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EX-99.1
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SHARE PURCHASE AGREEMENT
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among
SECURITY SERVICES PLC,
SECURICOR COMMUNICATIONS LIMITED,
3 NET HOLDINGS LIMITED,
SECURICOR 3 NET LIMITED
and
TELTREND INC.
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DATED AUGUST 28, 1997
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TABLE OF CONTENTS
SECTION PAGE
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ARTICLE I
DEFINITIONS AND TERMS
1.1 Specific Definitions 2
1.2 Other Terms 15
1.3 Other Definitional Provisions 15
ARTICLE II
PURCHASE AND SALE OF SHARES
2.1 Purchase and Sale of Shares 16
2.2 Purchase Price and Adjustment 16
(a) Purchase Price 16
(b) Preparation of Closing and Pro Forma Closing
Balance Sheets 16
(c) Review of and Resolution of Disputes Relating to
Closing and Pro Forma Closing Balance Sheets 17
(d) Access to Information and Participation in Audit 18
(e) Purchase Price Adjustment 18
(f) Purchase Price Allocation 19
2.3 Closing 19
(a) Closing Date and Location 19
(b) Closing Deliveries by Sellers 19
(c) Closing Deliveries by Teltrend 21
2.4 Certain Transfer Costs 22
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
3.1 Organization of Sellers 22
3.2 Authorization 22
3.3 Consents and Approvals 23
3.4 Noncontravention 23
3.5 Binding Effect 23
3.6 Brokers' Fees 23
3.7 Organization and Qualification of Company and
Subsidiaries 24
3.8 Capitalization of Company and Subsidiaries 24
3.9 Title to Shares and Capital of Subsidiaries 25
3.10 Financial Statements 25
3.11 Borrowing and Bank Facilities 27
3.12 Absence of Certain Changes 28
3.13 Litigation 29
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3.14 Personal Property 30
3.15 Intellectual Property 30
3.16 Real Property 32
3.17 General Tax Matters 34
3.18 U.K. Tax Matters 37
3.19 Compliance with Laws 44
3.20 Licenses and Permits 45
3.21 Suppliers 45
3.22 Customers 45
3.23 Environmental Matters 46
3.24 Inventory 47
3.25 Insurance 47
3.26 Material Contracts 48
3.27 U.K. Pension Schemes 49
3.28 Other Employee Benefits and Related Matters 50
3.29 Labor Matters 51
3.30 Guarantees 52
3.31 Powers of Attorney 52
3.32 Title Deeds 52
3.33 Intercompany Agreements 52
3.34 Accounts and Notes Receivable 53
3.35 Restrictions 53
3.36 Certain Business Practices 53
3.37 Miscellaneous 53
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TELTREND
4.1 Organization 53
4.2 Corporate Authorization 54
4.3 Binding Effect 54
4.4 Brokers' Fees 54
ARTICLE V
COVENANTS
5.1 Access Prior to Closing 54
5.2 Conduct of Business; Other Specific Covenants 55
5.3 Best Efforts 57
5.4 Continued Effectiveness of Representations and
Warranties/Covenants 57
5.5 Confidentiality 58
5.6 Public Announcements 58
5.7 Employee Benefit Plans 59
(a) Liability Under Seller Plans 59
(b) Transitional Access to Seller Plans 59
5.8 Further Assurances 60
5.9 Covenant Not to Compete 61
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5.10 No Shop Clause 61
5.11 Assignment of Certain Agreement 62
5.12 Securicor Name 62
5.13 Purchaser Names 62
5.14 Books and Records 62
5.15 Certain Covenants Regarding Representations and
Warranties 63
5.16 Set Off 64
5.17 Preparation of Financial Statements 64
5.18 Guarantees 64
5.19 Restrictive Trade Practices Act of 1976 65
5.20 Commercial Filings 65
5.21 Elimination of Certain Encumbrances 65
5.22 ▇▇▇▇▇ ▇▇▇▇▇ Financial Statements 65
5.23 Tax Elections for Purposes of U.S. Code Section 338 66
5.24 Settlement of Matters with Respect to ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇
▇.▇▇ ▇▇▇▇▇▇▇ Actions with Respect to NDL 66
5.26 Regulatory Fillings 66
5.27 3Net Australia Lease Arrangements 66
5.28 Certain Outstanding Powers and Arrangements 67
ARTICLE VI
CONDITIONS TO OBLIGATION OF TELTREND TO CLOSE
6.1 Representations and Warranties 67
6.2 Performance 67
6.3 Results of Operations; No Material Adverse Effect 67
6.4 Delivery of Documents 67
6.5 Consents; No Legal Obstruction 68
ARTICLE VII
CONDITIONS TO OBLIGATION OF SELLERS TO CLOSE
7.1 Representations and Warranties 68
7.2 Performance 69
7.3 Delivery of Documents 69
7.4 No Legal Obstruction 69
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ARTICLE VIII
TERMINATION
8.1 Termination 69
8.2 Effect of Termination 70
ARTICLE IX
INDEMNIFICATION AND SURVIVAL
9.1 Indemnification of Teltrend 70
9.2 Indemnification of Sellers 71
9.3 Foreign Currency Adjustments 72
9.4 Procedures for Indemnification 73
(a) Notice of Third Party Claims 73
(b) Legal Defense of Third Party Claims 73
(c) Settlement of Third Party Claims 73
(d) Other Claims 74
9.5 Indemnification Payments 74
9.6 Obligations Absolute 74
9.7 Remedies Cumulative 75
9.8 Exchange of Information 75
9.9 Contribution 75
9.10 Survival 76
9.11 Relationship to Tax Deed 76
ARTICLE X
MISCELLANEOUS
10.1 Written Agreement to Govern 76
10.2 Severability 77
10.3 Notices 77
10.4 Counterparts 78
10.5 Law to Govern 78
10.6 Successors and Assigns 78
10.7 Gender and Headings 78
10.8 Annexes 79
10.9 Waiver of Provisions 79
10.10 Expenses 79
10.11 Recitals 79
10.12 No Third Party Beneficiaries 80
10.13 Sellers Actions Under the Transaction Documents 80
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LIST OF ANNEXES
ANNEX TITLE
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Annex 1.1 Particulars of Sellers and the Company
Annex 1.2 Particulars of Teltrend
Annex 1.3 Form of Tax Deed
Annex 2.3(b)(xiii) Intellectual Property to be Assigned
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SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (the "Agreement") is made and entered into
this 28th day of August, 1997, by and among SECURITY SERVICES PLC, a company
incorporated in England and Wales the particulars of which are set forth on
Annex 1.1 hereto ("Securicor"), SECURICOR COMMUNICATIONS LIMITED, a company
incorporated in England and Wales the particulars of which are set forth on
Annex 1.1 hereto ("SECURICOR COMMUNICATIONS"), 3 NET HOLDINGS LIMITED, a
company incorporated in England and Wales the particulars of which are set
forth on Annex 1.1 hereto ("3Net HOLDINGS" and, together with Securicor and
Securicor Communications, the "Sellers"), SECURICOR 3 NET LIMITED, a company
incorporated in England and Wales the particulars of which are set forth on
Annex 1.1 hereto (the "COMPANY"), and TELTREND INC., a Delaware corporation
the particulars of which are set forth on Annex 1.2 hereto ("Teltrend").
PRELIMINARY STATEMENTS
A. Securicor is the direct or indirect parent holding company of each
of the other Sellers, the Company and each of the Subsidiaries (as defined
below). 3Net Holdings is the direct owner of 100% of the issued shares in the
capital of the Company and the direct owner of 100% of the issued capital stock
of Securicor 3Net Inc. ("3NET DELAWARE").
B. Securicor and the other Sellers desire to sell to Teltrend, and
Teltrend desires to purchase from Securicor and the other Sellers, the Company
and Subsidiaries (as defined below) by Securicor and Securicor Communications
causing 3Net Holdings to sell to Teltrend all of the issued shares of capital
stock of 3Net Delaware and all of the issued shares in the capital of the
Company. Securicor Communications and Securicor, as the direct and indirect
parent company, respectively, of 3Net Holdings have asked 3Net Holdings to
enter into this Agreement and are themselves entering into this Agreement in
consideration, among other things, of the execution and delivery hereof by
3Net Holdings.
C. This Agreement and the Ancillary Agreements (as defined below) set
forth the terms and conditions applicable to the aforementioned purchases and
sales.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement, the parties hereto hereby agree as
follows:
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ARTICLE I
DEFINITIONS AND TERMS
1.1 SPECIFIC DEFINITIONS. As used in this Agreement and in the Ancillary
Agreements, the following terms shall, except as otherwise expressly provided
herein or therein, have the meanings set forth or referenced below:
"3NET AUSTRALIA" means Securicor 3Net Pty Limited, a company organized
under the laws of the state of Queensland, Australia, the particulars of which
are set forth on Schedule 1.9 to the Disclosure Memorandum.
"3NET CHINA" means Securicor 3Net (Beijing) Networking Co. Limited, a
company organized under the laws of the People's Republic of China, the
particulars of which are set forth on Schedule 1.9 to the Disclosure
Memorandum.
"3NET DELAWARE" means Securicor 3Net Inc., a Delaware corporation, the
particulars of which are set forth on Schedule 1.9 to the Disclosure
Memorandum.
"3NET GROUP" collectively refers to the Company and the Subsidiaries.
"3NET HOLDINGS" means 3 Net Holdings Limited, a corporation
incorporated in England and Wales, the particulars of which are set forth on
ANNEX 1.1 hereto.
"ADJUSTMENT" has the meaning set forth in SECTION 2.2(e) hereof.
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly Controlling, Controlled by or under common Control with
such first Person as of the date on which, or at any time during the period for
which, the determination of affiliation is being made. For the avoidance of
doubt, a member of the board of directors of a Person is an Affiliate of that
Person.
"AGREEMENT" means this Share Purchase Agreement and the Annexes hereto,
as the same may be amended or supplemented from time to time in accordance with
the terms hereof.
"ANCILLARY AGREEMENTS" means the Disclosure Memorandum, Tax Deed and
each other agreement entered into by or among the parties hereto or any of
their Affiliates in connection with the consummation of the transactions
contemplated hereby, in each case as the same may be amended or supplemented
from time to time in accordance with the terms hereof or thereof.
"ANNUAL FINANCIAL STATEMENTS" means the unaudited special purpose
consolidated combined balance sheet, combined profit and loss account and
combined statement of total recognized gains and losses of the Company and the
Subsidiaries as
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at and for the financial year ended September 30, 1996, together in each
case with the related notes, previously delivered to Teltrend and included in
Schedule 1.1 to the Disclosure Memorandum.
"ANTICOMPETITION ACTS" means the U.S. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
thereunder, as well as any other similar Law of any other jurisdiction.
"APPLICABLE TAX LAW" means any applicable Law of any nation, state,
region, province, locality, municipality or other jurisdiction relating to
Taxation, including regulations and other official pronouncements of any
governmental entity or political subdivision of such Jurisdiction charged with
interpreting such Laws.
"Approved" means approved by the U.K. Board of Inland Revenue and
treated by them as an exempt approved scheme under Chapter I Part XIV of ICTA.
"▇▇▇▇▇ ▇▇▇▇▇" means ▇▇▇▇▇ ▇▇▇▇▇, Chartered Accountants, independent
public accountants.
"▇▇▇▇▇ ▇▇▇▇▇ FINANCIAL STATEMENTS" means the following financial
statements and related documentation for the Company and the Subsidiaries,
audited by ▇▇▇▇▇ ▇▇▇▇▇ in accordance with generally accepted accounting
principles in the United States: (i) an audited consolidated special purpose
balance sheet as at September 30, 1995; (ii) an audited consolidated special
purpose balance sheet as at September 30, 1996 and an audited consolidated
special purpose income statement, statement of cash flows and statement of
changes in shareholders' equity for the financial year ended September 30,
1996; (iii) an opinion of ▇▇▇▇▇ ▇▇▇▇▇ to the effect that such firm has audited
the financial statements identified in the foregoing clauses (i) and (ii) in
accordance with generally accepted auditing standards in the United States and
that such financial statements have been prepared in accordance with generally
accepted accounting principles in the United States, consistently applied, and
give a true and fair view of the combined financial position of the Company
and the Subsidiaries as at September 30, 1995 and September 30, 1996 and of
the combined results of operations and cash flows of the Company and the
Subsidiaries for the financial year ended September 30, 1996; and (iv) a
consent to the reference to ▇▇▇▇▇ ▇▇▇▇▇ and the inclusion of all or any of the
items identified in the foregoing clauses (i), (ii) and (iii) in any filing
made by Teltrend pursuant to the securities laws of the United States, in a
form satisfactory to Teltrend and ▇▇▇▇▇ ▇▇▇▇▇.
"BALANCE SHEET" means the unaudited consolidated combined balance sheet
of the Company and the Subsidiaries as at June 30, 1997, together with the
related notes, previously delivered to Teltrend and included in SCHEDULE 1.2
to the Disclosure Memorandum.
"BOOKS AND RECORDS" means all lists, files and other documents of or
relating to the Company, any Subsidiary or the Business, and all general
ledgers and underlying books of original entry and other financial records of
or relating to the
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Company, any Subsidiary or the Business, including Taxation Returns and Taxation
records.
"Business" refers collectively to the businesses and operations that
are or were at any time since September 30, 1995 conducted by the Company
or any Subsidiary.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or any
other day on which either (i) banks in New York City are authorized or
obligated by Law or executive order to close or (ii) clearing banks in the City
of London are not ordinarily open for business. "CLAIMS" has the meaning set
forth in SECTION 3.13(I) hereof.
"CLOSING" means the closing of the transactions contemplated by this
Agreement.
"CLOSING BALANCE SHEET" has the meaning set forth in SECTION 2.2(b)
hereof.
"CLOSING DATE" has the meaning set forth in SECTION 2.3(A) hereof.
"CLOSING EXCHANGE RATE" means (a) with respect to amounts expressed in
pounds, the official dollar-pound exchange rate published by The Financial
Times on the second Business Day immediately preceding the Closing Date, and
(b) with respect to amounts expressed in any other currency denomination, the
official dollar exchange rate for such currency denomination published by The
Financial Times on the second Business Day immediately preceding the Closing
Date.
"COMPANIES ACT" means the U.K. Companies ▇▇▇ ▇▇▇▇, as amended by the
U.K. Companies ▇▇▇ ▇▇▇▇.
"COMPANY" means Securicor 3 Net Limited, a company incorporated in
England and Wales, the particulars of which are set forth on ANNEX 1.1 hereto.
"CONFIDENTIALITY AGREEMENT" means the Letter of Confidentiality
executed by Teltrend on June 27, 1997 in favor of the Company.
"CONFIDENTIAL INFORMATION" has the meaning set forth in SECTION 5.5
hereof.
"CONSENT" means any consent, approval, authorization, waiver, permit,
grant, franchise, concession, agreement, license, exemption or order of,
registration, certificate, declaration or filing with, or report or notice to,
any Person, including but not limited to any Governmental Authority.
"CONTRACTS" means, with respect to the Company or any Subsidiary, all
agreements, contracts, Intellectual Property licenses, leases, purchase orders
and
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other arrangements and commitments of a contractual nature, whether oral or in
writing, (i) to which the Company or such Subsidiary is a party, (ii) by which
the assets of the Company or such Subsidiary are bound or (iii) which
otherwise relate to the Business (including any general terms and conditions
of purchase or sale or product warranties included or incorporated by
reference in any of the foregoing).
"CONTROL" (including, with correlative meanings, "CONTROLLING" and
under common "CONTROL" with) means the power to control, directly or
indirectly, the management or policies of a Person, through the ownership of
voting securities, by contract, as a general partner of a partnership or
otherwise.
"CPA Firm" has the meaning set forth in Section 2.2(c) hereof.
"DISCLOSURE MEMORANDUM" means the Disclosure Memorandum, dated and
signed by the parties hereto as of the date hereof, to which are attached the
various Schedules referred to in various representations and warranties,
covenants and indemnification and other provisions set forth herein.
"EMPLOYEE BENEFIT PLAN" means any ERISA Plan and any pension,
retirement, early retirement, welfare (e.g., life insurance, disability
insurance or health insurance), bonus, profit sharing, incentive or deferred
compensation, stock option, stock appreciation, phantom stock, severance,
termination, reduction in force, retention, change of control, relocation,
salary continuation, vacation, educational assistance or other employee or
retiree benefit or compensation plan, program, agreement, policy, understanding
or arrangement, whether written or unwritten, that provides or may provide
benefits or compensation to any employee or former employee of the Company,
any Subsidiary or the Business (in respect of such individual's service
thereto) or such employee's or former employee's beneficiaries or dependents.
"ENCUMBRANCES" means any liens, charges (fixed or floating), mortgages,
suretyships, attachments, encumbrances, pledges, security interests, claims,
depository receipts, pre-emptive rights, voting trusts or shareholder
agreements, exceptions, usufructs, options, calls, title defects, licenses or
any other restrictions or third-party rights of any kind or nature whatsoever
now or hereafter attaching.
"ENVIRONMENTAL CLAIM" means any accusation, allegation, notice of
violation, claim, demand, abatement or other order or directive
(conditional or otherwise), judgment, lien or other assessment by any
Governmental Authority or any other Person for personal injury
(including sickness, disease or death), tangible or intangible property
damage, damage to the environment, nuisance, pollution, contamination
or other adverse effects on the environment, or for fines, penalties or
restrictions, resulting from or based upon (i) the existence, or the
continuation of the existence, of a Release (including sudden or
non-sudden, accidental or non-accidental leaks or spills) of, or
exposure to, any Hazardous Substances, odor or audible noise in, into or
onto the environment (including the air, surface water, ground water,
drinking water supply, surface or subsurface strata), at, in, by, from
or related to, any of the
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Company, any Subsidiary, any Prior Subsidiary or the Business, or any assets
or former assets of any of the Company, any Subsidiary, any Prior Subsidiary or
the Business, (ii) the transportation, storage, treatment or disposal of any
Hazardous Substances in connection with the operation of the Business or any
other current or former business or operations of the Company, any Subsidiary,
any Prior Subsidiary, or otherwise, or (iii) the violation, or alleged
violation, of any applicable Environmental Laws or any Environmental Permits by
the Company, any Subsidiary or any Prior Subsidiary, or otherwise related to
the Business.
"ENVIRONMENTAL LAW" means any applicable Law in effect or pending on or
prior to the Closing Date relating to (i) the protection of the environment
(including air, surface water, ground water, drinking water supply, surface or
subsurface strata), (ii) the exposure to, or the use, storage, recycling,
treatment, generation, emission, discharge, transportation, processing,
handling, holding, abatement, existence, labeling, protection, Release or
disposal of, Hazardous Substances, or otherwise to pollution of the
environment, nuisance or protection of human safety and health, or (iii)
reporting, licensing, permitting, investigation or remediation of emissions,
discharges, Releases or threatened Releases of Hazardous Substances into the
air, surface water, ground water, drinking water supply, surface or subsurface
strata, or relating to the manufacture, processing, distribution, storage, use,
sale, treatment, receipt, disposal, transport or handling of Hazardous
Substances.
"ENVIRONMENTAL PERMITS" means any Governmental Authorization required
under any Environmental Law.
"ERNST & YOUNG" has the meaning set forth in SECTION 2.2(b) hereof.
"ERNST & YOUNG CLOSING OPINION" has the meaning set forth m SECTION
2.2(b) hereof.
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974,
as amended.
"ERISA PLAN" means an "employee benefit plan" as defined in Section
3(3) of ERISA, whether or not such plan is subject to ERISA.
"FINAL PRO FORMA CLOSING BALANCE SHEET" has the meaning set forth in
SECTION 2.2(c) hereof.
"FINANCIAL DEBT" means, as of any date, the aggregate outstanding
principal amount of (i) all indebtedness for borrowed money, whether
short-term or long-term and whether from an Affiliate or from external
sources, and (ii) all outstanding lease obligations under leases required by
GAAP to be capitalized.
"FINANCIAL STATEMENTS" has the meaning set forth in SECTION 3.10(a)
hereof.
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"FIXTURES AND EQUIPMENT" means all furniture, fixtures, furnishings,
machinery, vehicles, equipment (including research and development equipment)
and other tangible personal (movable) property owned by the Company or any
Subsidiary or used in or otherwise related to the Business, all as determined
in accordance with GAAP.
"GAAP" means the generally accepted accounting principles in the
United Kingdom.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof, or any Person exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including, without limitation, any government authority,
agency, department, board, commission or instrumentality of the United States
or any state thereof, the United Kingdom, Australia or any state thereof,
China, New Zealand, the European Union or any political subdivision of any
thereof, and any tribunal(s) or arbitrator(s) of competent jurisdiction, and
any self-regulatory organization(s).
"GOVERNMENTAL AUTHORIZATIONS" means all Consents required to carry on
the Business or any other business or operations of, or transactions involving,
the Company, any Subsidiary or any Prior Subsidiary under applicable Laws.
"HAZARDOUS SUBSTANCES" means any: (a) chemicals, forms of energy,
petroleum or petroleum products or derivative or fraction thereof, flammable
materials, explosives, radioactive materials (including radon gas, other than
that which is naturally occurring), asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls or related materials; (b) other material
which contains substances defined as hazardous or toxic substances (or words
of similar import), or requiring investigation, removal or remediation, under
any Environmental Law; or (c) pollutant, contaminant, waste or other substance
that is regulated by any Governmental Authority or under any Environmental
Law.
"ICTA" means the U.K Income and Corporation ▇▇▇▇▇ ▇▇▇ ▇▇▇▇.
"INDEMNIFIABLE LOSSES" means, with respect to any Person, all Losses
for which such Person would be entitled to indemnification pursuant to ARTICLE
IX hereof.
"INDEMNIFYING PARTY" has the meaning set forth in SECTION 9.4(a)
hereof.
"INDEMNITEE" has the meaning set forth in SECTION 9.4 (a) hereof.
"INTANGIBLE RIGHTS" means, with respect to the Company or any
Subsidiary, all rights to or in respect of claims, deposits, proceeds
(including rights to or in respect of proceeds under any insurance contract or
arrangement), prepayments, prepaid assets, refunds, credits, causes of action,
rights of recovery, rights of set-off and recoupment, and all attorney-client,
work product, and other legal privileges of
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the Business, the Company or any Subsidiary or of any Seller or Affiliate or
any Seller with respect to the Company, any Subsidiary or the Business (or any
of their respective assets) or otherwise relating to the Business.
"INTELLECTUAL PROPERTY" means all intellectual property (and the
rights and any goodwill associated therewith, whether such rights arise through
ownership, license or otherwise) including the following:
(a) trademarks, service marks, brand names, logos, certification marks,
trade dress, assumed names, trade names, business and product names, slogans
and other indications of origin, any goodwill associated with the foregoing,
and registrations in any jurisdiction of, and applications in any
jurisdiction to register, the foregoing, including any extension,
modification or renewal of any such registration or application, other than
the Securicor Trademarks;
(b) patents (including design patents, industrial designs and utility
models), applications for patents (including divisions, continuations,
continuations-in-part and renewal applications), patent disclosures awaiting
filing determination, inventions and improvements thereto, and any renewals,
extensions or reissues thereof, in any jurisdiction;
(c) technical information, manuals, instructions, know-how, processes,
designs, drawings, formulae, product specifications, discoveries,
improvements, methods, trade secrets and other confidential information and
rights in any jurisdiction to limit the use or disclosure thereof by any
Person;
(d) copyrights and design rights, including all registrations or
applications for registration of copyrights in any jurisdiction, and any
renewals or extensions thereof;
(e) mask work and other semiconductor chip rights and registrations
thereof;
(f) all rights in computer software;
(g) copies and tangible embodiments of any of the foregoing;
(h) intellectual property rights similar to any of the foregoing; and
(i) any claims or causes of action arising out of or related to any
infringement or misappropriation by third parties of any of the foregoing.
"INTERCOMPANY AGREEMENTS" has the meaning set forth in SECTION 3.33
hereof.
"INTERIM FINANCIAL STATEMENTS" means the balance sheet and the
unaudited consolidated combined profit and loss account and combined statement
of
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total recognised gains and losses of the Company and the Subsidiaries for the
nine-month period ended June 30, 1997, together in each case with the related
notes, previously delivered to Teltrend and included in SCHEDULE 1.2 to the
Disclosure Memorandum.
"INVENTORY" means all inventory held for sale or resale by, and all raw
materials, work in process, finished products, goods in transit, spares,
wrapping, supply and packaging items owned by, the Company or any Subsidiary,
including any consigned inventory or inventory in warehouses or other
locations, all as determined in accordance with GAAP.
"LAWS" includes all applicable provisions of all (i) constitutions,
treaties, statutes, laws (including the common law), rules, regulations,
ordinances, decrees, directives, codes, bylaws or orders of any Governmental
Authority, whether federal, national, state, regional, provincial or local,
(ii) Governmental Authorizations and (iii) orders, decisions, injunctions,
judgments, interpretations, awards and decrees of or agreements with any
Governmental Authority.
"LEASED REAL PROPERTY" has the meaning set forth in SECTION 3.16(a)(i)
hereof.
"LEASES" has the meaning set forth in Section 3.16(a)(i) hereof.
"LIABILITIES" means any liabilities, obligations or commitments
(pursuant to any Contract or otherwise), of any kind or nature whatsoever,
whether accrued or fixed, absolute or contingent, known or unknown, determined
or determinable.
"LIBOR" has the meaning set forth in SECTION 2.2(e) hereof.
"LICENSES" has the meaning set forth in SECTION 3.20 hereof.
"LICENSED INTELLECTUAL PROPERTY" has the meaning set forth in SECTION
3.15(a) hereof.
"LOSSES" means any damages, claims, losses, Liabilities, charges,
actions, suits, proceedings, deficiencies, interest, penalties and costs and
expenses (including reasonable attorneys' fees and reasonable accountants'
fees, and removal costs, remediation costs, closure costs, fines, penalties and
expenses of investigation and ongoing monitoring).
"MATERIAL" means, depending on the context in which it is used, any
item that (i) involves, could result in or does result in (a) any diminution or
reduction in the value of the Company, the Business or any of the Subsidiaries
or of the assets of any of the Company, the Business or any of the
Subsidiaries of more than $25,000, (b) any reduction in revenues (i.e.,
turnover or sales), operating income or net income of any of the Company, the
Subsidiaries or the Business, either individually or in the aggregate, of more
than $25,000, or (c) any levy, charge or assessment against, or any
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accrual or incurrence by, any of the Company, the Business or any of the
Subsidiaries, either individually or in the aggregate, of damages, fines,
costs, expenses (including attorneys' and accountants' fees and other costs of
investigation and/or litigation) or other Liabilities or Losses of any kind or
nature whatsoever of more than $25,000 (in each case determined, if applicable
and appropriate because the diminution, reduction, Liabilities or Losses are
expressed or measured in a currency other than dollars, by reference to (1)
the exchange rate for such currency into dollars as published in The Financial
Times on the date of this Agreement for purposes of any statement made as of
the date of this Agreement and (2) the Closing Exchange Rate for purposes of
any other statement made or deemed to be made hereunder or under any other
Transaction Document), or (ii) would otherwise have a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" means any event, occurrence, fact, condition,
change or effect that is or is reasonably likely to be materially adverse to
the business, condition (financial or otherwise), properties, assets,
prospects, value or operations of the Company, any Subsidiary or the Business.
"MARKED MATERIALS" has the meaning set forth in SECTION 5.12 hereof.
"MATERIAL CONTRACTS" has the meaning set forth in SECTION 3.26 hereof.
"MEMBER EMPLOYEES" means the employees of the Company who are active
members of the Securicor Scheme on the Closing Date.
"NDL" means Securicor 3Net (NDL) Limited, a company organized under
the laws of New Zealand, the particulars of which are set forth on SCHEDULE 1.9
to the Disclosure Memorandum.
"OBJECTION" has the meaning set forth in SECTION 2.2(c) hereof.
"ORDINARY COURSE OF BUSINESS" means the ordinary and usual course of
the Business, consistent with past custom and practice, including as to
quantity, quality and frequency.
"OWNED INTELLECTUAL PROPERTY" means all Intellectual Property that is
owned by the Company or any Subsidiary.
"PARTICIPATION PERIOD" means the period beginning on the Closing Date
and ending on November 1, 1997, or such earlier date or later date as the
Sellers and Teltrend may agree.
"PENSION SCHEMES" means the Securicor Scheme and the Save and Prosper
Scheme.
