Exhibit 2.2
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MEMBERS' AGREEMENT
BY AND AMONG
NORTEL NETWORKS INC.,
VOLT INFORMATION SCIENCES, INC.,
NUCO I, LTD.,
VOLT DELTA RESOURCE HOLDINGS, INC.
AND
VOLT DELTA RESOURCES, LLC
AS OF
AUGUST 2, 2004
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Table of Contents
Page
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms..........................................................................2
1.2 Terms Generally................................................................................6
ARTICLE II
GOVERNANCE
2.1 Board of Managers..............................................................................6
2.2 Company Matters Requiring Super-Majority Approval..............................................7
2.3 Officers.......................................................................................9
2.4 Financial and Tax Reporting....................................................................9
2.5 Inspection of Facilities and Records..........................................................10
2.6 Enforcement of Contribution Agreement.........................................................10
2.7 Business Opportunities Not Achieving Super-Majority Approval..................................11
ARTICLE III
ADDITIONAL MEMBER RIGHTS AND OBLIGATIONS
3.1 Restrictive Legend............................................................................11
ARTICLE IV
TRANSFER RESTRICTIONS
4.1 Limitations on Transfer.......................................................................12
4.2 Tag-Along Rights..............................................................................13
4.3 Transferee Rights and Obligations.............................................................14
ARTICLE V
ADDITIONAL AGREEMENTS OF THE PARTIES
5.1 Implementation................................................................................14
5.2 Company Covenant..............................................................................14
5.3 Implementation of Business Plan...............................................................14
5.4 Non-Competition...............................................................................14
5.5 Members' Trademarks and Tradenames............................................................18
5.6 Banking Matters...............................................................................18
5.7 Distributions.................................................................................18
5.8 Other Activities of Members and Affiliates....................................................19
5.9 Capital Contributions.........................................................................19
5.10 Restriction on Security Interests.............................................................19
5.11 Relationship Agreement Payments...............................................................19
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5.12 Confidentiality...............................................................................19
ARTICLE VI
TERM AND TERMINATION
6.1 Termination...................................................................................20
6.2 Termination Events............................................................................21
6.3 Put and Call Options..........................................................................21
6.4 Option Closing................................................................................22
6.5 Audit Rights..................................................................................22
6.6 Dispute Resolution............................................................................23
6.7 No Prejudice to Rights........................................................................23
ARTICLE VII
MISCELLANEOUS
7.1 Expenses......................................................................................24
7.2 Notices.......................................................................................24
7.3 Headings......................................................................................25
7.4 Severability..................................................................................25
7.5 Entire Agreement..............................................................................25
7.6 Assignment....................................................................................25
7.7 No Third-Party Beneficiaries..................................................................25
7.8 Amendment.....................................................................................25
7.9 Governing Law.................................................................................26
7.10 Counterparts..................................................................................26
7.11 No Presumption................................................................................26
7.12 No Special Damages............................................................................26
7.13 Specific Performance..........................................................................26
7.14 Performance by Nuco and Holdings..............................................................26
Exhibits:
Exhibit A: Amended and Restated Operating Agreement
Exhibit B: Articles of Organization
Exhibit C: Business Plan
Exhibit D: Initial VIS Managers, Initial Nortel Networks Manager and Initial Officers of the
Company
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MEMBERS' AGREEMENT
This MEMBERS' AGREEMENT (the "Agreement") is made and entered into as
of August 2, 2004, by and among Volt Delta Resources, LLC, a Nevada limited
liability company (the "Company"), Nortel Networks Inc., a Delaware corporation
("Nortel Networks"), Volt Delta Resource Holdings, Inc., a Nevada corporation
("Holdings"), Nuco I, Ltd., a Nevada corporation ("Nuco"), and Volt Information
Sciences, Inc., a New York corporation ("VIS" and together with Nortel Networks,
the "Members").
WHEREAS, VIS owns 100% of the issued and outstanding capital stock of
Nuco, and Nuco owns 100% of the issued and outstanding capital stock of
Holdings;
WHEREAS, Nortel Networks and Holdings have entered into an Amended and
Restated Operating Agreement dated the date hereof (the "Operating Agreement"),
a true and complete copy of which is attached hereto as Exhibit A;
WHEREAS, the Company and Nortel Networks entered into a Contribution
Agreement dated as of June 11, 2004 (the "Contribution Agreement");
WHEREAS, upon the consummation of the transactions contemplated by the
Contribution Agreement, Nortel Networks shall beneficially own in the aggregate
Membership Interests (as defined in the Contribution Agreement) representing
twenty-four percent (24%) of the issued and outstanding Membership Interests of
the Company, VIS shall beneficially own in the aggregate Membership Interests
representing seventy-six percent (76%) of the issued and outstanding Membership
Interests of the Company and Holdings shall be the record holder of such
Membership Interests beneficially owned by VIS;
WHEREAS, it is a condition to the Closing that this Agreement and the
other agreements, documents and instruments entered into by the parties pursuant
to the terms hereof be in full force and effect and that the parties hereto have
complied with their obligations hereunder and thereunder;
WHEREAS, the Members and the Company desire to provide for the
management of the Company and the respective rights and obligations of the
Members generally;
WHEREAS, VIS desires to make payments in the aggregate amount of
$4,000,000 to Nortel Networks in consideration of Nortel Networks entering into
the Relationship Agreement with the Company dated as of the date hereof; and
NOW, THEREFORE, in consideration of the mutual covenants,
representations and warranties, and subject to the terms and conditions
contained herein, the parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. Capitalized terms used but not defined
herein have the meanings ascribed to them in the Contribution Agreement. As used
in this Agreement, the following terms shall have the following meanings:
"Agreement" has the meaning set forth in the preamble to this
Agreement.
"Arbitrator" has the meaning set forth in Section 6.6(b).
"Articles of Organization" means the articles of organization of the
Company in the form of Exhibit B.
"Audit Report" has the meaning set forth in Section 6.5(a).
"Authorized Officer" means any of the chief executive officer, the
controller or the chief financial officer of the Company.
"Beneficial Ownership" or "Beneficially Own" means, with respect to any
Membership Interest, the ability to vote and/or direct the disposition of such
Membership Interest.
"Beneficial Ownership Percentage" means, with respect to any Person or
Persons, the percentage calculated by dividing the total outstanding number of
Membership Interests (on a fully-diluted basis) which are Beneficially Owned,
directly or indirectly, by such Person or Persons (without double counting),
into the total outstanding number of Membership Interests of the Company (on a
fully-diluted basis), as of the relevant time for making such calculation, it
being understood that for purposes of this definition, Membership Interests
which a Person has the right to acquire but has not yet acquired shall not be
deemed to be Beneficially Owned.
"Board" means the Board of Managers of the Company.
"Business Plan" means the yearly business and operations plan,
including income statement, balance sheet and cash flow statement, capital
expenditure budget and financial projections for the Company. The Business Plan
for the two (2) year period following the Closing Date is attached hereto as
Exhibit C.
"Cause" means, with respect to any Manager, (i) a final judgment of a
court of competent jurisdiction that such Manager has acted in breach of his or
her duty to the Company and such action was not permitted by Section 5.8 hereof
or has committed an act of willful misconduct, gross negligence or abuse of
authority, or (ii) that any Governmental Authority has formally charged such
Manager with one or more felonious criminal acts.
"Change in Control" means, with respect to any Person in the Industry
Group, any of the following: (i) the sale, lease, exchange, transfer or other
disposition, either directly or indirectly, of assets constituting all or
substantially all of the assets of such Person in the Industry Group and its
subsidiaries taken as a whole, to a Person or group of Person that did not own,
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directly or indirectly, substantially all of such assets prior to such transfer;
(ii) any merger, consolidation or other business combination, or refinancing or
recapitalization of such member of the Industry Group that results in the
holders of the issued and outstanding voting securities of such member of the
Industry Group immediately prior to such transaction beneficially owning or
controlling less than a majority of the voting securities of the continuing or
surviving entity immediately following such transaction; or (iii) any Person or
Persons acting together or which would constitute a "group" for the purposes of
Section 13(d) of the Exchange Act, together or with any Affiliates thereof
becoming the beneficial owner (as defined in Rule 13d-3 of the Exchange Act) or
controlling, directly or indirectly, at least 50% of the total voting power of
all classes of capital stock entitled to vote generally in the election of
directors of such member of the Industry Group, which Person or "group" did not
previously control, directly or indirectly, at least 50% of such total voting
power.
"Company" has the meaning set forth in the preamble to this Agreement.
"Company Call Option" has the meaning set forth in Section 6.3(a).
"Company Event of Default" has the meaning set forth in Section 5.4(d).
"Competitive Products" has the meaning set forth in Section 5.4(b)(i).
