use their
best efforts to attempt to agree upon the Inventory Value. Seller shall
make available to Buyer Seller's books and records with respect to the
Inventory and provide to each other such assistance as is reasonably
necessary in connection with Buyer's review of Seller's determination of
the quantity of the Inventory and the Inventory Value. Within ten (10)
Business Days after the delivery by Seller to Buyer of the Inventory Value
Calculation (the "Inventory Disagreement Period"), Buyer shall notify
Seller in writing as to any disagreement it has with respect to all or any
portion of the Inventory Value Calculation and shall identify in detail the
nature and extent of Buyer's disagreement with the Inventory Value
Calculation (called an "Inventory Disagreement") and, to the extent
possible, shall indicate Buyer's computation of the Inventory Value and, to
the extent not then possible, Buyer shall provide its computation of the
Inventory Value within five (5) Business Days thereafter. In the event
that Buyer does not notify Seller of an Inventory Disagreement within the
Inventory Disagreement Period, Buyer shall be deemed to have agreed with
the Inventory Value Calculation ("Final Inventory Amount"). In the event
that Buyer does notify Seller of an Inventory Disagreement and the parties
are unable to resolve such Inventory Disagreement within fifteen (15)
business Days of the receipt of such notice of Inventory Disagreement by
Seller, Buyer and Seller shall forthwith jointly retain an individual at an
independent accounting firm mutually agreed upon by the parties (the
"Arbitrator") to settle the Inventory Disagreement. The Arbitrator shall
be directed to use every effort to settle the Inventory Disagreement within
fifteen (15) Business Days of being retained and shall, to the extent the
Arbitrator feels it is necessary, (i) after hearing any evidence and
representations that the parties may submit, make any determination with
respect to the Inventory Disagreement within the range determined as the
Inventory Value computed by Seller and the Inventory Value computed by
Buyer and reduce the same to writing and deliver one copy thereof to each
of the parties hereto and (ii) determine any matter of procedure for
settling the Inventory Disagreement not specified herein. In making any
determination with respect to the Inventory Disagreement within the range
determined as the Inventory Value computed by Seller and the Inventory
Value computed by Buyer, the Arbitrator shall be governed by the
provisions of this Agreement and, where not in conflict with this
Agreement, by GAAP. The Arbitrator shall be given full access during
normal business hours to, and copies of, the books and records of each
party relating to the Inventory and the Inventory Value. Any decision of
the Arbitrator with respect to the Inventory Disagreement shall be final
and binding upon both parties hereto ("Final Inventory Amount"). The fees
and disbursements of the Arbitrator and all other costs incurred by the
Arbitrator in settling the Inventory Disagreement shall be shared equally
be Seller and Buyer.
(d) In the event the Closing Inventory Payment is (i) greater than
[ * ] of the Final Inventory Amount, then Seller shall pay Buyer an amount
-----------
* The text within the brackets has been omitted and separately filed with the
Securities and Exchange Commission pursuant to a Rule 24b-2 request for
confidential treatment.
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equal to such excess and (ii) less than [ * ] of the Final Inventory Amount,
then Buyer shall pay Seller an amount equal to such deficit. All payments
under this Section 2.3(d) shall be made within Five (5) Business Days after
the determination of the Final Inventory Amount (such fifth Business Day
shall be referred to as the "Adjustment Payment Date") and any such
payments not made by the Adjustment Payment Date shall bear interest at 8%
per annum accruing from the Adjustment Payment Date until such time such
payment is made.
2.4 Assumed Liabilities
On the Closing Date, Buyer and Seller shall execute and deliver an
assignment and assumption agreement in substantially the form set forth at
Exhibit B (the "Assignment and Assumption Agreement") pursuant to which
Seller shall assign to Buyer, and Buyer shall assume and agree to pay,
perform or otherwise discharge after the Closing Date, in accordance with
the respective terms and subject to the respective conditions thereof, all
of the liabilities and obligations of Seller accruing after the Closing
Date pursuant to and under the Assumed Liabilities. "Assumed Liabilities"
shall mean all liabilities and obligations set forth in this Section 2.4,
whether or not any such obligation has a value for accounting purposes or
is carried or reflected on or specifically referred to in Seller's books or
financial statements:
(a) All liabilities and obligations of Seller accruing after the
Closing Date under the Contracts, including all warranty and repair
obligations thereunder;
(b) All liabilities and obligations of Seller accruing after the
Closing Date under the Licenses; and
(c) All liabilities and obligations of Seller accruing after the
Closing Date under the Governmental Permits transferred pursuant to Section
2.1(f).
2.5 Excluded Liabilities
Buyer shall not assume or be obligated to pay, perform or otherwise
assume or discharge any liabilities or obligations of Seller or any of its
Affiliates, whether direct or indirect, known or unknown, or absolute or
contingent, except for the Assumed Liabilities (all of such liabilities and
obligations not so assumed being referred to herein as the "Excluded
Liabilities"), and, notwithstanding the provisions of Section 2.4, the
Buyer shall not assume (and each shall be deemed to be an Excluded
Liability) any liabilities or obligations in respect of Excluded Assets.
Excluded Liabilities shall include (i) any liability for product liability
lawsuits or the infringement of any Third Party rights arising from the
sale of any Business Products manufactured by Seller before the Closing
Date; (ii) any liability for violation of any Environmental Law in
connection with the conduct of the business before the Closing Date; and
(iii) any liability of Seller not specifically assumed by Buyer.
-----------
* The text within the brackets has been omitted and separately filed with the
Securities and Exchange Commission pursuant to a Rule 24b-2 request for
confidential treatment.
11
2.6 Consent of Third Parties; Further Assurances
(a) From time to time following the Closing, Seller shall execute
and deliver, or cause to be executed and delivered, to Buyer such
additional instruments of conveyance and transfer as Buyer may reasonably
request or as may be otherwise necessary to more effectively convey or
transfer to, and vest in, Buyer and put Buyer in possession of, any part of
the Purchased Assets including any such instruments described in the
Transition Plan.
(b) Nothing in this Agreement nor the consummation of the
transactions contemplated hereby shall be construed as an attempt or
agreement to assign any Contract, License or Governmental Permit, which by
its terms or by law is not assignable ("Nonassignable Assets") without the
consent of third Persons ("Consents") unless and until such consent shall
be given. Seller and Buyer shall cooperate to obtain such Consents
promptly.
(c) To the extent permitted by applicable law, in the event
Consents cannot be obtained on or before the Closing Date such
Nonassignable Assets shall be held, as and from the Closing Date, by Seller
in trust for Buyer and the covenants and obligations thereunder shall be
performed by Buyer in Seller's name and all benefits and obligations
existing thereunder shall be for Buyer's account.
(d) Seller shall take or cause to be taken at Buyer's expense such
action in its name or otherwise as Buyer may reasonably request so as to
provide Buyer with the benefits of the Nonassignable Assets and to effect
collection of money or other consideration to become due and payable under
the Nonassignable Assets, and Seller shall promptly pay over to Buyer all
money or other consideration received by it in respect to all Nonassignable
Assets.
(e) As of and from the Closing Date, Seller authorizes Buyer, to
the extent permitted by applicable law and the terms of the Nonassignable
Assets, at Buyer's expense, to perform all the obligations and receive all
the benefits of Seller under the Nonassignable Assets and appoints Buyer
its attorney-in-fact to act in its name on its behalf with respect thereto.
(f) At or after Closing, Seller shall deliver to Buyer such
documentation as Buyer may reasonably request and, at Buyer's expense, take
all actions reasonably necessary in order to transfer to Buyer, all the
U.L. listings relating to the Business Products and remove Seller from any
listing in connection with such U.L. listings.
2.7 No Licenses
Unless expressly set forth in the Technology Transfer Agreement or
Patent License Agreement, no right or license of any kind is granted to
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Buyer pursuant to this Agreement with respect to Seller's Proprietary
Information (other than Business Records), either directly or indirectly,
by implication, by estoppel or otherwise.
