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Exhibit 4.(a)(xi)
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement"), dated as of 29 September,
2000, by and between Madge Networks (New Jersey) Inc., a Delaware corporation,
with principal offices at 625 Industrial Way West, Eatontown, New Jersey, 07724
(the "Seller") and YorkTel Acquisition Corporation, a New Jersey corporation,
with principal offices at 1 Industrial Way West, Building E, Eatontown, New
Jersey 07724 (the "Buyer").
RECITALS
A. The Seller is engaged in the ISDN video networking business which
involves the development, manufacture and sale of ISDN based switches
primarily used for building video networks; supplying ISDN network
simulation equipment used by network vendors in the development and
testing of their ISDN products; research and development; and providing
and supplying ISDN based video networking solutions.
B. The Seller and the Seller's Affiliates (as defined below) desire to sell
and the Buyer desires to purchase the business described in Recital A,
except for the part of the business which carries out the manufacturing
function, which part of the Business the Seller and the Seller's
Affiliates (as defined below) desire to sell to Freedom Vertical
Technologies, Inc., a New Jersey Corporation with principal offices at
625 Industrial Way West, Eatontown, New Jersey, 07724 ("Freedom"). The
manufacturing part of the business is hereinafter defined as the
"Excluded Business" and the remaining business which the Buyer is
acquiring pursuant to this Agreement is hereinafter defined as the
"Business".
C. On the close of the sale of the Business by the Seller and the Seller's
Affiliates (as defined below) to the Buyer, the Buyer is proposing to
enter into a supply agreement with Freedom (the "Supply Agreement")
whereby Freedom will manufacture and supply the products of the Business
to the Buyer and will also supply RMA services (to be more particularly
defined in the Supply Agreement) in respect of these products to the
Buyer.
D. The sale of the Business by the Seller and the Seller's Affiliates (as
defined below) to the Buyer, pursuant to the terms and conditions of
this Agreement is conditional on the simultaneous close of the sale of
the Excluded Business by the Seller and the Seller's Affiliates to
Freedom and the terms of the Supply Agreement being on terms
satisfactory to the Seller.
E. The Seller and the Seller's Affiliates have agreed to sell, and the
Buyer has agreed to purchase, certain of the Seller's assets and the
assets of the Seller's Affiliates used in the conduct of Business, but
excluding the "Retained Assets" (as defined herein and listed in Section
2.02), and assume certain of the liabilities of the Business (as defined
as the "Assumed Liabilities" in Section 3.02) in accordance with the
terms and conditions of this Agreement.
NOW THEREFORE, in consideration of the payments herein provided for and
the mutual promises, representations, warranties and covenants herein contained
and the mutual benefits to be derived herefrom, the Parties hereby agree as
follows:
ARTICLE 1
DEFINITIONS
Unless elsewhere defined herein, the following terms shall have the
meanings set forth in this Article 1.
"ACCESSSWITCH PRODUCTS" has the meaning set forth in section 4.06.
"AFFILIATE" means, with respect to any Person, at the time in question,
any other Person controlling, controlled by or under common control with such
Person. For purposes of this definition,
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"control" (including the terms "controlling," "controlled by" and "under common
control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, employment,
position or otherwise.
"AGREEMENT" means this Asset Purchase Agreement.
"ASSET CONSIDERATION" has the meaning set forth in Section 5.01(b).
"ASSUMED LIABILITIES" has the meaning set forth in Section 3.02.
"BUSINESS" has the meaning set forth in Recital B.
"BUSINESS FINANCIAL STATEMENTS" means the unaudited, management prepared
balance sheet of the Business for the quarter ended March 31, 2000, together
with the information contained in the "WAVE 06/00 Results Pack" for the quarter
ended June 30, 2000.
"BUYER" has the meaning set forth in the introductory paragraph of this
Agreement.
"BUYER INDEMNITEES" shall have the meaning set forth in Section 13.01.
"COMPUTER SOFTWARE" means all computer software, including computer
software programs, program specifications, charts, procedures, source codes
(including annotations), object codes, input data, diagnostic and other
routines, data bases, disks, documentation, operating manuals, related systems
data, source programs, report layouts and formats, record layouts, diagrams,
program libraries, and any other documentation in those application areas that
may pertain to any data processing system or operation, developed, owned or used
by the Seller or any of the Seller's Affiliates with respect to the Business.
For the purposes of this definition, the term "computer software programs"
includes any set of arithmetic and/or logical instructions meant to run on, or
to control the operation of any computer (i) whether those instructions are a
complete program, a collection of programs making up a subsystem or system, or
are merely subroutines or meant to operate in conjunction with other software,
and (ii) whether such instructions must be run throughout another computer
program before being useable on a computer, whether such instructions can be
used at execution time only in conjunction with another computer program (i.e.
an "interpreter") or whether such instructions are in a form that can be run on
a computer "as is," except for any necessary interfaces with the computer's
microcode, operating system or reference-resolving routines; provided, that
there shall be excluded from this definition the Computer Software listed in
Schedule A (the "Excluded Computer Software").
"CLOSING" means the closing of the transactions contemplated by this
Agreement.
"CLOSING CONDITIONS" has the meaning set forth in section 2.01.
"CLOSING DATE" has the meaning set forth in Section 11.01.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended from time to time.
"CONTRACTS" means all contracts, agreements, leases, licenses,
instruments, commitments, quotations, bids, undertakings, arrangements or
understandings of any kind, written or oral, to which or by which the Seller or
any Seller's Affiliate with respect to the Business is a party or otherwise
bound or to which or by which any of the Purchased Assets or Assumed Liabilities
are subject, including, without limitation, customer agreements, maintenance
agreements, VAR agreements, service agreements, MASP agreements, software
license agreements, purchase orders, sales orders, distributor agreements, sales
and representative agreements, supplier agreements, subcontractor agreements,
warranty agreements, employment and consulting agreements, guaranty agreements,
confidentiality agreements and non-compete agreements, but excluding (a) any
inter-company agreements entered into by the Seller or any Sellers' Affiliate
with other members of the Madge group and (b) the Hibbings Agreement (subject to
the terms of section 4.12).
"CUSTOMER SERVICE INVENTORY AND CUSTOMER SERVICE INVENTORY
CONSIDERATION" have the meanings set forth in section 4.02.
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"DISCLOSURE SCHEDULES" or "SCHEDULE" mean the schedules attached to this
Agreement.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(2).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCLUDED BUSINESS" has the meaning set forth in Recital B.
"EXCLUDED COMPUTER SOFTWARE" has the meaning set forth in the definition
of "Computer Software."
"FIXED ASSETS AND EQUIPMENT" means the fixed assets and equipment of the
Seller and of the Seller's Affiliates used in the Business which the Buyer
chooses to purchase at the Closing.
"FIXED CONSIDERATION" has the meaning set forth in Section 5.01(a).
"FREEDOM" has the meaning set forth in Recital B.
"GOVERNMENTAL AUTHORITY" means any federal, state, local or foreign
government, political subdivision or governmental or regulatory authority,
agency, board, bureau, commission, instrumentality or court, or
quasi-governmental authority in whatever jurisdiction.
"HIBBINGS AGREEMENT" means the arrangement with K-Byte Hibbing
Manufacturing (which shall be referred to as "Hibbings" in this Agreement), as
at the Closing, pursuant to which the Seller sells certain inventory items to
Hibbings which Hibbings then incorporates into boards manufactured by Hibbings
for onward sale to the Seller as a finished product of the Business.
"HIBBINGS BOARDS" has the meaning set forth in section 4.12.
"HIBBINGS INVENTORY" has the meaning set forth in section 4.12.
"HIBBINGS MONTHLY REPORT" has the meaning set forth in section 4.12.
"HIPAA" means the Health Insurance Portability and Accountability Act of
1996.
"INITIAL PERIOD" has the meaning set forth in section 4.03.
"INTELLECTUAL PROPERTY" means the intellectual property owned or used by
the Seller or any Seller's Affiliate with respect to the Business, including,
without limitation:
(a) all United States and foreign trademarks and service marks (whether
common law or registered), trade dress, logos, and trade names, together with
all translations, adaptations, derivatives, and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith;
all inventions (whether patentable or unpatentable, and whether or not reduced
to practice), all improvements thereto, and all United States and
foreign patents, patent applications, and invention disclosures
(including, without limitation, those in Computer Software), together
with all reissues, continuations, revisions, extensions, divisions, and
reexaminations thereof;
all copyrightable works, all United States and foreign copyrights (including,
without limitation, those in Computer Software), and all United States
and foreign applications, registrations, and renewals in connection
therewith;
all trade secrets and confidential business information (including ideas,
concepts, research and development, know-how, technology, formulas,
compositions, processes and techniques, technical data, designs,
drawings, schematics, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and
proposals).
all Computer Software; and
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all copies and tangible embodiments of any of the foregoing (in whatever form or
medium, including electronic media)
all licenses, sublicenses, assignments in respect thereto and rights thereunder,
remedies against infringements thereof and rights to protection of
interest therein relating to the items in classes (a) - (e) above.
"INVENTORY" shall include (i) component and subassembly items; (ii)
spare parts and refurbished products (RMA); and (iii) last time buy items, that
are required for the ongoing manufacture of the products of the Business
following the Closing Date.
"INVENTORY COMPONENT LIST" has the meaning set forth in section 4.08.
"INVENTORY SUMMARY" has the meaning set forth in section 4.01.
"LEASED PROPERTY" has the meaning set forth in Section 2.01(e).
"LIEN(S)" means any lien, mortgage, charge, pledge, hypothecation,
security interest, claim, or other encumbrance of a similar nature.
"LOSS" means all liabilities (whether known or unknown, matured or
unmatured, stated or unstated, fixed or contingent), obligations, damages of any
kind (including, without limitation, general, special, incidental and
consequential damages), judgments, liens, injunctions, charges, orders, decrees,
rulings, demands, claims, losses, dues, assessments, Taxes, fines, expenses,
fees, costs, penalties and amounts paid in settlement (including reasonable
attorneys' and expert fees and disbursements in connection with investigating,
defending or settling any action or threatened action).
"LUCENT CLAIMS" means any claim asserted by Lucent Technologies or its
Affiliates in respect of the patents listed on Exhibit A.
"MADGE N.V." means Madge Networks N.V., the Seller's parent company.
"MONTHLY REPORTS" has the meaning set forth in section 4.10.
"PARTY" means the Buyer or the Seller, referred to individually, and
"PARTIES" means the Buyer and the Seller referred to collectively.
"PERMITS" has the meaning set forth in Section 2.01(h).
"PERSON" means an individual, corporation, limited liability company,
partnership, association, estate, trust, unincorporated organization,
Governmental Authority, or other entity or organization.
"PROFIT STATEMENT" has the meaning set forth in section 5.01(a).
"PURCHASE ORDER" has the meaning set forth in section 4.09.
"PURCHASE PRICE" has the meaning set forth in Section 5.01.
"PURCHASED ASSETS" has the meaning set forth in Section 2.01.
"RELATED AGREEMENTS" means the agreements contemplated by this Agreement
relating to the transactions contemplated hereby, including those attached to
this Agreement as Exhibits.
"RETAINED ASSETS" has the meaning set forth in Section 2.02.
"RETAINED LIABILITIES" has the meaning set forth in Section 3.01.
"REQUIRED SURPLUS ITEMS" has the meaning set forth in section 4.04.
"SALE AGREEMENT" means the agreement to be entered into at the Closing
between the Seller and Freedom in relation to the sale of the Excluded Business
to Freedom.
"SELLER" has the meaning set forth in the introductory paragraph of this
Agreement.
"SELLER EMPLOYEE BENEFIT PLANS" has the meaning set forth in Section
6.18.
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"SELLER INDEMNITEES" shall have the meaning set forth in Section 13.02.
"SIX MONTH PRODUCTION SCHEDULES" has the meaning set forth in section
4.03.
"SUPPLY AGREEMENT" has the meaning set forth in Recital C.
"SURPLUS ITEMS" has the meaning set forth in section 4.04
"TAX" means any federal, state or local tax or any foreign tax
(including, without limitation, any tax upon or in relation to the following,
net income, gross income, profits, premium, estimated, excise, sales, value
added, services, use, occupancy, gross receipts, franchise, license, ad valorem,
severance, capital levy, production, stamp, transfer, withholding, employment,
unemployment, social security (including FICA), payroll or property tax, customs
duty or any other governmental charge or assessment) together with any interest,
addition to tax, or penalty.
"TAX CODE" means the Internal Revenue Code of 1986, as amended.
"TECHNICAL SUPPORT SERVICES" means the technical support services the
Buyer is providing to the customers of the Business through the Buyer's national
service desk as at the Closing.
"THIRD PARTY CLAIM" has the meaning set forth in Section 13.04.
"TOKEN RING BUSINESS" means the manufacture and sale of certain token
ring products and ATM equipment by the Seller and the Seller's Affiliates in the
US and Canada for and on behalf of Madge Logistics.
"TOTAL PURCHASED INVENTORY COST" has the meaning set forth in Section
4.10.
"TOTAL UTILIZED INVENTORY COST" has the meaning set forth in section
4.10.
"TOTAL UTILIZED HIBBINGS INVENTORY COST" has the meaning set forth in
section 4.12.
"TRANSFERRING EMPLOYEES" means the employees listed in Schedule 2.01(j).
"TUPE" means the Transfer of Undertakings (Protection of Employment)
Regulations 1981.
"UK TRANSFERRING EMPLOYEES" means those Transferring Employees who are
employed in the United Kingdom.
ARTICLE 2
SALE AND PURCHASE OF ASSETS
2.01 PURCHASED ASSETS. On the terms and subject to the conditions of
this Agreement, and for the consideration set forth in Article 5, the Seller
shall sell, assign, transfer and convey, and shall cause the Seller's Affiliates
to sell, assign, transfer and convey to the Buyer, free and clear of all Liens,
and the Buyer shall purchase all of the right, title and interest of the Seller
or the Seller's Affiliates in and to the following assets:
(a) Fixed Assets and Equipment. The Fixed Assets and Equipment. Schedule
2.01(a) lists the Fixed Assets and Equipment.
(b) Customer Service Inventory. The Customer Service Inventory, which
shall be purchased and paid for in accordance with section 4.02.
(c) Required Surplus Items. The Required Surplus Items, which shall be
purchased and paid for in accordance with section 4.04.
(d) Other Items of Inventory. Any other items of Inventory (not being
Customer Service Inventory or Required Surplus Items), which shall be purchased
in accordance with section 4.
(e) Contracts. All Contracts, except for the real property lease
agreement covering the Seller's premises at 625 Industrial Way West, Eatontown,
New Jersey 07724 (the "Leased Property").
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Schedule 2.01(e) lists all written Contracts and all known oral Contracts,
including the parties thereto and the general subject matter thereof.