"PERMITTED ENCUMBRANCES" means: (i) Encumbrances set forth in SCHEDULE
1.3 to the Disclosure Memorandum; (ii) liens for Taxation, assessments and
other governmental charges not yet due and payable or being contested in good
faith
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by permissible proceedings; (iii) customary retention of title provisions in
contracts with suppliers for the purchase of goods or equipment entered into
in the Ordinary Course of Business pending payment for such goods and
equipment in accordance with customary payment terms; (iv) planning, zoning,
building and other similar governmental regulations; (v) unrecorded easements
or rights-of-way for any utilities providing utility service to any Leased
Real Property; and (vi) encroachments that do not materially interfere with
the use, occupancy or operation of any of the Leased Real Property.
"PERSON" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or other entity or organization.
"POST-CLOSING PERIOD" shall mean any Tax Period commencing after the
Closing Date and the portion of any Straddle Period commencing after the
Closing Date.
"PRE-CLOSING PERIOD" shall mean any Tax Period ending on or before the
Closing Date and the portion of any Straddle Period ending on the Closing
Date.
"PRIOR SUBSIDIARY" means any Person, 50% or more of the equity or other
ownership interest of which the Company or any Subsidiary has at any time,
either directly or indirectly, owned or which the Company or any Subsidiary at
any time otherwise Controlled, but which Person is no longer so owned or
Controlled by the Company or any Subsidiary.
"PRO FORMA ADJUSTMENTS" means the adjustments listed on SCHEDULE 1.4 to
the Disclosure Memorandum made to the Balance Sheet to arrive at the Pro Forma
Balance Sheet and to the Closing Balance Sheet to arrive at the Pro Forma
Closing Balance Sheet, to the extent such adjustments affect the Balance Sheet
and as of the Closing continue to affect the Closing Balance Sheet.
"PRO FORMA BALANCE SHEET" means the Balance Sheet as adjusted by the
Pro Forma Adjustments, which Pro Forma Balance Sheet was previously delivered to
Teltrend and is included in Schedule 1.5 to the Disclosure Memorandum.
"PRO FORMA CLOSING BALANCE SHEET" has the meaning set forth in SECTION
2.2(b) hereof.
"PURCHASE PRICE" has the meaning set forth in SECTION 2.2(a) hereof.
"PURCHASER INDEMNIFIED PARTIES" has the meaning set forth in SECTION
9.1(a) hereof.
"PURCHASER TRANSACTION DOCUMENTS" has the meaning set forth in SECTION
2.3(c)(v) hereof.
"PURCHASER'S WARRANTIES" has the meaning set forth in SECTION 5.15(a)
hereof.
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"REAL PROPERTY" has the meaning set forth in SECTION 3.23(c) hereof.
"RELEASE" means any release, spill, emission, abandonment of any
container or receptacle containing any Hazardous Substance, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the environment, or into or out of any property owned, occupied, leased or used
by the Company, any Subsidiary, any Prior Subsidiary or otherwise in connection
with the Business, including the movement or migration, gradual or
otherwise, of any Hazardous Substance through or in the air, soil, surface
water, ground water, or land surface or subsurface strata or formation.
"REQUIRED APPROVALS" means the Consents identified on SCHEDULE 1.6 to
the Disclosure Memorandum, the receipt or completion of which shall be a
condition to the consummation of Teltrend's obligations hereunder.
"RETAINED LIABILITIES" means those Liabilities or Losses of the Company
or any Subsidiary identified on SCHEDULE 1.7 to the Disclosure Memorandum,
which Liabilities and Losses, to the extent that they affect the Balance Sheet,
are included as a Pro Forma Adjustment to the Pro Forma Balance Sheet and
shall, prior to or contemporaneously with the Closing, be assumed by a Person
other than the Company or a Subsidiary.
"RTPA" means the U.K. Restrictive Trade Practices ▇▇▇ ▇▇▇▇, as amended.
"SAVE AND PROSPER SCHEME" means the 3 Net Save and Prosper Scheme.
"SECURICOR" means Security Services plc, a company incorporated in
England and Wales, the particulars of which are set forth on ANNEX 1.1 hereto.
"SECURICOR COMMUNICATIONS" means Securicor Communications Limited, a
company incorporated in England and Wales, the particulars of which are set
forth on ANNEX 1.1 hereto.
"SECURICOR SCHEME" means the Securicor Group Pension Scheme established
by Trust Deed dated 19 December 1994 between Securicor Group Public Limited
Company and Securicor Group Trustees Limited.
"SECURICOR TRADEMARKS" means those trademarks, service marks and
tradenames containing the word "SECURICOR", along with their respective
registrations and applications wherever used or registered and all associated
logos and goodwill.
"SELLERS" means, collectively, Securicor, Securicor Communications and
3Net Holdings.
"SELLER PLAN" has the meaning set forth in SECTION 5.7(a) hereof.
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"SELLER TRANSACTION DOCUMENTS" has the meaning set forth in SECTION
2.3(b)(xii) hereof.
"SELLER INDEMNIFIED PARTIES" has the meaning set forth in SECTION
9.2(a) hereof.
"SELLERS' WARRANTIES" has the meaning set forth in SECTION 5.15(a)
hereof.
"SHARES" means collectively the U.S. Shares and the U.K. Shares.
"STATUTORY ACCOUNTS" means the (i) the financial statements of the
Company as at and for the financial year ended September 30, 1996,
together with the related directors' report, notes and auditors' report,
and (ii) the financial statements of NDL as at and for the financial year
ended September 30, 1996, together with the related directors' report
and notes, each of which is included in SCHEDULE 1.8 to the Disclosure
Memorandum.
"STRADDLE PERIOD" shall mean any Tax Period that begins before and
ends after the Closing Date.
"SUBSIDIARY" means, with respect to the Company, (i) any other
Person (A) which the Company, either directly or through or together with any
other Subsidiary of the Company, owns 50% or more of the equity or other
ownership interest of, or (B) which the Company otherwise Controls, and (ii)
3Net Delaware. A list of Subsidiaries, together with the particulars of each,
is set forth as SCHEDULE 1.9 to the Disclosure Memorandum.
"TAXATION" means (i) within the United Kingdom, corporation tax,
advance corporation tax, amounts corresponding to advance corporation tax,
capital gains tax, income tax (including income tax required to be deducted or
withheld from or accounted for in respect of any payment), the charge on
payments to employers under Section 601 (1) ICTA, development land tax,
inheritance tax, national insurance, capital duty, stamp duty, stamp duty
reserve tax, value added tax, customs and other import or export duties and
any other taxes, levies, duties, charges, imposts or withholdings
corresponding to, similar to, replaced by or replacing any of them, and (ii)
outside the United Kingdom, any income, corporation, gross receipts, profits,
gains, capital stock, capital duty, franchise, withholding, social security
(including any social security charge or premium), unemployment, disability,
property, wealth, welfare, stamp, excise, occupation, sales, use, transfer,
value added, alternative minimum, estimated or other similar tax (including
any fee, assessment, or other charge in the nature of or in lieu of any tax)
however imposed and any interest, penalties, additions to tax, or additional
amounts in respect of the foregoing, and including any transferee or secondary
Liability in respect of any tax (whether by Law, contractual agreement or
otherwise) and any Liability in respect of any tax as a result of being a
member of any affiliated, consolidated, combined, unitary or similar group.
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"TAX AUTHORITY" means, with respect to any Taxation, the governmental
entity or political subdivision thereof that imposes such Taxation, and the
agency (if any) charged with the collection of such Taxation for such entity or
subdivision, including any governmental or quasi-governmental entity or agency
that imposes, or is charged with collecting, social security or similar charges
or premiums.
"TAX DEED" means the Tax Deed to be entered into by and among the
Sellers, the members of the 3Net Group and Teltrend at the Closing in the form
attached hereto as ANNEX 1.3.
"TAX PERIOD" shall mean, with respect to any Taxation, the period for
which the Taxation is reported as provided under Applicable Tax Laws.
"TAX RETURN" means, with respect to any Taxation, any information
return with respect to such Taxation, any report, statement, declaration or
document required to be filed under the Applicable Tax Law in respect of such
Taxation, any claims for refund of Taxation paid, and any amendments or
supplements to any of the foregoing.
"TELTREND" means Teltrend Inc., a Delaware corporation, the particulars
of which are set forth on ANNEX 1.2 hereto.
"THIRD PARTY CLAIM" has the meaning set forth in SECTION 9.4(a) hereof.
"TRANSACTION DOCUMENTS" collectively refers to the Seller Transaction
Documents and Purchaser Transaction Documents.
"TRANSFER AGREEMENTS" collectively refers to the U.S. Transfer
Agreement and U.K. Transfer Agreement.
"U.K. COMPANIES" means the Company and those Subsidiaries that are
incorporated under the laws of any jurisdiction of the United Kingdom.
"U.K. LEASES" means the two Underleases dated 15 January 1996 between,
in each case, Imperial Group Pension Trust Limited and Imperial Group Pension
Investments Limited of the first part, the Company of the second part and
Securicor of the third part, relating to, in one case, the Ground, First and
Second Floors and, in the other case, the Third Floor of ▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇.
"U.K. SHARES" means all of the issued shares in the capital of the
Company.
"U.K. TRANSFER AGREEMENT" means a share transfer agreement with
respect to the U.K. Shares in form and substance mutually agreeable to the
parties.
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"U.S. CODE" means the United States Internal Revenue Code of 1986, as
amended, or any successor law.
"U.S. SHARES" means all of the issued shares of capital stock of 3Net
Delaware.
"U.S. TRANSFER AGREEMENT" means a share transfer agreement with respect
to the U.S. Shares in form and substance mutually agreeable to the parties.
"WARRANTIES" has the meaning set forth in SECTION 5.15(b) hereof.
"WISDM" means Wisdm Limited, a company incorporated in England and
Wales, the particulars of which are set forth on SCHEDULE 1.9 to the Disclosure
Memorandum.
1.2 OTHER TERMS. Other terms may be defined elsewhere in the
preliminary statements or text of this Agreement and, unless otherwise
indicated, shall have such meaning throughout this Agreement.
1.3 OTHER DEFINITIONAL PROVISIONS.
(a) The words "HEREOF", "HEREIN", "HEREBY", and "HEREUNDER", and
words of similar import, when used in this Agreement, shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
(b) The terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa.
(c) The term "INCLUDING" means including, without limitation.
(d) The terms "POUNDS" and "L" means pounds sterling.
(e) The terms "DOLLARS" and "$" means United States dollars.
(f) A reference to any statutory provision in this Agreement (i)
includes any order, instrument, plan, regulation, permission and direction
made or issued under such statutory provision or deriving validity from it,
and (ii) shall also be construed as a reference to any statutory provision of
which such statutory provision is a re-enactment or consolidation.
(g) References to an article, section or paragraph are (unless
otherwise stated) to an article, section or paragraph of this Agreement.
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(h) With respect to 3Net China, references to "GOVERNING DOCUMENTS" or
"CONSTITUENT DOCUMENTS" shall include, without limitation, 3Net China's
Approval Document, Approval Certificate, Business License, Articles of
Association, Capital Verification Report, Tax Registration Certificate dated
22 July 1997 and Enterprise Legal Person Code Certificate dated 10 June 1997.
(i) For purposes hereof, whenever a currency exchange rate is to be
determined by reference to an exchange rate published in The Financial Times
and The Financial Times does not include an exchange rate as of the relevant
date for the currencies in question, such exchange rate shall be determined by
reference to the official exchange rate of Lloyds Bank plc for such currencies
as of such relevant date.
ARTICLE II
PURCHASE AND SALE OF SHARES
2.1 PURCHASE AND SALE OF SHARES. On the terms and subject to the
conditions set forth herein, at the Closing 3Net Holdings shall (and the other
Sellers shall cause it to) sell and transfer with full title guarantee to
Teltrend, and Teltrend shall purchase from 3Net Holdings, all of the Shares,
free and clear of any Encumbrances and together with all rights now or
hereafter attaching to them. Teltrend shall not be obliged to complete the
purchase of any of the Shares unless the purchase of all of the Shares is
completed simultaneously. 3Net Holdings waives all rights of pre-emption over
any of the U.S. Shares or U.K. Shares conferred by the governing documents of
3Net Delaware or the Company or otherwise.
2.2 PURCHASE PRICE AND ADJUSTMENT.
(a) PURCHASE PRICE. The aggregate purchase price to be paid for the
Shares (the "PURCHASE PRICE") shall be pound sterling 9,000,000, payable in
dollars at the Closing (the amount of such dollar payment to be determined by
applying the Closing Exchange Rate to pound sterling 9,000,000); provided,
however, that (i) if the Closing Exchange Rate is greater than $1.722 per
pound, the Purchase Price shall nonetheless be $15,498,000, and (ii) if the
Closing Exchange Rate is less than $1.558 per pound, the Purchase Price shall
nonetheless be $14,022,000. The Purchase Price shall be subject to adjustment
as set forth in this SECTION 2.2.
(b) PREPARATION OF CLOSING AND PRO FORMA CLOSING BALANCE Sheets. Within
60 days following the Closing, Teltrend shall prepare, or cause to be
prepared, and deliver to Sellers (i) an audited consolidated special purpose
balance sheet (the "CLOSING BALANCE SHEET") of the Company and the
Subsidiaries, which shall set forth a true and fair view of the combined
assets and liabilities of the Company and the Subsidiaries as of the Closing,
all as determined in accordance with GAAP, consistently applied, and (ii) a
pro forma closing balance sheet (the "PRO FORMA CLOSING BALANCE SHEET"), as of
the Closing, consistent with the presentation of the Pro Forma Balance Sheet,
and reflecting the application of the Pro Forma Adjustments to the Closing
Balance Sheet (to the extent they affect the Closing Balance Sheet), the
amounts of which shall be determined as of the Closing. The
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Closing Balance Sheet shall be accompanied by an opinion (the "ERNST & YOUNG
CLOSING OPINION") of Ernst & Young, Chartered Accountants ("ERNST & YOUNG"),
to the effect that such firm has audited the Closing Balance Sheet in
accordance with generally accepted auditing standards in the United Kingdom
and that the Closing Balance Sheet has been prepared in accordance with GAAP,
consistently applied, and gives a true and fair view of the combined financial
position of the Company and the Subsidiaries as at the Closing in accordance
with GAAP. The expenses of Ernst & Young in connection with their audit of the
Closing Balance Sheet and preparation of the Pro Forma Closing Balance Sheet
shall be shared equally by Teltrend, on the one hand, and Sellers, on the
other hand.
(c) REVIEW OF AND RESOLUTION OF DISPUTES RELATING TO CLOSING AND PRO
FORMA CLOSING BALANCE SHEETS. Sellers and their accountants shall complete
their review of the Closing Balance Sheet and Pro Forma Closing Balance
Sheet within 30 days after the later of (i) the date on which the Pro
Forma Closing Balance Sheet, Closing Balance Sheet and the Ernst & Young
Closing Opinion are delivered to Sellers, and (ii) the date on which the
Ernst & Young work papers supporting the Closing Balance Sheet and Pro
Forma Closing Balance Sheet are first made available to Sellers and their
accountants. In the event that Sellers determine that any item reflected
on the Pro Forma Closing Balance Sheet has not been determined on the
basis set forth in this Agreement, Sellers shall so inform Teltrend in
writing (the "OBJECTION"), on or before the last day of such 30-day
period, setting forth a specific description of the basis or bases of the
Objection and the adjustments to the Pro Forma Closing Balance Sheet which
Sellers believe should be made. Teltrend shall have 30 days after its
receipt of the Objection to review and respond to the Objection and the
parties shall attempt in good faith to reach an agreement with respect to
any matters in dispute. If Sellers and Teltrend are unable to resolve all
of their differences within 45 days after delivery of the Objection, they
shall refer their remaining differences to an internationally recognized
firm of independent chartered accountants as to which Sellers and Teltrend
shall mutually agree or, in the event that they are unable so to agree, to
such a firm to be selected by the President for the time being of the
Institute of Chartered Accountants in England and Wales (the "CPA FIRM").
the CPA Firm shall, acting as binding experts and not as arbitrators,
determine, on the basis of the standards set forth in this Agreement, and
only with respect to the remaining differences so submitted, whether and
to what extent, if any, the items reflected on the Pro Forma Closing
Balance Sheet require adjustment. The CPA Firm's determination shall be
conclusive and binding upon Sellers and Teltrend and shall be set forth in
a written determination of the CPA Firm. The fees and disbursements of the
CPA Firm shall be shared equally by Sellers, on the one hand, and
Teltrend, on the other hand. Teltrend and Sellers shall each make readily
available to the CPA Firm all relevant books and records and any work
papers (including those of their respective accountants) relating to the
Balance Sheet, Pro Forma Closing Balance Sheet and Closing Balance Sheet,
and all other items reasonably requested by the CPA Firm. As used herein,
the term "FINAL PRO FORMA CLOSING BALANCE SHEET" means (i) the Pro Forma
Closing Balance Sheet in the event that no Objection is delivered to
Sellers during the 30-day period specified above, (ii) the Pro Forma
Closing Balance Sheet, adjusted in accordance with the Objection in the
event that Teltrend does not respond to the Objection within the 30-day
period
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following receipt by Teltrend of the Objection, (iii) the Pro Forma Closing
Balance Sheet, as adjusted by the mutual agreement of Sellers and Teltrend, or
(iv) the Pro Forma Closing Balance Sheet as determined by the CPA Firm in
accordance with the terms hereof if Sellers and Teltrend are unable to reach
any mutual agreement regarding their differences concerning the Pro Forma
Closing Balance Sheet and, pursuant to the terms of this SECTION 2.2(C), refer
their remaining differences to the CPA Firm.
(d) Access TO INFORMATION AND PARTICIPATION IN AUDIT. Sellers shall, to
the extent they remain in possession or control thereof at or after the
Closing Date, provide (or cause to be provided) to Teltrend and its
accountants all Books and Records and any other information or data relating
to the pre-Closing operation of the Business and shall otherwise reasonably
cooperate with Teltrend and, to the extent necessary for Teltrend's
preparation of the Closing Balance Sheet and Pro Forma Closing Balance Sheet,
grant Teltrend access to their personnel familiar with the pre-Closing
operation of the Business. Teltrend shall provide Sellers and their
accountants reasonable access to the Books and Records and any other
information relating to the pre-Closing operation of the Business in
accordance with SECTION 5.14(b) hereof to the extent necessary for Sellers and
their accountants to review the Closing Balance Sheet and Pro Forma Closing
Balance Sheet. In connection with their review of the Closing Balance Sheet
and Pro Forma Closing Balance Sheet, Sellers and their accountants shall have
full access to all information used by Ernst & Young and/or Teltrend in
preparing or causing to be prepared the Closing Balance Sheet and Pro Forma
Closing Balance Sheet. Upon completion of the audit by Ernst & Young of the
Closing Balance Sheet and preparation of the Pro Forma Closing Balance Sheet,
Sellers and their accountants shall have the opportunity to review Ernst &
Young's work papers and to discuss proposed adjustments and other matters
related to the audit with Ernst & Young.
(e) PURCHASE PRICE ADJUSTMENT. The Purchase Price shall be adjusted on
a pound-for-pound basis (the "ADJUSTMENT") to the extent that the "Net Assets"
reflected on the Final Pro Forma Closing Balance Sheet have decreased by more
than pound sterling 100,000 from the amount of "Net Assets" reflected on the
Pro Forma Balance Sheet. Sellers shall pay to Teltrend within five Business Days
following the determination of the Final Pro Forma Closing Balance Sheet an
amount in cash equal to the Adjustment, if any, plus interest thereon from the
date of delivery of the Ernst & Young Closing Opinion to the date of payment at
an annual rate equal to the London Interbank Offer Rate in effect on the
Closing Date as reflected in The Financial Times ("LIBOR"), by wire transfer
of immediately available funds to an account or accounts designated by
Teltrend; provided, however, that if such payment is not made within the
aforesaid five Business Days, interest thereon shall accrue thereafter at an
annual rate equal to LIBOR plus 100 basis points to the date of payment. The
Adjustment and interest payment shall be payable in dollars, the amount of
such dollar payment to be determined by applying the Closing Exchange Rate to
the amount of the Adjustment and interest payment as denominated in pounds.
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(f) Purchase Price Allocation. The Purchase Price shall be allocated
between the U.S. Shares and the U.K. Shares as set forth on SCHEDULE 2.2(f) to
the Disclosure Memorandum. Teltrend and each Seller shall prepare or cause to
be prepared any Tax Return required to be filed in connection with or
reflecting the transactions contemplated hereby on a basis consistent with the
allocation of the Purchase Price as set forth in this Section 2.2(f).
2.3 CLOSING.
(a) CLOSING DATE AND LOCATION. The Closing shall take place at the
offices of ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇ located at Beaufort House, ▇▇ ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ at 9:00 a.m., local time, on September 18, 1997
(subject to SECTION 5.7(b)(iii) hereof), or at such other time or location as
the parties may mutually agree. The date on which the Closing occurs shall be
referred to herein as the "CLOSING DATE."
(b) CLOSING DELIVERIES BY SELLERS. At the Closing, Sellers shall
deliver, or cause to be delivered, to Teltrend, in form and substance
satisfactory to Teltrend, the following:
(i) the Transfer Agreements, duly executed by 3Net Holdings;
(ii) duly executed transfers of the Shares by the registered
holders in favor of Teltrend (or such other Persons
nominated by Teltrend) as contemplated by SECTION 2.1 hereof
and the share certificates and any additional documentation
necessary to establish the transferor's title to the Shares,
to authorize the executions of such transfers and to allow the
transferees (subject to due stamping) to be registered in
the register of members of the Company and the stockholders'
ledger of 3Net Delaware as holders of the U.K. Shares and U.S.
Shares, respectively;
(iii) the Tax Deed duly executed by the Sellers and the members of
the 3Net Group;
(iv) the common seal (if applicable), statutory books and other
record books of the Company and each Subsidiary written-up to
Closing;
(v) the certificates in respect of all issued shares in the capital
or capital stock of the Subsidiaries duly registered in the
name of the Company or another Subsidiary, or, to the extent
that certificates have not been and are not required to be
issued in respect of the share capital of any Subsidiary, a
true and complete
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copy of the share register of that Subsidiary showing the
Company or another Subsidiary as the registered owner of all
of that Subsidiary's issued share capital;
(vi) all current cheque books relating to all bank accounts of the
Company and each Subsidiary;
(vii) resignation letters from all secretaries, directors and managing
directors or members of the supervisory boards or boards of
directors of the Company and the Subsidiaries who are not
expected to continue to serve in such capacity or capacities
after the Closing (as determined in the sole discretion of
Teltrend) and resolutions or other evidence of corporate action
appointing such individuals as may be designated by Teltrend in
replacement thereof;
(viii) an unqualified letter of resignation from the auditors of the
Company and each Subsidiary, in the form prescribed by Section
394 of the Companies Act or as otherwise provided by Teltrend,
accompanied by written confirmation that such auditors have no
claims for unpaid fees or expenses;
(ix) [intentionally omitted];
(x) the opinion of Messrs. ▇▇▇▇▇▇▇ ▇▇▇▇▇, dated the Closing Date,
as to, among other things, the due organization of Sellers
and the Company, the due authorization, execution and delivery
of the Agreement and the applicable Ancillary Agreements by
Sellers and the Company and the binding effect thereof (the
form of which shall be agreed upon by the parties prior to
Closing);
(xi) evidence that all Required Approvals have been obtained;
(xii) certificates, duly executed by each Seller and dated the
Closing Date, to the effect that (A) all representations and
warranties of such Seller contained in this Agreement, the
Disclosure Memorandum, any other Ancillary Agreement or any
schedule, annex, exhibit, certificate or other document
delivered to Teltrend (or its representatives) by or on behalf
of such Seller pursuant to this Agreement or any Ancillary
Agreement or in connection with the transactions contemplated
hereby or thereby (collectively, for all Sellers, the
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"SELLER TRANSACTION DOCUMENTS") are true and accurate as of the
Closing as if made as of the Closing, and (B) all agreements
and covenants of such Seller and the Company to be performed or
complied with on or prior to the Closing have been duly
performed or complied with;
(xiii) a duly executed instrument of assignment, transferring the
Intellectual Property identified on Annex 2.3(b)(xiii) to or
at the direction of Teltrend;
(xiv) the Deeds relating to the Leased Real Property as set forth in
SCHEDULE 3.16(a)(i) to the Disclosure Memorandum; and
(xv) such other instruments, documents and releases as Teltrend may
reasonably request in connection with the Closing or relating to
others with whom Teltrend, the Company or any Subsidiary may
be dealing with respect to the Business after the Closing.
(c) CLOSING DELIVERIES BY TELTREND. At the Closing, Teltrend shall
deliver, or cause to be delivered, to Sellers the following:
(i) the Purchase Price (determined in accordance with Section
2.2(a) hereof) in immediately available funds by wire
transfer to the account or accounts designated by Sellers not
less than two Business Days prior to the Closing;
(ii) the Tax Deed duly executed by Teltrend;
(iii) a duly executed instrument of assignment, in form and
substance mutually agreeable to the parties, transferring the
trademark "Securinet" and all associated goodwill to or at the
direction of Securicor;
(iv) the opinion of ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇, dated the Closing
Date, as to, among other things, the due authorization,
execution and delivery of the Agreement and the applicable
Ancillary Agreements by Teltrend and the binding effect thereof
(the form of which shall be agreed upon the parties prior to
Closing);
(v) a certificate, duly executed by Teltrend and dated the Closing
Date, to the effect that (A) all representations and warranties
of Teltrend contained in this Agreement, any Ancillary
Agreement or any annex, certificate or
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other document delivered to any Seller (or its representatives)
by or on behalf of Teltrend pursuant to this Agreement
or any Ancillary Agreement or in connection with the
transactions contemplated hereby or thereby (collectively, the
"PURCHASER TRANSACTION DOCUMENTS") are true and correct as of
the Closing as if made as of the Closing, and (B) all
agreements and covenants of Teltrend to be performed or
complied with on or prior to the Closing have been duly
performed or complied with; and
(vi) such other instruments, documents and releases as Sellers may
reasonably request in connection with the Closing.
2.4 CERTAIN TRANSFER COSTS. Teltrend shall pay and be responsible
for any stamp duty or similar transfer tax imposed on the transfer of the
Shares to or at the direction of Teltrend pursuant hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each of the Sellers hereby represents and warrants to Teltrend, its
successors and assigns, jointly and severally, as follows:
3.1 ORGANIZATION OF SELLERS. Each Seller is duly incorporated,
validly existing and in good standing under the laws of England and Wales,
with the requisite power and authority to own, lease and operate its assets and
to carry on its business as now being and as heretofore conducted. No
proceedings for the liquidation, dissolution, merger or disposition of all or
substantially all the assets of, or bankruptcy, reorganization, moratorium,
assignment for the benefit of creditors or other similar transaction or
arrangement with respect to, any Seller are pending or, to the best knowledge
of Sellers, threatened, and no corporate action in view of any such
transaction or arrangement has been taken. No Seller has stopped payment to
any of its creditors, is unable to pay its debts as they fall due or is
insolvent.
3.2 AUTHORIZATION. Each Seller and the Company has the requisite
power and authority to enter into, execute and deliver this Agreement and the
Disclosure Memorandum, and at Closing each Seller and the Company will have
the requisite power and authority to enter into, execute and deliver each
other Ancillary Agreement and Transaction Document to which it will be a
party, and in each case to perform its obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance by each Seller and the Company of this
Agreement and the Disclosure Memorandum and the consummation of the
transactions contemplated hereby and thereby has been, and at Closing the
execution, delivery and performance by each Seller and the Company of each
other Ancillary Agreement and Transaction Document to which it will be party
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will be, duly and validly authorized, and no further corporate authorization
or consent will be required.
3.3 CONSENTS AND APPROVALS. Except as set forth on SCHEDULE 3.3 to the
Disclosure Memorandum, no Governmental Approval or other Consent is required
to be obtained or made by any Seller, the Company or any Subsidiary in
connection with the execution and delivery of this Agreement, the Ancillary
Agreements or the other Transaction Documents, or the consummation of the
transactions contemplated hereby and thereby.