2.8 Bulk Sales Law
Buyer hereby waives compliance by Seller with the requirements and
provisions of any "bulk-transfer" laws of any jurisdiction that may
otherwise be applicable with respect to the sale of any or all of the
Purchased Assets to Buyer.
2.9 Taxes
The Purchase Price shall be exclusive of, and Buyer agrees to pay
all, applicable sales, transfer, excise, value added, use or other similar
taxes and all recording and filing fees, whether levied on Seller or Buyer,
that are payable by reason of the sales, transfers, licenses, and
assignments contemplated by this Agreement, except for Seller's income and
capital gains taxes or franchise or other taxes based on Seller's income.
2.10 Employees
Buyer is not obligated to offer employment to any employee of Seller,
but shall have the right to offer employment, on or after the Closing
Date, to any or all of the management (i.e., non-represented) personnel of
the Business as of the Closing Date, as Buyer deems necessary for its
future operations, on terms and conditions of employment established by
Buyer.
3. Representations and Warranties of Seller
Seller represents and warrants to Buyer that:
3.1 Organization and Authority
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the state of Delaware and has full corporate
power to carry on the Business as now conducted.
3.2 Authorization; Binding Obligations
Seller has all necessary corporate power and authority to execute and
deliver this Agreement and the Collateral Agreements and to effect the
transactions contemplated hereby and thereby and has duly authorized the
execution, delivery and performance of this Agreement and the Collateral
Agreements by all necessary corporate action. This Agreement has been, and
each of the Collateral Agreements will be as of the Closing Date, duly
executed and delivered by Seller and this Agreement is, and the Collateral
Agreements, when duly executed and delivered by Seller will be, valid and
legally binding obligations of Seller, enforceable against it in accordance
with their terms, except to the extent that enforcement of the rights and
13
remedies created hereby and thereby may be affected by bankruptcy,
reorganization, insolvency and similar laws of general application
affecting the rights and remedies of creditors and by general equity
principles.
3.3 No Violations
(a) Except as set forth on Schedule 3.3, the execution, delivery and
performance of this Agreement and the Collateral Agreements by Seller and
the consummation of the transactions contemplated hereby and thereby do not
and will not: (i) result in a breach or violation of any provision of
Seller's charter or by-laws or in a violation of any statute, rule,
regulation or ordinance applicable to Seller, (ii) violate or result in a
breach of or constitute an occurrence of default under any provision of,
result in the acceleration or cancellation of any obligation under, or give
rise to a right by any party to terminate or amend its obligations under,
(x) any material mortgage, deed of trust, conveyance to secure debt, note,
loan, indenture, lien, lease, agreement, instrument, order, judgment,
decree or other material arrangement or commitment to which Seller is a
party or by which it is bound or which relates to the Purchased Assets, or
(y) any Contract, License or Governmental Permit, or (iii) violate any
order, judgment, decree, rule or regulation of any court or any
Governmental Body having jurisdiction over Seller or any of its Purchased
Assets.
(b) Except as set forth on Schedule 3.3, no consent, approval,
order or authorization of, or registration, declaration or filing with, any
Person is required by Seller in connection with the execution and delivery
of this Agreement and the Collateral Agreements or the consummation of the
transactions contemplated hereby or thereby, except for consents of third
Persons which are required to transfer or assign to Buyer any Purchased
Assets or assign the benefits of or delegate performance with regard
thereto.
3.4 Assets
(a) Except for leased equipment, if any, listed on Schedule 3.4,
Seller has good and marketable title to, all the tangible Purchased Assets
free and clear of any Encumbrance, except for Permitted Encumbrances.
(b) No Inventory is stored at any location other than at a Business
Location, the Principal Manufacturing Location or, on a customer's or
potential customer's premises identified on Schedule 3.4. The Inventory
was or will be acquired and maintained in accordance with the regular
business practices of the Seller and consists or will consist of new and
unused items.
3.5 Personal Property
The items of personal property set forth in Schedule 3.5 are in
reasonable operating condition (subject to normal wear and tear), in light
of their respective ages, for the purposes for which they are currently
being used. To Seller's knowledge, all other personal property included in
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the Purchased Assets and used in the operation of the Business within the
last 12 months from the date hereof are in reasonable operating condition
(subject to normal wear and tear), in light of their respective ages, for
the purposes for which they are currently being used. The Principal
Equipment includes all of the equipment of the type specified on Schedule
2.1(a) owned by Seller and used to carry on the Business as presently
conducted.
3.6 Permits, Licenses
Except as set forth on Schedule 3.6, there are no Governmental
Permits necessary for or used by Seller in the operation of the Business or
to use the Purchased Assets.
3.7 Compliance With Laws and Litigation
(a) Except as set forth on Schedule 3.7(a), Seller is in compliance
with all laws, rules, regulations, ordinances, decrees, orders, judgments,
permits and licenses of or from Governmental Bodies applicable to the
Purchased Assets or the Business.
(b) Except as set forth on Schedule 3.7(b), there are no actions,
suits, proceedings or governmental investigations pending or, to Seller's
knowledge, threatened against or relating to the Business or the Purchased
Assets or against it that could be reasonably expected to have a Material
Adverse Effect on the Purchased Assets.
3.8 Contracts
Schedule 2.1(c) contains a complete and accurate list of all
outstanding Contracts that would require over the full term thereof cash
payments by or to Seller of more than $1,000 or which require Buyer's
performance of warranty or repair obligations. Each of such Contracts is
valid, binding and enforceable against Seller and, to Seller's knowledge,
the other parties, thereto in accordance with its terms. Each such
Contract is in full force and effect. Each Contract has been obtained by
Seller in the ordinary course of business consistent with past practice.
Seller is not, and has received no notice that it is, in default or breach
of or is otherwise delinquent in performance under any such Contracts, and,
to Seller's knowledge, each of the other parties thereto has performed in
all material respects all obligations required to be performed by it under,
and is not in default in any material respect under, any of such Contracts.
No event has occurred that, with notice or lapse of time, or both, would
constitute a default under any such Contract.
3.9 Brokers
No broker, investment banker, financial advisor or other Person is
entitled to any broker's, finder's, financial advisor's or other similar
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Seller.
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3.10 Historical Financial Information
The financial information set forth in Schedule 3.10 ("Financial
Information") was compiled from the books and records of Seller, which are
maintained in accordance with sound accounting practices. The Financial
Information fairly presents in all material respects, except as noted
therein and subject to the notes thereon, the sales, cost of sales,
operating expenses, gross profits, research and development expenses and
general and administrative expenses (which expenses may be direct or
allocated) with respect to the Business for each of the twelve month
periods ended December 31, 1995 and December 31, 1996.
3.11 Products Liability
Except as set forth on Schedule 3.11, (i) there is no notice, claim,
action, suit, inquiry or investigation of a civil, criminal or
administrative nature before any court or governmental or other regulatory
or administrative agency, commission or authority, against or involving
Seller and any Business Product which is pending or, to Seller's knowledge,
threatened, resulting from an alleged defect in design, manufacture,
materials or workmanship of any Business Product, or any alleged failure to
warn, or from any breach of implied warranties or representations
(collectively, "Product Liability Lawsuits"); (ii) since January 1, 1995,
there has not been any Occurrence (as hereinafter defined); and (iii) since
January 1, 1995, there has not been nor is there under consideration or
investigation by the Seller, any Business Product rework or retrofit
conducted by or on behalf of the Seller as a result of an Occurrence. For
purposes of this Section 3.11, the term "Occurrence" shall mean any
accident, happening or event which is caused or allegedly caused by any
alleged hazard or alleged defect in manufacture, design, materials or
workmanship of any Business Product including, without limitation, any
alleged failure to warn or any breach of express or implied warranties or
representations with respect thereto, or any such accident, happening or
event otherwise involving any Business Product that is likely to result in
a claim or loss.