"Contribution Agreement" has the meaning set forth in the recitals to
this Agreement.
"Designated Division" has the meaning set forth in Section 5.4(c)(iv).
"Disclosing Party" has the meaning set forth in Section 5.12(a).
"Disputed Items" has the meaning set forth in Section 6.5(c).
"Distribution Payment Date" has the meaning set forth in Section
5.7(a).
"Excess Cash" has the meaning set forth in Section 5.7(a).
"Exchange Act" means the United States Securities Exchange Act of 1934
(as amended, together with the rules and regulations thereunder).
"Exit Payment" has the meaning set forth in Section 6.3(c).
"Expiration Date" has the meaning set forth in Section 6.5(a).
"Fair Value" means the product of (x) the LTM Revenue as of the
Put/Call Date multiplied by (y) seventy percent (70%) of the Industry Average
Multiple.
"Holdings" has the meaning set forth in the preamble to this Agreement.
"Industry Average Multiple" means the average LTM Revenue Market
Multiples of the Industry Group as of the Put/Call Date. In no event shall the
Industry Average Multiple exceed 1.8.
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"Industry Group" means Comverse Technology (CMVT), Convergys (CVG) and
CSG Systems (CSGS). If, as of the date that any determination of Fair Value is
made hereunder, there has been a Change in Control of any Person in the Industry
Group that would make such Person's business segments and source of revenue
generation less comparable to the Company than it was on the Closing Date or any
Person in the Industry Group no longer makes available the relevant publicly
available financial information, the Members shall promptly agree on one or more
other comparable companies in lieu of such Person. If the Members cannot agree,
the entities comprising the Industry Group shall be resolved by an independent
investment banking firm of national repute promptly selected by the agreement of
the Members. The Members shall use their commercially reasonable efforts to
cause such investment banking firm to select substitute Persons to comprise the
Industry Group that are comparable to the original Industry Group enumerated
above within thirty (30) days of the date of engagement of such investment
banking firm. The fees and expenses of such investment banking firm shall be
divided equally between the Members.
"LTM" means the twelve (12) month period ended as of the most recent
fiscal quarter ended.
"LTM Revenue" means the LTM revenue of the Company on a consolidated
basis as determined in accordance with GAAP.
"LTM Revenue Market Multiple" means, with respect to any Person in the
Industry Group as of a particular date, (i) the market capitalization of such
Person (i.e., the average of the last closing stock price of such Person on the
twenty (20) immediately prior trading days multiplied by the fully-diluted
number of shares outstanding of such Person as of the most recent date
practicable) adjusted by deducting cash and adding debt held by such Person as
of the most recent date practicable (commonly known as the "Enterprise Value")
divided by (ii) the gross revenue reported by such Person in its forms, reports
and documents filed with the Securities and Exchange Commission or by a public
announcement or release as of the most recent date practicable for the
immediately proceeding LTM.
"Manager" means a member of the Board of Managers of the Company
designated pursuant to Section 2.1(a).
"Members" has the meaning set forth in the preamble to this Agreement.
"Necessary Action" means, with respect to a specified result, required
actions (to the extent such actions are permitted by Applicable Law) reasonably
necessary to cause such result, including (i) exercising voting rights with
respect to Membership Interests, (ii) causing the adoption of member resolutions
and amendments to the Operating Agreement, Articles of Organization or other
constituent documents, (iii) causing Managers (to the extent such Managers were
nominated or designated by the Person obligated to undertake the Necessary
Action) to act in a certain manner or causing them to be removed in the event
they do not act in such manner, (iv) executing agreements that are required to
cause such specified result, and (v) making, or causing to be made, with any
Governmental Authority, filings, registrations or similar actions that are
reasonably necessary or required to achieve such specified result.
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"Net Income" means, with respect to the Company, the net income (or
loss) after taxes of the Company and its Subsidiaries on a consolidated basis,
as determined in accordance with GAAP.
"Nortel Networks" has the meaning set forth in the preamble to this
Agreement. All references to Nortel Networks shall include Persons who acquire
Nortel Networks' Membership Interests pursuant to a Permitted Transfer or with
the consent of the non-Transferring Member(s) (as contemplated by Section
4.1(a)).
"Nortel Networks Manager" has the meaning set forth in Section 2.1(a).
"Nortel Networks Non-Compete Period" has the meaning set forth in
Section 5.4(a).
"Nortel Networks Put Option" has the meaning set forth in Section
6.3(a).
"Nuco" has the meaning set forth in the preamble to this Agreement.
"Operating Agreement" has the meaning set forth in the recitals to this
Agreement.
"Option" has the meaning set forth in Section 6.3(b).
"Option Closing" has the meaning set forth in Section 6.4.
"Option Floor" means $25,000,000, subject to adjustment pursuant to
Section 4.2(e).
"Option Interests" has the meaning set forth in Section 6.3(a).
"Permitted Transfer" means a Transfer to a Qualified Affiliate.
"Proposed Transfer" has the meaning set forth in Section 4.2(a).
"Proposed Transferee" has the meaning set forth in Section 4.2(a).
"Put/Call Date" has the meaning set forth in Section 6.3(b).
"Qualified Affiliate" means an Affiliate of any Person (a) which
Affiliate has agreed in writing: (i) to be bound, in respect of all Membership
Interests it Beneficially Owns, by the provisions applicable to such Person in
this Agreement and any other agreement or instrument executed and delivered by
such Person pursuant to the terms hereof and (ii) prior to ceasing to be such a
Qualified Affiliate and without prejudice to Permitted Transfers, to Transfer
its ownership in all securities issued by the Company and rights and obligations
hereunder to such Person or to another Qualified Affiliate of such Person; and
(b) as to which such Person (or the guarantors of such Person under this
Agreement and any other agreement or instrument executed by such Person pursuant
to the terms hereof) has agreed in writing to guarantee the
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obligations of such Qualified Affiliate hereunder and any other agreement or
instrument executed by such Qualified Affiliate pursuant hereto.
"Recipient Party" has the meaning set forth in Section 5.12(a).
"Relationship Agreement" means the Relationship Agreement dated as of
the date hereof between Nortel Networks and the Company.
"Remainder Interests" has the meaning set forth in Section 4.2(d).
"Representative" has the meaning set forth in Section 5.12(a).
"Securities Act" means the United States Securities Act of 1933 (as
amended, together with the rules and regulations thereunder).
"SIP" has the meaning set forth in Section 5.4(b)(ii).
"Statement" has the meaning set forth in Section 6.3(c).
"Super-Majority Vote" has the meaning set forth in Section 2.2.
"Tag-Along Right" has the meaning set forth in Section 4.2(a).
"Termination Event" has the meaning set forth in Section 6.2.
"TOPS" has the meaning set forth in Section 5.4(b)(i).
"Transfer" means, whether voluntary or involuntary, any transfer,
assignment, sale, including by way of merger or other business combination,
pledge or hypothecation.
"VIS" has the meaning set forth in the preamble to this Agreement. All
references to VIS shall include Persons who acquire VIS's Membership Interests
pursuant to a Permitted Transfer or with the consent of the non-Transferring
Member(s) (as contemplated by Section 4.1(a)).
"VIS Manager" has the meaning set forth in Section 2.1(a).
1.2 Terms Generally. (a) Words in the singular shall include the plural
and vice versa, and words of one gender shall include the other genders as the
context requires, (b) the term "hereof," "herein," and "herewith" and words of
similar import shall, unless otherwise stated, be construed to refer to this
Agreement and not to any particular provision of this Agreement, and Article,
Section, paragraph, Exhibit and Schedule references are to the Articles,
Sections, paragraphs, Exhibits and Schedules to this Agreement unless otherwise
specified and (c) the word "including" and words of similar import when used in
this Agreement shall mean "including, without limitation," unless otherwise
specified.
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ARTICLE II
GOVERNANCE
2.1 Board of Managers. (a) From and after the Closing, the Members
shall take all Necessary Action to cause the Board to be comprised of five (5)
Managers, one (1) of whom shall be designated by Nortel Networks (the "Nortel
Networks Manager") and four (4) of whom shall be designated by VIS (each a "VIS
Manager").
(b) Each Member shall have the exclusive right from time to
time without meeting to appoint and remove its respective designees to
the Board upon providing notice thereof to the other Member and the
Company, as well as the exclusive right to fill vacancies created by
reason of death, removal or resignation of such designees; provided,
however, that any Manager may be removed for Cause by the Members so
long as such Manager is replaced by another Manager designated by the
Member which originally designated the Manager being replaced. In
addition, to the extent a Member has the right to designate a Manager
pursuant to Section 2.1(a), such Member shall have the right to
designate a replacement for such Manager. The Members shall take all
Necessary Action to give effect to this provision. Notwithstanding the
foregoing, after the second anniversary of the Closing Date, VIS shall
have the right to require that Nortel Networks designate as the Nortel
Networks Manager an individual that does not occupy a "line position"
in one of Nortel Networks' lines of business. For the avoidance of
doubt, the preceding sentence shall not prohibit Nortel Networks from
designating as the Nortel Networks Manager a Finance employee or a
Legal employee.