3.4 NONCONTRAVENTION. The execution, delivery and performance by each
Seller and the Company of this Agreement and each Ancillary Agreement and
other Transaction Document to which it is or will be a party, and the
consummation of the transactions contemplated hereby and thereby, does not and
will not (i) violate any provisions of the charter, bylaws or other governing
documents of any Seller, the Company or any Subsidiary, (ii) conflict with, or
result in the breach of, or constitute a default under, any agreement,
instrument or arrangement to which any Seller is a party or by which any
Seller or its assets are bound, (iii) subject to obtaining the Required
Approvals, conflict with, or result in a breach of, or constitute a default
under, or result in the termination, cancellation or acceleration (whether
after the giving of notice or the lapse of time or both) of any right or
obligation of the Company or any Subsidiary under, or a loss of any benefit to
which the Company or any Subsidiary is entitled under, any Contract or other
arrangement to which the Company or any Subsidiary is a party or by which the
Company, any Subsidiary or any of their respective assets is bound, or result
in the creation of any Encumbrance upon the shares in the capital or capital
stock (or other ownership interests) or any assets of the Company or any
Subsidiary, or (iv) violate, or result in a breach of, or constitute a default
under, any Law or other restriction of any Governmental Authority to which any
Seller, the Company or any Subsidiary is subject (including any Governmental
Authorization) or the rules or requirements of any professional body or trade
association of which any Seller, the Company or any Subsidiary is a member or
by which any Seller, the Company or any Subsidiary is bound.
3.5 BINDING EFFECT. Each of this Agreement and the Disclosure Memorandum
has been duly executed and delivered by each Seller and the Company and on the
Closing Date each other Ancillary Agreement and Transaction Document will have
been duly executed and delivered by each Seller and the Company to the extent
it will be a party thereto. Each of this Agreement and the Disclosure
Memorandum constitutes a valid and legally binding obligation of each Seller
and the Company, and each other Ancillary Agreement, when executed and
delivered by the parties thereto, will constitute a valid and legally binding
obligation of each Seller and the Company to the extent it is a party thereto,
in each case enforceable against each of them in accordance with its terms.
3.6 BROKERS' FEES. None of the Sellers, the Company or the Subsidiaries
has any Liability to pay any fees or commissions to any broker, finder or
agent with respect to any of the transactions contemplated by this Agreement
or any of the Ancillary Agreements or other Transaction Documents for which
Teltrend
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could become liable or obligated, or the Company or any Subsidiary could
become or remain liable or obligated, after the Closing.
3.7 ORGANIZATION AND OUALIFICATION OF COMPANY AND SUBSIDIARIES. The
Company and each Subsidiary is a corporation duly incorporated or organized,
validly existing and in good standing, in each case under the Laws of the
jurisdiction of its incorporation or organization. The Company and each
Subsidiary has all requisite power and authority, corporate or otherwise, to
own and operate its assets and to carry on its business and operations
(including the Business) as now being and as heretofore been conducted. 3Net
Delaware is duly qualified to do business and is in good standing as a foreign
corporation in the State of New Jersey, and there are no other foreign
jurisdictions in which the conduct of its business or activities or its
ownership of assets as currently carried out requires any other qualification
under applicable Law. No proceedings for the liquidation, dissolution, merger
or disposition of all or substantially all the assets of, or bankruptcy,
reorganization, moratorium, assignment for the benefit of creditors or other
similar transaction or arrangement with respect to, the Company or any
Subsidiary is pending or threatened, and no corporate action in view of any
such transaction or arrangement has been taken. Neither the Company nor any of
the Subsidiaries has stopped payment to its creditors, is unable to pay its
debts as they fall due or is insolvent. Due compliance has been made with all
requirements of Law in connection with the formation of the Company and each
Subsidiary, the allotment, issue, purchase and redemption of shares,
debentures, capital and other securities in the Company and each Subsidiary,
the reduction of the authorized and issued share capital of the Company and
each Subsidiary, any amendment to the memorandum or articles of association,
certificate of incorporation, bylaws, constitution or other governing
documents of the Company and each Subsidiary and the passing of resolutions
and the payment of dividends by the Company and each Subsidiary. The Company
and each Subsidiary has at all times conducted its business intra ▇▇▇▇▇, has
not entered into any transaction ultra ▇▇▇▇▇ the Company or such Subsidiary,
as applicable, or outside of the authority or powers of the directors of the
Company or such Subsidiary, as applicable, and has at all times operated in
accordance with the provisions of its governing documents. Except as set forth
on SCHEDULE 3.7 to the Disclosure Memorandum, the statutory and minute books
of the Company and each Subsidiary have been properly kept and contain an
accurate and complete record of the matters which should be dealt with in
those books and no notice or allegation that any of them is incorrect or
should be rectified has been received.
3.8 CAPITALIZATION OF COMPANY AND SUBSIDIARIES. SCHEDULE 3.8 to the
Disclosure Memorandum sets forth the entire authorized share capital or
capital stock (or other form of ownership interest, in the case of 3Net China)
of the Company and each Subsidiary, indicating in each case which shares in
the capital or of capital stock (or other form of ownership interest, in the
case of 3Net China) are issued (allotted) and the owners thereof. Neither the
Company nor any Subsidiary has any direct or indirect equity or other
ownership interest in any corporation, company, joint venture, partnership,
business association, entity, enterprise or other Person other than another
Subsidiary as identified on SCHEDULE 3.8 to the Disclosure Memorandum. All of
such issued shares in the capital or of capital stock (or other ownership
interests)
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have been duly authorized and are validly issued, fully paid and non-assessable
(i.e., the holders of such shares or other ownership interests have no
liability to the issuer thereof arising out of the ownership thereof). There
are no outstanding or authorized options, warrants, rights, Contracts, calls,
puts, rights to subscribe, conversion rights or other agreements, arrangements
or commitments to which the Company or any Subsidiary is a party or which are
binding upon or otherwise affect the Company or any Subsidiary providing for
the issuance, disposition, transfer, conversion or acquisition of any of the
share or loan capital or other equity or ownership interests of such entity, or
giving any Person (other than Teltrend) any rights with respect thereto. There
are no outstanding or authorized stock appreciation, phantom stock or similar
rights with respect to the Company or any Subsidiary.
3.9 TITLE TO SHARES AND CAPITAL OF SUBSIDIARIES. 3Net Holdings is the
legal and beneficial owner of all the Shares, and has good and marketable
title to the Shares free and clear of any Encumbrances. Upon consummation of
the transactions contemplated by this Agreement in accordance with the terms
and conditions hereof, Teltrend will be vested with good and marketable title
to the Shares, free and clear of any Encumbrances. Each owner of the shares in
the capital or of the capital stock (or other form of ownership interest, in
the case of 3Net China) of any Subsidiary has good and marketable title to such
shares (or other ownership interests), free and clear of any Encumbrances. Each
of the memorandum and articles of association, certificate of incorporation and
bylaws, constitution or similar governing documents of the Company and each
Subsidiary is true and complete and, to the extent applicable, has embodied in
it or annexed to it a copy of every such resolution or agreement as is referred
to in Section 380(1) Companies Act, and sets out in full the rights and
restrictions attaching to each class of the share capital (or other form of
ownership interest, in the case of 3Net China) of the Company and each
Subsidiary.
3.10 FINANCIAL STATEMENTS.
(a) Included as SCHEDULES l.1 and 1.2 to the Disclosure Memorandum is a
true, complete and correct copy of the Annual Financial Statements and the
Interim Financial Statements (collectively, the "FINANCIAL STATEMENTS").
(b) Save that the Balance Sheet includes no provision (reserve) for
corporate income Taxation, all of the Financial Statements (i) have been
prepared from the Books and Records (which Books and Records are true and
accurate in all material respects), (ii) have been prepared in accordance with
GAAP, comply with all relevant statements of standard accounting practice and
all pronouncements issued or adopted by the Accounting Standards Board, and
(iii) show a true and fair view of the state of affairs and financial position
of the Company and the Subsidiaries as of the dates thereof and of the profit
or losses of the Company and the Subsidiaries for the periods then ended
(subject only to normal year-end adjustments and any other adjustments
described in the notes thereto, in the case of the Interim Financial
Statements).
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(c) Without prejudice to the generality of the foregoing, in the
Financial Statements:
(i) depreciation of the fixed assets of the Company and the
Subsidiaries has been made at a rate sufficient to write down
the value of such assets to nil not later than the end of their
useful working lives and no fixed asset has attributed to it a
value exceeding its current market value at the date of the
Financial Statement;
(ii) the value attributed to stock and work-in-progress does not
exceed the lower of cost and net realizable value at the date
of the Financial Statement;
(iii) proper provision or reserve (as appropriate) has been made for
all bad and doubtful debts, all liabilities and obligations
(actual, contingent or disputed) and all capital commitments;
(iv) save that the Balance Sheet includes no provision (reserve) for
corporate income Taxation, provision or reserve (as appropriate)
has been made for all Taxation liable to be assessed on the
Company or any Subsidiary or for which the Company or any
Subsidiary is accountable (whether primarily or otherwise) in
respect of income, profits or gains earned, accrued or received
on or before the date of the Financial Statement or deemed to
have been or treated as earned, accrued or received for Taxation
purposes and/or for any event on or before the Financial
Statement, including distributions made down to the date of the
Financial Statement or provided for in the Financial Statement;
and
(v) proper provision or reserve (as appropriate) has been made in
the Financial Statements for all deferred Taxation of the
Company and the Subsidiaries.
(d) Except as set forth on SCHEDULE 3.10(d) to the Disclosure Memorandum,
the profits and losses of the Company and the Subsidiaries shown by the
Financial Statements and the trend of profits and losses thereby shown have not
(except as therein disclosed) been affected to a Material extent by any
non-recurring, exceptional, extraordinary or short-term item (including, but
not limited to, any pension contribution holiday or any rental or other
outgoing at below market rates) or by any other matter which has rendered such
profits or losses unusually high or low.
(e) All books of account and other accounting records of the Company and
each Subsidiary have been kept on a consistent basis, are in its
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possession and made up to date and contain the information required by Law and
applicable generally accepted accounting principles.
(f) Attached hereto as SCHEDULE 1.5 to the Disclosure Memorandum is the
Pro Forma Balance Sheet.
(g) The Statutory Accounts for the Company have been prepared in
accordance with generally accepted auditing standards in the United Kingdom,
comply with the requirements of the Companies Act and of all relevant
statements of standard accounting practice and with all pronouncements issued
or adopted by the Accounting Standards Board, properly show all assets and
liabilities (whether actual or contingent) of the Company as at the dates
specified therein and show a true and fair view of the state of affairs and
the financial position of the Company as at and for the financial years ended
on the dates specified therein and of the profits and losses of the Company,
for the financial years ended on the dates specified therein. The Statutory
Accounts for NDL have been prepared in accordance with generally accepted
auditing standards in New Zealand, comply with the requirements of the ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ and 1993 and the New Zealand Financial Reporting
▇▇▇ ▇▇▇▇ and of all relevant statements of standard accounting practice and
with all pronouncements issued or adopted by the New Zealand Society of
Accountants, properly show all assets and liabilities (whether actual or
contingent) of NDL as at the date specified therein and show a true and fair
view of the state of affairs and the financial position of NDL as at and for
the financial years ended on the dates specified therein and of the profits
and losses of NDL for the financial years ended on the dates specified
therein.
3.11 BORROWINGS AND BANK FACILITIES. Full and accurate details of all
overdrafts, loans or other financial facilities outstanding or available to
the Company and/or Subsidiaries are contained in SCHEDULE 3.11 to the
Disclosure Memorandum and neither the Sellers nor the Company nor any of the
Subsidiaries has done or omitted to do anything whereby the continuance of any
such facilities in full force and effect might be affected or prejudiced. The
Company and the Subsidiaries are not in breach of the terms of any of such
financial facilities.
A list of all the bank accounts (and the names of all Persons
authorized to draw thereon) of the Company and each Subsidiary is included in
SCHEDULE 3.11 to the Disclosure Memorandum, together with a statement of the
credit or debit balances on such accounts as at a date not more than fourteen
days before the date of this Agreement. Since such statement there have been no
payments out of any such accounts except for routine payments in the Ordinary
Course of Business and, save for such routine payments, the balances on
current account are not now substantially different from the balances shown on
such statement.
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3.12 ABSENCE OF CERTAIN CHANGES. Except as set forth on SCHEDULE 3.12 to
the Disclosure Memorandum, since June 30, 1997, the Company and each
Subsidiary has conducted its business only in the Ordinary Course of Business
without any Material interruption or alteration in the nature, scope or manner
of the Business and has incurred no Liabilities other than current Liabilities
incurred in connection with or for services rendered or goods supplied in the
Ordinary Course of Business, Liabilities on account of Taxation and
governmental charges but not penalties, interest or fines in respect thereof,
and Liabilities incurred by virtue of the execution of this Agreement and the
Disclosure Memorandum. Except as set forth on SCHEDULE 3.12 to the Disclosure
Memorandum, since June 30, 1997, there has not been any:
(i) Material Adverse Effect;
(ii) damage, destruction or loss of any Material property owned by any
member of the 3Net Group or used in the operation of the Business,
whether or not covered by insurance;
(iii) voluntary or involuntary sale, lease, transfer, surrender, release,
abandonment or other disposition of any kind (or agreement
regarding the same) by any member of the 3Net Group of any Material
assets, property or rights (including Intellectual Property and
Intangible Rights), except in each case the sale of Inventory and
collection of accounts in the Ordinary Course of Business;
(iv) loan or advance by the Company or any Subsidiary to any party other
than sales to customers on credit in the Ordinary Course of
Business;
(v) declaration, setting aside or payment of any dividend or other
distribution in respect of the shares in the capital or capital
stock or other equity or other ownership interests of any member of
the 3Net Group or any direct or indirect redemption, purchase or
other acquisition of such shares;
(vi) amendment or termination of any Material Contract (as hereinafter
defined), other than expiration of Material Contracts in accordance
with their terms;
(vii) loss or, to the best knowledge of Sellers, threatened loss of any
customer who (together with any Affiliated customers) accounted for
sales during the last full fiscal year, or was prior to such loss or
threatened loss anticipated to have accounted for sales during the
current fiscal year, in excess of L.100,000 or change in the
relationship of any member of the 3Net Group with any customer,
supplier or contractor that might reasonably be expected to have a
Material Adverse Effect;
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(viii) change in accounting principles, methods or practices (including,
without limitation, any change in depreciation or amortization
policies or rates) utilized by any member of the 3Net Group;
(ix) discharge or satisfaction of any Liability or Encumbrance which is
Material or payment of any Liability which is Material, other than
current Liabilities paid in the Ordinary Course of Business or
cancellation of any debts of or claims against the Company or any
Subsidiary;
(x) increase in the compensation or benefits payable or to become
payable by the Company or any Subsidiary to any employee or former
employee other than in the Ordinary Course of Business;
(xi) acquisition of or agreement to acquire any asset by any member of
the 3Net Group for consideration exceeding the fair market value at
the time of the acquisition, or disposition or agreement to dispose
of any asset by any member of the 3Net Group for consideration
lower than the fair market value and book value at the time of
disposition; or
(xii) unusual increases or decreases in stock levels for the Company or
any Subsidiary.
3.13 LITIGATION. Except as set forth in SCHEDULE 3.13 to the Disclosure
Memorandum (which shall disclose the parties to, nature of and relief sought
for each matter to be disclosed):
(i) there is no suit, action, proceeding, investigation' claim or order
pending or, to the best knowledge of the Sellers, threatened
against either the Company, any Subsidiary or any of their
respective Employee Benefit Plans, or any fiduciary of any such
plan (or, to the best knowledge of the Sellers, pending or
threatened against any of the officers, directors, employees or
agents of the Company or any Subsidiary with respect to the
Business), or to which the Company or any Subsidiary is otherwise a
party or which may affect either the Company, any Subsidiary or the
Business before any Governmental Authority (collectively,
"CLAIMS"), nor is there any basis for any such Claims to be
asserted in the future;
(ii) the Company and the Subsidiaries are not subject to any outstanding
judgment, writ, award, ruling, injunction, order, stipulation or
decree of, award by or undertaking or assurance given to, any
Governmental Authority;
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(iii) the current insurance maintained by or on behalf of the Company
and Subsidiaries is adequate to cover all pending or threatened
Claims, the Company has or the Subsidiaries have given all required
notice of such Claims to its or their appropriate insurance
carrier(s) and/or all such Claims have been fully reserved for on
the Balance Sheet; and
(iv) no litigation or arbitration matters involving the Company or any
Subsidiary have been settled or compromised during the past three
years for an amount exceeding pound sterling .50,000 in the
aggregate.
3.14 PERSONAL PROPERTY. The Company and each Subsidiary has good and
marketable title to the Fixtures and Equipment and other tangible or
intangible personal property owned by it (including all assets reflected on the
Balance Sheet as owned by it, other than personal property disposed of in the
Ordinary Course of Business after the date thereof, and all assets that will be
reflected on the Closing Balance Sheet as owned by it), and the Company and
each Subsidiary has valid leasehold or licensee interests in all tangible or
intangible personal property leased or licensed to it, in each case free and
clear of all Encumbrances other than Permitted Encumbrances. All such property
is in good working condition and repair, is not dangerous, inefficient,
obsolete or in need of replacement and constitutes all tangible and intangible
personal property necessary for the operation of the Business as historically
and as presently contemplated by Sellers and/or the Company to be conducted
without any limitations or restrictions of any kind. Except as set forth in
SCHEDULE 3.14 to the Disclosure Memorandum, neither Company nor any Subsidiary
holds any property on consignment, nor does the Company or any Subsidiary hold
title to any property in the possession of others.
3.l5 INTELLECTUAL PROPERTY.
(a) SCHEDULE 3.15(a)(i) to the Disclosure Memorandum contains a complete
and correct list of all Owned Intellectual Property other than any Owned
Intellectual Property of the nature or type described in subsection (c) of the
definition of Intellectual Property contained in SECTION 1.1 hereof which is
not the subject of any registration or application for registration or patent
disclosure awaiting filing determination. SCHEDULE 3.15(a)(ii) to the
Disclosure Memorandum contains a complete list of all Intellectual Property
that is licensed by the Company or any Subsidiary from any other Person (the
"LICENSED INTELLECTUAL PROPERTY"). The Company and its Subsidiaries own the
entire right, title and interest in and to the Owned Intellectual Property and
have the unrestricted right to use the Licensed Intellectual Property in
accordance with the relevant license terms, in each case free and clear of any
Encumbrances. The Owned Intellectual Property and Licensed Intellectual
Property comprise all of the Intellectual Property necessary for the conduct
and operation of the Business as historically and as presently contemplated by
Sellers and/or the Company to be conducted.
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(b) The Company, the Subsidiaries and the conduct of the Business have
not in the past infringed and do not presently infringe or otherwise conflict
with any rights of any Person in respect of any Intellectual Property or with
respect to the Securicor Trademarks. To the best knowledge of the Sellers,
none of the Owned Intellectual Property or Licensed Intellectual Property is
being infringed, and none of the Owned Intellectual Property is otherwise used
or available for use (except as set forth on SCHEDULE 3.15(c)(i) to the
Disclosure Memorandum), by any other Person. That portion of the Owned
Intellectual Property and the Licensed Intellectual Property which is
confidential has been maintained as such and has not been disclosed to any
Person in whole or in part (other than to employees of the Company and
Subsidiaries in circumstances where the confidentially of such Intellectual
Property has been drawn to their attention and steps have been taken to
preserve such confidentiality).
(c) SCHEDULE 3.15(c)(i) to the Disclosure Memorandum sets forth all
agreements, arrangements or Laws (i) pursuant to which the Company or any
Subsidiary has licensed Intellectual Property to, or the use of Intellectual
Property is otherwise permitted (through non-assertion, settlement or similar
agreements or otherwise) by, any other Person, and (ii) pursuant to which the
Company or any Subsidiary has had Intellectual Property licensed to it, or has
otherwise been permitted to use Intellectual Property (through non-assertion,
settlement or similar agreements or otherwise). Except as set forth on SCHEDULE
3.15(c)(ii) to the Disclosure Memorandum, all of the agreements or arrangements
set forth on SCHEDULE 3.15(c)(i) to the Disclosure Memorandum (x) are in full
force and effect in accordance with their terms and no default exists
thereunder by the Company or any Subsidiary or, to the best knowledge of
Sellers, by any other party thereto, (y) are free and clear of all
Encumbrances, and (z) do not contain any change in control or other terms or
conditions that will become applicable or inapplicable as a result of the
consummation of the transactions contemplated by this Agreement. All royalties,
license fees, charges and other amounts payable by, on behalf of, to or for the
account of the Company or any Subsidiary in respect of any Intellectual
Property are disclosed in the Financial Statements.
(d) No claim or demand of any Person has been made nor is there any
proceeding that is pending, or to the knowledge of Sellers, threatened, nor is
there a reasonable basis therefor, which (i) challenges the rights or
activities of the Company, any Subsidiary or the Business in respect of any
Intellectual Property, (ii) asserts that the Company, any Subsidiary or the
Business is infringing or otherwise in conflict with, or is, except as
reflected in the agreements listed on SCHEDULE 3.15(c)(i) to the Disclosure
Memorandum, required to pay any royalty, license fee, charge or other amount
with regard to, any Intellectual Property, or (iii) claims that any default
exists under any agreement or arrangement listed on SCHEDULE 3.15(c)(i) to the
Disclosure Memorandum. None of the Owned Intellectual Property or Licensed
Intellectual Property is subject to any outstanding order, writ, award,
ruling, decree, judgment or stipulation of, or undertaking or assurance given
to, any Governmental Authority, or has been the subject of any litigation
within the last five years, whether or not resolved in favor of the Company or
a Subsidiary.
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3.16 REAL PROPERTY.
(a) LEASE OBLIGATIONS.
(i) SCHEDULE 3.16(a)(i) to the Disclosure Memorandum contains
a true and complete list of (A) all real property used or
occupied by the Company or any Subsidiary or otherwise in
connection with the Business (the "LEASED REAL PROPERTY"),
and (B) of all leases, together with any amendments,
letter agreements and assignments relating thereto (the
"LEASES"), with respect to the Leased Real Property.
(ii) Each Lease is legal, valid, binding and enforceable, and
in full force and effect. Neither the Company nor any
Subsidiary and, to the best knowledge of the Sellers, no
other party is in default, breach or violation in any
respect under any Lease or any lease superior to such
Lease, and no event, to the best knowledge of Sellers, has
occurred and is continuing that constitutes, or with
notice and/or the passage of time would constitute, a
default, violation or breach in any respect under any
Lease or any lease superior to such Lease; provided,
however, that any warranties relating to any lease
superior to the Leases of the Leased Real Property shall
only be so far as the Sellers are liable to perform any
obligations in such superior lease under the terms of the
Leases of the Leased Real Property or so far as the
Sellers have been given notice that there has been any
default, breach or violation of any of the terms of any
leases superior to the Leases of the Leased Real Property.
(iii) Each Lease grants the tenant under the Lease the exclusive
right to use and occupy the demised premises thereunder.
The Company and each Subsidiary has good and valid title
to the leasehold estate under each Lease to which it is a
party, free and clear of all Encumbrances other than
Permitted Encumbrances. The Company and each
Subsidiary enjoys peaceful and undisturbed possession
under its respective Leases of the Leased Real Property.
(iv) There are no forfeiture or other similar proceedings
pending or, to the best knowledge of Sellers, threatened
affecting any portion of the Leased Real Property. There
is no writ, injunction, decree, order, award, ruling,
stipulation or judgment outstanding, nor any action,
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claim, suit or proceeding pending or, to the best
knowledge of the Sellers, threatened relating to the
ownership, lease, use, occupancy or operation by any
Person of any Leased Real Property; provided, however,
that this warranty is given on the basis that the Sellers
have not been notified of any such matters relating to any
lease superior to the Leases of the Leased Real Property,
have made no specific enquiry relating to such matters
affecting any such superior lease and shall not be obliged
to make any such enquiry.
(v) Except as set forth on SCHEDULE 3.16(a)(v) to the
Disclosure Memorandum, the use and operation of the Leased
Real Property in the conduct of the Business does not
violate in any Material respect any agreement to or of
which the Company, any Subsidiary or any of their
Affiliates is a party or is aware affecting the Leased
Real Property. To the best knowledge of Sellers, there are
no matters affecting the Leased Real Property which might
curtail or interfere with the use of the Leased Real
Property for the purposes for which it is used by the
Company or any Subsidiary, as applicable.
(vi) The Leased Real Property and the use thereof by the
Company or any Subsidiary, as applicable, is in full
compliance with all applicable building, zoning or
planning, fire, water, health, environmental and other
land use and similar Laws affecting the Leased Real
Property.
(vii) The Leased Real Property is in good operating condition
and repair.
(viii) The expenditure of substantial sums of money on the Leased
Real Property by the Company or any Subsidiary is not
anticipated or necessary in the near future.
(ix) The title of each lessor under any Lease to grant each
Lease has been investigated and found to be satisfactory
in all respects.
(x) Any Consent required from any superior lessor and any
Consent required from any mortgagee of any superior title
for the grant or assignment of any Lease and/or the
execution of any works of any nature to the Leased Real
Property subsequent to the grant of such Lease has been
duly obtained.
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(b) OTHER. The Leased Real Property constitutes all the interests in real
property held for use in connection with or necessary for the conduct of the
Business as now being or as contemplated by Sellers and/or the Company to be
conducted. Neither the Company nor any Subsidiary has any interest in, or any
right or obligation to acquire any interest in, or any residual Liability in
respect of, any other real property.
3.17 GENERAL TAX MATTERS.
(a) The Company and each Subsidiary has duly and timely filed each Tax
Return required to be filed with any Tax Authority and Sellers or Sellers'
Affiliates have duly and timely filed each Tax Return required to be filed with
any Tax Authority by Sellers or Sellers' Affiliates which include or are based
upon the assets, operations, ownership or activities of the Company or any of
the Subsidiaries, including any consolidated, combined, unitary, fiscal unity
or similar Tax Return which includes or is based upon the assets, operations,
ownership or activities of the Company or any of the Subsidiaries. All such
Tax Returns are complete, true and accurate and give full disclosure of all
material facts and circumstances and any other information required to be
shown therein. There is no investigation or other proceeding pending or, to
the best knowledge of Sellers, threatened or expected to be commenced by any
Tax Authority for any jurisdiction where the Company and Subsidiaries do not
file Tax Returns with respect to a given Taxation that may lead to an assertion
by such Tax Authority that the Company or any Subsidiary is or may be subject
to a given Taxation in a Material amount in such jurisdiction, and there is no
meritorious basis for such an investigation or other proceeding that would
result in any such assessment.
(b) The Company and each Subsidiary has paid (or Sellers or Sellers'
Affiliates on behalf of the Company and each Subsidiary has paid) all Taxation
which it (or they) have become liable to pay with respect to the assets,
ownership, operations and activities of the Company and the Subsidiaries
(whether or not shown on any Tax Return) and have withheld and paid all
Taxation required to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor, shareholder
or other party. Except as set forth on SCHEDULE 3.17(b) to the Disclosure
Memorandum, neither the Company nor any Subsidiary has ever paid or become
liable to pay any penalty, fine or surcharge in connection with Taxation.
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(c) There are no pending or, to the best knowledge of Sellers, threatened
or proposed audits, assessments or claims from any Tax Authority for
deficiencies, penalties or interest against the Company or any of the
Subsidiaries or any of their assets, operations or activities and there is no
basis for any such audit, assessment or claim. There are no pending claims for
refund of any Taxation of the Company or any of the Subsidiaries (including
refunds of Taxation allocable with respect to consolidated, combined, unitary,
fiscal unity or similar Tax Returns).
(d) Each asset with respect to which the Company or any Subsidiary claims
depreciation, amortization or similar expense for Taxation purposes is owned
for Taxation purposes by the Company or such Subsidiary under Applicable Tax
Law.
(e) There are no outstanding rulings of, or requests for rulings with,
any Tax Authority expressly addressed to the Company or any Subsidiary (or to
an Affiliate of the Company or any Subsidiary) and that are, or if issued would
be, binding upon the Company or any Subsidiary or their respective assets,
operations or activities for any Post-Closing Period.
