EXHIBIT 2.1
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*** Text Omitted and Filed Separately
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4), 200.83 and
240.24b-2
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ASSET PURCHASE AGREEMENT
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between
QUALCOMM INCORPORATED
and
TELEFONAKTIEBOLAGET LM ERICSSON (publ)
Dated as of March 24, 1999
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS
SECTION 1.01. Certain Defined Terms.....................................................................2
SECTION 1.02. Other Defined Terms.......................................................................9
SECTION 1.03. Other Definitional Provisions............................................................10
ARTICLE II PURCHASE AND SALE
SECTION 2.01. Assets to Be Sold........................................................................10
SECTION 2.02. Assumption and Exclusion of Liabilities..................................................13
SECTION 2.03. Purchase Price...........................................................................14
SECTION 2.04. Closing..................................................................................15
SECTION 2.05. Closing Deliveries by the Seller.........................................................15
SECTION 2.06. Closing Deliveries by the Purchaser......................................................15
SECTION 2.07. Pre-Closing Adjustment of the Purchase Price.............................................16
SECTION 2.08. Post-Closing Adjustment of the Purchase Price............................................18
SECTION 2.09. Allocation of the Purchase Price.........................................................20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER
SECTION 3.01. Organization, Authority and Qualification of the Seller..................................21
SECTION 3.02. No Conflict .............................................................................21
SECTION 3.03. Governmental Consents and Approvals......................................................22
SECTION 3.04. Financial Information....................................................................22
SECTION 3.05. No Undisclosed Liabilities...............................................................22
SECTION 3.06. Receivables..............................................................................23
SECTION 3.07. Inventories..............................................................................23
SECTION 3.08. Sales and Purchase Order Backlog.........................................................24
SECTION 3.09. Customers................................................................................24
SECTION 3.10. Suppliers................................................................................24
SECTION 3.11. Products and Services....................................................................24
SECTION 3.12. Year 2000 Readiness......................................................................25
SECTION 3.13. Vendor Financing Obligations.............................................................25
SECTION 3.14. Litigation...............................................................................25
SECTION 3.15. Compliance with Laws.....................................................................26
SECTION 3.16. Conduct in the Ordinary Course; Absence of Certain Changes, Events and Conditions........26
SECTION 3.17. Permits and Licenses.....................................................................28
SECTION 3.18. Environmental Matters....................................................................28
SECTION 3.19. Material Contracts.......................................................................29
SECTION 3.20. Intellectual Property....................................................................30
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SECTION 3.21. Real Property............................................................................31
SECTION 3.22. Tangible Personal Property...............................................................32
SECTION 3.23. Right, Title and Interest in Assets......................................................33
SECTION 3.24. Employee Benefit Matters.................................................................33
SECTION 3.25. Labor Matters............................................................................36
SECTION 3.26. Key Employees............................................................................37
SECTION 3.27. Taxes....................................................................................37
SECTION 3.28. Insurance................................................................................37
SECTION 3.29. Brokers..................................................................................38
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
SECTION 4.01. Organization and Authority of the Purchaser..............................................38
SECTION 4.02. No Conflict..............................................................................38
SECTION 4.03. Governmental Consents and Approval.......................................................39
SECTION 4.04. Litigation...............................................................................39
SECTION 4.05. Brokers..................................................................................39
ARTICLE V ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing.................................................39
SECTION 5.02. Access to Information....................................................................40
SECTION 5.03. Confidentiality..........................................................................41
SECTION 5.04. Regulatory and Other Authorizations; Notices and Consents................................42
SECTION 5.05. Notice of Developments...................................................................44
SECTION 5.06. No Solicitation or Negotiation...........................................................44
SECTION 5.07. Use of Intellectual Property.............................................................45
SECTION 5.08. Non-Competition..........................................................................45
SECTION 5.09. Excluded Liabilities.....................................................................47
SECTION 5.10. Bulk Transfer Laws.......................................................................47
SECTION 5.11. Tax Matters..............................................................................47
SECTION 5.12. Letters of Credit, Etc...................................................................48
SECTION 5.13. License of Excluded Intellectual Property................................................49
SECTION 5.14. Ancillary Agreements.....................................................................49
SECTION 5.15. Other Matters............................................................................49
SECTION 5.16. Provision of Subscriber Units............................................................50
SECTION 5.17. Joint Support of Third Generation Standard...............................................50
SECTION 5.18. Further Action...........................................................................50
ARTICLE VI EMPLOYEE MATTERS
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SECTION 6.01. Offer of Employment......................................................................51
SECTION 6.02. Transferred Employee Liabilities.........................................................51
SECTION 6.03. Participation in Certain Retirement Plans................................................51
SECTION 6.04. Executive Plan...........................................................................52
SECTION 6.05. Welfare Benefit Plans....................................................................52
SECTION 6.06. Service Credit...........................................................................53
SECTION 6.07. Indemnity................................................................................53
SECTION 6.08. Employee Information.....................................................................53
SECTION 6.09. Certain Other Employee-Related Costs.....................................................54
ARTICLE VII CONDITIONS TO CLOSING
SECTION 7.01. Conditions to Obligations of the Seller..................................................54
SECTION 7.02. Conditions to Obligations of the Purchaser. .............................................55
ARTICLE VIII INDEMNIFICATION
SECTION 8.01. Survival of Representations and Warranties...............................................57
SECTION 8.02. Indemnification by the Seller............................................................58
SECTION 8.03. Indemnification by the Purchaser.........................................................59
SECTION 8.04. Indemnification Procedures...............................................................59
SECTION 8.05. Tax Matters..............................................................................60
ARTICLE IX TERMINATION AND WAIVER
SECTION 9.01. Termination..............................................................................61
SECTION 9.02. Effect of Termination....................................................................61
SECTION 9.03. Waiver. ................................................................................61
ARTICLE X GENERAL PROVISIONS
SECTION 10.01. Expenses................................................................................62
SECTION 10.02. Notices.................................................................................62
SECTION 10.03. Public Announcements....................................................................63
SECTION 10.04. Headings................................................................................63
SECTION 10.05. Severability............................................................................63
SECTION 10.06. Entire Agreement........................................................................64
SECTION 10.07. Assignment..............................................................................64
SECTION 10.08. No Third Party Beneficiaries............................................................64
SECTION 10.09. Amendment...............................................................................64
SECTION 10.10. Governing Law...........................................................................64
SECTION 10.11. Counterparts............................................................................65
SECTION 10.12. Specific Performance....................................................................65
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Exhibits
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A Form of the License Agreements
B Principal Terms of the ASICS Supply Agreements
C Form of Assumption Agreements
D Form of Bills of Sale and Assignment
E Principal Terms of the Infrastructure Supply Agreement
F Principal Terms of the Interim Services Agreement
G Principal Terms of the Lease Agreements
H Principal Terms of the Vendor Financing Agreement
2.01(a)(i) Transferred Customer Contracts
2.01(a)(iii) Other Transferred Contracts
2.01(a)(vi) Physical Assets
2.01(b)(i) Excluded Contracts
2.09 Allocation of Purchase Price
7.01(f)(i) Form of Opinion of the Purchaser's General Counsel
7.01(f)(ii) Form of Opinion of the Purchaser's U.S. Counsel
7.02(g) Form of Opinion of Seller's Counsel
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of March 24, 1999, between
QUALCOMM INCORPORATED, a Delaware corporation (the "SELLER"), and
TELEFONAKTIEBOLAGET LM ERICSSON (publ), a company organized under the laws of
Sweden (the "PURCHASER").
W I T N E S S E T H:
WHEREAS, the Seller, through its Wireless Systems Division, is
engaged in the business of designing, developing, manufacturing, marketing,
selling and servicing CDMA terrestrial-based cellular, personal communications
services ("PCS"), and wireless local loop ("WLL") network infrastructure
products, at various locations in the United States and other countries (the
"BUSINESS");
WHEREAS, in connection with the conduct of the Business and other
businesses conducted by the Seller, the Purchaser and the Seller have engaged in
certain disputes relating to the use by the Seller of certain intellectual
property rights of the Purchaser and its subsidiaries;
WHEREAS, as a result of such disputes, the Seller and an affiliate
of the Seller and the Purchaser and an affiliate of the Purchaser are currently
engaged in litigation styled "Ericsson Inc. et al. v. QUALCOMM Inc. et al.",
Civil Action No. 2:96cv183-DF/HWM (Consolidated) in the United States District
Court for the Eastern District of Texas, Marshall Division (the "CURRENT
LITIGATION");
WHEREAS, the Seller and the Purchaser desire to resolve such
intellectual property disputes and to settle the Current Litigation;
WHEREAS, coincident with such settlement and the resolution of such
intellectual property disputes, concurrently with the execution and delivery of
this Agreement, the Seller and the Purchaser are entering into a Subscriber Unit
License Agreement and a Multi-Product License Agreement, in the respective forms
attached hereto as Exhibit A (the "LICENSE AGREEMENTS"), pursuant to which the
parties are agreeing to license certain intellectual property rights to each
other;
WHEREAS, the Seller and the Purchaser desire to jointly support the
adoption of a single CDMA third generation standard;
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WHEREAS, the Seller also desires to sell to the Purchaser, and the
Purchaser desires to purchase from the Seller, a significant portion of the
Business, including, without limitation, all right, title and interest of the
Seller in and to certain properties and assets of the Business, and in
connection therewith the Purchaser is willing to assume certain liabilities of
the Seller relating thereto, all upon the terms and subject to the conditions
set forth herein; and
WHEREAS, in connection with the closing of the transactions
contemplated by this Agreement, the Seller and the Purchaser intend to enter
into certain other related agreements.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, and intending to be legally
bound hereby, the Purchaser and the Seller hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"ACTION" means any action, suit, arbitration, inquiry, proceeding or
investigation by or before any Governmental Authority.
"ACQUIRED BUSINESS" means the Business as conducted by the Seller's
Wireless Systems Division as of the Closing Date, which shall be comprised of
the Assets, the Assumed Liabilities and the Transferred Customer Contracts but
which shall not include (a) the Excluded Contracts or Excluded Liabilities, (b)
chips or chipsets which the Seller has developed or is developing for sale to
other network infrastructure equipment licensees, nor the component designs,
mask sets and associated software and developmental hardware, (c) the design,
development, manufacture, marketing and sale of network infrastructure products
to United States governmental entities or for use in satellite-based
applications or (d) activities conducted by the Seller which are not part of the
Seller's Wireless Systems Division (including, without limitation, subscriber
units, OmniTRACs, etc.).
"AFFILIATE" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"AGREEMENT" or "THIS AGREEMENT" means this Asset Purchase Agreement,
dated as of March 24, 1999, between the Seller and the Purchaser (including the
Exhibits hereto and
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the Disclosure Schedule) and all amendments hereto made in accordance with the
provisions of Section 10.09.
"ANCILLARY AGREEMENTS" means the ASICS Supply Agreements, the
Assumption Agreements, the Bills of Sale, the Infrastructure Supply Agreement,
the Interim Services Agreement, the Lease Agreements, the License Agreements,
the Settlement Agreement and the Vendor Financing Agreement.
"ANNUAL FINANCIAL STATEMENTS" means the audited consolidated balance
sheets of the Seller as of September 30, 1997 and September 30, 1998, together
with the related statements of income and cash flows for the fiscal years then
ended, included in the Seller's Annual Report on Form 10-K for the fiscal year
ended September 30, 1998.
"ASICS SUPPLY AGREEMENTS" means the ASICS Supply Agreements to be
entered into between the Seller and the Purchaser at the Closing containing the
principal terms set forth on Exhibit B.
"ASSUMPTION AGREEMENTS" means the Assumption Agreements to be
entered into between the Seller and the Purchaser or Affiliates of the Purchaser
at the Closing substantially in the form of Exhibit C.
"BILLS OF SALE" means the Bills of Sale and Assignment to be
executed by the Seller at the Closing substantially in the form of Exhibit D.
"BUSINESS DAY" means any day that is not a Saturday, a Sunday or
other day on which banks are required or authorized by Law to be closed in The
City of New York.
"BUSINESS EMPLOYEE" means any employee of the Seller who is employed
in the Business.
"CODE" means the Internal Revenue Code of 1986, as amended through
the date hereof.
"CONFIDENTIALITY AGREEMENT" means the letter agreement dated as of
July 27, 1998, between the Seller and the Purchaser.
"CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH"), with respect to the relationship between or among two or more
Persons, means the possession, directly or indirectly or as trustee, personal
representative or executor, of the power to direct or cause the direction of the
affairs or management of a Person, whether through the ownership of voting
securities, as trustee, personal representative or executor, by contract or
otherwise, including, without limitation, the ownership, directly or indirectly,
of
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securities having the power to elect a majority of the board of directors or
similar body governing the affairs of such Person.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule, dated as of the
date hereof, delivered by the Seller to the Purchaser.
"ENCUMBRANCE" means any security interest, pledge, mortgage, lien,
charge, encumbrance, adverse claim, preferential arrangement, or restriction of
any kind, including, without limitation, any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of ownership.
"ENVIRONMENTAL CLAIMS" means any and all administrative, regulatory
or judicial actions, suits, demands, claims, liens, notices of non-compliance or
violation, investigations, proceedings, consent orders or consent agreements
relating in any way to any Environmental Law or any permit under any
Environmental Law (hereinafter "Claims"), including, without limitation, (a) any
and all Claims by Governmental Authorities for enforcement, cleanup or other
actions or damages pursuant to any applicable Environmental Law and (b) any and
all Claims by any Person seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from Hazardous Materials
or arising from alleged injury or threat of injury to health, safety or the
environment.
"ENVIRONMENTAL CONDITION" means a condition relating to or arising
or resulting from a failure to comply with any applicable Environmental Law or
any permit under any Environmental Law or a release or discharge of a Hazardous
Material into the environment.
"ENVIRONMENTAL LAW" means any Law, now or hereafter in effect and as
amended, and any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent decree or judgment, relating to
the environment, health, safety or Hazardous Materials.
"GOVERNMENTAL AUTHORITY" means any United States federal, state or
local or any foreign government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal, or judicial or arbitral
body.
"GOVERNMENTAL ORDER" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"HAZARDOUS MATERIALS" means (a) petroleum and petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, transformers or other equipment that contain
polychlorinated biphenyls, and radon gas, (b) any other chemicals, materials or
substances defined as or included in the definition of "hazardous substances",
"hazardous wastes", "hazardous materials", "toxic
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substances", "contaminants" or "pollutants", or words of similar import, under
any applicable Environmental Law, and (c) any other chemical, material or
substance exposure to which is regulated by any Governmental Authority. "HSR
ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations promulgated thereunder.
"INDEBTEDNESS" means, with respect to any Person, (a) all
indebtedness of such Person, whether or not contingent, for borrowed money, (b)
all obligations of such Person for the deferred purchase price of property or
services, (c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (e) all obligations of such Person as
lessee under leases that have been or should be, in accordance with U.S. GAAP,
recorded as capital leases, (f) all obligations, contingent or otherwise, of
such Person under acceptance, letter of credit or similar facilities, (g) all
Indebtedness of others referred to in clauses (a) through (f) above guaranteed
directly or indirectly in any manner by such Person, or in effect guaranteed
directly or indirectly by such Person through an agreement (i) to pay or
purchase such Indebtedness or to advance or supply funds for the payment or
purchase of such Indebtedness, (ii) to purchase, sell or lease (as lessee or
lessor) property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Indebtedness or to assure the holder
of such Indebtedness against loss, (iii) to supply funds to or in any other
manner invest in the debtor (including any agreement to pay for property or
services irrespective of whether such property is received or such services are
rendered) or (iv) otherwise to assure a creditor against loss, and (h) all
Indebtedness referred to in clauses (a) through (f) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Encumbrance on property (including, without
limitation, accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness.
"INFRASTRUCTURE SUPPLY AGREEMENT" means the Infrastructure Supply
Agreement to be entered into between the Seller and the Purchaser at the Closing
containing the principal terms set forth on Exhibit E.
"INTERIM FINANCIAL STATEMENTS" means the unaudited consolidated
balance sheets of the Seller as of December 31, 1997 and December 31, 1998,
together with the related statements of income and cash flows for the fiscal
quarters then ended, included in the Seller's Quarterly Report on Form 10-Q for
the fiscal quarter ended December 31, 1998.
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"INTERIM SERVICES AGREEMENT" means the Interim Services Agreement to
be entered into between the Seller and the Purchaser at the Closing containing
the principal terms set forth on Exhibit F.
"INTELLECTUAL PROPERTY" means the Seller's and its Affiliates' (a)
inventions, ideas and conceptions of inventions, whether or not patentable,
whether or not reduced to practice, and whether or not yet made the subject of a
pending patent application or applications, (b) all United States, international
and foreign statutory invention registrations, patents, patent registrations and
patent applications (including, without limitation, all reissues, divisions,
continuations, continuations-in-part, extensions and reexaminations thereof) and
all rights therein provided by international treaties or conventions and all
improvements to the inventions disclosed in each such registration, patent or
application, (c) trademarks, service marks, certification marks, collective
marks, trade dress, logos, domain names, product configurations, trade names,
business names, corporate names and other source identifiers, whether or not
registered and whether or not currently in use, including all common law rights,
and registrations and applications for registration thereof, including, but not
limited to, all marks registered in the United States Patent and Trademark
Office or in any office or agency of any State or Territory thereof or of any
foreign country, and all rights therein provided by international treaties or
conventions, and all reissues, extensions and renewals of any of the foregoing,
(d) copyrighted works, copyrights, whether or not registered, and registrations
and applications for registration thereof in the United States and any foreign
country, and all rights therein provided by international treaties or
conventions, (e) moral rights (including, without limitation, rights of
paternity and integrity), and waivers of such rights by others, (f) computer
software, including, without limitation, source code, object code, objects,
comments, screens, user interfaces, report formats, templates, menus, buttons
and icons, and all files, data, documentation and other materials related
thereto, (g) confidential and proprietary information, including know-how, trade
secrets, manufacturing and production processes and techniques, research and
development information, technical data, financial, marketing and business data,
pricing and cost information, business and marketing plans, and customer and
supplier lists and information, (h) copies and tangible embodiments of all the
foregoing, in whatever form or medium, (i) all rights to obtain and rights to
register trademarks and copyrights, and (j) all rights to sue or recover and
retain damages and costs and attorneys' fees for past, present and future
infringement of any of the foregoing.
"INVENTORIES" means all inventory, merchandise, finished goods,
works in process, raw materials, packaging, supplies and other personal property
intended to be used in the Acquired Business, maintained, held or stored by or
for the Seller on the Closing Date and any prepaid deposits for any of the same.
"IRS" means the Internal Revenue Service of the United States.
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"LAW" means any federal, state, local or foreign statute, law,
ordinance, regulation, rule, code, order, requirement or rule of common law.
"LEASE AGREEMENTS" means (a) the Lease Agreements to be entered into
between the Seller and the Purchaser at the Closing containing the principal
terms set forth on Exhibit G and (b) the assignments and subleases of the leases
to be entered into pursuant to Section 2.01(a)(ii).
"LIABILITIES" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable, including, without limitation, those arising under
any Law (including, without limitation, any Environmental Law), Action or
Governmental Order and those arising under any contract, agreement, arrangement,
commitment or undertaking.
"MATERIAL ADVERSE EFFECT" means any circumstance, change in, or
effect on, the Acquired Business that, individually or in the aggregate with any
other circumstances, changes in, or effects on, the Acquired Business is, or
could reasonably be expected to be, materially adverse to the Assets or Assumed
Liabilities or the operations, employee relationships, customer or supplier
relationships, results of operations or the condition (financial or otherwise)
of the Acquired Business. Notwithstanding the foregoing, in no event shall any
of the following constitute a Material Adverse Effect: (a) any circumstance,
change or effect generally affecting the industry in which the Seller operates
the Acquired Business or arising from changes in general business or economic
conditions, (b) any circumstance, change or effect (including, without
limitation, delays in customer orders, a reduction in sales, a disruption in
supplier, distributor or similar relationships or loss of employees) resulting
from the fact that the Purchaser (rather than another party) is the purchaser of
the Acquired Business, or (c) any circumstance, change or effect resulting from
actions taken by the Seller that are required by this Agreement or any of the
Ancillary Agreements.
"PERMITTED ENCUMBRANCES" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) liens for taxes, assessments and governmental charges or
levies not yet due and payable; (b) Encumbrances imposed by Law, such as
materialmen's, mechanics', carriers', workmen's and repairmen's liens and other
similar liens arising in the ordinary course of business securing obligations
that (i) are not overdue for a period of more than 30 days and (ii) are not in
excess of $100,000 in the case of a single property or $250,000 in the aggregate
at any time; (c) pledges or deposits to secure obligations under workers'
compensation laws or similar legislation or to secure public or statutory
obligations; and (d) minor survey exceptions, reciprocal easement agreements and
other customary encumbrances on title to real property that (i) do not render
title to the property encumbered thereby unmarketable and (ii) do not,
individually or in the aggregate, materially adversely affect the value of such
property or the use of such property for its present purposes.