3.12 No Other Representations or Warranties
(a) With respect to the Purchased Assets, the Business, or any
other rights or obligations to be transferred hereunder or pursuant hereto,
Buyer has not been induced by and has not relied upon any representations,
warranties or statements, whether express or implied, made by Seller or any
agent, employee, attorney or other representative of Seller or by any
Person representing or purporting to represent Seller that are not
expressly set forth in this Agreement or, the Technology Transfer Agreement
or Patent License Agreement (including the Schedules hereto and thereto),
whether or not any such representations, warranties or statements were made
in writing or orally. It is hereby agreed by Buyer that, except as
otherwise expressly provided herein or, in the Technology Transfer
Agreement or Patent License Agreement, Seller makes no representations or
warranties with respect to the Purchased Assets or the Business. Buyer
further acknowledges that Seller has not made any warranty, express or
implied, as to the future of the Business and/or its profitability for
16
Buyer, or with respect to any forecasts, projections or business plans
prepared by Seller and delivered to Buyer in connection with the offering
of the Business by Seller and the negotiation and the execution of this
Agreement.
4. Representations and Warranties of Buyer
Buyer represents and warrants to Seller that:
4.1 Organization and Authority
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the state of Delaware and Buyer has full
corporate power and authority necessary to carry on its business as now
being conducted.
4.2 Authorization; Binding Obligations
Buyer has all necessary corporate power to execute and deliver this
Agreement and the Collateral Agreements and to effect the transactions
contemplated hereby and thereby and has duly authorized the execution,
delivery and performance of this Agreement and the Collateral Agreements by
all necessary corporate action. This Agreement has been and each of the
Collateral Agreements will be as of the Closing Date duly executed and
delivered by Buyer and this Agreement is, and the Collateral Agreements
when duly executed and delivered by Buyer will be, valid and legally
binding obligations of Buyer, enforceable against it in accordance with
their terms, except to the extent that enforcement of the rights and
remedies created hereby and thereby may be limited by bankruptcy and other
similar laws of general application affecting the rights and remedies of
creditors and by general equity principles.
4.3 No Violations
(a) Except as set forth in Schedule 4.3 the execution, delivery and
performance of this Agreement and the Collateral Agreements by Buyer and
the consummation of the transactions contemplated hereby and thereby do not
and will not (i) result in a breach or violation of any provision of
Buyer's charter or by-laws or in a violation of any statute, rule,
regulation or ordinance applicable to Buyer or (ii) violate or result in a
breach of or constitute an occurrence of default under any provision of,
result in acceleration or cancellation of any obligation under, or give
rise to a right by any party to terminate or amend its obligations under,
any material mortgage, deed of trust, conveyance to secure debt, note,
loan, indenture, lien, lease, agreement, instrument, order, judgment,
decree or other material arrangement or commitment to which Buyer is a
party or by which it or its assets or properties are bound, or
(iii) violate any order, judgment, decree, rule or regulation of any court
or any Governmental Body having jurisdiction over Buyer or any of its
properties.
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(b) Except as disclosed on Schedule 4.3, no consent, approval,
order or authorization of, or registration, declaration or filing with, any
Person is required by Buyer in connection with the execution and delivery
of this Agreement and the Collateral Agreements or the consummation of the
transactions contemplated hereby or thereby, except for such consents,
approvals, orders, authorizations, registrations, declarations or filings
where failure of compliance would not, individually or in the aggregate,
have a material adverse effect on Buyer's ability to consummate the
transactions contemplated hereby.
4.4 Brokers
No broker, investment banker, financial advisor or other Person,
other than Cameron Associates, the fees and expenses of which will be paid
by Buyer, is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions
contemplated by this Agreement based on arrangements made by or on behalf
of Buyer.
4.5 Sufficiency of Funds
Buyer (i) has funds available to it to pay the Purchase Price and any
expenses incurred by Buyer in connection with the transactions contemplated
by this Agreement; and (ii) has the financial resources and capabilities to
perform the Assumed Liabilities.
5. Certain Covenants
5.1 Information
(a) Seller will give to Buyer and to its officers, employees,
accountants, counsel and other representatives reasonable access during
Seller's normal business hours throughout the period prior to the Closing
to all of Seller's properties, books, contracts, commitments, reports of
examination and records (excluding personnel records) directly relating to
the Purchased Assets (but excluding the Excluded Assets and Excluded
Liabilities and subject to any limitations that are reasonably required to
preserve any applicable attorney-client privilege or third-party
confidentiality obligation). Buyer will hold, and will cause such
representatives to hold, such information in confidence as provided in
Article 6. Further, prior to closing, Seller will afford Buyer access
during normal business hours to the Business Location and the Seller's
environmental books and records (except books and records subject to
attorney-client or attorney-work product privileges) so as to afford Buyer
full opportunity to make such review, examination and investigation of
environmental matters and environmental conditions of the Purchased Assets
as Buyer may reasonably desire to make.
(b) After the Closing Date, Seller and Buyer will provide to each
other and to their respective officers, employees, counsel and other
representatives, upon request (subject to any limitations that are
reasonably required to preserve any applicable attorney-client privilege or
18
third-party confidentiality obligation), reasonable access for inspection
and copying of all Business Records, Governmental Permits, Contracts and
any other files, records and information existing as of the Closing Date
and relating to the Business, and will make their respective personnel
reasonably available for interviews, depositions and testimony in any legal
matter concerning transactions, operations or activities, including
treatment, storage, transportation, disposal, recycling and handling of
Hazardous Substances or compliance with Environmental Laws, relating to the
Business or the Purchased Assets prior to the Closing Date, and as
otherwise may be necessary or desirable to enable the party requesting such
assistance to: (i) comply with reporting, filing or other requirements
imposed by any foreign, local, state or federal court, agency or regulatory
body; (ii) assert or defend any claims or allegations in any litigation or
arbitration or in any administrative or legal proceeding other than claims
or allegations that one party to this Agreement has asserted against the
other; or (iii) (subject to clause (ii) above), perform its obligations
under this Agreement. The party requesting such information or assistance
shall reimburse the other party for all out-of-pocket costs and expenses
incurred by such party in providing such information and in rendering such
assistance. The access to files, books and records contemplated by this
Section 5.1(b) shall be during normal business hours and upon not less than
two Business Days' prior written request and shall be subject to such
reasonable limitations as the party having custody or control thereof may
impose to preserve the confidentiality of information contained therein.
(c) Each party agrees to preserve all Business Records and
Governmental Permits and other files, records and information relating to
the Business for at least 6 years after the Closing Date. After this 6
year period and at least 90 days prior to the planned destruction of any
Business Records, Governmental Permits, or such files, records or
information, the party in possession thereof shall notify the other party
in writing and shall make available to the other party, upon its request,
such Business Records and Governmental Permits, or files, records or
information as applicable.
5.2 Preservation of Assets
From and after the date of this Agreement and until the Closing Date,
except as set forth on Schedule 5.2 or as otherwise contemplated by this
Agreement or the Schedules hereto or as Buyer shall otherwise consent to in
writing, Seller, other than in the ordinary course of business or as may be
required by law or governmental authority, will not permit all or any of
the Purchased Assets (real or personal, tangible or intangible) to be sold,
licensed or subjected to any Encumbrance (other than a Permitted
Encumbrance).
5.3 Sale by Buyer of Inventory Marked With Seller's Name
(a) To the extent that Inventory consists of product or material
that is marked with the name or ▇▇▇▇ "Lucent Technologies" or "AT&T" (or
with other indicia of either of them) (the "Marked Inventory"), Buyer
shall, consistent with customer requirements, use its Best Efforts to ship
such Marked Inventory prior to shipping the same or similar products of
Buyer. Except as specifically permitted under Section 5.3(b) below, Buyer
19
shall cease, immediately upon the Closing, to ▇▇▇▇, both internally and
externally, all Business Products or any other product of Buyer that is
not Marked Inventory with the names, marks or other indicia of "Lucent
Technologies" or "AT&T". Notwithstanding the foregoing, Buyer shall have
the right to make factual reference to the Lucent Technologies ▇▇▇▇
Laboratories name in accordance with the Use Guidelines attached hereto as
Exhibit D.