(f) Neither the Company nor any Subsidiary (nor Sellers or Sellers'
Affiliates with respect to any of the Company or any of the Subsidiaries) has,
in a manner that would be binding on the Company or any of the Subsidiaries
for any Post-Closing Period, (i) executed, become subject to or entered into
any closing agreement pursuant to Section 7121 of the U.S. Code or any similar
or predecessor provision thereof or other Applicable Tax Law, (ii) agreed to
any extension of time with respect to the filing of any Tax Return of the
Company or any of the Subsidiaries (including any Tax Return which includes or
is based upon their respective assets, ownership, operations or activities),
the payment of any Taxation of the Company or any of the Subsidiaries, or any
limitation period regarding the assessment of any such Taxation, or (iii)
received approval to make or agreed to a change in accounting method requiring
the filing of any form or specific notice in a Tax Return or report required
to be filed within the last five years and neither the Company nor any
Subsidiary (nor Sellers or Sellers' Affiliates with respect to the Company or
any Subsidiary) has any application pending with any Tax Authority requesting
permission for any such change.
(g) Except as disclosed on SCHEDULE 3.17(g) to the Disclosure Memorandum,
as to each year or period for which the statute of limitations for assessments
has not yet expired as to a given Taxation, neither the Company nor any of the
Subsidiaries is (i) a member of an affiliated, consolidated, unitary, fiscal
unity, combined or similar Taxation group which files a consolidated, unitary,
combined or similar Tax Return for purposes of that Taxation or (ii) a party
to any allocation, sharing or reimbursement agreement or arrangement regarding
Taxation with any Person.
(h) No item of income or gain reported for financial purposes in any
Pre-Closing Period is required to be included in taxable income for a
Post-Closing Period.
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(i) Neither the Company nor any Subsidiary has any taxable income or gain
as a result of prior intercompany transactions that have been deferred and
that will be taxed as a result of the changes in ownership contemplated by
this Agreement and the Ancillary Agreements (for example, under the U.S. Code,
income or gains attributable to deferred intercompany transactions as defined
in U.S. Treasury Regulation Section 1.1502-13).
(j) The transactions contemplated by this Agreement are carried out by the
Sellers for bona fide commercial reasons and such transactions do not have as
their main object, or one of their main objects, the obtaining of a Taxation
advantage.
(k) There are no facts or circumstances now in existence such that on or
after Closing any Seller would be liable to the Company, any Subsidiary or
Teltrend under the terms of the Tax Deed.
(l) No charge to Taxation will arise on the Company, any Subsidiary or
Teltrend merely as a result of entering into or the Closing of the transactions
contemplated by this Agreement, other than stamp duty payable on the transfer
of the U.K. Shares to Teltrend.
(m) Neither the Company nor any Subsidiary has carried out or been
engaged in any transaction or arrangement such that the Law provides that
there may be substituted for the amount or value or the actual consideration
given or received (or to be given or received) by the Company or Subsidiary
any different amount or value for Taxation purposes.
(n) Except as set forth on SCHEDULE 3.17(n) to the Disclosure Memorandum
and except as contemplated by the Tax Deed, neither the Company nor any
Subsidiary (whether alone or jointly with any other Person) has an outstanding
entitlement or obligation:
(i) to make any claim (including a supplementary claim) for relief from
Taxation:
(ii) to make any election for one type of relief, or one basis, system or
method of Taxation as opposed to another;
(iii) to make any appeal (including a further appeal) against an assessment
to Taxation;
(iv) to make any application for the postponement of payment of Taxation;
or
(v) to submit any Tax Return or provide particulars or information to any
Tax Authority.
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43
(o) All payments by the Company or any Subsidiary to any Person which
ought to have been made under deduction of Taxation have been so made and the
Company or such Subsidiary has (if required by law to do so) accounted to the
relevant Tax Authority for the Taxation so deducted.
(p) Neither Company nor any Subsidiary is liable as agent or lessee for
any Taxation Liability of another Person.
(q) No Tax Authority has agreed to operate any special arrangement (being
an arrangement which is not based on a strict and detailed application of the
relevant legislation, generally published statements of practice or generally
published extra-statutory concessions) in relation to the affairs of the
Company or any Subsidiary.
(r) Except as set forth on SCHEDULE 3.17(r) to the Disclosure Memorandum,
the Company and each Subsidiary has complied with all notices served on it by
any Tax Authority and no such notice remains outstanding.
(s) No member of the 3Net Group has at any time obtained or sought a
Taxation advantage through any fraud or evasion or made or entered into a
transaction or arrangement which was at the time it was made or entered into a
sham or fiscal nullity.
(t) NDL: (i) is a registered person for the purposes of the New Zealand
Goods and Services Tax ▇▇▇ ▇▇▇▇; (ii) has complied in all respects with that
Act; and (iii) is not in default of any obligation to make any payment or
return or notification under that Act.
3.18 U.K. TAX MATTERS.
(a) GENERAL.
(i) There has not been any transaction, arrangement, event or omission
occurring after September 30, 1996: (A) which has caused or will cause any
expenditure (including any payment of Taxation) incurred or deemed to have
been incurred for Taxation purposes by any U.K. Company not to qualify for all
or part of any relief, allowance, credit or deduction for Taxation purposes
which might be expected by Teltrend to be available to such U.K. Company; or
(B) which has given rise or will give rise (1) to income or gains being deemed
to arise to, or supplies being deemed to be made by, any U.K. Company for
Taxation purposes, or (2) to any Taxation otherwise being assessable or
chargeable on any U.K. Company when the relevant income or gains do not in
fact accrue to or the relevant supplies are not in fact made by such U.K.
Company; or (C) the Taxation treatment of which is or may become the subject
of any dispute with any Tax Authority.
(ii) In the three years prior to Closing there has not been a major
change in the nature or conduct of any trade or business carried on by any
U.K. Company (or a surrendering company) such that could affect the ability of
any U.K.
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44
Company to utilize advance corporation tax or trading losses under any of
Sections 245, 245A, 768 or 768A ICTA. As at the date hereof, the Company had
tax losses available for carry-forward against the profits of the same trade as
currently conducted by the Business of at least 3,390,000 pounds.
(iii) There have been no clearances obtained by or relating to any U.K.
Company pursuant to any statutory provision or statement of practice relating
to Taxation, or any press release issued by any Tax Authority.
(b) DISTRIBUTIONS.
(i) No U.K. Company has since September 30, 1996 made or agreed to make
any distributions within the meaning of Section 209 ICTA (meaning of
"distribution").
(ii) No U.K. Company has been concerned in any exempt distribution within
Sections 213 to 218 ICTA (demergers) within the period of five years preceding
Closing.
(iii) No U.K. Company has issued any security (as defined in Section
254(1) ICTA) which will be outstanding at Closing in circumstances such that
any interest or other payment payable in respect of it constitutes a
distribution under Section 209 ICTA (meaning of "distribution").
(iv) No U.K. Company has made any repayment of share capital to which
Section 210(1) ICTA (bonus issue following repayment of share capital) might
apply.
(v) No U.K. Company has issued any share capital or securities as paid up
other than by receipt of new consideration within the meaning of Section 254
ICTA.
(c) CAPITAL ALLOWANCES.
(i) The aggregate book value of each of the assets of each U.K. Company
on which an entitlement to industrial building allowances or other allowances
in respect of capital expenditure has arisen under the Capital ▇▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇ or the Capital ▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, in or adopted for the purposes of its
statutory accounts, does not exceed the aggregate residue of expenditure or
written-down value attributable to such assets for the purposes of those Acts
and the aggregate book value of plant and machinery allocated to a pool of
plant and machinery on which an entitlement to capital allowances has arisen
under Part II Capital Allowances Act 1990 (machinery and plant) does not exceed
the written-down value of the qualifying expenditure in respect of each such
pool under that Act.
(ii) All expenditure incurred by each U.K. Company or which it may incur
under any subsisting commitment for the provision of machinery or plant has
qualified or will qualify (if not deductible as a trading expense of a trade
carried
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on by the U.K. Company) for writing down allowances under Part II Capital
Allowances Act 1990 (machinery and plant).
(iii) Since September 30, 1996, nothing has happened as a result of
which: there may be made against any U.K. Company a balancing charge under the
Capital ▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ or under the Capital ▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇; or any
disposal value may be brought into account under Section 24 Capital Allowances
Act 1990 (writing down allowances and balancing adjustments); or there may be
any recovery of excess relief within Sections 46 or ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇ (recovery of excess relief); or a relevant event may occur within the
meaning of Section 138 Capital Allowances Act 1990 (scientific research).
(iv) There is not, and there are no circumstances which could give rise
to, any dispute between any U.K. Company and any other Person as to the
entitlement to capital allowances under Sections 51 to 59 Capital Allowances
Act 1990 (fixtures).
(v) No U.K. Company has made any election under Section 37 Capital
Allowances Act 1990 (short life assets) nor has been taken to have made an
election under sub-section (8)(c) of that Section.
(d) CAPITAL GAINS.
(i) The book value in or adopted for the purposes of its statutory
accounts as the value of each of the assets of each U.K. Company on the
disposal of which a chargeable gain or allowable loss could arise does not
exceed the amount deductible under Section 38 Taxation of Chargeable Gains ▇▇▇
▇▇▇▇ (acquisition and disposal costs etc.) (excluding any indexation
allowance) in respect of each such asset.
(ii) No debt owed to any U.K. Company would on its disposal give rise to
a chargeable gain by reason of Section 251 Taxation of Chargeable Gains ▇▇▇
▇▇▇▇ (debts-general provisions).
(iii) No U.K. Company has any interest in any qualifying corporate bond
to which Section 116 Taxation of Chargeable Gains ▇▇▇ ▇▇▇▇ (reorganizations,
conversions and reconstructions) applies.
(iv) No benefit under any policy of assurance or contract for a deferred
annuity has been acquired by any U.K. Company which would on its disposal give
rise to a chargeable gain by reason of Section 210 Taxation of Chargeable
Gains ▇▇▇ ▇▇▇▇ (life assurance and deferred annuities).
(v) Except as set forth on SCHEDULE 3.18(d)(v) to the Disclosure
Memorandum, no U.K. Company has an interest in any assets which are wasting
assets within the meaning of Section 44 Taxation of Chargeable Gains ▇▇▇ ▇▇▇▇
(meaning of "wasting asset") and which do not qualify for capital allowances.
(vi) No U.K. Company has made nor is it entitled to make any claim or
election under either of Section 24 Taxation of Chargeable Gains Act 1992
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(disposals where assets lost or destroyed, or become of negligible value) or
Section 161(3) Taxation of Chargeable Gains ▇▇▇ ▇▇▇▇ (appropriations to and
from stock) and no U.K. Company has since September 30, 1996 appropriated any
asset forming part of its trading stock for any other purpose.
(vii) No U.K. Company has since September 30, 1996 been a party to any
depreciatory transaction for the purpose of Section 176 Taxation of Chargeable
Gains ▇▇▇ ▇▇▇▇ (depreciatory transactions in a group) or which could be
treated as a depreciatory transaction under Section 177 Taxation of Chargeable
Gains ▇▇▇ ▇▇▇▇ (dividend stripping).
(viii) No U.K. Company has made or is entitled to make any claim under
Section 280 Taxation of Chargeable Gains ▇▇▇ ▇▇▇▇ (consideration payable
by installments) to pay by installments Taxation on chargeable gains.
(ix) No election has been made under Section 35(5) Taxation of
Chargeable Gains Tax 1992 (assets held on 31 March 1982) in respect of any of
the assets of any U.K. Company.
(x) There are no capital losses to be carried forward by any U.K.
Company which are or might be affected by Taxation of Chargeable Gains ▇▇▇ ▇▇▇▇
Section 177(a) and Taxation of Chargeable Gains ▇▇▇ ▇▇▇▇ Schedule 7(a)
(restriction of preemptory losses).
(e) GROUPS OF COMPANIES.
(i) No U.K. Company is or has ever been treated for the purposes of
Value Added Tax Act 1994 (groups of companies) as a member of a group.
(ii) SCHEDULE 3.18(e)(ii) to the Disclosure Memorandum sets forth full
details of all surrenders, claims and agreements for surrenders or claims
(other than that contemplated by the Tax Deed) for (A) any amounts by way of
group relief under the provisions of Sections 402 to 413 ICTA (group relief),
and (B) any amounts of advance corporation tax under the provisions of Section
240 ICTA (surplus ACT), in each case where any payment for group relief (within
the meaning of Section 402(6) ICTA) or for surrender of amounts of advance
corporation tax (within the meaning of Section 240(8) ICTA) remains
outstanding or could be reduced or increased or the claim or surrender has
yet to be agreed by the Inland Revenue for a specific amount.
(iii) All dividends and other payments referred to in Section 247 ICTA
(group income) which have been paid by any U.K. Company have been paid under
an election made under that Section and all such elections are now and will up
to Closing remain valid and in force. No U.K. Company has since September 30,
1996 made and no U.K. Company will up to Closing make or receive any payment
of any dividend in respect of which a notice under Section 247(3) ICTA has
effect.
(iv) Since September 30, 1996 no U.K. Company has ceased to be a member
of a group of companies such that Section 178 or Section 179 Taxation of
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Chargeable Gains Act 1992 (company ceasing to be member of group) has effect in
relation to any asset or property of such U.K. Company. Neither Section 178
nor Section 179 Taxation of Chargeable Gains ▇▇▇ ▇▇▇▇ will have effect in
relation to any asset or property of any U.K. Company as a result of this
Agreement.
(v) None of the assets of any U.K. Company have been acquired from
another company which, at the time of acquisition, was a member of the same
group as defined in Section 170 Taxation of Chargeable Gains ▇▇▇ ▇▇▇▇ (groups
of companies - interpretation).
(vi) No tax-free benefit has ever been conferred either upon any U.K.
Company or upon any Person connected with any U.K. Company within the meaning
of Section 30 Taxation of Chargeable Gains ▇▇▇ ▇▇▇▇ (tax-free benefits). No
scheme or arrangement has been effected under which such a tax-free benefit
could be so conferred.
(vii) None of any U.K. Company's assets and no relevant asset has been
materially reduced in value within the meaning of Section 30 Taxation of
Chargeable Gains ▇▇▇ ▇▇▇▇ (tax-free benefits). No scheme or arrangement has
been effected under which there could be such a reduction in value.
(f) VALUE ADDED TAX.
(i) Each U.K. Company is a registered and taxable person for the purpose
of the Value Added Tax ▇▇▇ ▇▇▇▇ and has complied with and observed in all
respects the terms of all statutory provisions, directions, conditions,
notices, and agreements with H.M. Customs and Excise relating to value added
tax. Each U.K. Company has maintained and obtained accounts, records, invoices
and other documents (as the case may be) appropriate or requisite for the
purposes of value added tax which are complete, correct and up-to-date.
(ii) Each U.K. Company: (A) is not, nor in the two years prior to Closing
has been, in arrears with any payments or returns or notifications under any
statutory provisions, directions, conditions or notices relating to value
added tax, or liable to any forfeiture or penalty or interest or surcharge or
to the operation of any penalty, interest or surcharge provision; (B) has not
been required by H.M. Customs and Excise to give security other than as
reflected on the Balance Sheet; (C) is not, and has not agreed to become, an
agent, manager or factor for the purposes of Section 47 Value Added Tax ▇▇▇
▇▇▇▇ (agents etc.) of any Person who is not resident in the United Kingdom; (D)
has not made, and will not make prior to Closing, any supplies that are exempt
supplies; and (E) has not received a notice under paragraphs 1 and 3 of
Schedule 6 Value Added Tax ▇▇▇ ▇▇▇▇ (valuation - special cases) directing that
the value of goods supplied by such U.K. Company be taken to be their open
market value.
(iii) Each U.K. Company has not since September 30, 1996 been, and will
not prior to Closing be, treated as having made any supply of goods or services
for the purposes of value added tax where no supply has in fact been made by
such U.K. Company.
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(iv) No U.K. Company uses any scheme made under any of the following
regulations: Value Added Tax Regulations 1995 Sl 1995/2518 Part IX (Supplies
by Retailers); Value Added Tax Regulations 1995 SI 1995/2518 Part VIII (Cash
Accounting); or Value Added Tax Regulations 1995 SI 1995/2518 Part VII (Annual
Accounting).
(v) No U.K. Company is approved for the purposes of the Customs Duties
(Deferred Payment) Regulations 1976 (deferral of duty on imports).
(vi) No U.K. Company has ever received a surcharge liability notice under
Section 59 Value Added Tax ▇▇▇ ▇▇▇▇ (default surcharge) or 59a Value Added Tax
▇▇▇ ▇▇▇▇ (default surcharge: payments on account) or a penalty liability
notice under Section 64 Value Added Tax Act 1994 (persistent
mis-declarations).
(vii) No UK Company has ever received a notice under Section 5 Value
Added Tax ▇▇▇ ▇▇▇▇ (Inaccuracies in EC sales statements) or under Section 66
Value Added Tax Act 1994 (Failure to submit EC sales statement).
(viii) No U.K. Company is for the purpose of paragraph 5(5) of Schedule
10, Value Added Tax ▇▇▇ ▇▇▇▇ (developers of certain non-residential buildings
etc.) the developer of any building or work in respect of which no election
has been made under paragraph 2(1) of that Schedule by such U.K. Company.
(ix) There are no assets of any U.K. Company to which Part 15 of the
Value Added Tax (General) Regulations 1995 (adjustments to the deductions of
input tax on capital items) applies or will apply.
(x) There is no land, building or civil engineering work in which any
U.K. Company has an interest: (A) for which an election to waive exemption
under paragraph 2(1) of Schedule 10, Value Added Tax Act 1994 has been made;
(B) which is intended for use as a dwelling, for a relevant residential
purpose or a relevant charitable purpose; (C) which is a freehold building or
freehold civil engineering work that was completed for value added tax
purposes less than three years prior to the date of this Agreement; (D) which
is a building or work subject to a developmental tenancy, development lease or
developmental license; or (E) which is freehold building or freehold civil
engineering work that has not been completed for value added tax purposes.
(xi) No U.K. Company is required to pay amounts on account of value added
tax under any order made under Section 28 Value Added Tax Act 1994 (payments
on accounts).
(xii) No U.K. Company or its directors has ever been subject to a penalty
under Sections 60 to 63 (inclusive) and Sections 67 to 69 (inclusive) of Value
Added Tax ▇▇▇ ▇▇▇▇ or Value Added Tax Regulations 1995 SI 1995/2790. To the
best knowledge of the Sellers, no enquiries have been undertaken by H.M.
Customs and Excise which may lead to any such penalty.
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(xiii) No director or employee of any U.K. Company has been convicted
under Section 72 Value Added Tax Act 1994 (offences) and, to the best knowledge
of Sellers, no enquiries have been undertaken by H.M. Customs and Excise which
may lead to any such conviction.
(g) CLOSE COMPANIES.
(i) Each U.K. Company is not and has never been a close company within
the meaning of Section 414 ICTA (close companies).
(ii) No U.K. Company has ever made any transfer of value within the
meaning of the Inheritance Tax ▇▇▇ ▇▇▇▇.
(iii) No circumstances exist, or but for Section 204(b) Inheritance Tax
Act 1984 would exist, such that a power of sale could be exercised in relation
to any assets or shares of any U.K. Company pursuant to Section 212 Inheritance
Tax Act 1984 (contingent liability of transferee for unpaid capital transfer
tax or inheritance tax).
(iv) Neither the assets owned by nor the shares of any U.K. Company are
subject to an outstanding Inland Revenue charge as defined in Section 237
Inheritance Tax ▇▇▇ ▇▇▇▇.
(h) EMPLOYEES.
(i) No U.K. Company has received any notifications or notices under
Section 166 ICTA (benefits in kind: notices of nil liability).
(ii) Except as set forth on SCHEDULE 3.18(h) to the Disclosure
Memorandum, no U.K. Company operates any scheme approved under Section 202
ICTA (charities: payroll deduction scheme) or registered under Chapter III of
Part V ICTA (profit-related pay) or any unapproved scheme.
(iii) Except as set forth on SCHEDULE 3.18(h) to the Disclosure
Memorandum, no officer or employee of any U.K. Company participates in any
scheme approved under Schedule 9 ICTA (approved share option and profit
sharing schemes) or is a beneficiary or potential beneficiary of a qualifying
employee share ownership trust as defined in Schedule 5 Finance ▇▇▇ ▇▇▇▇
(employee share ownership trusts).
(iv) Since September 30, 1996 no U.K. Company has received any payment
to which Section 601 to 603 ICTA applies (pension scheme surpluses: payments
to employers).
(v) All sums payable under the existing arrangements for remunerating
officers and employees and rewarding persons rendering services to each U K.
Company are deductible for the purposes of Section 74 or 75 ICTA
(deductions).
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50
(i) STAMP DUTIES.
(i) There is no instrument which is necessary to establish any U.K.
Company's title to any right or asset which is liable to stamp duty but which
has not been duly stamped or which would attract stamp duty if brought within
the relevant jurisdiction.
(ii) Each U.K. Company has complied in all respects with the provisions
of Part IV, Finance Act 1986 (stamp duty reserve tax) and with any regulations
made under the same and each U.K. Company is not and will not become liable to
pay stamp duty reserve tax by reference to any agreement which falls within the
terms of Section 87(1) of that Act and is entered into prior to Closing.
(j) INTERNATIONAL.
(i) Each U.K. Company is and always has been resident only in the
United Kingdom for Taxation purposes. No U.K. Company is liable to Taxation in
any jurisdiction other than the United Kingdom.
(ii) No U.K. Company has, without the prior consent of the Treasury,
entered into any of the transactions specified in Section 765 ICTA (migration
etc. of companies).
(iii) No income has arisen in a territory outside the United Kingdom in
respect of which any claim under Section 584 ICTA (unremittable overseas
income) has been or could be made by any U.K. Company.
(iv) No U.K. Company has disposed of any asset or of any interest in
any asset in a territory outside the United Kingdom in respect of which any
claim under Section 279 Taxation of Chargeable Gains ▇▇▇ ▇▇▇▇ (foreign assets:
delayed remittances) has been or could be made.
(v) No U.K. Company has any interest in any controlled foreign company
or in any offshore fund as defined respectively in Chapters IV and V of Part
XVII of ICTA.
(vi) No U.K. Company has any interest in any company which is not
resident in the United Kingdom which would be a close company if it were
resident in the United Kingdom (Section 13 Taxation of Chargeable Gains ▇▇▇
▇▇▇▇ - attribution of gains to members of non-resident companies).
(k) MISCELLANEOUS. No U.K. Company has any outstanding Liability
to pay installments of development land tax.
3.19 COMPLIANCE WITH LAWS. The Company and each Subsidiary and Prior
Subsidiary (and its respective directors, officers, employees and agents with
respect to its business and operations) has complied with all Laws applicable
to it or its operation of the Business and has not received (and the Sellers
are not aware of) any notice of any alleged claim or threatened claim under,
violation of or Liability or potential responsibility under any such Law which
has not been cured or for which
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there is remaining Liability. To the best knowledge of the Sellers there is no
proposed, pending or threatened change in any Law which would constitute a
Material Adverse Effect.
3.20 LICENSES AND PERMITS. SCHEDULE 3.20 to the Disclosure Memorandum
sets forth a true and complete list of all notifications, licenses, permits
(including, without limitation, environmental, construction and operation
permits), franchises, certificates, approvals, exemptions, classifications,
registrations and other similar documents and authorizations, and applications
therefor (collectively, "LICENSES"), held by the Company or any Subsidiary and
issued by, or submitted by the Company or any Subsidiary to, any Governmental
Authority or other Person, which constitute all such Licenses used in the
conduct of the Business. The Company and each Subsidiary owns or possesses all
right, title and interest in and to all of the Licenses which are necessary or
desirable to enable it to carry on the Business as presently conducted by it.
All such Licenses are valid, binding and in full force and effect. The
execution delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not cause a breach under, be contrary
to the terms of or cause any member of the 3Net Group to lose the benefits of
any such Licenses. The Company and each Subsidiary has taken all necessary
action to maintain and is not in breach of any of such Licenses. To the best
knowledge of the Sellers, no loss or expiration of any such License is
threatened, pending or reasonably foreseeable (other than expiration upon
the end of the term thereof if the Company or Subsidiary, as applicable, has
complied with all of the terms thereof).
3.21 SUPPLIERS. Except as set forth on SCHEDULE 3.21 to the Disclosure
Memorandum, during the last year, no supplier to the Company, any Subsidiary
or the Business has canceled or otherwise modified, or, to the Sellers' best
knowledge, threatened to cancel or otherwise modify, its relationship with the
Company, any Subsidiary or the Business. None of the Sellers, the Company or
the Subsidiaries has received any notice or is aware that any such supplier
intends to cancel or otherwise modify its relationship with the Company, any
Subsidiary or the Business.
3.22 CUSTOMERS. During the last year, none of the ten largest customers
of the Business (as determined by reference to sales by all members of the
3Net Group to such customers during such period) has canceled or otherwise
terminated, or, to the best knowledge of the Sellers, threatened to cancel or
otherwise terminate, its relationship with the Company, any Subsidiary or the
Business, or reduced or, to the best knowledge of the Sellers, threatened to
reduce in a Material respect, its business with the Company, any Subsidiary or
the Business. None of the Sellers, the Company or the Subsidiaries has
received any notice or is aware that any such customer intends to cancel or
otherwise modify its relationship with the Company or any Subsidiary.
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3.23 ENVIRONMENTAL MATTERS.
(a) The Company and the Subsidiaries operate the Leased Real Property
solely for the purpose of conducting the Business.
(b) The Company and each Subsidiary and Prior Subsidiary has at all
times been in compliance with all applicable Environmental Laws and there are
no Liabilities under any Environmental Law with respect to the business and
operations of the Company or any Subsidiary (including the Business) or any
former business or operation of the Company or any Subsidiary or Prior
Subsidiary (to the best knowledge of Sellers), or the ownership, occupation or
use of its property or the ownership, occupation or use of previously owned,
previously occupied or previously used property.
(c) Neither the Company nor any Subsidiary nor (to the best of the
knowledge of the Sellers) any previous owner, tenant, occupier or user of the
Leased Real Property or any other real property at any time owned, leased,
operated or otherwise used by the Company, any Subsidiary or Prior Subsidiary
or the Business (the "REAL PROPERTY") has engaged in or permitted on the Real
Property any of the uses or activities listed in Annex C to the consultation
paper entitled "Public Registers of Land which may be Contaminated" issued by
the Department of Environment dated May 1991.
(d) There are no Hazardous Substances present on the Real Property and
there are no used or disused underground storage tanks located on the Real
Property.
(e) There has been no Release into, on or from the Real Property
which may cause harm to health or to the environment, give rise to any third
party Liability or restrict or materially increase the cost of any
re-development of the Real Property.
(f) No Government Authority has exercised or, to the best knowledge of
Sellers, threatened to exercise any powers to carry out works to remedy
contamination on the Real Property, or required the Company or any Subsidiary
or Prior Subsidiary to carry out such works.
(g) No environmental survey, inspection, report or audit has been
carried out for or on behalf of the Company, any Subsidiary or Prior Subsidiary
or the Sellers and, so far as the Sellers are aware, no environmental survey,
inspection, report or audit has been carried out for or on behalf of any third
party involving the Company, any Subsidiary or Prior Subsidiary or the
Business.
(h) To the best knowledge of Sellers, no land use or activity, listed
in Annex C to the consultation paper entitled "Public Registers of Land Which
may be Contaminated" issued by the Department of the Environment dated May
1991 has taken place on any land adjoining the Real Property.
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(i) Neither the Company, any Subsidiary or Prior Subsidiary nor any
Seller has received any Environmental Claim during the past three years, or
prior thereto if the Environmental Claim has not been resolved, and none of the
Sellers otherwise has knowledge of any such Environmental Claim.
(j) There are no writs, injunctions, decrees, orders, stipulations,
awards or judgments outstanding, or any actions, suits, proceedings or
investigations pending or, to the best knowledge of the Sellers, threatened,
relating to any Environmental Claim or compliance with or Liability under any
Environmental Law affecting the Company, any Subsidiary or Prior Subsidiary or
the Business.
3.24 INVENTORY. All Inventory is of good, usable and merchantable
quality in all material respects and does not include obsolete or discontinued
items, except to the extent of any provision (reserve) therefor reflected on
the Balance Sheet. All Inventory is of such quality as to meet the quality
control standards of the Company and the Subsidiaries and any applicable
governmental quality control standards, all Inventory that are finished goods
are saleable as current Inventory at the current prices thereof in the Ordinary
Course of Business without any rebate, discount or allowance (other than
rebates, discounts and allowances granted to customers in the Ordinary Course
of Business), all Inventory is recorded on the books of the Business in
accordance with GAAP and no write-down in Inventory has been made or should
have been made pursuant to GAAP since September 30, 1995. SCHEDULE 3.24 to
the Disclosure Memorandum lists the locations of all Inventory.