(f) Lists and Records. All books and records, customer and supplier
lists, records and files, sales, cost and shipping records, sales and marketing
materials and other lists and documents related to the Business, and all
employment records related to the Transferring Employees (except that the Seller
shall not transfer any employment records until such employees have formally
accepted an offer of employment from the Buyer); provided, that for the
avoidance of doubt, the Seller and the Seller's Affiliates (as the case may be)
shall retain all financial, accounting and tax records of the Business.
(g) Intellectual Property. All Intellectual Property, including, without
limitation, the Intellectual Property set forth on Schedule 2.01(g), but
excluding (i) the "Madge" logo, (ii) the "Madge" name, provided that Buyer shall
have a non-exclusive license to use the "Madge" name for the period of time and
for the purposes as provided for in Section 8.05 herein, (iii) certain patents
which relate to both the products of the Business and products of other
companies within the Seller's affiliated group, and (iv) certain trademarks
which include the Madge name, provided that Buyer shall have a non-exclusive
license to use such patents and trademarks as Buyer may require to carry on the
Business following the Closing in accordance with the terms of Section 8.07
herein.
(h) Government Permits and Licenses. All of the permits, licenses,
orders, certifications, approvals, consents, and other governmental or
regulatory authorizations issued to the Seller (the "Permits") in connection
with the Business. Schedule 2.01(h) lists all such Permits.
(i) Claims Against Third Parties. All rights of Seller or any of
Seller's Affiliates against third parties for claims, actions, suits,
proceedings and demands of any nature relating to the Purchased Assets relating
to any period after the Closing Date.
(j) Employees. All Transferring Employees. Schedule 2.01(j) lists all of
the Transferring Employees.
(k) Goodwill. All of the goodwill of the Business.
together the "Purchased Assets". The sale and purchase of the Purchased Assets
shall take place on the Closing Date apart from the sale and purchase of the
Required Surplus Items and any other items of Inventory not being Customer
Service Inventory, which shall be purchased at the times specified in sections
4.04 and 4.03, 4.10 and 4.11, respectively. The sale and purchase of those
Purchased Assets which are due to take place on the Closing Date shall be
conditional on (x) the simultaneous close of the sale of the Excluded Business
by the Seller to Freedom and (y) the Supply Agreement containing terms and
conditions acceptable to the Seller (the "Closing Conditions"). Each of the
Parties shall use their best endeavors to procure that the Closing Conditions
are satisfied at the Closing. In the event that the Closing Conditions are not
satisfied, all the obligations and liabilities of the Parties under this
Agreement (other than pursuant to sections 8.09 (Payment of Transaction Fees),
14.08 (Governing Law), 14.10 (Public Announcements) and 14.12 (Confidential
Information)) shall cease and terminate and neither of the Parties shall have a
claim against the other.
2.02 RETAINED ASSETS. Notwithstanding the foregoing, the following
assets shall be retained by the Seller or any of the Seller's Affiliates (as the
case may be) and shall not be included in the Purchased Assets (the "Retained
Assets"):
(a) Excluded Business. The Excluded Business and all assets, properties
and rights of the Excluded Business.
(b) Token Ring Business. The Token Ring Business and all assets,
properties and rights of the Token Ring Business.
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(c) Cash. The aggregate cash balances of the Business as of the Closing
Date.
(d) Accounts Receivable. The accounts receivable of the Seller and of
the Seller's Affiliates with respect to the Business as at the Closing Date.
(e) Inventory Items. The items of Inventory which the Buyer does not
purchase after the Closing Date.
(f) Fixed Assets and Equipment. Any fixed assets and equipment of the
Seller and of the Seller's Affiliates used in the Business which the Buyer does
not purchase at the Closing Date.
(g) Tax Benefit. The tax benefit which may be realized (together with
any amounts receivable by Seller or any other company within the Seller's
affiliated group) in respect of the cumulative net operating losses of Seller
accumulated prior to the Closing or in respect of taxation paid or payable by
Seller or such other company within Seller's affiliated group in connection with
the operation of the Business prior to the Closing.
(h) Certain Intellectual Property. The Excluded Computer Software listed
on Schedule A, the "Madge" logo which the Buyer shall not be licensed or
otherwise permitted to use, the "Madge" name which the Buyer shall be licensed
and permitted to use as provided for in Section 8.05 herein, certain patents
which relate to both the products of the Business and products of other
companies within the Seller's affiliated group, and certain trademarks which
include the Madge name; provided that Buyer shall be licensed and permitted to
use such patents and trademarks which it may require to carry on the Business as
provided for in Section 8.07 herein.
(i) Related Rights. All claims and rights of, related to or arising
from, any of the Retained Assets or Retained Liabilities.
(j) Shareholders Equity. The Seller's shareholders' equity.
(k) Leased Property and Leasehold Improvements. The real property lease
agreement, the Seller's leasehold improvements with respect to the Leased
Property and all rent and security deposits relating to the Leased Property.
ARTICLE 3
LIABILITIES
3.01 RETAINED LIABILITIES. Except for those specific liabilities and
obligations provided for in Section 3.02, the Buyer shall not assume, be liable
for or pay, and the Seller or the Seller's Affiliates (as the case may be) shall
retain, be liable for and pay, any liability or obligation (whether known or
unknown, matured or unmatured, stated or unstated, fixed or contingent) of the
Seller or the Seller's Affiliates accruing with respect to, or arising from or
relating to, the operation of the Business or the ownership of the Purchased
Assets prior to the Closing (the "Retained Liabilities"), including, without
limitation, the following:
(a) Excluded Business: All liabilities and obligations of the Excluded
Business.
Token Ring Business. All liabilities and obligations of the Token Ring Business.
(b) Accounts Payable. All accounts payable of the Seller and of the
Seller's Affiliates with respect to the Business as at the Closing Date.
(c) Intercompany Payables. All intercompany accounts payable.
(d) Provisions and Accruals. All provisions and accruals.
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(e) Lease Obligations. All obligations with respect to the real property
lease for the Leased Property.
(f) Retained Assets. Any liability or obligation under or in connection
with the Retained Assets.
(g) Taxes. Any federal, state, local or other foreign Tax payable with
respect to the Business or the Purchased Assets for any period prior to the
Closing.
(h) Indebtedness. Any indebtedness of the Seller or the Seller's
Affiliates for borrowed money.
(i) Claims. All liabilities of the Seller or the Seller's Affiliates
with respect to any claim, litigation or proceeding accruing with respect to, or
arising from or relating to the operation of the Business or the ownership of
the Purchased Assets prior to the Closing, including, without limitation, those
matters set forth on Schedule 6.14.
(j) Employees. All liabilities, obligations, payments, benefits, costs
and expenses: (i) accruing, or arising from or relating to any period, prior to
the Closing with respect to the Transferring Employees and all former employees
of the Business whose employment terminated before the Closing including any
salary, wage, bonus, severance or other benefit which accrues prior to the
Closing, but is payable after the Closing; (ii) accruing under any Seller
Employee Benefit Plan, whether before or after the Closing, including in
connection with the termination of any Transferring Employee's participation
under such plan; or (iii) relating to any claims made by UK Transferring
Employees with respect to their employment accruing or arising from any period
prior to the Closing, notwithstanding the Buyer's agreement to comply with TUPE.
(k) Warranty. Except for such warranty liabilities and obligations
expressly assumed by the Buyer pursuant to Section 3.02(c), all warranty
liability of the Seller or the Seller's Affiliates, including without
limitation, for claims related to the Business under the Seller's written
manufacturer warranties which arise and are presented prior to the Closing Date.
3.02 ASSUMPTION OF LIABILITIES. As further consideration for the
acquisition of the Purchased Assets, the Buyer shall assume and agrees to pay,
perform and discharge only the following liabilities and obligations of the
Seller or the Seller's Affiliates (as the case may be) with respect to the
Business (the "Assumed Liabilities"):
(a) Contracts. Liabilities and obligations under the Contracts to the
extent that such liabilities and obligations, accrue with respect to, arise
from, or relate to the operation of the Business by the Buyer after the Closing.
(b) Transferring Employees. All liabilities, obligations, costs and
expenses accruing after the Closing with respect to the employment of the
Transferring Employees wherever such Transferring Employees are employed. In
relation to the UK Transferring Employees, the Buyer shall also assume and
agrees to pay, perform and discharge all liabilities, obligations, costs and
expenses arising out of or in connection with (i) any change in the working
conditions of any of the Transferring Employees occurring on or after the
Closing; or (ii) the employment on or after the Closing of any of the
Transferring Employees other than on terms at least as good as those enjoyed
immediately prior to the Closing (excluding any right, entitlement, benefit or
interest with respect to a stock option, stock purchase or other equity plan) or
the termination of the employment of any of them on or after the Closing; or
(iii) any claim of any kind by any Transferring Employee for any remedy as a
result of any act or omission of the Buyer or any of the Buyer's Affiliates
after the Closing.
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(c) Warranty. All liabilities and obligations of the Seller for claims
related to the Business under the Seller's written manufacturer warranties
(copies of which are attached hereto in Schedule 2.01(e)) which arise prior to
or after the Closing, but which are presented after the Closing.
(d) Prepaid Service. All liabilities and obligations of the Seller to
carry out the prepaid service commitments outstanding as at the Closing.
(e) Non-Product Related Purchase Orders. The non-product related
purchase orders which are open on the Closing Date and which have been approved
and accepted by the Buyer prior to the Closing Date as designated on the
attachment to Schedule 6.06 to this Agreement.
ARTICLE 4
INVENTORY
4.01 INVENTORY SUMMARY. Prior to the Closing the Buyer and the Seller
shall agree a true and complete summary of the Inventory as at the Closing Date,
which summary shall list separately the Customer Service Inventory which shall
be purchased by the Buyer pursuant to section 4.02 below. This summary is set
forth in Schedule 4.01 to this Agreement and is hereinafter defined as the
"Inventory Summary".
4.02 CUSTOMER SERVICE INVENTORY. The Customer Service Inventory shall
be purchased by the Buyer at the Closing in accordance with section 2.01 above.
The consideration to be paid by the Buyer for the Customer Service Inventory
shall be the total sum of $218,718.00 (the "Customer Service Inventory
Consideration"). The Buyer shall pay the Customer Service Inventory
Consideration in six equal installments of $36,453.00 over a period of five
months following the Closing, the first such installment to be paid by the Buyer
in cash or immediately funds on the Closing Date, the second installment in cash
or immediately available funds on the last business day of October, 2000 and the
remaining four installments to be paid on the last business day of each month
until the Customer Service Inventory has been paid in full.
The Customer Service Inventory Consideration shall bear interest at an annual
rate equal to the Interest Rate as defined in section 5.01 which shall be paid
at the same time as the installments. In the event that any amount due by the
Buyer in respect of the Customer Service Inventory Consideration is not paid
within thirty days of the due date the amount shall bear interest at twice the
Interest Rate until payment of the amount due has been paid in full.
4.03 SIX MONTH PRODUCTION SCHEDULES. The Buyer shall deliver the
following production schedules to the Seller:
(a) At or prior to the Closing, a production schedule of the products
of the Business to be manufactured in the six month period following the Closing
Date (the "Initial Period"); and
(b) At least one (1) month in advance of the end of the Initial Period,
a production schedule of the products of the Business to be manufactured in the
six month period following the Initial Period
such production schedules shall hereinafter be defined as the "Six Month
Production Schedules".
The Buyer agrees that it shall be committed to purchase all the items of
Inventory required to build the products identified in the Six Month Production
Schedules and the Seller agrees that it will commit to supply to the Buyer all
the items of Inventory required to build the products on such production
schedules. The sale and purchase of such items of Inventory shall be in
accordance with the procedure set out in sections 4.09, 4.10 and 4.11 below.
4.04 REQUIRED SURPLUS ITEMS. At the end of the twelve month period
following the Closing (the "Twelve Month Period"), the Buyer shall be entitled
to purchase any or all items of Inventory not identified in the Six Month
Production Schedules (the "Surplus Items") such right being
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exercisable by the Buyer notifying the Seller in writing of the Surplus Items it
wishes to purchase (the "Required Surplus Items") at any time prior to the end
of the Twelve Month Period. The price to be paid by the Buyer for any Surplus
Items it wishes to purchase shall be the lower of the book value or the
appraised value (if obtained by the Buyer before the end of the Twelve Month
Period). The total consideration to be paid by the Buyer for the Required
Surplus Items (the "Required Surplus Items Consideration") shall be payable by
the Buyer in six equal installments over a period of five months following the
end of the Twelve Month Period, the first such installment to be paid by the
Buyer in cash or immediately available funds at the end of the Twelve Month
Period and the remaining five installments to be paid on the last business day
day of each month until the Required Surplus Items Consideration has been paid
in full.
The Required Surplus Items Consideration shall bear interest at an annual rate
equal to the Interest Rate as defined in section 5.01 which shall be paid at the
same time as the installments. In the event that any amount due by the Buyer in
respect of the Required Surplus Items Consideration is not paid within thirty
days of the due date the amount shall bear interest at twice the Interest Rate
until payment of the amount due has been paid in full.
The Seller shall be entitled at any time after the end of the Twelve Month
Period, to sell all the Surplus Items or those Surplus Items not purchased by
the Buyer pursuant to this section as the case may be, to a third party other
than the Buyer or to otherwise dispose of such items in any manner whatsoever.
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4.05 EXCLUSIVE TWELVE MONTH PERIOD. The Buyer shall not be required to
purchase any Inventory other than the Inventory required to build the products
identified in the Six Month Production Schedules or the Required Surplus Items.
For the Twelve Month Period, the Buyer agrees that if it requires other
Inventory that is not identified in the Six Month Production Schedules or is not
a Required Surplus Item and the Seller has such Inventory available on
consignment to Freedom or subject to open purchase orders which have not been
unreasonably delayed, it will purchase this Inventory from the Seller. If the
Seller does not have such other Inventory available on consignment to Freedom or
subject to open purchase orders which have not been unreasonably delayed, the
Buyer may purchase such Inventory from any other party. During the Twelve Month
Period, the Seller shall not sell any Inventory to any party other than to the
Buyer, without the prior consent of the Buyer. Any purchase of Inventory under
this Section 4.05 shall not be deemed to be the exercise of the Buyer's right to
purchase Surplus Items under Section 4.04.