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"PERSON" means any individual, partnership, limited liability
company, firm, corporation, association, trust, unincorporated organization or
other entity, as well as any syndicate or group that would be deemed to be a
person under Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended.
"PURCHASER'S ACCOUNTANTS" means PricewaterhouseCoopers LLP,
independent accountants of the Purchaser.
"RECEIVABLES" means any and all accounts receivable (but not notes
receivable) arising from the conduct of the Business before the Closing Date,
whether or not in the ordinary course, together with any unpaid financing
charges accrued thereon.
"REGULATIONS" means the Treasury Regulations (including Temporary
Regulations) promulgated by the United States Department of Treasury with
respect to the Code or other federal tax statutes.
"SELLER'S ACCOUNTANTS" means PricewaterhouseCoopers LLP, independent
accountants of the Seller.
"SETTLEMENT AGREEMENT" means the Settlement Agreement and Mutual
Release, dated as of the date hereof, among the Seller, Qualcomm Personal
Electronics, the Purchaser and Ericsson Inc.
"TAX" or "TAXES" means any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including,
without limitation: taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value added, or gains taxes;
license, registration and documentation fees; and customs' duties, tariffs, and
similar charges.
"U.S. GAAP" means United States generally accepted accounting
principles and practices in effect from time to time applied consistently by the
Seller throughout the periods involved.
"VENDOR FINANCING AGREEMENT" means the Vendor Financing Agreement to
be entered into between the Seller and the Purchaser at the Closing containing
the principal terms set forth on Exhibit H.
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SECTION 1.02. Other Defined Terms. The following terms shall have
the meanings defined for such terms in the Sections of this Agreement set forth
below:
Term Section
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Adjustment Threshold 2.07(b)(ii)
Assets 2.01(a)
Assumed Liabilities 2.02(a)
Business Recitals
Business Financial Statements 3.04
Business Intellectual Property 3.20(b)
Business Systems 3.12
Closing 2.04
Closing Date 2.04
Closing Net Book Value 2.08(a)
Closing Statement of Net Assets 2.08(a)
COBRA 6.05(c)
Competitive Activities 5.08(a)
Competitive Entity 5.08(a)
Current Litigation Recitals
Employee Amounts 6.09
ERISA 3.24(a)
Excluded Assets 2.01(b)
Excluded Contracts 2.01(b)(i)
Excluded Intellectual Property 2.01(b)(viii)
Excluded Liabilities 2.02(b)
FMLA 6.01
Independent Accounting Firm 2.07(b)(ii)
ITU 5.17
IP Licenses 3.20(e)
January Net Book Value 2.07(a)
January Statement of Net Assets 2.07(a)
Leased Real Property 3.21(b)
Leases 3.21(b)
License Agreements Recitals
Licensed Intellectual Property 3.20(b)
Loss 8.02(a)
Material Contracts 3.19(a)
Multiemployer Plan 3.24(b)
Multiple Employer Plan 3.24(b)
Owned Intellectual Property 3.20(a)
Owned Real Property 3.21(a)
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PCS Recitals
Permits 3.17
Permitted Percentage 5.08(a)
Plans 3.24(a)
Purchase Price 2.03
Purchaser Preamble
Purchaser Non-Solicit Period 5.08(c)
Purchaser's DCP 6.04
Real Property 3.21(b)
Restricted Period 5.08(a)
Selected Business Employees 6.01
Seller Preamble
Seller Non-Solicit Period 5.08(b)
Seller's DCP 6.04
Single CDMA Standard 5.17
Supplier Systems 3.12
Tangible Personal Property 3.22
Third Party Claims 8.04
Transferred Customer Contracts 2.01(a)(i)
Transferred Employees 6.01
Vendor Financing Commitments 3.13
WARN 3.24(g)
WLL Recitals
Year 2000 Plan 3.12
Year 2000 Ready 3.12
SECTION 1.03. Other Definitional Provisions. (a) The terms "dollars"
and "$" shall mean United States dollars.
(b) Terms defined in the singular shall have a comparable meaning
when used in the plural and vice versa.
ARTICLE II
PURCHASE AND SALE
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SECTION 2.01. Assets to Be Sold. (a) On the terms and subject to the
conditions of this Agreement, the Seller shall, on the Closing Date, sell,
assign, transfer, convey and deliver to the Purchaser, or cause to be sold,
assigned, transferred, conveyed and delivered to the Purchaser (or to one or
more Affiliates of the Purchaser designated by the Purchaser at or prior to the
Closing), and the Purchaser shall (or shall cause one or more Affiliates of the
Purchaser designated by the Purchaser at or prior to the Closing to) purchase
from the Seller, on the Closing Date, all the assets, properties, goodwill and
business of every kind and description and wherever located, whether tangible or
intangible, real, personal or mixed, directly or indirectly owned by the Seller
or to which it is directly or indirectly entitled and, in any case, primarily
used or intended to be primarily used in the Business as conducted by the Seller
as of the Closing Date, other than the Excluded Assets (the assets to be
purchased by the Purchaser or Affiliates of the Purchaser being referred to as
the "ASSETS"), including, without limitation, the following:
(i) all rights of the Seller in, to and under the contracts listed
on Exhibit 2.01(a)(i) (the "TRANSFERRED CUSTOMER CONTRACTS") (which, other
than the Transferred Customer Contracts with US West Wireless LLC and
Mauritius Telecom Limited, shall not include rights or obligations related
to the provision of handsets or other subscriber equipment);
(ii) all rights of the Seller in, to and under the leases to be
assigned or subleased pursuant to Exhibit G;
(iii) except for the Excluded Assets, all rights of the Seller under
all other contracts, agreements, leases, commitments, and sales and
purchase orders, and under all commitments, bids and offers (to the extent
such offers are transferable) to the extent primarily used or intended to
be primarily used in the Acquired Business, including, without limitation,
such items as are set forth on Exhibit 2.01(a)(iii);
(iv) all Inventories primarily used or intended to be used in the
Business, except for Inventories that cannot be used in connection with
the Transferred Customer Contracts without significant expense incurred
other than in the ordinary course of business;
(v) all Receivables to the extent related to the Acquired
Business;
(vi) all rights of the Seller in and to the furniture, equipment,
machinery, vehicles and other tangible personal property primarily used or
held for use by the Seller at the locations at which the Acquired Business
is conducted, or otherwise owned or held by the Seller primarily for use
in the conduct of the Acquired Business, including, without limitation,
the assets listed on Exhibit 2.01(a)(vi), other than such assets primarily
used or intended to be used in connection with the Excluded Contracts;
12
(vii) all the Seller's right, title and interest in, to and under
the Business Intellectual Property;
(viii) all municipal, state and federal franchises, permits,
licenses, agreements, waivers and authorizations primarily held or used by
the Seller in connection with the Acquired Business, to the extent
transferable;
(ix) all claims, causes of action, choices in action, rights of
recovery and rights of set-off of any kind (including rights to insurance
proceeds and rights under and pursuant to all warranties, representations
and guarantees made by suppliers of products, materials or equipment, or
components thereof), primarily pertaining to or primarily arising out of
the Business, except to the extent any of the foregoing relates to the
Excluded Assets or the Excluded Liabilities;
(x) all books of account, general, financial, tax and personnel
records, invoices, shipping records, supplier lists, correspondence and
other documents, records and files and all computer software and programs
and any rights thereto primarily used in, or primarily relating to, the
Acquired Business;
(xi) all sales and promotional literature, customer lists and other
sales-related materials designed for and intended to be used in the
Acquired Business by the Seller;
(xii) the Acquired Business as a going concern and the goodwill of
the Seller relating to the Acquired Business; and
(xiii) except for the Excluded Assets, all the Seller's right, title
and interest in, to and under all other assets, rights and claims of every
kind and nature primarily used or intended to be primarily used in the
operation of the Acquired Business.
(b) The Assets shall exclude the following assets owned by the
Seller (the "EXCLUDED ASSETS"):
(i) all rights of the Seller in, to and under the contracts listed
on Exhibit 2.01(b)(i) and all other similar telecommunication system sales
and financing contracts with customers not included in the Transferred
Customer Contracts (the "EXCLUDED CONTRACTS");
(ii) all rights of the Seller in, to and under the Transferred
Customer Contracts (other than the Transferred Customer Contracts with US
West Wireless LLC and Mauritius Telecom Limited) to the extent related to
the provision of handsets or other subscriber equipment;
13
(iii) all Owned Real Property;
(iv) all cash, cash equivalents and bank accounts owned by the
Seller;
(v) all Inventories not primarily used or intended to be used in
the Business and all Inventories that cannot be used in connection with
the Transferred Customer Contracts without significant expense incurred
other than in the ordinary course of business;
(vi) all Receivables not related to the Acquired Business;
(vii) the capital stock, notes and other securities of, and all
other interests of the Seller in, any Person, including, without
limitation, all subsidiaries of the Seller and all investments of the
Seller in telecommunications operators or other entities;
(viii) all right, title and interest of the Seller in or to (A) the
name "Qualcomm", (B) any Intellectual Property described in clause (a) or
(b) of the definition of Intellectual Property, (C) patent cross-license
agreements and other intellectual property licenses entered into as part
of such cross-license agreements or related to such cross-license
agreements, and (D) all Intellectual Property other than that described in
clauses (A), (B) and (C) used both in the Acquired Business and in
businesses of the Seller other than the Acquired Business (collectively,
the "EXCLUDED INTELLECTUAL PROPERTY");
(ix) all federal, state and local income and franchise tax credits
and tax refund claims (and any foreign equivalents thereof) relating to or
arising out of the Business prior to the Closing;
(x) all rights of the Seller under this Agreement and the
Ancillary Agreements; and
(xi) all the Seller's right, title and interest on the Closing Date
in, to and under all other assets, properties, goodwill and business of
every kind, wherever located, whether tangible or intangible, real,
personal or mixed, not primarily used or intended to be primarily used in
the operation of the Acquired Business.
(c) Subject to the Purchaser's right to assign its rights under
this Agreement in accordance with Section 10.07 of this Agreement, Assets (other
than Business Intellectual Property) located in the United States shall be
purchased by Ericsson Inc., a wholly owned subsidiary of the Purchaser (or
another Affiliate of the Purchaser incorporated in the United States and
designated by the Purchaser at or prior to the Closing), and Assets located
outside
14
the United States shall be purchased by the Purchaser or an Affiliate of the
Purchaser incorporated outside the United States designated by the Purchaser at
or prior to the Closing.
SECTION 2.02. Assumption and Exclusion of Liabilities. (a) On the
terms and subject to the conditions of this Agreement, the Purchaser shall, on
the Closing Date, assume and shall pay, perform and discharge when due only the
following and no other Liabilities of the Seller as at the Closing Date, other
than the Excluded Liabilities (the "ASSUMED LIABILITIES"):
(i) Liabilities primarily arising out of or relating to the
Acquired Business to the extent such Liabilities are reflected on the
Closing Statement of Net Assets, including all accrued liabilities (other
than liabilities for accrued salary and benefits and accrued vacation) to
the extent reflected or reserved for on the Closing Statement of Net
Assets;
(ii) all Liabilities arising out of the Transferred Customer
Contracts, and other contracts, agreements, leases, commitments, sales and
purchase orders, bids and offers that are included in the Assets (whether
such obligations arise before or after the Closing Date);
(iii) those employment-related Liabilities expressly assumed by the
Purchaser pursuant to Article VI; and
(iv) all Liabilities for accounts payable for goods and services
received or rendered following the Closing Date.
(b) The Seller shall retain, and shall be responsible for paying,
performing and discharging when due, and the Purchaser shall not assume or have
any responsibility for, all Liabilities of the Seller as of the Closing Date
other than the Assumed Liabilities (the "EXCLUDED LIABILITIES"), including,
without limitation:
(i) all Taxes now or hereafter owed by the Seller or any Affiliate
of the Seller, or attributable to the Assets or the Business, relating to
any period, or any portion of any period, ending on or prior to the
Closing Date;
(ii) all Liabilities to the extent relating to or arising out of
the Excluded Assets;
(iii) those employment-related Liabilities expressly retained by the
Seller pursuant to Article VI; and
15
(iv) all Liabilities for accounts payable for goods and services
received or rendered on or prior to the Closing Date.
SECTION 2.03. Purchase Price. Subject to the adjustments set forth
in Sections 2.07 and 2.08, if any, the purchase price for the Assets shall be
[*] (the "PURCHASE PRICE").
SECTION 2.04. Closing. Subject to the terms and conditions of this
Agreement, the sale and purchase of the Assets and the assumption of the Assumed
Liabilities contemplated by this Agreement shall take place at a closing (the
"CLOSING") to be held at the offices of Shearman & Sterling, 599 Lexington
Avenue, New York, New York at 9:00 A.M. New York time on the later to occur of
(i) May 24, 1999 or (ii) the third Business Day following the satisfaction or
waiver of all conditions to the obligations of the parties set forth in Article
VII, or at such other place or at such other time or on such other date as the
Seller and the Purchaser may mutually agree upon in writing (the day on which
the Closing takes place being the "CLOSING DATE").
SECTION 2.05. Closing Deliveries by the Seller. At the Closing, the
Seller shall deliver or cause to be delivered to the Purchaser:
(a) one or more Bills of Sale and such other instruments, in form
and substance reasonably satisfactory to the Purchaser, as may be requested by
the Purchaser to transfer the Assets to the Purchaser (or to Affiliates of the
Purchaser designated by the Purchaser) or to evidence such transfer on the
public records;
(b) an executed counterpart of one or more Assumption Agreements,
the ASICS Supply Agreements, the Infrastructure Supply Agreement, the Interim
Services Agreement, the Lease Agreements and the Vendor Financing Agreement;
(c) a receipt for the Purchase Price; and
(d) the opinions, certificates and other documents required to be
delivered pursuant to Section 7.02.
SECTION 2.06. Closing Deliveries by the Purchaser. At the Closing,
the Purchaser shall deliver or cause to be delivered to the Seller:
(a) the Purchase Price, as may be adjusted prior to the Closing
pursuant to Section 2.07, by wire transfer in immediately available funds to a
bank account in the United States to be designated by the Seller in a written
notice to the Purchaser at least two Business Days prior to the Closing;
* Confidential Treatment Requested
16
(b) an executed counterpart of one or more Assumption Agreements,
the ASICS Supply Agreements, the Infrastructure Supply Agreement, the Interim
Services Agreement, the Lease Agreements and the Vendor Financing Agreement; and
(c) the opinions, certificates and other documents required to be
delivered pursuant to Section 7.01.
SECTION 2.07. Pre-Closing Adjustment of the Purchase Price. The
Purchase Price shall be subject to adjustment as specified in this Section 2.07:
(a) January Statement of Net Assets. The Seller has prepared and
delivered to the Purchaser an audited schedule of specified assets and
liabilities of the Acquired Business as of the close of business on January 24,
1999 (the "JANUARY STATEMENT OF NET ASSETS"), which the Seller represents was
prepared in accordance with U.S. GAAP applied on a basis consistent with the
preparation of the Annual Financial Statements and the Interim Financial
Statements, reflecting only the book value of the Assets and the Assumed
Liabilities (as the same shall exist as of January 24, 1999) and eliminating the
book value of the Excluded Assets and the Excluded Liabilities (as the same
shall exist as of January 24, 1999), together with a report thereon of the
Seller's Accountants stating that the January Statement of Net Assets fairly
presents the financial position of the Acquired Business as of January 24, 1999
in accordance with U.S. GAAP. The specified net assets of the Acquired Business
as of January 24, 1999 (the "JANUARY NET BOOK VALUE") shall be calculated as the
excess of the book value of the Assets as of January 24, 1999 over the book
value of the Assumed Liabilities as of January 24, 1999.
(b) Disputes. (i) Subject to clause (ii) of this Section 2.07(b),
the January Statement of Net Assets delivered by the Seller to the Purchaser
shall be deemed to be and shall be final, binding and conclusive on the parties
hereto.
(ii) The Purchaser may dispute any amounts reflected on the January
Statement of Net Assets to the extent the net effect of such disputed
amounts in the aggregate would affect the January Net Book Value reflected
on the January Statement of Net Assets by more than [*] (the "ADJUSTMENT
THRESHOLD"), but only on the basis that the amounts reflected on the
January Statement of Net Assets were not arrived at in accordance with
U.S. GAAP applied on a basis consistent with the preparation of the Annual
Financial Statements and Interim Financial Statements or that the amounts
reflected thereon do not properly adjust to include only the book value of
the Assets and the Assumed Liabilities and to eliminate the book value of
the Excluded Assets and the Excluded Liabilities; provided, however, that
the Purchaser shall have notified the Seller and the Seller's Accountants
in writing of each disputed item, specifying the amount thereof in dispute
and setting forth, in reasonable detail, the basis
* Confidential Treatment Requested
17
for such dispute, within 15 Business Days of the date hereof. In the event
of such a dispute, the Seller's Accountants and the Purchaser's
Accountants shall attempt to reconcile their differences, and any
resolution by them as to any disputed amounts shall be final, binding and
conclusive on the parties hereto. If any such resolution by the
Purchaser's Accountants and the Seller's Accountants leaves in dispute
amounts the net effect of which in the aggregate would not affect the
January Net Book Value reflected on the January Statement of Net Assets by
more than the Adjustment Threshold, all such amounts remaining in dispute
shall then be deemed to have been resolved in favor of the January
Statement of Net Assets delivered by the Seller to the Purchaser. If the
Seller's Accountants and the Purchaser's Accountants are unable to reach a
resolution with such effect within ten Business Days after receipt by the
Seller and the Seller's Accountants of the Purchaser's written notice of
dispute, the Seller's Accountants and the Purchaser's Accountants shall
submit the items remaining in dispute for resolution to an independent
accounting firm of international reputation mutually acceptable to the
Purchaser and the Seller (such accounting firm being referred to herein as
the "INDEPENDENT ACCOUNTING FIRM"), which shall, within ten Business Days
after such submission, determine and report to the Purchaser and the
Seller upon such remaining disputed items, and such report shall be final,
binding and conclusive on the Seller and the Purchaser. The fees and
disbursements of the Independent Accounting Firm shall be allocated
between the Seller and the Purchaser in the same proportion that the
aggregate amount of such remaining disputed items so submitted to the
Independent Accounting Firm that is unsuccessfully disputed by each such
party (as finally determined by the Independent Accounting Firm) bears to
the total amount of such remaining disputed items so submitted.
(iii) In acting under this Agreement, the Purchaser's Accountants,
the Seller's Accountants and the Independent Accounting Firm shall be
entitled to the privileges and immunities of arbitrators.
(c) Purchase Price Adjustment. The January Statement of Net Assets
shall be deemed final for the purposes of this Section 2.07 upon the earlier of
(A) the failure of the Purchaser to notify the Seller of a dispute within 15
Business Days of the date hereof, (B) the resolution of all disputes, pursuant
to Section 2.07(b)(ii), by the Purchaser's Accountants and the Seller's
Accountants and (C) the resolution of all disputes, pursuant to Section
2.07(b)(ii), by the Independent Accounting Firm. Prior to the Closing, a
Purchase Price adjustment shall be made as follows:
(i) in the event that the January Net Book Value reflected on the
final January Statement of Net Assets exceeds the January Net Book Value
reflected on the January Statement of Net Assets delivered by the Seller
to the Purchaser by at least the Adjustment Threshold, then the Purchase
Price shall be adjusted upward in an amount equal to such excess over the
Adjustment Threshold; and
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(ii) in the event that the January Net Book Value reflected on the
January Statement of Net Assets delivered by the Seller to the Purchaser
exceeds the January Book Value reflected on the final January Statement of
Net Assets by at least the Adjustment Threshold, then the Purchase Price
shall be adjusted downward in an amount equal to such excess over the
Adjustment Threshold.
(d) If the January Statement of Net Assets is not deemed final in
accordance with Section 2.07(c) on or prior to the Closing, (i) the Purchase
Price shall be [*], and (ii) the Purchase Price shall be further adjusted
pursuant to Section 2.07(c) as soon as the January Statement of Net Assets is
deemed final in accordance with Section 2.07(c), with the Seller or the
Purchaser, as the case may be, making a cash payment to the other to reflect
such adjustment, by wire transfer in immediately available funds.