(c) The initial VIS Managers and the initial Nortel Networks
Manager designated pursuant to Section 2.1(a) shall be the individuals
set forth on Exhibit D.
(d) The Board shall have full authority with respect to the
management of the Company and its Subsidiaries.
(e) The Members shall take all Necessary Action to cause,
subject to the Super-Majority Vote requirements of Section 2.2, the
Board to form and appoint members to such committees as it deems
appropriate and to delegate certain of the Board's powers to such
committees; provided that each such committee shall include the Nortel
Networks Manager.
(f) Except as otherwise provided herein and subject to the
Super-Majority Vote requirements of Section 2.2, the Members shall take
all Necessary Action to cause the Board to approve decisions only by
the affirmative vote of at least a majority of the Managers or by
unanimous written consent of the Managers as required by Applicable
Law.
(g) The Members shall take all Necessary Action to cause the
Board to meet at least once each quarter and any committees formed by
the Board to meet as directed by the Board.
2.2 Company Matters Requiring Super-Majority Approval. Notwithstanding
anything to the contrary in Section 2.1, the Members shall take all
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Necessary Action to cause the Company not to take, and the Company shall not
take, and shall take all Necessary Action to cause its Subsidiaries not to take,
any of the following actions without the affirmative vote of at least a majority
of the Board (including the affirmative vote of the Nortel Networks Manager and
a majority of the other Managers) (such vote, a "Super-Majority Vote") except to
the extent that the following actions are contemplated by the Business Plan:
(a) except as provided in Section 2.7 hereof, approval of any
Contracts (other than the Ancillary Agreements) between or involving
the Company or any of its Subsidiaries, on the one hand, and any Member
or Affiliate thereof (other than Nortel Networks or any of its
Affiliates), on the other hand, as well as any amendment, consent or
waiver with respect to such Contracts; provided, however, that until
such time as the Company has obtained necessary third party financing,
this provision shall not apply to loans from VIS or its Affiliates to
the Company or its Subsidiaries, to the extent (i) such loans bear
interest at rates no greater than those charged to VIS or such
Affiliate under its third party financing arrangements for loans of
similar type, (ii) such loans would otherwise be permitted hereunder
and (iii) no other fees or expenses are charged to the Company or its
Subsidiaries in respect of such loans;
(b) removal of Managers other than for Cause except by the
Member which designated the Manager to be removed;
(c) approval of capital purchases, rental or lease agreements
of the Company or any of its Subsidiaries providing for one or more
payments to be made in excess of $2,000,000; provided, however, that
additional capital purchases required for the performance of new
business awarded to the Company after the Closing Date shall not be
subject to such limitation;
(d) providing loans, guarantees, or other extensions of credit
other than to customers for the purchase of products of the Company or
any of its Subsidiaries in the ordinary course of business;
(e) amendment of the Operating Agreement, Articles of
Organization or other charter documents of the Company or any of its
Subsidiaries;
(f) merger of the Company or any of its Subsidiaries into or
with, or an acquisition by the Company or any of its Subsidiaries of
all or a substantial part of the business of, another Person;
(g) reorganization, reincorporation, conversion,
consolidation, combination or merger, or sale, transfer or other
disposition of all or substantially all of the assets of the Company or
any of its Subsidiaries;
(h) liquidation, dissolution, winding up or voluntary
bankruptcy of the Company or any of its Subsidiaries;
(i) any material change in the Business Plan or adoption of
any future Business Plans subsequent to the initial Business Plan
attached hereto as Exhibit C;
(j) any change to the distribution requirement set forth in
Section 5.7;
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(k) issuance, purchase or redemption by the Company or any of
its Subsidiaries of any of their respective securities and any change,
increase or reduction in the capitalization of the Company or its
Subsidiaries, except for an issuance of Membership Interests by the
Company on or after the Put/Call Date, the closing of which occurs
simultaneously with the Option Closing and the proceeds of which (to
the extent necessary to fund the Exit Payment) are used solely to fund
the Exit Payment and are paid to Nortel Networks simultaneously with
such closing;
(l) incurrence, in one or more transactions, of any
indebtedness for borrowed money by the Company or any of its
Subsidiaries of an aggregate amount at any time in excess of
$2,000,000; provided, however, that (i) indebtedness incurred in order
to fund the capital purchases referenced in the proviso in Section
2.2(c) hereof and (ii) any indebtedness incurred by the Company on or
after the Put/Call Date, the closing of which occurs simultaneously
with the Option Closing and the proceeds of which (to the extent
necessary to fund the Exit Payment) are used solely to fund the Exit
Payment and are paid to Nortel Networks simultaneously with such
closing, shall not be subject to such limitation;
(m) material restructuring of the business of the Company or
any of its Subsidiaries including, but not limited to, a single or
series of related workforce reductions in excess of 25% of the
Company's total workforce;
(n) any exclusive license of the Intellectual Property Rights
of the Company or any of its Subsidiaries; provided, however, that this
provision shall not apply to exclusive licenses for particular
geographic or industry markets or territories or exclusive licenses for
customized software or products for particular customers, industry
markets or territories;
(o) making or changing any material Tax election, initiating
or settling any Tax proceeding, or filing any material Tax return;
(p) the appointment or removal of a Person as its auditor
(other than the auditors used by VIS so long as such auditors are a
nationally recognized accounting firm), any change to its revenue
recognition policies, or any other material change to its accounting
policies other than as is required to comply with GAAP or to conform to
VIS's accounting policies; or
(q) entering into any agreement to effect any of the above.
2.3 Officers. The officers of the Company shall include a president,
one or more vice presidents, a treasurer, a secretary and such subordinate
officers as the Board may appoint. The officers shall be appointed by the Board,
and shall serve at the discretion of the Board. The initial officers are
identified on Exhibit D.
2.4 Financial and Tax Reporting. (a) The Company shall deliver to the
Members, as soon as available and in no event more than ninety (90) days after
the end of each fiscal year, audited annual consolidated financial statements
for the Company (including a balance sheet and statements of income, changes in
financial position and changes in members' equity) at and as of the end of such
fiscal year (including, commencing in 2005, the respective
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consolidated financial statements in comparative form as of the end of and for
the previous fiscal year) prepared in accordance with GAAP.
(b) The Company shall deliver to the Members, as soon as
available and in no event more than forty-five (45) days after the end
of each consecutive three-month period in each fiscal year, quarterly
unaudited consolidated financial statements for the Company (including
a balance sheet and statements of income, changes in financial position
and changes in members' equity) at and as of the end of such
three-month period (including, commencing in 2005, the respective
consolidated and consolidating financial statements in comparative form
as of the end of and for the corresponding period in the previous
fiscal year) prepared in accordance with GAAP, all of which shall be
certified by an Authorized Officer.
(c) The Company shall deliver to the Members, as soon as
available and in no event less than thirty (30) days after the end of
each month, a copy of the Company's consolidated monthly operating and
management reports with variances and explanations, including monthly
income statements.
(d) As soon as practicable, but in any event no later than
four (4) months after the date hereof, the Company shall engage, a
nationally recognized accounting firm to serve as the Company's
independent auditors, which may be the auditors of VIS.
(e) The Company shall keep its and its Subsidiaries' books and
records in a manner necessary to comply with Applicable Law.
(f) The Company shall supply any Member upon request with
complete and accurate statements of any financial and other information
regarding the Company and its Subsidiaries that such Member is required
to file with any Governmental Authority or deliver to any institutional
lender of such Member, and such Member shall be entitled to file or
deliver such financial or other information notwithstanding the
provisions of Section 5.12 hereof; provided that any institutional
lenders which are to receive such information pursuant to this Section
2.4(f) shall have previously agreed to keep such information
confidential.
(g) As soon as practicable, but in no event later than March 1
after the end of each taxable year, the Company shall supply to the
Members an IRS Form 1065, and other material Tax Returns, for review.
The Company shall, promptly after the review of the Members regarding
the IRS Form 1065 for any taxable year, supply a Schedule K-1 to the
Members.
(h) The Company shall pay all costs incurred in connection
with the preparation and delivery of financial statements and other
reports and documents to the Members pursuant to this Section 2.4.