4.06 COMMITMENT TO SELL ACCESSSWITCH. For the Twelve Month Period the
Buyer shall (a) continue to sell the full range of the AccessSwitch products of
the Business available as at the Closing Date (the "AccessSwitch Products"); (b)
facilitate existing and ongoing customer demand for AccessSwitch Products; and
(c) not issue an end of life notice in respect of any of the AccessSwitch
Products PROVIDED THAT this section 4.06 shall not operate to prevent the Buyer
from issuing an end of life notice in respect of any of the AccessSwitch
Products in the event that such end of life is necessary due to circumstances
beyond the reasonable control of the Buyer and is in the best interests of the
customer base of the Business, including, without limitation, if any development
effort, including redesign of products or parts, software design, research and
development, rebuilding of source code and other similar development efforts
beyond the reasonable resources of the Buyer, is required in respect of any
AccessSwitch Product (a "Necessary End of Life"). The Buyer shall give the
Seller thirty days prior written notice of a Necessary End of Life stating in
sufficient detail the reasons for the issuance of such end of life notice. In
the event that the Seller does not agree that with the Necessary End of Life and
the dispute cannot be resolved by the Director of Business Operations of the
Buyer and the General Manager of Madge.Connect or, their designated
representatives, the dispute shall be escalated to the CFO or other appropriate
senior officer of the Buyer and the Seller to finally resolve the dispute.
4.07 TERMS AND CONDITIONS OF THE INVENTORY. At the Closing the Seller
shall deliver the Inventory to Freedom and Freedom shall keep such Inventory at
it's premises and shall use the Inventory on the terms and conditions set out in
this section, together with the terms and conditions set out in section 4.12.
These terms and conditions (together with the terms and conditions set out in
section 4.12) shall be incorporated into the Sale Agreement and the Supply
Agreement at the Closing and each Party undertakes to procure that Freedom
complies with such terms and conditions, as follows:
(a) Title in the Inventory shall at all times vest in the Seller until
such time as it is purchased and paid for by the Buyer pursuant to the terms and
conditions set out in this Article 4;
(b) Risk in the Inventory shall pass to Freedom upon delivery by the
Seller to it's premises and Freedom shall be responsible for properly and safely
storing such Inventory in accordance with these terms and conditions provided
that the Seller shall take out, at it's own expense, a policy of insurance in
respect of destruction or loss or damage to the Inventory while in the custody
of Freedom as a result of catastrophic events usually found in such cover and
Freedom shall be liable for all other stock loss or damage above a certain
tolerance level, as agreed between the Seller and Freedom and set out in the
Sale Agreement. The Buyer shall be responsible for insuring any Inventory which
may be purchased directly by the Buyer from the Seller after the Closing (but
not including the Inventory consigned by the Seller to Freedom) and the Seller
shall accordingly not be liable in any manner whatsoever in respect of such
Inventory;
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(c) Freedom shall keep the Inventory separate from any other inventory
or property of Freedom, the Buyer, or any other third party so that it is
clearly identifiable as the property of the Seller;
(d) Freedom shall be authorized to use the Inventory in accordance with
the Six Month Production Schedules and with the orders placed by the Buyer on
Freedom in respect of finished goods. Freedom shall not be authorized to use the
Inventory for any other purpose including, without limitation, building finished
goods for any other third party;
(e) Freedom shall use the Inventory in priority to other third party
inventory or components to build the finished goods of the Buyer in accordance
with the Six Month Production Schedules and the orders referred to in section
4.07(d) above;
(f) Freedom shall not purchase the Inventory from the Seller (as the
Inventory is to be purchased by the Buyer in accordance with the terms of this
Agreement) unless agreed in writing between the Buyer and the Seller. Freedom
shall accordingly not be entitled to sell the Inventory to a third party or
otherwise deal with it except as authorized pursuant to the terms and conditions
set out herein; and
(g) Freedom shall allow the Seller access to it's premises and the
Inventory at any time and from time to time upon prior reasonable notice from
the Seller to enable the Seller to carry out stock checks in such detail and for
such periods as the Seller shall in it's sole discretion determine and to take
possession of any items of Inventory which the Seller so wishes. Freedom shall
provide the Seller with reasonable assistance in carrying out any stock check
and/or identifying any items of Inventory.
4.08 INVENTORY COMPONENT LIST. Prior to the Closing, the Buyer and the
Seller shall agree a price list of all the items of Inventory which Freedom
shall be using in accordance with the Production Schedules and the orders
submitted by the Buyer to Freedom to build finished goods for the Buyer. Such
list is set forth in Schedule 4.08 to this Agreement and is hereinafter defined
as the "Inventory Component List". The Inventory Component List shall also
include prices for the Hibbings Inventory.
4.09 PURCHASE ORDERS. At the same time as the Buyer delivers the Six
Month Production Schedules to the Seller in accordance with section 4.03 above,
the Buyer shall deliver to the Seller and Freedom six (6) monthly purchase
orders substantially in the form attached hereto as Exhibit F (the "Purchase
Order") in respect of all the Inventory items identified in the relevant
production schedule. With respect to each Purchase Order, the Buyer shall have
the right upon thirty (30) days notice to the Seller and Freedom to extend the
time for delivery and purchase of any or all of the Inventory items identified
in the Purchase Order for a period of time not to exceed ninety (90) days from
the scheduled delivery date(s) set forth in the Purchase Order.
4.10 MONTHLY REPORTS. Within five (5) working days of the last day of
each month Freedom shall deliver to the Seller (with a copy to the Buyer) an
inventory usage report and a full inventory listing and a report of finished
goods shipped by Freedom (together the "Monthly Report") for the previous month
together with a calculation of the total cost of the items of Inventory used by
Freedom during that month calculated using the Inventory Component List (the
"Total Utilized Inventory Cost") and a calculation of the total cost of the
items of Inventory used by Freedom with respect to finished goods which have
been shipped by Freedom (the "Total Purchased Inventory Cost"). For the purposes
of producing the Monthly Report and for recording all Inventory transactions,
the Seller shall at the Closing grant Freedom access to the Seller's Oracle
applications. Freedom shall use it's best endeavors to accurately record all
transactions in the Inventory using Oracle and shall nominate Don McCooey or his
designated representative to be responsible for this task. Subject to section
4.11 below, the Seller shall issue an invoice to the Buyer against the relevant
Purchase Order in respect of the Total Purchased Inventory Cost, such invoice
being due and payable
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by the Buyer within thirty days of it's date. In the event that this invoice is
not paid within thirty days, the amount due shall bear interest at the Interest
Rate until paid in full. Inventory used by Freedom to repair or replace any
defective product returned to Freedom under the warranty terms of the Supply
Agreement shall not be included in the calculation of Total Purchased Inventory
Cost for any month, and the Buyer shall not be liable to the Seller for the
payment of the cost of such Inventory items. The parties acknowledge that
Freedom has agreed separately with the Buyer and the Seller that Freedom shall
pay to the Seller the cost of any such Inventory items used to repair or replace
defective products returned under the warranty terms of the Supply Agreement.
DISPUTE RESOLUTION PROCEDURE. In the event that either the Seller or Buyer does
not agree with the Monthly Report and the Total Purchased Inventory Cost, the
Seller or Buyer shall advise the other party and Freedom of any discrepancies
within ten (10) working days following delivery of the Monthly Report. Freedom
shall immediately allow the Seller and Buyer access to it's premises and the
Inventory to carry out any stock check it may require and Freedom and the Buyer
shall provide the Seller and the Buyer with copies of any documentation the
Seller and Buyer may reasonably require to verify the discrepancies. The Buyer,
the Seller and Freedom shall use their best endeavors to agree the Monthly
Report and the Total Purchased Inventory Cost within ten (10) working days of
the Seller or the Buyer advising the other party and Freedom of the
discrepancies. In the event that the Monthly Report and the Total Purchased
Inventory Cost cannot be agreed by the Director of Business Operations of the
Buyer and the General Manager of Madge.Connect, or their designated
representatives, and the Vice President of Sales of Freedom, then the dispute
shall be escalated to the CFO or other appropriate senior officer of each of the
Buyer, the Seller and Freedom to finally resolve such dispute. The Seller shall
issue an invoice to the Buyer in respect of the Total Purchased Inventory Cost
as soon as it has been agreed, such invoice being due and payable by the Buyer
immediately or at the end of the thirty days from the delivery of the original
invoice by the Seller in accordance with section 4.10, whichever is later.
4.11 RELATIONSHIP WITH HIBBINGS. After the Closing, the following terms
and conditions shall apply to the Hibbings Agreement (and the Seller shall
notify Hibbings accordingly):
(a) Hibbings shall place all orders for items of Inventory (the
"Hibbings Inventory") it requires to manufacture the boards (the "Hibbings
Boards") in accordance with the Hibbings Agreement, on Freedom (Freedom being
appointed as the Seller's agent for these purposes), with a copy of such orders
being sent to the General Manager of Madge.Connect;
(b) Freedom shall be accordingly authorized by the Seller, as the
Seller's agent, to supply the Hibbings Inventory to Hibbings in accordance with
the orders referred to in 4.12 (a);
(c) Within five (5) working days of the last day of each month Freedom
shall deliver to the Seller an inventory usage report of the Hibbings Inventory
together with a calculation of the total cost of the Hibbings Inventory used by
Freedom during that month (the "Total Utilized Hibbings Inventory Cost")
calculated using the Inventory Component List (together the "Hibbings Monthly
Report"). Freedom shall use the Seller's Oracle applications for the purposes of
producing the Hibbings Monthly Report and for recording all Hibbings Inventory
transactions. Freedom shall use it's best endeavors to accurately record all
transactions in the Hibbings Inventory using Oracle and shall nominate Don
McCooey or his designated representative to be responsible for this task. In the
event of a dispute in relation to the Hibbings Monthly Report and the Total
Utilized Hibbings Inventory Cost, the dispute procedure set out in section 4.11
shall be followed (except that the Buyer shall not be involved in any
procedure). Subject to the resolution of any dispute in accordance with section
4.11, the Seller shall issue an invoice to Hibbings in respect of the Total
Utilized Hibbings Inventory Cost, such invoice being due and payable by Hibbings
within thirty days of it's date.
(d) Hibbings shall sell the Hibbings Boards to Freedom who shall use
the Hibbings Boards as components in the products of the Business to be
manufactured by Freedom for the Buyer pursuant to the Supply Agreement.
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(e) In the event that the Buyer chooses to purchase the Hibbings
Inventory as Required Surplus Items, the Seller shall procure that the Hibbings
Agreement is duly assigned to the Buyer and the terms and conditions in
paragraphs 4.12 (a) - (d) shall be replaced with a direct relationship between
the Buyer, Freedom and Hibbings.
4.12 BINDING OBLIGATIONS ON FREEDOM. The Seller and the Buyer agree
that the Sale Agreement and the Supply Agreement respectively, shall include
terms pursuant to which Freedom expressly agrees to be bound by, subject to and
obligated under all of the terms governing the purchase of Inventory by the
Buyer as set forth in this Agreement.
4.13 BINDING OBLIGATIONS ON FREEDOM. The Seller and the Buyer agree
that the Sale Agreement and the Supply Agreement respectively, shall include
terms pursuant to which Freedom expressly agrees to be bound by, subject to and
obligated under all of the terms governing the purchase of Inventory by the
Buyer as set forth in this Agreement.
ARTICLE 5
PURCHASE PRICE
5.01 PURCHASE PRICE. The purchase price to be paid by the Buyer to the
Seller for the Purchased Assets shall consist of (i) the Customer Service
Inventory Consideration in respect of the Customer Service Inventory, payable in
accordance with section 4.02; and (ii) the consideration in respect of the
Required Surplus Items, payable in accordance with section 4.04; and (iii) the
Total Purchased Inventory Cost for each month, payable in accordance with
section 4.10 and 4.11; and (iv) the Fixed Consideration defined below and
payable in accordance with this section 5.01(a); and (v) the Asset
Consideration, defined below and payable in accordance with this section 5.01(b)
( collectively referred to as the "Purchase Price").
(a) Fixed Consideration. The fixed consideration to be paid by the
Buyer to the Seller shall be an amount equal to one million and fifty thousand
dollars ($1,050,000), less the following deductions :
(i) $422,697.00, which represents a sum equal to fifty per
cent (50%) of the prepaid service commitment amounts of the Business as
at 31 August, 2000; and
(ii) $100,000, in respect of the Technical Support Services
for the period from 31 July, 2000 to 30 September, 2000; and
(iii) $158,047.00, which represents a sum equal to all prepaid
service amounts received or due in respect of any new or renewed
service agreements of the Business during the period from 31 August
2000 to the Closing Date
the Fixed Consideration therefore being the sum of $369,256.00 (the "Fixed
Consideration").
The Fixed Consideration shall be paid by the Buyer to the Seller by quarterly
installments of amounts equal to twenty five per cent (25%) of the pre-tax
profit generated by the Business in the preceding quarter, together with
interest, the first such payment being due and payable on 31 January 2001. The
Buyer shall continue paying quarterly installments (on January 31, April 30,
July 31 and October 31 each year) until the Fixed Consideration has been paid in
full provided that any Fixed Consideration remaining due together with interest
shall become immediately due and payable by the Buyer without demand in full on
31 December, 2002.
The Fixed Consideration shall bear interest at an annual rate equal to the
greater of 10% or the prime rate designated by Fleet Bank, N.A. at the time any
payment is due (the "Interest Rate") and such interest shall also be paid on a
quarterly basis (the "Interest").
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Within twenty (20) days of the end of each quarter the Buyer shall furnish to
the Seller a written statement which shows the pre-tax profit of the Business
for the preceding quarter and a calculation of the amount of Fixed Consideration
and Interest due (the "Profit Statement") and any payments of Fixed
Consideration and Interest due in respect of a quarter shall be paid by the
Buyer to the Seller within thirty (30) days following the end of the quarter. In
the event that any amount due by the Buyer is not paid within a further thirty
days of such thirty day period the amount outstanding shall bear interest at
twice the Interest Rate until payment of the amount due has been made in full,
unless the Profit Statement has not been agreed upon by the Buyer and the Seller
in which event the amount outstanding shall continue to bear interest at the
Interest Rate until payment of the amount due has been made in full.
The Seller shall have the right to audit the determination by the Buyer of the
amount of the Fixed Consideration and Interest due in any quarter. The Seller
shall commence any audit as soon as reasonably practicable following delivery of
the Profit Statement and shall advise the Buyer of any discrepancies found
within ten (10) days following delivery of the Profit Statement. The Seller and
the Buyer shall use their best endeavors to agree the Profit Statement and the
amount due by the end of the thirty day payment period (i.e. within thirty days
following the end of the quarter). In the event that the Profit Statement cannot
be agreed by the Director of Business Operations of the Buyer and the General
Manager of Madge.Connect then the dispute shall be escalated to the CFO or other
appropriate senior officer of each of the Buyer and the Seller to finally
resolve such dispute. The Buyer shall cooperate with the Seller in conducting
such audit, including, without limitation, providing the Seller with reasonable
access at the Buyer's principal business offices to the Buyer's books, records
and other information used to determine the amount of the Fixed Consideration
and the Interest and supplying the Seller with copies of any documentation which
the Seller may reasonably require.