(b) For a period of 60 days after the Closing Date, Buyer may
continue to apply the name "Lucent Technologies" to Business Products
manufactured during that 60-day period. At the end of that 60-day
period, Buyer agrees to cease all use of "Lucent Technologies" name
and to permanently remove the Lucent Technologies name on all molds
bearing the Lucent Technologies name. Buyer may sell or otherwise
distribute Business Products which display the Lucent Technologies
name until such Business Products are depleted or until December 31,
1998, whichever occurs first. In the event Business Products bearing
the Lucent Technologies name and manufactured in accordance with this
paragraph fall below the standard of quality of Seller's products (as
determined in good faith by Seller), Seller retains the right to
terminate this grant upon written notice to Buyer.
(c) If, after the Closing Date, Buyer desires to use any molds
bearing the "AT&T" name to manufacture any Business Product to fulfill a
customer's request, and Seller has within 12 months prior to the Closing
Date used such mold to manufacture such Business Product, then Seller, at
its sole cost and expense, agrees to remove the "AT&T" name on such mold as
promptly as practicable.
5.4 Collateral Agreements
On or prior to the Closing Date, Buyer shall execute and deliver to
Seller and Seller shall execute and deliver to Buyer the following
agreements (the "Collateral Agreements"): Technology Transfer Agreement,
Patent License Agreement, Assignment and Assumption Agreement and ▇▇▇▇ of
Sale.
5.5 Regulatory Compliance
Each of Buyer and Seller shall use reasonable efforts to obtain, and
to cooperate with each other in obtaining, all authorizations, consents,
orders and approvals of Governmental Entities that may be or become
necessary in connection with the consummation of the transactions
contemplated by this Agreement, prior to or following the Closing, and to
take all reasonable actions to avoid the entry of any order or decree by
any Governmental Entity prohibiting the consummation of the transactions
contemplated hereby.
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5.6 Contacts with Suppliers, Employees and Customers
Prior to the Closing Date, without the prior written consent of
Seller, which may be withheld for any reason or no reason, Buyer will not
contact any suppliers to or customers of the Business.
5.7 Negotiations
From and after the date hereof until the Closing Date or termination
of this Agreement, neither Seller, nor its officers or directors nor
anyone acting on behalf of Seller or such persons shall, directly or
indirectly, encourage, solicit, engage in discussions or negotiations with,
or provide any information to, any person, firm, or other entity or group
(other than the Buyer or its representatives) concerning any sale of
substantial assets of the Business or similar transaction involving
Seller. Seller shall promptly communicate to Buyer any inquiries or
communications concerning any such transaction which it may receive or of
which it may become aware.
5.8 Transition Plan; Interim Operations
(a) As soon as practicable after the Closing Date, the parties will
agree on a "Transition Plan" that will describe how the parties will use
their good faith efforts to smoothly transition the Business from Seller
after the Closing Date. It will include, among other things: (i)
transition plan for intellectual property, inventory, and information
related to manufacturing, customers and sales; (ii) schedule for completing
the transition; (iii) procedure for resolving disputes during the
transition (which procedure shall be resorted to before the procedures set
forth in Section 9.5) and (iv) allocation of expenses related to the
transition. Notwithstanding any provision contained herein or to be
contained in the Transition Plan, the parties acknowledge and agree that
each and every obligation to be performed by either party under the
Transition Plan shall terminate on December 31, 1997.
(b) After the Closing Date, Buyer will have responsibility for
decisions relating to the Purchased Assets either directly or through
Seller pursuant to arrangements established under the Transition Plan. The
Buyer and Seller will cooperate fully to ensure that the Buyer's decisions
are communicated within Seller's organization to the appropriate personnel.
Notwithstanding the foregoing, but subject to Section 5.8(c) below, it is
understood that each party will at all times retain direction and control
of, and full responsibility for, and liability to, its own employees or
representatives. The parties will consult each other in good faith with
respect to any management or operational functions not specifically
addressed by the Transition Plan and assign responsibility therefor by
mutual agreement. Any disputes between the parties concerning their
respective responsibilities or costs incurred therefor which cannot be
resolved between them will be resolved pursuant to the escalation
procedures set forth in the Transition Plan.
21
(c) Notwithstanding the foregoing, and at the request of Buyer,
Seller hereby agrees to operate the Business on Buyer's behalf as Buyer's
agent for a period of 30 days after the Closing Date (the "Interim
Period"). During the Interim Period, Seller shall serve as the day-to-day
operator of the Business and shall operate the Business as such Business
was operated by Seller in the ordinary course prior to the Closing Date.
All costs and expenses directly incurred by Seller in operating the
Business during the Interim Period, including, without limitation,
salaries, employee benefits, payments to third party suppliers and vendors,
and any other out-of pocket expenses, shall be borne by Buyer
(collectively, the "Interim Costs and Expenses"). Notwithstanding any
provision contained herein, the term "Interim Costs and Expenses" shall not
include the value of any part, inventory or equipment (including the
circuit boards referenced in Section 5.11) purchased by Buyer pursuant to
this Agreement and which are used to manufacture a Business Product. All
cash receipts received by Seller from the Business for products or services
sold or rendered after the Closing Date shall be held by Seller for the
benefit of Buyer and Seller shall, within forty-five (45) Business Days
after the Interim Period, deliver such cash receipts to Buyer net of the
Interim Costs and Expenses. Buyer acknowledges and agrees that Seller will
operate the Business during the Interim Period as Buyer's agent and
accordingly, each and every contractual obligations and other liabilities
in respect of the Business that become incurred during the Interim Period
shall be the responsibility of Buyer. Seller hereby agrees to operate the
Business during the Interim Period in good faith. Seller shall not be
liable to Buyer for any error of judgment, loss suffered or liability
incurred by Buyer in connection with the operation of the Business by
Seller during the Interim Period, except for such losses resulting from
Seller's willful misconduct or gross negligence
5.9 Customer Orders
For a period of two (2) years from the Closing Date, Buyer shall use
good faith efforts to provide Business Products that Buyer deems to be
viable ongoing products to any customer of the Business on terms and
conditions agreed upon between Buyer and such customer; provided, for a
period of nine (9) months after the Closing Date, Buyer agrees to
manufacture, produce and maintain all Business Products which were sold by
Seller during the 12 month period prior to the Closing Date so long as
Buyer is not required to purchase or lease any equipment to comply with the
foregoing covenant. During such two (2) year period , if any such
customer insists on placing an order for such Business Products with
Seller, Buyer and Seller shall enter into such arrangements (including
subcontracting) on terms and conditions which would allow Buyer to preserve
its historic gross margin on products similar to such Business Product had
Buyer made the sale directly so that Seller can satisfy the customer's
desire to purchase Business Products from Seller.
22
5.10 Non-Compete
(a) Subject to the exceptions set forth in subsection (b) below,
for a period of two (2) years following the Closing Date, Seller shall not
engage in the public terminals business in North America.
(b) Notwithstanding subsection (a) above, Seller shall not be
prohibited from competing in the public terminals business as a result of:
(a) investing in an entity which is directly or indirectly engaged in the
public terminals business, as long as, based upon information available to
Seller, less than 20% of the revenues of such entity are attributable to
the public terminals business (in which case Seller shall use reasonable
efforts to dispose of such public terminals business activities in a
financially prudent manner); (b) acquiring through merger, acquisition or
other business combination another entity which is directly or indirectly
engaged in the public terminals business, as long as the value of such
other entity or the assets of such other entity exceeds 5% of the annual
revenues of Seller; (c) investing in equity securities of any publicly
traded business organization which is directly or indirectly engaged in the
public terminals business, as long as the investment in any class of
securities does not exceed 5% of the issued and outstanding shares of such
class; (d) any activities whereby Seller is a customer of Buyer; (e)
fulfilling contractual obligations to customers under contracts which are
not or cannot be assigned under this Agreement; and (f) to avoid any
possible misunderstanding, the Lucent Global Provisioning Centers Public
Terminals Refurbishment Operations as currently conducted by Seller.
5.11 Buy-Back of Circuit Boards
On the Closing Date, Buyer will buy back from Seller 1,949 Olympian
5501 Printed Circuit Boards held by Seller for resale to the Entel-Chile
for a price of [ * ] dollars ($[*]) per unit (which represents an
aggregate purchase price of $[ * ]), by wire transfer of immediately
available funds to the account of Seller designated by Seller's written
instructions. The Printed Circuit Boards will be sold to Buyer "AS IS"
(other than title).
Buyer acknowledges that 1,202 Olympian 5501 Printed Circuit Boards
have been incorporated into Business Products which have been or are in the
process of being delivered to Buyer. Seller acknowledges and agrees that
upon receipt by Buyer of such Business Products, Buyer shall be entitled to
reduce from the invoiced amount for such Business Products $[*] per each
Olympian 5501 Printed Circuit Board incorporated in such Business Product.
-----------
* The text within the brackets has been omitted and separately filed with the
Securities and Exchange Commission pursuant to a Rule 24b-2 request for
confidential treatment.
23
6. Confidential Nature of Information
6.1 Confidentiality Agreement
Buyer agrees that the Confidentiality Agreement between Buyer and
Seller dated March 31, 1997 shall apply to (a) all documents, materials and
other information that it shall have obtained regarding Seller or its
Affiliates during the course of the negotiations leading to the
consummation of the transactions contemplated hereby (whether obtained
before or after the date of this Agreement), any investigations made in
connection therewith and the preparation of this Agreement and related
documents and (b) all analyses, reports, compilations, evaluations and
other materials prepared by Buyer or its counsel, accountants or financial
advisors that contain or otherwise reflect or are based upon, in whole or
in part, any of the provided information; provided, however, that subject
to Section 6.2(a), the Confidentiality Agreement shall terminate as of the
Closing and shall be of no further force and effect thereafter with respect
to information of Seller transferred to Buyer.
6.2 Seller's Proprietary Information
(a) (i) Except as provided in Section 6.2(b) or as otherwise
provided in the Technology Transfer Agreement, after the Closing and for a
period of five (5) years following the Closing Date, each party will keep
confidential all of the other party's and its Affiliates' Proprietary
Information (other than with respect to the Business) that is received
from, or made available by, such party in the course of the transactions
contemplated hereby, including, for purposes of this Section 6.2,
information about Seller's and its Affiliates' business plans and
strategies, marketing ideas and concepts, especially with respect to
unannounced products and services, present and future product plans,
pricing, volume estimates, financial data, product enhancement information,
business plans, marketing plans, sales strategies, customer information
(including customers' applications and environments), market testing
information, development plans, specifications, customer requirements,
configurations, designs, plans, drawings, apparatus, sketches, software,
hardware, data, prototypes, connecting requirements or other technical and
business information, except for such Proprietary Information as is
conveyed to Buyer as part of the Purchased Assets. (ii) Subsequent to the
Closing Date, the Seller will hold, and will instruct its officers,
directors, advisors, Affiliates, employees and agents to hold, in
confidence and not use in the public terminals business, Business Records,
if any, retained by Seller and all documents and information concerning the
Business, if any, retained by the Seller under Section 2.2(c).
(b) Notwithstanding the foregoing, such Proprietary Information
shall not be deemed confidential and the recipient party shall have no
obligation with respect to any such Proprietary Information that:
(i) was already known to Buyer other than through this
transaction;
24
(ii) is or becomes publicly known through publication,
inspection of a product, or otherwise, and through no negligence or other
wrongful act of the recipient party;
(iii) is received by the recipient party from a Third Party
without similar restriction and without breach of any agreement;
(iv) to the extent it is independently developed by the
recipient party after Closing Date; or
(v) is, subject to Section 6.2(c), required to be disclosed
under applicable law or judicial process.
(c) If the recipient party (or any of its Affiliates) is requested
or required (by oral question, interrogatory, request for information or
documents, subpoena, civil investigative demand or similar process) to
disclose any Proprietary Information, the recipient party will promptly
notify the other party of such request or requirement and will cooperate
with the other party such that the other party may seek an appropriate
protective order or other appropriate remedy. If, in the absence of a
protective order or the receipt of a waiver hereunder, the recipient party
(or any of its Affiliates) is in the written opinion of the recipient
party's counsel compelled to disclose the Proprietary Information or else
stand liable for contempt or suffer other censure or significant penalty,
the recipient party (or its Affiliate) may disclose only so much of the
Proprietary Information to the party compelling disclosure as is required
by law. The recipient party will exercise its (and will cause its
Affiliates to exercise their) Best Efforts to obtain a protective order or
other reliable assurance that confidential treatment will be accorded to
such Proprietary Information.
(d) Notwithstanding anything in this Article 6 to the contrary, in
the event that any such Proprietary Information is also subject to a
limitation on disclosure or use contained in another written agreement
between Buyer and Seller that is more restrictive than the limitation
contained in this Article 6, then the limitation in such agreement shall
supersede this Article 6.
7. Closing
At the Closing, the following transactions shall take place:
7.1 Documents to be Delivered by Seller
On the Closing Date, Seller shall deliver, or execute and deliver,
the following documents and agreements to Buyer:
(a) the Collateral Agreements;
(b) the ▇▇▇▇ of Sale with respect to the Purchased Assets;
25
(c) the Assignment and Assumption Agreement;
(d) all consents, waivers or approvals required to be obtained by
Seller with respect to the Purchased Assets or the consummation of the
transactions contemplated by this Agreement;
(e) an opinion or opinions of Counsel for Seller dated the Closing
Date with respect to the matters described in Sections 3.1, 3.2 and 3.3 in
a form and subject to such exceptions as are customary for transactions
similar to those contemplated hereby, which form shall be reasonably
acceptable to Buyer;
(f) a certificate of an appropriate officer of Seller, dated the
Closing Date, certifying to the fulfillment of the conditions set forth in
Sections 8.2(a) and (b);
(g) to the extent required, updated Schedules revised to reflect
changes in the operations or condition of the Business between the date
hereof and the Closing Date; and
(h) all such other bills of sale, assignments and other instruments
of assignment, transfer or conveyance as Buyer may reasonably request or as
may be otherwise necessary to evidence and effect the sale, transfer,
assignment, conveyance and delivery of the Purchased Assets to Buyer and to
put Buyer in actual possession or control of the Purchased Assets.
7.2 Documents to be Delivered by Buyer
On the Closing Date, Buyer shall deliver, or execute and deliver, the
following funds, documents and agreements to Seller:
(a) the Purchase Price as provided in Section 2.3;
(b) the Collateral Agreements;
(c) the Assignment and Assumption Agreement;
(d) an opinion or opinions of Counsel for Buyer dated the Closing
Date with respect to the matters described in Sections 4.1, 4.2 and 4.3 in
a form and subject to such exceptions as are customary for transactions
similar to those contemplated hereby, which form shall be reasonably
acceptable to Seller;
(e) a certificate of an appropriate officer of Buyer, dated the
Closing Date, certifying to the fulfillment of the conditions set forth in
Sections 8.3(a), and (b);
(f) all such other documents and instruments as Seller may
reasonably request or as may be otherwise necessary or desirable to
evidence and effect the assumption by Buyer of the Assumed Liabilities.
26
7.3 Closing Date
The Closing shall take place at the office of Seller on such date and
at such time as Seller and Buyer may agree upon (such date and time being
referred to herein as the "Closing Date"), but in no event later than
December 31, 1997. Notwithstanding the foregoing, Buyer and Seller hereby
agree that the Closing shall take place on or within three (3) days after
all the conditions specified in Article 8 have been satisfied or waived.
7.4 Contemporaneous Effectiveness
All acts and deliveries prescribed by this Article 7, regardless of
chronological sequence, will be deemed to occur contemporaneously and
simultaneously on the occurrence of the last act or delivery, and none of
such acts or deliveries will be effective until the last of the same has
occurred.
8. Conditions Precedent to Closing
8.1 General Conditions
The respective obligations of Buyer and Seller to effect the Closing
of the transactions contemplated hereby are subject to the fulfillment,
prior to or at the Closing, of the following condition:
(a) Legal Proceedings. No order of any court or administrative
agency shall be in effect that enjoins, restrains, conditions or prohibits
consummation of this Agreement, and no litigation, investigation or
administrative proceeding that has a substantial chance of success on its
merits initiated by any bona fide Third Party shall be pending or
threatened that would enjoin, restrain, condition or prohibit consummation
of this Agreement.
8.2 Conditions Precedent to Buyer's Obligations
The obligations of Buyer to effect the Closing of the transactions
contemplated hereby are subject to the fulfillment, prior to or at the
Closing, of each of the following conditions, any of which may be waived in
writing by Buyer:
(a) Representations and Warranties of Seller True at Closing. The
representations and warranties of Seller contained in this Agreement or in
any schedule, certificate or document delivered pursuant to the provisions
hereof or in connection with the transactions contemplated hereby shall be
true and correct in all material respects at and as of the Closing Date, as
though such representations and warranties were made at and as of the
Closing Date, except (i) to the extent of any event, occurrence or
condition listed on the updated schedules delivered pursuant to
Section 7.1(g) that constitutes a breach of any of such representations and
warranties, but that does not constitute a material breach (provided,
however, that nothing herein, nor consummation of the Closing, shall be
27
deemed to constitute a waiver of such breach), (ii) as affected by the
transactions contemplated hereby, and (iii) to the extent that such
representations and warranties are made as of a specified date, in which
case such representations and warranties shall be true in all material
respects as of the specified date.
(b) Performance by Seller. Seller shall have performed in all
material respects all obligations and agreements and complied in all
material respects with all covenants and conditions required by this
Agreement to be performed or complied with by it prior to or at the
Closing.
(c) Consents. Any Third Party and Governmental consents, approvals
or authorizations necessary for the conveyance of the Purchased Assets or
the consummation of the transactions contemplated hereby shall have been
obtained and shall be in full force and effect on the Closing Date.
8.3 Conditions Precedent to Seller's Obligations
The obligations of Seller to effect the Closing of the transactions
contemplated hereby are subject to the fulfillment, prior to or at the
Closing, of each of the following conditions, any of which may be waived in
writing by Seller:
(a) Representations and Warranties of Buyer True at Closing. The
representations and warranties of Buyer contained in this Agreement or in
any certificate or document delivered pursuant to the provisions hereof or
in connection with the transactions contemplated hereby shall be true in
all material respects at and as of the Closing Date as though such
representations and warranties were made at and as of the Closing Date,
except to the extent that such representations and warranties are made as
of a specified date, in which case such representations and warranties
shall be true in all material respects as of the specified date.
(b) Performance by Buyer. Buyer shall have performed in all
material respects all obligations and agreements and complied in all
material respects with all covenants and conditions required by this
Agreement to be performed or complied with by it prior to or at the Closing
including the payment required under Section 5.11.
(c) Tax Exemptions. Buyer shall have produced fully executed
resale exemption certificates to support any claimed exemption from sales
or use taxes.
(d) Consents. Subject to Section 2.6, any Third Party and
Governmental consents, approvals or authorizations necessary for the
conveyance of the Purchased Assets or the consummation of the transactions
contemplated hereby shall have been obtained and shall be in full force and
effect on the Closing Date.
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9. Status of Agreements
The rights and obligations of Buyer and Seller under this Agreement
shall be subject to the following terms and conditions:
9.1 Effect of Breach
In the event of a material breach of any representation,
certification or warranty, or agreement or covenant of Seller under this
Agreement that is discovered by Buyer prior to Closing and that cannot be
or is not cured by Seller upon prior notice and the passage of a
reasonable period of time, Buyer may elect not to proceed with the closing
hereunder, which shall be Buyer's sole remedy for such breach; provided,
however, in such event, Buyer may make a claim for reimbursement of
reasonable expenses incurred by it in connection with this transaction up
to a maximum of twenty five thousand dollars ($25,000).
9.2 Survival of Representations and Warranties
The representations and warranties of Buyer and Seller contained in
this Agreement shall survive the Closing for twenty-four (24) months,
except for (a) the representations and warranties contained in Sections 3.1
and 3.2 and Section 3.3, (only with respect to Seller's charter and by-
laws), which shall survive for the applicable statute of limitations, and
(b) the representations and warranties contained in Sections 4.1 and 4.2
and Section 4.3 (only with respect to Buyer's charter and by-laws), which
shall survive the applicable statute of limitations. Neither Seller nor
Buyer shall have any liability whatsoever with respect to any such
representations or warranties after the survival period for such
representation or warranty expires, except for claims then pending or
theretofore asserted in writing by any party in accordance with the terms
and conditions of this Agreement. The respective representations and
warranties of Buyer and Seller contained in this Agreement or any
certificates or other documents delivered prior to or at the Closing shall
not be deemed waived or otherwise affected by any investigation made by any
party hereto. Any investigation by such party shall be for its own
protection only and shall not affect or impair any right or remedy
hereunder.
9.3 General Agreement to Indemnify
(a) Each party the ("Indemnifying Party") shall indemnify, defend
and hold harmless the other party hereto and any employee, director,
officer or Affiliate of the other party (each an "Indemnified Party") from
and against any and all claims, actions, suits, proceedings, liabilities,
obligations, losses, and damages, amounts paid in settlement, interest,
costs and expenses (including reasonable attorney's fees, court costs and
other out-of-pocket expenses incurred in investigating, preparing or
defending the foregoing) (collectively, "Losses") incurred or suffered by
any Indemnified Party to the extent that the Losses arise out of, result
from or relate to (i) the failure of any representation or warranty of such
party contained in this Agreement to have been true, or with respect to the
29
representations or warranties set forth in Section 3.3(a) (ii), 3.3(b),
3.4(b), 3.6, 3.7(a), 3.8 (with respect to the first sentence thereof),
4.3(b), 4.3(a) (ii) and (iii), true in all material respects, when made and
as of the Closing Date or such other date as expressly provided otherwise
in Section 8.2(a) or 8.3(a) or (ii) the breach by such party of any
covenant or agreement of such party contained in this Agreement to the
extent not waived by the other party.
(b) Buyer further agrees to indemnify and hold harmless Seller from
and against any Losses incurred by Seller arising out of, resulting from or
relating to: (i) any failure of Buyer to discharge any of the Assumed
Liabilities; (ii) any liability arising out of the operation of the
Purchased Assets on or after the Closing Date; and (iii) any claim, demand
or liability for the taxes referred to in Section 2.9, including interest
and penalties thereon.
(c) Seller further agrees to indemnify and hold harmless Buyer from
and against any Losses incurred by Buyer arising out of, resulting from, or
relating to: (i) any failure by Seller to discharge any of the Excluded
Liabilities; (ii) any liability arising out of the operation of the
Purchased Assets prior to the Closing Date except for the Assumed
Liabilities; (iii) any termination, salary continuation or severance pay or
benefits payable by Seller to any employee by reason of such employee's
termination of employment by Seller; or (iv) Buyer's waiver of any
applicable Bulk Sales laws.
(d) Amounts payable in respect of the parties' indemnification
obligations shall be treated as an adjustment to the Purchase Price. Buyer
and Seller agree to cooperate in the preparation of a supplemental Asset
Acquisition Statement as required by Section 2.3 and Treasury Reg.
paragraph 1.1060-1T(f) and (h)(2)(ii) as a result of any adjustment to the
Purchase Price pursuant to the preceding sentence. Whether or not the
Indemnifying Party (as defined below) chooses to defend or prosecute any
Third-Party Claim (as defined in Section 9.4(a)), both parties hereto shall
cooperate in the defense or prosecution thereof and shall furnish such
records, information and testimony, and attend such conferences, discovery
proceedings, hearings, trials and appeals, as may be reasonably requested
in connection therewith or as provided in Section 5.1.
(e) The amount of the Indemnifying Party's liability under this
Agreement shall be reduced by any applicable insurance proceeds actually
received by, the Indemnified Party as reimbursement of Losses. The
indemnification obligations of each party hereto under this Article 9 shall
inure to the benefit of the directors, officers, employees and Affiliates
of the other party hereto on the same terms as are applicable to such other
party.
(f) The Indemnifying Party's liability for all claims under Section
9.3(a) shall be subject to the following limitations: (i) the Indemnifying
Party shall have no liability for such claims until the aggregate amount of
the Losses incurred shall exceed $25,000, in which case the Indemnifying
Party shall be liable only for the portion of the Losses exceeding $25,000,
and (ii) the Indemnifying Party's aggregate liability for all claims
including those made under Section 9.3(a) shall not exceed the Purchase
30
Price. The Indemnified Party may not make a claim for indemnification
under Section 9.3(a) for breach by Seller of a particular representation or
warranty after the expiration of the survival period specified in
Section 9.2 applicable to such representation or warranty.
(g) The indemnification provided in this Article 9 shall be the
sole and exclusive remedy after the Closing Date for damages available to
the parties to this Agreement for breach of any of the terms, conditions,
representations or warranties contained herein or any right, claim or
action arising from the transactions contemplated by this Agreement;
provided however that nothing herein shall be deemed to limit or restrict
in any manner any rights or remedies available at law, in equity or
otherwise based on fraud by either party.
(h) Notwithstanding anything contained in this Agreement to the
contrary, no party shall be liable to the other party for indirect,
special, punitive or consequential loss or damage (including any loss of
revenue or profit) arising out of this Agreement; provided, however, the
foregoing shall not be construed to preclude recovery by the Indemnified
Party in respect of Losses directly incurred from Third Party claims. Both
parties shall use reasonable efforts to mitigate their damages.
9.4 Procedures for Indemnification
(a) The Indemnified Party seeking indemnification under this
Agreement shall promptly notify the party against whom indemnification is
sought (the "Indemnifying Party") of the assertion of any claim, or the
commencement of any action, suit or proceeding by any Third Party, in
respect of which indemnity may be sought hereunder and will give the
Indemnifying Party such information with respect thereto as the
Indemnifying Party may reasonably request, but failure to give such notice
shall not relieve the Indemnifying Party of any liability hereunder (unless
the Indemnifying Party has suffered material prejudice by such failure).
The Indemnifying Party shall have the right, but not the obligation,
exercisable by written notice to the Indemnified Party within 30 days of
receipt of notice from the Indemnified Party of the commencement of or
assertion of any claim, action, suit or proceeding by a Third Party in
respect of which indemnity may be sought hereunder (a "Third-Party Claim"),
to assume the defense and control the settlement of such Third-Party Claim
that (i) involves (and continues to involve) solely money damages or
(ii) involves (and continues to involve) claims for both money damages and
equitable relief against the Indemnified Party that cannot be severed,
where the claims for money damages are the primary claims asserted by the
Third Party and the claims for equitable relief are incidental to the
claims for money damages, and where the Indemnified Party reasonably
determines (and continues to reasonably determine) that defense of the
claim by the Indemnifying Party will not have a Material Adverse Effect on
the Indemnified Party.
(b) The Indemnifying Party or the Indemnified Party, as the case
may be, shall have the right to participate in (but not control), at its
own expense, the defense of any Third-Party Claim that the other is
defending, as provided in this Agreement.
31
(c) The Indemnifying Party, if it has assumed the defense of any
Third-Party Claim as provided in this Agreement, shall not consent to a
settlement of, or the entry of any judgment arising from, any such Third-
Party Claim without the Indemnified Party's prior written consent (which
consent shall not be unreasonably withheld) unless such settlement or
judgment relates solely to monetary damages which the Indemnifying Party
will pay in full. The Indemnifying Party shall not, without the
Indemnified Party's prior written consent, which consent shall not be
unreasonably withheld, enter into any compromise or settlement that
(i) commits the Indemnified Party to take, or to forbear to take, any
action or (ii) does not provide for a complete release by such Third Party
of the Indemnified Party. The Indemnified Party shall have the sole and
exclusive right to settle any Third-Party Claim, on such terms and
conditions as it deems reasonably appropriate, to the extent such Third-
Party Claim involves equitable or other nonmonetary relief against the
Indemnified Party, and shall have the right to settle any Third-Party Claim
involving money damages for which Seller has not assumed the defense
pursuant to this Section 9.4 with the written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld or delayed.
9.5 Arbitration; Choice of Law
(a) Any dispute, controversy or claim, whether based on contract,
tort, statute or other legal theory (including, but not limited to, any
claim of fraud or misrepresentation), arising out of or related to this
Agreement, shall be resolved by arbitration pursuant to this Section 9.5
and the then-current Commercial Rules and supervision of the American
Arbitration Association. The duty to arbitrate shall extend to any
officer, employee, shareholder, principal, agent, trustee in bankruptcy or
otherwise, affiliate, subsidiary, third-party beneficiary or guarantor, of
a party hereto making or defending any claim which would otherwise be
arbitrable hereunder.
(b) Prior to demanding arbitration, the parties shall first in good
faith consult among appropriate officers of Buyer and Seller, which shall
begin promptly after one party has delivered to the other a written request
for consultation. At any time thereafter, either party may request in
writing that the dispute be referred to appropriate Senior Executives of
Buyer and Seller. Within 10 Business Days after such request, the Senior
Executives (and not their designees) shall meet and attempt in good faith
to resolve the dispute.
(c) Neither party shall file a demand for arbitration until 45
Business Days after a request is made for Senior Executive meetings as
provided for in Section 9.5(b).
(d) The arbitration shall be held in the headquarters city of the
party not initiating the claim before a single arbitrator who is
knowledgeable in the subject matter of the dispute. The arbitrator's
decisions and award shall be issued within 30 Business Days from the
hearing of final arguments of the parties. The decision and award shall be
final and binding and may be entered in any court having jurisdiction
thereof. The arbitrator shall not have the power to award punitive or
exemplary damages, or any damages excluded by, or in excess of any damage
limitations expressed in, this Agreement .
32
(e) In order to prevent irreparable harm, the arbitrator may grant
temporary or permanent injunctive or other equitable relief for the
protection of intellectual property rights.
(f) Issues of arbitrability shall be determined in accordance with
the federal substantive and procedural laws relating to arbitration; all
other aspects of this Agreement shall be interpreted in accordance with,
and the arbitrator shall apply and be bound to follow the substantive laws
of, the State of New York. Each party shall bear its own attorneys' fees
associated with the arbitration and other costs and expenses of the
arbitration shall be borne as provided by the rules of the American
Arbitration Association.
(g) The parties agree not to submit a dispute subject to this
Section 9.5 to any federal, state, local or foreign court or arbitration
association except as may be necessary to enforce the arbitration
procedures of this Section 9.5, or to enforce the award of the arbitrator.
If court proceedings to stay litigation or compel arbitration are
necessary, the party who unsuccessfully opposes such proceedings shall pay
all associated costs, expenses and attorneys' fees which are reasonably
incurred by the other party.
(h) The arbitrator may order the parties to exchange copies of non-
rebuttal exhibits and copies of witness lists in advance of the arbitration
hearing. The parties shall be entitled to the exchange in discovery of
documents which shall be limited to those documents which are relevant and
for which a requesting party has a substantial demonstrable need. However,
except as provided in the preceding sentence, the arbitrator shall have no
other power to order discovery or depositions unless and then only to the
extent that all parties otherwise agree in writing.