2.5 Inspection of Facilities and Records. Each Member shall have the
right to inspect the facilities of the Company and to examine the books of
account and records of the Company at all reasonable times during usual business
hours upon reasonable advance notice to the Company. Such right may be exercised
through any agent, employee or representative of
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such Member designated by it, or by an independent public accountant. The Member
conducting such examination or inspection shall bear all costs and expenses
incurred in connection therewith.
2.6 Enforcement of Contribution Agreement. Notwithstanding any other
provision of this Agreement, the enforcement by the Company or Nortel Networks
of any of their respective rights, remedies, claims and causes of action against
the other party under or with respect to the Contribution Agreement and/or any
ancillary agreements, documents or instruments relating thereto, and the defense
by the Company or Nortel Networks against any rights, remedies, claims or causes
of action of the other party under or with respect to the Contribution Agreement
and/or any ancillary agreements, documents or instruments relating thereto,
including without limitation, claims for indemnification, the initiation and
defense of litigation, the settlement of litigation, claims and disputes, the
funding of such actions by such party, and the retention of counsel and other
professional advisors in connection therewith, may be authorized and prosecuted
on behalf of either the Company or Nortel Networks without the action or consent
of the other party. Furthermore, such actions on behalf of the Company may be
authorized by action of the Board without any notice to, vote, consent or
participation of the Nortel Networks Manager or Nortel Networks. Without
limiting the generality of the foregoing, (i) the Nortel Networks Manager may,
at the request of the Board, be excluded from participation in any Board meeting
or portion thereof at which such disputes are to be discussed and (ii) no
Super-Majority Vote shall be required in connection with the matters referred to
in this Section 2.6.
2.7 Business Opportunities Not Achieving Super-Majority Approval. In
the event that the Company is unable to undertake any new business opportunity,
contract, bid or proposal, whether or not it would require capital expenditures,
additional indebtedness or expansion or restructuring of the business of the
Company, because any of the provisions of Section 2.2 hereof would require a
Super-Majority Vote, and the Super-Majority Vote is not obtained because of the
objections and/or non-voting or non-participation of the Nortel Networks
Manager, then VIS may undertake such business opportunity, contract, bid or
proposal at VIS's own expense and VIS may subcontract to the Company all or any
portion of such business opportunity, contract, bid or proposal, to be performed
by the Company at the Company's best rates to customers for similar services;
provided that such subcontract would not require the Company to perform any
services that it does not already provide to its customers and the services to
be performed by the Company pursuant to such subcontract would not otherwise
require a Super-Majority Vote pursuant to any of the provisions of Section 2.2
hereof.
ARTICLE III
ADDITIONAL MEMBER RIGHTS AND OBLIGATIONS
3.1 Restrictive Legend. The Members and the Company agree that:
(a) they shall take all Necessary Action to cause each
certificate evidencing the Membership Interests issued by the Company
or any certificates representing the capital stock of a successor to
the Company to contain the following restrictive legend:
11
THE SALE, ASSIGNMENT, TRANSFER, LIEN OR OTHER DISPOSITION OF
THE SECURITIES EVIDENCED BY THIS CERTIFICATE, INCLUDING AS A
CONSEQUENCE OF EXECUTION OF ANY LIEN OR BY ANY OTHER MEANS, IS
RESTRICTED BY THE TERMS AND CONDITIONS OF A MEMBERS'
AGREEMENT, DATED AS OF AUGUST 2, 2004, COPIES OF WHICH ARE ON
FILE WITH THE ISSUER OF THIS CERTIFICATE. NO SALE, ASSIGNMENT,
TRANSFER OR OTHER DISPOSITION SHALL BE VALID OR EFFECTIVE,
UNLESS AND UNTIL THE TERMS AND CONDITIONS OF THE AFORESAID
MEMBERS' AGREEMENT SHALL HAVE BEEN COMPLIED WITH IN FULL.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES; AND SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED OTHER THAN IN ACCORDANCE WITH THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, OR AN
EXEMPTION THEREFROM.
(b) In the event either of the restrictive legends set forth
in Section 3.1(a) has ceased to be applicable, each Member shall take
all Necessary Action to cause the Company to provide any Members, at
their request, without any expense to such Persons (other than
applicable transfer taxes and similar governmental charges, if any),
with new certificates for such securities of like tenor not bearing the
legend with respect to which the restriction has ceased and terminated
(it being understood that (i) the restriction referred to in the first
paragraph of the legend in Section 3.1(a) shall cease and terminate
upon the termination of this Agreement and the amendment of any related
provisions in the Operating Agreement of the Company and (ii) the
restriction referred to in the second paragraph of the legend in
Section 3.1(a) shall cease and terminate at the earlier of (1) the time
when such restriction is no longer required in order to assure
compliance with the Securities Act and any applicable state securities
and "blue sky" laws or (2) the time when such securities shall have
been effectively registered under the Securities Act and any applicable
state securities and "blue sky" laws).
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ARTICLE IV
TRANSFER RESTRICTIONS
4.1 Limitations on Transfer. (a) Except as the non-Transferring Member
may otherwise consent in writing, no Member may Transfer any Membership
Interests other than (i) in connection with a Permitted Transfer, (ii) a
Transfer by Nortel Networks pursuant to its rights under Section 4.2, (iii) upon
the exercise of rights provided by Article VI or (iv) a privately negotiated
Transfer by VIS at any time after the eighteen (18) month anniversary of the
Closing Date; provided, however, that the proceeds from any such Transfer by VIS
pursuant to clause (iv) shall be used to finance the Exit Payment on behalf of
the Company. Any Transfer by VIS pursuant to clause (iv) shall be for
consideration consisting only of cash or other consideration previously approved
by Nortel Networks (or, if such other form of consideration is not approved by
Nortel Networks, VIS may substitute cash for the fair market value of the
non-cash consideration received by VIS), and VIS shall promptly deposit the
proceeds of such Transfer (in no event shall the amount deposited exceed
$70,000,000) into an escrow account to be held for the purpose of funding the
Exit Payment on behalf of the Company until the Exit Payment is paid in full to
Nortel Networks pursuant to Section 6.4.
(b) Any Transfer of Membership Interests in breach of this
Agreement shall be void and ineffectual and shall not operate to
Transfer any interest or title in the Membership Interests purported to
be Transferred to the purported transferee. If, notwithstanding the
immediately preceding sentence, any Transfer is held by an arbitral
panel or a court of competent jurisdiction to be effective, then and
without prejudice to any applicable remedies or penalties hereunder,
the restrictions on Transfer under this Article IV applicable to the
transferor shall apply to the transferee and to any subsequent
transferee as if such transferee was a party hereto.
(c) To the full extent of its powers under Applicable Law, the
Company shall refrain from taking any action that would or could be
viewed as recognizing or acknowledging any Transfer of Membership
Interests in violation of the terms and conditions of this Agreement.
(d) Each of the Members acknowledges that any of its
Membership Interests may not be Transferred other than in compliance
with all applicable securities laws, including, without limitation, to
the extent applicable, the Securities Act.
4.2 Tag-Along Rights. (a) In the case of a proposed Transfer by VIS of
all or any portion of its Membership Interests pursuant to Section 4.1(a)(iv)
(including any contemplated subsequent Transfers, a "Proposed Transfer"), Nortel
Networks shall, subject to Section 4.2(d), have the right (the "Tag-Along
Right") to require VIS to cause the proposed transferee (a "Proposed
Transferee") to purchase from Nortel Networks up to all of its Membership
Interests, equal to the number derived by multiplying the total number of
Membership Interests owned by Nortel Networks by a fraction, the numerator of
which is equal to the number of Membership Interests that is proposed to be
purchased by the Proposed Transferee and the denominator of which is the total
number of Membership Interests then owned by VIS.
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(b) VIS shall give notice to Nortel Networks of a Proposed
Transfer not later than twenty-five (25) Business Days prior to the
closing of the Proposed Transfer, setting forth the number of
Membership Interests proposed to be so Transferred, the name and
address of the Proposed Transferee, the proposed amount of
consideration, and other terms and conditions of payment offered by the
Proposed Transferee (it being understood that the terms of any such
Proposed Transfer shall be subject to Section 4.1). VIS shall deliver
or cause to be delivered to Nortel Networks copies of all transaction
documents relating to the Proposed Transfer as the same become
available and disclose to Nortel Networks all of the terms of the
transaction including any and all ancillary or supplementary written or
oral agreements or any understandings of any nature whatsoever with
respect to subsequent Transfers of Membership Interests. The Tag-Along
Right must be exercised by Nortel Networks within twelve (12) Business
Days following receipt of the notice required by the first sentence of
this Section 4.2(b), by delivery of a written notice to VIS indicating
its desire to exercise its rights and specifying the number of
Membership Interests it desires to Transfer.