The Fixed Consideration and Interest shall be due and payable immediately on the
agreement of the Profit Statement or within thirty days of the end of the
quarter, whichever is the later.
(b) Asset Consideration. The Asset Consideration ("Asset
Consideration") is the sum of $235,836.00 and shall be paid on the Closing Date.
5.02 ALLOCATION OF THE PURCHASE PRICE. The Purchase Price shall be
allocated among the Purchased Assets as mutually agreed by the Buyer and the
Seller as set forth on Schedule 5.02. Except as otherwise required by law, the
allocation agreed upon by the parties shall be used by the Buyer and the Seller
in the preparation and filing of Internal Revenue Service Form 8594 and any
other domestic or foreign income tax returns with respect to the transactions
contemplated in this Agreement, and no Party hereto shall take or assert any
position inconsistent herewith. The Buyer and the Seller shall cooperate with
regard to the preparation, execution and filing with the Internal Revenue
Service of all necessary information returns required by Section 1060 of the Tax
Code and comparable provisions under applicable foreign law relating to the
allocation of the Purchase Price.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE SELLER
In order to induce Buyer to enter into this Agreement, Seller hereby
represents and warrants as follows:
6.01 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. The Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and each of the Seller's Affiliates is a corporation
duly organized and validly existing under the laws of the jurisdiction of its
incorporation. The Seller and each of the Seller's Affiliates is duly qualified
to conduct business and is in good standing under the laws of the State of New
Jersey and each other jurisdiction in which the operation of the Business or the
ownership, lease or use of the Purchased Assets requires such qualification,
except for those other jurisdictions where the failure to be so qualified would
not have a material adverse effect on the Business. The Seller and each of the
Seller's Affiliates has full corporate power and authority to carry on the
Business as presently being conducted
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and to own, lease, use, possess or dispose of the Purchased Assets, and to enter
into this Agreement and each of the Related Agreements, and to consummate the
transactions contemplated hereby and thereby. The Seller has furnished to the
Buyer true and complete copies of its Articles of Incorporation and By-laws,
each as in effect on the date hereof.
6.02 SUBSIDIARIES. No part of the Purchased Assets consists of any
capital stock of, or other equity interest in, any Person or participation in
any joint venture or similar arrangement with any Person.
6.03 CORPORATE AUTHORITY. The execution, delivery and performance of
this Agreement and each of the Related Agreements has been duly and validly
authorized and approved by all necessary corporate action of the Seller and the
Seller's Affiliates and, assuming the due authorization, execution and delivery
by the Buyer, constitutes the legal, valid, and binding obligation of the Seller
and each of the Seller's Affiliates (to the extent a Party to this Agreement
and/or any of the Related Agreements), enforceable against the Seller and each
of Seller's Affiliates in accordance with their terms, except as enforcement may
be limited by bankruptcy, insolvency or other similar laws of general
applicability affecting the enforcement of creditors' rights and remedies and to
general principles of equity.
6.04 NON-CONTRAVENTION. The execution, delivery and performance by the
Seller or any of the Seller's Affiliates of this Agreement or any of the Related
Agreements and the consummation of any of the transactions contemplated hereby
or thereby does not and will not: (i) conflict with or violate any provision of
the Articles of Incorporation or By-laws of the Seller; (ii) except as set forth
on Schedule 6.04, require on the part of the Seller or any of the Seller's
Affiliates the filing with, or any permit, authorization, consent or approval of
any Governmental Authority; (iii) except as set forth on Schedule 6.04, conflict
with, result in a breach of, constitute (with or without due notice or lapse of
time or both) a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify or cancel, or require notice,
consent or waiver under, any Contract to which the Seller or any of the Seller's
Affiliates is a party or by which the Seller or any of the Seller's Affiliates
is bound or to which any of the Purchased Assets or any of the Assumed
Liabilities are subject; (iv) result in the imposition of a Lien upon any of the
Purchased Assets; (v) violate any order, writ, injunction or decree, applicable
to the Seller, any of the Seller's Affiliates, any of the Purchased Assets, or
any of the Assumed Liabilities; or (vi) violate in any material respect any
statute, law, rule or regulation applicable to the Seller, or any of the
Seller's Affiliates, any of the Purchased Assets, or any of the Assumed
Liabilities.
6.05 FINANCIAL STATEMENTS. Copies of the Business Financial Statements
have been delivered to the Buyer and are attached hereto as Schedule 6.05.
The Business Financial Statements (i) have been derived from the accounting
books and records of the Seller and the Seller's Affiliates with respect to the
Business and are consistent with such books and records, (ii) have been prepared
in accordance with the Seller's historical accounting principles, applied on a
consistent basis to the Business since the Seller's acquisition of the Business,
and (iii) present fairly the financial condition and results of operations of
the Business as of the date of and for the period referred to therein. There are
no material misstatements of any item contained in and there are no material
omissions from the Business Financial Statements.
6.06 ABSENCE OF CERTAIN CHANGES.
(a) Except as disclosed in Schedule 6.06, since December 31, 1999 the
Seller and the Seller's Affiliates have conducted the Business in the ordinary
course consistent with past practices.
(b) Except as disclosed in Schedule 6.06 as at the Closing there are no
open purchase orders with respect to the Business placed by the Seller on a
third party. Any that are listed, list the vendors
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name and address and the period through which they are valid. Any that there
are, have been incurred in the ordinary course of the running the Business.
(c) Except for any disclosure set forth in Schedule 6.06, general
market or economic conditions, or the conduct of a Person (other than an
Affiliate of the Seller) of which the Seller or any of the Seller's Affiliates
does not have knowledge: since December 31, 1999 there has not been any event,
fact, condition, change, development or effect, nor has there been any damage,
destruction or loss (whether or not covered by insurance), which has occurred or
is pending or, to the knowledge of the Seller or any of the Seller's Affiliates,
is threatened, and which has had a material adverse change or could have a
material adverse effect on (i) the Business, its operations, condition
(financial or otherwise), or prospects, (ii) the Purchased Assets, (iii) the
Assumed Liabilities, (iv) the ability of Seller to consummate the transactions
contemplated by this Agreement or any of the Related Agreements, or (v) the
ability of the Buyer to receive all material benefits of the transactions
contemplated by this Agreement and the Related Agreements and to conduct the
Business after the Closing in the manner in which it is conducted by the Seller
and the Seller's Affiliates at the time of the Closing.
6.07 PREPAID SERVICE AND WARRANTY.
(a) Neither the Seller nor any of the Seller's Affiliates has any
material indebtedness or material liability with respect to the Business or the
Purchased Assets other than (i) liabilities set forth in the Business Financial
Statements, (ii) liabilities which have arisen after June 30, 2000 in the
ordinary course of the operation of the Business consistent with historical
practice, and (iii) liabilities set forth in Schedule 6.07.
(b) Schedule 6.07 sets forth a correct and complete list of all of the
Seller's and the Seller's Affiliates' prepaid service and warranty obligations
in relation to the Business as of the Closing Date, including the name of the
customer, period of performance, and amount prepaid. The Seller has delivered to
Buyer all of the prepaid service and warranty contracts.
(c) Schedule 2.01(e) contains complete and accurate copies of all of
the Seller's written manufacturer warranties which represent the only warranty
obligations of Seller being assumed by the Buyer pursuant to Section 3.02(d) of
this Agreement.
6.08 INVENTORY. The Inventory and the Customer Service Inventory are of
a quality and quantity to be useable and saleable in the ordinary course of the
Business as conducted at the Closing.
6.09 FIXED ASSETS AND EQUIPMENT. The Fixed Assets and Equipment are in
reasonable operating condition and repair, subject to ordinary wear and tear,
and are suitable for the purposes for which such assets are used in the Business
as of the Closing. The Seller and the Seller's Affiliates enjoy peaceful and
undisturbed possession and use of all Fixed Assets and Equipment that are
covered by personal property leases.
6.10 TITLE TO PURCHASED ASSETS. The Seller and the Seller's Affiliates
(as the case may be), have good and marketable title to all of the Purchased
Assets and valid leasehold interests in all Fixed Assets and Equipment leased by
them under any personal property lease, in each case free and clear of Liens
except (a) Liens for current Taxes not yet due and payable or (b) Liens set
forth on Schedule 6.10, if any. The Parties agree that this warranty shall not
apply to any patent infringement claims (apart from the Lucent Claims and apart
from any claim which would constitute a breach of Section 6.12(e) of this
Agreement or which would be indemnified by the Seller pursuant to
13.01(a)(viii)) following Close and Madge shall accordingly have no liability to
York Tel following close in relation to any such patent infringement claims.
6.11 CONTRACTS. Schedule 2.01(e) contains a true and complete list of
all written Contracts to which or by which the Seller or any Seller's Affiliate
with respect to the Business is a party or
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otherwise bound or to which or by which any of the Purchased Assets or Assumed
Liabilities are subject. So far as the Seller is aware, neither the Seller nor
any of the Seller's Affiliates is a party to or otherwise subject to or bound by
any material oral contract with respect to the Business. The Seller and the
Seller's Affiliates have made available to the Buyer a true and complete copy of
each such Contract. Except as set forth in Schedule 6.11, neither the Seller nor
any of the Seller's Affiliates nor, to the knowledge of the Seller or any of the
Seller's Affiliates, any other party is in default under or in breach or in
violation of any Contract, nor has an event occurred that (with or without
notice, lapse of time or both) would constitute a default, breach or violation
by the Seller or any of the Seller's Affiliates or, to the knowledge of the
Seller or any of the Seller's Affiliates, by any other party under any Contract.
Each Contract is legal, valid, binding, enforceable and in full force and
effect. The legality, validity and enforceability of any Contract will not be
affected in any manner by, and each Contract shall be binding and in full force
and effect upon, the consummation of the transactions contemplated by this
Agreement and the Related Agreements subject to bankruptcy, insolvency or other
similar laws of general applicability affecting the enforcement of creditor's
rights and remedies and to general principles of equity.
6.12 INTELLECTUAL PROPERTY.
(a) Except as set forth on Schedule 6.12, the Seller and the Seller's
Affiliates own, or are licensed or otherwise possess legally enforceable rights
to use (excluding "patent infringement claims") all Intellectual Property which
are used or are usable to conduct the Business as of the Closing.
(b) Schedule 2.01(g) lists all Intellectual Property owned or licensed
by the Seller or any of the Seller's Affiliates and which is used or usable in
the Business, including the jurisdictions in which each such Intellectual
Property right has been issued or registered or in which any such application
for such issuance or registration has been filed.
(c) The Seller has made available to the Buyer correct and complete
copies of all documents relating to patents, trademarks, and copyrights,
including copies of all registrations, applications and all licenses,
sublicenses and agreements. With respect to any Computer Software which is owned
by the Seller or any Seller's Affiliate with respect to the Business and which
is available for retail purchase or license, the Seller or the Seller's
Affiliate is the owner and registered user or licensee of all such retail
Computer Software (i) used by the employees of the Business in the scope of
performing their duties or (ii) loaded on any of the Seller's or Seller's
Affiliate's computers, and the Seller or Seller's Affiliate is in compliance
with the licensing requirements of such Computer Software.
(d) With respect to each item of Intellectual Property that the Seller
or any Seller's Affiliate owns or uses: (x) subject to such rights as have been
granted by the Seller or any Seller's Affiliate under license agreements entered
into by the Seller or any Seller's Affiliate (copies of which have previously
been made available to the Buyer), the Seller or the Seller's Affiliate
possesses all right, title and interest in and to such item (excluding patent
infringement claims) and such right, title and interest allows the Seller or the
Seller's Affiliate to use the Intellectual Property (if applicable) in products
produced by the Seller for resale and implementation to subsequent users; and
(y) such item is not subject to any outstanding Lien, judgment, order, decree,
stipulation or injunction. Except as set forth in Schedule 6.12, with respect to
each item of third party intellectual property rights: (i) the license,
sublicense or other agreement covering such item is legal, valid, binding,
enforceable and in full force and effect with respect to the Seller or the
appropriate Seller's Affiliate; (ii) the legality, validity and enforceability
of any such license, sublicense or other agreement will not be affected in any
manner by, and each such license, sublicense and other agreement shall be
binding and in full force and effect upon, the consummation of the transactions
contemplated by this Agreement and the Related Agreements; (iii) the Seller or
the Seller's Affiliate is not in breach or default thereunder and, to the
knowledge of the Seller or the Seller's Affiliate, no other party to such
license, sublicense or other agreement is in breach or default thereunder, and
no event has occurred which with notice or
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lapse of time would constitute a breach or default by the Seller or Seller's
Affiliate which would permit termination, modification or acceleration
thereunder; (iv) the underlying item of any third party intellectual property
right is not subject to any outstanding judgment, order, decree, stipulation or
injunction to which the Seller or Seller's Affiliate is a party or has been
specifically named, nor subject to any other outstanding judgment, order,
decree, stipulation, or injunction; and (v) no license or other fee is payable
upon any transfer or assignment of such license, sublicense or other agreement.
(e) Except as set forth in Schedule 6.12, neither the Seller nor any of
the Seller's Affiliates: (i) have been served in any suit, action or proceeding
which involves a claim of infringement or misappropriation of any third party
intellectual property right, or (ii) have received any written notice alleging
any such claim of infringement or misappropriation. The Seller has made
available to the Buyer correct and complete copies of all such suits, actions,
proceedings or notices. Except as set forth in Schedule 6.12, neither the Seller
nor any Seller's Affiliate has received any notice that the manufacturing,
marketing, licensing or sale of the products or performance of the services
pursuant to the operation of the Business currently infringe, or within the four
(4) years prior to the date of this Agreement infringed, upon any third party
intellectual property right; and to the knowledge of the Seller or any Seller's
Affiliate, the Intellectual Property rights of the Seller or any of the Seller's
Affiliates are not being infringed by activities, products or services of any
third party.
(f) Schedule 2.01(g) sets forth a list and summary description of all
Computer Software and identifies specifically: (i) Computer Software as to which
the source code is owned by the Seller; (ii) Computer Software which is licensed
to the Seller by third parties and as to which the Seller is in possession of
the source code; (iii) Computer Software which is licensed to the Seller by
third parties but as to which the Seller does not have possession of the source
code; (iv) Computer Software purchased by or licensed to the Seller solely for
resale or sublicense to its customers or which a third party licenses or sells
directly to such customers; (v) Computer Software in which the Seller has any
use, possessor or proprietary rights other than as set forth in (i) through (iv)
above; (vi) any other Computer Software employed in the Business which is not
owned by or licensed to the Seller, other than so called "shrink wrap" Computer
Software which is not a component of the Computer Software licensed or sold to
customers of the Business; (vii) in each case whether the particular component
of Computer Software is employed in the Computer Software licensed or sold by
the Seller to its customers; and (viii) all Computer Software development
projects undertaken within the past two (2) years with persons other than
employees, together with an identification of the persons undertaking such
projects. Schedule 2.01(g) also identifies all licenses, contracts and other
arrangements with respect to the third party Computer Software.