SECTION 2.08. Post-Closing Adjustment of the Purchase Price. The
Purchase Price shall be subject to adjustment after the Closing as specified in
this Section 2.08:
(a) Closing Statement Of Net Assets. As promptly as practicable,
but in any event within 45 calendar days following the Closing Date, the Seller
shall at its expense prepare and deliver to the Purchaser an audited schedule of
specified assets and liabilities of the Acquired Business as of the close of
business on the Closing Date (the "CLOSING STATEMENT OF NET ASSETS") prepared in
accordance with U.S. GAAP applied on a basis consistent with the preparation of
the January Statement of Net Assets (except that it shall include an appropriate
reserve for deferred costs or deferred revenues from vendor financing contracts,
if appropriate under U.S. GAAP), reflecting only the book value of the Assets
and the Assumed Liabilities (as the same shall exist as of the Closing) and
eliminating the book value of the Excluded Assets and the Excluded Liabilities
(as the same shall exist as of the Closing), together with (i) a report thereon
of the Seller's Accountants stating that the January Statement of Net Assets
fairly presents the financial position of the Acquired Business at the Closing
Date in accordance with U.S. GAAP, and (ii) a certification of the chief
financial officer or chief accounting officer of the Seller to the effect that
the Closing Statement of Net Assets has been prepared in compliance with the
requirements of this Section 2.08. The specified net assets of the Acquired
Business as of the Closing (the "CLOSING NET BOOK VALUE") shall be calculated as
the excess of the book value of the Assets reflected on the Closing Statement of
Net Assets over the book value of the Assumed Liabilities reflected on the
Closing Statement of Net Assets.
(b) Disputes. (i) Subject to clause (ii) of this Section 2.08(b),
the Closing Statement of Net Assets delivered by the Seller to the Purchaser
shall be deemed to be and shall be final, binding and conclusive on the parties
hereto.
* Confidential Treatment Requested
19
(ii) The Purchaser may dispute any amounts reflected on the Closing
Statement of Net Assets to the extent the net effect of such disputed
amounts in the aggregate would affect the Closing Net Book Value reflected
on the Closing Statement of Net Assets by more than the Adjustment
Threshold, but only on the basis that the amounts reflected on the Closing
Statement of Net Assets were not arrived at in accordance with U.S. GAAP
applied on a basis consistent with the preparation of the January
Statement of Net Assets or that the amounts reflected thereon do not
properly adjust to include only the book value of the Assets and the
Assumed Liabilities and to eliminate the book value of the Excluded Assets
and the Excluded Liabilities; provided, however, that the Purchaser shall
have notified the Seller and the Seller's Accountants in writing of each
disputed item, specifying the amount thereof in dispute and setting forth,
in reasonable detail, the basis for such dispute, within 15 Business Days
of the Seller's delivery of the Closing Statement of Net Assets to the
Purchaser. In the event of such a dispute, the Seller's Accountants and
the Purchaser's Accountants shall attempt to reconcile their differences,
and any resolution by them as to any disputed amounts shall be final,
binding and conclusive on the parties hereto. If any such resolution by
the Purchaser's Accountants and the Seller's Accountants leaves in dispute
amounts the net effect of which in the aggregate would not affect the
Closing Net Book Value reflected on the Closing Statement of Net Assets by
more than the Adjustment Threshold, all such amounts remaining in dispute
shall then be deemed to have been resolved in favor of the Closing
Statement of Net Assets delivered by the Seller to the Purchaser. If the
Seller's Accountants and the Purchaser's Accountants are unable to reach a
resolution with such effect within ten Business Days after receipt by the
Purchaser and the Purchaser's Accountants of the Seller's written notice
of dispute, the Seller's Accountants and the Purchaser's Accountants shall
submit the items remaining in dispute for resolution to the Independent
Accounting Firm, which shall, within ten Business Days after such
submission, determine and report to the Purchaser and the Seller upon such
remaining disputed items, and such report shall be final, binding and
conclusive on the Seller and the Purchaser. The fees and disbursements of
the Independent Accounting Firm shall be allocated between the Seller and
the Purchaser in the same proportion that the aggregate amount of such
remaining disputed items so submitted to the Independent Accounting Firm
that is unsuccessfully disputed by each such party (as finally determined
by the Independent Accounting Firm) bears to the total amount of such
remaining disputed items so submitted.
(iii) In acting under this Agreement, the Purchaser's Accountants,
the Seller's Accountants and the Independent Accounting Firm shall be
entitled to the privileges and immunities of arbitrators.
(iv) No adjustment to the Purchase Price pursuant to Section
2.08(c) shall be made with respect to amounts disputed by the Purchaser
pursuant to this Section
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2.08(b), unless the net effect of the amounts successfully disputed by the
Purchaser in the aggregate is to decrease the Closing Net Book Value
reflected on the Closing Statement of Net Assets by at least the
Adjustment Threshold, in which case such adjustment shall only be made in
an amount equal to any excess over the Adjustment Threshold.
(c) Purchase Price Adjustment. The Closing Statement of Net Assets
shall be deemed final for the purposes of this Section 2.08 upon the earlier of
(A) the failure of the Purchaser to notify the Seller of a dispute within 15
Business Days of the Seller's delivery of the Closing Statement of Net Assets to
the Purchaser, (B) the resolution of all disputes, pursuant to Section
2.08(b)(ii), by the Purchaser's and the Seller's Accountants and (C) the
resolution of all disputes, pursuant to Section 2.08(b)(ii), by the Independent
Accounting Firm. Subject to the limitation set forth in Section 2.08(b)(iv),
within three Business Days of the Closing Statement of Net Assets being deemed
final, a Purchase Price adjustment shall be made as follows:
(i) in the event that the January Net Book Value reflected on the
final January Statement of Net Assets exceeds the Closing Net Book Value
by at least the Adjustment Threshold, then the Purchase Price shall be
adjusted downward in an amount equal to such excess over the Adjustment
Threshold, and the Seller shall, within three Business Days of such
determination, pay such amount, together with interest thereon, from the
Closing Date through the date of payment at the rate of interest publicly
announced by Citibank, N.A. or any successor thereto in New York, New York
from time to time as its reference rate from the Closing Date to the date
of such payment, to the Purchaser by wire transfer in immediately
available funds; and
(ii) in the event that the Closing Net Book Value exceeds the
January Net Book Value reflected on the final January Statement of Net
Assets by at least the Adjustment Threshold, then the Purchase Price shall
be adjusted upward in an amount equal to such excess over the Adjustment
Threshold and the Purchaser shall, within three Business Days of such
determination, pay the amount of such excess together with interest
thereon, from the Closing Date through the date of payment at the rate of
interest publicly announced by Citibank, N.A. or any successor thereto in
New York, New York from time to time as its reference rate from the
Closing Date to the date of such payment, to the Seller by wire transfer
in immediately available funds.
SECTION 2.09. Allocation of the Purchase Price. The sum of the
Purchase Price and the Assumed Liabilities shall be allocated among the Assets
as of the Closing Date in accordance with Exhibit 2.09. Any subsequent
adjustments to the sum of the Purchase Price and Assumed Liabilities shall be
reflected in the allocation hereunder in a manner consistent
21
with Treasury Regulation Section 1.1060-1T(f). For all Tax purposes, the
Purchaser and the Seller agree to report the transactions contemplated in this
Agreement in a manner consistent with the terms of this Agreement, including the
allocation under Exhibit 2.09, and that neither of them will take any position
inconsistent therewith in any Tax return, in any refund claim, in any
litigation, or otherwise without the consent of the other party, which consent
shall not be unreasonably withheld or delayed.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SELLER
As an inducement to the Purchaser to enter into this Agreement, the
Seller hereby represents and warrants to the Purchaser as follows:
SECTION 3.01. Organization, Authority and Qualification of the
Seller. The Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all necessary corporate
power and authority to enter into this Agreement and the Ancillary Agreements,
to carry out its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The Seller is duly licensed or
qualified to do business and is in good standing in each jurisdiction in which
the Assets owned or leased by it or the operation of the Acquired Business makes
such licensing or qualification necessary, except to the extent that the failure
to be so licensed or qualified would not adversely affect (i) the ability of the
Seller to carry out its obligations under, and to consummate the transactions
contemplated by, this Agreement and the Ancillary Agreements and (ii) the
ability of the Seller to conduct the Acquired Business as it is currently being
conducted. The execution and delivery of this Agreement and the Ancillary
Agreements by the Seller, the performance by the Seller of its obligations
hereunder and thereunder and the consummation by the Seller of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
action on the part of the Seller. No approval of the stockholders of the Seller
is required in connection with the execution and delivery of this Agreement or
the Ancillary Agreements by the Seller, the performance by the Seller of its
obligations hereunder or thereunder or the consummation by the Seller of the
transactions contemplated hereby or thereby. This Agreement has been, and upon
their execution the Ancillary Agreements will be, duly executed and delivered by
the Seller, and (assuming due authorization, execution and delivery by the
Purchaser) this Agreement constitutes, and upon their execution the Ancillary
Agreements will constitute, legal, valid and binding obligations of the Seller
enforceable against the Seller in accordance with their respective terms, except
as enforceability may be limited by (i) bankruptcy, insolvency, reorganization,
debtor relief or similar laws affecting the rights of creditors generally, and
(ii) general principles of equity, including specific performance, injunctive
relief and other equitable remedies.
22
SECTION 3.02. No Conflict. Assuming that all consents, approvals,
authorizations and other actions described in Section 3.03 have been obtained
and all filings and notifications listed in Section 3.03 of the Disclosure
Schedule have been made, the execution, delivery and performance of this
Agreement and the Ancillary Agreements by the Seller do not and will not (a)
violate, conflict with or result in the breach of any provision of the charter
or by-laws (or similar organizational documents) of the Seller, (b) conflict
with or violate (or cause an event which could have a Material Adverse Effect as
a result of) any Law or Governmental Order applicable to the Seller or the
Assets or the Acquired Business, or (c) except as set forth in Section 3.02(c)
of the Disclosure Schedule, conflict with, result in any breach of, constitute a
default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, require any consent under, or give to others any
rights of termination, amendment, acceleration, suspension, revocation or
cancellation of, or result in the creation of any Encumbrance on any of the
Assets pursuant to, any note, bond, mortgage or indenture, contract, agreement,
lease, sublease, license, permit, franchise or other instrument or arrangement
to which the Seller is a party or by which any of the Assets is bound or
affected, except, in the case of clauses (b) and (c), as would not have a
Material Adverse Effect and would not prevent or materially delay consummation
by the Seller of the transactions contemplated by this Agreement.
SECTION 3.03. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement and each Ancillary Agreement by the
Seller do not and will not require any consent, approval, authorization or other
order of, action by, filing with or notification to, any Governmental Authority,
except (a) as described in Section 3.03 of the Disclosure Schedule, (b) the
notification requirements of the HSR Act and (c) where the failure to obtain
such consent, approval, authorization or order would not have a Material Adverse
Effect and would not prevent or materially delay consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements.
SECTION 3.04. Financial Information. Section 3.04 of the Disclosure
Schedule contains true and complete copies of (i) the unaudited statements of
income of the Business for each of the two fiscal years ended as of September
30, 1997 and September 30, 1998 (the "BUSINESS FINANCIAL STATEMENTS") and (ii)
the January Statement of Net Assets. The Business Financial Statements and the
January Statement of Net Assets (i) were prepared in accordance with the books
of account and other financial records of the Business, (ii) present fairly the
financial condition and results of operations of the Business or the Acquired
Business, as the case may be, as of the dates thereof or for the periods covered
thereby, (iii) have been prepared in accordance with U.S. GAAP applied on a
basis consistent with the past practices of the Business throughout the periods
involved (except that the unaudited financial statements may not contain
footnotes) and (iv) include or will include all adjustments (consisting only of
normal recurring accruals) that are necessary for a fair presentation of the
financial condition of the Business or the Acquired Business, as the case may
be, and the
23
results of the operations of the Business or the Acquired Business, as the case
may be, as of the dates thereof or for the periods covered thereby.
SECTION 3.05. No Undisclosed Liabilities. There are no Liabilities
of the Seller related to the Acquired Business other than Liabilities (i)
reflected or reserved against on the January Statement of Net Assets, (ii)
disclosed in Section 3.05 of the Disclosure Schedule, (iii) incurred since the
date of this Agreement in the ordinary course of business, consistent with past
practice, of the Business and which do not and could not reasonably be expected
to have a Material Adverse Effect, (iv) employment-related Liabilities expressly
assumed by the Seller pursuant to Article VI, or (v) arising in the ordinary
course under contracts assumed by the Purchaser under this Agreement. Reserves
are reflected on the January Statement of Net Assets against all Liabilities of
the Seller related to the Acquired Business, other than Liabilities relating to
the Excluded Assets and Excluded Liabilities, in amounts that have been
established on a basis consistent with the past practices of the Business and in
accordance with U.S. GAAP.
SECTION 3.06. Receivables. Section 3.06 of the Disclosure Schedule
is an aged list of the Receivables which are included in the Assets as of the
date of the January Statement of Net Assets. Except to the extent, if any,
reserved for on the January Statement of Net Assets, all Receivables reflected
on the January Statement of Net Assets arose from, and the Receivables existing
on the Closing Date will have arisen from, the sale of Inventory or services to
Persons not affiliated with the Seller and in the ordinary course of the
Business consistent with past practice and, except as reserved against on the
January Statement of Net Assets, constitute or will constitute, as the case may
be, only valid, undisputed claims of the Business not subject to valid claims of
set-off or other defenses or counterclaims other than normal cash discounts
accrued in the ordinary course of the Business consistent with past practice.
SECTION 3.07. Inventories. Subject to amounts reserved therefor on
the January Statement of Net Assets, the values at which all Inventories are
carried on the January Statement of Net Assets reflect the historical inventory
valuation policy of the Business of stating such Inventories at the lower of
cost (determined on the first-in, first-out method) or market value. The Seller
has good and marketable title to the Inventories free and clear of all
Encumbrances except Permitted Encumbrances. The Inventories are in good and
merchantable condition in all material respects, are suitable and usable for the
purposes for which they are intended and are in a condition such that they can
be sold in the ordinary course of the Business consistent with past practice.
The Inventories do not consist of, in any material amount, items that are
obsolete, damaged or slow-moving. The Inventories do not consist of any items
held on consignment. The Seller is not under any obligation or liability with
respect to accepting returns of items of Inventory or merchandise in the
possession of its customers, except to the extent consistent with past return
policies of the Business. No clearance or extraordinary sale of the Inventories
has been conducted since the date of the January
24
Statement of Net Assets. The Seller has not acquired or committed to acquire or
manufactured Inventory for sale which is not of a quality and quantity usable in
the ordinary course of the Business within a reasonable period of time and
consistent with past practice nor has the Seller changed the price of any
Inventory except for (i) reductions to reflect any reduction in the cost thereof
to the Seller, (ii) reductions and increases responsive to normal competitive
conditions and consistent with the past sales practices of the Business, and
(iii) increases to reflect any increase in the cost thereof to the Seller.
Section 3.07 of the Disclosure Schedule contains a complete list of the
addresses of all warehouses and other facilities in which any significant
portion of the Inventories are located.
SECTION 3.08. Sales and Purchase Order Backlog. (a) As of March 22,
1999, open sales orders accepted by the Seller related to the Acquired Business
as to which the unshipped portion exceeds [*] (as measured by standard cost).
Section 3.08(a) of the Disclosure Schedule lists all such sales orders.
(b) As of March 17, 1999, open purchase orders (other than
purchase orders relating to deployment projects) issued by the Seller related to
the Business totaled [*]. As of March 18, 1999, open purchase orders relating to
deployment projects issued by the Seller related to the Business totaled [*].
Section 3.08(b) of the Disclosure Schedule lists all purchase orders (other than
purchase orders relating to deployment projects) relating to the Business
exceeding $100,000 per order, which have been issued by the Seller and which are
open as of March 17, 1999, and all purchase orders relating to deployment
projects relating to the Business, exceeding $100,000 per order, which have been
issued by the Seller and which are open as of March 18, 1999.
SECTION 3.09. Customers. Section 3.09 of the Disclosure Schedule
lists the five most significant customers (by revenue) of the Acquired Business
for the twelve-month period ended September 30, 1998 and the amount of such
revenues from each such customer during such period. Except as disclosed in
Section 3.09 of the Disclosure Schedule, as of the date hereof the Seller has
not received any notice and has no reason to believe that any significant
customer of the Acquired Business has ceased, or will cease, to use the
products, equipment, goods or services of the Acquired Business or has
substantially reduced, or will substantially reduce, the use of such products,
equipment, goods or services at any time.
SECTION 3.10. Suppliers. Section 3.10 of the Disclosure Schedule
lists the ten most significant suppliers of raw materials, supplies, merchandise
and other goods for the Acquired Business for the twelve-month period ended
September 30, 1998 and the amount of such raw materials, supplies, merchandise
and other goods received from each such supplier related to the Acquired
Business during such period. Except as disclosed in Section 3.10 of the
Disclosure Schedule, as of the date hereof the Seller has not received any
notice and has no reason to believe that any such supplier will not sell raw
materials, supplies, merchandise and other goods to the Acquired Business at any
time after the Closing Date on terms and
* Confidential Treatment Requested
25
conditions similar to those imposed on current sales to the Acquired Business,
subject only to general and customary price increases.
SECTION 3.11. Products and Services. Except as described in Section
3.11 of the Disclosure Schedule, there is no material defect in design,
materials, manufacture or otherwise in any products designed, manufactured,
distributed or sold by the Business, or any material defect in repair to, or
replacement of, any such products. Section 3.11 of the Disclosure Schedule sets
forth a true and complete list of all products designed, manufactured, marketed
or sold by the Business that have been recalled or withdrawn (whether
voluntarily or otherwise) as of the date hereof. The aggregate expense of all
product recalls and withdrawals performed by the Business has not exceeded [*]
in any of the four fiscal quarters prior to the date hereof. The January
Statement of Net Assets includes, and the Closing Statement of Net Assets will
include, adequate reserves in accordance with U.S. GAAP for all product warranty
obligations of the Business.
SECTION 3.12. Year 2000 Readiness. The Seller has (i) undertaken an
assessment of all significant computer hardware, software, networks, systems and
equipment embedded within products of the Business and/or used in the conduct of
the Business as currently conducted ("BUSINESS SYSTEMS") that could be adversely
affected by a failure to accurately adapt, accommodate, process or respond to
the Year 2000 and thereafter ("YEAR 2000 READY"), (ii) developed a plan and time
line for rendering all significant Business Systems Year 2000 Compliant (the
"YEAR 2000 PLAN"), and (iii) to date, implemented such plan in accordance with
such timetable in all material respects. Assuming the Purchaser continues to
implement the Year 2000 Plan following the Closing in accordance with such
timetable, there are no Business Systems which will not be Year 2000 Ready in
all material respects. The Seller has also (i) requested all significant
suppliers to the Business to provide to the Seller assessments of the Year 2000
Readiness of all material computer hardware, software, networks, systems and
equipment of such suppliers used in providing products or services to the
Business ("SUPPLIER SYSTEMS"), (ii) is receiving assessments from all such
suppliers and (iii) based on such assessments to date, has no reason to believe
that any material Supplier Systems will not be Year 2000 Ready in all material
respects.
SECTION 3.13. Vendor Financing Obligations. Section 3.13 of the
Disclosure Schedule lists (i) all contracts or arrangements pursuant to which
the Seller has agreed to extend financing to any Person with respect to projects
in Mexico, Brazil Region 1, Chile and Russia (the "VENDOR FINANCING
COMMITMENTS"), (ii) the potential financing required in the next three months
under each Vendor Financing Commitment and (iii) the maximum financing
commitments of the Seller under each Vendor Financing Commitment. To the
Seller's best knowledge, the Seller has provided true and accurate information
to the Purchaser with respect to the financial condition and results of
operations of the borrower under each Vendor Financing Commitment.
* Confidential Treatment Requested
26
SECTION 3.14. Litigation. Except as described in Section 3.14 of the
Disclosure Schedule, there are no Actions by or against the Seller relating to
the Acquired Business, or affecting or that could reasonably be expected to
affect any of the Assets or the Acquired Business, pending before any
Governmental Authority (or, to the best knowledge of the Seller, threatened in
writing to be brought by or before any Governmental Authority). None of the
matters disclosed in Section 3.14 of the Disclosure Schedule has had or could
27
reasonably be expected to have a Material Adverse Effect or could affect the
legality, validity or enforceability of this Agreement or any Ancillary
Agreement or the consummation of the transactions contemplated hereby or
thereby. Except as set forth in Section 3.14 of the Disclosure Schedule, the
Seller is not subject to any Governmental Order relating to the Acquired
Business, or affecting or that could reasonably be expected to affect any of the
Assets or the Acquired Business (nor, to the best knowledge of the Seller, are
there any such Governmental Orders threatened in writing to be imposed by any
Governmental Authority).