(c) Any Transfer of Membership Interests by Nortel Networks to
a Proposed Transferee pursuant to this Section 4.2 shall, subject to
Section 4.2(d), be for substantially the same form of consideration
(including, without limitation, price and time of payment) as to be
paid to VIS (it being understood that Nortel Networks shall be under no
obligation to place any proceeds received into escrow).
(d) Notwithstanding anything in this Section 4.2 to the
contrary, if and to the extent that any exercise of Nortel Networks'
Tag-Along Right prior to the third (3rd) anniversary of the Closing
Date, whether in a single transaction or a series of transactions,
generates aggregate proceeds payable to Nortel Networks equal to or in
excess of $70,000,000, VIS shall have the right, at any time after (i)
all such proceeds have been paid in full to Nortel Networks and (ii)
the second (2nd) anniversary of the Closing Date, to purchase from
Nortel Networks, and Nortel Networks shall sell to VIS, the balance of
the Membership Interests then owned by Nortel Networks (the "Remainder
Interests") for a purchase price equal to $1.00.
(e) In the event Nortel Networks exercises its Tag-Along Right
in accordance with this Section 4.2 and, as a result thereof, Nortel
Networks' Beneficial Ownership Percentage decreases, the Option Floor
shall be multiplied by a fraction, the numerator of which shall equal
the number of Membership Interests held by Nortel Networks immediately
after such exercise, and the denominator of which shall equal the
number of Membership Interests held by Nortel Networks immediately
following the Closing.
4.3 Transferee Rights and Obligations. (a) Any Transfer of Membership
Interests by any Member to any Person, which Transfer is otherwise in compliance
herewith, shall be permitted hereunder only if, on prior notice to the Company
and the other Members, the Transferee of such Membership Interests (including,
without limitation, any pledgee) enters into a written unconditional agreement
that it shall, upon such Transfer, be bound, in respect of all Membership
Interests it Beneficially Owns, under this Agreement and any other agreement or
instrument executed and delivered under Section 5.1 by all obligations of the
transferor.
14
(b) Upon any Transfer of Membership Interests to any Person,
which Transfer is in compliance herewith, the transferee shall, upon
such Transfer, assume all rights held by the transferor at the time of
the Transfer with respect to such Membership Interests.
ARTICLE V
ADDITIONAL AGREEMENTS OF THE PARTIES
5.1 Implementation. In addition to its obligations hereunder, each of
the Members shall take all Necessary Action to implement, as soon as practicable
and to the extent permitted by Applicable Law, the provisions of this Agreement,
including, without limitation, the further actions of adopting or amending
appropriate charter documents for the Company and each of its Subsidiaries,
causing the Members and the Board and each of the Company's Subsidiaries to
adopt appropriate binding resolutions and causing the Company and each of its
Subsidiaries to enter into agreements and execute and deliver other instruments
and documents. Without limiting the generality of the foregoing, the parties
hereto agree to cause the Company to adopt the Operating Agreement and the
Articles of Organization attached hereto as Exhibit A and Exhibit B,
respectively, on the Closing Date.
5.2 Company Covenant. The Company agrees that wherever it is provided
herein that any Member shall, or shall take Necessary Action to, cause the
Company to take, or refrain from taking, any action, then the Company shall
take, or refrain from taking, such action.
5.3 Implementation of Business Plan. The Members shall take all
Necessary Action to cause the Company to, and the Company shall, implement the
Business Plan attached hereto as Exhibit C and any subsequent Business Plan
approved by the Board pursuant to Section 2.2(i).
5.4 Non-Competition. (a) Until the earlier of the occurrence of any
Company Event of Default (as defined below) and the 45th month after the Closing
Date (the "Nortel Networks Non-Compete Period"), Nortel Networks shall not
resell, distribute, sublicense, maintain or repair (except as provided in
Section 5.4(c)) products furnished by third parties that provide substantially
equivalent functionality similar to the Products and their natural evolutions.
(b) During the Nortel Networks Non-Compete Period, Nortel
Networks shall not (except as provided in Section 5.4(c)), directly or
indirectly, (x) internally develop for its own account or for third
parties or sell, distribute, maintain or repair Competitive Products
anywhere in the world, or (y) provide Directory Assistance or DA or
Enhanced Information Services in response to a dialed telephone call,
e.g., 411, 555-1212, NPA-555-1212, or other dialed number (DN).
(i) "Competitive Products" means any of the
following:
(1) the Products as of Closing, including the natural
evolutions and the maintenance thereof; or
15
(2) hardware and software systems, including the
maintenance thereof, that meet all of the following
requirements:
1) are accessed via the public switched and packet telephone
networks (PS&PTN) causing a call to be routed to Nortel Networks'
Telephone Operator Position System ("TOPS") (or successor systems),
e.g., 411, 555-1212, NPA-555-1212, or other dialed number (DN)
specifically translated to route to TOPS; and
2) are accessed from TOPS via one of the following TOPS
protocols (or successor or functionally equivalent protocols):
o DA Call Control Link;
o OPP - Open Position Protocol;
o OAP - Open Automation Protocol;
o OIA - Open Information Access; and
3) implement one or more of the following services including
any partial or complete automation of such services at the far end of
the protocols in subclause 2) above:
o Directory Assistance, e.g., lookup of a
telephone number or the name and address
associated with a telephone number;
o Enhanced Information Services, e.g., access
to information listed in a database;
o Operator Assistance, e.g., assistance
provided by an operator or automated system
intended to help a customer bill or complete
a call; or
o Intercept, e.g., provide a new telephone
number listing for a disconnected telephone
listing.
(ii) For the avoidance of doubt, Competitive Products
shall not be deemed to include (1) on-switch functions
(operating entirely within a switch or natural evolutions
thereof) of TOPS (and successor systems) including, automatic
call distribution functionality, call control, queuing, agent
and automation resource management, signaling, protocols, and
third-party billing, (2) Session Initiation Protocol
("SIP")-based products and services (and successors thereof),
(3) SIP directory products, or (4) any other Nortel Networks
products and services as of the Closing Date other than the
Products; provided, however, that any Nortel Networks product
offered by Nortel Networks outside of North America as of the
Closing Date that is substantially equivalent to the Products
shall not be sold, licensed or distributed by Nortel Networks
in North America after the Closing Date.
(c) Notwithstanding Sections 5.4(a) and (b) to the contrary,
Nortel Networks retains the right to:
16
(i) enable third-party developed Competitive Products
to interoperate with any of Nortel Networks' products;
(ii) incorporate the functionality in any of the
Competitive Products into any of Nortel Networks' products if
such integration is required (1) to comply with any existing
or prospective regulatory requirements in a particular
jurisdiction, which cannot be satisfied with the Company's
products, or (2) to satisfy a particular customer's bona fide
requirement to provide functionality from other than a
Competitive Product, in a particular jurisdiction(s). Nortel
Networks' rights under this Section 5.4(c)(ii)(1) and (2) are
only available after commercially reasonable attempts to
negotiate in good faith with the Company to meet the
requirements of items (1) and (2) do not result in an
agreement between Nortel Networks and the Company with respect
to items (1) and (2). In satisfying this obligation to
negotiate in good faith, (A) Nortel Networks shall give the
Company written notice setting forth in reasonable detail the
circumstances of such requirement; (B) the Company shall be
given the opportunity to meet in person with executive
management of Nortel Networks; (C) Nortel Networks shall make
a good faith effort to arrange a meeting between Nortel
Networks, the Company and the regulatory authority or
customer, as the case may be, to discuss the circumstances of
such requirement; and (D) the Company is unable to meet such
requirement at commercially reasonable terms;
(iii) make equity investments of less than 20% in a
Person that derives less than 25% of its revenue, in the
immediately preceding twelve (12) months, from the sale of
Competitive Products but Nortel Networks and its Subsidiaries
and Affiliates shall not be permitted to sell the Competitive
Products of that Person;
(iv) acquire any Person that derives less than 25% of
its revenue, in the immediately preceding twelve (12) months
prior to the date of acquisition, from the sale of Competitive
Products; provided, however, (1) Nortel Networks shall agree
to divest that portion of the acquired Person responsible for
the sale of Competitive Products (the "Designated Division")
within nine (9) months of the closing of such acquisition;
provided that such closing occurs earlier than nine (9) months
prior to the expiration of the Nortel Networks Non-Compete
Period, (2) the Designated Division shall be permitted to
sell, sublicense, repair or maintain the Competitive Products
of such acquired Person during the period between such
acquisition and such divestment, (3) Nortel Networks and its
Subsidiaries and Affiliates shall not be permitted to sell,
sublicense, repair or maintain the Competitive Products of the
Designated Division and (4) the Company shall have the first
right of negotiation for thirty (30) days to purchase the
Designated Division;
(v) perform any obligations under its agreements with
Nortel Networks Netas Telekomunikasyon A.S., Kapsch CarrierCom
A.G. and Telrad Networks Limited;
(vi) resell, sublicense, repair or maintain a
Competitive Product provided by a third party when required by
a particular customer but only after Nortel Networks has
exhausted commercially reasonable efforts to persuade the such
customer to accept a Competitive Product provided by the
Company. In satisfying this obligation
17
to negotiate in good faith, (A) Nortel Networks shall give the
Company written notice setting forth in reasonable detail the
circumstances of such requirement; (B) the Company shall be
given the opportunity to meet in person with executive
management of Nortel Networks; (C) Nortel Networks shall make
a good faith effort to arrange a meeting between Nortel
Networks, the Company and the customer to discuss the
circumstances of such requirement; and (D) the Company is
unable to meet such requirement at commercially reasonable
terms;
(vii) resell, sublicense, repair or maintain
Competitive Products purchased from the Company; or
(viii) develop and/or sell, sublicense, repair or
maintain a product that performs the same functions as the
IWS/MWS work station Product, if Nortel Networks has complied
with Section 5.05 of the Relationship Agreement and despite
that compliance, the Company does not maintain the
compatibility and interoperability of the IWS/MWS work station
product with Nortel Networks' TOPS or successor systems after
the Closing Date.