6.13 TAX MATTERS. The Seller and the Seller's Affiliates have filed all
tax returns and tax reports required to be filed by them with respect to the
Business or the Purchased Assets. There are no liens for Taxes on the Purchased
Assets, except with respect to liens for current Taxes not yet due and payable.
6.14 LITIGATION. Except as set forth on Schedule 6.14: (a) there is no
investigation, audit or review by any Governmental Authority pending or, to the
Seller's or any Seller's Affiliate's knowledge, threatened with respect to the
Seller, any of the Seller's Affiliates with respect to the Business, the
Purchased Assets or the Assumed Liabilities; (b) there are no claims, actions,
suits or proceedings pending or, to the knowledge of the Seller or any Seller's
Affiliate , threatened in connection with the Seller, any of the Seller's
Affiliates with respect to the Business, the Purchased Assets or the Assumed
Liabilities, at law or in equity, before or by any Governmental Authority or any
third party, and to the knowledge of the Seller there exists no state of facts
that could reasonably be expected to result in any such claim, action, suit or
proceeding; and (c) there is no outstanding judgment, order, injunction or
decree of any Governmental Authority or any third party against or affecting the
Purchased Assets, and the Seller and the Seller's Affiliates have not been a
party to or bound by, any such judgment, order, injunction or decree.
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6.15 FINDERS AND BROKERS. The Seller has no liability or obligation to
pay any fees or commissions to any broker, finder or other agent with respect to
the transactions contemplated by this Agreement.
6.16 PERMITS; COMPLIANCE WITH LAWS. The Seller and the Seller's
Affiliates have all of the material Permits required to own the Purchased Assets
and to carry on the Business as presently conducted and all such Permits are
valid and in effect, and neither the ownership of the Purchased Assets by the
Seller or the Seller's Affiliates nor the operation of the Business by the
Seller or the Seller's Affiliates as it is presently conducted, violates any
applicable order, law, ordinance, code or regulation. Neither the Seller nor the
Seller's Affiliates have received any written notice from any Governmental
Authority of any such violation.
6.17 EMPLOYEES.
(a) Schedule 2.01(j) contains a complete list as of the Closing Date,
of the name, position, salary, length of service and location of all persons
employed (including persons who are temporarily absent from active employment)
by the Seller or the Seller's Affiliates in the conduct of the Business who are
Transferring Employees. As of the Closing Date, the Seller has paid in full all
wages, salaries, commissions, bonuses, benefits, and other compensation due to
any Transferring Employee or otherwise arising under any employment related
policy, practice, agreement, plan, program, statute or law.
(b) The Seller is not now, nor has it ever been, a party to or bound by
any collective bargaining agreement.
(c) Except as set forth on Schedule 6.17, there are no unsatisfied
claims, grievances, arbitration proceedings or workers' compensation
proceedings, and neither the Seller nor any of the Seller's Affiliates is a
party to or otherwise bound by any consent decree, order or citation by any
Governmental Authority relating to any Transferring Employee, concerning
employment practices, wages, hours, and terms and conditions of employment with
respect to the Business. In particular, neither the Seller nor any of the
Seller's Affiliates is in violation, has been alleged to be in violation, has
been charged with any violation or, to the best of Seller's knowledge, has been
threatened with any claim of a violation, of any of the various provisions of
Title VII of the Federal Civil Rights Act, the Age Discrimination in Employment
Act, the Americans with Disabilities Act, or any other federal or state law
dealing with employment discrimination, federal or state wage and hour laws,
federal or state income or unemployment and social security tax withholding
laws, or occupational safety and health laws and applicable standards and
regulations thereunder.
(d) With respect to TUPE, the Seller (and any applicable Seller's
Affiliate) has complied with its consultation requirements under such
regulations.
6.18 EMPLOYEE BENEFIT PLANS.
(a) Schedule 6.18 contains a complete list of Seller's Employee Pension
Benefit Plans, Employee Welfare Benefit Plans and any other plans, agreements,
policies or arrangements, whether or not reduced to writing, to which the Seller
or any of the Seller's Affiliates contributes or is obligated to contribute, or
under which the Seller or any of the Seller's Affiliates has or may have any
liability for premiums or benefits, and which benefits any Transferring Employee
or any former or retired employee of the Business or consultant or other
independent contractor who provides or provided services to or for the benefit
of the Business (the "Seller Employee Benefit Plans").
(b) To the best of the Seller's knowledge, no circumstance exists and
no event (including any action or the failure to do any act) has occurred with
respect to any Seller Employee Benefit Plan maintained or formerly maintained or
contributed to by the Seller or any of Seller's Affiliates, or to which the
Seller or any of Seller's Affiliates is or has been required to contribute, that
would subject
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Buyer to liability, or the Purchased Assets to any lien, under ERISA, the Tax
Code, or otherwise, nor will the transactions contemplated by this Agreement or
the Related Agreements give rise to any such liability or lien.
6.19 ENVIRONMENTAL MATTERS. The Seller and each of the Seller's
Affiliates with respect to the Business are and have at all times in the conduct
of the Business been in compliance in all materials respects with all applicable
United States, federal, state, local, and foreign laws and regulations relating
to environmental, land use, health and safety matters. There is no suit, claim,
action or proceeding pending or, to the knowledge of Seller or any of the
Seller's Affiliates, threatened against the Seller or any of the Seller's
Affiliates with respect to the Business, in respect of (i) noncompliance by the
Seller or any of the Seller's Affiliates with any such laws or regulations, (ii)
personal injury, wrongful death or other tortious conduct arising out of or
resulting from materials, commodities or products held, used, transferred or
disposed of by or on behalf of the Seller or any of the Seller's Affiliates
containing or incorporating any hazardous or toxic materials, commodities or
substances, or (iii) the presence or release or threatened release into the
environment of any pollutant, contaminant or toxic or hazardous materials,
substance or waste, whether solid, liquid or gas including but not limited to
petroleum or any faction or derivative thereof (each a "Hazardous Substance") by
the Seller or any of the Seller's Affiliates. There have been no Hazardous
Substances generated by the Seller or any of the Seller's Affiliates that have
been disposed of or come to rest at the Leased Property. There has been no
release or threatened release by the Seller or any of the Seller's Affiliates of
Hazardous Substances on, upon, into or from the Leased Property. Except as set
forth on Schedule 6.19, to the knowledge of the Seller and the Seller's
Affiliates there are and have been no underground storage tanks located on, no
polychlorinated biphenyls ("PCBs") or PCB containing equipment used or stored
on, and no asbestos or asbestos containing materials present at the Leased
Property. No Hazardous Substance is stored by or on behalf of the Seller or any
of the Seller's Affiliates at the Leased Property. As it relates to the Leased
Property, this representation and warranty shall only apply to the period during
which the Seller has occupied the Leased Property and neither the Seller nor the
Seller's Affiliates shall have any liability for any previous period.
6.20 CUSTOMERS. Schedule 6.20 lists all customers of the Business to
which the Seller or any of the Seller's Affiliates sold goods or services in
excess of $250,000 during Q3 1999, Q4 1999, Q1 2000 and Q2 2000 (the "Customer
Period"). Neither Seller nor any of the Seller's Affiliates has received any
threat or notice that any one or more customers who in the aggregate purchased
goods or services in excess of $250,000 from them during the Customer Period
intend to discontinue or to reduce significantly purchases of such goods or
services or default under or terminate any Contract with the Seller or any of
the Seller's Affiliates whether as a result of the transactions contemplated by
this Agreement or otherwise. The Company has not received any notice of, nor is
it aware of any basis for, any material dispute between a customer and the
Seller and/or any of the Seller's Affiliates, whether with respect to payment
due, workmanship or otherwise.
6.21 SUPPLIERS. Schedule 6.21 lists all suppliers or subcontractors
from which the Seller or any Seller's Affiliates with respect to the Business
purchased goods or services in excess of $25,000 during the period covering the
beginning of November 1999 through Q2 2000 (the "Suppliers Period"). Neither
Seller nor any of the Seller's Affiliates has received any threat or notice that
any one or more suppliers or subcontractors, who in the aggregate sold goods or
services in excess of $100,000 to them during the Suppliers Period, intend to
discontinue or reduce delivery of any such goods or services or default under or
terminate any agreement with the Seller or any of the Seller's Affiliates,
whether as a result of the transactions contemplated by this Agreement or
otherwise.
6.22 DISCLOSURE. The documents and other written information provided
to Buyer by Seller or any advisor or employee of Seller as listed in and
attached to the Disclosure Schedules and/or this Agreement do not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein not misleading.
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ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF THE BUYER
In order to induce the Seller to enter into this Agreement the Buyer
makes the following representations and warranties to the Seller.
7.01 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. The Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New Jersey. The Buyer has full corporate power to enter into
this Agreement and each of the Related Agreements, and to consummate the
transactions contemplated hereby and thereby. The Buyer has furnished to the
Seller true and complete copies of its Certificate of Incorporation and By-laws,
each as in effect on the date hereof.
7.02 CORPORATE AUTHORITY. The Buyer has the requisite corporate power
and authority to enter into this Agreement and each of the Related Agreements
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance of this Agreement and each of the Related
Agreements has been duly and validly authorized and approved by all necessary
corporate action of the Buyer and, assuming the due authorization, execution and
delivery by the Seller and the Seller's Affiliates (to the extent a party to any
of the Related Agreements), constitutes the legal, valid, and binding obligation
of the Buyer, enforceable against the Buyer in accordance with their terms,
except as enforcement may be limited by bankruptcy, insolvency or other similar
laws of general applicability affecting the enforcement of creditors' rights and
remedies and to general principles of equity.
7.03 NON-CONTRAVENTION. The execution, delivery and performance by the
Buyer of this Agreement or any of the Related Agreements and the consummation of
any of the transactions contemplated hereby or thereby does not and will not:
(i) conflict with or violate any provision of the Certificate of Incorporation
or By-laws of the Buyer; (ii) require on the part of the Buyer the filing with,
or any permit, authorization, consent or approval of any Governmental Authority;
(iii) conflict with, result in a breach of, constitute (with or without due
notice or lapse of time or both) a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify or cancel, or
require notice, consent or waiver under, any agreement to which the Buyer is a
party or by which the Buyer is bound; or (iv) violate any order, writ,
injunction, decree, statute, law, rule or regulation applicable to the Buyer.
7.04 LITIGATION. No action investigation, audit, review, claim, suit or
proceeding by any Governmental Authority or third party is pending or, to the
knowledge of the Buyer, threatened against the Buyer which seeks to delay or
prevent the consummation of the transactions contemplated by this Agreement and
the Related Agreements or which may adversely affect or restrict the Buyer's
ability to consummate the transactions contemplated hereby or thereby. The Buyer
is not bound by any outstanding judgment, order, injunction or decree of any
Governmental Authority or any third party which would prevent the Buyer from
consummating the transactions contemplated by this Agreement or the Related
Agreements.
7.05 FINDERS AND BROKERS. The Buyer has no liability or obligation to
pay any fees or commissions to any broker, finder or other agent with respect to
the transactions contemplated by this Agreement
ARTICLE 8
CERTAIN COVENANTS
8.01 ASSIGNMENT OF CONTRACTS; THIRD PARTY CONSENTS; ECONOMIC BENEFIT.
At the Closing, the Seller shall assign or novate, and shall cause each of the
Seller's Affiliates to assign or novate, the Contracts to which or by which the
Seller or any of the Seller's Affiliates with respect to the Business is a party
or otherwise bound or to which or by which any of the Purchased Assets or
Assumed Liabilities are subject. In the event that prior notice to or consent or
authorization from a
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third party is required to effect the assignment or novation of a Contract, and
such notice is not given or such consent or authorization is not obtained prior
to the Closing, the Seller will take all measures reasonably necessary
(including, without limitation, the indemnification of any Loss resulting from
the failure to provide notice or obtain consent or authorization as provided for
in Section 13.01) to ensure that all economic benefits and rights of such
Contract transfer, accrue and vest in the Buyer at and after the Closing as
contemplated by this Agreement or the Related Agreements and to protect such
benefits and rights transferred to the Buyer (to the extent that such protection
is not frustrated by any actions of the Buyer). The Seller shall give any other
necessary notices to any third party and shall use its reasonable best efforts
to obtain any other required third party consent or authorization. The Buyer
shall, if requested by Seller, take such steps reasonably requested by the
Seller to assist in obtaining the required consents and authorizations.
8.02 TRANSFER OF NECESSARY PERMITS. The Seller shall use its reasonable
efforts to assist in the transfer to Buyer all Permits which are required to
operate the Business as operated by the Seller on the Closing Date, or if such
Permits are not legally transferable, to assist the Buyer in otherwise obtaining
such Permits. The Buyer shall be liable for any fees associated with the
transfer of or obtaining such Permits.
8.03 TRANSFER OF WARRANTIES. If any of the Purchased Assets are under
any warranty or vendor's indemnification agreement from the manufacturer or the
original seller thereof, the Buyer shall be entitled to the benefit of the
warranty or vendor's indemnification agreement to the extent that it is
available to the transferee of the Seller, and the Seller shall execute such
instruments as may be reasonably required to transfer the warranty to the Buyer.
8.04 FURTHER ASSURANCES AND ACTIONS. From time to time after the
Closing, the Buyer and the Seller shall, and the Seller shall cause the Seller's
Affiliates to, execute and deliver, or cause to be executed and delivered, all
such other instruments, including instruments of conveyance, assignment and
transfer and to make all filings with and to obtain all approvals or
authorizations of any Governmental Authority and take all other actions as may
be reasonably required or requested within a reasonable time following the
Closing Date in order to effectuate this Agreement and the Related Agreements
and the transactions contemplated herein and thereon. If the schedule which sets
forth prepaid service amounts received or due in respect of any new or renewed
service agreements of the Business during the period from 31 August, 2000 to the
Closing Date is as of a date before the Closing Date, the Parties agree to
reconcile this schedule after the Closing for any prepaid service amounts
received by the Seller or any of the Seller's Affiliates after the date of this
schedule and make any applicable adjustment to the amount of the Fixed
Consideration.
8.05 TRANSITIONAL USE OF TRADE NAME. Pursuant to the terms and
conditions of the license agreement attached hereto as Exhibit B, the Seller
shall grant to the Buyer a non-exclusive license for the Buyer's use of the
trade name "Madge" in connection with (i) products which are manufactured (or
manufactured by a sub-contractor of the Buyer) and sold by the Buyer during the
twelve (12) months after the Closing, and (ii) any Inventory items purchased by
the Buyer and any Madge products returned to the Buyer following the Closing,
until such time as the Inventory and returned products are fully depleted or
sold. The license shall not include use of the Madge logo (except in so far as
it appears on existing Inventory) and shall not be used for the sale of products
manufactured (or manufactured by a sub-contractor of the Buyer) and sold by the
Buyer after the first anniversary of the Closing Date.