SECTION 3.15. Compliance with Laws. The Seller has conducted and
continues to conduct the Business in all material respects in accordance with
all Laws and Governmental Orders applicable to the Seller, the Assets and the
Business (including, without limitation, the Foreign Corrupt Practices Act and
the anti-boycott laws and regulations promulgated under the Export
Administration Act of 1979), and the Seller is not in violation of any such Law
or Governmental Order in any material respect.
SECTION 3.16. Conduct in the Ordinary Course; Absence of Certain
Changes, Events and Conditions. From the date of the January Statement of Net
Assets through the date hereof, except as disclosed in Section 3.16 of the
Disclosure Schedule, the Acquired Business has been conducted in the ordinary
course and consistent with past practice. Except as disclosed in Section 3.16 of
the Disclosure Schedule, from the date of the January Statement of Net Assets
through the date hereof, the Seller has not:
(i) made any material changes in the customary methods of
operations of the Acquired Business, including, without limitation,
practices and policies relating to manufacturing, purchasing, Inventories,
marketing, selling and pricing;
(ii) sold, transferred, leased or otherwise disposed of any assets
of the Acquired Business, other than the sale of Inventories or the
disposition of immaterial amounts of obsolete assets in the ordinary
course of the Business consistent with past practice;
(iii) acquired any material assets related to the Acquired Business
other than in the ordinary course of the Business consistent with past
practice;
(iv) permitted or allowed any of the assets of the Acquired
Business to be subjected to any Encumbrance, other than Permitted
Encumbrances and Encumbrances that will be released at or prior to the
Closing;
(v) except in the ordinary course of the Business consistent with
past practice, discharged or otherwise obtained the release of any
Encumbrance or paid or otherwise discharged any Liability, other than
current liabilities reflected on the January Statement of Net Assets and
current liabilities incurred in the ordinary course
28
of the Business consistent with past practice since the date of the
January Statement of Net Assets;
(vi) written down or written up (or failed to write down or write
up in accordance with U.S. GAAP consistent with past practice) the value
of any Inventories or Receivables related to the Acquired Business or
revalued any assets of the Acquired Business other than in the ordinary
course of the Business consistent with past practice and in accordance
with U.S. GAAP;
(vii) made any change in any method of accounting or accounting
practice or policy used by the Business, other than such changes required
by U.S. GAAP and disclosed in Section 3.16 of the Disclosure Schedule;
(viii) made any capital expenditure or commitment for any capital
expenditure related to the Acquired Business in excess of [*];
(ix) incurred any indebtedness for borrowed money related to the
Acquired Business;
(x) other than in the ordinary course of Business, (A) granted any
increase, or announced any increase, in the wages, salaries, compensation,
bonuses, incentives, pension or other benefits payable by the Seller to
any employees of the Business, including, without limitation, any increase
or change pursuant to any Plan, (B) established or increased or promised
to increase any benefits under any Plan, in either case except as required
by Law or any collective bargaining agreement and involving ordinary
increases consistent with the past practice of the Business, or (C)
entered into any agreement, arrangement or transaction with any employees
of the Business;
(xi) terminated, discontinued, closed or disposed of any plant,
facility or other operation of the Acquired Business, or laid off any
employees of the Business or implemented any early retirement, separation
or program providing early retirement window benefits to employees of the
Business within the meaning of Section 1.401(a)-4 of the Regulations or
announced or planned any such action or program for the future;
(xii) suffered any material casualty loss or damage with respect to
any of the Assets;
(xiii) amended, modified or consented to the termination of any
Material Contract or the Seller's rights thereunder;
* Confidential Treatment Requested
29
(xiv) suffered any Material Adverse Effect; or
(xv) agreed, whether in writing or otherwise, to take any of the
actions specified in this Section 3.16, except as expressly contemplated
by this Agreement and the Ancillary Agreements.
SECTION 3.17. Permits and Licenses. Except as disclosed in Section
3.17 of the Disclosure Schedule, the Seller currently holds all the health and
safety and other permits, licenses, authorizations, certificates, exemptions and
approvals of Governmental Authorities (collectively, "PERMITS") necessary or
proper for the current use, occupancy and operation of the Assets and the
conduct of the Acquired Business, except for such Permits the failure of which
to hold has not had and could not reasonably be expected to have a Material
Adverse Effect, and all such Permits are in full force and effect. The Seller
has not received any written notice from any Governmental Authority revoking,
cancelling, rescinding, materially modifying or refusing to renew any material
Permit or providing notice of material violations under any Law or Permit.
Except as disclosed in Section 3.17 of the Disclosure Schedule, the Seller is in
all material respects in compliance with the Permits. The Seller has no reason
to believe that any consent of any Governmental Authority required in order to
transfer any Permit to the Purchaser in the event of the consummation of the
transactions contemplated by this Agreement will not be obtained, or if not
obtained that the Purchaser will not be able to obtain a replacement or
substitute Permit sufficient to conduct the Acquired Business as it is currently
conducted.
SECTION 3.18. Environmental Matters. (a) Except as disclosed in
Section 3.18(a) of the Disclosure Schedule, (i) Hazardous Materials have not
been generated, used, treated, handled or stored on, or transported to or from,
or released or discharged on any Real Property; (ii) the Seller has disposed of
all wastes in compliance with all applicable Environmental Laws and permits
required under Environmental Laws; (iii) there are no past, pending or
threatened Environmental Claims against the Seller or any Real Property; (iv) no
Real Property is listed or proposed for listing on the National Priorities List
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, or on the Comprehensive Environmental Response,
Compensation and Liability Information System or any analogous state list of
sites requiring investigation or cleanup; and (v) the Seller has not transported
or arranged for the transportation of any Hazardous Materials to any location
that is listed or proposed for listing on the National Priorities List under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, or on the Comprehensive Environmental Response, Compensation and
Liability Information System or any analogous state list or which is the subject
of any Environmental Claim.
(b) Except as disclosed in Section 3.18(b) of the Disclosure
Schedule, there are no circumstances with respect to any Real Property or any
Asset or the operation of the
30
Acquired Business which could reasonably be anticipated (i) to form
the basis of an Environmental Claim against the Seller or any Real Property or
Asset or (ii) to cause such Real Property or Asset to be subject to any
restrictions on ownership, occupancy, use or transferability under any
applicable Environmental Law.
SECTION 3.19. Material Contracts. (a) Section 3.19(a) of the
Disclosure Schedule lists each of the following contracts and agreements
(including, without limitation, oral and informal arrangements) of the Seller
related to the Acquired Business and that are in effect as of the date hereof,
other than Excluded Contracts (such contracts and agreements, together with the
Leases, the Transferred Customer Contracts, the Vendor Financing Commitments and
the IP Licenses, being "MATERIAL CONTRACTS"):
(i) each contract, agreement, invoice, purchase order, sales order
and other arrangement, for the purchase or sale of Inventory or other
products or equipment with any supplier or for the furnishing of services
by or to the Acquired Business under the terms of which the Seller: (A) is
obligated to pay or entitled to receive consideration of more than
$100,000 in the aggregate during the fiscal year ended September 30, 1999
or (B) is obligated to pay or entitled to receive consideration of more
than $100,000 in the aggregate over the remaining term of such contract;
(ii) all material broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research,
marketing consulting and advertising contracts and agreements to which the
Seller is a party and which are primarily related to the Acquired
Business;
(iii) all material contracts with independent contractors or
consultants (or similar arrangements) to which the Seller is a party and
which are primarily related to the Acquired Business;
(iv) all contracts and agreements that involve Indebtedness of the
Seller in excess of $500,000 and that are related to the Acquired
Business;
(v) all contracts and agreements with any Governmental Authority
to which the Seller is a party and which are primarily related to the
Acquired Business;
(vi) all contracts and agreements that limit or purport to limit
the ability of the Seller to engage in any Competitive Activity in any
geographic area or during any period of time;
(vii) all contracts and agreements between or among the Seller or
any Affiliate of the Seller which are primarily related to the Acquired
Business; and
31
(viii) all other contracts and agreements, whether or not made in
the ordinary course of the Business, which are material to the conduct of
the Acquired Business.
(b) The Seller has made available to the Purchaser true and
complete copies of all Material Contracts. Each Material Contract (i) is a
legal, valid and binding obligation of the Seller, and to the Seller's
knowledge, the other parties thereto, and is in full force and effect, (ii)
represents the entire agreement between the parties thereto with respect to the
subject matter thereof, (iii) is freely and fully assignable to the Purchaser
without penalty or other adverse consequences and (iv) upon consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements, except
in any case to the extent that any consents set forth in Section 3.02(c) of the
Disclosure Schedule are not obtained, shall continue in full force and effect
without penalty or other adverse consequence. Except as disclosed in Section
3.19(b) of the Disclosure Schedule, the Seller is not in breach of, or default
under, any Material Contract, and, to the best knowledge of the Seller, no event
has occurred that, with notice or lapse of time would constitute such a breach
or default or permit termination, modification or acceleration under any
Material Contract. The Seller has not received any notice of uncured breach or
default under, or termination of, any Material Contract. Except as disclosed in
Section 3.19(b) of the Disclosure Schedule, to the best knowledge of the Seller,
no other party to any Material Contract is in breach thereof or default
thereunder.
SECTION 3.20. Intellectual Property. (a) Section 3.20(a) of the
Disclosure Schedule sets forth a true and complete list of all trademarks,
service marks, trade names, registered copyrights and applications therefor
primarily used or intended to be primarily used in the conduct of the Acquired
Business as of the date hereof and which are owned by the Seller or subsidiaries
of the Seller, other than Excluded Intellectual Property (together with all
other Intellectual Property which exists on the Closing Date primarily used or
intended to be primarily used in the conduct of the Acquired Business and owned
by the Seller or subsidiaries of the Seller other than Excluded Intellectual
Property, the "OWNED INTELLECTUAL PROPERTY"). All Owned Intellectual Property is
owned by the Seller, free and clear of any Encumbrance other than Permitted
Encumbrances. Except for Excluded Contracts, the Seller has not granted any
license or other right to any other Person with respect to any material portion
of the Owned Intellectual Property.
(b) Section 3.20(b) of the Disclosure Schedule sets forth a true
and complete list of all trademarks, service marks, trade names, registered
copyrights and applications therefor and software primarily used or intended to
be primarily used in the conduct of the Acquired Business and which is licensed
or sublicensed by the Seller from a third party("IP LICENSES"), other than
Excluded Intellectual Property (the "LICENSED INTELLECTUAL PROPERTY", and,
together with the Owned Intellectual Property, the "BUSINESS INTELLECTUAL
PROPERTY").
32
(c) The Business Intellectual Property and the Intellectual
Property to be licensed to the Purchaser pursuant to the License Agreements and
Section 5.13 constitute all the material Intellectual Property primarily used or
intended to be used in, and all such Intellectual Property necessary in the
conduct of, the Acquired Business and there are no other items of Intellectual
Property that are material to the Acquired Business.
(d) Except as disclosed in Section 3.02(c) of the Disclosure
Schedule, all rights of the Seller in each item of Business Intellectual
Property are transferable to the Purchaser as contemplated by this Agreement. As
a result of the transactions contemplated by this Agreement and the License
Agreements, upon the Closing, the Purchaser shall own, or have adequate and
enforceable licenses, sublicenses or other rights to use, without payment of any
fee other than fees payable to third party licensors under such licenses or fees
disclosed in the License Agreements, all the Business Intellectual Property.
(e) There are no contracts pursuant to which the Seller licenses
or sublicenses Owned Intellectual Property or Licensed Intellectual Property to
a third party, other than Excluded Contracts and Transferred Customer Contracts.
(f) Except as otherwise described in Section 3.20(f) of the
Disclosure Schedule, to the best knowledge of the Seller, the rights of the
Seller in or to the Business Intellectual Property do not infringe on the rights
of any other Person and the Seller has not received any written notice from any
Person to such effect. Except as otherwise described in Section 3.20(f) of the
Disclosure Schedule, no Actions have been made or asserted or are pending (nor,
to the best knowledge of the Seller has any such Action been threatened in
writing) against the Seller either (A) based upon or challenging or seeking to
deny or restrict the use by the Seller of any of the Business Intellectual
Property or (B) alleging that any services provided, or products manufactured or
sold by the Business are being provided, manufactured or sold in violation of
any patents or trademarks, or any other rights of any Person. To the best
knowledge of the Seller, no Person is using any copyrights, trademarks, service
marks, trade names, trade secrets or similar property that infringe upon the
Business Intellectual Property or upon the rights of the Seller therein.
(g) Except as set forth in Section 3.02(c) of the Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
and the License Agreements will not result in the termination or impairment of
any of the Business Intellectual Property.
SECTION 3.21. Real Property. (a) Section 3.21(a) of the Disclosure
Schedule lists the address of each plant, office, warehouse and other parcels of
real property at which significant Assets are located or from which the Acquired
Business is conducted and which are owned by the Seller or subsidiaries of the
Seller (together with all buildings and other structures, facilities or
improvements located thereon and all fixtures attached or appurtenant
33
thereto, the "OWNED REAL PROPERTY") and the current use of each such parcel of
Owned Real Property.
(b) Section 3.21(b) of the Disclosure Schedule lists the address
of each plant, office, warehouse and other parcels of real property at which
significant Assets are located or from which the Acquired Business is conducted
and which are leased by the Seller or subsidiaries of the Seller as tenant
(together with all buildings and other structures, facilities or improvements
located thereon and all fixtures attached or appurtenant thereto, the "LEASED
REAL PROPERTY", and, together with the Owned Real Property, the "REAL PROPERTY")
and the current use of each such parcel of Leased Real Property and all
applicable lease agreements related thereto (collectively, the "LEASES").
(c) Except as described in Sections 3.21(c) of the Disclosure
Schedule, there is no material violation of any Law relating to any of the Real
Property. The Seller is in peaceful and undisturbed possession of each parcel of
Real Property and there are no contractual or legal restrictions that preclude
or restrict the ability to use the premises for the purposes for which they are
currently being used. All existing water, sewer, steam, gas, electricity,
telephone and other utilities required for the use, occupancy and operation of
the Real Property are adequate for the conduct of the Acquired Business as it
has been and currently is conducted. Except as set forth in Section 3.21(c) of
the Disclosure Schedule, the Seller has not leased or subleased any parcel or
any portion of any parcel of Real Property to any other Person, nor has the
Seller assigned its interest under any Lease to any third party.
(d) The real property set forth in Sections 3.21(a) and 3.21(b) of
the Disclosure Schedule constitutes all the real property used or intended to be
used by the Seller in, and all such real property necessary in the conduct by
the Seller of, the Acquired Business and there are no other parcels of real
property that are material to the Acquired Business. As a result of the
transactions contemplated by this Agreement and the Lease Agreements, upon the
Closing, the Purchaser shall possess adequate and enforceable leases or other
rights to use, without payment of any fee other than fees disclosed in the
Leases and the Lease Agreements, all the Real Property. To the best knowledge of
the Seller, there are no facts that would prevent the Real Property from being
occupied by the Purchaser after the Closing in the same manner as immediately
prior to the Closing.
SECTION 3.22. Tangible Personal Property. Exhibit 2.01(a)(vi) lists
each item or distinct group of machinery, equipment, tools, supplies, furniture,
fixtures, personalty, vehicles and other tangible personal property (the
"TANGIBLE PERSONAL PROPERTY") primarily used in the Acquired Business. Prior to
the Closing Date, the Seller will deliver to the Purchaser a revised list of
Tangible Personal Property, specifying the jurisdiction in which each group of
Tangible Personal Property is located.
34
SECTION 3.23. Right, Title and Interest in Assets. (a) Except as
disclosed in Section 3.23(a) of the Disclosure Schedule, the Seller owns, leases
or has the legal right to use all the Assets and, with respect to rights under
contracts included within the Assets, is a party to and enjoys the right to the
benefits of all such contracts, agreements and other arrangements. The Seller
has good and marketable title to, or, in the case of leased or subleased Assets,
valid and subsisting leasehold interests in, all the Assets, free and clear of
all Encumbrances, except (i) as disclosed in the Disclosure Schedule and (ii)
Permitted Encumbrances.
(b) The Assets and the other assets and properties licensed to the
Purchaser under the License Agreements or made available to the Purchaser under
the Interim Services Agreement constitute all the properties, assets and rights
primarily used or intended to be primarily used in, and all such properties,
assets and rights as are necessary in the conduct of, the Acquired Business. All
the Assets are in good operating condition and repair (normal wear and tear
excepted) and are suitable for the purposes for which they are used and
intended.
(c) Except as set forth in the Disclosure Schedule, the Seller has
the complete and unrestricted power and unqualified right to sell, assign,
transfer, convey and deliver the Assets to the Purchaser without penalty or
other adverse consequences. Following the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements and the execution of
the instruments of transfer contemplated by this Agreement and the Ancillary
Agreements, the Purchaser will own, with good, valid and marketable title, or
lease, under valid and subsisting leases, or otherwise acquire the interests of
the Seller in the Assets, free and clear of any Encumbrances, other than
Permitted Encumbrances, and without incurring any penalty or other adverse
consequence, including, without limitation, any increase in rentals, royalties,
or license or other fees imposed as a result of, or arising from, the
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements.
SECTION 3.24. Employee Benefit Matters. (a) Plans and Material
Documents. Section 3.24(a) of the Disclosure Schedule lists (i) all employee
benefit plans (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and all bonus, stock option, stock
purchase, restricted stock, incentive, deferred compensation, retiree medical or
life insurance, supplemental retirement, severance or other benefit plans,
programs or arrangements, and all employment, termination, severance or other
contracts or agreements, whether legally enforceable or not, to which the Seller
is a party, with respect to which the Seller has any obligation or which are
maintained, contributed to or sponsored by the Seller for the benefit of any
current or former employee, officer or director of the Seller, (ii) each
employee benefit plan for which the Seller could incur liability under Section
4069 of ERISA in the event such plan has been or were to be terminated, (iii)
any plan in respect of which the Seller could incur liability under Section
4212(c) of ERISA and (iv) any contracts, arrangements or
35
understandings between the Seller or any of its Affiliates and any employee of
the Seller including, without limitation, any contracts, arrangements or
understandings relating to a sale of the Business (collectively, the "PLANS").
Each Plan is in writing and the Seller has furnished the Purchaser with a true
and complete copy of each Plan and a true and complete copy of each material
document prepared in connection with each such Plan as follows: (i) a copy of
each trust or other funding arrangement, (ii) each summary plan description and
summary of material modifications, (iii) the most recently filed IRS Form 5500,
(iv) the most recently received IRS determination letter for each such Plan, and
(v) the most recently prepared actuarial report and financial statement in
connection with each such Plan. Except as disclosed on Section 3.24(a) of the
Disclosure Schedule, there are no other employee benefit plans, programs,
arrangements or agreements, whether formal or informal, whether in writing or
not, to which the Seller is a party, with respect to which the Seller has any
obligation or which are maintained, contributed to or sponsored by the Seller
for the benefit of any current or former employee, officer or director of the
Seller. The Seller has no express or implied commitment, whether legally
enforceable or not, (i) to create, incur liability with respect to or cause to
exist any other employee benefit plan, program or arrangement, (ii) to enter
into any contract or agreement to provide compensation or benefits to any
individual or (iii) to modify, change or terminate any Plan, other than with
respect to a modification, change or termination required by ERISA or the Code.
(b) Absence of Certain Types of Plans. None of the Plans is a
multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA)
(a "MULTIEMPLOYER PLAN") or a single employer pension plan (within the meaning
of Section 4001(a)(15) of ERISA) for which the Seller could incur liability
under Section 4063 or 4064 of ERISA (a "MULTIPLE EMPLOYER PLAN"). None of the
Plans is subject to Title IV of ERISA. None of the Plans provides for the
payment of separation, severance, termination or similar-type benefits to any
Person or obligates the Seller to pay separation, severance, termination or
similar-type benefits solely as a result of any transaction contemplated by this
Agreement and the Ancillary Agreements or as a result of a "change in the
ownership or effective control" or a "change in the ownership of a substantial
portion of the assets" of the Seller, within the meaning of such term under
Section 280G of the Code. None of the Plans provides for or promises retiree
medical, retiree disability or retiree life insurance benefits to any current or
former employee, officer or director of the Seller. Each of the Plans is subject
only to the laws of the United States or a political subdivision thereof.