(d) A "Company Event of Default" shall occur if:
(i) the Company (1) files for voluntary dissolution
in bankruptcy; (2) files a petition for voluntary
reorganization in bankruptcy (e.g., Chapter 11 in the U.S.),
which is then converted to involuntary proceedings for
dissolution based on a petition by a member of the creditor's
committee representing the creditors in the voluntary
proceeding (or its equivalent in non-U.S. jurisdictions) and
such proceedings are not dismissed within ninety (90) days; or
(3) is declared insolvent under applicable
bankruptcy/insolvency laws or other similar laws of any
jurisdictions;
(ii) there is a material failure or refusal by the
Company (but only to the extent provided below) in the due
observance or performance of any material covenant, condition,
or limitation in the MWS Agreement, the MWS Supply Agreement,
a Firm Fixed Quote provided by the Company pursuant to the
Relationship Agreement, the Subcontract Agreement or the
Intellectual Property License Agreement, but only if (1) such
noncompliance by the Company is material and continuing and
causes, or has the potential to cause, a material adverse
effect on Nortel Networks, (2) the Company shall have been
given written notice setting forth in reasonable detail the
circumstances of such noncompliance, (3) the Company shall
have been given the opportunity to meet in person with
executive management of Nortel Networks to discuss the
circumstances of such noncompliance, and (4) the Company shall
not have remedied its noncompliance within sixty (60) days
after receipt from Nortel Networks of such written notice of
such noncompliance. A Company default under this clause (ii)
shall apply on a product-by-product basis responsive to the
Company's violation of the agreements noted above and Nortel
Networks' compliance with requirements (1) through (4) of this
clause (ii). Nortel Networks' remedy upon such a Company
default will be to source the particular product from another
supplier in the case of a default under a Firm Fixed Quote
provided by the Company pursuant to the Relationship Agreement
and to sell, sublicense, repair or maintain directly or source
the IWS/MWS from another supplier in the case of a default
18
under the MWS Supply Agreement. In the event of continuous and
repetitive defaults of the agreements noted above that
materially impacts Nortel Networks' rights under those
agreements, then Nortel Networks shall be relieved of any and
all obligations under this Section 5.4 but only after the
parties' compliance with requirements (1) through (4) of this
clause (ii) with respect to such continuous and repetitive
defaults; or
(iii) the Company is acquired by any of the following
companies, including their Affiliates and any successors
thereof: 3Com Corporation, ALCATEL, SONUS NETWORKS, INC.,
Nokia Corporation, Samsung Electronics Co., Ltd., Cisco
Systems, Inc., TELEFONAKTIEBOLAGET LM ERICSSON, Fujitsu
Limited, Huawei Technologies Co., Ltd., LUCENT TECHNOLOGIES
INC., FutureWei Technologies Inc., MOTOROLA, INC., NEC
CORPORATION, Siemens Aktiengesellschaft, Taqua Systems, Inc.,
Tekelec, Sylantro Systems Corporation, AVAYA INC., Telica,
Inc., and CIENA Corporation.
5.5 Members' Trademarks and Tradenames. Unless otherwise provided in
this Agreement, the Contribution Agreement or any Ancillary Agreement, no
trademark, trade name or other trade identity owned or employed by any Member or
their respective Affiliates shall be used in connection with the activities or
business of the Company without the express written consent of such Member. The
Company shall execute any documents necessary to ensure that any agreed use of
such trade identity is properly attributed to that Member or its Affiliates.
5.6 Banking Matters. Funds of the Company shall be deposited in such
banks or other depositories as determined by the Board or its designee. Checks
or other orders of withdrawal shall be drawn upon the Company's account or
accounts only for purposes of the Company and shall be signed by such officers
or authorized representatives as are designated by the Board, subject to any
conditions or limitations which it may set.
5.7 Distributions. (a) For so long as both Nortel Networks and VIS (or
their Qualified Affiliates) hold any Membership Interests of the Company, the
Company shall distribute its Excess Cash, if any, in proportion to each of
Nortel Networks' and VIS's (or their Qualified Affiliates) respective Beneficial
Ownership Percentages in the Company at the time the distributions are declared.
Distributions will be declared semi-annually during the Company's fiscal year,
and will be paid within forty-five (45) days of declaration (each, a
"Distribution Payment Date"). For the purposes of this Agreement, "Excess Cash"
means, with respect to any semi-annual period, the amount (which amount shall in
no event be less than zero) equal to (i) the Net Income of the Company for such
semi-annual period plus (ii) all non-cash charges for such semi-annual period
less (iii) funds necessary for planned capital expenditures and planned
increases or decreases in working capital as set forth in the applicable
Business Plan for the next semi-annual period less (iv) $1,000,000. For the
avoidance of doubt, any amounts not generated though operations of the Company
and specifically deposited or held aside by the Company to pay the Exit Payment
shall not be considered in the calculation of Excess Cash.
(b) The amounts referred to in item (iii) of the definition of
Excess Cash with respect to any semi-annual period must be used for the
business of the Company during such period. To the extent such amounts
are not so used in such semi-annual period, such
19
amounts shall increase the amount of Excess Cash subject to
distribution in the next semi-annual period pursuant to Section 5.7(a).
To the extent any such amounts which are actually expended during such
semi-annual period are in excess of the planned amounts for such
period, such expended amounts shall decrease the amount of Excess Cash
subject to distribution in the next semi-annual period pursuant to
Section 5.7(a).
(c) For the avoidance of doubt, any amounts allocated in the
Business Plan for planned capital expenditures and working capital for
a given semi-annual period shall not be used for or by VIS or any
Affiliates of VIS other than the Company and its Subsidiaries.
(d) If the Option Closing has occurred pursuant to Section 6.4
below, at the Distribution Payment Date immediately following the date
of the Option Closing, the Company shall distribute to Nortel Networks
an amount equal to the product of (i) the Excess Cash for the
semi-annual period during which the Option Closing occurs, (ii) the
number of days from the beginning of such semi-annual period to the
date of the Option Closing divided by 182 and (iii) Nortel Networks'
Beneficial Ownership Percentage immediately prior to the Option
Closing.
5.8 Other Activities of Members and Affiliates. No Manager shall be
obligated to reveal confidential or proprietary information belonging to any
Member or a Member's Affiliates without the consent of such Member or its
Affiliate, as applicable. No Manager shall be obligated to recommend or take any
action in such Person's position as a Manager that prefers the interests of the
Company over the interests of a Member or any of its Affiliates, and the Company
hereby waives the fiduciary duty, if any, to the Company of such Person in the
event of any such conflict of interest.
5.9 Capital Contributions. Except as otherwise agreed by the parties,
and other than as contemplated by the Contribution Agreement, neither Nortel
Networks nor VIS shall be obligated to make any contributions of capital of any
type to the Company whatsoever.
5.10 Restriction on Security Interests. No Member may directly or
indirectly pledge, grant a security interest in, or otherwise encumber any or
all of its Membership Interests except with the prior written consent of each
other Member, which consent may be withheld with or without cause and without
any liability or accountability to any Person.
5.11 Relationship Agreement Payments. Upon each of the six (6) month
anniversary and the eighteen (18) month anniversary of the Closing Date, VIS
shall pay, or cause to be paid, to Nortel Networks an amount equal to $2,000,000
in immediately available funds, by wire transfer to an account designated by
Nortel Networks.