8.06 NON-SOLICITATION OF EMPLOYEES; COVENANT NOT TO COMPETE.
(a) The Seller agrees that for a period of two (2) years after the
Closing Date, it shall not, and shall cause any company within Seller's
affiliated group not to without first obtaining the written consent of the
Buyer, solicit or attempt to solicit any person who is employed by the Buyer to
leave his or her employment to become an employee of the Seller or any company
within the Seller's affiliated group.
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(b) For a period of three (3) years after the Closing Date, the Seller
shall not and shall cause any member within Seller's affiliated group not to in
the United States or any other jurisdiction in which the Business is conducted,
(i) own, manage, operate, join, control or participate in the ownership,
management, operation or control of any business where such business is
competitive with the Buyer's operation of the Business (defined as the Business
conducted as of the Closing), nor (ii) compete with the AccessSwitch technology,
AccessSwitch management and any derivatives thereof which are acquired by the
Buyer pursuant to this Agreement.
8.07 PATENTS AND TRADEMARKS. With respect to certain patents which
relate to both the products sold by the Business and products sold by other
companies within the Seller's affiliated group and certain trademarks which
include the Madge name, Seller or the appropriate Seller's Affiliate shall grant
to Buyer a non-exclusive license to use such patents and trademarks as the Buyer
may require to carry on the Business following the Closing, on the terms and
conditions set forth in the license agreement(s) attached hereto as Exhibit C.
The Buyer shall be solely responsible for any filing or registration (and the
costs thereof) at the US Patent and Trademark office or the UK trademark office
or any similar foreign Governmental Authority which may be necessary or
desirable in relation to the assignment or license of any patent or trademark by
the Seller or Sellers' Affiliates to the Buyer pursuant to this Agreement or the
Related Agreements.
8.08 MAKE RECORDS AND PERSONNEL AVAILABLE.
(a) From and after the Closing Date, the Buyer shall make available to
the Seller at its own cost and expense, from time to time as the Seller may
reasonably request, employees of the Business and copies of such records
transferred to the Buyer by the Seller pursuant to this Agreement as may be
reasonably required to enable the Seller to defend against or assert claims
related to or arising from ownership of the Purchased Assets or the conduct of
the Business by the Seller and the Seller's Affiliates prior to the Closing
Date, provided, however, that the Seller agrees to hold such records in
confidence and to return the same to the Buyer promptly upon the conclusion of
use by the Seller for the purposes herein specified. The Buyer shall maintain
such records transferred by Seller pursuant to this Agreement for a period of
six (6) years from the Closing.
(b) From and after the Closing Date, the Seller shall make available to
the Buyer at its own cost and expense, from time to time as the Buyer may
reasonably request employees of the Seller or the Seller's Affiliates and copies
of such records retained by Seller as identified in Section 2.01(f) of this
Agreement and as may be reasonably required to enable the Buyer to defend
against or assert any claims related to or arising from ownership of the
Purchased Assets or the conduct of the Business by the Buyer after the Closing
Date provided that Buyer agrees to hold such records in confidence and to return
the same to the Seller promptly upon the conclusion of use by the Buyer for the
purposes herein specified. The Seller shall maintain such records for a period
of six (6) years from the Closing.
8.09 PAYMENT OF TRANSACTION FEES.
(a) Each of the Seller and the Buyer shall be responsible and liable
for the payment of its respective expenses and fees incurred (with the Seller
responsible and liable for the expenses and fees of the Seller's Affiliates) in
connection with the negotiation, preparation, execution or performance of this
Agreement and the Related Agreements, including, without limitation, all legal,
accounting, consulting and other professional fees and expenses.
(b) Except as provided for in (c)and (d) below, the Seller shall be
responsible for the payment of all fees (including, without limitation, license
fees), expenses and other charges related to the legal transfer of the title
(where applicable) of Purchased Assets to the Buyer. The Seller shall be
responsible for the payment of any fees, expenses and other charges incurred in
relation to providing any required notice or soliciting or obtaining any consent
or authorization with respect to the transactions contemplated by this Agreement
or any of the Related Agreements (other than those fees relating to
authorizations required by the Buyer), including, without limitation, any
consent to or
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authorization for the assignment to the Buyer of any Contract or the novation of
any Contract in favor of the Buyer. On the Closing Date, the Buyer shall
reimburse the Seller the amount of $32,772.00 which the Seller has paid to
SHERPA in connection with the Buyer's use of the SHERPA license.
(c) The Buyer shall be responsible for any filing and the payment of
any filing fees, payable to the United Stated Patent and Trademark office or any
similar foreign Governmental Authority in relating to the assignment or license
of any patent or trademark by the Seller or the Seller's Affiliates to the
Buyer.
(d) The Buyer shall be liable for any fees associated with the transfer
of or obtaining any Permits.
8.10 ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE AND PAYMENTS RECEIVED.
Schedule 8.10 contains an aging schedule listing the accounts receivable of the
Business as at the Closing Date. The Seller confirms that it has not received
any notices from or on behalf of any account debtor asserting any defense to
payment or right of counterclaim or set off with respect to any of the accounts
receivable or the intention to return any goods. The Seller agrees that it will
utilize, and shall cause any company within the Seller's affiliated group to
utilize, normal collection efforts consistent with past business practices of
the Seller and the Seller's Affiliates in collecting the outstanding accounts
receivable of the Business as of the Closing. The Seller shall not, and shall
cause any company within the Seller's affiliated group not to, undertake any
formal collection action (whether legal action, referral to a collection agency
or otherwise) with respect to any such account receivable without first
informing the Buyer. The Seller agrees to pay, and shall cause any company
within the Seller's affiliated group to pay, in a manner consistent with past
business practice of the Seller, the outstanding accounts payable of the
Business as of the Closing. On or before the Closing, the Seller shall identify
in writing to the Buyer any disputed accounts payable of the Business as of the
Closing. The Seller and the Buyer agree that, after the Closing Date, they shall
hold and shall promptly transfer and deliver to the other, from time to time as
and when received by them and in the currency received by them, any cash, checks
(with appropriate endorsements) or other property that they may receive on or
after the Closing Date which property belongs to the other Party or is clearly
designated as payment to the other Party for goods or services provided by such
other Party, and each Party shall account to the other on a monthly basis for
all such receipts.
8.11 GUARANTEE OF PERFORMANCE.
The Seller shall cause Madge to deliver at the Closing the form of Guaranty
attached hereto as Exhibit D pursuant to which Madge, N.V. shall irrevocably and
unconditionally guarantee to the Buyer the full, faithful and prompt performance
by the Seller and the other Seller's Affiliates of all of their obligations,
when due, under this Agreement or any of the Related Agreements.
(a) The Buyer shall cause York Telecom Corporation to deliver at the
Closing the form of Guaranty attached hereto as Exhibit E pursuant to which York
Telecom Corporation shall irrevocably and unconditionally guarantee to the
Seller the full, faithful and prompt performance by the Buyer of all the Buyer's
obligations, when due, under this Agreement or any of the Related Agreements.
8.12 EMPLOYEES.
(a) The Buyer shall offer immediate employment (so that no period of
unemployment shall occur between employment with the Seller or any of the
Seller's Affiliates prior to the Closing and employment with the Buyer on or
after the Closing) to each of the Transferring Employees identified on Schedule
2.01(j), with such employment to commence immediately after the Closing. The
Buyer intends to keep the Transferring Employees in the current geographical
location where they work in the Business at the time of the Closing.
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(b) Schedule 8.12(b) sets forth the Buyer's existing benefits generally
available to the Buyer's (or York Telecom Corporation's) employees as of the
Closing. The Buyer further agrees to offer participation in the employee benefit
plans set forth in Schedule 8.12(b) to the Transferring Employees, and to cause,
without interruption in coverage, the Transferring Employees to become
participants in such employee benefit plans. The Buyer further agrees to provide
prior service credit with the Seller to Transferring Employees for purposes of
vesting and eligibility in the Buyer's employee benefit plans. The Buyer further
agrees to provide Transferring Employees credit toward any deductibles,
co-payments and out-of-pocket limits under the Buyer's Employee Welfare Benefit
Plans for all covered expenses incurred by the Transferring Employees under the
Seller's Employee Welfare Benefit Plans since January 1, 2000.
(c) Seller acknowledges and agrees that, on and as of the Closing Date,
if any Transferring Employee is entitled to an increase in benefits or
acceleration of vesting under the Seller's Employee Benefit Plans, such
increased benefit or accelerated vesting shall remain a liability of Seller. In
no event, however, shall Seller be liable to the Transferring Employees for any
benefits that may accrue after the Closing Date.
(d) Seller shall be responsible for all notifications required by ERISA
104(b)(1)(HIPAA - 101(c)(1). Seller agrees to provide or continue to provide
required COBRA coverage for any former employees of the Business, and their
dependents, who were COBRA covered participants prior to the Closing Date. To
the extent any of the Transferring Employees cease to be employees of Buyer
after the Closing Date, and such Transferring Employees are, or become, entitled
to benefits under COBRA or HIPAA, Buyer shall provide such notices and benefits
as are required by law.
(e) With regard to any UK Transferring Employee, the Buyer shall comply
with TUPE in respect of such employees and their transfer pursuant to this
Agreement. The parties acknowledge and agree that under TUPE the contracts of
employment of the UK Transferring Employees will have effect after the Closing
as if originally made between the Buyer and the UK Transferring Employees;
provided that the parties acknowledge and agree that the Buyer will not be bound
by, subject to, liable for or obligated under any provision of such contracts of
employment pursuant to which any of the UK Transferring Employees participates
or is entitled to participate in any stock option plan, stock purchase plan or
other equity plan sponsored by the Seller or any member of the Seller's
affiliated group, including, without limitation, the Madge N.V. 1993 Stock
Option Plan and the Madge Ltd 1993 Employee Stock Purchase Plan. The parties
acknowledge and agree that the Buyer shall not be liable to the UK Transferring
Employees nor obligated to compensate or provide any replacement or substituted
benefit to the UK Transferring Employees for any loss arising out of the
termination or forfeiture of any stock, option, account, right, benefit or
interest under any stock option plan, stock purchase plan, or other equity plan
sponsored by the Seller or any member of the Seller's affiliated group.
(f) Neither the Buyer nor the Seller intend that this Section 8.12
create any rights or interests, except as between the Buyer, the Seller and the
Seller's Affiliates, and no present or future employees (or any dependents or
beneficiaries of such employees) of either Party (or any of the Seller's
Affiliates) will be treated or deemed as third party beneficiaries in or under
this Agreement.
(g) Until the earlier of two (2) months after the Closing Date or the
date on which the Buyer provides medical coverage to the UK Transferring
Employees, the Seller or the applicable Seller's Affiliate shall continue to
provide medical insurance coverage to the UK Transferring Employees under their
current medical insurance arrangement. The Buyer will reimburse the Seller or
the applicable Seller's Affiliate for the amount of the costs incurred by it to
continue such coverage.
8.13 PREMISES FOR THE BUSINESS. The Parties acknowledge and agree that
the Buyer shall be solely responsible for finding office accommodation for the
Business following the Closing Date and the Seller shall have no liability in
relation thereto.
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8.14 RESELLER RELATIONSHIP. During the three (3) month transitional
period immediately following the Closing, the Parties agree, on request from the
Seller, to negotiate on mutually acceptable terms an industry standard VAR
agreement pursuant to which Seller or the Seller's Affiliates will be a reseller
of Buyer in the territories and upon the terms to be mutually agreed.
8.15 ENGINEERING SUPPORT. The Buyer, Seller and Vital will meet within
one (1) month of the Closing Date to discuss who will provide standard support
for the current installations in ROW (rest of world - i.e. everywhere outside of
the United States and Canada) for the duration of the existing customer
contracts executed prior to the Closing (whether written or oral) with the final
decision to be made by the Buyer.
8.16 CUSTOMER SERVICE. Subject to, and in addition to, the terms of the
trademark license agreement attached as Exhibit C, for a period of one (1) year
after the Closing, the Buyer will use its reasonable best efforts to maintain a
reasonably similar level of customer service as provided by the Seller at the
time of the Closing, and the Buyer will not take any action to disparage the
"Madge" name.
8.17 ISRA FILING. The Seller shall comply at its sole expense with the
Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et seq., and the regulations
promulgated thereunder through the issuance of a letter of non-applicability, a
de minimis exemption or a No Further Action Letter or the equivalent.
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF THE SELLER
In addition to the satisfaction of the Closing Conditions pursuant to
section 2.01, the obligations of the Seller under this Agreement are subject to
the satisfaction at or prior to the Closing Date of the following conditions,
any of which may be waived in whole or in part by the Seller in its sole
discretion by delivery of a written notice to that effect to the Buyer, which
shall constitute a release by the Seller with respect to such condition.
9.01 NO LITIGATION. At the Closing Date, no litigation, proceeding,
investigation, or inquiry shall be pending or threatened to enjoin or prevent
the consummation of the transactions contemplated by this Agreement.
9.02 TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Buyer contained herein shall be true and correct in all
material respects at and as of the Closing as if made as of the Closing in each
case. The Buyer shall furnish the Seller with an appropriate closing certificate
to that effect dated the Closing Date.
9.03 PERFORMANCE BY THE BUYER. All of the covenants and agreements
required by this Agreement to have been performed and complied with by the Buyer
shall have been performed and complied with by the Buyer in all material
respects prior to or on the Closing Date in each case. The Buyer shall furnish
the Seller with an appropriate closing certificate to that effect dated the
Closing Date.
9.04 STATUTORY PROHIBITION. No written or published statute, rule,
regulation or order shall have been enacted, entered or deemed applicable by any
domestic or foreign government or governmental or administrative agency or court
which would make the transactions contemplated by this Agreement illegal.
9.05 PAYMENT OF PURCHASE PRICE. The Buyer shall deliver to the Seller
on the Closing Date, the amount of $305,061, being the Asset Consideration, the
first installment of the Customer Service Inventory, and the payment for the
SHERPA license, in cash or immediately available funds.
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9.06 CHARTER DOCUMENTS, ETC. Buyer shall have delivered such
certificates or other documents as may be reasonably requested by Seller or its
counsel, including, without limitation, certificates of good standing and
customary closing certificates of the Secretary of the Buyer with respect to
representations, warranties, covenants and any other relevant matters.
9.07 AGREEMENT AND RELATED PARTY AGREEMENTS. Buyer shall have executed
and delivered the Agreement and each of the Related Agreements to which it is a
party.
9.08 NO BANKRUPTCY OR INSOLVENCY. No proceeding in which the Buyer or
York Telecom Corporation shall be a debtor, defendant or party seeking an order
for its own relief or reorganization shall have been brought or be pending by or
against the Buyer under any United States bankruptcy or insolvency law.