3.25 INSURANCE. SCHEDULE 3.25(a) to the Disclosure Memorandum contains
a true and complete list of all material insurance policies presently owned or
maintained by the Company and each Subsidiary or by Sellers or any of their
Affiliates with respect to the Company, any Subsidiary or the Business. All the
assets of the Company and Subsidiaries which are of an insurable nature have
at all material times been and are presently insured in amounts reasonably
regarded as adequate against risks normally insured against by companies
carrying on similar businesses or owning property of a similar nature and the
Company and Subsidiaries have at all material times been and are now adequately
covered against accident, third party Liability, injury, damage and other risks
normally covered by insurance by such companies. All such insurance is in full
force and effect, and is sufficient for compliance by the Company and each
Subsidiary with all applicable requirements of Law and all Contracts which
impose upon the Company or any Subsidiary any requirement to maintain
insurance. Except as disclosed in SCHEDULE 3.25(b) to the Disclosure
Memorandum, no member of the 3Net Group and no other person (with respect to
the Company, any Subsidiary or the Business) has within the past three years,
(i) had any material application for insurance rejected or any insurance policy
canceled or withdrawn, (ii) received any written notice from or on behalf of
any insurance carrier that insurance rates will be substantially increased,
(iii) received any written notice of non-renewal of any material insurance
policy then in effect, (iv) received written notice that material alterations
to the business operations of the Company or any Subsidiary are required by
such carrier or (v) made any claims for indemnity under any insurance policy.
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3.26 MATERIAL CONTRACTS. SCHEDULE 3.26(a) to the Disclosure Memorandum
contains a true and complete list of all Contracts (such Contracts, or those
which should have been listed on SCHEDULE 3.26(a), are the "MATERIAL
CONTRACTS"), except for purchase and sales orders made in the Ordinary Course
of Business and contracts terminable by the Company or a Subsidiary on 30
days' notice or less without penalty.
Each Material Contract is a valid and binding obligation of the Company
or the Subsidiary party thereto, and, to the best knowledge of the Sellers,
each other party thereto, enforceable against each of them in accordance with
its terms, and is in full force and effect. The Company and each Subsidiary
has performed all obligations required to be performed by it under each
Material Contract to which it is a party and neither the Company nor any
Subsidiary nor, to the knowledge of the Sellers, any other party to any
Material Contract, is (with or without the lapse of time or the giving of
notice, or both) in breach or default in any Material respect thereunder and
there exists no condition which, to the knowledge of the Sellers, would
constitute a breach or default thereunder. Neither the Company, the Sellers
nor any Subsidiary has been notified or is aware that any party to any
Material Contract intends to cancel, terminate, not renew or exercise an
option under any Material Contract, whether in connection with the
transactions contemplated hereby or otherwise.
None of the Sellers, the Company or the Subsidiaries has released any of
its rights under any Material Contract. No Contract requires from the Company
or any Subsidiary the payment or performance of material obligations on or
after the Closing Date without receipt by such company of consideration of
commensurate value on or after the Closing Date. No advance payments have been
made under any Material Contract. No Material Contract is currently of a
loss-making nature after taking into account costs directly allocable thereto.
There has been no offer given or made by the Company or any Subsidiary on or
before the date of this Agreement and still outstanding which is capable of
giving rise to a Material Contract merely by the unilateral act of another
Person. Except as set forth on SCHEDULE 3.15(c)(ii) to the Disclosure
Memorandum, no amounts shall become payable and no benefits shall accrue to
any Person under any Contract as a result of the execution of this Agreement
or any Ancillary Agreement and the consummation of the transactions
contemplated hereby and thereby. None of the Company or the Subsidiaries is or
has been party to any agreement (as defined in the RTPA) which has been
furnished to the Director General of Fair Trading as provided for in the RTPA
or which was subject to registration under the RTPA and has not been so
furnished. There is no pending warranty claim against any member of the 3Net
Group, other than claims the burden of which the relevant member of the 3Net
Group is able to pass on to the manufacturer of the product in question, nor
is there any basis for any such claim to be asserted.
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3.27 U.K. PENSION SCHEMES.
(a) The Pension Schemes are the only retirement benefit schemes (as
defined in Section 611 of ICTA) in which any U.K. Company participates for the
purpose of providing relevant benefits (as defined in Section 612(1) of ICTA)
to or in respect of the employees of any U.K. Company. Other than pursuant to
the Pension Schemes, there are no legal or moral obligations to pay any
pension, gratuity, superannuation allowance, death benefit, retirement
gratuity or like benefit or make any other payment after disability,
retirement or death or contribute to any life assurance in respect of any
current or former employee of any U.K. Company.
(b) The Pension Schemes are approved as exempt approved schemes (within
the meaning of Chapter I of Part XIV of ICTA) and the Sellers are not aware of
any reason why the Inland Revenue might withdraw or vary such approval.
(c) True and complete copies of all documents establishing and comprising
the Pension Schemes and full particulars of the benefit entitlements under the
Pension Schemes have been delivered to Teltrend as well as a list of the
employees of the Company who participate in the Securicor Scheme and a list of
employees and former employees of each U.K. Company who participate in the
Save and Prosper Scheme and there is no obligation to provide benefits under
the Pension Schemes other than is revealed in such documents and particulars.
(d) There are no claims against the trustees or administrators of the
Pension Schemes or any U.K. Company arising out of or in connection with the
Pension Schemes save for the routine payment of benefits.
(e) The Company has paid to the trustees of the Save and Prosper Scheme
all contributions due and payable under the Save and Prosper Scheme.
(f) The Save and Prosper Scheme is a fully insured paid up scheme with
Save & Prosper Group Limited.
(g) The Save and Prosper Scheme provides only money purchase benefits as
defined in Section 181(1) of the U.K. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇.
(h) Contributions have at all times been paid to the Securicor Scheme in
accordance with the contribution rates recommended by the Actuary to the
Securicor Scheme and a true and complete copy of the last actuarial valuation
report and of the latest accounts relating to the Securicor Scheme has been
delivered to Teltrend. The Securicor Scheme has sufficient assets to meet its
current liabilities to its beneficiaries on the basis used in the last
actuarial valuation. No circumstances or events have occurred since the last
actuarial valuation that rendered any U.K. Company liable to pay increased
contributions to the Securicor Scheme.
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3.28 OTHER EMPLOYEE BENEFITS AND RELATED MATTERS.
(a) SCHEDULE 3.28(a) to the Disclosure Memorandum lists all Employee
Benefit Plans other than those which are governmental or quasi-governmental
social security plans or arrangements (including governmental or quasi-
governmental medical and health insurance and similar plans or arrangements).
(b)
(i) All contributions required to be made under the terms of any
Employee Benefit Plan have been timely made.
(ii) The Company and each Subsidiary has made all required contributions
under all Employee Benefit Plans which are in the nature of "defined-
contribution" plans (i.e., plans under which a company's obligation is limited
to the obligation to make specified contributions as opposed to providing
specified benefits) with respect to all employees and former employees of the
Company and the Subsidiaries and Prior Subsidiaries, whether managed by
governmental or quasi-governmental entities or otherwise, other than
contributions not yet payable for which (A) all provisions (reserves) required
in accordance with GAAP have been made in the Balance Sheet, and (B) as of the
Closing Date all provisions (reserves) required in accordance with GAAP shall
have been made in the Closing Balance Sheet.
(iii) The Company and each Subsidiary has funded its obligations with
respect to all Employee Benefit Plans which are in the nature
of "defined-benefit" plans (i.e., plans under which a company's obligation
includes an obligation to provide specified benefits to employees or former
employees) with respect to all employees and former employees of the Company
and the Subsidiaries and Prior Subsidiaries, either (A) by transfers of
sufficient funds to reputable insurance companies or other independent
organizations which have undertaken to pay all such pensions, retirement
benefits or indemnities (and to assume all financial and actuarial risks
involved therewith), or (B) or through contributions to trusts or similar
funds. To the extent that any such plan is funded through contributions to a
trust or similar entity, the actuarial present value, determined in accordance
with the actuarial assumptions specified for accounting purposes in such plan's
most recent actuarial valuation report, of the accumulated plan benefit
obligations does not exceed the amount of the fair market value of the assets
of such trust or similar fund.
(c) Each Employee Benefit Plan which is intended to be qualified under
Section 401(a) of the U.S. Code has received a favorable determination letter
from the United States Internal Revenue Service and, to the best knowledge of
Sellers, there are no circumstances likely to result in revocation of any
such favorable determination letter.
(d) Each Employee Benefit Plan has at all relevant times been operated
and administered in compliance with all applicable Laws.
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(e) Except pursuant to the terms and conditions of the Employee Benefit
Plans which are not Seller Plans (as hereinafter defined), neither the Company
nor any Subsidiary has any Liability to make any contributions to any
individual pension scheme or any retirement annuity contract on behalf of, or
to pay any pension, retirement, post-retirement or other benefits to, any
employee or former employee or other Person.
3.29 LABOR MATTERS.
(a) SCHEDULE 3.29(a) to the Disclosure Memorandum sets forth a correct
and complete list, as of a recent date or dates, of all directors, officers
and other employees, and all consultants and contractors, of the Company and
Subsidiaries. Such Schedule sets forth the respective position, job location,
rate of compensation and date of hire, election or engagement of each such
individual listed thereon. No person who is not listed as an employee on such
Schedule (including any former employee) has the right to be an employee of the
Company or any Subsidiary. No person is or has been a shadow director of the
Company or any Subsidiary. No change in the remuneration, benefits and
arrangements for any Person identified on such Schedule is due or expected
within six months from the date of this Agreement (other than in the Ordinary
Course of Business) and no request for any such change has been received.
(b) There are no strikes, work stoppages, slowdowns, picketings,
lockouts, unfair labor practice charges, arbitrations or grievances pending,
or to the knowledge of Sellers, threatened against or involving the Company or
any Subsidiary. There are no disputes between the Company or any Subsidiary
and any trade union or similar labor organization.
(c) There are no written complaints, charges, grievances, arbitrations or
claims, whether they be statutory or contractual, against the Company or any
Subsidiary pending or, to the knowledge of the Sellers, threatened to be
brought or filed with any Governmental Authority based on or arising out of
the employment or actual or constructive termination of employment of any
individual or individuals by the Company or any Subsidiary.
(d) The Company and each Subsidiary is in compliance with all Laws
relating to the employment of labor and hiring of consultants and contractors,
including all such Laws relating to wages, hours, time off work, collective
bargaining, trade unions, labor relations, health and safety, recruitment,
maternity, discrimination, civil rights, withholding of Taxation and workers'
compensation.
(e) SCHEDULE 3.29(e) to the Disclosure Memorandum sets forth a true and
correct list of each collective bargaining or labor agreement, each standard
form of individual employment agreement and each individual employment
agreement for any employee whose annual compensation exceeds 80,000 pounds with
respect to employees or former employees (including directors who are or were
employees or who have a Contract with any member of the 3Net Group) of the
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Company or any Subsidiary, indicating in each case the name of the entity to
which such agreement relates.
(f) Except as set forth on SCHEDULE 3.29(f) to the Disclosure Memorandum,
there is not outstanding any contract of service between the Company or any
Subsidiary and any of its respective directors, officers, employees,
consultants or contractors which, subject to the statutory rights of such
Person under applicable employment legislation, is not terminable by the
Company or such Subsidiary without damages or compensation (other than any
compensation payable by statute) on no more than four month's notice given at
any time.
(g) No employee of the Company or any Subsidiary (other than 3Net
Australia) has given notice terminating his contract of employment or is under
notice of dismissal and no account due to or in respect of any employee or
former employee of the Company or any Subsidiary is in arrears and unpaid other
than his salary for the current pay period.
3.30 GUARANTEES. Neither the Company nor any Subsidiary is a guarantor
(whether as financial guarantor or performance guarantor), surety or
indemnitor or otherwise liable for or in respect of any Financial Debt or any
contractual or other Liability of any Person (other than the Company or a
Subsidiary), other than as an endorser of checks received by it and deposited
in the Ordinary Course of Business. Except as set forth on SCHEDULE 3.30 to
the Disclosure Memorandum, there is no outstanding guarantee, surety or
indemnity given by any Person (other than the Company or any Subsidiary) for
the benefit of the Company or any Subsidiary.
3.31 POWERS OF ATTORNEY. Except as set forth on SCHEDULE 3.31 to the
Disclosure Memorandum, there are no powers of attorney granted on behalf of the
Company or any Subsidiary that will remain in effect after the Closing, other
than powers of attorney which have been executed in the Ordinary Course of
Business to permit employees or agents of the Company or any Subsidiary to
accomplish administrative tasks or to permit persons expected to be employees of
the Company or any Subsidiary after the Closing to enter into Contracts
involving less than 20,000 pounds.
3.32 TITLE DEEDS. All documents which in any way affect the right, title
or interest of the Company or any Subsidiary in or to any of its property,
undertaking or assets and all Contracts to which the Company or any Subsidiary
is a party are in the possession of the Company or Subsidiary, as applicable,
and are properly stamped.
3.33 INTERCOMPANY AGREEMENTS. SCHEDULE 3.33 to the Disclosure Memorandum
contains an accurate and complete list of all written agreements or material
arrangements relating to all intercompany services and transactions (the
"INTERCOMPANY AGREEMENTS") by and between any Seller or any of its Affiliates
(other than the Company or any Subsidiary), on the one hand, and the Company or
any Subsidiary, on the other hand, currently existing, other than contracts for
the purchase or sale of goods or the supply of services in the Ordinary Course
of Business
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on arms'-length terms. All Intercompany Agreements have been effected on terms
equivalent to those which would have been established in arms'-length
negotiations and in accordance with all applicable Laws and all applicable
Governmental Authorizations for such Intercompany Agreements have been obtained
or made.
3.34 ACCOUNTS AND NOTES RECEIVABLE. All accounts receivable and
notes receivable of the Company and the Subsidiaries existing on the Closing
Date (net of the allowance for doubtful accounts which is reflected on the
Closing Balance Sheet) shall be good and collectible in full on or before the
date which is six months after the Closing Date. All such accounts receivable
and notes receivable are owed to the Company or the Subsidiaries by current or
former customers of the Company and its Subsidiaries and arose in the Ordinary
Course of Business.
3.35 RESTRICTIONS. The Company and Subsidiaries are not restricted
by any written agreement or understanding with any other Person from carrying
on business or competing anywhere in the world.
3.36 CERTAIN BUSINESS PRACTICES. Neither the Company nor any
Subsidiary nor any of their directors, officers, employees and agents has
made, offered to make or authorized the unlawful payment or giving of anything
of value to any Governmental Authority, political party or candidate for
political office or any other Person for purposes of influencing or affecting
any act, decision or omission of a Governmental Authority, political party or
official or political candidate in order to assist the Company or any
Subsidiary in obtaining or retaining business for or with, or directing
business to, any Person.
3.37 MISCELLANEOUS. The information contained in ANNEX 1.1 and in
the Disclosure Memorandum is true and accurate in all respects and is not
misleading. Sellers have delivered to Teltrend true, correct and complete
copies of all documents and written agreements (including all amendments)
listed in the Disclosure Memorandum.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TELTREND
Teltrend represents and warrants to each Seller as follows:
4.1 ORGANIZATION. Teltrend is a coporation duly organized; validly
existing and in good standing under the laws of the State of Delaware. No
proceedings for the liquidation, dissolution, merger or disposition of all or
substantially all of the assets of, or bankruptcy, reorganization, moratorium,
assignment for the benefit of creditors or any similar transaction or
arrangement with respect to, Teltrend are pending, and no corporate action with
respect to any such transaction or arrangement has been taken. Teltrend has not
stopped payment to any of its creditors, is not unable to pay its debts as they
fall due and is not insolvent.
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4.2 CORPORATE AUTHORIZATION. Teltrend has full corporate power and
authority to enter into, execute and deliver this Agreement and the Disclosure
Memorandum, and at Closing Teltrend will have full corporate power and
authority to enter into, execute and deliver each other Ancillary Agreement and
Transaction Document to which it will be a party, and in each case to perform
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance by
Teltrend of this Agreement and the Disclosure Memorandum and the consummation
by Teltrend of the transactions contemplated hereby and thereby has been, and
at Closing the execution, delivery and performance by Teltrend of each other
Ancillary Agreement and Tranactions Document to which it will be a party and
the consummation by Teltrend of the transactions contemplated thereby will be,
duly and validly authorized, and no further corporate authorization or consent
will be required.
4.3 BINDING EFFECT. Each of this Agreement and the Disclosure
Memorandum has been duly executed and delivered by Teltrend and on the Closing
Date each other Ancillary Agreement and Transaction Document will have been
duly executed and delivered by Teltrend to the extent it will be a party
thereto. Each of this Agreement and the Disclosure Memorandum constitutes a
valid and legally binding obligation of Teltrend, and each other Ancillary
Agreement, when executed and delivered by the parties thereto, will constitute
a valid and legally binding obligation of Teltrend to the extent it is a party
thereto, in each case enforceable against Teltrend in accordance with its
terms, except in each case as enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization and other similar laws affecting the
enforcement of creditors' rights generally or by general principles of equity
limiting the availability of equitable remedies.
4.4 BROKERS' FEES. Teltrend has no Liability to pay any fees or
commissions to any broker, finder or agent with respect to any of the
transactions contemplated by this Agreement or any of the Ancillary Agreements
for which any Seller could become liable or obligated.
ARTICLE V
COVENANTS
5.1 ACCESS PRIOR TO THE CLOSING. Prior to the Closing, the Sellers
shall permit, or cause the Company and the Subsidiaries to permit, Teltrend and
its representatives to have access, during regular business hours and upon
reasonable advance notice, to the Company and the Subsidiaries and their
properties (including the right to conduct reasonable investigations in
connection therewith), employees and customers, subject to reasonable rules and
regulations of the Sellers, and shall furnish, or cause to be furnished, to
Teltrend any financial and operating data and other information that is
available with respect to the Company and Subsidiaries as Teltrend shall from
time to time reasonably request. Teltrend shall abide by the terms of the
Confidentiality Agreement with respect to such access and any information
furnished to it or its representatives pursuant to this SECTION 5.1.
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5.2 CONDUCT OF BUSINESS; OTHER SPECIFIC COVENANTS.
(a) From the date hereof to the Closing the Sellers and the Company
shall regularly consult Teltrend about the conduct of the Business and,
except as otherwise contemplated by this Agreement or consented to or approved
by Teltrend in writing, each Seller and the Company shall, and shall cause each
member of the 3Net Group over which it has legal or effective Control to, (i)
operate the Business in the Ordinary Course of Business, (ii) use all
reasonable efforts to preserve intact the respective business organizations and
goodwill of the Company and each Subsidiary, (iii) use all reasonable efforts
to keep available the services of the officers, key employees and consultants
and employees as a group of the Company and each Subsidiary (other than 3Net
Australia), and (iv) use all reasonable efforts to maintain satisfactory
relationships with suppliers, distributors, customers, banks and others having
business relationships with the Company and each Subsidiary.
(b) Without prejudice to the generality of the foregoing, from and
after the date hereof until the Closing, except as otherwise contemplated by
this Agreement or consented to or approved by Teltrend in writing, each Seller
(with respect to the Company and each Subsidiary) and the Company shall not,
and shall not permit any member of the 3Net Group over which it has legal or
effective Control to:
(i) permit or allow any of the properties, assets or undertaking of
the Company or any Subsidiary to be mortgaged, pledged or
otherwise subjected to any Encumbrance, other than Permitted
Encumbrances in the Ordinary Course of Business;
(ii) sell, assign, transfer, lease or otherwise dispose of any of the
properties or assets or undertaking of the Company or any
Subsidiary, other than in the Ordinary Course of Business or
pursuant to this Agreement or any Ancillary Agreement;
(iii) borrow any money or incur or guarantee, whether by guarantee,
suretyship or otherwise, any Financial Debt, other than short-
term borrowings for working capital purposes in the Ordinary
Course of Business;
(iv) except in the Ordinary Course of Business, increase in any
manner the compensation or benefits of any employees or
consultants of the Company or any Subsidiary;
(v) authorize, create, vary any rights attached to, issue or sell
any shares in the capital or of capital stock or other equity or
ownership interests in the Company or any Subsidiary or
authorize, issue or sell any securities convertible into,
options with respect to, warrants to purchase or rights to
subscribe to
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any such shares in the capital or of capital stock or other
equity or ownership interests or uncalled capital;
(vi) make, declare or pay any dividend, or declare or make any
distribution on, or redeem, purchase or otherwise acquire,
any shares in the capital or of capital stock or other equity or
ownership interests of the Company or any Subsidiary, except as
expressly permitted by this Agreement;
(vii) effect any merger, recapitalization (e.g., reorganization of
share capital), reclassification, stock dividend, stock
split, reverse stock split or like change in capitalization or
total investment, or capitalize any amount standing to the
credit of any reserves of the Company or any Subsidiary;
(viii) amend the certificate of incorporation, bylaws, memorandum of
association, articles of association, constitution, business
license, approval certificate or other governing documents of
the Company or any Subsidiary;
(ix) permit the admission of any Person (other than Teltrend),
whether by subscription, transfer or transmission, as a member
or stockholder;
(x) make any loans or advances to any Person, give any indemnity,
or make any investments of a capital nature, either by purchase
of shares or securities, contributions to capital, property
transfer or otherwise, or by the purchase or lease of
any property or assets of any other Person, other than in the
Ordinary Course of Business;
(xi) terminate, other than in accordance with normal expiration
terms, or amend or rescind any Material Contract, or
amend, modify or exercise any rights or options with respect to
any Lease;
(xii) cancel any existing Material insurance policies covering the
Business or the properties or assets of the Company or any
Subsidiary;
(xiii) waive or release any Material rights or execute any
cancellation, compromise, release or assignment of any
indebtedness owed to the Company or any Subsidiary;
(xiv) acquire the shares or other equity or ownership interests,
assets or whole or part of the undertaking of any other Person,
other than in the Ordinary Course of Business; or
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(xv) enter into any Contract regarding any of the foregoing, any
joint venture, partnership, strategic alliance or other
similar arrangement, any Contract with any Seller or an
Affiliate of any Seller or any otherwise Material Contract.
(c) Each Seller and the Company shall procure that the Company
and each Subsidiary maintain all its material structures, equipment and other
tangible personal (movable) property currently in use in current operating
condition and repair, except for ordinary wear and tear.
(d) Except as otherwise agreed to in writing by Teltrend, Sellers
shall cause all intercompany accounts or obligations (other than trade accounts
resulting from transactions effected on an arm's-length basis) between any
Seller or any Affiliate of any Seller (other than the Company or a
Subsidiary), on the one hand, and the Company or any Subsidiary, on the other
hand, to be settled at or prior to the Closing; provided, however, that (i)
any Liability for Taxation which arises out of or in connection with such
settlement shall be a Retained Liability hereunder and Sellers shall
indemnify Teltrend and the members of the 3Net Group against the loss of any
Taxation Benefit (as defined in the Tax Deed) in connection therewith, and
(ii) Seller and each Affiliate of a Seller (other than the Company or any
Subsidiary) shall repay in cash any such accounts or obligations owed to the
Company or any Subsidiary.
(e) Prior to the Closing Date, the Sellers shall cause all of the
Retained Liabilities to be assumed in writing by a Person other than the
Company or a Subsidiary, on terms and conditions reasonably satisfactory to
Teltrend.
(f) Sellers and the Company shall cause to be terminated prior to
the Closing those intercompany agreements and arrangements listed on SCHEDULE
5.2(f)(i) to the Disclosure Memorandum (and from and after the Closing neither
the Company nor any Subsidiary shall have any further obligations thereunder),
and cause to be continued on the same terms and conditions those intercompany
agreements and arrangements listed on SCHEDULE 5.2(f)(ii) to the Disclosure
Memorandum, and terminate or continue, as Teltrend directs, any intercompany
agreements or arrangements not listed on SCHEDULES 5.2(f)(i) and 5.2(f)(ii) to
the Disclosure Memorandum, other than intercompany agreements entered into in
connection with the transactions contemplated by this Agreement, any Ancillary
Agreement or any other Transaction Document.
5.3 BEST EFFORTS. Each of the Sellers and the Company and Teltrend
will cooperate and use its respective reasonable best efforts to fulfill the
conditions precedent to the other parties' obligations hereunder, including
securing as promptly as practicable all Consents (in accordance with the terms
hereof) required in connection with the transactions contemplated hereby or by
any Ancillary Agreement.
5.4 CONTINUED EFFECTIVENESS OF REPRESENTATIONS AND
WARRANTIES/COVENANTS. From the date hereof through the Closing, each of the
parties hereto shall use its best efforts to cause its business and affairs to
be conducted in such a manner so that its representations and warranties
contained herein and the
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Disclosure Memorandum (or in any other Ancillary Agreement if it were executed
at Closing) shall continue to be true and correct in all material respects on
and as of the Closing as if made on and as of the Closing, and shall promptly
give to the other parties written notice of (i) any fact, event, condition or
circumstance that would constitute a violation or breach of this Agreement or
any Ancillary Agreement by it or of any inaccuracy in its representations and
warranties herein or in the Disclosure of any inaccuracy in its representations
and warranties herein or in the Disclosure Memorandum (or in any other
Ancillary Agreement if it were executed at Closing) or (ii) any fact, event,
condition or circumstance that will or might give rise to a claim under the Tax
Deed (if it were executed at Closing). No disclosure by a party hereto
pursuant to the provisions of this SECTION 5.4 shall be deemed to amend or
supplement this Agreement, the Disclosure Memorandum or any other Ancillary
Agreement or to cure any misrepresentation or breach or to limit the remedies
available to the party to which such disclosure is made.
5.5 CONFIDENTIALITY. The Sellers shall not, and shall not permit
any of their Affiliates, employees or agents to, use any of the Confidential
Information (as defined below) or disclose any Confidential Information to any
Person (except, for periods prior to the Closing only, in the Ordinary Course
of the Business). As used herein, the term "CONFIDENTIAL INFORMATION" means
all trade secrets and other confidential information of or about the Company,
the Subsidiaries and/or the Business, including, without limitation, any such
information regarding the business, methods of operation, products, financial
data or customers of the Company, the Subsidiaries and/or the Business,
exclusive of any such information which (a) is or becomes publicly known
through no wrongful act of any of the Sellers or their respective Affiliates,
employees or agents, (b) is rightfully received by any of the Sellers from a
third party after the Closing without similar restrictions and without breach
of its or a similar agreement, (c) is approved in advance for such use or
disclosure in writing by Teltrend or (d) is required pursuant to Law. In the
event any of the Sellers or any of their respective Affiliates, employees or
agents becomes legally required to disclose any Confidential Information, such
Seller shall provide Teltrend with prompt notice so that Teltrend may seek a
protective order or other appropriate remedy. Such Seller will, or will cause
its respective Affiliate, employee or agent to, cooperate with Teltrend, at the
expense of Teltrend, in seeking any such order or other remedy. Such Seller
shall not, and shall not permit its respective Affiliate, employee or agent to,
disclose any more of the Confidential Information than in the opinion of its
legal counsel it is legally required to disclose. If any confidentiality or
nondisclosure agreements of Sellers or any of its Affiliates exist relating to
the Company, any Subsidiary or the Business, Sellers shall, at the request and
expense of Teltrend, take (or cause their Affiliates to take) all actions
reasonably requested by Teltrend to enforce such agreements or assign such
agreements to Teltrend.
5.6 PUBLIC ANNOUNCEMENTS. Each of Sellers, on the one hand, and
Teltrend, on the other hand, will consult with each other before issuing or
permitting the issuance of any press releases or otherwise making or permitting
the making of any public statements or statements to the trade with respect to
this Agreement and the transactions contemplated hereby, and none of them shall
issue or permit the issuance of any such press release or make or permit the
making of any such public or trade
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statement prior to such consultations, except as may be required by Law or by
obligations pursuant to any listing agreement with any national securities
exchange or market.
5.7 EMPLOYEE BENEFIT PLANS.
(a) LIABILITY UNDER SELLER PLANS. Neither Teltrend, the Company nor
any Subsidiary shall have any Liability with respect to any Employee Benefit
Plan which is or in the Ordinary Course of Business has been maintained,
sponsored, offered, insured, secured or provided by, on behalf of or as part of
a general program maintained, offered, sponsored, insured, secured or provided
by any Seller or any Affiliate of any Seller other than the Company or a
Subsidiary (a "SELLER PLAN"), except to the extent expressly provided in this
SECTION 5.7, and all such Liabilities shall constitute Retained Liabilities
hereunder.