5.12 Confidentiality. (a) Each party shall treat as confidential all
Confidential Information furnished by the other party (the "Disclosing Party")
to such receiving party (the "Recipient Party") or its directors, officers,
employees, agents, advisors or Affiliates or representatives of its agents,
advisors or Affiliates (each of the foregoing, other than the Recipient Party, a
"Representative"), whether furnished before or after the date of this Agreement,
regardless of the form in which such Confidential Information is communicated or
20
maintained, and all notes, reports, analyses, compilations, studies, files or
other documents or material, whether prepared by the Recipient Party or others,
which are based on, contain or otherwise reflect such Confidential Information;
provided that after the Closing the Company shall not be required to treat as
confidential, information primarily relating to the Nortel Networks Business
which would otherwise be deemed as Confidential Information. Furthermore, VIS
and Nortel Networks agree that after the Closing all Confidential Information
comprised within the Assets constitutes Confidential Information of the Company,
and they agree to treat such information as confidential. Notwithstanding the
foregoing, the Recipient Party and its Representatives shall not be required to
treat as confidential, subject to any limitations in any of the Ancillary
Agreements to which the Recipient Party is a party, information that (i) is or
becomes available to the public lawfully, other than as a result of a disclosure
by the Recipient Party or a Representative of the Recipient Party in breach of
this Section 5.12; (ii) was available to the Recipient Party or a Representative
of the Recipient Party, or has become available to the Recipient Party or a
Representative of the Recipient Party, on a non-confidential basis from a source
other than the Disclosing Party or its Representatives; provided that the source
of such information was not bound by a confidentiality agreement with the
Disclosing Party or any of its Representatives with respect to such material, or
otherwise prohibited from transmitting the information to the Recipient Party or
such Representative of the Recipient Party by a contractual, legal or fiduciary
obligation; and (iii) the Recipient Party or a Representative of the Recipient
Party independently developed without reference to Confidential Information or
any derivative thereof. A Party may disclose Confidential Information if
required of such Party under Applicable Law; provided that the Recipient Party
shall have disclosed only to the extent required by such Applicable Law, shall
have promptly notified the Disclosing Party of any effort to compel disclosure
prior to any such disclosure, and reasonably cooperates and assists with the
Disclosing Party's lawful attempts to prevent disclosure and/or obtain a
protective order.
(b) Notwithstanding anything previously stated to either party
by the other party or included in any agreement between the parties,
either party (and each employee, representative, or other agent of
either party) may disclose to any and all Persons, without any
limitation, the tax treatment and tax structure of this transaction, as
well as materials detailing the tax treatment and tax structure.
However, specific details of the transaction not necessary to an
understanding of the tax treatment and tax structure shall not be
disclosed, including descriptions of the Assets and the identity of the
parties involved.
ARTICLE VI
TERM AND TERMINATION
6.1 Termination. (a) This Agreement shall continue until terminated
pursuant to this Article VI.
(b) Upon the termination of this Agreement in accordance with
this Article VI, this Agreement shall terminate, except that (i)
Section 5.4, Section 5.7(d) and Articles VI and VII shall survive
termination in accordance with the terms hereof and thereof and (ii)
any covenant, agreement, undertaking, Liability or obligation in
Section 2.2(o) and Sections 2.4(g) and (h) shall survive in full force
and effect until the expiration of any applicable statutory limitation
period (giving effect to any waiver, mitigation or
21
extension thereof) with respect to the period from the Closing Date to
the date of termination of this Agreement.
(c) The parties hereby agree that following the termination of
this Agreement pursuant to this Article VI until the expiration of any
applicable statutory period, the actions described in Section 2.2(o)
hereof shall be subject to the prior written consent of Nortel
Networks.
6.2 Termination Events. This Agreement shall only be terminated in the
following manner, upon the occurrence of any of the events described in Sections
6.2(a) through (b) (each, a "Termination Event"):
(a) The Members may terminate this Agreement at any time by
written agreement.
(b) This Agreement shall automatically terminate at such time
as a Member (or its Permitted Transferees) no longer owns any
Membership Interests.
6.3 Put and Call Options. (a) At any time (i) following the second
(2nd) anniversary of the Closing Date or (ii) upon the occurrence of a
Termination Event pursuant to Section 6.2(a), Nortel Networks shall have an
option (a "Nortel Networks Put Option") to require the Company to purchase from
Nortel Networks all of Nortel Networks' Membership Interests in the Company (the
"Option Interests"), and, upon exercise of such Nortel Networks Put Option, the
Company shall purchase the Option Interests at a price equal to the Exit Payment
pursuant to the terms set forth in Sections 6.3(b) through (d). At any time (i)
following the second (2nd) anniversary of the Closing Date or (ii) upon the
occurrence of a Termination Event pursuant to Section 6.2(a), the Company shall
have an option (a "Company Call Option") to purchase the Option Interests from
Nortel Networks, and, upon exercise of such Company Call Option, Nortel Networks
shall sell the Option Interests to the Company at a price equal to the Exit
Payment pursuant to the terms set forth in Sections 6.3(b) through (d).
(b) Either Nortel Networks or the Company may exercise a
Nortel Networks Put Option or a Company Call Option, as the case may be
(each, an "Option"), by delivering a written notice of exercise to the
other (such date of delivery, the "Put/Call Date").
(c) If the Put/Call Date is prior to the third (3rd)
anniversary of the Closing Date, the exercise price of the Option (the
"Exit Payment") shall be equal to the product of (i) Fair Value and
(ii) the quotient obtained by dividing the number of Option Interests
by the total number of Membership Interests of the Company outstanding
as of the Put/Call Date; provided, however, that the Exit Payment
calculated pursuant to this Section 6.3(c) shall not be greater than
$70,000,000 or less than the Option Floor. Not more than ten (10) days
after the Put/Call Date that is prior to the third (3rd) anniversary of
the Closing Date, the Company shall deliver to Nortel Networks a
written statement that sets forth in reasonable detail its reasonable
and good faith calculation of the Exit Payment (the "Statement"). If
Nortel Networks wishes to dispute the Statement in any manner, Nortel
Networks may exercise its audit rights pursuant to Section 6.5 below.
22
(d) If the Put/Call Date is on or after the third (3rd)
anniversary of the Closing Date, the Exit Payment shall be an amount
that is agreed upon by the Members. The Members shall promptly
negotiate in good faith and with reasonable diligence regarding such
amount. If, in such case where the Put/Call Date is on or after the
third (3rd) anniversary of the Closing Date, the Shareholders have not
reached an agreement on the amount of the Exit Payment within thirty
(30) days of the Put/Call Date, then the resolution of such amount
shall be submitted to an independent investment banking firm of
national repute promptly selected by the agreement of the Members. Such
investment banking firm shall find resolution within thirty (30) days
of the date of engagement of such investment banking firm. The fees and
expenses of such investment banking firm shall be divided equally among
the Members.
(e) Notwithstanding the foregoing, if Nortel Networks has
received proceeds equal to or in excess of $70,000,000 pursuant to
Section 4.2(d) above, then Sections 6.3 and 6.4 shall no longer be
applicable.
6.4 Option Closing. The purchase by the Company of the Option Interests
and the payment of the Exit Payment shall take place at such time and place as
may be agreed upon by the Company and Nortel Networks (the "Option Closing");
provided that the Option Closing shall occur as soon as practicable but no event
later than one hundred twenty (120) days after the Put/Call Date. At the Option
Closing:
(a) the Company shall pay, or cause to be paid, to Nortel
Networks in immediately available funds, by wire transfer to an account
designated by Nortel Networks, an amount equal to the Exit Payment; and
(b) the Company shall redeem the Option Interests.
Notwithstanding the foregoing, the Company may delegate its obligations
under this Section 6.4 to VIS; provided that the Company shall notify Nortel
Networks in writing of such proposed delegation within thirty (30) days
following the Put/Call Date and after such delegation, the Company shall
continue to be bound under this Section 6.4.
6.5 Audit Rights. (a) Until the date (the "Expiration Date") ninety
(90) days following the date of the Option Closing, Nortel Networks shall have
the right to audit the Statement and the other financial statements of the
Company for the periods prior to the date of the Option Closing. At any time on
or prior to such Expiration Date, Nortel Networks shall notify VIS and the
Company in writing of any amounts determined to be owed to Nortel Networks
pursuant to Section 5.7 hereof or of any disagreement with the determination of
the amount of the Exit Payment as set forth in the Statement (the "Audit
Report"). Nortel Networks shall pay all costs and expenses of the Audit Report;
provided, however, that if the Audit Report as accepted by VIS and the Company
or the final determination of Disputed Items pursuant to Section 6.6 reveals
underpayments to Nortel Networks greater than the greater of (i) 5% of the
amounts owed to Nortel Networks pursuant to Section 5.7 or Section 6.4 hereof or
(ii) $25,000, then the Company will pay all costs and expenses of the Audit
Report.