(c) Compliance with Applicable Law. Each Plan is now and always
has been operated in all material respects in accordance with the requirements
of all applicable Laws, including, without limitation, ERISA and the Code, and
all persons who participate in the operation of such Plans and all Plan
"fiduciaries" (within the meaning of Section 3(21) of ERISA) have always acted
in material compliance with the provisions of all applicable Laws, including,
without limitation, ERISA and the Code. The Seller has performed all material
obligations required to be performed by it under, is not in any material respect
in default under or in violation of, and has no knowledge of any material
default or violation by any party to, any Plan. No Action is pending or
threatened with respect to any Plan (other than claims for
36
benefits in the ordinary course) and no fact or event exists that could give
rise to any such Action.
(d) Qualification of Certain Plans. Each Plan which is intended to
be qualified under Section 401(a) of the Code or Section 401(k) of the Code has
received a favorable determination letter from the IRS that it is so qualified
and each trust established in connection with any Plan which is intended to be
exempt from federal income taxation under Section 501(a) of the Code has
received a determination letter from the IRS that it is so exempt, and, to the
knowledge of the Seller, no fact or event has occurred since the date of such
determination letter from the IRS to adversely affect the qualified status of
any such Plan or the exempt status of any such trust. Each trust maintained or
contributed to by the Seller which is intended to be qualified as a voluntary
employees' beneficiary association and which is intended to be exempt from
federal income taxation under Section 501(c)(9) of the Code has received a
favorable determination letter from the IRS that it is so qualified and so
exempt, and, to the knowledge of the Seller, no fact or event has occurred since
the date of such determination by the IRS to adversely affect such qualified or
exempt status.
(e) Absence of Certain Liabilities and Events. There has been no
material prohibited transaction (within the meaning of Section 406 or 407 of
ERISA or Section 4975 of the Code) with respect to any Plan. The Seller has not
incurred any material liability for any excise tax arising under Section 4971,
4972, 4980 or 4980B of the Code and no fact or event exists which could give
rise to any such liability. The Seller has not incurred any liability under,
arising out of or by operation of Title IV of ERISA (other than liability for
premiums to the Pension Benefit Guaranty Corporation arising in the ordinary
course), including, without limitation, any liability in connection with (i) the
termination or reorganization of any employee benefit plan subject to Title IV
of ERISA or (ii) the withdrawal from any Multiemployer Plan or Multiple Employer
Plan, and no fact or event exists which could give rise to any such liability.
(f) Plan Contributions and Funding. All contributions, premiums or
payments required to be made with respect to any Plan have been made on or
before their due dates. All such contributions have been fully deducted for
income tax purposes and no such deduction has been challenged or disallowed by
any Governmental Authority and, to the knowledge of the Seller, no fact or event
exists which could give rise to any such challenge or disallowance.
(g) Warn Act. The Seller is in compliance with the requirements of
the Worker Adjustment and Retraining Notification Act ("WARN") and has no
liabilities pursuant to WARN.
SECTION 3.25. Labor Matters. Except as set forth in Section 3.25 of
the Disclosure Schedule, (a) the Seller is not a party to any collective
bargaining agreement or
37
other labor union contract applicable to any Business Employee, and currently
there are no organizational campaigns, petitions or other unionization
activities seeking recognition of a collective bargaining unit; (b) there are no
controversies, strikes, slowdowns or work stoppages pending or, to the best
knowledge of the Seller, threatened between the Seller and any of the Business
Employees, and the Seller has not experienced any such controversy, strike,
slowdown or work stoppage within the past three years; (c) the Seller has not
breached or otherwise failed to comply with the provisions of any collective
bargaining or union contract covering Business Employees and there are no
grievances outstanding against the Seller under any such agreement or contract;
(d) there are no unfair labor practice complaints pending against the Seller
before the National Labor Relations Board or any other Governmental Authority or
any current union representation questions involving Business Employees; (e) the
Seller is currently in compliance with all applicable Laws relating to the
employment of labor, including those related to wages, hours, collective
bargaining and the payment and withholding of taxes and other sums as required
by the appropriate Governmental Authority and has withheld and paid to the
appropriate Governmental Authority or is holding for payment not yet due to such
Governmental Authority all amounts required to be withheld from Business
Employees and is not liable for any arrears of wages, taxes, penalties or other
sums for failure to comply with any of the foregoing; (f) the Seller has paid in
full to all Business Employees or adequately accrued for in accordance with U.S.
GAAP consistently applied all wages, salaries, commissions, bonuses, benefits
and other compensation due to or on behalf of such employees; (g) there is no
claim with respect to payment of wages, salary or overtime pay that has been
asserted or is now pending or threatened before any Governmental Authority with
respect to any Persons currently or formerly employed by the Seller in the
Business; (h) the Seller is not a party to, or otherwise bound by, any consent
decree with, or citation by, any Governmental Authority relating to employees of
the Business or employment practices; (i) there is no charge or proceeding with
respect to a violation of any occupational safety or health standards that has
been asserted or is now pending or threatened with respect to the Seller; (j)
there is no charge of discrimination in employment or employment practices, for
any reason, including, without limitation, age, gender, race, religion or other
legally protected category, which has been asserted or is now pending or
threatened before the United States Equal Employment Opportunity Commission, or
any other Governmental Authority in any jurisdiction in which the Seller has
employed or currently employs any Person in the Business; (k) to the knowledge
of the Seller, the Seller has properly classified independent contractors to the
Business for federal income tax purposes; and (l) to the knowledge of the
Seller, no Business Employee is in violation of the terms of any employment
contract, nondisclosure agreement, noncompetition agreement or nonsolicitation
agreement by which such Business Employee is bound due to the activities in
which such Business Employee engages for the Seller.
SECTION 3.26. Key Employees. (a) Section 3.26(a) of the Disclosure
Schedule lists the name, the place of employment, the current annual salary
rates, bonuses, deferred or contingent compensation, pension, accrued vacation,
"golden parachute" and other like benefits paid or payable (in cash or
otherwise), the date of employment and job title of
38
each current salaried employee, officer, director, consultant or agent of the
Business whose current annual compensation as of March 17, 1999 exceeded
$60,000.
(b) All Business Employees who are officers, management employees
or technical or professional employees are under written obligation to the
Seller to maintain in confidence all confidential or proprietary information
acquired by them in the course of their employment and to assign to the Seller
all inventions made by them within the scope of their employment during such
employment and for a reasonable period thereafter. All such agreements are
assignable by the Seller to the Purchaser without the consent of any Business
Employee.
SECTION 3.27. Taxes. (a) All returns and reports in respect of Taxes
required to be filed with respect to the Seller or the Acquired Business have
been timely filed; (b) all Taxes required to be shown on such returns and
reports or otherwise due have been timely paid; (c) all such returns and reports
are true, correct and complete in all material respects; (d) no adjustment
relating to such returns has been proposed formally or informally by any Tax
authority; (e) there are no pending or, to the best knowledge of the Seller,
threatened Actions for the assessment or collection of Taxes against the Seller
or (insofar as either relates to the activities or income of the Seller or the
Business or could result in liability of the Seller on the basis of joint and/or
several liability) any corporation that was includible in the filing of a return
with the Seller on a consolidated or combined basis; (f) no consent under
Section 341(f) of the Code has been filed with respect to the Seller; (g) there
are no Tax liens on any properties or assets of the Seller, including, without
limitation, the Assets and the Acquired Business; and (h) there are no proposed
reassessments of any property owned by the Seller that could increase the amount
of any Tax to which the Seller or the Business would be subject.
SECTION 3.28. Insurance. All material assets, properties and risks
of the Business and the Seller are, and for the past five years have been,
covered by valid and, except for policies that have expired under their terms in
the ordinary course, currently effective insurance policies or binders of
insurance (including, without limitation, general liability, property workers,
compensation, automobile liability, excess liability, fiduciary liability,
professional errors and omissions, directors and officers liability and fidelity
insurance) issued in favor of the Seller, in each case with responsible
insurance companies, in such types and amounts and covering such risks as are
consistent with customary practices and standards of companies engaged in
businesses and operations similar to those of the Seller.
SECTION 3.29. Brokers. Except for Lehman Brothers, no broker, finder
or investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement or
the Ancillary Agreements based upon arrangements made by or on behalf of the
Seller. The Seller is solely responsible for the fees and expenses of Lehman
Brothers.
39
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
As an inducement to the Seller to enter into this Agreement, the
Purchaser hereby represents and warrants to the Seller as follows:
SECTION 4.01. Organization and Authority of the Purchaser. The
Purchaser is a company duly organized and validly existing under the laws of
Sweden and has all necessary corporate power and authority to enter into this
Agreement and the Ancillary Agreements, to carry out its obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Ancillary
Agreements by the Purchaser, the performance by the Purchaser of its obligations
hereunder and thereunder and the consummation by the Purchaser of the
transactions contemplated hereby and thereby have been duly authorized by all
requisite action on the part of the Purchaser. This Agreement has been, and upon
their execution the Ancillary Agreements will be, duly executed and delivered by
the Purchaser (or Affiliates of the Purchaser in the case of Ancillary
Agreements), and (assuming due authorization, execution and delivery by the
Seller) this Agreement constitutes, and upon their execution the Ancillary
Agreements will constitute, legal, valid and binding obligations of the
Purchaser (or such Affiliates), enforceable against the Purchaser (or such
Affiliates) in accordance with their respective terms, except as enforceability
may be limited by (i) bankruptcy, insolvency, reorganization, debtor relief or
similar laws affecting the rights of creditors generally, and (ii) general
principles of equity, including specific performance, injunctive relief and
other equitable remedies.
SECTION 4.02. No Conflict. Assuming compliance with the notification
requirements of the HSR Act and the making and obtaining of all filings,
notifications, consents, approvals, authorizations and other actions referred to
in Section 4.03, except as may result from any facts or circumstances relating
solely to the Seller, the execution, delivery and performance of this Agreement
and the Ancillary Agreements by the Purchaser do not and will not (a) violate,
conflict with or result in the breach of any provision of the charter or by-laws
(or other organizational documents) of the Purchaser, (b) conflict with or
violate any Law or Governmental Order applicable to the Purchaser or (c)
conflict with, or result in any breach of, constitute a default (or event which
with the giving of notice or lapse of time, or both, would become a default)
under, require any consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation or cancellation of, or result in
the creation of any Encumbrance on any of the assets or properties of the
Purchaser pursuant to, any note, bond, mortgage or indenture, contract,
agreement, lease, sublease, license, permit, franchise or other instrument or
arrangement to which the Purchaser is a party or by
40
which any of such assets or properties is bound or affected, except, in the case
of clauses (b) and (c), as would not prevent or materially delay consummation by
the Purchaser of the transactions contemplated by this Agreement.
SECTION 4.03. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement and each Ancillary Agreement to which
it is a party by the Purchaser do not and will not require any consent,
approval, authorization or other order of, action by, filing with, or
notification to, any Governmental Authority, except (a) the notification
requirements of the HSR Act and (b) where the failure to obtain such consent,
approval, authorization or order would not prevent or materially delay
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements.
SECTION 4.04. Litigation. No claim, action, proceeding or
investigation is pending or, to the best knowledge of the Purchaser, threatened
in writing, which seeks to delay or prevent the consummation of, or which would
be reasonably likely to materially adversely affect the Purchaser's ability to
consummate the transactions contemplated by this Agreement and the Ancillary
Agreements.
SECTION 4.05. Brokers. Except for Merrill Lynch & Co., no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Purchaser. The Purchaser is
solely responsible for payment of the fees and expenses of Merrill Lynch & Co.
ARTICLE V
ADDITIONAL AGREEMENTS
41
SECTION 5.01. Conduct of Business Prior to the Closing. The Seller
covenants and agrees that, except (i) to the extent the Purchaser shall
otherwise consent in writing (which consent shall not be unreasonably withheld),
(ii) as set forth in Section 5.01 of the Disclosure Schedule, (iii) as permitted
or contemplated by this Agreement or the License Agreements, (iv) as may be
necessary or appropriate to carry out the transactions contemplated by this
Agreement or the License Agreements or (v) as may be required to facilitate
compliance with any legal requirement, between the date hereof and the Closing,
the Seller shall not conduct the Business other than in the ordinary course and
consistent with the Seller's past practice. Without limiting the generality of
the foregoing, the Seller shall (i) continue its advertising and promotional
activities, and pricing and purchasing policies, related to the Acquired
Business in accordance with past practice; (ii) not shorten or lengthen the
customary payment cycles for any of the payables or receivables of the Acquired
Business; (iii) use its reasonable best efforts to (A) preserve intact the
Assets and the organization of the Acquired Business, (B) keep available to the
Purchaser the services of the Selected Business Employees and (C) preserve the
Acquired Business' current relationships with its customers, suppliers and other
persons with which it has significant business relationships; and (iv) use its
reasonable best efforts to not engage in any practice, take any action, fail to
take any action or enter into any transaction which could reasonably be expected
to cause any representation or warranty of the Seller to be untrue or result in
a breach of any covenant made by the Seller in this Agreement. The Seller
covenants and agrees that, prior to the Closing, without the prior written
consent of the Purchaser, the Seller will not (x) do any of the things
enumerated in the second sentence of Section 3.16 or (y) enter into any new
Material Contract. Notwithstanding the preceding sentence, the Seller may enter
into contracts relating to Brazil Regions 1 and 3 without the Purchaser's
consent, provided, however, that such contracts shall not become Transferred
Customer Contracts unless the Purchaser has consented thereto, and if the
Purchaser does not so consent, the infrastructure equipment required thereunder
shall be manufactured and supplied by a third party and not by the Seller.
SECTION 5.02. Access to Information. (a) From the date hereof until
the Closing, upon reasonable notice, the Seller shall and shall cause each of
the Seller's officers, employees, agents, accountants and counsel to: (i) afford
the officers, employees and authorized agents, accountants, counsel and
representatives of the Purchaser reasonable access, during normal business
hours, to the offices, properties, plants, other facilities, books and records
of the Acquired Business and to those officers, employees, agents, accountants
and counsel of the Seller who have any knowledge relating to the Acquired
Business and (ii) furnish to the officers, employees and authorized agents,
accountants, counsel and representatives of the Purchaser such additional
financial and operating data and other information regarding the Acquired
Business as the Purchaser may from time to time reasonably request.
(b) In order to facilitate the resolution of any claims made
against or incurred by the Seller prior to or following the Closing, for a
period of seven years after the
42
Closing, the Purchaser shall (i) retain the books and records of the
Seller which are transferred to the Purchaser pursuant to this Agreement
relating to periods prior to or following the Closing in a manner reasonably
consistent with the prior practices of the Seller and (ii) upon reasonable
notice, afford the officers, employees, authorized agents, accountants, counsel
and representatives of the Seller reasonable access (including the right to make
photocopies at the Seller's expense), during normal business hours, to such
books and records.
(c) In order to facilitate the resolution of any claims made by or
against or incurred by the Purchaser after the Closing, for a period of seven
years following the Closing, the Seller shall (i) retain all books and records
of the Seller which are not transferred to the Purchaser pursuant to this
Agreement and which relate to the Acquired Business for periods prior to the
Closing and which shall not otherwise have been delivered to the Purchaser and
(ii) upon reasonable notice, afford the officers, employees, authorized agents,
accountants, counsel and representatives of the Purchaser, reasonable access
(including the right to make photocopies at the Purchaser's expense), during
normal business hours, to such books and records.
SECTION 5.03. Confidentiality. (a) The Seller agrees to, and shall
cause its agents, representatives, Affiliates, employees, officers and directors
to: (i) treat and hold as confidential (and not disclose or provide access to
any Person to) all information relating to trade secrets, processes, patent or
trademark applications, product development, price, customer and supplier lists,
pricing and marketing plans, policies and strategies, operations methods,
product development techniques, business acquisition plans, new personnel
acquisition plans and any other confidential information with respect to the
Acquired Business, (ii) in the event that the Seller or any such agent,
representative, Affiliate, employee, officer or director becomes legally
compelled to disclose any such information, provide the Purchaser with prompt
written notice of such requirement so that the Purchaser may seek a protective
order or other remedy or waive compliance with this Section 5.03, (iii) in the
event that such protective order or other remedy is not obtained, or the
Purchaser waives compliance with this Section 5.03, furnish only that portion of
such confidential information which is legally required to be provided and
exercise its reasonable best efforts to obtain assurances that confidential
treatment will be accorded such information, and (iv) promptly furnish (prior
to, at, or as soon as practicable following, the Closing) to the Purchaser any
and all copies (in whatever form or medium) of all such confidential information
then in the possession of the Seller or any of its agents, representatives,
Affiliates, employees, officers and directors and destroy any and all additional
copies then in the possession of the Seller or any of its agents,
representatives, Affiliates, employees, officers and directors of such
information and of any analyses, compilations, studies or other documents
prepared, in whole or in part, on the basis thereof; provided, however, that
this sentence shall not apply to any information that, at the time of
disclosure, is available publicly and was not disclosed in breach of this
Agreement by the Seller, its agents, representatives, Affiliates, employees,
officers or directors; provided further that specific information shall not be
deemed to be within the foregoing exception
43
merely because it is embraced in general disclosures in the public domain. In
addition, any combination of features shall not be deemed to be within the
foregoing exception merely because the individual features are in the public
domain unless the combination itself and its principle of operation are in the
public domain.
(b) The Purchaser agrees to, and shall cause its agents,
representatives, Affiliates, employees, officers and directors to: (i) treat and
hold as confidential (and not disclose or provide access to any Person to) all
information relating to trade secrets, processes, patent or trademark
applications, product development, price, customer and supplier lists, pricing
and marketing plans, policies and strategies, operations methods, product
development techniques, business acquisition plans, new personnel acquisition
plans and any other confidential information obtained by the Purchaser pursuant
to the Confidentiality Agreement and not related to the Acquired Business, (ii)
in the event that the Purchaser or any such agent, representative, Affiliate,
employee, officer or director becomes legally compelled to disclose any such
information, provide the Seller with prompt written notice of such requirement
so that the Seller may seek a protective order or other remedy or waive
compliance with this Section 5.03, (iii) in the event that such protective order
or other remedy is not obtained, or the Seller waives compliance with this
Section 5.03, furnish only that portion of such confidential information which
is legally required to be provided and exercise its reasonable best efforts to
obtain assurances that confidential treatment will be accorded such information,
and (iv) promptly furnish (prior to, at, or as soon as practicable following,
the Closing) to the Seller any and all copies (in whatever form or medium) of
all such confidential information then in the possession of the Purchaser or any
of its agents, representatives, Affiliates, employees, officers and directors
and destroy any and all additional copies then in the possession of the
Purchaser or any of its agents, representatives, Affiliates, employees, officers
and directors of such information and of any analyses, compilations, studies or
other documents prepared, in whole or in part, on the basis thereof; provided,
however, that this sentence shall not apply to any information that, at the time
of disclosure, is available publicly and was not disclosed in breach of this
Agreement by the Purchaser, its agents, representatives, Affiliates, employees,
officers or directors; provided further that specific information shall not be
deemed to be within the foregoing exception merely because it is embraced in
general disclosures in the public domain. In addition, any combination of
features shall not be deemed to be within the foregoing exception merely because
the individual features are in the public domain unless the combination itself
and its principle of operation are in the public domain.
(c) Each of the Seller and the Purchaser agrees and acknowledges
that remedies at Law for any breach of its obligations under this Section 5.03
are inadequate and that in addition thereto a party shall be entitled to seek
equitable relief, including injunction and specific performance, in the event of
any such breach, without the necessity of demonstrating the inadequacy of money
damages.
44
(d) Upon consummation of the Closing, the Confidentiality
Agreement shall terminate without any further action on the part of the
Purchaser or the Seller.
SECTION 5.04. Regulatory and Other Authorizations; Notices and
Consents. (a) Each of the Seller and the Purchaser shall use its reasonable best
efforts to obtain all authorizations, consents, orders and approvals of all
Governmental Authorities and officials that may be or become necessary for its
execution and delivery of, and the performance of its obligations pursuant to,
this Agreement and the Ancillary Agreements and will cooperate fully with the
other party in promptly seeking to obtain all such authorizations, consents,
orders and approvals. Each party hereto agrees to make an appropriate filing, if
necessary, pursuant to the HSR Act with respect to the transactions contemplated
by this Agreement as promptly as practicable, but in any event within ten
Business Days of the date hereof, and to supply as promptly as practicable to
the appropriate Governmental Authorities any additional information and
documentary material that may be requested pursuant to the HSR Act.