(b) TRANSITIONAL ACCESS TO SELLER PLANS.
(i) PENSION SCHEME.
(A) The Sellers shall use all reasonable commercial efforts to
procure that any requisite Consent is obtained prior to Closing from the
principal employer and trustees under the Securicor Scheme and from the Board
of Inland Revenue to:-
(1) the continued participation of the Company in the
Securicor Scheme during the Participation Period; and
(2) the continued participation of the Member Employees in the
Securicor Scheme during the Participation Period.
(B) The Seller shall, so long as the payment of contributions to
the Securicor Scheme as set forth in SECTION (b)(i)(C) is being made:-
(1) procure that prior to the Closing Date and during the
Participation Period no action is taken or any announcement
made by any Person (except as required by Law) which would
cause the Securicor Scheme to be terminated or would alter
any of its provisions or result in the exercise of any
discretion thereunder, in each case to the detriment of
Teltrend, the Company or the Member Employees, without the
prior written consent of Teltrend (such consent not to be
unreasonably delayed or withheld);
(2) ensure that all lump sum death in-service benefits of the
Member Employees under the Securicor Scheme are fully
insured; and
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(3) use all reasonable endeavors to ensure that the Securicor
Scheme remains Approved and contracted-out of the state
earnings related pension scheme.
(C) During the Participation Period Teltrend will use all reasonable
endeavors to procure that the Company will:-
(1) while the Member Employees remain active members of the
Securicor Scheme deduct from the pay of such Member
Employees any contributions payable by them under the
Securicor Scheme (including any additional voluntary
contributions) and promptly pay to the Securicor Scheme
such contributions together with employer contributions in
relation to such Member Employees (but the Company shall
not be required to pay contributions determined on a basis
inconsistent with the determination of those payable by
other employers participating in the Securicor Scheme); and
(2) perform in all other material respects its obligations
under the Securicor Scheme.
(D) Teltrend shall use its reasonable endeavors to procure that the
Company will give any necessary withdrawal notice at the requisite time under
the Securicor Scheme in relation to the termination of the Company's
participation in the Securicor Scheme at the end of the Participation Period.
(ii) OTHER SELLER PLANS. Until November 1, 1997 (other than in the
case of the Western Provident Association health care scheme, which shall be
until September 30, 1997), Sellers shall, and shall cause their respective
Affiliates to, permit employees of the Company or any Subsidiary to continue
to participate in those Seller Plans not identified in clause (i) above which
Teltrend may request on the same terms and conditions as such employees
participate in such Seller Plans as of the date hereof. Teltrend shall
reimburse each Seller and each of its respective Affiliates for its reasonable
costs and expenses incurred in connection with the provision of such continued
participation. Sellers shall use all reasonable commercial efforts to obtain
prior to Closing all requisite third party Consents in respect of the foregoing.
(iii) CONSENTS. To the extent any requisite third party Consent is not
obtained prior to Closing as contemplated by clauses (i) and (ii) above,
Teltrend shall have the right to delay the Closing until such time as it can
procure adequate (in its sole discretion) alternative arrangements to those
contemplated by this SECTION 5.7(b).
5.8 FURTHER ASSURANCES. From and after the Closing, Teltrend, on
the one hand, and each of the Sellers, on the other hand, shall use all
reasonable commercial efforts to take or cause to be taken, all actions and to
do, or cause to be done, all things necessary, proper or advisable to carry out
the provisions hereof and
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to consummate and make effective the transactions contemplated hereby,
including, without limitation, the execution of further instruments of transfer
and assignment.
5.9 COVENANT NOT TO COMPETE. Each of the Sellers covenants with
Teltrend that it will not either on its own account or in conjunction with or
on behalf of any other Person or Persons, whether directly or indirectly, for
the period of:
(a) three years from the Closing Date, solicit or endeavour to
solicit in respect of any goods designed, manufactured or distributed, or any
services offered, by or on behalf of the Business the custom of any Person
which was at the Closing Date, or which during the period of 12 months prior to
the Closing had been, a customer or client of any member of the 3Net Group or
the Business in respect of such goods and/or services;
(b) 18 months from the Closing Date, solicit or entice away, or
endeavour to solicit or entice away, from Teltrend, the Company, any Subsidiary
or the Business any Person who was at the Closing Date, or who during the
period of six months prior to the Closing Date had been, employed by any member
of the 3Net Group or the Business, whether or not such Person would commit a
breach of his or her contract of employment by reason of leaving service, save
that this clause shall not apply to any individual employed by any member of
the 3Net Group or the Business in a purely secretarial or non-managerial
administrative role; and
(c) three years from the Closing Date, carry on or be engaged,
concerned or interested in any business which competes with the Business (other
than as a holder of securities listed or dealt in on a recognized investment
exchange provided that such holding shall not exceed five percent of the class
of securities of which the said holding forms part).
Each of the undertakings contained in this SECTION 5.9 is a separate
undertaking by each Seller in relation to itself and its interests and shall be
enforceable by Teltrend separately and independently of its right to enforce any
one or more of the other covenants contained in this SECTION 5.9 and in the
event that any such undertaking shall be found to be void but would be valid if
some part were deleted or the period or area of application were reduced, then
such undertaking shall apply with such modification as may be necessary to make
it valid and effective.
5.10 NO SHOP CLAUSE. Prior to termination of this Agreement in
accordance with ARTICLE VIII, neither Sellers nor any of their Affiliates
(including the Company), through any of their employees, officers, agents or
representatives or otherwise, shall solicit, contact or have any discussion
with any Person with a view to (i) the acquisition of any assets or undertaking
of the Business, (ii) the acquisition of any shares in the capital or of
capital stock or other equity or ownership interests of the Company or any of
the Subsidiaries, (iii) the merger or consolidation of the Company or any of
the Subsidiaries or (iv) the acquisition by the Company or any of the
Subsidiaries of the equity interests, assets or undertaking of any other
Person. Sellers shall give Teltrend immediate telephone notice regarding all
details of any
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attempt by any third party to solicit, make contact regarding or discuss any
of the matters set forth in clauses (i) through (iv) above.
5.11 ASSIGNMENT OF CERTAIN AGREEMENT. At or prior to the Closing,
Sellers shall cause Axiom Inc. (as successor to Securicor Telesciences Inc.)
to assign and transfer to 3Net Delaware all right, title and interest in and to
the Product Development and Technology Transfer Agreement, dated 8 December
1994, between the Company and Securicor Telesciences Inc., on terms and
conditions satisfactory to Teltrend.
5.12 SECURICOR NAME. To the extent the Securicor Trademark are
used by the Business on stationery, signage, invoices, receipts, forms, supplies
advertising and promotional materials, product, training and service
literature and materials, computer programs or like materials existing as of
the Closing Date (the "MARKED MATERIALS") or appear on Inventory (packaged or
otherwise) as of the Closing Date, the Company and Subsidiaries may use such
Marked Materials after the Closing for a period of 60 days and sell such
Inventory (packaged or otherwise) after the Closing for a period of one year
without altering or modifying such Marked Materials or Inventory, or removing
such Securicor Trademarks. In addition, Teltrend agrees to remove the word
"Securicor" from the corporate name of the Company and each Subsidiary within
30 days following the Closing, or as soon thereafter as practicable (but in any
event within 90 days, except in the case of 3Net China), and the Company and
each Subsidiary shall have the right to use the word "Securicor" in its
corporate name pending such removal. The Company and Subsidiaries shall not
use the Securicor Trademarks after the Closing in any other manner without the
consent of Securicor.
5.13 PURCHASER NAMES. After the Closing, no Seller will, directly
or indirectly, use or do business, or allow any of its Affiliates to use or
do business, or assist any third party in using or doing business, under the
name and ▇▇▇▇ "3NET", OR "TELTREND" (or any other name or ▇▇▇▇ confusingly
similar to either of such names and marks).
5.14 BOOKS AND RECORDS.
(a) Sellers shall, and shall cause its Affiliates to, deliver to the
Company and the Subsidiaries at or prior to the Closing all Book and Records in
their possession that relate primarily to the Company, any Subsidiary or the
Business except to the extent such items are already in the possession of the
Company or a Subsidiary.
(b) Teltrend will retain all Books and Records in existence on the
Closing Date and make the same reasonably available after the Closing Date for
inspection and copying by Sellers, at Sellers' expense during the normal
business hours of the Company or Subsidiaries, as applicable, upon reasonable
request and upon reasonable notice. No such Books and Records shall be
destroyed by any of Teltrend, the Company or the Subsidiaries for a period of
seven years after the Closing without first advising Sellers in writing and
giving Sellers a reasonable
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opportunity to obtain possession thereof. Without prejudice to the generality
of the foregoing, Teltrend will, and will cause the Company and each of the
Subsidiaries to, make available to Sellers and their respective
representatives all information for pre-Closing periods deemed necessary or
desirable by any Seller in preparing its respective financial statements.
(c) Sellers will, and will cause each of their Affiliates to,
retain all books and records and other documents pertaining to the Company, any
Subsidiary or the Business in existence on the Closing Date not delivered to
the Company or a Subsidiary pursuant to SECTION 5.14(a) hereof and to make the
same reasonably available after the Closing Date for inspection and copying by
Teltrend, at Teltrend's expense during the normal business hours of Sellers or
such Affiliate, as applicable, upon reasonable request and upon reasonable
notice. No such books, records or documents shall be destroyed by Sellers or
any of their Affiliates for a period of seven years after the Closing without
first advising Teltrend in writing, and giving Teltrend a reasonable
opportunity to obtain possession thereof. Without prejudice to the generality
of the foregoing, Sellers will, and will cause each of their Affiliates to,
make available to Teltrend and its representatives all information deemed
necessary or desirable by Teltrend in preparing its financial statements and
the financial statements of any member of the 3Net Group.
5.15 CERTAIN COVENANTS REGARDING REPRESENTATIONS AND WARRANTIES.
(a) No information of which Teltrend has knowledge (actual or
constructive) shall prejudice any claim made by Teltrend in respect of the
representations and warranties given by the Sellers pursuant to this
Agreement, any Ancillary Agreement or any other Transaction Document (the
"SELLERS' WARRANTIES") or operate to reduce any amount recoverable. No
information of which any Seller has knowledge (actual or constructive) shall
prejudice any claim made by such Seller in respect of the representations and
warranties made by Teltrend pursuant to this Agreement, any Ancillary
Agreement or any other Transaction Document (the "PURCHASER'S WARRANTIES") or
operate to reduce any amount recoverable.
(b) Where any statement in the Sellers' Warranties or Purchaser's
Warranties (collectively, the "WARRANTIES") is qualified by the expression "to
the best knowledge" or "is aware" or any similar expression, the party making
the statement shall be deemed to have knowledge of anything of which it would
have had knowledge had it made due and careful enquiry immediately before
giving the Warranties and of anything of which it ought reasonably to have
knowledge including, in the case of the Sellers, due and careful enquiry of
the directors, officers, employees and agents of the Company, Subsidiaries and
Business.
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(c) A disclosure in the Disclosure Memorandum with respect to a
particular lettered or numbered paragraph (or portion thereof) in ARTICLE 3
shall not be deemed to be an adequate disclosure or exception with respect to
any representation or warranty of any Seller contained in any other lettered
or numbered paragraph (or portion thereof) in ARTICLE 3 unless (i) such other
lettered or numbered paragraph (or portion thereof) is specifically referenced
in the disclosure, or (ii) based upon the nature of the disclosure and the
facts described therein, it would be clear to a reasonably prudent business
person that such disclosure is also related to and is an exception or
qualification with respect to such other representation or warranty.
(d) The Sellers shall be deemed to warrant and represent again to
Teltrend, its successors and assigns in the terms of the Sellers' Warranties
as of the Closing, and Teltrend shall be deemed to warrant and represent again
to the Sellers, their successors and assigns in terms of Purchaser's
Warranties as of the Closing, in each case with reference to the facts and
circumstances then subsisting (save that a reference to any fact, matter,
event or circumstance existing, occurring or having occurred at or before the
date of this Agreement shall also be construed as a reference to its existing,
occurring or having occurred at or before Closing).
5.16 SET OFF. The Sellers undertake not to exercise any right of
counterclaim or set-off or any other claim or right of recovery against
Teltrend, the Company or any of the Subsidiaries, or any of their respective
officers, employees, auditors or advisers, in relation to any claim which may
be made in respect of this Agreement, any Ancillary Agreement or any other
Transaction Document.
5.17 PREPARATION OF FINANCIAL STATEMENTS. The Sellers hereby
acknowledge that the Financial Statements were initially prepared by Ernst &
Young, acting as advisers to Teltrend. The Sellers acknowledge and agree that
they had a full and fair opportunity to review the Financial Statements in
consultation with their advisers, Ernst & Young and Teltrend. The Sellers
further acknowledge and agree that the Financial Statements were initially
prepared by Ernst & Young for the sake of convenience alone and nothing
surrounding the circumstances under which the Financial Statements were
prepared shall in any way (i) limit or otherwise affect the representations,
warranties and other statements made by any Seller herein, in any Ancillary
Agreement or in any other Transaction Document regarding the Financial
Statements or (ii) limit or otherwise affect any rights which Teltrend may
have against any Seller hereunder or under any Ancillary Agreement or other
Transaction Document.
5.18 GUARANTEES. On or as soon as practicable following Closing,
Teltrend shall use all reasonable commercial efforts to obtain the release of
Securicor from the sureties given by Securicor pursuant to (i) Section 8.1 of
the U.K. Lease relating to the Ground, First and Second Floors, and (ii)
Section 9.1 of the U.K. Lease relating to the Third Floor, and pending such
release indemnify and hold harmless Securicor as from Closing against any
Losses arising in respect of such sureties for any act or omission which
occurs or is alleged to have occurred after the Closing Date.
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5.19 RESTRICTIVE TRADE PRACTICES ▇▇▇ ▇▇▇▇. Where this Agreement is or
forms part of any agreement which is subject to registration under the RTPA,
no restriction accepted or information provision made under that agreement
shall come into effect until the day after particulars of the agreement have
been furnished to the Director General of Fair Trading under Section 24 RTPA. If
any party shall wish to furnish such particulars, the other parties will
render such co-operation and undertake such action as may reasonably be
required of them for such purpose so that particulars may be furnished as soon
as practicable following the signature of this Agreement and each of the
parties consents to the disclosure of all information so furnished. In this
SECTION 5.19 the words and terms "agreement" and "subject to registration"
shall have the meanings respectively given to them by the RTPA and the
reference to "restrictions accepted" or "information provisions made" under
the agreement shall be to restrictions accepted or information provisions made
by virtue of which the agreement is subject to registration.
5.20 COMMERCIAL FILINGS. At the request of Teltrend, the Sellers
shall use their best efforts to update, or cause to be updated, the filings with
local commercial registries and similar officials to bring the Company and the
Subsidiaries into compliance in all material respects with applicable Law
prior to the Closing.
5.21 ELIMINATION OF CERTAIN ENCUMBRANCES. At or prior to the Closing,
Sellers shall cause those Encumbrances identified on SCHEDULE 5.21 to the
Disclosure Memorandum to be released, satisfied and fully discharged (and
shall cause evidence thereof to be recorded with the appropriate registry) and
such Encumbrances shall not be considered "Permitted Encumbrances" for
purposes of any representation, warranty or agreement made pursuant to any
Transaction Document as of or after the Closing; provided, however, that the
fact that the Encumbrance identified at Item 3 of SCHEDULE 5.21 to the
Disclosure Memorandum is not so fully discharged at or prior to Closing shall
not constitute a failure to satisfy Teltrend's condition to Closing set forth
in SECTION 6.2 hereof so long as it is the result of circumstances reasonably
beyond the control of any of the Sellers and Sellers agree at Closing to
indemnify Teltrend to its satisfaction against any Loss or other Liability
related to such Encumbrance.
5.22 ▇▇▇▇▇ ▇▇▇▇▇ FINANCIAL STATEMENTS. At or prior to Closing,
Sellers shall deliver, or cause to be delivered, to Teltrend the ▇▇▇▇▇ ▇▇▇▇▇
Financial Statements in form and substance satisfactory to Teltrend, together
with all work papers or related documentation prepared in connection with the
audit of the ▇▇▇▇▇ ▇▇▇▇▇ Financial Statements. Teltrend shall deliver, or shall
cause to be delivered, to Sellers and ▇▇▇▇▇ ▇▇▇▇▇ drafts of the financial
information to be contained in the ▇▇▇▇▇ ▇▇▇▇▇ Financial Statements for
consideration and audit by ▇▇▇▇▇ ▇▇▇▇▇ no later than five Business Days prior
to Closing. The costs and expenses of Teltrend and/or its representatives
incurred in connection with the preparation of the financial information for
inclusion in the ▇▇▇▇▇ ▇▇▇▇▇ Financial Statements as contemplated by this
SECTION 5.22, and the costs and expenses of ▇▇▇▇▇ ▇▇▇▇▇ incurred in connection
with the audit of the ▇▇▇▇▇ ▇▇▇▇▇ Financial Statements, shall be borne and paid
50% by Teltrend and 50% by the Sellers. From and after the Closing, Sellers
shall, and shall use their best efforts to cause ▇▇▇▇▇ ▇▇▇▇▇ to, assist and
cooperate with Teltrend in the
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preparation and review of any financial information to be included in any
filing made by Teltrend pursuant to the U.S. securities laws.
5.23 TAX ELECTIONS FOR PURPOSES OF U.S. CODE SECTION 338. The parties
acknowledge that Teltrend may, in its sole discretion, make one or more
elections under Section 338 of the U.S. Code with respect to the purchase of
the Shares contemplated hereby. Sellers hereby agree to (i) cooperate, and to
cause their Affiliates to cooperate, with Teltrend in respect of any such
election which Teltrend determines it is necessary or advisable to make and
(ii) not take, and not permit any of their Affiliates to take, any action
inconsistent with, or which would jeopardize the benefits to Teltrend
contemplated by, any such election.
5.24 SETTLEMENT OF MATTERS WITH RESPECT TO RINGWAY HOUSE. Prior to
Closing, Sellers shall contact the lessor for the property leased by the
Company pursuant to the U.K. Leases, and shall use all reasonable commercial
efforts to determine in consultation therewith the full amount of any amounts
due and owing to such lessor as of a date no earlier than five Business Days
prior to Closing and, if so determined, shall pay all such amounts, in full and
final settlement of any disputes which may be existing between the Company and
such lessor.
5.25 CERTAIN ACTIONS WITH RESPECT TO NDL. Prior to the Closing,
Sellers shall cause all amounts payable to the former shareholders of NDL
on October 1, 1997 under that certain Memorandum of Agreement, dated March
1996, among the Company, the minority shareholders named therein, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇, Aslan Solutions Limited and NDL, to be paid in full, which shall be funded
through a cash contribution by 3Net Holdings to the capital of the Company in
an amount equal to such amounts payable.
5.26 REGULATORY FILINGS. As soon as practicable following the date
of this Agreement, the parties shall make or cause to be made such filings
as Teltrend determines may be required under the Anticompetition Acts with
respect to the consummation of the transactions contemplated hereby, and shall
thereafter file or cause to be filed any supplementary information as may be
requested pursuant to the Anticompetition Acts by the Governmental Authority
charged with administration and/or enforcement thereof. Each of the parties
shall use all reasonable commercial efforts to obtain any Consent Teltrend
determines is required under the Anticompetiton Acts (provided no party shall
be required to dispose of any assets, lines of business or equity interests in
order to obtain such Consents) with respect to the consummation of the
transactions contemplated hereby.
5.27 3NET AUSTRALIA LEASE ARRANGEMENTS. Prior to Closing, the Sellers
shall use all reasonable efforts to cause to be paid and fully discharged all
Liabilities of any member of the 3Net Group under the Leases relating to the
following Leased Real Property: (i) ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇; and (ii) Part ▇▇▇▇▇
▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, I ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇;
provided, however, that the fact that any Liability under either of such Leases
is not so fully paid and discharged prior to Closing shall not constitute a
failure to satisfy Teltrend's condition to Closing
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set forth in SECTION 6.2 hereof so long as it is the result of circumstances
reasonably beyond the control of any Seller.
5.28 CERTAIN OUTSTANDING POWERS AND ARRANGEMENTS. Prior to Closing,
Sellers shall cause all powers of attorney given by or with respect to any
members of the 3Net Group to any Person who is not expected to serve as an
employee, director or other agent of a member of the 3Net Group after Closing
(as determined in the sole discretion of Teltrend) to be terminated (including
all signatory powers with respect to bank accounts held by members of the 3Net
Group).
ARTICLE VI
CONDITIONS TO OBLIGATION OF TELTREND TO CLOSE
The obligation of Teltrend to effect the Closing and to consummate the
transactions contemplated hereby is subject to the satisfaction, on or before
the Closing Date, of each of the following conditions, unless otherwise waived
in writing by Teltrend:
6.1 REPRESENTATIONS AND WARRANTIES. All representations and
warranties of each of the Sellers contained in this Agreement, any Ancillary
Agreement or any other Transaction Document shall be true and accurate in all
material respects as of the Closing as if made as of the Closing (it being
expressly understood and agreed that, notwithstanding the fact that only the
failure of such representations and warranties to be true and accurate in all
material respects as of the Closing shall constitute a failure to satisfy
Teltrend's condition to Closing set forth in this SECTION 6.1, such
representations and warranties as deemed to be given as of the Closing pursuant
to SECTION 5.15 hereof are to be true and accurate in all respects for purposes
of each other covenant, agreement or provision contained herein or in any other
Transaction Document).
6.2 PERFORMANCE. Each of the Sellers and the Company shall have duly
performed or complied with all of the agreements and covenants to be performed
or complied with by it on or prior to the Closing.
6.3 RESULTS OF OPERATIONS: NO MATERIAL ADVERSE EFFECT. Except as set
forth on SCHEDULE 3.12 to the Disclosure Memorandum, since June 30, 1997 there
shall not have occurred any Material Adverse Effect.
6.4 DELIVERY OF DOCUMENTS. Teltrend shall have received all
documents and other items to be delivered by any of the Sellers under SECTION
2.3(b) hereof.
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6.5 CONSENTS; NO LEGAL OBSTRUCTION. Each of the Required Approvals
shall have been given, made or obtained. No suit, action or proceeding by any
Governmental Authority or other Person shall be pending or threatened which
could have (i) a Material Adverse Effect, (ii) a material adverse effect on
the condition (financial or otherwise), business, properties, value, assets,
operations or prospects of Teltrend or any of its Affiliates, or (iii) a
material adverse effect on the benefits to Teltrend of the transactions
contemplated hereby or by any Ancillary Agreement. No injunction, restraining
order or order of any nature shall have been issued or threatened by or be
pending before any Governmental Authority challenging the validity or legality
of any of the transactions contemplated hereby or restraining or prohibiting
or otherwise challenging the consummation of any of such transactions or
compelling Teltrend to dispose of or discontinue or materially restrict the
operations of a significant portion of the Business or of the business
conducted by Teltrend as a result of the consummation of the transactions
contemplated hereby. No Governmental Authority shall have proposed or enacted
any Law which would prohibit, materially restrict or materially delay
completion of the sale and purchase of the Shares or the operation of the
Company, any Subsidiary or the Business after Closing. Any Consent determined
by Teltrend to be required under any Anticompetition Act shall have been duly
obtained.
ARTICLE VII
CONDITIONS TO OBLIGATION OF SELLERS TO CLOSE
The obligation of each of the Sellers hereunder to effect the Closing
and consummate the transactions contemplated hereby is subject to the
satisfaction, on or before the Closing Date, of each of the following
conditions, unless otherwise waived in writing by Sellers:
7.1 REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Teltrend contained in this Agreement, any Ancillary Agreement
or any other Transaction Document shall be true and accurate in all material
respects on and as of the Closing as if made as of the Closing (it being
expressly understood and agreed that, notwithstanding the fact that only the
failure of such representations and warranties to be true and accurate in all
material respects shall constitute a failure to satisfy Sellers' condition to
Closing set forth in this Section 7.1, such representations and warranties as
deemed to be given as of the Closing pursuant to SECTION 5.15 hereof are to be
true and accurate in all respects for purposes of each other covenant,
agreement or provision contained herein or in any other Transaction Document).
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7.2 PERFORMANCE. Teltrend shall have duly performed or complied
with all of the agreements and covenants to be performed or complied with by
it on or prior to the Closing.
7.3 DELIVERY OF DOCUMENTS. Each of the Sellers shall have received
all documents and other items to be delivered by Teltrend under SECTION 2.3(c)
hereof.
7.4 NO LEGAL OBSTRUCTION. No injunction, restraining order or order
of any nature shall have been issued or threatened by or be pending before any
Governmental Authority challenging the validity or legality of any of the
transactions contemplated hereby or by any Ancillary Agreement or restraining,
prohibiting or otherwise challenging the consummation of any of such
transactions.
ARTICLE VIII
TERMINATION
8.1 TERMINATION. This Agreement may be terminated and abandoned,
without limiting or waiving any other rights and remedies any party may have
at law or in equity (subject to SECTION 8.2 below), at any time prior to the
Closing:
(a) upon the mutual written agreement of the parties hereto;
(b) by Teltrend, if the conditions set forth in ARTICLE VI hereof
shall not have been fully satisfied or waived by Teltrend or if the Closing
shall not have occurred on or before October 30, 1997; or
(c) by any of the Sellers, if the conditions set forth in ARTICLE
VII hereof shall not have been fully satisfied or waived by each of the Sellers
or if the Closing shall not have occurred on or before October 30, 1997.
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8.2 EFFECT OF TERMINATION. If this Agreement is terminated and
the transactions contemplated hereby are not consummated as provided above,
each and every representation, warranty and covenant contained in this
Agreement, any Ancillary Agreement or any other Transaction Document shall
expire and none of the parties hereto shall be under any liability whatsoever
with respect to any such representation, warranty or covenant; provided
however, that notwithstanding the foregoing, (i) the agreements contained in
SECTIONS 5.5, 5.6, 5.16 and ARTICLE X (and those provisions of ARTICLE I or
other definitions necessary for interpretation thereof) shall survive
termination of this Agreement, and (ii) subject to SECTION 10.10 hereof, each
party shall be and remain liable to the others in the event that the failure
so to close hereunder shall occur as a consequence of the failure of such
party to perform fully its covenants and agreements hereunder or the material
breach by such party of its representations or warranties contained in this
Agreement, any Ancillary Agreement or any other Transaction Document (except
that no party shall be liable to any other party under this SECTION 8.2 for
loss of profits or any other consequential damage of any kind or if Teltrend
terminates the Agreement because the Consent described in Item 4 of SCHEDULE
1.6 to the Disclosure Memorandum is not received on or prior to such
termination).
ARTICLE IX
INDEMNIFICATION AND SURVIVAL
9.1 INDEMNIFICATION OF TELTREND.
(a) The Sellers, jointly and severally, shall indemnify, defend and
hold harmless Teltrend, the Company, each of the Subsidiaries and their
respective officers, directors, employees, agents, representatives and
shareholders, and their respective heirs, executors, personal representatives,
successors and assigns (the "PURCHASER INDEMNIFIED PARTIES") from and against
any Losses imposed on, sustained, incurred or suffered by or asserted against
any Purchaser Indemnified Party, directly or indirectly, with respect to, in
connection with, arising from or alleged to result from or arise out of or in
connection with:
(i) a breach by any of the Sellers of any representation or warranty
made by any of the Sellers in this Agreement, any Ancillary Agreement or any
other Transaction Document;
(ii) a breach by any of the Sellers or the Company of any covenant or
agreement made by or applicable to any of the Sellers or the Company and
contained in this Agreement, any Ancillary Agreement or any other Transaction
Document; and
(iii) the Retained Liabilities.
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(b) Except as set forth in SECTION 9.1(d) hereof: (i) the aggregate
liability of the Sellers in respect of SECTION 9.1(a) above shall not exceed
the Purchase Price, and (ii) no liability shall attach to the Sellers in
respect of Losses pursuant to SECTION 9.1(a) above unless the aggregate amount
of the liability of the Sellers in respect of all such Losses shall exceed
$100,000, in which event this limitation shall cease to apply and the whole of
such amounts (subject to SECTION 9.1(c) below) shall be payable.
(c) Except as set forth in SECTION 9.1(d) hereof, no Purchaser
Indemnified Party shall make any claim under SECTION 9.1(a) above unless the
individual claim exceeds $15,000, save that for the purposes of satisfying
this de minimis limit each Purchaser Indemnified Party shall be entitled to
aggregate a series of similar individual claims arising out of the same set of
facts and circumstances.
(d) The provisions of Sections 9.1(b) and 9.1(c) hereof shall not
apply to any Losses arising from or relating to, or alleged to arise from or
relate to, any of the Retained Liabilities, and no such Losses shall be counted
against the dollar limitations contained in SECTION 9.1(b) hereof.
(e) None of the Sellers shall be liable in respect of a claim made
pursuant to SECTION 9.1(a) hereof to the extent that it arises or is increased
as a result only of (i) any change in generally accepted accounting practice
after the Closing Date, or (ii) any change in the date to which the Company or
any of the Subsidiaries make up their accounts.
9.2 INDEMNIFICATION OF SELLER.
(a) Teltrend shall indemnify, defend and hold harmless each of the
Sellers and their respective officers, directors, employees, agents,
representatives and shareholders, and their respective heirs, executors,
personal representatives, successors and assigns (the "SELLER INDEMNIFIED
PARTIES") from and against any and all Losses imposed on, sustained, incurred
or suffered by or asserted against any Seller Indemnified Party with respect
to, in connection with, arising from or alleged to result from or arise out of
or in connection with:
(i) a breach by Teltrend of any representation or warranty made by
Teltrend contained in this Agreement, any Ancillary Agreement or any
other Transaction Document; and
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(ii) a breach by Teltrend of any covenant or agreement made by
Teltrend contained in this Agreement, any Ancillary Agreement or any
other Transaction Document.
(b) The aggregate liability of Teltrend in respect of SECTION 9.2(a)
above shall not exceed $1,000,000. No liability shall attach to Teltrend in
respect of Losses pursuant to SECTION 9.2(a) above unless the aggregate amount
of the liability of Teltrend in respect of all such Losses shall exceed
$100,000, in which event this limitation shall cease to apply and the whole of
such amounts (subject to SECTION 9.2(c) below) shall be payable.
(c) No Seller Indemnified Party shall make any claim under SECTION
9.2(a) above unless the individual claim exceeds $15,000, save that for the
purposes of satisfying this de minimis limit each Seller Indemnified Party
shall be entitled to aggregate a series of similar individual claims arising
out of the same set of facts and circumstances.
9.3 FOREIGN CURRENCY ADJUSTMENTS. Payments under this ARTICLE IX
shall be made in dollars. In the event that any indemnification payment
required to be made under this ARTICLE IX shall be denominated in a currency
other than dollars, the amount of such payment shall be translated into dollars
using the foreign exchange rate for such currency as reported by The Financial
Times determined in accordance with the following rules:
(a) with respect to any Indemnifiable Losses arising from the
payment by a financial institution under a guarantee, comfort
letter, letter of credit, foreign exchange contract or similar
instrument, the foreign exchange rate for such currency shall be
determined as of the date on which such financial institution
shall have been reimbursed; and
(b) with respect to any other Indemnifiable Losses, the foreign
exchange rate for such currency shall be determined as of the
date that notice of the claim with respect to such Indemnifiable
Losses shall be given to the Indemnitee.
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9.4 PROCEDURES FOR INDEMNIFICATION.
(a) NOTICE OF THIRD PARTY CLAIMS. If a claim or demand is made
against a Person entitled to indemnification under SECTION 9.1 or 9.2 hereof
(an "INDEMNITEE") by any third party (a "THIRD PARTY CLAIM") as to which such
Indemnitee is entitled to indemnification pursuant to this Agreement, such
Indemnitee shall notify the party with such indemnification obligation (the
"INDEMNIFYING PARTY") in writing, and in reasonable detail, of the Third Party
Claim promptly (and in any event within 30 Business Days) after receipt by such
Indemnitee of written notice of the Third Party Claim; provided, however, that
failure to give such notification shall not affect the Indemnitee's right to
indemnification hereunder except to the extent the Indemnifying Party shall
have been actually prejudiced as a result of such failure. Thereafter, the
Indemnitee shall deliver to the Indemnifying Party, promptly (and in any event
within 30 Business Days) after the Indemnitee's receipt thereof, copies of all
notices and documents (including court papers) received by the Indemnitee
relating to the Third Party Claim.
(b) LEGAL DEFENSE OF THIRD PARTY CLAIMS. If a Third Party Claim is
made against an Indemnitee, the Indemnifying Party shall be entitled to
participate with the Indemnitee in the defence thereof at its own expense and
assisted by counsel of its own choosing (such counsel being subject to the
consent of the Indemnitee, which consent shall not be unreasonably withheld or
delayed), subject to the Indemnitee's right to settle, compromise and discharge
the Third Party Claim as provided in SECTION 9.4(c) hereof.
(c) SETTLEMENT OF THIRD PARTY CLAIMS. In no event shall an
Indemnitee settle, compromise or discharge a Third Party Claim without
providing prior written notice to the Indemnifying Party, which shall have the
option within 15 Business Days following receipt of such notice to:
(i) approve and agree to pay the settlement;
(ii) approve and agree to pay the amount of the settlement,
reserving the right to contest the Indemnitee's right to indemnity; or
(iii) disapprove the settlement and assume in writing all past and
future responsibility for the Losses related to such Third Party
Claim (including all of Indemnitee's prior expenditures in
connection therewith).
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(d) OTHER CLAIMS. Any claim on account of an Indemnifiable Loss
which does not result from a Third Party Claim shall be asserted by written
notice given by the Indemnitee to the applicable Indemnifying Party. Such
Indemnifying Party shall have a period of 15 Business Days after the receipt
of such notice within which to respond thereto. If such Indemnifying Party
does not respond within such 15 Business-Day period, such Indemnifying Party
shall be deemed to have refused to accept responsibility to make payment. If
such Indemnifying Party does not respond within such 15 Business-Day period or
rejects such claim in whole or in part, such Indemnitee shall be free to
pursue such remedies as may be available to such party under applicable Law or
under this Agreement.
9.5 INDEMNIFICATION PAYMENTS. Indemnification required by this
ARTICLE IX shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or Loss
is incurred. If any Indemnifying Party makes any payment to an Indemnitee
pursuant to SECTION 9.1 or 9.2 hereof with respect to an Indemnifiable Loss and
such Indemnitee subsequently recovers from a third party any amount (whether by
way of payment, discount, credit, set-off or otherwise) in respect of that
Indemnifiable Loss, such Indemnitee shall, once it has received such amount,
immediately repay or procure the repayment to the Indemnifying Party so much of
the amount paid by such Indemnifying Party as does not exceed the sum recovered
from the third party less all reasonable costs, charges and expenses paid,
incurred or accrued by such Indemnitee or its Affiliates (as the case may be)
in recovering that sum from the third party and less any Taxation paid,
incurred or accrued by such Indemnitee or its Affiliates on the money recovered
from the third party. Nothing in this SECTION 9.5 shall be deemed to require
any Indemnitee to make any claim for insurance or other third party recovery in
respect of any Loss which is or may be subject to indemnification under this
ARTICLE IX.
9.6 OBLIGATIONS ABSOLUTE. The foregoing contractual obligations of
indemnification set forth in this ARTICLE IX shall:
(i) also apply to any and all Third Party Claims that allege that any
Indemnitee is independently, directly, vicariously or jointly
and severally liable to such third party;
(ii) to the extent permitted by applicable Law, apply even if the
Indemnitee is partially negligent or otherwise partially
culpable or at fault, whether or not such Liability arises under
any doctrine of strict liability; and
(iii) be in addition to any Liability that an Indemnifying
Party may have other than pursuant to this Agreement.
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9.7 REMEDIES CUMULATIVE. The remedies provided in this ARTICLE IX
shall be cumulative and shall be in addition and without prejudice to any other
rights or the seeking of any and all other remedies by an Indemnitee against
any Indemnifying Party.
9.8 EXCHANGE OF INFORMATION. In connection with the handling of
current or future actions or Third Party Claims, the parties may determine that
it is in their mutual interest to exchange privileged or confidential
information. If so, the parties agree to discuss whether it is in their mutual
interest to enter into a joint defense agreement or information exchange
agreement to maintain the confidentiality of their communications and to permit
them to maintain the confidentiality of proprietary information or information
that is otherwise confidential or subject to any applicable privilege,
including but not limited to the attorney-client, work product, executive,
deliberative process or self-evaluation privileges.
9.9 CONTRIBUTION. To the extent that any indemnification provided
for hereunder is unavailable to an Indemnitee or is insufficient in respect of
any the Indemnifiable Losses of such Indemnitee then the Indemnifying Party, in
lieu of indemnifying such Indemnitee hereunder, shall contribute to the amount
paid or payable by such Indemnitee as a result of such Indemnifiable Losses (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Indemnifying Party on the one hand and the Indemnitee on the other hand
from the transaction or other matter which resulted in the Indemnifiable Losses
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable Law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the Indemnifying Party on the one hand and of the Indemnitee on the other
hand in connection with the action, inaction, statements or omissions that
resulted in such Indemnifiable Losses as well as any other relevant equitable
considerations.
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9.10 SURVIVAL. All covenants and agreements of any party hereto set
forth herein or in any Ancillary Agreement or other Transaction Document shall
survive and continue in full force and effect after the Closing. Further, all
representations and warranties contained in this Agreement, any Ancillary
Agreement or any other Transaction Document shall survive the Closing and shall
remain in effect for a period of two years after the Closing Date
(after which time no claims shall be made pursuant to this ARTICLE IX in
respect thereof); provided, however, that (i) any representations or
warranties relating to Taxation or matters under any Environmental Law or with
respect to any Environmental Claim shall not expire until the running of their
respective statutes of limitation, (ii) any representation or warranty which is
not true when made and which is made fraudulently or with intent to defraud or
mislead shall survive for a period six years after the Closing Date, and (iii)
the representations and warranties contained in SECTIONS 3.7, 3.8 and 3.9
hereof shall survive indefinitely. Each of the Sellers agrees that,
notwithstanding any right of any of Teltrend to fully investigate the affairs of
each of the Company and Subsidiaries and notwithstanding any knowledge of facts
determined or determinable by Teltrend pursuant to such investigation or right
of investigation, Teltrend has the right to rely fully upon the
representations, warranties, indemnities, covenants and agreements of each of
the Sellers and the Company (as applicable) contained in this Agreement, any
Ancillary Agreement or any other Transaction Document, all of which are
material and none of which supersedes any obligation of any of the Sellers or
the Company (as applicable) under any of such representations, warranties,
indemnities, covenants or agreements. Nothing contained herein shall in any
way be deemed to limit or otherwise compromise by reference to the passage of
time, a time limitation or a specified date the ability of any Purchaser
Indemnified Party to obtain indemnification from any Seller pursuant to this
ARTICLE IX with respect to any Retained Liability or breach of any covenant or
agreement of any Seller and/or the Company contained herein or in any other
Transaction Document.
9.11 RELATIONSHIP TO TAX DEED. The indemnification provided in this
ARTICLE IX shall be in addition to, and shall in no way limit or compromise,
any indemnification provided under the terms of the Tax Deed, and vice versa.
ARTICLE X
MISCELLANEOUS
10.1 WRITTEN AGREEMENT TO GOVERN. This Agreement and the Ancillary
Agreements set forth the entire understanding and supersede all prior and
contemporaneous oral or written agreements among the parties hereto relating to
the subject matter contained herein, and merge all prior and contemporaneous
dicussions among them.
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10.2 SEVERABILITY. In the event any one or more of the provisions
contained in this Agreement or any Ancillary Agreement should be held illegal,
invalid or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby. The parties shall endeavour in
good-faith negotiations to replace the illegal, invalid or unenforceable
provisions with valid provisions, the economic effect of which comes as close
as possible to the invalid, illegal or unenforceable provisions
l0.3 NOTICES. Any and all notices and other communications necessary
or desirable to be served hereunder shall be in writing and shall be either
personally delivered or sent by prepaid same-day or overnight internationally-
recognized delivery service, proof of delivery requested, or United States or
United Kingdom, as applicable, certified or registered mail, postage prepaid,
return receipt requested, addressed as follows:
(a) If to Sellers:
Security Services plc
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇
Attention: Company Secretary
With a copy to:
Securicor Communications Limited
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇
Attention: Finance Director
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(b) If to the Company:
Securicor 3 Net Limited
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇
UK
Attention: Managing Director
(c) If to Teltrend:
Teltrend Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇
Attention: Secretary
With a copy to:
Jenner & Block
▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
or to such other address or addresses as any party hereto may designate for
itself from time to time in a written notice served upon the party sending the
notice in accordance herewith. Any notice sent as hereinabove provided shall
be deemed delivered upon receipt or refusal of delivery, except in the case of
certified or registered United States or United Kingdom, as applicable, mail
which shall be deemed delivered on the third Business Day next following the
postmark date which it bears.
10.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each counterpart shall constitute an original instrument,
but all such separate counterparts shall constitute one and the same
agreement.
10.5 LAW TO GOVERN. The validity, construction and enforceability of
this Agreement shall be governed in all respects by the laws of England.
10.6 SUCCESSORS AND ASSIGNS. Neither this Agreement, nor any of the
rights, duties or obligations hereunder, may be assigned by operation of law
or otherwise by any of the parties hereto without the prior written consent of
all other parties hereto. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective permitted successors
and assigns.
10.7 GENDER AND HEADINGS. The masculine, feminine or neuter pronouns
used herein shall be interpreted without regard to gender. The headings in
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this Agreement are inserted for convenience or reference only and are not a
part of this Agreement.
10.8 ANNEXES. The Annexes referred to herein and attached hereto are
incorporated herein by such references as if fully set forth in the text
hereof.
10.9 WAIVER OF PROVISIONS. The terms, covenants, representations,
warranties and conditions of this Agreement, any ancillary Agreement or any
other Transaction Document may be waived only by a written instrument executed
by the party waiving compliance. The failure or delay of any party at any time
to require performance of any provisions hereof shall, in no manner, affect the
right at a later date to enforce the same or any other provision. No waiver by
any party of any condition, or breach of any provision, term, covenant,
representation or warranty, contained in this Agreement, any Ancillary
Agreement or any other Transaction Document, whether by conduct or otherwise,
in any one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such conditon or of the breach of any other provision,
term, covenant, representation or warranty of this Agreement, any Ancillary
Agreement or any other Transaction Document. Any release, waiver or compromise
or any other arrangement which Teltrend gives or enters into with any party to
this Agreement shall not affect any right or remedy of Teltrend as regards any
other party's liabilities under or in relation to this Agreement and such other
party shall continue to be bound by this Agreement as if it had been the sole
contracting party.
10.10 EXPENSES. Except as otherwise expressly provided herein, the
Sellers shall bear the costs and expenses of Sellers, the Company and the
Subsidiaries incidental to this Agreement, the Ancillary Agreements and the
transactions contemplated hereby and thereby, and Teltrend shall bear its own
costs and expenses incidental to this Agreement, the Ancillary Agreement and
the transactions contemplated hereby and thereby, in each case including all
fees of counsel, accountants and consultants. Notwithstanding the foregoing,
if this Agreement shall be terminated (i) by Teltrend pursuant to SECTION
8.1(b) hereof (other than because of any failure of a condition set forth in
ARTICLE VI hereof which failure is the result of a fact, circumstance, act or
omission reasonably beyond the control of any of the Sellers), Sellers shall
indemnify Teltrend against its reasonable costs and expenses incidental to this
Agreement, the Ancillary Agreements and the transactions contemplated hereby
and thereby, or (ii) by any Seller pursuant to SECTION 8.1(c) hereof (other
than because of any failure of a condition set forth in ARTICLE VII hereof
which failure is the result of a fact, circumstance, act or omission reasonably
beyond the control of Teltrend), Teltrend shall indemnify Sellers against their
reasonable costs and expenses incidental to this Agreement, the Ancillary
Agreements and the transactions contemplated hereby and thereby.
10.11 RECITALS. The recitals set forth above on the initial page of
this Agreement are incorporated herein by this reference, and this Agreement
shall be construed in light thereof.
79
86
10.12 NO THIRD PARTY BENEFICIARIES. Except as provided in ARTICLE IX
hereof (relating to Indemnitees), this Agreement is made solely for the
benefit of Sellers, Teltrend and the members of the 3Net Group and shall not
give rise to any rights of any kind to third parties.
10.13 SELLERS ACTIONS UNDER TRANSACTION DOCUMENTS. For all purposes
hereunder and under any Ancillary Agreement or other Transactional Document,
Teltrend shall be entitled to rely on any act of or notice by any one of the
Sellers as if it were the act of or notice by all of the Sellers.
[SIGNATURE PAGE TO FOLLOW]
80
87
IN WITNESS WHEREOF, the patties hereto have caused this Agreement to be
executed as of the date first written above.
SECURITY SERVICES PLC
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------
Title: DIRECTOR
-----------------------------
SECURICOR COMMUNICATIONS
LIMITED
By: /s/ M.C. WILKINSON
--------------------------------
Name: ▇.▇. ▇▇▇▇▇▇▇▇▇
------------------------------
Title: DIRECTOR
-----------------------------
3 NET HOLDINGS LIMITED
By: /s/ M.C. WILKINSON
--------------------------------
Name: ▇.▇. ▇▇▇▇▇▇▇▇▇
------------------------------
Title: DIRECTOR
-----------------------------
SECURICOR 3 NET LIMITED
By: /s/ ▇.▇. ▇▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇.▇. ▇▇▇▇▇▇▇▇▇
------------------------------
Title: DIRECTOR
-----------------------------
TELTREND INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. HERFMEYER
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. HERFMEYER
------------------------------
Title: V. P. Finance
-----------------------------
81
88
ANNEX 1.1
TO SHARE PURCHASE AGREEMENT
PARTICULARS OF THE SELLERS AND THE COMPANY
3 NET HOLDINGS LIMITED
COMPANY NO: 1680698
INCORPORATED IN: England and Wales
REGISTERED OFFICE: ▇▇▇▇▇▇ Park House
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇
DIRECTORS: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
SECRETARY: ▇▇▇▇ ▇▇▇▇▇▇
SECURICOR COMMUNICATIONS LIMITED
COMPANY NO: 1500752
INCORPORATED IN: England and Wales
REGISTERED OFFICE: ▇▇▇▇▇▇ Park House
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇
DIRECTORS: ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
SECRETARY: ▇▇▇▇ ▇▇▇▇▇▇
89
SECURITY SERVICES PLC
COMPANY NO: 57379
INCORPORATED IN: England and Wales
REGISTERED OFFICE: ▇▇▇▇▇▇ Park House
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇
DIRECTORS: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
SECRETARY: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
SECURICOR 3 NET LIMITED
COMPANY NO: 1907195
INCORPORATED IN:
England and Wales
REGISTERED OFFICE: ▇▇▇▇▇▇ Park House
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇
DIRECTORS: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
SECRETARY:
▇▇▇▇ ▇▇▇▇▇▇
90
ANNEX 1.2
TO SHARE PURCHASE AGREEMENT
PARTICULARS OF TELTREND
Corporate Name: Teltrend Inc.
State of Incorporation:
Registered Office: Delaware, U.S.A.
Corporation Trust Center
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ of ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇.▇.▇.
Directors: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, III
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. Major
91
ANNEX 1.3
TO
SHARE PURCHASE AGREEMENT
Dated September 1997
------------------------
-----------------
DEED OF INDEMNITY
-----------------
92
THIS DEED OF INDEMNITY the ("DEED") is made and entered into this ____ day of
September, 1997, by and among SECURITY SERVICES PLC, a company incorporated in
England and Wales ("SECURICOR"), SECURICOR COMMUNICATIONS LIMITED, a company
incorporated in England and Wales ("SECURICOR COMMUNICATIONS"), 3 NET HOLDINGS
LIMITED, a company incorporated in England and Wales ("3 NET HOLDINGS" and,
together with Securicor and Securicor Communications, the "Sellers,"), TELTREND
INC. a Delaware corporation (the "PURCHASER"), and the companies identified on
Schedule I hereto (the "GROUP COMPANIES").
WITNESSES as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 The following words and phrases shall have the following meanings:
"Affiliate" has the meaning ascribed to that term in
the Agreement.
"Agreement" means that certain Share Purchase
Agreement, dated August __, 1997, by and
among the Sellers, the Company and the
Purchaser.
"Applicable Tax Law" has the meaning ascribed to that phrase in
the Agreement.
"Business say" has the meaning ascribed to that phrase in
the Agreement.
"Claim for Taxation" means any notice, demand, assessment,
letter or other document issued or action
taken indicating that:
(a) the Purchaser or a Group Company is
or may be sought to be placed under a
liability to make a payment of or in
respect of Taxation; or
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93
(b) a Group Company is or may be sought to
be placed under a liability to repay
(other than to another Group Company)
any amount paid for the surrender of
any group relief (as defined in
Section 402(1) ICTA) or surplus
advance corporation tax; or
(c) any Relief or right to repayment of
Taxation of a Group Company is or may
be (whether in whole or in part) lost,
set-off or deducted from or in
computing Profits or Taxation; or
(d) any of the assets of a Group Company
or the Purchaser (including any shares
in a Group Company) are subject to any
charge or any power of sale, mortgage
or charge resulting from or in
consequence of any liability to
inheritance tax.
"Closing" has the meaning ascribed to that term
in the Agreement.
"Closing Date" has the meaning ascribed to that
phrase in the Agreement.
"Company" means Securicor 3 Net Limited, a
company incorporated in England and
Wales.
"Due Date" has the meaning ascribed to that
phrase in subclause 10.6 of this Deed.
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94
"Event" includes any event, transaction, act,
occurrence, or omission of whatever
nature, the acquisition, disposal or
realization of any asset, the making of
any claim relevant for taxation
purposes, and the failure to take any
action which would prevent or have
prevented in whole or in part an
apportionment of income under Chapter
III of Part XI and Schedule 19 of ICTA.
"Final Closing Balance has the meaning ascribed to that phrase
Sheet" in the Agreement.
"Governmental has the meaning ascribed to that term in
Authority" the Agreement.
"Group Companies" or means the companies listed on Schedule I
"Group Company" to this Deed.
in the singular
"ICTA" means the U.K Income and Corporation
Taxes ▇▇▇ ▇▇▇▇.
"Input Tax" has the meaning ascribed to that phrase
by Section 24 of the Value Added Tax ▇▇▇
▇▇▇▇;
"Laws" has the meaning ascribed to that term in
the Agreement.
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95
"Liability to Taxation" means not only a liability to make a
payment of, in respect of or relating
to Taxation but also includes:
(a) the loss, deducting from or in
computing, or setting off against
Profits or Taxation, of any Relief
which would (were it not for the said
loss or setting off) have been
available to a Group Company and which
has been taken into account in
computing (and so reducing) any
provision for deferred Taxation which
appears in the Final Closing Balance
Sheet (or which, but for the presumed
availability of such Relief, would
have appeared in the Final Closing
Balance Sheets);
(b) the deducting from or in computing, or
setting off against, Profits earned,
accrued or received on or before the
Closing Date or Taxation arising in
respect of any Event on or before the
Closing Date, of any Relief which is
not available on or before the Closing
Date but which arises in respect of
any Event occurring or period ending
after the Closing Date in
circumstances where but for such
setting off any Group Company would
have had a liability to Taxation in
respect of which it or the Purchaser
would have been able to make a claim
under this Deed; and
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96
(c) the loss or setting off against any
liability to Taxation (for which no
provision has been made in preparing
the Final Closing Balance Sheet and in
respect of which, but for such setting
off the Purchaser or a Group Company
would have been able to make a claim
under this Deed) of a right to
repayment of Taxation which has been
treated as an asset of any Group
Company in preparing the Final Closing
Balance Sheet;
and in the cases mentioned in paragraphs
(a), (b) and (c) of this definition the
amount of the Liability to Taxation shall
be determined in accordance with clause 4
of this Deed.
"Output Tax" has the meaning ascribed to that phrase by
Section 24 of the Value Added Tax ▇▇▇ ▇▇▇▇.
"Post-Closing Period" means, with respect to any Group Company,
any Tax Period commencing after the
Closing Date and the portion of any
Straddle Period commencing after the
Closing Date.
"Pre-Closing Period" means, with respect to any Group Company,
any Tax Period ending on or before the
Closing Date and the portion of any
Straddle Period ending on the Closing
Date.
"Profits" includes income, profits, gains (including
capital gains) or the value of supplies
and any other consideration, value, or
receipts used or charged for taxation
purposes.
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97
"Relief" means any relief, exemption, allowance,
set-off, deduction or credit relevant to
the computation of any Liability to
Taxation.
"Straddle Period" shall mean, with respect to any Group
Company, any Tax Period that begins before
and ends after the Closing Date.
"Taxation" Includes:
(a) within the United Kingdom,
corporation tax, advance corporation
tax, amounts corresponding to
advance corporation tax, capital
gains tax, income tax (including
income tax required to be deducted
or withheld from or accounted for in
respect of any payment), the charge
on payments to employers under
Section 601 (1) ICTA, development
land tax, inheritance tax, national
insurance, capital duty, stamp duty,
stamp duty reserve tax, value added
tax, customs and other import or
export duties and any other taxes,
levies, duties, charges, imposts or
withholdings, corresponding to,
similar to, replaced by or replacing
any of them;
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98
(b) outside the United Kingdom, any
income, corporation, gross receipts,
profits, gains, capital stock, capital
duty, franchise, withholding, social
security (including any social security
charge or premium), unemployment,
disability, property, wealth, welfare,
stamp, excise, occupation, sales, use,
transfer, value added, alternative
minimum, estimated or other similar tax
(including any fee, assessment, or other
charge in the nature of or in lieu of
any tax) imposed by any Governmental
Authority and any interest, penalties,
additions to tax, or additional amounts
in respect of the foregoing, and
including any transferee or secondary
liability in respect of any tax (whether
by Law, contractual agreement or
otherwise) and any liability in respect
of any tax as a result of being a member
of any affiliated, consolidated,
combined, unitary or similar group;
-8-
99
where any such taxes, duties, levies,
imposts or withholdings are directly or
primarily chargeable against or to a
Group Company (whether or not any amount
in respect of the same is recoverable
from any other person) or where any such
taxes, duties, levies, imposts or
withholdings are directly or primarily
chargeable against or to a person other
than a Group Company or the Purchaser to
the extent that the same are payable or
suffered by a Group Company together
with in any such case all interest,
fines, penalties, charges and losses
consequential upon, incidental or
relating to the imposing of any of the
taxes, levies, duties, charges, imposts
or withholdings referred to in
paragraphs (a) and (b) of this
definition to the extent that the same
are payable or suffered by Purchaser or
any Group Company.
"Taxation Assessment" means any assessment, demand or other
similar form of notice of a Liability to
Tax issued by or on behalf of a Tax
Authority by virtue of which a Group
Company is or will with the passing of
time become liable to make a payment of
Taxation.
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100
"Taxation Benefit" means the present value of any refund,
credit or reduction in otherwise
required Taxation payments, including
any interest payable thereon, which
present value shall be computed as of
the Closing Date or the first date on
which the right to the refund, credit or
other Taxation reduction arises or
otherwise becomes available to be
utilized, whichever is later, (i) using
the Taxation rate applicable to the
highest level of income with respect to
such Taxation under the Applicable Tax
Law on such date, and (ii) using the
interest rate on such date imposed on
corporate deficiencies paid within
thirty (30) days of a notice of proposed
deficiency under the U.S. Code or other
Applicable Tax Law. Any Taxation Benefit
shall be computed net of any related
Taxation cost (which shall be computed
in the same manner in which Taxation
Benefits are otherwise computed pursuant
to this definition).
"Tax Authority" has the meaning ascribed to that phrase
in the Agreement.
"Tax Period" means, with respect to any Taxation, the
period for which the Taxation is
reported as provided under Applicable
Tax Laws.
"Tax Return" has the meaning ascribed to that phrase
In the Agreement.
1.2 References to Profits earned, accrued or received include Profits deemed
to have been or treated as earned accrued or received for taxation
purposes.
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101
1.3 References to Profits being earned, accrued or received on or before a
particular date or in respect of a particular period shall include
Profits deemed for taxation purposes to have been earned, accrued or
received on or before that date or in respect of that period.
1.4 References to clauses and the Schedule are to clauses and the Schedule
of this Deed. Headings are for convenience only and shall not affect the
construction or interpretation of this [Deed.
1.5 References to any payment, dividend or distribution paid or made on or
before a particular date shall include:
(a) any payment, dividend or distribution which on or before
that date has fallen due to be made; and
(b) any Event which has occurred on or before that date and is
or has been deemed to be a payment, dividend or
distribution
1.6 References to any payment, dividend or distribution shall include
anything which has been deemed to be a payment, dividend or distribution
for taxation purposes.
1.7 References to inheritance tax shall include references to capital
transfer tax and references to the Inheritance Tax ▇▇▇ ▇▇▇▇ shall include
references to the Capital Transfer Tax ▇▇▇ ▇▇▇▇.
1.8 In construing this Deed, general words introduced by the word "other"
shall not be given a restrictive meaning by reason of the fact that they
are preceded by words indicating a particular class of acts, matters or
things and general words and defined terms shall not be given a
restrictive meaning by reason of the fact that they are followed by
particular examples intended to be embraced by the general words.
1.9 References to any statute or statutory provision shall be construed first
as a reference to such statute or statutory provision as in force at the
date of this Deed and as respectively
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102
re-enacted or consolidated, and second as a reference to any statute or
statutory provision of which such statute or statutory provision is a
re-enactment or consolidation.
1.10 References to something being deemed or treated "for taxation
purposes" in a certain way shall mean that for the purposes of any
applicable Law relating to or having reference to Taxation such things
are deemed or treated in the way described.
1.11 References to a "person" shall include references to any individual,
corporation, limited liability company, unincorporated association, body
of persons, partnership, trust or other entity or organization.
1.12 References to "claim" shall, unless the context otherwise requires, be
to a claim brought under the indemnities contained in this Deed.
1.13 The terms defined in the singular shall have a comparable meaning when
used in the plural, and vice versa.
1.14 The term "including" means including, without limitation.
2. GENERAL PRORATION AND RESPONSIBILITY FOR TAXES
2.1 All Taxation items shall be apportioned between the Pre-Closing
Period and the Post-Closing Period based on a closing of the books and
records of each Group Company as of the Closing Date (provided that (i)
any Taxation item incurred by reason of the transactions occurring on or
before the Closing Date as contemplated by the Agreement shall be treated
as occurring in a Pre-Closing Period and (ii) depreciation, amortization
and depletion for any Straddle Period shall be apportioned on a daily
pro rata basis). Notwithstanding anything to the contrary in the
preceding sentence, the parties agree that for U.S. federal income
Taxation purposes, Taxation items for any Straddle Period shall be
apportioned between the Pre-Closing Period and the Post-Closing Period
in accordance with U.S. Treasury Regulation Section 1.1502-76(b), which
regulation shall
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103
be reasonably interpreted by the parties in a manner intended to
achieve the method of apportionment described in the preceding sentence.
3. INDEMNITY
3.1 Consistent with the prorations set forth in Section 2.1 above, the
Sellers hereby jointly and severally agree with and undertake to the
Purchaser as a separate covenant and to each Group Company to indemnify,
defend and hold harmless each Group Company and the Purchaser, and keep so
indemnified each Group Company and the Purchaser, against any Liability to
Taxation resulting from or in respect of their respective Profits,
operations, assets or activities for any Pre-Closing Period.
3.2 Without limiting the generality of Section 3.1, Sellers hereby
jointly and severally agree with and undertake to the Purchaser and as a
separate covenant to each Group Company to indemnify and keep indemnified
each Group Company and the Purchaser against any Liability to Taxation
resulting from or in respect of any of the following occurrences:
(a) the payment of any dividend or the making of any
distribution; or
(b) the disposal or realization of any asset (including
trading stock) in circumstances where the consideration (if
any) actually received (or due to be received) for such
disposal or realization is less than the consideration deemed
to be or have been received for taxation purposes; or
(c) the supply of any service or business facility of any kind
(including a loan of money or the letting, hiring, licensing or
creation of any tangible or intangible property or rights) for a
consideration which was less than that which is deemed to be
received for taxation purposes; or
(d) any Event which gives rise to a Liability to
Taxation on deemed (as opposed to actual) Profits; or
(e) any Event which results in a Group Company becoming liable
to pay or bear a Liability to Taxation directly or primarily
chargeable against or
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104
attributable to another person (other than another Group
Company or the Purchaser) or any Event which results in a Group
Company becoming liable to pay or bear a Liability to Taxation
under Part VIII of the Taxes Management ▇▇▇ ▇▇▇▇ or any
subsequent replacing legislation; or
(f) a Group Company ceasing, for taxation purposes, to be a
member of any group or associated with any other Group Company
or any Group Company ceasing to be resident in the United
Kingdom; or
(g) any Event which results in the payment by any Group
Company of any (or any increased) penalty, fine, interest or
surcharge whatsoever in respect of or relating to Taxation; or
(h) any supply of goods or services made by a Group Company
which is not expressed to be exclusive of any Value Added Tax
payable in respect of the supply in circumstances where the
supply was stated or agreed, under the terms of the contract or
on the invoice receipt or other document relating to the supply,
to be exempt or zero-rated for Value Added Tax purposes but
which is subsequently determined or found to have been a
standard-rated supply; or
(i) the failure by a Group Company to pay all income tax and
National insurance premiums (both employer's and employees') due
under the system commonly known in the United Kingdom as the
PAYE System and the failure by a Group Company to comply with
all its reporting obligations in connection with the benefits
provided for employees and directors of a Group Company;
where the relevant occurrence occurred or is deemed, for taxation
purposes, to have occurred on or before the Closing Date.
3.3 Without prejudice to the generality of sub-clauses 3.1 and 3.2,
the Sellers jointly and severally agree with and undertake to the
Purchaser and as a separate covenant to each
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105
Group Company to indemnify, defend and hold harmless each Group Company
and the Purchaser, and keep indemnified each Group Company and the
Purchaser, against any depletion in or reduction in value of its or their
assets or increase in its or their liabilities as a result of any
inheritance tax which:
(a) at the Closing Date is a charge on any of the shares or
assets of any Group Company or gives rise to a power to sell,
mortgage or charge any of the shares or assets of the Group
Company; or
(b) after the Closing Date becomes a charge on or gives rise
to a power to sell, mortgage or charge any of the shares or
assets of any Group Company being a liability in respect of
additional inheritance tax payable on the death of any person
within seven years after a transfer of value if a charge on or
power to sell, mortgage or charge any such shares or assets
existed at the Closing Date or would, if the death had occurred
immediately before the Closing Date and the inheritance tax
payable as a result of such death had not been paid, have
existed at the Closing Date; or
(c) arises as a result of a transfer of value occurring on or
before the Closing Date (whether or not in conjunction with the
death of any person whenever occurring) which increased or
decreased the value of the estate of a Group Company.
3.4 Without prejudice to the generality of sub-clauses 3.1, 3.2 and 3.3
the Sellers jointly and severally agree with and undertake to the
Purchaser and as a separate covenant to each Group Company to
indemnify, defend and hold harmless each Group Company and the
Purchaser, and keep indemnified each Group Company and the Purchaser,
against any depletion in or reduction in value of its assets or
increase in its liabilities as a result of
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106
any liability of a Group Company (other than to any other Group
Company) to repay in whole or in part any payment for group relief or
payment for the surrender of surplus advance corporation tax received
pursuant to any agreement or arrangement entered into on or before the
Closing Date.
3.5 Without prejudice to the generality of sub-clauses 3.1, 3.2, 3.3
and 3.4, the Sellers jointly and severally agree with and undertake to the
Purchaser and as a separate covenant to each Group Company to indemnify,
defend, and hold harmless each Group Company, and keep indemnified each
Group Company, against any depletion in or reduction in value of its
assets or increase in its liabilities as a result of such Group Company
being the representative member of or treated as a member of the same
group as another body corporate (other than another Group Company) for the
purposes of Section 43 of the Value Added Tax ▇▇▇ ▇▇▇▇ for any prescribed
accounting periods in respect of which returns have not been made or Value
Added Tax (if payable) has not been accounted for except to the extent
that such depletion, reduction or increase is attributable to the amount
by which Output Tax exceeds deductible Input Tax in respect of supplies
made by and to any of the Group Companies during such prescribed
accounting periods.
3.6 Without prejudice to the generality of sub-clauses 3.1, 3.2, 3.3,
3.4 and 3.5, the Sellers jointly and severally agree with and undertake to
the Purchaser and as a separate covenant to each Group Company to
indemnify, defend and hold harmless the Purchaser and each Group Company,
and keep indemnified the Purchaser and each Group Company, against all
costs and expenses reasonably incurred or payable in connection with or in
consequence of any Claim for Taxation or any matter for which a claim may
be made by the Purchaser or a Group Company.
4. AMOUNTS PAYABLE TO THE PURCHASER OR THE GROUP COMPANY
4.1 The amount of the Liability to Taxation or, as the case may be, the
amount of the depletion in or reduction in value of the assets or
increase in liabilities of the Purchaser or a Group Company indemnified
against under this Deed (the "Relevant Amount") shall be
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determined in accordance with sub-clauses 4.2 to 4.6 provided that
where any Relevant Amount is paid to any person under this Deed in
respect of any Claim for Taxation any other Relevant Amount which may also
be due under this Deed to such person in respect of the same Claim for
Taxation shall be reduced by the amount of such payment. There shall, in
addition to any Relevant Amount calculated in accordance with this clause,
be paid to the Purchaser such further amounts as may be due under
sub-clause 3.6, clause 6, and clause 8 and sub-clause 10.6.
4.2 Where a Group Company is placed under a liability to make a payment of
or in respect of Taxation, the Relevant Amount shall be the amount of
such payment.
4.3 Where a Group Company suffers the loss in whole or in part, of any
Relief, or a Relief is deducted from or in computing or is set off
against Profits or Taxation:
(a) if the Relief is deducted from or set off against
Taxation, the Relevant Amount shall be the amount of the Relief
so deducted or set off;
(b) if the Relief is deducted from or in computing or is set
off against Profits, the Relevant Amount shall be the amount of
Taxation saved as a consequence of such deduction or set off;
and
(c) if the Group Company loses the Relief, the Relevant Amount
shall be the amount of Taxation which would have been saved had
such Relief been available on the assumption that Profits or
Taxation in respect of the earliest period for which such Relief
is available are such that the Relief could have been fully
utilized and that such Relief would have been utilized by set
off against or by deduction from or in computing any such
Profits or Taxation. For this purpose any amount of Taxation
actually payable as a result of the loss, denial or deprivation
of Relief referred to in this paragraph (c) shall be disregarded.
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4.4 Where as a result of or in consequence of a Claim for Taxation a
Group Company has a right to the repayment of any Taxation nullified,
canceled or reduced or has any such right to set off against any
Liability to Taxation arising as a result of or in consequence of any
Claim for Taxation for which a claim may be made, the Relevant Amount
shall be the amount of the repayment which would otherwise have been
obtained or the amount by which such repayment is reduced, as the case
may be.
4.5 Where a Group Company is placed under a liability to make a
repayment as described in clause 3.4, the Relevant Amount shall be the
amount of such repayment.
4.6 In any other case the Relevant Amount shall be the amount of the
depletion in or reduction in value of the assets or increase in the
liabilities of the Purchaser or the relevant Group Company as reasonably
determined by the Purchaser.
5. POWER TO SELL: INHERITANCE TAX
In determining for the purposes of sub-clause 3.3 whether a charge on or
power to sell, mortgage or charge any of the shares or assets of any
Group Company exists at any time the fact that any Taxation is not yet
payable or may be paid by instalments shall be disregarded and such
Taxation shall be treated as becoming due and a charge or power to sell,
mortgage or charge as arising on the date of the transfer of value or
other date or event on or in respect of which it becomes payable or
arises and the provisions of Section 213 of the Inheritance Tax ▇▇▇ ▇▇▇▇
shall not apply thereto.
6. WITHHOLDINGS AND DEDUCTIONS
6.1 All sums payable by the Sellers under this Deed shall be paid free and
clear of all deductions or withholdings whatsoever save only as may be
required by Law. If any such deductions or withholdings are required by
Law the Sellers shall be obliged to pay such sum as will after such
deduction or withholding has been made leave the amount the recipient
would have been entitled to receive in the absence of any such
requirement to make a deduction or withholding.
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6.2 In the event that a Tax Authority seeks to charge to tax any sum
paid to the Purchaser or any Group Company hereunder as a result of the
indemnities or other obligations contained in this Deed or in the
Agreement the Sellers shall be obligated to pay such sum as will after
payment of the tax so charged leave a sum equal to the amount that would
otherwise be payable under any such indemnity or obligation.
7. REFUNDS OF TAXATION; AMENDED RETURNS; CARRYOVERS.
7.1 Subject to Section 7.3 hereof, if Purchaser or any Group Company
receives a Taxation refund with respect to Taxation arising in a
Pre-Closing Period, Purchaser shall pay, within the ninety (90) days
following the receipt of such Taxation refund, the amount of such Taxation
refund to the Sellers. If Sellers receive a Taxation refund with respect
to Taxation arising in any Post-Closing Tax Period, within ninety (90)
days following the receipt of such Taxation refund, Sellers will pay the
amount of such Taxation refund to Purchaser.
7.2 Amended Tax Returns.
(a) Subject to Section 7.3 hereof, any amended Tax Return or
claim for Taxation refund for any Pre-Closing Period other than a Straddle
Period shall be filed, or caused to be filed, only by Sellers. Sellers
shall not, without the prior written consent of Purchaser (which consent
shall not be unreasonably withheld or delayed), make or cause to be made
any such filing, to the extent such filing, if accepted, reasonably might
change the Liability to Taxation of Purchaser or any Group Company for any
Tax Period.
(b) An amended Tax Return or claim for Taxation refund for
any Straddle Period shall be filed by the Party responsible for filing the
original Tax Return hereunder if either Purchaser or Seller so requests,
except that such filing shall not be done without the consent (which shall
not be unreasonably withheld or delayed) of Purchaser (if the request is
made by Sellers) or of Sellers (if the request is made by Purchaser).
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(c) Any amended Tax Return or claim for Taxation refund for any
Post-Closing Period other than a Straddle Period shall be filed, or caused
to be filed, only by Purchaser, who shall not be obligated to make (or
cause to be made) such filing. Purchaser shall not, without the prior
written consent of Sellers (which consent shall not be unreasonably
withheld or delayed) file, or cause to be filed, any amended Tax Return or
claim for Taxation refund for any Post-Closing Period to the extent that
such filing, if accepted, reasonably might change the Liability to
Taxation of any Seller for any Pre-Closing Period.
7.3 If any Taxation loss or credit with respect to the Group Companies
arising a Post-Closing Period may be carried back and included in any Tax
Return filed or caused to be filed by any Seller or any Affiliate of any
Seller (other than a Group Company) with respect to any of the Group
Companies for any Pre-Closing Period, Purchaser may elect (at its expense)
to carry back such Taxation items (subject to Sellers' consent, which
consent shall not be unreasonably withheld or delayed), in which case
Sellers shall pay to Purchaser amount equal to the Tax Benefit resulting
from such carryback of Taxation loss or credit, provided that Sellers
shall not be required to file any carryback claim unless Purchaser so
requests in writing and agrees to pay the reasonable expenses related to
the claim for refund.
8. CONDUCT OF CLAIMS
8.1 Within thirty (30) Business Days of the Purchaser or any of the
Group Companies becoming aware of a Claim for Taxation relevant for the
purposes of this Deed, the Purchaser or such Group Company (as the case
may be), shall give written notice of the Claim for Taxation to the
Sellers; provided, however, that failure to give such notification shall
not affect the Purchaser's or any Group Company's right to indemnification
hereunder except to the extent the Sellers have actually been prejudiced
as a result of such failure. If the Sellers shall indemnify and secure the
relevant Group Company or Group Companies to their reasonable satisfaction
against all losses, costs, damages and expenses (including, without
limitation, interest on overdue Taxation), which may be incurred by the
relevant Group Company or Group Companies, then the Purchaser and the
relevant
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Group Company or Group Companies shall take such action and give such
information and assistance in connection with the affairs of the relevant
Group Company or Group Companies as the Sellers may reasonably and
promptly by written notice request to avoid, resist, appeal or compromise
the Claim for Taxation.
8.2 No Group Company shall be obliged to appeal against any Taxation
Assessment raised on it if, having given the Sellers written notice of
the receipt of that Taxation Assessment in accordance with sub-clause
8.1, it has not within twenty (20) Business Days of the giving of such
notice received instructions in writing from the Sellers, in accordance
with sub-clause 8.1, to make that appeal.
8.3 The Sellers shall not be entitled to request the Purchaser or a Group
Company to take any action under this clause if in respect of any Claim
for Taxation notified under sub-clause 8.1 it appears to the Purchaser
(and would appear to a reasonably prudent business person) that either
the Sellers or the relevant Group Company, whilst it was under the
control of the Sellers, has committed acts or omissions which may
constitute fraud or misfeasance.
8.4 For the avoidance of doubt, the actions which the Sellers may reasonably
request under sub-clauses 8.1 and 8.2 shall include the relevant Group
Company or Group Companies applying to postpone (so far as legally
possible) the payment of any Taxation but the Sellers shall not be
entitled under sub-clauses 8.1 and 8.2 to request that it be allowed to
take on or take over the conduct of all or any proceedings arising in
connection with the Claim for Taxation in question. The Purchaser and the
relevant Group Company or Group Companies shall provide the Sellers with
copies of all correspondence entered into and notes of any conversations
or meetings with any Tax Authority to the extent that such correspondence
or notes relate to the Claim for Taxation in question. The Sellers shall
keep all such information confidential.
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8.5 The relevant Group Company or the Purchaser (as the case may be) shall
be at liberty without reference to the Sellers to admit, compromise,
settle, discharge or otherwise deal with any Claim for Taxation after
whichever is the earliest of:
(a) the service of a notice in writing on the relevant Group
Company or the Purchaser by any of the Sellers to the effect that it
considers the Claim for Taxation should no longer be resisted;
(b) the expiry of a period of ten (10) Business Days following
the service of a notice by the relevant Group Company or the
Purchaser (as the case may be) on the Sellers requiring the Sellers
to clarify or explain the terms of any request made under sub-clause
8.1; and
(c) if appropriate, the expiration of any period prescribed by
applicable legislation for the making of any appeal against either
the Claim for Taxation in question or the decision of any court or
tribunal in respect of any such Claim for Taxation, as the case may
be.
8.6 The Sellers shall be bound to accept for the purposes of this Deed any
admission, compromise, settlement or discharge of any Claim for Taxation
(and the outcome of any proceedings relating thereto) made or arrived at
in accordance with the provisions of this clause 8.
9. PREPARATION AND FILING OF TAX RETURNS.
9.1 Sellers' Responsibilities. Sellers shall have the right and obligation to
timely prepare and file, or cause to be timely prepared and filed, when
due:
(a) any Tax Return that is required to include the operations,
ownership, assets or activities of the Group Companies for Tax
Periods ending on or before the Closing Date; and
(b) all Tax Returns for any transfer Taxes or other related
transfer costs to be paid by Sellers pursuant to the term hereof or
the Agreement.
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9.2 Purchaser's Rights and Responsibilities.
(a) Purchaser shall have the right and obligation to timely prepare
and file, or cause to be timely prepared and filed, when due, all Tax
Returns that are required to include the operations, ownership,
assets or activities of the Group Companies for any Tax Periods
ending after the Closing Date (including all Straddle Period Tax
Returns).
9.3 Preparation of Tax Returns.
(a) Sellers shall prepare or cause to be prepared and provide
to Purchaser such Taxation information as is reasonably requested by
Purchaser with respect to the operations, ownership, assets or
activities of the Group Companies for Pre-Closing Periods.
(b) Each of the Sellers shall, on the one hand, and Purchaser
shall, on the other, with respect to any Tax Return which such party
is responsible hereunder for preparing and filing, or causing to be
prepared and filed, make such Tax Return and related work papers
available for review by the other parties if the Tax Return (A) is
with respect to Taxation for which any of the other parties or one
of its Affiliates may be liable hereunder or under Applicable Tax
Law, or (B) claims Taxation Benefits which any of the other parties
or one of its Affiliates is entitled to receive hereunder. The
filing party shall use its reasonable best efforts to make Tax
Returns available for review as required under this paragraph
sufficiently in advance of the due date for filing such Tax Returns
to provide the non-filing party or parties with a meaningful
opportunity to analyze and comment on such Tax Returns and have such
Tax Returns modified before filing, and such non-filing party shall
accept the position of the filing party unless such position is
contrary to the provisions of Section 9.4 hereof.
9.4. Consistency of Accounting Method. Any Tax Return which includes or is
based on the operations, ownership, assets or activities of any Group
Company for any Pre-Closing
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Period, and any Tax Return which includes or is based on the
operations, ownership, assets or activities of any Group Company for any
Post-Closing Period to the extent the items reported on such Tax Return
might reasonably increase any Taxation liability of any Seller for any
Pre-Closing Period or any Straddle Period shall be prepared in accordance
with past Taxation accounting practices used with respect to the Tax
Returns in question (unless such past practices are no longer permissible
under the Applicable Tax Law), and to the extent any items are not covered
by past practices (or in the event such past practices are no longer
permissible under the Applicable Tax Law), in accordance with reasonable
Taxation accounting practices selected by the filing party with respect to
such Tax Return under this Deed with the consent (not to be unreasonably
withheld or delayed) of the non-filing party or parties.
10. PROTECTION OF PURCHASER AND THE GROUP COMPANIES
Notwithstanding anything to the contrary in clause 8, neither the
Purchaser nor any Group Company shall be obliged to take any action, the
effect of which is, or is reasonably likely, to increase the amount of
Taxation payable by the Group Companies or the Purchaser in respect of
accounting periods ending after the Closing Date beyond what that
liability would have been but for the taking of that action, and shall not
be obliged to take any action the effect of which is reasonably
foreseeable to be likely to prejudice the ability of the Group Companies
to order their affairs in such a way as to minimize their liability to
Taxation in respect of any such later accounting periods.
11. DUE DATE FOR PAYMENT
11.1 Where a Liability to Taxation to which this Deed applies involves the
Purchaser or the relevant Group Company being placed under a liability to
make a payment or increased payment of Taxation (including, without
limitation, any case where a payment under this Deed itself results in
further Taxation becoming due), the Sellers shall pay to the Purchaser (or
the relevant Group Company) in cleared funds the amount claimed in
respect of that Liability to Taxation under this Deed or any further
amount which the
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Sellers are liable to pay by virtue of clause 6 on or before the date
which is the later of the date five (5) Business Days after demand is made
by the Purchaser and the second Business Day prior to the date on which
the Taxation in question is payable to the Tax Authority demanding the
same.
11.2 Where a Claim for Taxation to which this Deed applies involves the
reduction, nullification or cancellation of a right to a repayment of
Taxation, the Sellers shall pay to the Purchaser (or the relevant Group
Company) the amount claimed under this Deed in respect of that Claim for
Taxation on or before the date which is the later of the date five (5)
Business Days after demand is made by the Purchaser and, in the case of a
reduced repayment, the date such reduced repayment is received, or in the
case of a nullified or canceled repayment the date when such repayment
would have been due were it not for its nullification or cancellation
(which latter date for the purposes of this Deed shall, where no due date
for repayment is specified by any applicable legislation, be deemed to be
the date fifteen (15) Business Days after the date on which the relevant
claim for repayment has been made or, if no such claim was required, the
date fifteen Business Days after the date on which all the relevant facts
giving rise to the repayment were provided or available to the Tax
Authority concerned).
11.3 Where a Claim for Taxation to which this Deed applies involves the loss,
deduction or set off of any Relief, the Sellers shall pay to the
Purchaser (or the relevant Group Company) the amount claimed under this
Deed in respect of that Claim for Taxation on or before the date
whichever is the later of the date five (5) Business Days after demand is
made by the Purchaser or the Group Company concerned, as the case may be,
and:
(a) in a case where such Relief is deducted from or in computing
or is set off against Profits or Taxation, the date when the
Taxation saved as a result would otherwise have been payable to
the Taxation Authority demanding the same; and
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(b) in a case where a Group Company loses (in whole or in
part) such Relief, the date when the Taxation (for which the
Group Company would be liable as a result of such loss) would be
payable to the Tax Authority demanding the same on the
assumption that such Taxation would be payable in respect of the
earliest period for which the relevant Relief would have been
available. For this purpose, any actual Claim for Taxation which
results from the loss of the Relief shall be disregarded.
11.4 Where an amount is claimed under this Deed by virtue of the provisions
of sub-clause 3.4, the Sellers shall pay to the Purchaser the amount
claimed under the said sub-clause on or before the date whichever is the
later of five (5) Business Days after demand is made by the Purchaser and
the fifth Business Day prior to the date on which an amount is repaid to
the person demanding the same in the circumstances described in
sub-clause 3.4.
11.5 Where an amount is claimed under sub-clause 3.6 the Sellers shall pay
to the Purchaser or the relevant Group Company the amount claimed on or
before the date which is five (5) Business Days after demand is made for
the same.
11.6 Any sums not paid by the Sellers on the date specified in
sub-clauses 11.1 to 11.5 for payment of the same (the "Due Date") shall
bear interest (which shall accrue from day to day after as well as before
any judgment for the same) from the Due Date at the rate per annum of the
base rate of National Westminster Bank plc applicable from time to time
(or in, the absence of such rate at such similar rate as the Purchaser
shall select) plus four percent to and including the day of actual payment
of such sums, such interest to be compounded quarterly. Such interest
shall be paid on the demand of the Purchaser or the relevant Group Company
concerned.
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12. NOTICES, SERVICE OF PROCEEDINGS AND GOVERNING LAW
12.1 Any notice to be given under this Deed shall be given in accordance with
the notice provisions of Section 10.3 of the Agreement.
12.2 This Deed shall be governed by English law and the parties submit to the
exclusive jurisdiction of the English Courts.
13. SPECIAL PROVISIONS REGARDING GROUP RELIEF
If requested to do so by Securicor, the Company, subject to the
restrictions imposed by Sections 402 to 413 inclusive ICTA, agrees to
consent to the surrender of losses, in respect of the financial year to
30th September 1997, to Securicor or any Affiliate of Securicor and in
consideration for giving such consent the Company shall be paid an amount
equal to 33% of the amount of losses surrendered, such payment to be made
on 1st July 1998. In the event that the amount of losses which Securicor is
requesting the Company to surrender is not determined by 1st July 1998
then payment when made (such payment to be made in any event by 30
September 1999 or the date the losses are determined, whichever is the
earlier), will be subject to an interest charge from 1 July 1998 to the
actual date of payment at the annual rate of LIBOR (as defined in the
Agreement) plus 100 basis points compounded annually.
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IN WITNESS WHEREOF, the parties hereto caused this Deed to be executed as
of the date first written above.
SECURITY SERVICES PLC
By:_____________________
Title:__________________
SECURICOR COMMUNICATIONS LIMITED
By:_____________________
Title:__________________
3 NET HOLDINGS LIMITED
By:_____________________
Title:__________________
SECURICOR 3 NET LIMITED
By:_____________________
Title:__________________
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WISDM LIMITED
By:___________________
Title:________________
SECURICOR 3NET INC.
By:___________________
Title:________________
SECURICOR 3NET (BEIJING) NETWORKING CO. LIMITED
By:___________________
Title:________________
TELTREND INC.
By:___________________
Title:________________
SECURICOR 3NET (NDL) LIMITED
By:___________________
Title:________________
SECURICOR 3NET (PTY) LIMITED
By:___________________
Title:________________
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SCHEDULE I
GROUP COMPANIES
Securicor 3 Net Limited, a company incorporated in England and Wales.
Wisdm Limited, a company incorporated in England and Wales.
Securicor 3 Net Inc., a Delaware company.
Securicor 3Net (NDL) Limited, a company organized under the laws of New
Zealand.
Securicor 3Net Pty Limited, a company organized under the laws of the
state of Queensland, Australia.
Securicor 3Net (Beijing) Networking Co. Limited, a company organized under
the laws of China.
121
ANNEX 2.3 (b) (xiii)
TO
SHARE PURCHASE AGREEMENT
INTELLECTUAL PROPERTY TO BE ASSIGNED
All right, title and interest in and to the following trademarks (including
any associated logos and goodwill) held by Securicor Telesciences, Inc. or
Axiom Inc., including the related applications for registration pending before
the United States Patent and Trademark Office:
▇▇▇▇:
Connect iQ
Secure iQ
Network iQ
Remote iQ