23
(b) After receipt of the Audit Report, VIS and the Company
shall have fifteen (15) days to review the same.
(c) Unless VIS or the Company delivers written notice to
Nortel Networks on or prior to the fifteenth (15th) day after receipt
of the Audit Report specifying in reasonable detail all disputed items
and the bases therefor ("Disputed Items"), each of VIS and the Company
shall be deemed to have accepted and agreed to the Audit Report. If VIS
or the Company delivers written notice to Nortel Networks of any
Disputed Items as described above, the parties shall adhere to the
dispute resolution provisions set forth in Section 6.6.
6.6 Dispute Resolution. (a) Nortel Networks, VIS and the Company shall,
within fifteen (15) days following the date of any notice delivered pursuant to
Section 6.5(c), promptly attempt in good faith and with reasonable diligence to
resolve all Disputed Items and any such resolution of a Disputed Item shall be
final, binding, conclusive and nonappealable for all purposes under this
Agreement.
(b) If at the conclusion of such fifteen (15) day resolution
period Nortel Networks, VIS and the Company have not reached an
agreement on all Disputed Items, then the resolution of such remaining
Disputed Items shall be submitted to a nationally recognized
unaffiliated accounting firm chosen by the agreement of Nortel
Networks, VIS and the Company (the "Arbitrator"). Nortel Networks, VIS
and the Company shall use their reasonable best efforts to cause the
Arbitrator to render a decision in accordance with this Section 6.5
along with a statement of reasons therefor within ten (10) days of
submission of the remaining Disputed Items, or a reasonable time
thereafter, and shall provide the Arbitrator with prompt and reasonable
access to all books and records and employees of the Company in order
to allow the Arbitrator to complete its review. The decision of the
Arbitrator with respect to the Disputed Items submitted to it shall be
final, binding, conclusive and nonappealable for all purposes under
this Agreement. The fees and expenses of the Arbitrator shall be
divided equally between the Members.
(c) Promptly following the resolution of all Disputed Items as
described above, the Company or VIS, as the case may be, shall pay to
Nortel Networks any amounts determined to be owed to Nortel Networks
pursuant to Section 5.7 or Section 6.4 plus interest at a rate per
annum equal to the rate of interest publicly announced by Citibank,
N.A. in New York City from time to time as its prime rate plus two
percent (2%), calculated from the date such amounts should have been
paid, unless such resolution occurs prior to the date of the Option
Closing, in which case such amounts shall be paid to Nortel Networks at
the Option Closing.
(d) Any payments made pursuant to Section 6.6(c) shall be made
in immediately available funds, by wire transfer to an account
designated by Nortel Networks.
6.7 No Prejudice to Rights. Termination of this Agreement shall be
without prejudice to:
24
(a) the rights of the parties hereto to any payments due under
this Agreement existing at the time of termination;
(b) any remedies which any party may then have hereunder or at
law; and
(c) any party's right to obtain performance of any obligations
provided for in this Agreement which survive termination by their
express terms.
ARTICLE VII
MISCELLANEOUS
7.1 Expenses. Except as otherwise provided herein, the parties shall
bear their respective direct and indirect expenses incurred in connection with
the negotiation, preparation, execution and performance of this Agreement and
the transactions contemplated hereby.
7.2 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by overnight courier service, by facsimile, by registered or certified
mail (postage prepaid, return receipt requested) to the respective parties at
the following addresses (or at such other address for a party as shall be
specified in a notice given in accordance with this Section 7.2):
(a) if to Nortel Networks:
Nortel Networks Inc.
8200 Dixie Road, Suite 100
Brampton, Ontario, Canada L6T 5P6
Facsimile: (905) 863- 8386
Attention: Secretary
and a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, NY 10006
Facsimile: (212) 225-3999
Attention: Paul J. Shim, Esq.
25
(b) if to VIS, Nuco or Holdings:
Volt Information Sciences, Inc.
560 Lexington Avenue
New York, NY 10022
Facsimile: (212) 704-2417
Attention: William Shaw and Howard B. Weinreich, Esq.
with a copy to:
Jenkens & Gilchrist Parker Chapin LLP
405 Lexington Avenue
New York, NY 10174
Facsimile: (212) 704-6288
Attention: Lloyd Frank, Esq. and Lawrence M. Levinson, Esq.
(c) if to the Company:
Volt Delta Resources, LLC
560 Lexington Avenue
New York, NY 10022
Facsimile: (212) 704-2417
Attention: William Shaw and Howard B. Weinreich, Esq.
with a copy to:
Jenkens & Gilchrist Parker Chapin LLP
405 Lexington Avenue
New York, NY 10174
Facsimile: (212) 704-6288
Attention: Lloyd Frank, Esq. and Lawrence M. Levinson, Esq.
7.3 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.4 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any Applicable Law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not fundamentally changed. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to the greatest
extent possible.
26
7.5 Entire Agreement. This Agreement, together with the Contribution
Agreement, the Parent Agreement and the Ancillary Agreements, constitute the
entire agreement of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and undertakings, both written and oral,
between Nortel Networks, VIS and the Company with respect to the subject matter
hereof.
7.6 Assignment. No party may transfer any of its rights or obligations
hereunder, except as expressly provided herein.
7.7 No Third-Party Beneficiaries. This Agreement is for the sole
benefit of the parties hereto and their respective Qualified Affiliates and
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person or entity any legal or equitable right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
7.8 Amendment. This Agreement may not be amended or modified except by
an instrument in writing signed by the parties hereto.
7.9 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the Applicable Law of the State of New York without regard
to its conflicts of law principles, except that the laws of the State of Nevada
shall apply to matters relating to the internal governance of the Company. All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined exclusively in a New York state or federal court sitting in
the County of New York, and the parties hereto hereby irrevocably submit to the
exclusive jurisdiction of such courts in any such action or proceeding and
irrevocably agree to the laying of venue in such courts and waive the defense of
an inconvenient forum to the maintenance of any such action or proceeding.
7.10 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Agreement by telecopier shall be as
effective as delivery of a manually executed counterpart of this Agreement.
7.11 No Presumption. This Agreement shall be construed without regard
to any presumption or rule requiring construction or interpretation against the
party drafting or causing any instrument to be drafted.
7.12 No Special Damages. None of the parties hereto shall be entitled
to any recovery under this Agreement for its or its Affiliates' own special,
indirect or consequential damages (including loss of profits) or for punitive
damages.
7.13 Specific Performance. The parties hereto agree that irrevocable
damage would occur if any of the provisions of Sections 5.4, 5.12 and 6.3 of
this Agreement were not performed in accordance with their specific terms or
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of Sections 5.4, 5.12 and
6.3 of this Agreement and to enforce specifically the terms and provisions
27
thereof, in addition to any other remedy to which they are is entitled at law or
in equity, without the need to post a bond or prove special damages.
7.14 Performance by Nuco and Holdings. Nuco and Holdings agree to be
bound by all of the obligations of VIS hereunder and to act as directed by VIS
with respect to the matters contemplated by this Agreement. VIS agrees to cause
Nuco and Holdings to take all Necessary Action to implement, as soon as
practicable and to the extent permitted by Applicable Law, the provisions of
this Agreement and to fulfill all of VIS's obligations hereunder. VIS further
agrees not to Transfer any of the capital stock of Nuco and Nuco agrees not to
Transfer any of the capital stock of Holdings during the term of this Agreement.
28
IN WITNESS WHEREOF, Nortel Networks, VIS, Nuco, Holdings and the
Company have caused this Agreement to be executed as of the date first written
above by their respective officers thereunto duly authorized.
NORTEL NETWORKS INC.
By: /s/ Gayle Lanier
-------------------------------------
Name: Gayle Lanier
Title: General Manager
VOLT INFORMATION SCIENCES, INC.
By: /s/ Howard B. Weinreich
-------------------------------------
Name: Howard B. Weinreich
Title: Senior Vice President
NUCO I, LTD.
By: /s/ Howard B. Weinreich
-------------------------------------
Name: Howard B. Weinreich
Title: Vice President
VOLT DELTA RESOURCE HOLDINGS, INC.
By: /s/ Howard B. Weinreich
-------------------------------------
Name: Howard B. Weinreich
Title: Senior Vice President
VOLT DELTA RESOURCES, LLC
By: /s/ Ronald Kochman
-------------------------------------
Name: Ronald Kochman
Title: Vice President
By: /s/ Debra L. Hobbs
-------------------------------------
Name: Debra L. Hobbs
Title: Vice President
29