(b) The Seller shall give promptly such notices to third parties
and use its reasonable best efforts to obtain all such third party consents that
are necessary or desirable in connection with the transfer of the Material
Contracts. The Purchaser shall cooperate and use its reasonable best efforts to
assist the Seller in giving such notices and obtaining such consents; provided,
however, that the Purchaser shall have no obligation to give any guarantee or
other consideration of any nature in connection with any such notice or consent
or to consent to any change in the terms of any Material Contract which the
Purchaser in its sole discretion may deem adverse to the interests of the
Purchaser or the Acquired Business.
(c) The Seller and the Purchaser agree that, in the event any
consent, approval or authorization necessary or desirable to preserve for the
Acquired Business or the Purchaser any right or benefit under any lease,
license, contract, commitment or other agreement or arrangement to which the
Seller is a party is not obtained prior to the Closing, the Seller will,
subsequent to the Closing, cooperate with the Purchaser in attempting to obtain
such consent, approval or authorization as promptly thereafter as practicable.
If such consent, approval or authorization cannot be obtained, the Seller will
use its reasonable best efforts to provide the Purchaser with the rights and
benefits of the affected lease, license, contract, commitment or other agreement
or arrangement for the term of such lease, license, contract or other agreement
or arrangement, and, if the Seller provides such rights and benefits, the
Purchaser shall assume the obligations and burdens thereunder.
(d) The Seller and the Purchaser agree to cooperate with each
other (i) in providing to the Purchaser, on commercially reasonable terms and
for purposes of conducting the Acquired Business, the benefit of any asset or
right that is currently used in the Acquired Business and that is not
effectively transferred to the Purchaser under this Agreement or the Ancillary
Agreements and (ii) in providing to the Seller, on commercially reasonable terms
and for purposes of conducting the businesses of the Seller as of the date
hereof other than the
45
Acquired Business, the benefit of any asset or right that is
currently used in such businesses and that is transferred to the Purchaser under
this Agreement or the Ancillary Agreements.
(e) The Seller and the Purchaser shall cooperate in preparing a
comprehensive list prior to the Closing of all Permits that are non-transferable
or which will require the consent of any Governmental Authority in order to be
transferred to the Purchaser in the event of the consummation of the
transactions contemplated by this Agreement.
SECTION 5.05. Notice of Developments. (a) Prior to the Closing, the
Seller shall promptly notify the Purchaser in writing of (i) all events,
circumstances, facts and occurrences arising subsequent to the date of this
Agreement which could reasonably be expected to result in any material breach of
a representation or warranty or covenant of the Seller in this Agreement or
which could reasonably be expected to have the effect of making any
representation or warranty of the Seller in this Agreement untrue or incorrect
in any material respect and (ii) all other material adverse developments
affecting the Assets, Liabilities, business, financial condition, operations,
results of operations, customer or supplier relations, employee relations,
projections or prospects of the Seller or the Business.
(b) Prior to the Closing, the Purchaser shall promptly notify the
Seller in writing of all events, circumstances, facts and occurrences arising
subsequent to the date of this Agreement which could reasonably be expected to
result in any material breach of a representation or warranty or covenant of the
Purchaser in this Agreement or which could reasonably be expected to have the
effect of making any representation or warranty of the Purchaser in this
Agreement untrue or incorrect in any material respect.
SECTION 5.06. No Solicitation or Negotiation. The Seller agrees that
between the date of this Agreement and the earlier of (i) the Closing and (ii)
the termination of this Agreement, neither the Seller nor any of its respective
Affiliates, officers, directors, representatives or agents will (a) solicit,
initiate, consider, encourage or accept any other proposals or offers from any
Person relating to any acquisition or purchase of all or any portion of the
Assets or the Acquired Business (other than (i) Inventory to be sold in the
ordinary course of the Business consistent with past practice and (ii) proposals
or offers related to the acquisition of all or substantially all of the assets
or capital stock of the Seller in a transaction subject to the prior rights of
the Purchaser under this Agreement related to the acquisition of the Assets and
the Acquired Business), or (b) participate in any discussions, conversations,
negotiations or other communications regarding, or furnish to any other Person
any information with respect to, or otherwise cooperate in any way, assist or
participate in, facilitate or encourage any effort or attempt by any other
Person to seek to do any of the foregoing. The Seller immediately shall cease
and cause to be terminated all existing discussions, conversations, negotiations
and other communications with any Persons conducted heretofore with respect to
any of the foregoing. Subject to confidentiality agreements binding upon the
Seller as of the date hereof, the Seller shall notify the Purchaser promptly if
any such
46
proposal or offer, or any inquiry or other contact with any Person with respect
thereto, is made and shall, in any such notice to the Purchaser, indicate in
reasonable detail the identity of the Person making such proposal, offer,
inquiry or contact and the material terms and conditions of such proposal,
offer, inquiry or other contact. The Seller agrees not to, without the prior
written consent of the Purchaser, release any Person from, or waive any
provision of, any confidentiality or standstill agreement to which the Seller is
a party and which is primarily related to a potential acquisition of all or any
portion of the Assets or the Acquired Business, and the Seller agrees to send,
promptly after the date of this Agreement, requests to all parties under such
agreements to return or destroy confidential information obtained from the
Seller thereunder related to the Assets or the Business.
SECTION 5.07. Use of Intellectual Property. (a) Except as reasonably
necessary for the Seller to commercially exploit the Excluded Assets or to
fulfill its obligations under the Excluded Liabilities and Excluded Contracts,
from and after the Closing, the Seller shall not use any of the Business
Intellectual Property (other than software not customized for the Acquired
Business), other than as contemplated pursuant to the Ancillary Agreements. The
Purchaser hereby grants to the Seller a perpetual, royalty-free license to use
such Business Intellectual Property as it exists at the Closing Date to
commercially exploit the Excluded Assets and to fulfill its obligations under
the Excluded Liabilities and Excluded Contracts.
(b) The Seller shall not use or put into use after the Closing any
materials that bear any trademark, service mark, trade dress, logo or trade name
contained in the Business Intellectual Property transferred to the Purchaser
pursuant to this Agreement or any trademark, service mark, trade dress, logo or
trade name similar or related thereto.
(c) After the Closing, the Purchaser shall not use any advertising
or promotional materials or other paper goods or supplies that state or
otherwise indicate thereon that the Acquired Business is a division or unit of
the Seller; provided, that to the extent that any such materials or supplies
included in the Assets so indicate, the Purchaser may use such materials and
supplies for a period of six months after the Closing Date.
SECTION 5.08. [*]
* Confidential Treatment Requested
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[*]
* Confidential Treatment Requested
48
[*]
SECTION 5.09. Excluded Liabilities. The Seller shall pay and
discharge the Excluded Liabilities as and when the same become due and payable.
SECTION 5.10. Bulk Transfer Laws. The Purchaser hereby acknowledges
that the Seller has not taken, and does not intend to take, any action required
to comply with any applicable bulk sale or bulk transfer laws or similar laws,
and the Purchaser hereby waives compliance by the Seller with any applicable
bulk sale or bulk transfer laws of any jurisdiction in connection with the sale
of the Assets to the Purchaser (other than any obligations with respect to the
application of the proceeds herefrom). Pursuant to Article VIII, the Seller has
agreed to indemnify the Purchaser against any and all liabilities which may be
asserted by third parties (including with respect to Taxes) against the
Purchaser as a result of the Seller's noncompliance with any such law.
SECTION 5.11. Tax Matters. (a) The Seller agrees to indemnify and
hold harmless the Purchaser against any loss, damage, liability or expense,
including reasonable fees for attorneys and other outside consultants, incurred
in contesting or otherwise in connection with Taxes imposed on the Seller or the
Acquired Business with respect to taxable periods or portions thereof ending on
or before the Closing Date and Taxes imposed on the Purchaser as a result of any
breach of warranty or misrepresentation under Section 3.27 of this Agreement.
(b) Payment by the Seller of any amounts due under this Section
5.11 in respect of Taxes shall be made (i) at least three Business Days before
the due date of the
* Confidential Treatment Requested
49
applicable estimated or final tax return required to be filed by the Purchaser
on which is required to be reported income for a period ending after the Closing
Date for which the Seller is responsible under Section 5.11(a) without regard to
whether the tax return shows overall net income or loss for such period, and
(ii) within three Business Days following an agreement between the Seller and
the Purchaser that an indemnity amount is payable, an assessment of a Tax by a
taxing authority, or a "determination" as defined in Section 1313(a) of the
Code. If liability under this Section 5.11 is in respect of costs or expenses
other than Taxes, payment by the Seller of any amounts due under this Section
5.11 shall be made within five Business Days after the date when the Seller has
been notified by the Purchaser that the Seller has a liability for a
determinable amount under this Section 5.11 and is provided with calculations or
other materials supporting such liability.
(c) The Seller and the Purchaser shall share equally any real
property transfer or gains, sales, use, transfer, value added, stock transfer,
and stamp taxes, any transfer, recording, registration, and other fees, and any
similar Taxes which become payable in connection with the transactions
contemplated by this Agreement and the Ancillary Agreements. The Seller, after
review and consent by the Purchaser, shall file such applications and documents
as shall permit any such Tax to be assessed and paid on or prior to the Closing
Date in accordance with any available pre-sale filing procedure. The Purchaser
shall execute and deliver all instruments and certificates necessary to enable
the Seller to comply with the foregoing. The Purchaser shall complete and
execute a resale or other exemption certificate with respect to the inventory
items sold hereunder, and shall provide the Seller with an executed copy
thereof. The Seller shall provide to the Purchaser such information regarding
the location of tangible property of the Acquired Business sufficient to support
the filing of complete and accurate Tax returns and reports by the Purchaser.
(d) At the request of the Purchaser, the Seller shall file with
all applicable Tax authorities any statements, certificates or forms provided
for under federal, state, local or foreign Tax laws to prevent the Purchaser
from being liable as a transferee for Taxes of the Seller.
(e) The Seller and the Purchaser agree to treat all payments made
by either to or for the benefit of the other under this Section 5.11 and any
other indemnity provisions of this Agreement and for any misrepresentations or
breach of warranties or covenants, as adjustments to the Purchase Price for Tax
purposes and that such treatment shall govern for purposes hereof except to the
extent that the laws of a particular jurisdiction provide otherwise, in which
case such payments shall be made in an amount sufficient to indemnify the
relevant party on an after-Tax basis.
(f) The Seller shall, on or before September 30, 1999, provide to
the Purchaser such information and substantiating documentation, as required
under Section 41(f)(3) of the Code, regarding "qualified research expense" and
"gross receipts" of the
50
Acquired Business for purposes of computing the credit for increasing research
activities under Section 41 of the Code.
SECTION 5.12. Letters of Credit, Etc. (a) Set forth on Section 5.12
of the Disclosure Schedule is a true and complete list of all letters of credit,
performance bonds and similar obligations arising under any Transferred Customer
Contracts. The Purchaser shall use all reasonable efforts to cause the Seller to
be released, as of or as promptly as practicable following the Closing, from all
such letters of credit, performance bond and similar obligations (whether
through the provision of a replacement letter of credit, guaranty or otherwise).
(b) The Seller shall use all reasonable efforts to cause the
Purchaser to receive the benefits following the Closing of all letters of
credit, performance bonds and similar obligations that have been issued in favor
of or for the benefit of the Seller under any Transferred Customer Contracts
(whether through the assignment thereof, the issuance of a replacement letter of
credit, guaranty or otherwise).
SECTION 5.13. License of Excluded Intellectual Property. The Seller
hereby grants to the Purchaser a perpetual, exclusive (subject to license
agreements existing as of the date hereof) royalty-free license to use the
Intellectual Property described in clause (D) of the definition of Excluded
Intellectual Property as it exists at the Closing Date in the conduct of the
Acquired Business.
SECTION 5.14. Ancillary Agreements. The parties shall cooperate in
good faith to prepare, negotiate and finalize the Ancillary Agreements as
promptly as practicable after the date hereof. Notwithstanding anything to the
contrary contained in this Agreement, in the event the parties cooperate in good
faith but are nevertheless unable to finalize any Ancillary Agreement by the
time otherwise scheduled for the Closing, the term sheet attached hereto which
sets forth the principal terms of such Ancillary Agreement shall be binding on
the parties and shall govern the relationship of the parties following the
Closing with respect to the matters covered thereby until such time as the
parties shall execute and deliver the applicable Ancillary Agreement.
SECTION 5.15. Other Matters. (a) The Purchaser agrees that San Diego
shall be the Purchaser's principal research and development center for IS-95 and
CDMA 2000 applications for the foreseeable future.
(b) The Seller shall, to the extent and in the manner it deems
commercially reasonable, cause wireless system operators in which it has an
existing equity investment to purchase their IS-95 and CDMA 2000 infrastructure
products from the Purchaser if the Purchaser offers products competitive as to
quality and price with other products then available in the market.
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(c) The Purchaser agrees to actively promote and support
IS-95-based products, to the extent and in the manner it deems commercially
reasonable. The Purchaser represents to the Seller that it will exercise
commercially reasonable efforts to sell IS-95 equipment under the Transferred
Customer Contracts.
(d) The Purchaser and the Seller each agree to actively promote
the high data rate project currently under development by the Seller as each
deems commercially reasonable.
SECTION 5.16. Provision of Subscriber Units. In order for the
Purchaser to comply with its obligations to provide subscriber units under the
Transferred Customer Contracts with US West Wireless LLC and Mauritius Telecom
Limited, the Seller shall, if the Purchaser so requests, sell subscriber units
to the Purchaser in the quantities required by such Transferred Customer
Contracts and on the other terms set forth therein, [*].
SECTION 5.17. Joint Support of Third Generation Standard. The Seller
and the Purchaser hereby agree to jointly support approval by the International
Telecommunications Union (the "ITU") and other standards bodies, including the
U.S. Telecommunications Industry Association and the European Telecommunication
Standards Institute, of a single CDMA third generation standard that encompasses
three optional modes of operation: (i) direct sequence FDD, (2) multi-carrier
FDD and (3) TDD (the "SINGLE CDMA STANDARD"). Each mode supports operation with
both GSM MAP and ANSI-41 networks. The Seller and the Purchaser believe that
rapid adoption of the Single CDMA Standard is in the best interests of the
industry and allows each operator to select which mode of operation to deploy
based on marketplace needs. The Seller and the Purchaser shall commit to the ITU
and to other standards bodies to license their essential patents for the single
CDMA Standard or any of its modes on a fair and reasonable basis free from
unfair discrimination. Accordingly, both parties shall, on the Closing Date,
notify the ITU and other relevant standards bodies that any intellectual
property rights blocking currently in force will be immediately withdrawn.
SECTION 5.18. Further Action. Each of the parties hereto shall use
all reasonable efforts to take, or cause to be taken, all appropriate action, do
or cause to be done all things necessary, proper or advisable under applicable
Laws, and execute and deliver such documents and other papers, as may be
required to carry out the provisions of this Agreement and consummate and make
effective the transactions contemplated by this Agreement, including, without
limitation, delivering, or causing to be delivered, the certificates, opinions
and other documents to be delivered to the other party as a condition to such
other party's obligations under Article VII of this Agreement.
* Confidential Treatment Requested
52
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01. Offer of Employment. Section 6.01 of the Disclosure
Schedule sets forth a list of the Business Employees as of the date of this
Agreement. On or prior to the 30th calendar day after the date of this
Agreement, the Purchaser shall deliver to the Seller a list of Business
Employees to which it intends to extend an offer of employment (the "SELECTED
BUSINESS EMPLOYEES"), [*]. On the Closing Date, the Purchaser shall offer to
employ on an "at-will" basis and subject to the Purchaser's standard terms,
conditions and policies of employment, each of the Selected Business Employees
on the same basis (i.e., full- or part-time) as such Selected Business Employees
were employed by the Seller immediately prior to the Closing Date; provided,
however, that any Selected Business Employee who is on vacation at the Closing
Date shall be offered employment only if his return date is within 30 days of
the Closing Date; provided, further, however, that any Selected Business
Employee who is on short-term disability or on an approved leave of absence
shall be offered employment hereunder upon the employee obtaining a medical
release or other documentation reasonably satisfactory to the Purchaser which
evidences the employee's ability to perform the essential functions of his
regular work, with or without reasonable accommodation, and the employee returns
to active employment with the Purchaser (i) if on short-term disability or on an
approved leave of absence under the Family Medical Leave Act of 1993, as amended
("FMLA"), no later than the last day on which the employee may return to work
under the provisions of the applicable Seller short-term disability plan or
FMLA, or (ii) for all other approved leaves of absence, within 30 days of the
Closing Date. Those Selected Business Employees who accept such offers prior to
the Closing Date shall become employees of the Purchaser as of the Closing Date,
or, for individuals on leave, as of their return from leave as described in the
previous sentence (the "TRANSFERRED EMPLOYEES"). The Purchaser shall be
responsible for obtaining any necessary visas for Transferred Employees.
SECTION 6.02. Transferred Employee Liabilities. Except as otherwise
provided herein, the Purchaser shall assume all employer or employment related
obligations to the Transferred Employees arising after the Closing Date. The
Seller shall retain, and the Purchaser shall not assume, all obligations (i)
relating to any Business Employees who do not become Transferred Business
Employees and (ii) relating to any Business Employees arising on or prior to the
Closing Date.
SECTION 6.03. Participation in Certain Retirement Plans. All
Transferred Employees shall be eligible to participate in the Purchaser's CAP &
Savings Plan and the Purchaser's defined benefit pension plan as of the Closing
Date, or, for individuals on leave as of the Closing Date, as of the date such
individuals become Transferred Employees in
* Confidential Treatment Requested
53
accordance with Section 6.01, and service credit under such plans shall be
provided pursuant to Section 6.06.
SECTION 6.04. Executive Plan. Prior to the Closing Date, the
Purchaser shall have established a separate non-qualified deferred compensation
plan (the "PURCHASER'S DCP") providing for the payment of deferred benefits to
the executives of the Business who are Transferred Employees who have previously
deferred income under the terms of the Seller's Voluntary Executive Retirement
Contribution Plan (the "SELLER'S DCP"). On the Closing Date, the Seller shall
transfer the benefit obligations to Transferred Employees under Seller's DCP to
Purchaser's DCP and shall transfer the assets in any trusts established to fund
the Seller's obligations under the Seller's DCP to trusts established for this
purpose by the Purchaser. The Purchaser's DCP shall contain substantially
identical provisions to the Seller's DCP, provided that (i) the Purchaser shall
not be obligated to provide identical investment opportunities to participants
and (ii) the Purchaser's DCP shall be maintained on a frozen basis after the
Closing Date (i.e., no further participant deferrals or employer matching
contributions shall be permitted). The Purchaser agrees that it shall honor the
terms of the distribution elections previously made by Transferred Employees who
are participants in the Seller's DCP. The Purchaser shall indemnify and hold the
Seller harmless in respect of all obligations to pay benefits under the Seller's
DCP that have been transferred to the Purchaser under the Purchaser's DCP.
SECTION 6.05. Welfare Benefit Plans. (a) Benefits related to any
Transferred Employee or an eligible dependent under any Seller-sponsored welfare
benefit plan in which the employee or eligible dependent participated prior to
the Closing Date shall cease as of the Closing Date; provided, however, that
liabilities relating to claims of Transferred Employees or eligible dependents
for medical benefits incurred for medical services rendered to, and purchases of
prescription drugs and other health care products made by, such persons while
actively employed by the Seller (or while an eligible dependent of such a
person) shall be retained by the Seller (including but not limited to the cost
of hospitalization and any related charges for any such person hospitalized
before the Closing Date and who remains continuously hospitalized after the
Closing Date, until such persons's date of discharge from the hospital). The
Purchaser agrees to recognize any deductibles and co-payments paid by
Transferred Employees and their eligible dependents under the Seller's welfare
benefit plans in the calendar year in which the Closing Date occurs toward any
applicable calendar year deductibles and co-payments under the Purchaser's
welfare benefit plans.
(b) All Transferred Employees and their eligible dependents who
are participating in the Seller's welfare benefit plans on the Closing Date
shall become participants in the Purchaser's welfare benefit plans on the
Closing Date. The Purchaser agrees to waive any pre-existing medical condition
restrictions and similar restrictions contained in the Purchaser's welfare
benefit plans. The Purchaser further agrees to permit all dependents of
Transferred Employees who were participating in any Seller-sponsored welfare
benefit plan on
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the Closing Date to participate in the Purchaser's welfare benefit plans on the
Closing Date, regardless of whether such dependents are currently eligible to
participate in the Purchaser's welfare benefit plans under their terms of
dependent eligibility. The eligibility of all other dependents of Transferred
Employees to participate in the Purchaser's welfare benefit plans will be
determined in accordance with the dependent eligibility provisions of such
plans. The Purchaser shall, as of the Closing Date, be solely responsible for
the cost of any and all benefits to which Transferred Employees and their
eligible dependents become entitled under the terms of the Purchaser's welfare
benefit plans, as in effect from time to time.