9.09 GENERAL. All instruments and legal and corporate proceedings in
connection with the transactions contemplated by this Agreement and the other
Related Agreements shall be reasonably satisfactory in form and substance to
Seller, and Seller shall have received counterpart original, or certified or
other copies, of all documents that it may reasonably request in connection
therewith.
9.10 NO MATERIAL ADVERSE CHANGE. There has been no material adverse
change in the financial condition of the Buyer or of York Telecom Corporation.
ARTICLE 10
CONDITIONS TO OBLIGATIONS OF THE BUYER
In addition to the satisfaction of the Closing Conditions pursuant to
section 2.01, the obligations of the Buyer under this Agreement are subject to
the satisfaction at or prior to the Closing Date of the following conditions,
any of which may be waived in whole or in part by the Buyer in its sole
discretion by delivery of a written notice to that effect to the Seller, which
shall constitute a release by the Buyer with respect to such condition.
10.01 NO LITIGATION. At the Closing Date, no litigation, proceeding,
investigation, or inquiry shall be pending or threatened to enjoin or prevent
the consummation of the transactions contemplated by this Agreement, or
involving any of the Purchased Assets or Assumed Liabilities (apart from the
Lucent Claims).
10.02 NO CASUALTY. Prior to the Closing Date, there shall not have
occurred any material single uninsured casualty in or to any of the material
Purchased Assets, unless the Seller agrees to replace the damaged or destroyed
Purchased Asset(s) or unless the Buyer and the Seller mutually agree to an
adjustment in the Purchase Price.
10.03 TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Seller contained herein shall be true and correct in all
material respects at and as of the Closing as if made as of the Closing in each
case. The Seller shall furnish the Buyer with an appropriate closing certificate
to that effect dated the Closing Date.
10.04 PERFORMANCE BY THE SELLER AND THE SELLER'S AFFILIATES. All of the
covenants and agreements required by this Agreement to have been performed and
complied with by the Seller and the Seller's Affiliates shall have been
performed and complied with by the Seller and the appropriate Seller's Affiliate
in all material respects prior to or on the Closing Date in each case. The
Seller shall furnish the Buyer with an appropriate closing certificate to that
effect dated the Closing Date.
10.05 NO MATERIAL ADVERSE CHANGE. There shall not have been any adverse
change in the financial condition or property of the Business as such is
currently conducted which change is materially adverse to the value of the
Purchased Assets taken as a whole or materially adverse to the Business, the
condition (financial or otherwise), prospects or results of operations of the
Business in each case taken as a whole.
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10.06 STATUTORY PROHIBITION. No written or published statute, rule,
regulation or order shall have been enacted, entered or deemed applicable by any
domestic or foreign government or governmental or administrative agency or court
which would make the transactions contemplated by this Agreement illegal.
10.07 NO BANKRUPTCY OR INSOLVENCY. No proceeding in which the Seller or
any of the Seller's Affiliates (which have a material interest in the Business),
shall be a debtor, defendant or party seeking an order for its own relief or
reorganization shall have been brought or be pending by or against the Seller or
any of the Seller's Affiliates under any United States or United Kingdom
bankruptcy or insolvency law.
10.08 CHARTER DOCUMENTS, ETC. Seller shall have delivered such
certificates or other documents as may be reasonably requested by Buyer or its
counsel, including without limitation certificates of good standing of the
Seller from the Secretary of State of the State of Delaware and the Department
of Treasury of the State of New Jersey, and customary closing certificates of
Seller with respect to representation, warranties, covenants and any other
relevant matters.
10.09 AGREEMENT AND RELATED PARTY AGREEMENTS. Seller and each of the
Seller's Affiliates shall have executed and delivered the Agreement and the
Related Agreements to which it is a party. Madge, N.V. shall have executed and
delivered its Guaranty.
10.10 DELIVERY OF POSSESSION. Seller shall have delivered to Buyer
possession and control of the Purchased Assets by allowing the Buyer to take
possession of the Purchased Assets at the places they are located at on the
Closing Date, apart from the Inventory which shall be delivered to Freedom in
accordance with section 4.07.
10.11 UCC-3 TERMINATION STATEMENTS. Seller shall have delivered to
Buyer executed UCC-3 Termination Statements, in form and substance reasonably
satisfactory to Buyer, and terminating the UCC-1 Financing Statements identified
on Schedule 6.10. The Seller shall continue to have an obligation after the
Closing to provide the Buyer with all executed UCC-3 Termination Statements
which are not delivered on or before the Closing Date.
ARTICLE 11
CLOSING
11.01 THE CLOSING DATE. If the sale and purchase becomes unconditional
in accordance with section 2.01, the Closing shall take place at the Seller's
offices, 625 Industrial Way West, Eatontown, New Jersey 07724 on 29 September,
2000 or at such other place and time as the Buyer and the Seller shall agree
upon. Such date is herein called the "Closing Date". The Closing shall be deemed
effective as of the close of business, Eastern Daylight Time, on the Closing
Date. If all of the conditions specified in Articles 9 and 10 shall have been
fulfilled or waived in writing by the Buyer or by the Seller, as the case may
be, on or before the Closing Date, then, on the Closing Date, the Buyer and the
Seller shall make the following deliveries.
11.02 DELIVERIES BY THE BUYER. Subject to the terms and conditions of
this Agreement, at the Closing the Buyer shall deliver or cause to be delivered
to the Seller:
(a) this Agreement;
(b) amount of $305,061 being the Asset Consideration, the first
installment of the Customer Service Inventory, and the payment for the SHERPA
license, in cash or immediately available funds;
(c) copies of the Buyer's Certificate of Incorporation and By-laws;
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(d) a certificate executed by the Buyer certifying that each of the
representations and warranties of the Buyer set forth herein is true and correct
in all material respects as of the Closing Date, and that each of the covenants
and agreements to be performed and complied with by the Buyer have been
performed and complied with in all material respects;
(e) an incumbency and specimen signature certificate with respect to
the officers of the Buyer executing this Agreement, the Related Agreements and
any other document or instrument delivered by the Buyer hereunder;
(f) Certificate of Good Standing of the Buyer issued by the Department
of Treasury of the State of New Jersey;
(g) Guaranty of York Telecom Corporation; and
(h) any other documents required to be delivered under this Agreement.
11.03 DELIVERIES BY THE SELLER. Subject to the terms and conditions of
this Agreement, at the Closing the Seller shall deliver or cause the Seller's
Affiliates to deliver to the Buyer:
(a) this Agreement;
(b) assignments in respect of the Sellers' ownership rights in the
copyrights, certain of the trademarks and certain of the patents in mutually
satisfactory form.
(c) copies of the Seller's Articles of Incorporation and By-laws;
(d) the license agreement for the use by the Buyer of the tradename
"Madge;"
(e) the license agreements for the use by the Buyer of the certain
patents which relate to both products sold by the Business and by other
companies within the Seller's Affiliated group and certain trademarks which
include the Madge name;
(f) a certificate executed by the Seller certifying that each of the
representations and warranties of the Seller set forth herein is true and
correct in all material respects as of the Closing Date, and that each of the
covenants and agreements to be performed and complied with by the Seller and the
Seller's Affiliates have been performed and complied with in all material
respects;
(g) an incumbency and specimen signature certificate with respect to
the officers of the Seller and the Seller's Affiliates executing this Agreement,
the Related Agreements and any other document or instrument delivered by the
Seller hereunder;
(h) Certificate of Good Standing of the Seller issued by the Secretary
of State of Delaware and the Department of Treasury of the State of New Jersey;
(i) The Guaranty of Madge Networks, N.V.;
(j) Letter of Non-Applicability, No Further Action Letter or its
equivalent issued by the New Jersey Department of Environmental Protection under
ISRA; and
(k) any other documents required to be delivered by the Seller under
this Agreement.
11.04 RIGHTS TO POSSESSION. The Buyer's rights to possession of the
Purchased Assets shall commence once Closing has been completed in accordance
with this Article 11, and the Buyer shall
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take possession of the Purchased Assets (apart from the Inventory which shall be
delivered to Freedom in accordance with section 4.07) at the places they are
located on the Closing Date.
ARTICLE 12
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
12.01 SURVIVAL. The representations, warranties, covenants and
agreements of the Parties contained in this Agreement shall survive the Closing
only for the applicable period set forth in this Article 11 as follows:
(a) the representations and warranties in Sections 6.13 (Tax Matters),
6.14 (Litigation), 6.18 (Employee Benefit Plans) and 7.04 (Litigation) shall
survive the Closing until the expiration of the applicable statutory period of
limitation, giving effect to any waiver, mitigation or extension thereof;
(b) the representations and warranties in Section 6.01 (Organization,
Qualification and Corporate Power), Section 6.03 (Corporate Authority), Section
6.10 (Title to Purchased Assets), Section 7.01 (Organization, Qualification and
Corporate Power), and Section 7.02 (Corporate Authority) shall survive the
Closing without limitation;
(c) the representations and warranties in Section 6.12 (Intellectual
Property) shall survive the Closing for the period of time which is the lesser
of (i) the applicable statutory period of limitation, giving effect to any
waiver, mitigation or extension thereof, or (ii) five (5) years from the Closing
Date;
(d) the Seller's indemnity for the Lucent Claims pursuant to section
13.01(b) shall not survive after October 1, 2003.
(e) all other representations and warranties shall survive the Closing
for a period of thirty (30) months from the Closing Date;
(f) the covenants and agreements contained in this Agreement which do
not have specific time periods of applicability shall survive the Closing Date
without limitation; and
(g) the covenants and agreements contained in this Agreement which have
specific time periods of applicability shall survive the Closing Date for the
periods set forth therein.
12.02 NOTICE OF CLAIM. No Party shall have an obligation to indemnify
the other for breach of any representation, warranty, covenant or agreement
unless notice of a claim for indemnification with respect to such breach has
been submitted in accordance with Article 13 prior to the end of the applicable
survival period. If written notice of a claim for breach of any representation,
warranty, covenant or agreement has been given by a party within the notice
periods of Article 13, and prior to the expiration of the survival period
applicable thereto as provided in Section 12.01, then the relevant
representation, covenant or agreement shall survive until the claim has been
finally resolved.
ARTICLE 13
INDEMNIFICATION
13.01 INDEMNIFICATION OF THE BUYER.
(a) General. Seller hereby agrees to indemnify, and hold harmless each
of the Buyer, its Affiliates and their respective officers, directors,
employees, agents, advisors and representatives (the "Buyer Indemnitees") from
and against any Loss incurred by any of the Buyer Indemnitees arising out of,
resulting from or relating to (i) any breach of any representation or warranty
made by Seller or any of the Seller's Affiliates in this Agreement or any of the
Related Agreements or in any certificate or other closing document furnished by
the Seller or any of the Seller's Affiliates pursuant to this Agreement or any
of the Related Agreements, (ii) any breach or default in performance by the
Seller
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or any of the Seller's Affiliates of any covenant or agreement of the Seller or
any of the Seller's Affiliates in this Agreement or in any of the Related
Agreements or in any certificate or other closing document furnished by the
Seller or any of the Seller's Affiliates, pursuant to this Agreement or any of
the Related Agreements, (iii) the Retained Liabilities, (iv) the failure to
obtain the consent or authorization required for the assignment or novation of
any Contract, (v) the failure to obtain any other consent or other authorization
required in connection with the consummation of this Agreement and the Related
Agreements and the transactions contemplated herein and therein, (vi) the
failure to provide notice or timely notice required of the Seller or any of the
Seller's Affiliates in connection with the consummation of this Agreement and
the Related Agreements and the transactions contemplated herein and therein,
(vii) the operation of the Business by the Seller or any of the Seller's
Affiliates prior to the Closing, provided that this clause 13.01(a) shall not
apply to the Lucent Claims in respect of which the Seller shall indemnify the
Buyer pursuant to the terms of clause 13.01(b), (viii) any patent infringement
claim (other than the Lucent Claims which are covered by the terms of clause
13.01(b) of this Agreement) following the Closing, provided that the Seller's
indemnification obligation for any such patent infringement claim shall only
cover Losses arising out of the operation of the Business by the Seller or any
of the Seller's Affiliates prior to the Closing, or (ix) any claim by a UK
Transferring Employee arising out of (a) the termination or forfeiture of any
stock, option, account, right, benefit or other interest of any UK Transferring
Employee under the Madge N.V. 1993 Stock Option Plan, the Madge Ltd. 1993
Employee Stock Purchase Plan, or any other equity plan offered by the Seller or
any of the Seller's Affiliates, or (b) either the Buyer not offering any stock
option plan, stock purchase plan or any other type of equity plan to the UK
Transferring Employees, or the Buyer offering a stock option plan, stock
purchase plan, or other type of equity plan to the UK Transferring Employees on
terms which are not as good as the terms contained in any such plan sponsored by
the Seller or any of the Seller's Affiliates.
(b) INDEMNIFICATION FOR LUCENT CLAIMS. Seller hereby agrees to
indemnify, defend and hold Buyer Indemnitees harmless against any and all Losses
(excluding special, incidental and consequential damages) arising out of,
resulting from, relating to or arising in connection with any claim asserted by
Lucent Technologies or its affiliates (collectively "Lucent") in respect of the
Lucent Claims, provided that if Lucent secures an injunction or other equitable
relief against any Buyer Indemnitee, Seller shall also indemnify, defend and
hold such Buyer Indemnitee harmless against any and all special, incidental and
consequential damages in respect thereof.
Seller shall assume and conduct the defense of each claim in respect of
the Lucent Claims and shall have exclusive control of the defense of each such
claim and, except as otherwise expressly provided herein, all negotiations
relating to settlement. Buyer shall assist Seller in all necessary respects in
the defense of such claim and all negotiations relating to settlement and shall
make reasonably available to the Seller, without cost, all witnesses, pertinent
records, materials and other information relating to such claims which is under
Buyer's control. Seller shall keep Buyer informed, on request, of the progress
of such defense and negotiations relating to settlement of such claims. Seller
shall not settle or compromise any such claim or make any admission of liability
which provides for or would result in injunctive or equitable relief against the
Buyer without the Buyer's express prior written consent.
Seller shall not be liable for any infringement that would not occur
but for a modification by Buyer of products which are the subject of the Lucent
Claims, except to the extent that such modification is based on work in progress
obtained by Buyer as part of the Purchased Assets.
The Seller's indemnity obligation under this Section 13.01(b) does not
apply to any Loss arising in relation to Buyer Indemnitee sales or other
activities after October 1, 2003.
