Exhibit 2.1
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EXECUTION COPY
CONTRIBUTION AGREEMENT
BY AND BETWEEN
NORTEL NETWORKS INC.
AND
VOLT DELTA RESOURCES, LLC
AS OF
JUNE 11, 2004
TABLE OF CONTENTS
PAGE
Article I
DEFINITIONS
Section 1.01. Certain Defined Terms..........................................1
Section 1.02. Other Defined Terms...........................................15
Section 1.03. Terms Generally...............................................16
Article II
CONTRIBUTION
Section 2.01. Contribution..................................................16
Section 2.02. Assumption and Exclusion of Liabilities.......................17
Section 2.03. Issuance of Shares and Membership Interests...................17
Section 2.04. Closing.......................................................18
Section 2.05. Closing Deliveries by Nortel Networks.........................18
Section 2.06. Closing Deliveries by the Company.............................19
Section 2.07. Accounting....................................................19
Article III
REPRESENTATIONS AND WARRANTIES OF NORTEL NETWORKS
Section 3.01. Incorporation and Authority of Nortel Networks and the Nortel
Contributing Entities........................................ 19
Section 3.02. No Conflict...................................................20
Section 3.03. Consents and Approvals........................................20
Section 3.04. Financial Information; No Undisclosed Liabilities.............21
Section 3.05. Absence of Material Adverse Effect............................21
Section 3.06. Absence of Litigation.........................................21
Section 3.07. Compliance with Laws..........................................21
Section 3.08. Governmental Licenses.........................................22
Section 3.09. The Assets....................................................22
Section 3.10. Employee Benefit Matters......................................22
Section 3.11. Environmental Matters.........................................24
Section 3.12. Nortel Networks Contracts.....................................24
Section 3.13. Brokers.......................................................25
Section 3.14. Intellectual Property.........................................25
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TABLE OF CONTENTS
(continued)
PAGE
Section 3.15. Relationships with Customers and Suppliers....................26
Section 3.16. Inventory and Supplies........................................26
Section 3.17. EXCLUSIVITY OF REPRESENTATIONS................................27
Article IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.01. Incorporation and Authority of the Company and the Company
Entities......................................................27
Section 4.02. No Conflict...................................................28
Section 4.03. Consents and Approvals........................................28
Section 4.04. Capitalization; Subsidiaries..................................28
Section 4.05. Financial Information; No Undisclosed Liabilities.............29
Section 4.06. Absence of Material Adverse Effect............................30
Section 4.07. Absence of Litigation.........................................30
Section 4.08. