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EXECUTION COPY
ASSET PURCHASE AGREEMENT
by and among
BTGP, INC.
and
BROOKTROUT TECHNOLOGY EUROPE LIMITED
as Buyer
BROOKTROUT TECHNOLOGY, INC.,
as Parent
and
OCTEL COMMUNICATIONS CORPORATION
and
RHETOREX EUROPE LIMITED
as Sellers
December 17, 1998
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ASSET PURCHASE AGREEMENT
INDEX
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SECTION 1. PURCHASE AND SALE OF ASSETS.....................................1
1.1 Sale of Assets..................................................1
1.2 Assumption of Liabilities.......................................5
1.3 Purchase Price and Payment......................................7
1.4 Time and Place of Closing.......................................8
1.5 Delivery of Agreement for Assumption of
Liabilities, Lease Assignments and Licenses.....................8
1.6 Transfer of Subject Assets......................................8
1.7 Delivery of Records and Contracts...............................8
1.8 Further Assurances..............................................8
1.9 Allocation of Purchase Price....................................9
1.10 Sales and Transfer Taxes........................................9
1.11 Accounts Receivable.............................................9
1.12 Procedures for Assets not Transferable..........................9
1.13 Employees, Wages and Benefits..................................11
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLERS......................13
2.1 Making of Representations and Warranties.......................13
2.2 Organization and Qualifications of Sellers.....................13
2.3 Subsidiaries...................................................14
2.4 Authority of Sellers...........................................14
2.5 Real and Personal Property.....................................15
2.6 Values of Certain Assets and Liabilities.......................16
2.7 Taxes..........................................................17
2.8 Accounts Receivable............................................18
2.9 Inventory......................................................18
2.10 Ordinary Course; Absence of Certain Changes....................19
2.11 Banking Relations..............................................20
2.12 Intellectual Property..........................................20
2.13 Contracts......................................................21
2.14 Litigation.....................................................23
2.15 Compliance with Laws...........................................23
2.16 Warranty or Other Claims.......................................23
2.17 Powers of Attorney.............................................23
2.18 Permits; Burdensome Agreements.................................23
2.19 Corporate Records; Copies of Documents.........................24
2.20 Related Transactions...........................................24
2.21 Employee Benefit Programs......................................24
2.22 Environmental Matters..........................................25
(i)
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2.23 Disclosure.....................................................26
2.24 Employees; Labor Matters.......................................27
2.25 Customers, Distributors and Suppliers..........................27
2.26 Purchase Commitments...........................................27
2.27 Required Consents..............................................27
2.28 Adequacy of Subject Assets.....................................27
2.29 Year 2000 Readiness............................................27
SECTION 3. COVENANTS OF SELLERS...........................................28
3.1 Making of Covenants and Agreements.............................28
3.2 Notice of Default..............................................28
3.3 Consummation of Agreement......................................28
3.4 Cooperation of Sellers.........................................28
3.5 Non-competition................................................29
3.6 No Solicitation of Employees...................................29
3.7 Confidentiality................................................30
3.8 Tax Returns....................................................30
3.9 Bank Accounts..................................................30
3.10 Payments to Employees..........................................30
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER........................30
4.1 Making of Representations and Warranties.......................30
4.2 Organization of Buyer and Parent...............................30
4.3 Authority of Buyer and Parent..................................31
4.4 Litigation.....................................................32
4.5 Brokers........................................................32
SECTION 5.A U.K. VAT MATTERS...............................................32
5.A.1 Transfer of a Going Concern....................................32
5.A.2 Effect of Certain Representations..............................32
5.A.3 Buyer VAT Representations......................................33
SECTION 5. CONDITIONS.....................................................33
5.1 Conditions to the Obligations of Buyer.........................33
5.2 Conditions to Obligations of Sellers...........................35
SECTION 6. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING...................36
6.1 Survival of Warranties.........................................36
6.2 Collection of Assets...........................................36
6.3 Payment of Obligations.........................................36
SECTION 7. INDEMNIFICATION................................................37
(ii)
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7.1 Indemnification by Sellers.....................................37
7.2 Limitations on Indemnification by Sellers......................37
7.3 Indemnification by Buyer and Parent............................38
7.4 Limitation on Indemnification by Buyer and Parent..............39
7.5 Notice; Defense of Claims......................................39
7.6 Additional Provisions..........................................40
SECTION 8. MISCELLANEOUS..................................................41
8.1 Bulk Sales Law.................................................41
8.2 Fees and Expenses..............................................41
8.3 Governing Law..................................................41
8.4 Notices........................................................41
8.5 Entire Agreement...............................................42
8.6 Assignability; Binding Effect..................................42
8.7 Captions and Gender............................................43
8.8 Execution in Counterparts......................................43
8.9 Amendments.....................................................43
8.10 Publicity and Disclosures......................................43
8.11 Dispute Resolution.............................................43
(iii)
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ASSET PURCHASE AGREEMENT
AGREEMENT entered into as of December 17, 1998 by and among BTGP, Inc., a
Delaware corporation ("BTGP"), BROOKTROUT TECHNOLOGY EUROPE LIMITED, a company
limited by shares organized under the laws of England ("BTEUK" and together with
BTGP, "Buyer"), BROOKTROUT TECHNOLOGY, INC., a Massachusetts corporation
("Parent"), OCTEL COMMUNICATIONS CORPORATION, a Delaware corporation ("Octel"),
and RHETOREX EUROPE LIMITED, a company limited by shares organized under the
laws of England ("Rhetorex," and together with Octel, the "Sellers").
W I T N E S S E T H
WHEREAS, subject to the terms and conditions set forth herein, Buyer
desires to purchase from Sellers, and Sellers desire to sell, transfer and
assign to Buyer, the Subject Assets (as defined in Section 1.1 hereof), which
constitute substantially all of the properties and assets of Sellers related to,
used or held for use in connection with the business operations of the Lucent
Computer Telephony Products Group (such business and operations are referred to
herein as the "Business"); and
WHEREAS, subject to the terms and conditions hereof, Buyer desires to
purchase such Subject Assets and to assume the Assumed Liabilities (as defined
in Section 1.2 hereof) for the consideration specified herein.
NOW, THEREFORE, in order to consummate said purchase and sale and in
consideration of the mutual agreements and consents set forth herein, the
parties hereto agree as follows:
SECTION 1. PURCHASE AND SALE OF ASSETS.
1.1 SALE OF ASSETS.
(a) Subject to the provisions of this Agreement, Sellers agree to
sell and Buyer agrees to purchase, at the Closing (as defined in Section 1.4
hereof) and, with effect from the Closing shall sell, all of the Sellers' right,
title and interest in, to and under all of the following properties, assets and
business of Sellers related to, used in or held for use in the Business,
including without limitation, goodwill, (except as hereinafter provided in
Section 1.1(b)) of every kind and description, tangible and intangible, real,
personal or mixed, and wherever located:
(i) all inventory, work-in-progress, finished goods and raw
materials, including, but not limited to, those identified in SCHEDULE
1.1(a)(i)
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(collectively, the "Inventory") and, to the extent assignable, any rights
of either Seller to the warranties received from suppliers and any related
claims, credits, rights of recovery and set off with respect to such
Inventory; provided, however, that if any such rights are not so
assignable, Buyer's rights in respect thereof shall be governed pursuant to
the terms and conditions of Section 1.12 hereof;
(ii) all machinery, equipment and leasehold and personal
property, including, but not limited to, those identified in SCHEDULE
1.1(a)(ii) (collectively, the "Fixed Assets"), and, to the extent
assignable, any rights of either Seller to the warranties received from the
manufacturers and distributors of said items and to any related claims,
credits, rights of recovery and set off with respect to such items;
provided, however, that if any such rights are not so assignable, Buyer's
rights in respect thereof shall be governed pursuant to the terms and
conditions of Section 1.12 hereof;
(iii) all right, title and interest in and to the trademarks,
service marks, trade names and product names of the Business listed and
identified on SCHEDULE 1.1(A)(III), all registrations and pending
applications therefor, and all goodwill associated therewith (collectively,
the "Trademarks");
(iv) all accounts receivable of the Sellers with respect to
the Business (the "Receivables");
(v) to the extent related to the Business, and to the extent
assignable, all of Sellers' rights and interests in and to all contracts,
agreements, leases, supply contracts, purchase orders, sales orders,
commitments, consulting agreements and instruments each Seller has received
or is a party to, including, but not limited to, all license agreements
under which Sellers have licensed other parties to use, distribute, modify,
manufacture or resell products (including software) of the Business, the
backlog of orders for the sale or lease of products or services for which
no revenues have been recognized by Sellers (collectively, the
"Contracts"), including, but not limited to, those Contracts identified on
SCHEDULE 1.1(a)(v) hereto, but excluding any contracts or agreements
pursuant to which either Seller or an affiliate purchases products or
services from a third party to the extent for any purpose other than solely
for the Business, none of which such excluded contracts are material to the
Business; provided, however, that to the extent any such rights and
interests in and to such Contracts are not so assignable, Buyer's rights
and interests in respect thereof shall be governed pursuant to the terms
and conditions of Section 1.12 hereof;
(vi) all of Sellers' right, title and interest in and to all
franchises, licenses, permits, certifications, registrations, certificates
of inspection, approvals, authorizations and homologations used in the
Business issued by any unit, division, department, commission, board,
agency, bureau or official of any federal, state, local or foreign
governmental entity (collectively, the "Governmental Permits"), but only to
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the extent that any such Governmental Permits are assignable or
transferable by Sellers to Buyer;
(vii) Seller's investment in Systems Integration Network
Limited (the "Investment") and as allocable to the Business, all prepaid
expenses ("Prepaid Expenses");
(viii) all mailing lists, customer lists, customer records and
histories, customer invoices, lists of suppliers and vendors and all
records relating thereto, engineering drawings, records with respect to
production, engineering, product development, costs, advertising matter,
catalogues, photographs, sales literature and materials, purchasing
materials, media materials, manufacturing and quality control records and
procedures, research and development files, data and laboratory books,
vendor data equipment maintenance records, warranty information, records of
operations, standard forms of documents, manuals of operation or business
procedures and other similar information used in the Business, and all
trade secret and copyright rights therein (collectively, the "Proprietary
Business Information");
(ix) all books and records of Sellers (including all discs,
tapes and other media-storing data and other information) used in the
Business, but excluding (1) information management systems set forth in
SCHEDULE 1.1(a)(ix) and (2) the Excluded Records (as defined in Section
1.1(b)(iv)(3)) (collectively, the "Information Management Systems");
(x) all of Sellers' rights, claims or causes of action
against third parties related to any Subject Asset or Assumed Liability
(but not any Excluded Asset or Excluded Liability) arising out of
transactions occurring prior to the Closing Date; and
(xi) all of Sellers' right, title and interest in and to the
licenses, agreements and other arrangements under which either Seller has
the right to use any propriety information of a third party, or the right
to use, reproduce, distribute or modify any works of authorship of a third
party, in either case, to the extent used or held for use in the conduct of
the Business, including, without limitation, those identified on SCHEDULE
1.1(a)(xi) (the "Licenses"), but only to the extent that any such License
is by its terms or by law assignable or transferable to Buyer.
(b) Notwithstanding the foregoing, there shall be excluded from
such purchase and sale the following property and assets:
(i) any assets or property of either Seller that are not
Subject Assets;
(ii) any Technical Information (as such term is defined in
the Technology Transfer Agreement to be executed by the parties pursuant to
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Section 5.1(k) hereof (the "Technology Transfer Agreement")) or
Intellectual Property (as such term is defined in Section 2.12) of the
Sellers or any of their affiliates, other than any Technical Information or
Intellectual Property of the Sellers or any of their affiliates transferred
to Buyer pursuant to the terms of Section 1.1(a) hereof and the Technology
Transfer Agreement;
(iii) any of either Seller's employee receivables, cash, bank
deposits or similar cash items;
(iv) any claim, right or interest of either Seller in or to
any refund, rebate, abatement or other recovery for Taxes (as such term is
defined in Section 2.7 hereof), customs, duties, governmental fees or other
like assessment or charges of any kind whatsoever, together with any
interests due thereon or penalty rebate arising therefrom, for any periods
prior to the Closing Date; provided, however, that such exclusion shall
apply only to the extent such Taxes, customs, duties, governmental fees or
other like assessment or charges have been or are to be paid by Seller
following the Closing, and; provided, further, that such exclusion shall
not apply to the extent any such refund, rebate, abatement or other
recovery is in respect of any Sales Taxes (as defined in Section
1.2(a)(ii)) or to the extent any of the foregoing items constitute Prepaid
Expenses;
(v) except for any of Sellers' rights, claims or causes of
action related to a Subject Asset or Assumed Liability, all of Sellers'
rights, claims or causes of action against third parties relating to any
Excluded Liability or Excluded Asset arising out of transactions occurring
prior to the Closing Date;
(vi) (1) Sellers' corporate franchise, stock record books,
corporate record books containing minutes of meetings of directors and
stockholders and such other records as have to do exclusively with Sellers'
organization or stock capitalization (collectively, the "Corporate
Records");
(2) any of the Sellers' or their respective affiliates'
personnel records pertaining to any employees of Sellers employed in the
Business (collectively, the "Personnel Records");
(3) any other books and records related to the Business
that Sellers or any of their respective affiliates are required by law to
retain or that Sellers or any of their affiliates determine are reasonably
necessary or advisable to retain (the "Retained Records," and together with
the Corporate Records and the Personnel Records, the "Excluded Records");
provided, however, that, except to the extent prohibited under any
applicable law, each Seller shall provide Buyer with access to the Excluded
Records for the purpose of allowing Buyer to make copies; and
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(4) to the extent identified on SCHEDULE 1.1(a)(ix),
any information management system of Sellers or any of their affiliates.
(vii) the capital stock of Rhetorex; and
(viii) all "Lucent Technologies" or "Octel" - identified or
marked sales and marketing or packaging materials, letterhead, samples,
prototypes, other similar "Lucent Technologies" or "Octel" identified sales
and marketing or packaging materials, except to the extent Buyer is
permitted to possess, own and/or use such assets pursuant to the terms and
conditions of the Transition Services Agreement to be executed by the
parties pursuant to Section 5.1(h) hereof (the "Transition Services
Agreement").
The assets, property and business of Sellers to be sold to and purchased by
Buyer under Section 1.1(a) are hereinafter sometimes referred to as the "Subject
Assets," and the assets, property and business of the Sellers which are excluded
from the Subject Assets under this Section 1.1(b) are hereinafter sometimes
referred to as the "Excluded Assets."
1.2 ASSUMPTION OF LIABILITIES.
(a) Upon the sale and purchase of the Subject Assets, Buyer shall
assume and agree to pay or discharge when and as due in accordance with their
respective terms only the following liabilities:
(i) those trade liabilities of Sellers related to the
Business and incurred in the ordinary course of business as listed on
SCHEDULE 1.2(a)(i), and which trade liabilities are outstanding at the time
of the Closing (collectively, the "Trade Payables") together with any
changes thereto incurred in the ordinary course of the Business consistent
with past practices since September 30, 1998;
(ii) any sales tax or sales commissions that have accrued
with respect to Receivables related to the Business, but only to the extent
that such Receivables (i) are acquired by Buyer pursuant to Section
1.1(a)(iv) and (ii) have not been collected by the Sellers prior to the
Closing (the "Sales Tax" and "Sales Commissions," respectively);
(iii) with respect to the Business, any product warranty
liabilities arising from Sellers' sales of products in the ordinary course
of business, but only to the extent that such product warranty liabilities
do not exceed $300,000 (the "Warranty Liabilities"), and any marketing
liabilities, but only to the extent that such marketing liabilities do not
exceed $203,993 (the "Marketing Liabilities"); and
(iv) any Permitted Encumbrances and other obligations
attaching to the Subject Assets. For the purposes hereof, "Permitted
Encumbrances" means (1) to
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the extent arising by operation of law, statutory liens for taxes not yet
due and payable, (2) to the extent arising by operation of law, 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, (3) to the extent arising by operation of law, liens incurred or
deposits made in the ordinary course of business to secure the performance
of tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return of money bonds and similar
obligations, (4) to the extent arising by operation of law, purchase money
liens incurred in the ordinary course of business, and (5) any licenses
granted by either Seller to third parties or affiliates in connection with
sales of products in the ordinary course of business, and (6) with respect
to leasehold interests, minor imperfections in title and minor
encroachments, if any, not material in amount and that, individually or in
the aggregate, do not materially interfere with the conduct of the Business
or with the use of such leasehold interests and do not materially affect
the value of the Business as a whole.
With respect to the period commencing from and after the Closing, Buyer shall
also assume and agree to pay the following liabilities:
(i) all liabilities relating to the Contracts, the Licenses
and the Governmental Permits in each case arising under such Contracts, or
Licenses Governmental Permits in accordance with their terms for the period
from and after the Closing in each case to the extent assignable; provided,
however, with respect to any Contract not so assignable, Buyer's rights and
obligations in respect thereof shall be governed pursuant to the terms and
conditions of Section 1.12 hereof; and
(ii) as related to the Business, any employment-related
liabilities and obligations arising from Buyer's employment after the
Closing of any employees of Sellers;
provided, however, that notwithstanding anything to the contrary herein, Buyer
shall not assume hereunder any accounts payable, liabilities or obligations of
either Seller or any affiliate that are not related exclusively to the Business.
(b) Except for the Assumed Liabilities, Buyer shall not assume or
be bound by any obligations or liabilities of either Seller or any affiliate of
either Seller of any kind or nature, known, unknown, accrued, absolute,
contingent or otherwise, whether now existing or hereafter arising whatsoever.
In connection therewith and notwithstanding the foregoing, except for the
Assumed Liabilities, it is specifically agreed that Buyer shall not assume and
shall not pay any other liabilities of either Seller, including, without
limitation, the following:
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(i) Liabilities incurred by either Seller in connection with
or relating to this Agreement and the transactions provided for herein,
including, without limitation, counsel and accountant's fees, any broker's
commissions or finder's fees and expenses pertaining to the performance by
either Seller and its respective affiliates of its or their obligations
hereunder;
(ii) Taxes (as defined in Section 2.7 hereof), other than the
Sales Tax, of either Seller (whether relating to periods before or after
the transactions contemplated in this Agreement or incurred by either
Seller in connection with this Agreement, including any increase in taxes
as a result of the applicability of Section 280G of the Code, and the
transactions provided for herein), including any liability for Taxes
arising out of the inclusion of either Seller in any group filing
consolidated, combined or unitary tax returns or arising out of any
transferee liability;
(iii) Liabilities relating to all debt owed to third parties
or to related parties or affiliates of either Seller;
(iv) Liabilities of either Seller with respect to any
options, warrants, agreements or convertible or other rights to acquire any
shares of its capital stock of any class; and
(v) Liabilities in connection with or relating to all
actions, suits, claims, proceedings, demands, assessments and judgments,
costs, losses, liabilities, damages, deficiencies and expenses (whether or
not arising out of third-party claims), including, without limitation,
interest, penalties, reasonable attorneys' and accountants' fees and all
amounts paid in investigation, defense or settlement of any of the
foregoing.
Furthermore, and notwithstanding anything contained in this Agreement to
the contrary, it is specifically agreed that Buyer shall not assume and shall
not pay any liabilities of either Seller or any of their affiliates to M. ▇▇▇
▇▇▇▇▇▇ under that certain letter to M. ▇▇▇ ▇▇▇▇▇▇ dated June 28, 1996 or
otherwise.
The liabilities set forth in Section 1.2 hereof to be assumed by Buyer
under this Agreement are hereinafter sometimes referred to as the "Assumed
Liabilities" and all other liabilities which are not assumed by Buyer under this
Agreement are hereinafter sometimes referred to as the "Excluded Liabilities."
The assumption of said liabilities by any party hereunder shall not enlarge any
rights of third parties under contracts or arrangements with Buyer or either of
the Sellers and nothing herein shall prevent any party from contesting in good
faith with any third party any of said liabilities.
1.3 PURCHASE PRICE AND PAYMENT. In consideration of the sale by Sellers
to Buyer of the Subject Assets, subject to the assumption by Buyer of the
Liabilities and the satisfaction of all of the conditions contained herein,
Buyer agrees that at the Closing it will deliver to Sellers
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Twenty-Nine Million Four Hundred Thousand Dollars ($29,400,000) (the "Purchase
Price") by bank cashiers checks in Boston Clearing House Funds or by wire
transfer of immediately available funds to an account designated by Sellers'
written instructions to Buyer at least two (2) Business Days prior to Closing.
$1,000,000 of the Purchase Price shall be paid to Sellers by BTEUK in respect of
those Subject Assets located in the United Kingdom and $28,400,000 of the
Purchase Price shall be paid to sellers by BTGP Buyer in respect of all of the
other Subject Assets.
1.4 TIME AND PLACE OF CLOSING. The closing of the purchase and sale
provided for in this Agreement (herein called the "Closing") shall be held at
the offices of ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ LLP at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇, such
Closing to be effective as of the close of business on the date hereof (the
"Closing Date").
1.5 DELIVERY OF AGREEMENT FOR ASSUMPTION OF LIABILITIES, LEASE
ASSIGNMENTS AND LICENSES. At the Closing, Buyer shall deliver or cause to be
delivered to Sellers, an Agreement for Assumption of the Liabilities by Buyer in
the form of EXHIBIT 1.5(a) hereto and an Assignment and Assumption of Lease with
respect to the Lease relating to the premises located in Los Gatos, California
and a License to Occupy with respect to the premises located in Bracknell,
United Kingdom, in the form of EXHIBITS 1.5(b) AND (c) hereto.
1.6 TRANSFER OF SUBJECT ASSETS. At the Closing, Sellers shall deliver or
cause to be delivered to Buyer good and sufficient instruments of transfer
transferring to Buyer title to all the Subject Assets other than the Subject
Assets located in the United Kingdom which has passed by delivery. Such
instruments of transfer shall be in the forms of Assignment and ▇▇▇▇ of Sale and
Trademark Assignment attached hereto as EXHIBITS 1.6(a) AND (b), respectively
(collectively, the "Transfer Instruments").
1.7 DELIVERY OF RECORDS AND CONTRACTS. At the Closing, each Seller shall
deliver or cause to be delivered to Buyer all of such Seller's leases,
contracts, commitments, agreements (including without limitation non-competition
agreements) and rights relating to the conduct and operation of the Business,
with such assignments thereof and consents to assignment as are identified on
SCHEDULE 1.7 to assure Buyer of the full benefit of the same. Each Seller shall
also deliver to Buyer at the Closing all of the Books and Records other than the
Excluded Records in accordance with the terms of Section 1.1(b)(vi), and Sellers
shall take all requisite steps to put Buyer in actual possession and operating
control of such assets. Notwithstanding the foregoing, to the extent that any
such Books and Records are currently located at the premises of the Business,
Sellers shall be deemed to have delivered such Books and Records to Buyer
pursuant to this Section 1.7.
1.8 FURTHER ASSURANCES.
(a) Each Seller from time to time after the Closing at the request
of Buyer and without further consideration shall execute and deliver further
instruments of transfer and assignment and take such other action as Buyer may
reasonably require to more effectively
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transfer and assign to, and vest in, Buyer each of the Subject Assets. Nothing
herein shall be deemed a waiver by Buyer of its right to receive at the Closing
an effective assignment of each of the leases, contracts, commitments or rights
of each Seller as otherwise set forth in this Agreement.
(b) "Commercially reasonable efforts" or similar variations thereof
when used in this Agreement mean 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 or did not in fact utilize its reasonable commercial efforts in
attempting to accomplish the objective.
1.9 ALLOCATION OF PURCHASE PRICE. Sellers and Buyer agree to allocate the
Purchase Price based on the actual values of the Accounts Receivable, Inventory,
Fixed Assets, Trade Payables and other categories as exist on the Closing Date
which such allocation will be in accordance with Section 1.1060-1T of the
Regulations promulgated under the Internal Revenue Code of 1986, as amended.
Such allocation shall be conclusive and binding on Buyer and Seller for tax
purposes. Neither Sellers nor Buyer shall, without written approval of the
other, file any tax returns takes any position inconsistent with such
allocation. Buyer and Sellers, respectively, will notify each other as soon as
reasonably practicable of any audit adjustment or proposed audit adjustment by
any taxing authority which affects the allocation.
1.10 SALES AND TRANSFER TAXES.
(a) All sales and transfer taxes, fees, duties and other similar
expenses under applicable law incurred in connection with this Agreement or the
transactions contemplated thereby will be borne and paid by the party prescribed
by applicable law or regulation as primarily liable.
(b) Buyer shall be responsible for all Taxes attributable to,
levied upon or incurred in connection with the Subject Assets pertaining to the
period (or that portion of the period) immediately beginning after the Closing
Date. Sellers shall be responsible for all Taxes (other than the Sales Tax
described in Section 1.2(a)(ii)) attributable to, levied upon or incurred in
connection with the Subject Assets pertaining to the period (or that portion of
the period) prior to or on the Closing Date.
1.11 ACCOUNTS RECEIVABLE. Each Seller shall use its commercially
reasonable efforts to assist Buyer in collecting the Receivables following the
Closing. Any and all amounts received by either Seller in respect of any
Receivables shall be promptly remitted to Buyer.
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1.12 PROCEDURES FOR ASSETS NOT TRANSFERABLE.
(a) If any of the Subject Assets, including any Contract, License,
Governmental Permit, certificate, approval, authorization, agreement, lease, or
other right is not assignable or transferable either by virtue of the provisions
thereof or under applicable law without the consent of some party or parties
(each a "Nonassignable Asset") and any such consent is not obtained prior to the
Closing, this Agreement and the related instruments of transfer shall not
constitute an assignment or transfer thereof and, unless otherwise agreed
between Buyer and Sellers with respect to any such Nonassignable Asset, Buyer
shall not assume either Seller's obligations with respect thereto as provided
herein, but Sellers shall use all commercially reasonable efforts to obtain any
such consent as soon as possible after the Closing or otherwise obtain for Buyer
the practical benefit of such property or rights and Buyer shall use all
commercially reasonable efforts to assist in that endeavor; provided, however,
that in obtaining such consent, Seller shall not be required to remain
secondarily liable or to make any payment in obtaining any such consent with
respect to any Nonassignable Asset; and provided further, that this Section 1.12
shall not apply with respect to Leases relating to the Leased Real Property
located in the United Kingdom which will be governed pursuant to the License to
Occupy.
(b) To the extent permitted by applicable law, in the event
consents to assignment cannot be obtained, such Nonassignable Assets shall be
held, as and from the Closing Date, by the applicable Seller in trust for Buyer
and the covenants and obligations thereunder shall be performed by Buyer in the
applicable Seller's name and all benefits and obligations existing thereunder
shall be for Buyer's account. Sellers shall, as Buyer may reasonably request,
take or cause to be taken at Buyer's expense such action in its name or
otherwise 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 Sellers shall promptly pay over to
Buyer all money or other consideration received by it in respect to all
Nonassignable Assets. As of and from the Closing Date, each 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 the applicable Seller under the Nonassignable Assets
and appoints Buyer its attorney-in-fact to act in its name on its behalf with
respect thereto.
(c) In the event that any purchase order included in the Subject
Assets is not assigned by Sellers by reason of the foregoing provisions of this
Section 1.12, Buyer agrees to purchase from Sellers at the contract price all
property thereunder which Sellers are obligated to purchase and Sellers agree to
sell the same to Buyer at such price. In the event that any sales order included
in the Subject Assets is not assigned by Sellers by reason of the foregoing
provisions of this Section 1.12, Buyer agrees to sell to Sellers any products
required to complete such contracts at the same price provided for therein and
otherwise to complete such contracts on behalf of Sellers and Sellers agree to
purchase the same from Buyer at such price. If Sellers fail to comply with the
provisions of this Section 1.12, Buyer may, to the extent
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permitted by applicable law, on its own behalf and at Buyer's expense undertake
to complete such contracts and collect amounts due thereunder in the name of
Sellers.
1.13 EMPLOYEES, WAGES AND BENEFITS.
(a) All employees of each Seller related to the Business are set
forth on SCHEDULE 1.13. In each case such Schedule includes the current job
title and aggregate annual compensation of each individual. Buyer shall not
assume or have any obligations or liabilities with respect to any employees of
Sellers who ordinarily work outside the United Kingdom immediately prior to the
Closing or any spouse or other beneficiaries of such employees for periods prior
to the time of hire by Buyer in connection with the Closing (Section 1.13(f)
below applies in relation to such employees of the Sellers who ordinarily work
in the United Kingdom immediately prior to the Closing (the "UK Employees").
Except as provided in this Section 1.13, Buyer will offer employment to all such
employees as at will employees, at substantially the same salary as previously
provided by the respective Seller, and will employ such employees, provided that
each such employee agrees to be so hired, and, as a condition of employment, to
execute Buyer's standard form of Proprietary Information and Inventions
Agreement (as modified to reflect any changes required by or appropriate under
California or other applicable law) and such other agreements as Buyer deems
reasonably necessary to conduct its business. It is understood that the
employment of the employees of the Business that accept Buyer's offer of
employment will not commence until immediately following the close of business
on the Closing Date, except (i) the employment of H1B Employees (as defined in
Schedule D of the Transition Services Agreement referenced in Section 5.1(h) of
this Agreement) will become effective pursuant to Schedule D of the Transition
Services Agreement; and (ii) that the employment of individuals receiving
short-term disability benefits or an approved leave of absence on the Closing
Date will become effective as of the date they present themselves for work with
Buyer immediately upon the termination of the short-term disability benefits or
approved leave of absence, respectively; provided that nothing herein shall
require Buyer to employ any employee who does not report for work before or at
the conclusion of an authorized short term disability leave of absence or other
authorized leave of absence, provided further, that a leave of absence shall be
considered to be "authorized" if it is authorized by law or was authorized by a
Seller pursuant to such Seller's disability leave of absence or other leave of
absence policies. Any employee that falls within the immediately preceding
sentence is so indicated on SCHEDULE 1.13, which further specifies which
employees are H1B Employees and which employees are on an authorized short term
disability leave of absence or other authorized leave of absence as of the
Closing Date.
(b) Each Seller acknowledges and agrees that Buyer may interview
and discuss employment terms and issues with such Seller's employees.
(c) (i) Each Seller shall pay all wages, salaries, commissions
and the cost of all fringe benefits provided to each employee of such Seller
that is engaged in employment with respect to the Business, which wages,
salaries commissions and benefits shall have become due for work performed by
such employee as of and through the Closing, and
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Sellers shall collect and pay all taxes in respect of such wages, salaries,
commissions and benefits. Each Seller shall retain liability for benefits to all
individuals entitled to benefits required to be provided by the continuation
health care coverage requirements of Section 4980B of the Code and Sections 601
through 607 of ERISA as of the Closing including, without limitation, with
respect to any individual entitled to such coverage prior to the Closing and any
individual who loses health care coverage as a result of the transactions
contemplated by this Agreement.
(ii) Except as provided in the Transition Services Agreement,
Buyer shall pay all wages, salaries, commissions and the cost of all fringe
benefits provided to each employee of Buyer that is engaged in employment with
respect to the Business, which wages, salaries, commissions and benefits shall
have become due for work performed by such employee from and after the Closing,
and Buyer shall perform all tax withholding, collection, payment and reporting
duties in respect of such wages, salaries, commissions and benefits. Buyer will
continue to provide tuition assistance to those employees of the Business listed
on SCHEDULE 1.13 and who are identified on such Schedule as receiving such
assistance as of the Closing Date. Buyer will continue to provide relocation
assistance to those employees of the Business listed on SCHEDULE 1.13 and who
are identified on such Schedule as receiving such assistance as of the Closing
Date.
(d) Sellers acknowledge and agree that Buyer is not assuming and
shall not have any obligations or liabilities under any Employee Program (as
defined in Section 2.21 hereof) maintained by, or for the benefit of employees
of, either Seller, including without limitation obligations for severance.
(e) Buyer shall provide benefits comparable in the aggregate to the
benefits that similarly situated current employees of Parent receive. Buyer
shall recognize all service with Sellers, including service with predecessor
employers that was recognized by Sellers for purposes of determining such
benefits, including, without limitation, retirement and other welfare plan
participation and vesting (but not benefit accrual purposes). Buyer's health and
welfare plans including, but not limited to, medical, dental, life insurance and
disability insurance shall waive any pre-existing condition exclusion and any
proof of insurability, but only to the extent such pre-existing condition
exclusion and proof of insurability was not applicable to an employee of the
Business under Sellers' plans. Buyer's health and welfare plans shall recognize
for purposes of satisfying any deductibles during the coverage periods for such
plans that includes the date on which the employees of the Business are enrolled
in such plans, any payment made by any employee of the Business towards
deductibles under any health or other insurance plan of Seller.
(f) As regard any of the UK Employees, if any contract of
employment of a person who is not a UK Employee has effect as if originally made
between the Buyer and such person as a result of the Transfer of Undertakings
(Protection of Employment) Regulations 1981 (the "Regulations"):
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(i) the Buyer may within 3 months of becoming aware of the
application of the Regulations to such contract, give
notice to such person to terminate such contract; and
(ii) the Sellers shall indemnify and keep indemnified the
Buyer against any costs (including any costs relating to
settlement), claims, liabilities or expenses arising out
of or in connection with such termination and against
any sums payable to or in relation to such person under
or in connection with such contract to the date of such
termination.
Furthermore, if as at the Closing, any of the terms and conditions of
employment of any of the UK Employees differs or was omitted from those which
have been provided by the Sellers to the Buyer prior to the Closing, the Sellers
shall indemnify and keep indemnified the Buyer against any cost (including any
costs relating to settlement), claims, liabilities or expenses incurred by the
Buyer which the Buyer would not have incurred in the absence of such difference
or omission.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLERS.
2.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material inducement to
Buyer to enter into this Agreement and consummate the transactions contemplated
hereby, Sellers, jointly and severally, hereby make to Buyer the representations
and warranties contained in this Section 2.
2.2 ORGANIZATION AND QUALIFICATIONS OF SELLERS.
(a) Octel is a corporation duly organized, validly existing and in
good standing under the laws of Delaware with full corporate power and authority
to own or lease its properties related to, used in or held for use in connection
with the Business and to conduct the Business in the manner and in the places
where such properties are owned or leased. Octel is duly qualified or licensed
as a foreign corporation to do business and is in good standing in each
jurisdiction where the nature of its business or the ownership, leasing or
operation of its properties makes such qualification or licensing necessary,
except where the failure to be so qualified or licensed and in good standing
would not have a material adverse effect on the Business taken as a whole.
(b) Octel is of a sufficient financial condition such that it will
be able to satisfy all of Sellers' obligations under this Agreement and each
agreement, document and instrument to be executed and delivered by Sellers
pursuant to this Agreement.
(c) Rhetorex, an indirect wholly-owned subsidiary of Octel, is a
company limited by shares duly organized under the laws of England with full
corporate power and
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authority to own or lease its properties and to conduct the Business in the
manner and in the places where such properties are owned or leased or the
Business is currently conducted or proposed to be conducted. Rhetorex is duly
qualified or licensed as a foreign corporation to do business and is in good
standing in each jurisdiction where the nature of its business or the ownership,
leasing or operation of its properties makes such qualification or licensing
necessary, except where the failure to be so qualified or licensed and in good
standing would not have a material adverse effect on the Business taken as a
whole.
2.3 SUBSIDIARIES. Except for Octel's interest in Rhetorex and Rhetorex's
interest in Systems Integration Network Limited, neither of the Sellers has any
subsidiary or owns or has any direct or indirect interest in or control over any
corporation, partnership, limited liability company, joint venture or entity of
any kind, which corporation, partnership, joint venture or other entity is
engaged in activities or operations related to the conduct and operations of the
Business.
2.4 AUTHORITY OF SELLERS. Each Seller has all necessary corporate power
and authority to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by such Seller pursuant to this
Agreement and to carry out the transactions contemplated hereby. The execution,
delivery and performance by each Seller of this Agreement and each such other
agreement, document and instrument have been duly authorized by all necessary
corporate action of such Seller and no other action on the part of such Seller
is required in connection therewith.
This Agreement and each agreement, document and instrument executed and
delivered by each Seller pursuant to this Agreement constitutes, or when
executed and delivered will constitute, valid and binding obligations of such
Seller enforceable in accordance with their terms, except to the extent that
enforcement of the rights and remedies created hereby and thereby may be
affected by bankruptcy, reorganization, moratorium, insolvency and similar laws
of general application affecting the rights and remedies of creditors and by
general equity principles. Except as specifically identified on SCHEDULE 2.4,
the execution, delivery and performance by each Seller of this Agreement and
each such agreement, document and instrument:
(i) does not and will not violate any provision of the
organizational documents of such Seller;
(ii) does not and will not violate any applicable law, order,
judgment, decree, rule or regulation of any court or any governmental body
having jurisdiction over either Seller or any of the Subject Assets or
require either Seller to obtain any approval, consent or waiver of, or make
any filing with, any person or entity (governmental or otherwise), except
for (A) any filings required to be made under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended, and (B) consents of third
parties that are required to transfer or assign to Buyer any Subject Assets
or assigns the benefits of or delegate performance with regard thereto; and
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(iii) does not and will not result in a breach of, constitute
a default under, accelerate any obligation under, give rise to a right of
termination of, or permit any third party to exercise any additional rights
under, any indenture or loan or credit agreement or any other agreement,
contract, instrument, mortgage, lien, lease, permit, authorization, order,
writ, judgment, injunction, decree, determination or arbitration award to
which either Seller is a party or by which the property of either Seller is
bound or affected, or result in the creation or imposition of any mortgage,
pledge, lien, security interest or other charge or encumbrance on any of
the Subject Assets, other than a Permitted Encumbrance arising as a result
of the transactions contemplated hereby, except in each case (i), (ii) or
(iii) which would not have a material adverse effect on the Subject Assets
and the Business taken as a whole.
2.5 REAL AND PERSONAL PROPERTY.
(a) OWNED REAL PROPERTY. Neither Seller owns any real property.
(b) LEASED REAL PROPERTY. All of the real property leased by either
Seller as tenant or lessee is identified on SCHEDULE 2.5(b) (collectively
referred to herein as the "Leased Real Property"). Each Seller hereby makes the
following representations and warranties with respect to the Leased Real
Property:
(i) LEASES. The copies of the leases of the Leased Real
Property, together with any amendments thereto, (collectively, the
"Leases") delivered by Sellers to Buyer and the information with respect to
each of the Leases set forth in SCHEDULE 2.5(b) is complete, accurate, true
and correct. With respect to each of the Leases, except as set forth on
SCHEDULE 2.5(b):
(A) each of the Leases is in full force and effect and
has not been further modified, amended, or altered, in writing or
otherwise;
(B) all obligations of the landlord and/or tenant under
the Leases which have accrued have been performed, and to the best of
the knowledge of Sellers, there is no default under any Lease by
either Seller, and to the Sellers' knowledge, there is no default
under any Lease by the landlord; and
(C) Sellers have obtained or will obtain prior to the
Closing the consent of each landlord or lessor under any Leases for
premises located in the United States whose consent is required to
the assignment of the Leased Real Property to Buyer.
(ii) TITLE AND DESCRIPTION. Each Seller holds a valid
leasehold interest in the Leased Real Property.
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(iii) REAL ESTATE TAXES. To Sellers' knowledge, neither Seller
has received notice of any pending or threatened real estate tax deficiency
or reassessment or condemnation of all or any portion of any of the Leased
Real Property.
(c) PERSONAL PROPERTY. A complete listing of the Fixed Assets as of
December 11, 1998 relating to, used in or held for use in the Business is
contained in SCHEDULE 1.1(a)(ii). Except as specifically disclosed in said
Schedule, Sellers have good and valid title to or a leasehold interest in, all
of such personal property. The transfer of the Subject Assets from Sellers to
Buyer pursuant to the terms of this Agreement and the Transfer Instruments shall
effectively transfer to Buyer good and valid title to or leasehold interest in
all of such personal property, as well as all of the other Subject Assets, free
and clear of all liens, restrictions and encumbrances (other than Permitted
Encumbrances). None of such personal property or assets relating to, used in or
held for use in the Business, including the Subject Assets, is subject to any
mortgage, pledge, lien, conditional sale agreement, security agreement,
encumbrance or other charge except for Permitted Encumbrances or as specifically
disclosed in said Schedule. Except as otherwise specified in SCHEDULE 2.5(c),
any such items used in the Business are in reasonable operating condition, in
light of their respective ages, for the purposes for which they are currently
being used, but are otherwise being transferred "AS IS" as to their condition.
2.6 VALUES OF CERTAIN ASSETS AND LIABILITIES.
(a) The values of the following Subject Assets and Assumed
Liabilities, as reflected in the Sellers' Books and Records as of September 30,
1998, were as follows:
(i) the values of the Prepaid Expenses and the Investments
was $220,843, and $418,370, respectively;
(ii) the value of the Accounts Receivable was $4,311,571 (net
of Sellers' reserve for bad debts in the amount of $405,338);
(iii) the value of the Inventory was $2,550,522;
(iv) the value of the Fixed Assets was $2,154,265 (net of
depreciation and amortization);
(v) the value of the Trade Payables was $2,017,209.
(vi) the value of the Marketing Liabilities was $203,993; and
(vii) the value of the Warranty Liabilities was $300,000.
(b) The values of the Subject Assets and Assumed Liabilities (and
bad debt reserve amount) set forth in Section 2.6(a) were reflected in the
Sellers' Books and Records as
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of September 30, 1998 in accordance with Sellers' accounting practices and
methods consistently applied. Such Books and Records are correct and complete in
all material respects and present fairly in all material respects the values of
such Subject Assets and Assumed Liabilities (and depreciation and amortization
and bad debt reserve amounts) as of September 30, 1998.
(c) To Seller's knowledge, there are no material liabilities
related to customers or suppliers of the Business that are not set forth on the
Sellers' Books and Records as of September 30, 1998 or incurred in the ordinary
course of the Business since that date.
2.7 TAXES.
(a) Each Seller has paid or caused to be paid all federal, state,
local, foreign, and other taxes, including, without limitation, income taxes,
estimated taxes, alternative minimum taxes, excise taxes, sales taxes, use
taxes, value-added taxes, gross receipts taxes, franchise taxes, capital stock
taxes, employment and payroll-related taxes, withholding taxes, stamp taxes,
transfer taxes, windfall profit taxes, environmental taxes and property taxes,
whether or not measured in whole or in part by net income, and all deficiencies,
or other additions to tax, interest, fines and penalties (collectively,
"Taxes"), required to be paid by it with respect to the Business through the
date hereof.
(b) U.K. TAXES GENERAL.
(i) None of the Subject Assets of that part of the business
currently carried on in the United Kingdom by Rhetorex (the "U.K.
Business") are subject to an outstanding Inland Revenue charge as defined
in section 237 Inheritance Tax ▇▇▇ ▇▇▇▇.
(ii) No circumstances exist, or but for section 204(6)
Inheritance Tax Act 1984 would exist, such that a power of sale could be
exercised in relation to any of the Subject Assets of the U.K. Business
pursuant to section 212 Inheritance Tax Act 1984 (contingent liability of
transferee for unpaid inheritance tax).
(iii) There is no instrument which is necessary to establish
each of the Sellers' title to any of the Subject Assets of the U.K.
Business pursuant to this Agreement which is liable to stamp duty in the
United Kingdom but which has not been duly stamped or which would attract
stamp duty if brought within the United Kingdom.
(c) U.K. VALUE ADDED TAX ("VAT").
(i) Rhetorex is a registered and taxable person for the
purposes of the VAT ▇▇▇ ▇▇▇▇ in respect of the U.K. Business.
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(ii) So far as Rhetorex is aware none of the Subject Assets
of the U.K. Business is an asset to which Part XV of the Value Added Tax
Regulations 1995 (adjustments to the deductions of input tax on capital
items) applies.
(iii) So far as Rhetorex is aware, it is not approved for the
purposes of the Customs Duties (Deferred Payment) Regulations 1976
(deferral of duty on imports).
(iv) Neither Rhetorex nor any member of their VAT group has
made an election pursuant to the provisions of paragraph 2 Schedule 10 of
the VAT ▇▇▇ ▇▇▇▇ in respect of the Property and Rhetorex undertakes that
neither it nor any member of its VAT group will make any such election
prior to Closing;
(d) U.K. TAXATION AND EMPLOYEES.
(i) None of Rhetorex's employees to be transferred to the
Purchaser have any interest in or right to any readily convertible asset
provided by Rhetorex prior to Closing (as defined in section 203F Income
and Corporation Taxes Act 1988) in respect of which so far as Rhetorex is
aware the Buyers will have a liability to account for income tax under Pay
As You Earn ("PAYE") or national insurance contributions in the three
months following Closing.
(ii) Rhetorex has properly operated the U.K. PAYE and
National Insurance systems relating to the U.K. Business and has deducted
tax as required by U.K. law from all payments to or treated as made to or
benefits provided for Rhetorex's employees and ex-employees and consultants
and has duly accounted to the Inland Revenue and/or the Department of
Social Security (as the case may be) for tax so deducted and contributions
payable. Each of the Sellers has maintained and retained such books and
records relating to PAYE and to national insurance contributions as it is
required to maintain and retain.
(e) U.K. CAPITAL ALLOWANCES CLAUSE.
(i) The parties agree that, as soon as practicable following
Closing, they will agree an apportionment of the Purchase Price to be
attributed to those Subject Assets of the U.K. Business which constitute
machinery and plant for the purposes of Capital Allowances Act 1990 and the
proportion which represents fixtures and shall execute an election under
Section 59B if appropriate.
2.8 ACCOUNTS RECEIVABLE. The Receivables represent valid obligations
arising from sales actually made or services actually performed by Sellers in
the ordinary course of the Business and are or will be at the Closing valid and
enforceable claims and subject to no set off or counterclaim.
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2.9 INVENTORY. The Inventory is of quality and quantity usable or
saleable in the ordinary course of the Business, except for obsolete items and
items of below-standard quality that have been written down on the Sellers'
Books and Records to net realizable values. The Inventory as of September 30,
1998 not written off has been valued at the lower of cost or market in
accordance with Sellers' accounting practices and methods consistently applied.
The quantities of purchase commitments for Inventory are consistent with the
conduct of the Business in the ordinary course by Sellers. The Inventory is
located on the Leased Real Property, or, as set forth on SCHEDULE 2.9, on the
property of customers of the Business or at the facilities used by the Business
for manufacturing the products of the Business.
2.10 ORDINARY COURSE; ABSENCE OF CERTAIN CHANGES.
(a) Since September 30, 1998, Sellers have conducted the Business
only in the ordinary course and consistently with its prior practices. Except in
the ordinary course consistent with past practices, since September 30, 1998
there has not been with respect to the Business:
(i) any change in the Subject Assets or the Assumed
Liabilities or the Business taken as a whole, which change by itself or in
conjunction with all other such changes, has had, or could reasonably be
expected to have a material adverse effect on the Business taken as a
whole;
(ii) any cancellation of any material debt or claim owing to,
or waiver of any material right of, such Seller although there has been a
discussion regarding the foregoing, as disclosed on SCHEDULE 1.1(a)(v) with
respect to the Investments;
(iii) any mortgage, encumbrance or lien (other than Permitted
Encumbrances) placed on any of the Subject Assets which remains in
existence on the date hereof or will remain on the Closing Date;
(iv) any material liabilities related to customers or
suppliers of the Business that are not set forth on the Sellers' Books and
Records as of September 30, 1998 or incurred in the ordinary course of the
Business since that date;
(v) any damage, destruction or loss, whether or not covered
by insurance, that had or could reasonably be expected to have a material
adverse effect with respect to the Business;
(vi) any labor trouble or claim of unfair labor practices
involving the Business; any change in the compensation payable or to become
payable by Sellers to any of its officers, employees, agents or independent
contractors engaged in employment or activities related to the Business,
other than normal
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merit increases in accordance with its usual practices and the December 1,
1998 focal review date, or any bonus payment or arrangement made to or with
any of such officers, employees, agents or independent contractors;
(vii) other than the Chief Financial Officer of the Business,
who resigned his position as of October 9, 1998, any change with respect to
the officers or management of Sellers engaged in employment or activities
related to the Business;
(viii) any obligation or liability incurred by Sellers to any
of its officers or employees engaged in employment or activities related to
the Business, or any loans or advances made by Sellers to any of its
officers or employees engaged in employment or activities related to the
Business, except normal compensation and expense allowances payable to
officers or employees;
(ix) any other transaction entered into by Sellers with
respect to the Business other than transactions in the ordinary course of
business;
(x) Since September 30, 1998, no Inventory has been sold or
disposed of, except in the ordinary course of the Business; or
(xi) any agreement or understanding whether in writing or
otherwise, for Sellers to take any of the actions specified in paragraphs
(i) through (x) above.
(b) Since September 30, 1998 there has not been with respect to the
Business, any change in accounting methods or practices, credit practices or
collection policies used by Sellers with respect to the Business.
2.11 BANKING RELATIONS. With respect to the Business, all of the
arrangements which either Seller has with any banking institution are completely
and accurately identified in SCHEDULE 2.11, indicating with respect to each of
such arrangements the type of arrangement maintained (such as checking account,
borrowing arrangements, safe deposit box, etc.).
2.12 INTELLECTUAL PROPERTY.
(a) Except as described in SCHEDULE 2.12, Sellers have exclusive
ownership of or a valid right to use to the full extent provided in the
Technology Transfer Agreement all patent, copyright, trade secret, trademark, or
other proprietary rights included in (i) the Trademarks, (ii) the Proprietary
Business Information, and (iii) the rights assigned or licensed to Parent
pursuant to the Technology Transfer Agreement (collectively, the "Intellectual
Property"). To Sellers' knowledge, there are no claims or demands of any other
person pertaining to any of such Intellectual Property, excluding immaterial
assertions of rights which have not been presented in the form of a specific
claim or demand. No material proceedings
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have been instituted, or are pending or, to Sellers' knowledge, threatened,
which challenge the rights of either Seller in respect thereof, excluding
immaterial assertions of rights which have not been presented in the form of a
specific claim or demand.
(b) To the knowledge of Sellers, the licensors under the Licenses
have and had all requisite power and authority to grant the rights purported to
be conferred thereby.
(c) Each Seller has required all of its professional and technical
employees employed in connection with the Business, and other employees having
access to the Assigned Technical Information (as defined in the Technology
Transfer Agreement) or the Proprietary Business Information, to execute
agreements under which such employees are required to convey to such Seller
ownership of all inventions and developments conceived or created by them in the
course of their employment and to maintain the confidentiality of all such
information of such Seller. Neither of the Sellers has made any such information
available to any person other than employees of such Seller employed in
connection with the Business except pursuant to written agreements requiring the
recipients to maintain the confidentiality of such information and appropriately
restricting the use thereof, except for disclosures of information which are not
material in amount or kind. Neither of the Sellers has knowledge of any material
infringement by others of any of the Assigned Technical Information, the
Proprietary Business Information or the Trademarks.
(d) To Sellers' knowledge, the present and contemplated business,
activities and products of the Business do not infringe any Intellectual
Property of any other person. No proceeding charging Sellers with infringement
of any adversely held Intellectual Property has been filed or, to Sellers'
knowledge, is threatened to be filed. To Sellers' knowledge, there exists no
unexpired patent or patent application owned by any person (including, without
limitation, any affiliates of the Sellers, other than patents transferred or
licensed under the Technology Transfer Agreement) which includes claims that
would be infringed by products of the Business being produced or sold or
actively planned for production or sale at the Closing Date. To Sellers'
knowledge, Seller is not making unauthorized use of any confidential information
or trade secrets of any person, including without limitation any former employer
of any past or present employee of Seller. To Sellers' knowledge, the activities
of Sellers' employees in the Business on behalf of Sellers do not violate any
agreements or arrangements which any such employees have with former employers
or other persons.
2.13 CONTRACTS. Except for Contracts listed on SCHEDULE 1.1(a)(v) and the
Licenses listed on SCHEDULE 1.1(a)(xi) (true and complete copies of which
Contracts have been delivered to Buyer), neither of the Sellers nor any of their
affiliates is a party to or subject to any of the following:
(a) any plan or contract providing for bonuses, pensions, options,
stock purchases, deferred compensation, retirement payments, profit sharing,
collective bargaining or the like, or any contract or agreement with any labor
union other than these maintained by Octel or Lucent Technologies, Inc. or any
affiliate, which are identified on SCHEDULE 2.21;
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(b) any employment contract, contract for services, loan or
advance, severance arrangement, golden parachute or the like, other than those
by and between Octel and/or Lucent or any affiliate thereof and M. ▇▇▇ ▇▇▇▇▇▇
and Loka ▇▇▇▇▇ which such contracts, severance arrangements, golden parachutes
and the like between ▇▇. ▇▇▇▇▇▇ and Loka ▇▇▇▇▇ and Octel, Lucent and/or any
affiliate are identified on SCHEDULE 2.13(b);
(c) any contract or agreement for the purchase of any commodity,
material or equipment;
(d) any other contracts or agreements creating any obligations of
either Seller not specifically disclosed elsewhere under this Agreement;
(e) any contract or agreement providing for the purchase of all or
substantially all of its requirements of a particular product from a supplier;
(f) any contract or agreement which by its terms does not terminate
or is not terminable without penalty by either Seller or any successor or assign
within one year after the date hereof;
(g) any contract or agreement for the sale or lease of its products
not made in the ordinary course of business;
(h) any contract which, as a result of the execution, delivery and
performance of this Agreement and each agreement, document and instrument
executed and delivered by either Seller pursuant to this Agreement will give
rise to or permit any third party to exercise additional rights under any
contract or agreement to which either Seller is a party and which is included in
or related to the Subject Assets or the Assumed Liabilities, including, without
limitation, any contract which provides for the transfer of any intellectual
property, such as source code or other information, upon a change in control of
either Seller;
(i) any contract with any sales agent or distributor of products of
Sellers;
(j) any contract containing covenants limiting the freedom of
either of the Sellers or their respective assignees or successors to compete in
any line of business or with any person or entity;
(k) any contract or agreement for the purchase of any fixed asset;
(l) any license agreement (as licensor or licensee);
(m) any indenture, mortgage, promissory note, loan agreement,
guaranty or other agreement or commitment for the borrowing of money; or
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(n) any contract or agreement with any officer, employee, director
or stockholder of either Seller or with any persons or organizations controlled
by or affiliated with any of them;
except in each case, any such item that would require over the full term thereof
payments by or to either Seller of less than $25,000. The Contracts and Licenses
include all existing contracts, license and commitments of Sellers which are (i)
related to the Business, (ii) by which the Subject Assets may be bound or
affected, or (iii) which relate to or affect the Subject Assets, in each case
whether written or oral. Except as set forth in SCHEDULES 1.1(a)(v) and
1.1(a)(xi) neither Seller is or has received notice that it is in default or
breach of or is otherwise delinquent in performance under any such Contracts or
Licenses, and neither of the Sellers has any knowledge of conditions or facts
which with notice or passage of time, or both, would constitute a default.
2.14 LITIGATION. SCHEDULE 2.14 hereto lists all currently pending
litigation (including without limitation any arbitration proceedings) and
governmental or administrative proceedings or investigations relating to the
Business to which either Seller is a party. Except for matters described in
SCHEDULE 2.14, there is no litigation or governmental or administrative
proceeding or investigation pending or, to the knowledge of either Seller,
threatened against either Seller or any affiliate of such Seller which could
reasonably be expected to have any adverse effect on the Subject Assets or the
Business taken as a whole or which would prevent or hinder the consummation of
the transactions contemplated by this Agreement. With respect to each matter set
forth therein, SCHEDULE 2.14 sets forth a description of the matter, the forum
(if any) in which it is being conducted, the parties thereto and the type and
amount of relief sought.
2.15 COMPLIANCE WITH LAWS. Except as set forth in SCHEDULE 2.15 each
Seller is in compliance in all material respects with all applicable statutes,
ordinances, orders, judgments, decrees and rules and regulations promulgated by
any federal, state, municipal or other governmental authority which apply to
such Seller with respect to the conduct of the Business, and such Seller has not
received notice of a violation or alleged violation of any such statute,
ordinance, order, rule or regulation. Neither Seller knows of any pending or
threatened change of any laws, ordinances or regulations which could reasonably
be expected to have a material adverse effect on the Subject Assets and the
Business taken as a whole.
2.16 WARRANTY OR OTHER CLAIMS. Except as disclosed in SCHEDULE 2.16, there
are no existing or, to the Seller's knowledge, threatened product liability,
warranty, price redetermination or renegotiation or other similar claims with
respect to the Business, or any facts upon which a material claim of such nature
could be based, against either of the Sellers or their products for products or
services which are defective or fail to meet any product or service warranties.
2.17 POWERS OF ATTORNEY. With respect to the conduct and operations of the
Business, neither of the Sellers has granted powers of attorney which are
presently outstanding.
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2.18 PERMITS; BURDENSOME AGREEMENTS. SCHEDULE 2.18 lists all Governmental
Permits necessary in order for Sellers to conduct the Business as now being
operated, which Governmental Permits are required by currently effective laws,
rules or regulations. Sellers have obtained all such Governmental Permits, which
are valid and in full force and effect, and are operating in compliance
therewith. Except as disclosed in SCHEDULE 2.18 or in any other Schedule hereto,
neither of the Sellers is subject to or bound by any judgment, decree or order
which could reasonably be expected to have an adverse effect on the Subject
Assets and the Business taken as a whole.
2.19 CORPORATE RECORDS; COPIES OF DOCUMENTS. Each Seller has made, or upon
request will make, available for inspection and copying by Buyer and its counsel
complete and correct copies of the Books and Records, the Excluded Records and
any documents referenced in the Schedules delivered to Buyer pursuant to this
Agreement.
2.20 RELATED TRANSACTIONS. Neither of the Sellers, nor Lucent Technologies
Inc., owns directly or indirectly on an individual or joint basis any equity
interest in Dialogic Corporation, Natural Microsystems, Bicom or Acculab
Limited, except for any such indirect interests, if any, that may be held by or
through the Lucent Foundation, Lucent Venture Partners or the New Ventures
Group.
2.21 EMPLOYEE BENEFIT PROGRAMS.
(a) SCHEDULE 2.21 lists every Employee Program (as defined below)
that either Seller currently maintains, contributes to or under which it has any
liability. With respect to each such Employee Program, Sellers have been made
available to Buyer true and complete copies of the most recent summary plan or
other written description.
(b) Each Employee Program which has ever been maintained by either
Seller or any Affiliate with respect to any employees of Seller engaged in
employment related to the Business and which has at any time been intended to
qualify under Section 401(a) or 501(c)(9) of the Code has received a favorable
determination or approval letter from the Internal Revenue Service ("IRS")
regarding its qualification under such section or (with respect to certain
voluntary employee beneficiary associations) has timely applied for such an
approval letter which is pending as of the date hereof).
(c) Except as described in SCHEDULE 2.21, no Employee Program
maintained by the Sellers or any Affiliate with respect to any employees of
Seller engaged in employment related to the Business (i) that is subject to
title IV of ERISA (other than a Multiemployer Plan, as defined in Section 3(37)
of ERISA) has any "unfunded benefit liabilities" within the meaning of ERISA
Section 4001(a)(18), or (ii) fails to comply with any provision of ERISA, other
applicable law, or any agreement which, in the case of either (i) or (ii) could
subject the Buyer to any material liability either directly or indirectly
(including, without limitation, through any obligation of indemnification or
contribution) for any damages, penalties, or taxes, or any other loss or
expense. Neither the Sellers nor any Affiliate has ever maintained a
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Multiemployer Plan, covering any employees of Seller engaged in employment
related to the Business. None of the Employee Programs ever maintained by the
Sellers or any Affiliate has ever provided health care or any other non-pension
benefits to any employees of either Seller engaged in employment related to the
Business after their employment is terminated (other than as required by part 6
of subtitle B of title I of ERISA) or has ever promised to provide such
post-termination benefits.
(d) For purposes of this section:
(i) "Employee Program" means, in respect of any employee of
the Business, each "employee benefit plan," as defined in Section 3(3) of
ERISA (including any "multiemployer plan" as defined in Section 3(37) of
ERISA) and each profit-sharing, bonus, stock option, stock purchase, stock
ownership, pension, retirement, severance, deferred compensation, excess
benefit, supplemental unemployment, post-retirement medical or life
insurance, welfare or incentive plan, or sick leave, long-term disability,
medical, hospitalization, life insurance, other insurance plan, or other
employee benefit plan program or arrangement, whether written or unwritten,
qualified or non-qualified, funded or unfunded, maintained or contributed
to by either Seller.
(ii) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides (or has promised to provide) benefits
under such Employee Program, or has any obligation (by agreement or under
applicable law) to contribute to or provide benefits under such Employee
Program, or if such Employee Program provides benefits to or otherwise
covers employees of such entity, or their spouses, dependents, or
beneficiaries.
(iii) An entity is an "Affiliate" of Sellers if it would have
ever been considered a single employer with such Seller under ERISA Section
4001(b) or part of the same "controlled group" as such Seller for purposes
of ERISA Section 302(d)(8)(C).
2.22 ENVIRONMENTAL MATTERS.
(a) In connection with the operation of the Business conducted on
the Leased Premises, except as set forth in SCHEDULE 2.22 or as otherwise
permitted by law, (i) neither Seller has ever generated, transported, used,
stored, treated, disposed of, or managed any Hazardous Substance (as defined
below); (ii) no Hazardous Substance (as defined below) has ever been spilled,
released, discharged, or disposed of by either Seller, or used by either Seller,
or to Sellers' knowledge is currently located in the soil or groundwater on the
Leased Premises; (iii) no Hazardous Substance has ever been transported by or
for either Seller for treatment, storage, or disposal at any other place; and
(iv) in connection with the presence of any Hazardous Substance, to Seller's
knowledge no lien has ever been imposed by any governmental agency on any
property, facility, machinery, or equipment owned, operated, leased, or used by
either Seller.
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(b) In connection with the operation of the Business conducted on
the Leased Premises, except as set forth, in SCHEDULE 2.22, (i) neither Seller
has ever violated, any Environmental Law (as defined below) or, to Sellers'
knowledge has any material liability under, any Environmental Law; (ii) each
Seller is presently in compliance with all applicable Environmental Laws in all
material respects; (iii) neither Seller has ever entered into or been subject to
any judgment, consent decree, compliance order, or administrative order with
respect to any environmental or health and safety matter or received any request
for information, notice, demand letter, administrative inquiry, or formal or
informal complaint or claim with respect to any environmental or health and
safety matter or the enforcement of any Environmental Law; and (iv) neither
Seller has any knowledge or reason to know that any of the items enumerated in
clause (iii) of this subsection will be forthcoming.
(c) Except as set forth in SCHEDULE 2.22, to Sellers knowledge, the
Leased Premises do not contain any asbestos or asbestos-containing material, any
polychlorinated biphenyls (PCBs) or equipment containing PCBs, or any urea
formaldehyde foam insulation.
(d) Each Seller has provided or made available to Buyer copies of
all documents, records, and information maintained by such Seller for regulatory
purposes concerning any environmental or health and safety matter relevant to
such Seller and that relates to the operations of the Business, whether
generated by such Seller or others and given to such Seller, including, without
limitation, environmental audits, environmental risk assessments, site
assessments, documentation regarding off-site disposal of Hazardous Substances,
spill control plans, and reports, correspondence, permits, licenses, approvals,
consents, and other authorizations related to environmental or health and safety
matters issued by any governmental agency.
(e) For purposes of this Section 2.22, (i) "Hazardous Substance"
means any substance or material that is regulated under any Environmental Law or
is deemed by any Environmental Law to be "hazardous," "toxic," or "contaminant,"
"waste," a source of contamination or a pollutant; (ii) "Environmental Law"
shall mean any environmental or health and safety-related law, regulation, rule,
ordinance, or by-law at the foreign, federal, state, or local level, whether
existing as of the date hereof, previously enforced, or subsequently enacted;
and (iii) "Seller" shall mean and include each Seller and any affiliates of such
Seller for whose conduct such Seller is or may be held responsible under any
Environmental Law.
2.23 DISCLOSURE. The representations, warranties and statements contained
in this Agreement and in the certificates, exhibits and schedules delivered by
Sellers pursuant to this Agreement to Buyer do not contain any untrue statement
of a material fact, and, when taken together, do not omit to state a material
fact necessary in order to make such representations, warranties or statements
not misleading in light of the circumstances under which they were made. To
Sellers' knowledge there are no facts which would reasonably by likely to have a
material adverse affect on the Subject Assets and the Business taken as a whole
which have not
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been specifically disclosed herein or in a Schedule furnished herewith, other
than general economic conditions affecting Sellers' industry as applicable to
the Business.
2.24 EMPLOYEES; LABOR MATTERS. With respect to the Business, Sellers
employs 101 full-time employees, one part-time employee and no temporary
employees . Sellers contract with employment agencies for contract workers;
approximately 10 contract workers currently provide services to the Business.
Sellers generally enjoy good employer-employee relationships. None of the
employees is covered by any union, collective bargaining or other similar labor
agreement, nor is either Seller engaged in the negotiation of any of the same,
nor has either Seller received notice from any union of a request to negotiate
any of the same. Except as set forth on SCHEDULE 2.24, neither Seller has any
policy, practice, plan or program of paying severance pay or any form of
severance compensation in connection with the termination of employment. There
is no requirement for a work permit in relation to the employment of any of the
employees in the Business and, other than as set forth on SCHEDULE 1.13, no such
employee has given notice to terminate his contract of employment or is under
notice of termination. No person has a right to return to work or to be
reinstated or reengaged in the Business.
2.25 CUSTOMERS, DISTRIBUTORS AND SUPPLIERS. SCHEDULE 2.25(a) lists any
customer, representative or distributor of the Business (whether pursuant to a
commission, royalty or other arrangement) (collectively, the "Customers and
Distributors"). SCHEDULE 2.25(b) is a true and complete list of the suppliers of
the Business (the "Suppliers").
2.26 PURCHASE COMMITMENTS. SCHEDULE 2.26 lists, as of December 11, 1998,
all commitments for the purchase or lease by Sellers of raw materials, parts,
equipment, components, products or services to be used in connection with the
Business.
2.27 REQUIRED CONSENTS. SCHEDULE 2.27 lists all of the Contracts and
whether (i) such Contracts require consent to permit them to be assigned to
Buyer, (2) such Contracts are silent on whether consent is required or (3) such
Contracts do not require consent to permit them to be assigned to Buyer.
2.28 ADEQUACY OF SUBJECT ASSETS. Except for the Excluded Assets set forth
in Section 1.1(b)(ii)-(viii), the Subject Assets, the Nonassignable Assets and
the rights granted to Buyer under the Technology Transfer Agreement and the
Transition Services Agreement represent all of the properties and assets used by
Sellers to operate the Business on or prior to the Closing Date. In the event
this Section 2.28 is breached because Sellers have failed to identify and
transfer any assets or properties used in the Business, such breach shall be
deemed cured if Sellers promptly transfer such properties or assets to Buyer and
Buyer shall have no further remedy with respect thereto.
2.29 YEAR 2000 READINESS.
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(a) PRODUCTS OF THE BUSINESS. The products of the Business do not
use any 2 or 4 digit calendar codes so as to effect whether or not any such
products are Year 2000 Compliant.
(b) INTERNAL SYSTEMS AND OPERATIONS. Except as set forth in
SCHEDULE 2.29(b), all material internal systems used by or on behalf of the
Sellers in the operation and management of the Business and that are being
transferred to Buyer, including without limitation financial management and
accounting, manufacturing, order processing, distribution, and similar systems
used in operations, are Year 2000 Compliant.
(c) THIRD PARTIES. Sellers have made the inquiries and
investigation as to the Year 2000 Compliance of all third parties as set forth
in SCHEDULE 2.29(c) and have received responses thereto, which responses are set
forth in SCHEDULE 2.29(c).
(d) DEFINITION. For purposes of this Agreement, "Year 2000
Compliant" shall mean, as to any product (including without limitation
software), service or system, (i) that such product, service or system shall
operate in the same manner during and after January 1, 2000 (without limitation
as to time); and (ii) record, process, store and present data containing dates
in the Year 2000, and thereafter (without limitation as to time) in the same
manner as data containing dates prior to the Year 2000.
SECTION 3. COVENANTS OF SELLERS, BUYER AND PARENT.
3.1 MAKING OF COVENANTS AND AGREEMENTS. Each of Sellers, Buyer and Parent
hereby make their respective covenants and agreements set forth in this Section
3.
3.2 NOTICE OF DEFAULT. Promptly upon the occurrence of, or promptly upon
any of the Sellers, Buyer or Parent becoming aware of the impending or
threatened occurrence of, any event which would cause or constitute a breach or
default, or would have caused or constituted a breach or default had such event
occurred or been known to any of the Sellers, Buyer or Parent prior to the date
hereof, of any of the representations, warranties or covenants of any of the
Sellers, Buyer or Parent contained in or referred to in this Agreement or in any
Schedule or Exhibit referred to in this Agreement, each of the Sellers, Buyer or
Parent shall give detailed written notice thereof to Buyer and Parent or
Sellers, as the case may be.
3.3 CONSUMMATION OF AGREEMENT. Each of Sellers, Buyer or Parent shall use
their commercially reasonable efforts to perform and fulfill all conditions and
obligations on their or any of their affiliates' parts to be performed and
fulfilled under this Agreement, the Technology Transfer Agreement and the
Transition Services Agreement.
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3.4 COOPERATION OF SELLERS.
(a) Each of Sellers, Buyer or Parent shall cooperate with all
reasonable requests of Buyer and Buyer's counsel or Sellers and Sellers'
counsel, as the case may be, in connection with the consummation of the
transactions contemplated hereby.
(b) Each Seller shall use their commercially reasonable efforts to
cooperate with Buyer, from time to time after the Closing, at the request of
Buyer and without further consideration, to the extent such cooperation is
required by Buyer to enable Buyer, at Buyer's expense, to complete a full audit
of the Business.
3.5 NON-COMPETITION.
(a) As a material inducement to Buyer to enter into this Agreement
and consummate the transactions contemplated hereby, each of the Sellers and
Lucent agrees, on behalf of themselves and on behalf of their affiliates, that,
for two (2) years after the Closing (the "Non-Compete Period"), it will not
engage in an Acquisition of or with Dialogic Corporation, Natural Microsystems
Corporation, Bicom Inc. or Acculab Limited.
(b) If, during the Non-Compete Period, Lucent or any of its
affiliates engages in an Acquisition with an entity that is partially engaged in
a business that competes with the Business (a "Competitive Business"), then
Lucent, on behalf of itself and its affiliates, hereby agrees to consider any
offer from Buyer to purchase that portion of the business so acquired that
constitutes a Competitive Business.
(c) Sellers and their affiliates agree that they will not use any
of the assets retained by Sellers pursuant to Sections 1b(vi)(1), (2), (3) nor
the brand name "Computer Telephony Products" to make, market or sell board
products having features substantially the same as features of the current
products of the Business or products under development by the Business as of the
Closing Date.
"Acquisition" shall be defined as acquiring by merger, purchase of assets
or otherwise, or the acquisition of a controlling interest.
3.6 NO SOLICITATION OF EMPLOYEES. Neither Seller nor any of their
respective representatives or affiliates will at any time during the one (1)
year period after the Closing, directly or indirectly, hire, solicit or accept
for hire the employment of any person who, at the time of the Closing, was an
employee of either of the Sellers in the Business being sold pursuant to this
Agreement. The term "solicit the employment" shall not be deemed to include
generalized searches for employees through media advertisements, employment
firms or otherwise. This restriction shall not apply to any employee of the
Business whose employment with the Buyer is involuntarily terminated by the
Buyer after the Closing. Sellers agree to give notice of this provision to (i)
the employees of Octel, (ii) Lucent Technologies Inc.'s Human Resources
organization and (iii) all recruiters, and headhunters or recruiting, employment
and
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executive search firms or other similar types of organizations that are
currently or that in the future are engaged by Sellers or any of their
affiliates. Sellers further agree not to pay any incentive fees, referral
bonuses or any similar types of compensation to any of Seller's employees in the
event that any employee of the Business employed by Buyer is hired by Sellers
after the Closing.
3.7 CONFIDENTIALITY. Sellers and Buyer agree that the terms and
conditions of the Confidentiality Agreement dated September 28, 1998, by and
between Buyer and Lucent Technologies Inc. shall survive for a period of three
years after the Closing.
3.8 TAX RETURNS. To the extent reasonably necessary to the Buyer's
compliance with federal, state, local and foreign tax laws, from and after the
Closing each Seller shall provide Buyer with reasonable access to all books and
records with respect to the Business.
3.9 BANK ACCOUNTS. Immediately following the Closing, Sellers agree to
eliminate the signing authority of Sellers and any officer or other agent or
representative of Sellers to each of Sellers' bank or similar accounts
established with respect to the Business that are transferred to Buyer.
3.10 PAYMENTS TO EMPLOYEES. In addition to the Purchase Price, in
connection with the consummation of the transactions contemplated hereby and as
an inducement to employees of the Business to be hired by Buyer, Buyer agrees to
make certain sign on, retention and performance payments to employees of the
Business in the aggregate amount of $2,000,000 such payments shall be made at
such times and in such amounts and to such employees as shall be determined by
Buyer in its sole and absolute discretion.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER.
4.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material inducement to
Sellers to enter into this Agreement and consummate the transactions
contemplated hereby, each of Buyer and Parent, jointly and severally, hereby
makes the representations and warranties to Sellers contained in this Section 4.
4.2 ORGANIZATION OF BUYER AND PARENT.
(a) (i) BTGP is a corporation duly organized, validly existing
and in good standing under the laws of Delaware with full corporate power to own
or lease its properties and to conduct its business in the manner and in the
places where such properties are owned or leased or such business is conducted
by it.
(ii) BTEUK is a corporation duly organized under the laws of
the United Kingdom with full corporate power to own or lease its properties
and to conduct
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its business in the manner and in the places where such properties are
owned or leased or such business is conducted by it.
(b) Parent is a corporation duly organized, validly existing and in
good standing under the laws of Massachusetts with full corporate power to own
or lease its properties and to conduct its business in the manner and in the
places where such properties are owned or leased or such business is conducted
by it.
4.3 AUTHORITY OF BUYER AND PARENT. Each of Buyer and Parent has all
necessary corporate power and authority to enter into this Agreement and each
agreement, document and instrument to be executed and delivered by Buyer or
Parent pursuant to this Agreement and to carry out the transactions contemplated
hereby. The execution, delivery and performance by Buyer and Parent of this
Agreement and each such other agreement, document and instrument have been duly
authorized by all necessary corporate action of Buyer and Parent and no other
action on the part of Buyer or Parent is required in connection therewith. This
Agreement and each other agreement, document and instrument executed and
delivered by Buyer or Parent pursuant to this Agreement constitute, or when
executed and delivered will constitute, valid and binding obligations of Buyer
or Parent enforceable in accordance with their terms, except to the extent that
enforcement of the rights and remedies created hereby and thereby may be
affected by bankruptcy, reorganization, moratorium, insolvency and similar laws
of general application affecting the rights and remedies of creditors and by
general equity principles. The execution, delivery and performance by Buyer and
Parent of this Agreement and each such agreement, document and instrument:
(i) does not and will not violate any provision of the
organization documents or by-laws of Buyer or Parent;
(ii) does not and will not violate any applicable law, order,
judgment, decree, rule or regulation of any court or any governmental body
having jurisdiction over Buyer or Parent or require Buyer or Parent to
obtain any approval, consent or waiver of, or make any filing with, any
person or entity (governmental or otherwise) which has not been obtained or
made except for any filings required to be made under ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976 as amended; and
(iii) does not and will not result in a breach of, constitute
a default under, accelerate any obligation under, give rise to a right of
termination of, or permit any third party to exercise any additional rights
under, any indenture or loan or credit agreement or any other agreement,
contract, instrument, mortgage, lien, lease, permit, authorization, order,
writ, judgment, injunction, decree, determination
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or arbitration award to which Buyer or Parent is a party or by which the
property of Buyer or Parent is bound or affected, except in each case (i),
(ii) or (iii) which would not have a material adverse effect on the
business of Buyer and Parent.
4.4 LITIGATION. There is no litigation or governmental or administrative
proceeding or investigation pending or, to its knowledge, threatened against
Buyer or Parent which would prevent or hinder the consummation of the
transactions contemplated by this Agreement.
4.5 BROKERS. Neither Buyer nor Parent has engaged any broker, investment
banker, financial advisor or other person in respect of which either of the
Sellers or any of their respective affiliates would be responsible for or
obligated in respect of the payment of any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement, and Buyer or Parent agree to pay any such fees
and expenses, if any.
SECTION 5.A U.K. VAT MATTERS.
5.A.1 TRANSFER OF A GOING CONCERN.
(a) All amounts expressed in this Agreement to be payable by the
Buyer are expressed exclusive of any VAT which may be chargeable thereon.
(b) The parties acknowledge and agree that the transfer of the
Subject Assets of the U.K. Business pursuant to this Agreement constitutes a
transfer of a business as a going concern for the purposes of Section 49 of the
VAT ▇▇▇ ▇▇▇▇ and Article 5 of the VAT (Special Provisions) Order 1995 (the
"Special Provisions Order"), and accordingly the transfer of the Subject Assets
of the U.K. Business is neither a supply of goods nor a supply of services for
the purposes of U.K. VAT.
(c) The parties agree to use all their reasonable endeavors to
secure that the sale of the Subject Assets of the U.K. Business is treated as
neither a supply of goods nor a supply of services for VAT purposes.
5.A.2 EFFECT OF CERTAIN REPRESENTATIONS.
(a) Notwithstanding Section 5.A.1(b) and 5.A.1(c), if H.M. Customs
& Excise subsequently determine (the "Determination") that Rhetorex is obliged
to account for VAT on the transfer of the Business, Rhetorex shall issue a valid
VAT invoice in respect thereof against which the Buyer shall pay to Rhetorex by
way of additional consideration the amount of VAT chargeable on the transfer of
the Subject Assets pursuant to this Agreement.
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(b) Rhetorex hereby undertakes to the Buyer that, at the date of
Closing, Rhetorex shall deliver to the Buyer the VAT business records relating
to the Business. The Buyer shall preserve the records for such period as may be
required by law and shall allow Rhetorex, on reasonable notice, to inspect and
make copies of the same.
(c) If the Buyer disagrees with the Determination referred to in
Section 5.A.1(a) it may, within 21 business days of being notified by Rhetorex
of the Determination, by notice require Rhetorex to request H.M. Customs &
Excise to review the Determination, such notice to specify the reasons to be
advanced by Rhetorex when requesting the review. Rhetorex shall make that
request in writing forthwith upon receiving the notice.
(d) Rhetorex shall forthwith, upon receipt, forward to the Buyer
the Determination following any review made in accordance with Section 5.A.1(c).
If the Buyer is not satisfied with the Determination as reviewed, the Buyer
may by notice require the Seller, provided the Seller has been indemnified to
its reasonable satisfaction against any costs, expenses or losses which may be
incurred in so doing, to appeal against the Determination and the Seller shall
delegate the conduct of such appeal and of any further appeals entirely to the
Buyer. The Buyer shall indemnify the Seller against all reasonable costs and
expenses that he Seller may incur in respect of any such appeal. In any case
where an appeal cannot be made against the Determination without the Seller
accounting for the VAT the Seller shall deliver to the Buyer a valid VAT
invoice, against which the Buyer will pay to the Seller the amount of the VAT.
(e) Following the Determination, upon any review referred to in
Section 5.A.2(c), or if pursuant to Section 5.A.2(d) an appeal has been made
against the Determination, following the final determination of that appeal and
any further appeal, the Seller shall deliver to the Buyer a valid VAT invoice
against which the Buyer shall pay to the Seller the amount of VAT that has been
determined to be properly chargeable on the transfer of the Assets pursuant to
this Agreement, less any amount previously paid by the Buyer to the Seller under
Section 5.A.2(a) and/or Section 5.A.2(d). If the amount paid by the Buyer to the
Seller under Section 5.A.2(a) and/or Section 5.A.2(d) is greater than the amount
of VAT properly chargeable, the Seller shall refund the difference to the Buyer
together with interest at the rate or rates then current for refunds by H.M.
Customs & Excise of VAT.
5.A.3 BUYER VAT REPRESENTATIONS. BTEUK hereby represents to the Sellers
that:
(a) with effect from Closing, BTEUK is a taxable person for VAT
purposes;
and
(b) for the purposes of paragraph 5 of the Special Provisions
Order, BTEUK intends to use the Subject Assets of the U.K. Business in carrying
on the same kind of business as that currently carried on by Rhetorex with the
Subject Assets of the U.K. Business;
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SECTION 5. CONDITIONS.
5.1 CONDITIONS TO THE OBLIGATIONS OF BUYER. The obligation of Buyer to
consummate this Agreement and the transactions contemplated hereby are subject
to the fulfillment, prior to or at the Closing, of the following conditions
precedent:
(a) REPRESENTATIONS; WARRANTIES; COVENANTS. Each of the
representations and warranties of Sellers contained in Section 2 shall be true
and correct as though made on and as of the Closing except (i) as affected by
the transactions contemplated hereby and (ii) 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 and correct as of the
specified date; and Sellers shall, on or before the Closing, have performed all
of its obligations hereunder which by the terms hereof are to be performed on or
before the Closing.
(b) CERTIFICATE FROM OFFICERS. Each Seller shall have delivered to
Buyer a certificate of such Seller's President dated as of the Closing to the
effect that the statements set forth in paragraph (a) above in this Section 5.1
are true and correct.
(c) APPROVAL OF BUYER'S COUNSEL. All actions, proceedings,
instruments and documents required to carry out this Agreement and the
transactions contemplated hereby and all related legal matters contemplated by
this Agreement shall have been approved by ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ LLP and
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ as counsels for Buyer, and such counsel shall have
received on behalf of Buyer such other certificates, opinions, and documents in
form satisfactory to such counsel, as Buyer may reasonably require from Sellers
to evidence compliance with the terms and conditions hereof as of the Closing.
(d) OPINION OF COUNSEL. On the date of the Closing, Buyer shall
have received from a Corporate Counsel for Octel and from ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇,
counsel for Rhetorex, one or more opinions as of the date of the Closing, in the
forms attached hereto as EXHIBIT 5.1(d)(i) and EXHIBIT 5.1(d)(ii).
(e) NO LITIGATION. There shall have been no commencement by any
person or any federal, state or other governmental authority of litigation,
proceedings or other action against Buyer, Parent, Sellers or any of their
respective affiliates that seeks to enjoin, restrain, condition or prohibit
consummation of this Agreement.
(f) CONSENTS. Sellers shall have made, or shall have caused to be
made, all filings with and notifications of governmental authorities, regulatory
agencies and other governmental entities required to be made by Sellers or any
of their affiliates in connection with the execution and delivery of this
Agreement by Sellers or the performance by Sellers of the transactions
contemplated hereby; and Sellers shall have received all authorizations,
waivers, consents and permits, required from all third parties, including,
without limitation, applicable governmental authorities, regulatory agencies,
lessors, lenders and contract parties,
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required to permit the consummation by Sellers of the transactions contemplated
by this Agreement.
(g) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. All required ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ filings under
the HSR Act shall have been completed and all applicable time limitations under
such Act shall have expired without a request for further information by the
relevant federal authorities under such Act, or in the event of such a request
for further information, the expiration of all applicable time limitations under
the Act shall have occurred without the objection of such federal authorities.
(h) TRANSITION SERVICES AGREEMENT. Sellers and Buyer shall have
executed and delivered a Transition Services Agreement in substantially the form
of EXHIBIT 5.1(h) attached hereto.
(i) EMPLOYEE PROGRAMS. Sellers shall have taken all steps necessary
to provide Buyer with such pertinent data or information as the Buyer may
reasonably request with respect to each employee of either Seller offered
employment by Buyer in order to effect a transition of employment and employee
benefits as of the Closing Date.
(j) NO LIENS. Prior to or at the Closing, the Subject Assets shall
be free and clear of all liens, encumbrances and charges other than Permitted
Encumbrances.
(k) TECHNOLOGY TRANSFER AGREEMENT. The Sellers and their affiliates
and Buyer shall have executed and delivered a Technology Transfer Agreement in
substantially the form of EXHIBIT 5.1(K) hereto.
(l) LANDLORD CONSENTS AND/OR LICENSES. Buyer shall have received
from Sellers consents from the applicable landlords with respect to the
assignment by Sellers to Buyer of the leases concerning premises located in the
United States identified on SCHEDULE 2.5(b) or, with respect to those leases
concerning premises located in the United Kingdom, a license or licenses, as
applicable, from Sellers to use the premises in respect of such leases.
5.2 CONDITIONS TO OBLIGATIONS OF SELLERS. Sellers' obligation to
consummate this Agreement and the transactions contemplated hereby is subject to
the fulfillment, prior to or at the Closing, of the following conditions
precedent:
(a) REPRESENTATIONS; WARRANTIES; COVENANTS. Each of the
representations and warranties of Buyer and Parent contained in Section 4 shall
be true and correct in all respects as though made on and as of the Closing
except (i) as affected by the transactions contemplated hereby and (ii) to the
extent such representations and warranties are made as of a specified date, in
which case such representations and warranties shall be true and correct as of
the specified date. Buyer and Parent shall, on or before the Closing, have
performed all of its obligations hereunder which by the terms hereof are to be
performed on or before the Closing;
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and Buyer and Parent shall have delivered to Sellers a certificate of the
President or any Vice President of Buyer and Parent dated on the Closing to such
effect.
(b) APPROVAL OF SELLERS' COUNSEL. All actions, proceedings,
instruments and documents required to carry out this Agreement and the
transactions contemplated hereby and all related legal matters contemplated by
this agreement shall have been approved by a Corporate Counsel for Sellers, and
such counsel shall have received on behalf of Sellers such other certificates,
opinions and documents in form satisfactory to counsel for Sellers as Sellers
may reasonably require from Buyer or Parent to evidence compliance with the
terms and conditions hereof as of the Closing.
(c) NO LITIGATION. There shall have been no commencement by any
person or any federal, state or other governmental authority of litigation,
proceedings or other action against Buyer, Parent, Sellers or any of their
respective affiliates that seeks to enjoin, restrain, condition or prohibit
consummation of this Agreement.
(d) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. All required ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ filings under
the HSR Act shall have been completed and all applicable time limitations under
such Act shall have expired without a request for further information by the
relevant federal authorities under such Act, or in the event of such a request
for further information, the expiration of all applicable time limitations under
the Act without the objection of such federal authorities.
(e) OPINION OF COUNSEL. On the date of the Closing, Buyer shall
have received from ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ LLP, counsel for U.S. Buyer and
Parent, and from ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, counsel for U.K. Buyer, an opinion
as of the date of Closing, in the forms attached hereto as EXHIBIT 5.2(e)(i) and
EXHIBIT 5.2(e)(ii).
SECTION 6. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING.
6.1 SURVIVAL OF WARRANTIES. Each of the representations, warranties,
agreements, covenants and obligations herein or any other agreement entered into
in connection therewith are material, shall be deemed to have been relied upon
by the other party and shall survive the Closing regardless of any investigation
and shall not merge in the performance of any obligation by either party hereto.
Notwithstanding the foregoing, the representations and warranties shall only
survive for the period of time as to which indemnification is available under
Section 7. Neither Sellers nor Buyer shall have any liability whatsoever with
respect to a breach of any such representations and warranties after the
expiration of the period of time as to which indemnification is available under
Section 7.
6.2 COLLECTION OF ASSETS. Subsequent to the Closing, Buyer shall have the
right and authority to collect all Receivables and other items transferred and
assigned to it by Sellers hereunder and to endorse with the name of Sellers any
checks received on account of such Receivables or other items, and each Seller
agrees that it will promptly transfer or deliver to
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Buyer from time to time, any cash or other property that such Seller may receive
with respect to any Receivables of any character or any other items included in
the Subject Assets.
6.3 PAYMENT OF OBLIGATIONS. Sellers shall pay all of the Excluded
Liabilities in the ordinary course of business as they become due, and Buyer
shall pay all of the Assumed Liabilities in the ordinary course of business as
they become due.
SECTION 7. INDEMNIFICATION.
7.1 INDEMNIFICATION BY SELLERS. Sellers, jointly and severally, agree
subsequent to the Closing to indemnify and hold Buyer and its respective
subsidiaries and affiliates and persons serving as officers, directors, partners
or employees thereof (individually a "Buyer Indemnified Party" and collectively
the "Buyer Indemnified Parties") harmless from and against any damages,
liabilities, diminution in value, losses, fines, penalties, costs, and expenses
(including, without limitation, reasonable fees of counsel) of any kind or
nature whatsoever (whether or not arising out of third-party claims and
including all amounts paid in investigation, defense or settlement of the
foregoing) which may be sustained or suffered by any of them arising out of or
based upon any of the following matters:
(a) fraud, intentional misrepresentation or a deliberate or wilful
breach by Sellers of any of their representations or warranties under this
Agreement;
(b) any other breach of any representation or warranty of Sellers
under this Agreement or in any other agreement, or in any certificate, schedule
or exhibit delivered by them pursuant hereto or thereto;
(c) any breach of any covenant of Sellers under this Agreement, to
the extent not waived in writing by Buyer;
(d) all claims asserted under the Bulk Sales Act; and
(e) any failure by Sellers to perform and discharge any of the
Excluded Liabilities as set forth in this Agreement.
Notwithstanding anything contained herein to the contrary, for the purposes
of determining whether or not a breach of representation or warranty has
occurred under Section 7.1(b), all representations and warranties that are
qualified by "material," "in all material respects" or words of similar meaning
shall be read as if such qualifications were not present.
7.2 LIMITATIONS ON INDEMNIFICATION BY SELLERS. Notwithstanding the
foregoing, the right of Buyer Indemnified Parties to indemnification under
Section 7.1 shall be subject to the following provisions:
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(a) No indemnification shall be payable pursuant to Subsection
7.1(b) above to any Buyer Indemnified Party, unless the total of all claims for
indemnification pursuant to Section 7.1 shall exceed $275,000 in the aggregate,
whereupon the amount in excess of such claims shall be recoverable in accordance
with the terms hereof;
(b) No indemnification shall be payable to a Buyer Indemnified
Party with respect to claims asserted pursuant to Section 7.1(b) (exclusive of
claims for indemnification for a breach of any representation or warranty with
respect to title to the Subject Assets or any breach relating to or involving
fraud or intentional misrepresentation) after March 30, 2000 (the
"Indemnification Cut-Off Date"); provided, however, if prior to the relevant
date of expiration, a Buyer Indemnified Party shall have given written notice of
a claim for indemnification under Section 7.5, then the right to indemnification
with respect thereto shall remain in effect without regard to when such matter
shall have been finally determined and disposed of in accordance with this
Agreement, according to the date on which notice of the applicable claim is
given; and
(c) No indemnification shall be payable to a Buyer Indemnified
Party with respect to claims asserted pursuant to Subsection 7.1(b) (exclusive
of claims for a breach of any representation or warranty with respect to title
to the Subject Assets or any breach relating to or involving fraud or
intentional misrepresentation) to the extent that the aggregate amount payable
under Section 7.1(b) exceeds Seven Million Three Hundred and Fifty Thousand
Dollars ($7,350,000).
7.3 INDEMNIFICATION BY BUYER AND PARENT. Buyer and Parent jointly and
severally agree subsequent to the Closing to indemnify and hold each Seller and
its respective representatives, affiliates, subsidiaries and persons serving as
officers, directors, partners or employees thereof (individually a "Seller
Indemnified Party" and collectively the "Seller Indemnified Parties") harmless
from and against any damages, liabilities, diminution in value, losses, fines,
penalties, costs and expenses (including, without limitation, reasonable fees of
counsel) of any kind or nature whatsoever (whether or not arising out of
third-party claims and including all amounts paid in investigation, defense or
settlement of the foregoing) which may be sustained or suffered by any of them
arising out of or based upon any of the following matters:
(a) fraud, intentional misrepresentation or a deliberate or willful
breach by Buyer or Parent of any of their representations or warranties under
this Agreement;
(b) any other breach of any representation or warranty of Buyer or
Parent under this Agreement or in any other agreement, or in any certificate,
schedule or exhibit delivered by them pursuant hereto or thereto;
(c) any breach of any covenant of Buyer or Parent under this
Agreement to the extent not waived in writing by Sellers; and
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(d) any failure by Buyer to perform and discharge any of the
Assumed Liabilities as set forth in this Agreement.
Notwithstanding anything contained herein to the contrary, for the purposes
of determining whether or not a breach of representation or warranty has
occurred under Section 7.3(b), all representations and warranties that are
qualified by "material," "in all material respects" or words of similar meaning
shall be read as if such qualifications were not present.
7.4 LIMITATION ON INDEMNIFICATION BY BUYER AND PARENT. Notwithstanding
the foregoing, the right of Sellers Indemnified Parties to indemnification under
Section 7.3 shall be subject to the following provisions:
(a) No indemnification pursuant to Section 7.3(b) shall be payable
to any Seller Indemnified Party, unless the total of all claims for
indemnification pursuant to Section 7.3(b) shall exceed $275,000 in the
aggregate, whereupon the amount in excess of such claims shall be recoverable in
accordance with the terms hereof;
(b) No indemnification shall be payable to any Seller Indemnified
Party with respect to claims asserted pursuant to Section 7.3(b) above
(exclusive of any breach relating to or involving fraud or intentional
misrepresentation) after the Indemnification Cut-Off Date; provided, however, if
prior to the relevant date of expiration, a Seller Indemnified Party shall have
given written notice of a claim for indemnification under Section 7.5, then the
right to indemnification with respect thereto shall remain in effect without
regard to when such matter shall have been finally determined and disposed of in
accordance with this Agreement, according to the date on which notice of the
applicable claim is given;
(c) No indemnification shall be payable to any Seller Indemnified
Party with respect to claims asserted pursuant to Section 7.3(b) above
(exclusive of any breach relating to or involving fraud or intentional
misrepresentation) to the extent that the aggregate amount payable under Section
7.3(b) exceeds Seven Million Three Hundred and Fifty Thousand Dollars
($7,350,000).
7.5 NOTICE; DEFENSE OF CLAIMS. An indemnified party may make claims for
indemnification hereunder by giving written notice thereof to the indemnifying
party within the period in which indemnification claims can be made hereunder.
If indemnification is sought for a claim or liability asserted by a third party,
the indemnified party shall also give written notice thereof to the indemnifying
party promptly after it receives notice of the claim or liability being
asserted, but the failure to do so shall not relieve the indemnifying party from
any liability except to the extent that it is prejudiced by the failure or delay
in giving such notice. Such notice shall summarize the bases for the claim for
indemnification and any claim or liability being asserted by a third party.
Within 30 days after receiving such notice the indemnifying party shall give
written notice to the indemnified party stating whether it disputes the claim
for indemnification and whether it will defend against any third party claim or
liability at its own cost and expense. If the indemnifying party fails to give
notice that it
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disputes an indemnification claim within 30 days after receipt of notice
thereof, it shall be deemed to have accepted and agreed to the claim, which
shall become immediately due and payable. The indemnifying party shall be
entitled to direct the defense against a third party claim or liability with
counsel reasonably selected by it as long as the indemnifying party is
conducting a good faith and diligent defense. The indemnified party shall at all
times have the right to fully participate in the defense of a third party claim
or liability at its own expense directly or through counsel; provided, however,
that if the named parties to the action or proceeding include both the
indemnifying party and the indemnified party and the indemnified party is
advised that representation of both parties by the same counsel would be
inappropriate under applicable standards of professional conduct, the
indemnified party may engage separate counsel at the expense of the indemnifying
party. If no such notice of intent to dispute and defend a third party claim or
liability is given by the indemnifying party, or if such good faith, and
diligent defense is not being or ceases to be conducted by the indemnifying
party and written notice by the indemnified party is given to the indemnifying
party to such effect, the indemnified party shall have the right, at the expense
of the indemnifying party, to undertake the defense of such claim or liability
(with counsel selected by the indemnified party), and to compromise or settle
it, exercising reasonable business judgment if such claim is one that (i)
involves (and continues to involve) solely money damages or (ii) involves (or
continues to involve) claims for both money damages and equitable relief,
against the indemnifying party that cannot be severed, where the claims for
money damages are the primary claims asserted by a third party and the claims
for equitable relief are incidental to the claims for money damages. If the
third party claim or liability is one that by its nature cannot be defended
solely by the indemnifying party, then the indemnified party shall make
available such information and assistance as the indemnifying party may
reasonably request and shall cooperate with the indemnifying party in such
defense, at the expense of the indemnifying party.
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. The indemnifying party shall not, without the indemnified
party's prior written consent, 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
non-monetary relief against the indemnified party, and shall have the right to
settle any third-party claim involving money damages for which Sellers have not
assumed the defense pursuant to this Section 7.5 with the written consent of the
indemnifying party, which consent shall not be unreasonably withheld or delayed.
7.6 ADDITIONAL PROVISIONS. Amounts payable in respect to the parties
indemnification obligations shall be treated as an adjustment to the Purchase
Price, Buyer, Parent and Sellers agree to cooperate in the preparation of a
supplemental allocation of the
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Purchase Price under Section 1.9 and as required by Treasury Reg. ss.
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 an indemnifying party chooses
to defend or prosecute any third-party claim, each party 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. The amount of the indemnifying party's liability under this Agreement
shall be determined taking into account any applicable insurance proceeds
actually received by the indemnified party. The indemnification provided in this
Section 7 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
representations or warranties contained herein. Notwithstanding anything
contained in this Agreement to the contrary, no party shall be liable to the
other party for indirect, special, punitive, exemplary or consequential loss or
damage (including any loss of revenue or profit) for breach of any
representation or warranty contained in this Agreement, provided, however, the
foregoing shall not be construed to preclude recovery by the indemnified party
in respect of any losses directly incurred from third party claims. Both parties
shall use commercially reasonably efforts to mitigate their damages.
SECTION 8. MISCELLANEOUS.
8.1 BULK SALES LAW. Buyer waives compliance by Sellers with the
provisions of any applicable bulk sales, fraudulent conveyance or other law for
the protection of creditors (collectively, "Bulk Sales Act") in connection with
the transfer of the Subject Assets under this Agreement.
8.2 FEES AND EXPENSES. Each of the parties will bear its own expenses in
connection with the negotiation and the consummation of the transactions
contemplated by this Agreement, and no expenses of any party relating in any way
to the purchase and sale of the Subject Assets hereunder and the transactions
contemplated hereby, including without limitation legal, accounting or other
professional expenses of any party, shall be charged to or paid by any other
party.
8.3 GOVERNING LAW. This Agreement shall be construed under and governed
by the internal laws of the State of New York without regard to its conflict of
laws provisions.
8.4 NOTICES. Any notice, request, demand or other communication required
or permitted hereunder shall be in writing and shall be deemed to have been
given if delivered or sent by facsimile transmission, upon receipt, or if sent
by registered or certified mail or by a nationally recognized commercial
carrier, upon the sooner of the date on which receipt is acknowledged or the
expiration of three days after deposit in United States post office facilities
properly addressed with postage prepaid. All notices to a party will be sent to
the addresses
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set forth below or to such other address or person as such party may designate
by notice to each other party hereunder:
TO BUYER: BTGP, INC. OR BROOKTROUT TECHNOLOGY
EUROPE LIMITED
c/o Brooktrout Technology, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ATTENTION: ▇▇▇▇ ▇. ▇▇▇▇▇, President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: H. ▇▇▇▇▇ ▇▇▇▇▇▇, P.C.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, P.C.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
TO OCTEL OR RHETOREX: OCTEL COMMUNICATIONS CORPORATION
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Lucent Technologies, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: V.P. Corporate and Securities Law
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Any notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
8.5 ENTIRE AGREEMENT. This Agreement together with the other agreements
contemplated hereby, including the Schedules and Exhibits referred to herein and
therein and the other writings specifically identified herein and therein or
contemplated hereby, is complete, reflects the entire agreement of the parties
with respect to its subject matter, and supersedes all previous written or oral
negotiations, commitments and writings. No promises, representations,
understandings, warranties and agreements, express or implied, have been made by
any of the parties hereto except as referred to herein or therein or in such
Schedules and Exhibits or in such other writings; and all inducements to the
making of this Agreement relied upon by either party hereto have been expressed
herein or in such Schedules or Exhibits or in such other writings. Disclosure by
Seller on any one schedule to this Agreement shall be
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deemed disclosure on all other schedules to this Agreement for all purposes as
are evident from the nature of the disclosure being made.
8.6 ASSIGNABILITY; BINDING EFFECT. This Agreement shall be assignable by
Buyer to a corporation or partnership a limited liability company or other
entity controlling, controlled by or under common control with Buyer. Except as
set forth in the immediately preceding sentence, this Agreement may not be
assigned by Sellers or Buyer without the prior written consent of Buyer or
Sellers, as the case may be. This Agreement shall be binding upon and
enforceable by, and shall inure to the benefit of, the parties hereto and their
respective successors and permitted assigns. 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
reasonable commercial efforts to arrive at an accommodation that best preserves
for the parties the benefits and obligations of the offending provision.
8.7 CAPTIONS AND GENDER. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter,
as the context may require.
8.8 EXECUTION IN COUNTERPARTS. For the convenience of the parties and to
facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
8.9 AMENDMENTS. This Agreement may not be amended or modified, nor may
compliance with any condition or covenant set forth herein be waived, except by
a writing duly and validly executed by each party hereto, or in the case of a
waiver, the party waiving compliance.
8.10 PUBLICITY AND DISCLOSURES. As soon as practicable after the Closing
Date, Sellers and Buyers shall issue a press release substantially in the form
attached hereto as EXHIBIT 8.10. Neither Sellers nor Buyer shall, without the
approval of the other party, make any other 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 respective reasonable commercial 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 Federal Securities Law disclosure obligations.
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8.11 DISPUTE RESOLUTION.
(a) All disputes, claims, or controversies, 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 relating to this
Agreement or the negotiation, validity or performance hereof, that are not
resolved by mutual agreement shall be resolved solely and exclusively by binding
arbitration to be conducted before JAMS/Endispute, Inc. or its successor. The
arbitration shall be held in New York, New York before a single arbitrator and
shall be conducted in accordance with the rules and regulations promulgated by
JAMS/Endispute, Inc. unless specifically modified herein. The duty to arbitrate
shall extend to any affiliate, officer, employee, shareholder, principal, agent,
trustee in bankruptcy, subsidiary, third-party beneficiary or guarantor of a
party making or defending any claim which would otherwise be arbitrable
hereunder. Notwithstanding the foregoing, either party shall have the right to
proceed in court without prior arbitration for the limited purpose of seeking a
temporary or preliminary injunction so as to avoid immediate and irreparable
harm.
(b) The parties covenant and agree that the arbitration shall
commence within one hundred twenty (120) days of the date on which a written
demand for arbitration is filed by any party hereto. In connection with the
arbitration proceeding, the arbitrator shall have the power to order the
production of documents by each party and any third-party witnesses. In
addition, each party may take up to three depositions as of right, and the
arbitrator may in his or her discretion allow additional depositions upon good
cause shown by the moving party; however, the arbitrator shall not have the
power to order the answering of interrogatories or the response to requests for
admission. In connection with any arbitration, each party shall provide to the
other, no later than seven (7) business days before the date of the arbitration,
the identity of all persons that may testify at the arbitration and a copy of
all documents that may be introduced at the arbitration or considered or used by
a party's witness or expert. The arbitrator's decision and award shall be made
and delivered within six (6) months of the selection of the arbitrator. The
arbitrator's decision (i) shall set forth a reasoned basis for any award of
damages or finding of liability; (ii) may in appropriate circumstances include
injunctive relief; and (iii) may be continued and entered in any court. The
arbitrator shall not have power to award damages in excess of actual
compensatory damages and shall not multiply actual damages or award punitive
damages or any other damages that are specifically excluded under, or in excess
of any applicable damage limitations expressed in this Agreement, and each party
hereby irrevocably waives any claim to such damages. Notwithstanding the
foregoing, those matters arising under the Technology Transfer Agreement shall
be handled in accordance with the Technology Transfer Agreement.
(c) The parties covenant and agree that they will participate in
the arbitration in good faith and that they will share equally its costs, except
as otherwise provided herein. The arbitrator may in his or her discretion assess
costs and expenses (including the reasonable legal fees and expenses of the
prevailing party) against any party to a proceeding. Any party unsuccessfully
refusing to comply with an order of the arbitrators shall be liable for costs
and
44
49
expenses, including attorneys' fees, incurred by the other party in enforcing
the award. The provisions of this Section 8.11 shall be enforceable in any court
of competent jurisdiction.
(d) 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 without regard to its principles of conflicts of law.
(e) Except as provided in Sections 8.11(a) and (g), the parties
agree not to submit a dispute subject to this Agreement to any federal, state,
local or foreign court or arbitration association, except as may be necessary to
enforce the arbitration procedures of this Section 8.11 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.
(f) Except to its board of directors, officers, counsel and
accountants, neither party nor the arbitrator (except as required by the rules
of the JAMS/Endispute, Inc.) 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, the rules of any securities exchange or the NASD, as applicable, or as
necessary for financial and tax reports and audits.
(g) Notwithstanding anything to the contrary in this Section 8.11,
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. The party requesting such relief shall simultaneously
file a demand for arbitration of the dispute, and shall request the
JAMS/Endispute, Inc. to proceed under its rules for expedited hearing.
(h) If any part of this Section 8.11 is held to be unenforceable,
it shall be severed and shall not affect either the duty to arbitrate hereunder
or any other party of this Section 8.11.
8.12 CONSENT TO JURISDICTION. Each of the parties hereto irrevocably and
unconditionally consents to the exclusive jurisdiction of JAMS/Endispute, Inc.
to resolve all disputes, claims or controversies arising out of or relating to
(i) this Agreement or the negotiation, validity or performance hereof and
further consents to the jurisdiction of the courts of the State of New York for
the purposes of enforcing the arbitration provisions of Section 8.11 of this
Agreement. Each party further irrevocably waives any objection to proceeding
before JAMS/Endispute based upon lack of personal jurisdiction or to the laying
of venue and further irrevocably and unconditionally waives and agrees not to
make a claim in any court that arbitration before JAMS/Endispute, Inc. has been
brought in an inconvenient forum. Each of the parties hereto hereby consents to
service of process by registered mail at
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50
the address to which notices are to be given. Each of the parties hereto agrees
that its or his submission to jurisdiction and its or his consent to service of
process by mail is made for the express benefit of the other parties hereto.
8.13 THIRD PARTY BENEFICIARIES. Nothing herein expressed 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 action or other right
in excess of those existing without reference to the terms of this Agreement.
Nothing in this Agreement shall be construed as giving to any employee of the
Business, or any other individual, any right or entitlement under any Employee
Program, policy or procedure maintained by Buyer or Parent or any affiliate
thereof or by either Seller or an affiliate thereof, except as expressly
provided in such Employee Program, policy or procedure. No third party shall
have any rights under Section 502, 503 or 504 of ERISA or any regulations
thereunder because of this Agreement that would not otherwise exist without
reference to 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.
[THIS SPACE LEFT INTENTIONALLY BLANK]
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51
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date set forth above by their duly authorized
representatives.
BUYER:
BTGP, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Title: Vice President
-------------------------
and
BROOKTROUT TECHNOLOGY
EUROPE LIMITED
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Title: Vice President
-------------------------
PARENT:
BROOKTROUT TECHNOLOGY, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Title: Vice President
-------------------------
SELLERS:
OCTEL COMMUNICATIONS
CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
Title: Chief Operating Officer
-------------------------
RHETOREX EUROPE LIMITED
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
Title: Managing Director
-------------------------
52
By its execution below, Lucent agrees on behalf of itself and all of its
direct or indirect affiliates to be bound by the provisions of Sections 3.5 and
3.6 hereof.
LUCENT TECHNOLOGIES INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
Title: Chief Operating Officer
-------------------------
53
LIST OF EXHIBITS AND SCHEDULES
Schedules
---------
Schedule 1.1(a)(i) Inventory
Schedule 1.1(a)(ii) Fixed Assets
Schedule 1.1(a)(iii) Trademarks (U.S. & Foreign)
Schedule 1.1(a)(v) Contracts
Schedule 1.1(a)(ix) Information Management Systems
Schedule 1.1(a)(xi) Licenses
Schedule 1.2(a)(i) Trade Payables
Schedule 1.7 Consents to Assignment
Schedule 1.13 Employees
Schedule 2.4 Contravening Agreements, Documents, and Instruments
Schedule 2.5(b) Leased Real Property
Schedule 2.5(c) Personal Property
Schedule 2.9 Inventory Located at Customer Locations
Schedule 2.11 Banking Relations
Schedule 2.12 Intellectual Property
Schedule 2.13(b) Employment Related Contracts
Schedule 2.14 Litigation
Schedule 2.15 Compliance with Laws
Schedule 2.16 Warranty or Other Claims
Schedule 2.18 Governmental Permits
Schedule 2.21 Employee Benefit Programs
Schedule 2.22 Environmental Matters
Schedule 2.24 Employees; Labor Matters
Schedule 2.25(a) Customers and Distributors
Schedule 2.25(b) Suppliers
Schedule 2.26 Purchase Commitments
Schedule 2.27 Consents
Schedule 2.29(b) Year 2000 Compliance - Internal Systems and Operations
Schedule 2.29(c) Year 2000 Compliance - Third Parties
54
Exhibits
--------
Exhibit 1.5(a) Form of Agreement of Assumption of Liabilities
Exhibit 1.5(b) Form of Lease Assumption and Assignment (California, USA)
Exhibit 1.5(c) Form of License to Occupy Real Property (U.K.)
Exhibit 1.6(a) Form of U.S. Assignment and ▇▇▇▇ of Sale
Exhibit 1.6(b) Form of Trademark Assignment (U.S.)
Exhibit 5.1(d)(i) Form of Opinion of Counsel for Octel
Exhibit 5.1(d)(ii) Form of Opinion of Counsel for Rhetorex
Exhibit 5.1(h) Form of Transition Services Agreement
Exhibit 5.11(k) Form of Technology Transfer Agreement
Exhibit 5.2(e)(i) Form of Opinion of Counsel for BTGP
Exhibit 5.2(e)(ii) Form of Opinion of Counsel for BTEUK
[THE SCHEDULES AND EXHIBITS LISTED HAVE BEEN NOT BEEN FILED HEREIN. THE
REGISTRANT AGREES TO FURNISH SUPPLEMENTALLY A COPY OF ANY SUCH OMITTED ITEM TO
THE SECURITIES AND EXCHANGE COMMISSION UPON REQUEST.]