(c) The Seller agrees that it shall be and remain liable for
continuing group health benefits under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), for all Business Employees
(and their "qualified beneficiaries" as defined in COBRA) who do not become
Transferred Employees. The Purchaser shall assume all liability under COBRA in
respect of all Transferred Employees, including, without limitation, any COBRA
liability arising as a result of the termination of a Transferred Employee's
employment with the Seller on the Closing Date.
SECTION 6.06. Service Credit. Transferred Employees shall receive
credit for their service with the Seller or any of its Affiliates (including
service with any predecessor company) for all purposes under the Purchaser's
employee plans, programs and arrangements (other than for purposes of benefit
accrual under the Purchaser's defined benefit pension plans).
SECTION 6.07. Indemnity. Without limiting in any way the scope of
Article VIII or the applicability of such Article to employment-related and
benefit-related matters, the Seller shall indemnify and hold harmless the
Purchaser from any and all claims (including reasonable attorneys' fees and
expenses incurred in defending such claims) against the Purchaser by Transferred
Employees or other Business Employees (including former Business Employees) (i)
that arise from representations made by the Seller to such employees regarding
their future employment, (ii) that pertain to the payment of any bonus or other
incentive compensation accrued or earned by any Transferred Employee prior to
the Closing Date or (iii) that arise from the termination of employment (through
layoff or otherwise) of any Business Employee prior to the Closing Date. The
Seller shall further indemnify and hold harmless the Purchaser against any and
all claims against the Purchaser by any Selected Business Employee who does not
accept the Purchaser's offer of employment or who otherwise fails to become a
Transferred Employee.
SECTION 6.08. Employee Information. No later than 10 calendar days
after the Closing Date, the Seller shall furnish to the Purchaser the following
information with respect to each Transferred Employee, as applicable:
(a) social security number;
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(b) accrued and unused vacation as of the Closing Date;
(c) years and months of service as of the Closing Date; and
(d) base salary and bonus for the three calendar years immediately
preceding the Closing Date and current base salary.
SECTION 6.09. Certain Other Employee-Related Costs. Within five
Business Days after the Closing Date, the Seller shall provide the Purchaser
with a complete and accurate statement of any amounts expected to be payable by
the Purchaser following the Closing that relate to any service by any
Transferred Employee with the Seller through the Closing Date, including,
without limitation, any salary or wages, any accrued vacation, sick or personal
days or any bonuses, except to the extent that such amounts will be reflected as
Liabilities on the Closing Statement of Net Assets (the "EMPLOYEE AMOUNTS"). The
Seller shall retain liability for the Employee Amounts and shall pay an amount
of cash to the Purchaser equal to the Employee Amounts within ten Business Days
after the Closing Date.
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.01. Conditions to Obligations of the Seller. The
obligations of the Seller to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment or waiver, at or prior to the
Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Purchaser contained in this Agreement that are not qualified
as to materiality shall be true and correct in all material respects, and the
representations and warranties of the Purchaser contained in this Agreement that
are qualified as to materiality shall be true and correct, in each case of the
date of this Agreement and, except to the extent that such representations and
warranties speak specifically as of an earlier date, as of the Closing Date as
though made on and as of the Closing Date, and the Seller shall have received a
certificate from the Purchaser to such effect signed by a duly authorized
officer thereof;
(b) Covenants. The covenants and agreements contained in this
Agreement to be complied with by the Purchaser on or before the Closing shall
have been complied with in all material respects, and the Seller shall have
received a certificate from the Purchaser to such effect signed by a duly
authorized officer thereof;
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(c) HSR Act. Any waiting period (and any extension thereof) under
the HSR Act applicable to the purchase of the Assets contemplated by this
Agreement shall have expired or shall have been terminated;
(d) No Proceeding or Litigation. No Action shall have been
commenced by or before any Governmental Authority against either the Seller or
the Purchaser, seeking to restrain or materially and adversely alter the
transactions contemplated by this Agreement which is likely to render it
impossible or unlawful to consummate such transactions; provided, however, that
the provisions of this Section 7.01(d) shall not apply if the Seller has
directly or indirectly solicited or encouraged any such Action;
(e) Incumbency Certificate. The Seller shall have received a
certificate of the Secretary or an Assistant Secretary of the Purchaser
certifying the names and signatures of the officers of the Purchaser authorized
to sign this Agreement and the Ancillary Agreements to which it is a party and
the other documents to be delivered hereunder and thereunder;
(f) Legal Opinion. The Seller shall have received from the General
Counsel of the Purchaser and Shearman & Sterling legal opinions, addressed to
the Seller and dated the Closing Date, covering the matters set forth in Exhibit
7.01(f)(i) and Exhibit 7.01(f)(ii), respectively; and
(g) Ancillary Agreements. The Purchaser shall have executed and
delivered to the Seller each of the Ancillary Agreements to which it is a party
and all Ancillary Agreements shall be in force and effect (or, in the event all
Ancillary Agreements have not been executed and delivered, the Purchaser shall
have complied with its obligations under Section 5.14).
SECTION 7.02. Conditions to Obligations of the Purchaser. The
obligations of the Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment or waiver, at or prior to the
Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Seller contained in this Agreement shall be true and correct,
in each case of the date of this Agreement and, except to the extent that such
representations and warranties speak specifically as of an earlier date, as of
the Closing Date as though made on and as of the Closing Date (in each case
determined without respect to any qualification as to "materiality," "Material
Adverse Effect" or similar qualification), in all such respects as would not,
individually or in the aggregate, have a Material Adverse Effect, and the
Purchaser shall have received a certificate from the Seller to such effect
signed by a duly authorized officer thereof;
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(b) Covenants. The covenants and agreements contained in this
Agreement to be complied with by the Seller on or before the Closing (other than
Section 5.01) shall have been complied with in all material respects, the
covenants and agreements contained in Section 5.01 shall have been complied with
in all respects as would not, individually or in the aggregate, have a Material
Adverse Effect, and the Purchaser shall have received a certificate from the
Purchaser to such effect signed by a duly authorized officer thereof;
(c) HSR Act. Any waiting period (and any extension thereof) under
the HSR Act applicable to the purchase of the Assets contemplated hereby shall
have expired or shall have been terminated;
(d) No Proceeding or Litigation. No Action shall have been
commenced by or before any Governmental Authority against either the Seller or
the Purchaser, seeking to restrain or materially and adversely alter the
transactions contemplated hereby which is likely to render it impossible or
unlawful to consummate the transactions contemplated by this Agreement or which
could reasonably be expected to have a Material Adverse Effect; provided,
however, that the provisions of this Section 7.02(d) shall not apply if the
Purchaser has solicited or encouraged any such Action;
(e) Resolutions of the Seller. The Purchaser shall have received a
true and complete copy, certified by the Secretary or an Assistant Secretary of
the Seller, of the resolutions duly and validly adopted by the Board of
Directors of the Seller evidencing its authorization of the execution and
delivery of this Agreement and the Ancillary Agreements and the consummation of
the transactions contemplated hereby and thereby;
(f) Incumbency Certificate. The Purchaser shall have received a
certificate of the Secretary or an Assistant Secretary of the Seller certifying
the names and signatures of the officers of the Seller authorized to sign this
Agreement and the Ancillary Agreements and the other documents to be delivered
hereunder and thereunder;
(g) Legal Opinion. The Purchaser shall have received from Cooley
Godward LLP a legal opinion, addressed to the Purchaser and dated the Closing
Date, covering the matters set forth in Exhibit 7.02(g);
(h) Consents and Approvals. The Purchaser and the Seller shall
have received, each in form and substance reasonably satisfactory to the
Purchaser, all authorizations, consents, orders and approvals of all
Governmental Authorities and officials reasonably necessary for the consummation
of the transactions contemplated by
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this Agreement and the Ancillary Agreements, other than such authorizations,
consents, orders, approvals or consents the absence of which could not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect (taking into account in any such determination any rights or
benefits conveyed on the Purchaser pursuant to Sections 5.04(c) and (d));
(i) Ancillary Agreements. The Seller shall have executed and
delivered to the Purchaser each of the Ancillary Agreements to which it is a
party and all Ancillary Agreements shall be in force and effect (or, in the
event all Ancillary Agreements have not been executed and delivered, the Seller
shall have complied with its obligations under Section 5.14);
(j) No Material Adverse Effect. No circumstance, change in, or
effect on the Acquired Business shall have occurred which has a Material Adverse
Effect as of the Closing Date; and
(k) Certificate of Non-Foreign Status. The Purchaser shall have
received a certificate from the Seller (which complies with Section 1445 of the
Code) of non-foreign status executed in accordance with the provisions of the
Foreign Investment in Real Property Tax Act.
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ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Survival of Representations and Warranties. The
representations and warranties of the Seller contained in this Agreement shall
survive the Closing [*]. Neither the period of survival nor the liability of the
Seller with respect to the Seller's representations and warranties shall be
reduced by any investigation made at any time by or on behalf of the Purchaser.
If written notice of a claim has been given prior to the expiration of the
applicable representations and warranties, then the relevant representations and
warranties shall survive as to such claim until the claim has been finally
resolved.
SECTION 8.02. Indemnification by the Seller. (a) Following the
Closing, the Purchaser and its Affiliates, officers, directors, employees,
agents, successors and assigns shall be indemnified and held harmless by the
Seller for any and all Liabilities, losses, damages, diminution in value,
claims, costs and expenses, interest, awards, judgments and penalties
(including, without limitation, attorneys' and consultants' fees and expenses)
actually suffered or incurred by them (including, without limitation, any Action
brought or otherwise initiated by any of them) (hereinafter a "LOSS"), arising
out of or resulting from:
(i) the breach of any representation or warranty made by the
Seller contained in this Agreement (provided that solely for purposes of
this Article VIII, each such representation and warranty shall be read as
if all qualifications as to materiality, "Material Adverse Effect" and
similar qualifications were deleted therefrom); or
(ii) the breach of any covenant or agreement by the Seller
contained in this Agreement; or
* Confidential Treatment Requested
60
(iii) Liabilities of the Seller, whether arising before or after the
Closing Date, that are not expressly assumed by the Purchaser pursuant to
this Agreement, including, without limitation: (A) Liabilities arising
from or related to any failure to comply with laws relating to bulk
transfers or bulk sales with respect to the transactions contemplated by
this Agreement (notwithstanding the waiver contained in Section 5.10); and
(B) the Excluded Liabilities.
To the extent that the Seller's undertakings set forth in this
Section 8.02 may be unenforceable, the Seller shall contribute the maximum
amount that it is permitted to contribute under applicable Law to the payment
and satisfaction of all Losses incurred by the Purchaser.
(b) Notwithstanding anything to the contrary contained in this
Agreement, (i) the maximum aggregate amount of indemnifiable Losses which may be
recovered from the Seller arising out of or resulting from the causes enumerated
in Section 8.02(a)(i), or in Section 8.02(a)(ii) with respect to covenants and
agreements which by their terms are required to be complied with by the Seller
on or prior to the Closing Date, shall be an amount equal to [*] and (ii) the
Seller shall not be liable to indemnify the Purchaser for any indemnifiable
Losses otherwise payable thereunder until such time as all such indemnifiable
Losses shall aggregate to more than [*], after which time the Seller shall be
liable to indemnify the Purchaser only for the aggregate amount of all Losses in
excess of [*].
SECTION 8.03. Indemnification by the Purchaser. (a) Following the
Closing, the Seller and its Affiliates, officers, directors, employees, agents,
successors and assigns shall be indemnified and held harmless by the Purchaser
for any and all Losses, arising out of or resulting from:
(i) the breach of any representation or warranty made by the
Purchaser contained in this Agreement (provided that solely for purposes
of this Article VIII, each such representation and warranty shall be read
as if all qualifications as to materiality and similar qualifications were
deleted therefrom); or
(ii) the breach of any covenant or agreement by the Purchaser
contained in this Agreement; or
(iii) the Assumed Liabilities.
To the extent that the Purchaser's undertakings set forth in this
Section 8.03 may be unenforceable, the Purchaser shall contribute the maximum
amount that it is permitted to contribute under applicable Law to the payment
and satisfaction of all Losses incurred by the Seller.
* Confidential Treatment Requested
61
(b) Notwithstanding anything to the contrary contained in this
Agreement, (i) the maximum aggregate amount of indemnifiable Losses which may be
recovered from the Purchaser arising out of or resulting from the causes
enumerated in Section 8.03(a)(i), or in Section 8.03(a)(ii) with respect to
covenants and agreements which by their terms are required to be complied with
by the Purchaser on or prior to the Closing Date, shall be an amount equal to
[*] and (ii) the Purchaser shall not be liable to indemnify the Seller for any
indemnifiable Losses otherwise payable thereunder until such time as all such
indemnifiable Losses shall aggregate to more than [*], after which time the
Purchaser shall be liable to indemnify the Seller only for the aggregate amount
of all Losses in excess of $[*].
SECTION 8.04. Indemnification Procedures. An indemnified party shall
give the indemnifying party notice of any matter which an indemnified party has
determined has given or could give rise to a right of indemnification under this
Agreement, within 60 days of such determination, stating the amount of the Loss,
if known, and method of computation thereof, and containing a reference to the
provisions of this Agreement in respect of which such right of indemnification
is claimed or arises. The obligations and Liabilities of the indemnifying party
under this Article VIII with respect to Losses arising from claims of any third
party which are subject to the indemnification provided for in this Article VIII
("THIRD PARTY CLAIMS") shall be governed by and contingent upon the following
additional terms and conditions: if an indemnified party shall receive notice of
any Third Party Claim, the indemnified party shall give the indemnifying party
notice of such Third Party Claim within 30 days of the receipt by the
indemnified party of such notice; provided, however, that the failure to provide
such notice shall not release the indemnifying party from any of its obligations
under this Article VIII except to the extent the indemnifying party is
materially prejudiced by such failure and shall not relieve the indemnifying
party from any other obligation or liability that it may have to any indemnified
party otherwise than under this Article VIII. If the indemnifying party
acknowledges in writing its obligation to indemnify the indemnified party
hereunder against any Losses (subject to the limitations in Section 8.02(b) or
8.03(b), as appropriate) that may result from such Third Party Claim, then the
indemnifying party shall be entitled to assume and control the defense of such
Third Party Claim at its expense and through counsel of its choice if it gives
notice of its intention to do so to the indemnified party within five days of
the receipt of such notice from the indemnified party; provided, however, that
if there exists or is reasonably likely to exist a conflict of interest that
would make it inappropriate in the judgment of the indemnified party for the
same counsel to represent both the indemnified party and the indemnifying party,
then the indemnified party shall be entitled to retain its own counsel, in each
jurisdiction for which the indemnified party determines counsel is required, at
the expense of the indemnifying party. In the event the indemnifying party
exercises the right to undertake any such defense against any such Third Party
Claim as provided above, the indemnified party shall cooperate with the
indemnifying party in such defense and make available to the indemnifying party,
at the indemnifying party's expense, all witnesses, pertinent records, materials
and information in the indemnified party's possession or
* Confidential Treatment Requested
62
under the indemnified party's control relating thereto as is reasonably required
by the indemnifying party. Similarly, in the event the indemnified party is,
directly or indirectly, conducting the defense against any such Third Party
Claim, the indemnifying party shall cooperate with the indemnified party in such
defense and make available to the indemnified party, at the indemnifying party's
expense, all such witnesses, records, materials and information in the
indemnifying party's possession or under the indemnifying party's control
relating thereto as is reasonably required by the indemnified party. No such
Third Party Claim may be settled by the indemnifying party without the written
consent of the indemnified party, unless such settlement only requires payment
of money damages which will be indemnified.
SECTION 8.05. Tax Matters. Anything in this Article VIII (except for
the specific reference to Tax matters in Section 8.01) to the contrary
notwithstanding, the rights and obligations of the parties with respect to
indemnification for any and all Tax matters shall be governed by Section 5.11.
ARTICLE IX
TERMINATION AND WAIVER
SECTION 9.01. Termination. This Agreement may be terminated at any
time prior to the Closing:
(a) by the Purchaser if, between the date hereof and the time
scheduled for the Closing: (i) an event or condition occurs that has resulted in
or that could reasonably be expected to result in a Material Adverse Effect; or
(ii) the Seller makes a general assignment for the benefit of creditors, or any
proceeding shall be instituted by or against the Seller seeking to adjudicate it
a bankrupt or insolvent, or seeking liquidation, winding up or reorganization,
arrangement, adjustment, protection, relief or composition of its debts under
any Law relating to bankruptcy, insolvency or reorganization; or
(b) by either the Seller or the Purchaser if the Closing shall not
have occurred by July 31, 1999; provided, however, that the right to terminate
this Agreement under this Section 9.01(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement shall have been the
cause of, or shall have resulted in, the failure of the Closing to occur on or
prior to such date; or
(c) by either the Purchaser or the Seller in the event that any
Governmental Authority shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the transactions
contemplated by this
63
Agreement and such order, decree, ruling or other action shall have become final
and nonappealable; or
(d) by the mutual written consent of the Seller and the Purchaser.
SECTION 9.02. Effect of Termination. In the event of termination of
this Agreement as provided in Section 9.01, this Agreement shall forthwith
become void and there shall be no liability on the part of either party hereto
except (a) as set forth in Section 5.03 and Article X and (b) that nothing
herein shall relieve either party from liability for any breach of this
Agreement.
SECTION 9.03. Waiver. Either party to this Agreement may (a) extend
the time for the performance of any of the obligations or other acts of the
other party, (b) waive any inaccuracies in the representations and warranties of
the other party contained herein or in any document delivered by the other party
pursuant hereto or (c) waive compliance with any of the agreements or conditions
of the other party contained herein. Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the party to be bound
thereby. Any waiver of any term or condition shall not be construed as a waiver
of any subsequent breach or a subsequent waiver of the same term or condition,
or a waiver of any other term or condition, of this Agreement. The failure of
any party to assert any of its rights hereunder shall not constitute a waiver of
any of such rights.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Expenses. Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses, whether or not the Closing
shall have occurred.
SECTION 10.02. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by telecopy or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 10.02):
(a) if to the Seller:
64
QUALCOMM Incorporated
6455 Lusk Boulevard
San Diego, California 92121
Telecopy: (619) 658-2500
Attention: General Counsel
with a copy to:
Cooley Godward LLP
4365 Executive Drive
Suite 1100
San Diego, CA 92121-2128
Telecopy: (619) 453-3555
Attention: Frederick T. Muto
65
(b) if to the Purchaser:
Telefonaktiebolaget LM Ericsson
Telefonvagen 30
S-126 25 Stockholm
Sweden
Telecopy: (46-8) 719-9527
Attention: General Counsel
with copies to:
Ericsson Inc.
740 East Campbell Road
Richardson, Texas 75081
Telecopy: (972) 583-1839
Attention: General Counsel
and
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Telecopy: (212) 848-7179
Attention: Spencer D. Klein
SECTION 10.03. Public Announcements. No party to this Agreement
shall make, or cause to be made, any press release or public announcement in
respect of this Agreement or the transactions contemplated hereby or otherwise
communicate with any news media without the prior written consent of the other
party (which consent shall not be unreasonably withheld), and the parties shall
cooperate as to the timing and contents of any such press release or public
announcement. Notwithstanding the foregoing, following the announcement of the
execution of this Agreement, either party may disclose the contents of Section
5.17.
SECTION 10.04. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 10.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not
66
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby are consummated as originally contemplated to the greatest extent
possible.
SECTION 10.06. Entire Agreement. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and undertakings, both written and oral,
between the Seller and the Purchaser with respect to the subject matter hereof,
including, without limitation, the Confidentiality Agreement.
SECTION 10.07. Assignment. This Agreement may not be assigned by
operation of Law or otherwise without the express written consent of the Seller
and the Purchaser (which consent may be granted or withheld in the sole
discretion of the Seller and the Purchaser); provided, however, that (i) the
Purchaser may assign this Agreement in whole or in part, or any of its rights
hereunder, to an Affiliate of the Purchaser, without the consent of the Seller
(provided that the Purchaser shall nevertheless remain obligated to perform its
obligations hereunder following any such assignment), and (ii) the Seller may
assign this Agreement, in whole and not in part, to a Person who acquires all or
substantially all of the capital stock or assets and liabilities of the Seller,
without the consent of the Purchaser.
SECTION 10.08. No Third Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person, including, without limitation, any union or
any employee or former employee of the Seller, any legal or equitable right,
benefit or remedy of any nature whatsoever, including, without limitation, any
rights of employment for any specified period, under or by reason of this
Agreement.
SECTION 10.09. Amendment. This Agreement may not be amended or
modified except (a) by an instrument in writing signed by, or on behalf of, the
Seller and the Purchaser or (b) by a waiver in accordance with Section 9.03.
SECTION 10.10. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York, applicable
to contracts executed in and to be performed entirely within that state. All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined in any New York state or federal court sitting in the City
of New York.
67
SECTION 10.11. Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 10.12. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at Law or equity, without the necessity of demonstrating the inadequacy
of money damages.
68
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
QUALCOMM INCORPORATED
/s/ illegible
By_______________________________________
Name:
Title:
TELEFONAKTIEBOLAGET LM ERICSSON (publ)
/s/ illegible
By_______________________________________
Name:
Title:
/s/ illegible
By_______________________________________
Name:
Title:
EXHIBIT A
FORMS OF THE LICENSE AGREEMENTS
EXHIBIT B
PRINCIPAL TERMS OF THE ASICS SUPPLY AGREEMENTS
CONTRACT: The parties shall enter into an Infrastructure ASIC Supply
Agreement and a Subscriber Unit ASIC Supply Agreement
containing normal and customary terms and conditions to be
mutually agreed to and not otherwise inconsistent with this
Term Sheet (the "Agreements"). The Purchaser shall have the
right to purchase infrastructure ASICs and subscriber unit
ASICs under the Agreements, which shall be used in CDMA
infrastructure equipment and CDMA subscriber unit equipment,
respectively, manufactured and sold by Ericsson.
PRICING: [*]
TERM: Five years.
PAYMENT TERMS: Cash, net 30 days from date of invoice.
CURRENCY: United States Dollars
* Confidential Treatment Requested
EXHIBIT C
FORM OF ASSUMPTION AGREEMENTS
ASSUMPTION AGREEMENT, dated as of [________], 1999 (this "ASSUMPTION
AGREEMENT"), between QUALCOMM INCORPORATED, a Delaware corporation (the
"SELLER"), and [__], a [_____] corporation (the "PURCHASER").
W I T N E S S E T H:
WHEREAS, the Seller and [the Purchaser] [Telefonaktiebolaget LM
Ericsson] have entered into an Asset Purchase Agreement, dated as of March 24,
1999 (the "ASSET PURCHASE AGREEMENT"; unless otherwise defined herein,
capitalized terms shall be used herein as defined in the Asset Purchase
Agreement);
WHEREAS, pursuant to the Asset Purchase Agreement, the Purchaser has
agreed to assume certain liabilities and obligations of the Seller with respect
to the Business; and
WHEREAS, the execution and delivery of this Assumption Agreement by
the Purchaser is a condition to the obligations of the Seller to consummate the
transactions contemplated by the Asset Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants set forth herein and in the Asset Purchase Agreement,
and intending to be legally bound hereby, the Purchaser and the Seller hereby
agree as follows:
1. Assumption of Liabilities. Subject to Section 2 hereof, the
Purchaser hereby assumes and agrees to pay, perform and discharge when due
only the following and no other Liabilities of the Seller as at the date
hereof, other than the Excluded Liabilities (the "ASSUMED LIABILITIES"):
(i) Liabilities primarily arising out of or relating to the
Acquired Business to the extent such Liabilities are reflected on
the Closing Statement of Net Assets, including all accrued
liabilities (other than liabilities for accrued salary and benefits
and accrued vacation) to the extent reflected or reserved for on the
Closing Statement of Net Assets;
(ii) all Liabilities arising out of the Transferred Customer
Contracts, and other contracts, agreements, leases, commitments,
sales and purchase
orders, bids and offers that are included in the Assets (whether
such obligations arise before or after the date hereof);
(iii) those employment-related Liabilities expressly assumed
by the Purchaser pursuant to Article VI of the Asset Purchase
Agreement; and
(iv) all Liabilities for accounts payable for goods and
services received or rendered following the date hereof.
2. Excluded Liabilities. Notwithstanding the provisions of
Section 1 hereof, the Seller shall retain, and shall be responsible for
paying, performing and discharging when due, and the Purchaser shall not
assume or have any responsibility for, all Liabilities of the Seller as of
the date hereof other than the Assumed Liabilities (the "EXCLUDED
LIABILITIES"), including, without limitation:
(i) all Taxes now or hereafter owed by the Seller or any
Affiliate of the Seller, or attributable to the Assets or the
Business, relating to any period, or any portion of any period,
ending on or prior to the date hereof (as provided in Section 7.01
of the Asset Purchase Agreement);
(ii) all Liabilities to the extent relating to or arising out
of the Excluded Assets;
(iii) those employment-related Liabilities expressly retained
by the Seller pursuant to Article VI of the Asset Purchase
Agreement; and
(iv) all Liabilities for accounts payable for goods and
services received or rendered on or prior to the date hereof.
3. No Third Party Beneficiaries. This Assumption Agreement shall
be binding upon and inure solely to the benefit of the parties hereto and
their permitted assigns and nothing herein, express or implied, is
intended to or shall confer upon any other Person any legal or equitable
right, benefit or remedy of any nature whatsoever, under or by reason of
this Assumption Agreement.
4. Assignment. This Assumption Agreement may not be assigned by
operation of Law or otherwise without the express written consent of the
Seller and the Purchaser (which consent may be granted or withheld in the
sole discretion of the Seller or the Purchaser).
5. Counterparts. This Assumption Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which
3
when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
6. Governing Law. This Assumption Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York,
applicable to contracts executed in and to be performed entirely within
that state.
4
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Assumption Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
QUALCOMM INCORPORATED
By_______________________________________
Name:
Title:
[ ]
By_______________________________________
Name:
Title:
EXHIBIT D
FORM OF BILLS OF SALE AND ASSIGNMENT
BILL OF SALE AND ASSIGNMENT, dated as of [_______], 1999 (this "BILL
OF SALE AND ASSIGNMENT"), from [QUALCOMM INCORPORATED, a Delaware corporation]
(the "SELLER"), to [ ], a [__________] corporation (the "PURCHASER").
W I T N E S S E T H:
WHEREAS, the Seller and [the Purchaser] [Telefonaktiebolaget LM
Ericsson] have entered into an Asset Purchase Agreement, dated as of March 24,
1999 (the "ASSET PURCHASE AGREEMENT"; unless otherwise defined herein,
capitalized terms shall be used herein as defined in the Asset Purchase
Agreement); and
WHEREAS, the execution and delivery of this Bill of Sale and
Assignment by the Seller is a condition to the obligations of the Purchaser to
consummate the transactions contemplated by the Asset Purchase Agreement.
NOW, THEREFORE, for good and valuable consideration to the Seller,
the receipt and sufficiency of which is hereby acknowledged, and pursuant to the
Asset Purchase Agreement, the Seller, intending to be legally bound hereby, does
hereby agree as follows:
1. Sale and Assignment of Assets and Properties. (a) The Seller
does hereby sell, assign, transfer, convey, grant, bargain, set over,
release, deliver, vest and confirm unto the Purchaser, its successors and
assigns, forever, the entire right, title and interest of the Seller in
and to all the assets, properties, goodwill and business of every kind and
nature and wherever located, whether tangible or intangible, real,
personal or mixed, directly or indirectly owned by the Seller or to which
it is directly or indirectly entitled and, in any case, primarily used or
intended to be used in the Business as conducted by the Seller as of the
date hereof, other than the Excluded Assets (as defined below), including,
without limitation, the following property and assets (the "ASSETS"):
[TO BE CONFORMED TO SECTION 2.01(a) OF ASSET PURCHASE AGREEMENT]
The Seller warrants that upon delivery to the Purchaser of the Assets
sold, assigned, transferred, conveyed, granted, bargained, set over,
released, delivered, vested and confirmed from the Seller to the Purchaser
pursuant to this Bill of Sale and Assignment, the Purchaser will own, with
good and marketable title, or lease, under valid and
2
subsisting leasehold interests, the Assets, free and clear of all
Encumbrances, except as expressly contemplated by the Asset Purchase
Agreement, including, without limitation, the Exhibits and the Disclosure
Schedule that are a part thereof.
2. Assets and Properties Not Sold and Assigned. The Assets shall
exclude the following assets owned by the Seller (the "EXCLUDED ASSETS"):
[TO BE CONFORMED TO SECTION 2.01(b) OF ASSET PURCHASE AGREEMENT]
3. Power of Attorney. The Seller hereby constitutes and appoints
the Purchaser, its successors and assigns, the true and lawful attorney
and attorneys of the Seller, with full power of substitution, in the name
of the Purchaser or in the name and stead of the Seller, but on behalf of,
for the benefit and at the expense of the Purchaser, its successors and
assigns:
(i) to collect, demand and receive any and all Assets hereby
sold and assigned to the Purchaser or intended so to be and to give
receipts and releases for and in respect of the same;
(ii) to institute and prosecute any and all actions, suits or
proceedings, at law, in equity or otherwise, which the Purchaser may
deem proper in order to collect, assert or enforce any claim, right
or title of any kind in or to the Assets hereby sold and assigned to
the Purchaser or intended so to be, to defend or compromise any and
all actions, suits or proceedings in respect of any of the Assets,
and to do all such acts and things in relation thereto as the
Purchaser shall deem advisable;
(iii) to take any and all other reasonable action designed to
vest more fully in the Purchaser the Assets hereby sold and assigned
to the Purchaser or intended so to be and in order to provide for
the Purchaser the benefit, use, enjoyment and possession of such
Assets; and
(iv) to do all reasonable acts and things in relation to the
Assets hereby sold and assigned.
The Seller acknowledges that the foregoing powers are coupled with an
interest and shall be irrevocable by it or upon its subsequent dissolution
or in any manner or for any reason. The Purchaser shall be entitled to
retain for its own account any amounts collected pursuant to the foregoing
powers, including any amounts payable as interest with respect thereto.
The Seller shall from time to time pay to the Purchaser, when received,
any amounts which shall be received directly or indirectly by the Seller
3
(including amounts received as interest) in respect of any Assets sold and
assigned to the Purchaser pursuant hereto.
4. Obligations and Liabilities Not Assumed. Nothing expressed or
implied in this Bill of Sale and Assignment shall be deemed to be an
assumption by the Purchaser of any Liabilities of the Seller. The
Purchaser does not by this Bill of Sale and Assignment assume or agree to
pay, perform or discharge any Liabilities of the Seller of any nature,
kind or description whatsoever. The terms and provisions of the assumption
of Liabilities by the Purchaser are set forth in the Assumption Agreement
dated as of the date hereof between the Purchaser and the Seller.
5. No Third Party Beneficiaries. This Bill of Sale and Assignment
shall be binding upon and inure solely to the benefit of the parties
hereto and their permitted assigns and nothing herein, express or implied,
is intended to or shall confer upon any other Person any legal or
equitable right, benefit or remedy of any nature whatsoever, under or by
reason of this Bill of Sale and Assignment.
6. Assignment. This Bill of Sale and Assignment may not be
assigned by operation of Law or otherwise without the express written
consent of the Seller and the Purchaser (which consent may be granted or
withheld in the sole discretion of the Seller or the Purchaser); provided,
however, that the Purchaser may assign this Bill of Sale and Assignment to
an Affiliate of the Purchaser without the consent of the Seller.
7. Governing Law. This Bill of Sale and Assignment shall be
governed by, and construed in accordance with, the laws of the State of
New York.
4
IN WITNESS WHEREOF, the Seller has caused this Bill of Sale and
Assignment to be executed as of the date first written above by its officer
thereunto duly authorized.
[QUALCOMM INCORPORATED]
By_______________________________________
Name:
Title:
[NEW YORK] )
) ss.:
COUNTY OF [NEW YORK] )
On that __________ day of __________ 1999, before me personally came
[name of executing officer] to me known, who, being by me duly sworn, did depose
and say he resides at [address of executing officer]; and that he is [title of
executing officer] of [QUALCOMM Incorporated, a Delaware corporation] and the
corporation described in and which executed the foregoing instrument, and that
he had the authority to sign his name thereto on behalf of said corporation.
---------------------------------------------
Notary Public
[Notarial Seal]
EXHIBIT E
PRINCIPAL TERMS OF THE INFRASTRUCTURE SUPPLY AGREEMENT
CONTRACT: The parties shall enter into an infrastructure equipment and
services supply agreement containing normal and customary
terms and conditions to be mutually agreed to and not
otherwise inconsistent with this Term Sheet (the
"Agreement").
EQUIPMENT: Equipment that may be procured under the Agreement includes
any cdmaOne or CDMA 2000 infrastructure equipment
manufactured and sold by Ericsson at such time including:
(i) cdmaOne and CDMA 2000 base station transceiver
subsystems ("BTSs"), (ii) base station controllers ("BSCs"),
(iii) mobile switches ("MSCs") and (iv) subassemblies and
field replaceable units for BTSs, BSCs and MSCs.
SERVICES: Services that may be procured under the Agreement include
(i) normal and customary design, engineering, configuration,
installation, testing and optimization services relating to
the deployment of wireless terrestrial telecommunications
systems, (ii) warranty support for equipment and software
for such systems, (iii) "hotline" support for equipment and
software, (iv) software maintenance support under software
maintenance agreements, and (v) in general, such other
services as QUALCOMM is obligated to perform with respect to
"Category II" customers.
AVAILABILITY OF
EQUIPMENT AND [*]
SERVICES:
* Confidential Treatment Requested
2
[*]
PRICING: [*]
* Confidential Treatment Requested
3
TERM: The term shall extend as long as obligations exist on the
part of QUALCOMM to supply such equipment and to perform
such services.
PAYMENT TERMS: Cash, net 30 days from date of invoice.
CURRENCY: United States Dollars.
WARRANTY: One year for workmanship (but not for design).
EXHIBIT F
PRINCIPAL TERMS OF THE INTERIM SERVICES AGREEMENT
TERM: QUALCOMM shall provide Ericsson with the Services (as
defined below) for a period of between six (6) and twelve
(12) months (depending on the nature of the Service, which
time frame for any given Service shall be specified in
greater detail in the subject agreement), or for that longer
period of time as is mutually agreed to by the parties or
that shorter period of time as is directed by Ericsson for
any particular Service (the "Term").
SERVICES: The type and scope of such services which QUALCOMM shall
make available to Ericsson shall consist of those services
which QUALCOMM currently provides in support of the Acquired
Business (except to the extent providing such services
compromises or could reasonably be expected to compromise
QUALCOMM's confidential information), including the
following services and technical support (collectively, the
"Services"):
Manufacturing: QUALCOMM may provide services relating to the
manufacture and assembly of infrastructure equipment.
MIS Services: QUALCOMM may provide management information
services to Ericsson related to the Acquired Business,
including coordination of procurement of hardware and
software and software development and sales and
manufacturing.
Accounting Services: QUALCOMM may provide bookkeeping,
accounting services, internal audit and financial analytical
support services, each as related to the Acquired Business.
Human Resources and Payroll Services: QUALCOMM may provide
services related to human resources as well as
administration of employee payroll matters and maintenance
of general employee insurance and benefit obligations and
advice on employee relations and similar issues, each as
related to the Acquired Business.
Facilities Services: QUALCOMM may provide services related
to facilities to be leased by Ericsson from QUALCOMM such as
security, mail services, etc.
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Engineering Services: QUALCOMM may provide engineering and
technical services (for example, RF testing services).
Upon the earlier to occur of May 15, 1999 and the closing of
the transactions contemplated by the Asset Purchase
Agreement, Ericsson shall have designated to QUALCOMM the
specific type and scope of the Services requested by
Ericsson.
PERFORMANCE OF
SERVICES: QUALCOMM shall provide the Services on an ongoing basis
during the Term.
CHARGE FOR
SERVICES: [*]
OTHER TERMS: The Interim Services Agreement shall contain other customary
terms and conditions.
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EXHIBIT G
PRINCIPAL TERMS OF THE LEASE AGREEMENTS
Leased Facilities: Ericsson agrees to lease or sublease, as the case may be,
certain facilities "as-is" from QUALCOMM as follows
(collectively, the "Leases") for use by Ericsson in
continuing the Acquired Business:
[*]
[*]
[*]
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[*]
SPACE
DETERMINATION: The foregoing list of properties represents the
parties' current expectations and may change to the
extent set forth in the following sentence based on
the personnel plan finally developed by Ericsson. Upon
the parties' mutual agreement, this list may be
adjusted to exclude Building CC.
LEASE TERM: Other than for the six above-referenced
foreign office leases ("Offshore Leases"), each of the
foregoing facilities leases or subleases shall have an
initial term of [*] (unless the master lease has a
shorter term, in which case the term shall be
concurrent with the master lease), commencing on
consummation of the sale of the Acquired Business;
provided, however, that in the event the sale
transaction does not close, QUALCOMM and Ericsson
shall be under no obligation to lease the facilities
or enter into subleases. As used herein, the term
"Facilities Leases" shall refer to the
above-referenced domestic leases located in Boulder
and San Diego.
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OFFSHORE LEASES: QUALCOMM shall sublease the Offshore Leases to
Ericsson. Each sublease shall contain customary terms
and conditions consistent with the sublease of
commercial property.
[*] [*]
LEASE RATE: [*]
DEFAULTS; REMEDIES: Each Lease shall contain customary default
provisions, including without limitation, failure to
pay rent, failure to perform the terms of the Leases,
bankruptcy of Ericsson. In addition, each Lease shall
contain customary remedies for defaults, including the
right to terminate Ericsson's possession of the leased
premises and the right to seek damages.
ASSIGNMENT: None of the Leases shall be assigned by Ericsson
(except to Ericsson's subsidiaries or affiliates as
long as Ericsson agrees to remain primarily liable for
the Lease payments) without the prior written consent
of QUALCOMM, which consent shall not be unreasonably
withheld.
SUBLEASING: None of the Leases for facilities located in
San Diego shall be subleased by Ericsson (except to
Ericsson's subsidiaries or affiliates as long as
Ericsson agrees to remain primarily liable for the
Lease payments) during the first three years of the
initial lease term, without the prior written consent
of QUALCOMM, which consent shall not be unreasonably
withheld. The Leases for facilities located outside
San Diego can be subleased by
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Ericsson without obtaining the consent of QUALCOMM.
OTHER TERMS: Each Lease shall contain a requirement that E maintain
adequate insurance and other customary terms and
conditions consistent with the lease of commercial
property.
EXHIBIT H
PRINCIPAL TERMS OF THE VENDOR FINANCING AGREEMENT
ITEMS SUBJECT TO
FINANCING: cdmaOne basestation equipment, CDMA 2000 basestation
equipment and related infrastructure equipment (the
"Equipment"), together with associated services
("Services"), in each instance (i) supplied or
provided by Ericsson to the customers specified below,
(ii) as to whom Ericsson has assumed the contract
obligation as prime contractor, and (iii) as to which
Ericsson invoices the subject customer(s) for
Ericsson's account. With respect to the financing of
Equipment and Services for projects as to which there
are no current procurement arrangements, the relative
proportion of Equipment and Services to be financed
shall be substantially the same as the relative
proportion of Equipment and Services financed under
the subject current procurement arrangements.
STRUCTURE OF FINANCING
PROVIDED: As to those financing facilities pursuant to which
QUALCOMM and Ericsson are both providing financing,
the structure shall be mutually agreed to by QUALCOMM
and Ericsson on a case by case basis (for example, (i)
as co-lenders under a credit facility; (ii) by means
of assignments of loans for cash under a credit
facility, and/or (iii) by means of sales of
participation interests for cash under a credit
facility). Related intercreditor arrangements and
collateral sharing arrangements shall be mutually
agreed to on a case by case basis as to such
facilities. As to those financing facilities pursuant
to which only QUALCOMM is providing financing [*],
QUALCOMM can structure the financing in QUALCOMM's
reasonable discretion.
ECONOMIC TERMS AND
CONDITIONS: As to those financing facilities pursuant to which
QUALCOMM and Ericsson are both providing financing,
the economic terms and conditions of such financing
shall be mutually agreed to by QUALCOMM and Ericsson
on a case by case basis, but in any case on reasonable
terms and conditions for vendor financing transactions
of a similar nature. As to those financing facilities
pursuant to which only QUALCOMM is providing financing
[*], the economic terms and conditions of such
financing shall be in QUALCOMM's reasonable
discretion.
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PARI PASSU;
RISK OF LOSS SHARING: For any particular project, the Equipment and Services
financing provided by QUALCOMM shall rank pari passu
with the corresponding financing, if any, provided by
Ericsson. The financing shall be structured such that
both QUALCOMM and Ericsson shall have immediate
concurrent risk of loss (in their relative
percentages), without either party having a "first
loss" exposure and without either party providing its
relative percentage by means of a back-up guaranty or
other "make-whole" arrangement.
QUALIFIED PROJECTS;
AMOUNT: [*]
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[*]
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