13.02 INDEMNIFICATION OF THE SELLER. The Buyer hereby agrees to
indemnify, and hold harmless each of the Seller, its Affiliates, including each
Seller's Affiliate, and their respective officers, directors, employees, agents,
advisors and representatives (the "Seller Indemnitees") from and against any
Loss arising out of, resulting from or relating to (a) any breach of any
representation or warranty made by the Buyer or any of the Buyers' Affiliates in
this Agreement or in any of the
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Related Agreements or in any certificate or other closing document furnished by
the Buyer or any of the Buyers' Affiliates pursuant to this Agreement or any of
the Related Agreements, (b) any breach or default in performance by the Buyer or
any of the Buyers' Affiliates of any covenant or agreement of the Buyer or any
of the Buyers' Affiliates in this Agreement or in any of the Related Agreements
or in any certificate or other closing document furnished by the Buyer or any of
the Buyers' Affiliates, pursuant to this Agreement or any of the Related
Agreements, (c) the Assumed Liabilities, (d) the failure of Buyer or any of the
Buyers' Affiliates to provide notice or timely notice required of the Buyer or
any of the Buyers' Affiliates in connection with the consummation of this
Agreement and the Related Agreements and the transactions contemplated herein
and therein, (e) the operation of the Business by the Buyer or the Buyer's
Affiliates after the Closing, or (f) any patent infringement claim following the
Closing, provided that the Buyer's indemnification obligation for any such
patent infringement claims shall only cover Losses arising out of the operation
of the Business by the Buyer after the Closing.
13.03 LIMITS ON INDEMNIFICATION.
(a) The Seller shall not be liable under the terms and provisions of
this Article 13 unless and until the aggregate amount of liability for
indemnification claims made by the Buyer Indemnitees exceeds twenty thousand
dollars ($20,000) (the "Buyer Liability Basket") at which time the Seller shall
be liable for the full amount (including the amount of the Buyer Liability
Basket) of all indemnification claims made by the Buyer Indemnitees up to an
aggregate amount of two million dollars ($2,000,000); provided, that the
aggregate amount of all claims excluding the Lucent Claims which the Seller
shall be liable for is one million dollars ($1,000,000) (the "Buyer Liability
Cap"). The Buyer Liability Basket and the Buyer Liability Cap set forth in this
Section 13.03(a) shall not apply in the event of fraud, in which case the Buyer
Indemnitees shall be entitled to indemnification on a dollar for dollar basis
for the full amount of the Loss. The Buyer Liability Basket shall not apply to
any indemnification claim made by any of the Buyer Indemnitees with respect to
the Lucent Claims. Further, in the event any settlement payments are made in
connection with the Lucent Claims, including, without limitation, any fees,
expenses and charges under a license agreement (all of such amounts which shall
be paid by the Seller), the prorated amount of the aggregate fees, expenses and
charges attributable to the period prior to the Closing shall not be counted
against the Buyer Liability Cap.
The Buyer shall not be liable under the terms and provisions of this Article 13
unless and until the aggregate amount of liability under Article 13 for
indemnification claims made by the Seller Indemnitees exceeds ten thousand
dollars ($10,000) (the "Seller Liability Basket"), at which time the Buyer shall
be liable for the full amount (including the amount of the Seller Liability
Basket) of all indemnification claims made by the Seller Indemnitees up to an
aggregate amount of one million dollars ($1,000,000) (the "Seller Liability
Cap"). The Seller Liability Basket and Seller Liability Cap set forth in this
Section 13.03(b) shall not apply in the event of fraud in which case the Seller
Indemnitees shall be entitled to indemnification on a dollar for dollar basis
for the full amount of the Loss.
(b) The amount of any indemnified loss suffered by any Buyer Indemnitee
or Seller Indemnitee shall be reduced by the net effect of any tax-related
benefits related to the claim and/or insurance coverage and/or claim against a
third party which is realized by such indemnified party following the date of
such loss in respect of or as a result of such indemnified loss. Notwithstanding
the foregoing, it is understood and agreed that the determination of the net tax
effect and/or insurance coverage benefit of any indemnified loss and/or third
party claim, if any, shall not delay payment or indemnification of such
indemnified loss by the indemnifying party.
(c) Apart from (i) the Lucent Claims, (ii) any claim with respect to a
breach of Section 6.12(e) of this Agreement, or (iii) any patent infringement
claim to the extent covered by Section 13.01(a)(viii), neither the Seller nor
any of the Sellers' Affiliates shall be liable to the Buyer
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Indemnitees under the terms and provisions of this Article 13 in respect of any
patent infringement claim following the Closing.
(d) PROCEDURES FOR CLAIMS.
A Buyer Indemnitee or Seller Indemnitee shall provide written
notice of any indemnification claim under Article 12 (excluding all Lucent
Claims other than any claim in respect of the Lucent Claims asserted against
Buyer after the Closing Date) to the indemnifying party within ten (10) business
days of such party becoming aware of the existence of such indemnification
claim, stating the amount claimed to be due and payable, the basis of the claim
and the provision(s) of the Agreement under which such claim is asserted.
Failure to give notice as required in this Section 13.03 shall not affect the
indemnification obligations of the indemnifying party except to the extent the
indemnifying party can demonstrate such failure materially prejudiced such
party's ability to successfully defend the matter giving rise to the claim.
13.04 THIRD PARTY CLAIMS.
(a) Upon the assertion of any claim against a Buyer Indemnitee or a
Seller Indemnitee for which the indemnifying party may be responsible under this
Agreement (each, a "Third Party Claim") the indemnifying party shall have the
right, exercisable by written notice to the Buyer Indemnitee or Seller
Indemnitee, to assume and conduct the defense of each Third Party Claim with
counsel selected by the indemnifying party. If the indemnifying party does
assume and conduct the defense of a Third Party Claim, the Buyer Indemnitee or
Seller Indemnitee shall cooperate and make reasonably available to the
indemnifying party, without cost, all witnesses, pertinent records, materials
and information relating to the Third Party Claim and under such indemnitee's
control.
(b) If the indemnifying party does not assume the defense of such Third
Party Claim in accordance with this Section 13.04, then the Buyer Indemnitee or
Seller Indemnitee may continue to defend the Third Party Claim. If the
indemnifying party does assume the defense of a Third Party Claim, then the
indemnifying party shall not be liable for any legal expenses subsequently
incurred by the Buyer Indemnitee or Seller Indemnitee in connection with the
defense thereof. However, the Buyer Indemnitee or Seller Indemnitee may assume
its own defense and the indemnifying party shall be liable for all reasonable
costs or expenses paid or incurred in connection therewith, upon the
indemnifying party's failure to defend diligently the Third Party Claim, and the
provision of notice from the Buyer Indemnitee or Seller Indemnitee to the
indemnifying party with regard thereto.
(c) Without the prior written consent or authorization, which consent
or authorization will not be unreasonably withheld, the indemnifying party shall
not consent to a settlement of, or entry of any judgment arising from any Third
Party Claim which does not include as a term thereof the giving by the claimant
to the Buyer Indemnitee or Seller Indemnitee of a release from all liability in
respect of such Third Party Claim. If the Buyer Indemnitee or Seller Indemnitee
defends the Third Party Claim, the Buyer Indemnitee or Seller Indemnitee may
defend and settle such claim or litigation, after giving notice to the
indemnifying party, on such terms as the indemnified party may deem appropriate.
(d) The terms of this Section 13.04 shall not apply to any claim in
respect of the Lucent Claims.
13.05 DISCLOSURES. The Buyer shall not be entitled to claim that any
fact or combination of facts constitutes a breach of any of the representations,
warranties, covenants and agreements in this Agreement to the extent that such
fact or combination of facts has been disclosed in the Disclosure Schedules or
is apparent from any document which is expressly identified in the Disclosure
Schedule and delivered therewith.
13.06 ENTIRE AGREEMENT. Neither the Buyer nor the Seller have relied on
any representation, warranty or covenant of the other Party or any other person
except as expressly set
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forth in this Agreement, any of the Related Agreements or in any certificate or
closing document furnished by either Party pursuant to this Agreement or any of
the Related Agreements. No representation, warranty or covenant which is not
contained in this Agreement, any of the Related Agreements, or any certificate
or closing document furnished pursuant to this Agreement or any of the Related
Agreements shall give rise to any liability under this Agreement or any of the
Related Agreements.
13.07 KNOWLEDGE, SEARCHES AND JOINT MANAGEMENT. The Buyer shall not be
entitled to claim that any fact or combination of facts constitute a breach of
any of the representations, warranties, covenants and agreements in this
Agreement and thereby assert a claim under this Article 13, to the extent that
such fact or combination of facts (a) is within the actual knowledge of Ron
Gaboury and David Ireland of the Buyer and/or (b) is revealed by the searches or
investigations carried out by the Buyer's attorney as listed and attached at
Schedule 13.07, and/or (c) arises out of or results from any act or omission of
the Buyer during the Buyer's joint management of the Business for the period
from May 2, 2000 to June 30, 2000 which amounts to a breach of the joint
management agreement dated 4 May, 2000 between the parties, and/or (d) arises
out of or results from the willful misconduct or gross negligence of the Buyer
during the Buyer's consultancy with the Business for the period from July 1,
2000 to August 31, 2000 which amounts to a breach of the consultancy letter
agreement dated August 1, 2000 between the Parties.
13.08 SUBJECT TO THE AGREEMENT . The Buyer and the Seller acknowledge
and agree that the representations, warranties, covenants and agreements in this
Agreement are given subject to the Agreement, the Related Agreements and all
exhibits, schedules and annexes thereto and all other documents, acts and
transactions entered into or to be entered into in pursuance or referred to in
the Agreement and the provisions of and all information contained in any such
documents.
13.09 DISCLOSURE SCHEDULES. The contents of each Disclosure Schedule
and all documents referred to and attached to such Disclosure Schedules shall be
deemed to have been disclosed in relation to every provision of the Agreement to
which they relate so that the Seller is not obliged to cross reference items
disclosed on a Disclosure Schedule to items disclosed on one or more of the
other Disclosure Schedules to this Agreement.
ARTICLE 14
MISCELLANEOUS
14.01 NOTICES. All notices, requests, demands, consents and
communications necessary or required under this Agreement shall be deemed duly
given (i) when personally delivered, (ii) upon receipt of a telephonic facsimile
transmission with a confirmed facsimile receipt, (iii) seven (7) days after
having been deposited, certified or registered mail, return receipt requested,
postage prepaid, or (iv) two (2) business days after having been dispatched by a
nationally recognized overnight courier service, addressed to the Seller or the
Buyer at the following address (or at such other address or number as is given
in writing by the Seller or the Buyer) as follows:
If to the Buyer: Yorktel Acquisition Corporation
1 Industrial Way West, Building E
Eatontown, New Jersey 07724
Attention: President
Facsimile No.: (732) 389-5210
If to the Seller: Madge Networks (New Jersey) Inc.
Wexham Springs
Framewood Road
Wexham
Slough, SL3 6PJ
England
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Attention: Legal Department
Facsimile No.: +44 1753 661448
14.02 SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the Parties hereto; provided, however, that this
Agreement may not be assigned by any Party without the prior written consent of
the other Party.
14.03 WAIVER. None of the terms or conditions of this Agreement may be
waived except in writing, specifically so stating, at any time by the Party
which is entitled to the benefits thereof. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of such provision at
any time in the future or a waiver of any other provision hereof.
14.04 CAPTIONS. The captions set forth in this Agreement are for
convenience only and shall not be considered as part of this Agreement, and
shall not affect in any way the meaning of the terms and provisions hereof.
14.05 ENFORCEABILITY. If any provision of this Agreement as applied to
any Party or to any circumstance shall be adjudged by a court to be invalid or
unenforceable, the same shall in no way affect any other provision of this
Agreement. The Parties intend this Agreement to be enforced as written. If any
provision of this Agreement shall otherwise finally be determined to be
unlawful, then such provision shall be deemed to be severed from this Agreement
and every other provision of this Agreement shall remain in full force and
effect.
14.06 NO THIRD PARTY BENEFICIARY OR RIGHT TO RELY. Except under Article
13, this Agreement is not intended nor shall it confer any rights or remedies
upon any Person other than the Parties to this Agreement. No Third Party is
entitled to rely on any representations, warranties, covenants or agreements
contained herein and no Party hereto shall incur any liability or obligation to
any Third Party because of any reliance by such Third Party.
14.07 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument
14.08 GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement shall in
all respects be interpreted, construed and governed by and in accordance with
the laws of the state of New Jersey. Any judicial proceeding commenced with
respect to this Agreement shall be brought in any court of competent
jurisdiction in Monmouth County, New Jersey or in the United States District
Court for the District of New Jersey, and by execution and delivery of this
Agreement, the Parties hereby consent to the exclusive jurisdiction of any such
applicable court and waive any defense or opposition to such jurisdiction.
14.09 NO STRICT CONSTRUCTION. The language used in this Agreement shall
be deemed the language chosen by the Parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against either
Party.
14.10 PUBLIC ANNOUNCEMENTS. The Buyer and the Seller shall mutually
agree on the terms of all press releases, other public announcements, and
announcements relating to this Agreement and the transactions contemplated
hereby.
14.11 ENTIRE AGREEMENT; AMENDMENT. This Agreement, including all
Disclosure Schedules and Exhibits hereto, together with the Related Agreements,
constitute the sole understanding of the Parties with respect to the matters
contemplated hereby and thereby and supercedes and renders null and void all
other prior agreements and understandings, oral or written, between the Parties
with respect to such matters. No amendment, modification or alteration of the
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terms and provisions of this Agreement, including the Disclosure Schedules and
Exhibits hereto, shall be binding unless the same shall be in writing,
specifically so stating, and duly executed by the Party against whom such would
apply.
14.12 CONFIDENTIAL INFORMATION.
(a) For a period of five (5) years after the Closing, Seller will treat
and hold as confidential (and will use its best efforts to cause all Affiliates
of Seller to treat and hold as confidential) all information in its possession
concerning the Buyer, the Buyer's Affiliates and the Business, and refrain from
using any such information, except that Seller may disclose information that
becomes public other than through the act of Seller or an Affiliate of Seller
and to the extent required by applicable law or legal process.
For a period of five (5) years after the Closing, Buyer will treat and hold as
confidential (and will use its best efforts to cause all Affiliates of Buyer to
treat and hold as confidential) all information with respect to the Seller or
the Seller's Affiliates in its possession, other than information concerning the
Business, and refrain from using any such information, except that Buyer may
disclose information that becomes public other than through the act of Buyer or
an Affiliate of Buyer and to the extent required by applicable law or legal
process.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
duly executed and delivered by its duly authorized representative as of the date
first written above.
MADGE NETWORKS (NEW JERSEY) INC.
By: /s/ David Elliott
------------------------------------
Name: David Elliott
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Title: General Manager
---------------------------------
YORKTEL ACQUISITION CORPORATION
By: /s/ Ronald J Gaboury
------------------------------------
Name: Ronald J. Gaboury
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Title: President and COO
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