(i) Neither a party, witness nor the arbitrator may disclose the
contents or results of any arbitration hereunder without prior written
consent of all parties, unless and then only to the extent required to
enforce or challenge the award, as required by law, or as necessary for
financial and tax reports and audits.
(j) Notwithstanding anything to the contrary in this Section 9.5,
in the event of alleged violation of a party's intellectual property rights
(including, but not limited to, unauthorized disclosure of confidential
information), that party may seek temporary injunctive relief from any
court of competent jurisdiction pending appointment of an arbitrator. The
party requesting such relief shall simultaneously file a demand for
arbitration of the dispute, and shall request the American Arbitration
Association to proceed under its rules for expedited hearing. In no event
shall any such temporary injunctive relief continue for more than 30 days.
(k) If any part of this Section 9.5 is held to be unenforceable, it
shall be severed and shall not affect either the duty to arbitrate
hereunder or any other part of this Section 9.5.
33
10. Miscellaneous Provisions
10.1 Notices
All notices and other communications hereunder shall be in writing
and shall be deemed to have been duly given upon receipt if (i) mailed by
certified or registered mail, return receipt requested, (ii) sent by
Federal Express or other express carrier, fee prepaid, (iii) sent via
facsimile with receipt confirmed, or (iv) delivered personally, addressed
as follows or to such other address or addresses of which the respective
party shall have notified the other.
(a) If to Seller, to: ▇▇▇-▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Attention: Sr. V. P.,
Corporate Development
With a copy to: ▇▇▇-▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Attention: V.P. Law,
Corporate and Securities Group
(b) If to Buyer, to: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
With a copy to: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
10.2 Expenses
Except as otherwise provided in this Agreement, each party to this
Agreement will bear all the fees, costs and expenses that are incurred by
it in connection with the transactions contemplated hereby, whether or not
such transactions are consummated.
10.3 Entire Agreement; Modification
The agreement of the parties, which is comprised of this Agreement,
the Schedules and Exhibits hereto and the documents referred to herein,
sets forth the entire agreement and understanding between the parties and
supersedes any prior agreement or understanding, written or oral, relating
to the subject matter of this Agreement. No amendment, supplement,
34
modification or waiver of this Agreement shall be binding unless executed
in writing by the party to be bound thereby.
10.4 Assignment; Binding Effect; Severability
This Agreement may not be assigned by either party hereto without the
other party's written consent. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the successors, legal
representatives and permitted assigns of each party hereto. The provisions
of this Agreement are severable, and in the event that any one or more
provisions are deemed illegal or unenforceable the remaining provisions
shall remain in full force and effect unless the deletion of such provision
shall cause this Agreement to become materially adverse to either party, in
which event the parties shall use Best Efforts to arrive at an
accommodation that best preserves for the parties the benefits and
obligations of the offending provision.
10.5 Governing Law
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the state of New York without regard to its
principles of conflicts of law.
10.6 Execution in Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
10.7 Public Announcement
Neither Seller nor Buyer, without the approval of the other party,
shall make any press release or other announcement concerning the existence
of this Agreement or the terms of the transactions contemplated by this
Agreement, except as and to the extent that any such party shall be so
obligated by law, in which case the other party shall be advised and the
parties shall use their Best Efforts to cause a mutually agreeable release
or announcement to be issued; provided, however, that the foregoing shall
not preclude communications or disclosures necessary to comply with
accounting and Securities and Exchange Commission disclosure obligations.
10.8 No Third-Party Beneficiaries
Nothing in this Agreement, express or implied, is intended to or
shall (a) confer on any Person other than the parties hereto and their
respective successors or assigns any rights (including Third-Party
beneficiary rights), remedies, obligations or liabilities under or by
reason of this Agreement or (b) constitute the parties hereto as partners
or as participants in a joint venture. This Agreement shall not provide
Third Parties with any remedy, claim, liability, reimbursement, cause of
35
action or other right in excess of those existing without reference to the
terms of this Agreement. No Third Party shall have any right, independent
of any right that exists irrespective of this Agreement, under or granted
by this Agreement, to bring any suit at law or equity for any matter
governed by or subject to the provisions of this Agreement.
11. Termination and Waiver
11.1 Termination
This Agreement may be terminated at any time prior to the Closing
Date by:
(a) Mutual Consent. The mutual written consent of Buyer and
Seller;
(b) Court Order. Buyer or Seller if there shall be in effect a
nonappealable order of a court of competent jurisdiction prohibiting the
consummation of the transactions contemplated hereby.
(c) Delay. The Buyer or Seller if the Closing shall not have
occurred within six (6) months following the date hereof, provided that the
terminating party is not otherwise in material default or breach of this
Agreement.
(d) by either the Seller or the Buyer if there has been a material
breach by the other party of any representation, warranty, covenant or
agreement set forth in this Agreement which material breach has not been
cured by such other party within sixty (60) Business Days after notice
thereof.
11.2 Effect of Termination
In the event of the termination of this Agreement, this Agreement
shall become void and have no effect, except as provided in Article 6 and
Sections 10.2 and 10.7, without any liability on the part of any party or
its directors, officers or stockholders, except for any liability of any
party then in breach.
11.3 Waiver of Agreement
Any term or condition hereof may be waived at any time prior to the
Closing Date by the party hereto which is entitled to the benefits thereof
by action taken by its Board of Directors or its duly authorized officer or
employee ; provided, however, that such action shall be evidenced by a
written instrument duly executed on behalf of such party by its duly
authorized officer or employee. The failure of either party to enforce at
any time any provision of this Agreement shall not be construed to be a
waiver of such provision nor shall it in any way affect the validity of
this Agreement or the right of such party thereafter to enforce each and
every such provision. No waiver of any breach of this Agreement shall be
held to constitute a waiver of any other or subsequent breach.
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11.4 Amendment of Agreement
This Agreement may be amended with respect to any provision contained
herein at any time prior to the Closing Date by action of the parties
hereto taken by their Boards of Directors or by their duly authorized
officers or, in the case of Seller, employees, whether before or after
such party's action; provided, however, that such amendment shall be
evidenced by a written instrument duly executed on behalf of each party by
its duly authorized officer or by such employee
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IN WITNESS WHEREOF, each of Buyer and Seller has caused this
Agreement to be duly executed on its behalf by its duly authorized officer
as of the date first written above.
Lucent Technologies Inc.
By: /s/ ▇. ▇. ▇▇▇ ▇▇▇▇
-------------------------
Name: ▇. ▇. ▇▇▇ ▇▇▇▇
-------------------------
Title: Special Customer Operations
-------------------------
Vice President
Elcotel Direct, Inc.
By: /s/ C. ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------
Name: C. ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------
Title: President
-------------------------
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Schedule 1.1A Business Locations
Schedule 1.1C Supplier Locations
Schedule 1.2 Certain Persons
Schedule 2.1(a) Principal Equipment
Schedule 2.1(b) Inventory
Schedule 2.1(c) Contracts
Schedule 2.1(d) Licenses
Schedule 2.1(f) Governmental Permits
Schedule 2.1(h) Additional Excluded Assets
Schedule 3.3 Certain Violations
Schedule 3.4 Title to Assets; Location of Inventory
Schedule 3.5 Personal Property
Schedule 3.6 Permits, Licenses
Schedule 3.7(a) Compliance With Laws
Schedule 3.7(b) Litigation
Schedule 3.10 Financial Information
Schedule 3.11 Product Liability Claims
Schedule 4.3 Certain Violations; Buyer's Consents
Schedule 5.2 Seller's Exceptions to Preservation of Assets
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Exhibit A-1 Form of Technology Transfer Agreement
Exhibit A-2 Form of Patent License Agreement
Exhibit B Form of Assignment and Assumption Agreement
Exhibit C Form of ▇▇▇▇ of Sale
Exhibit D Use Guidelines
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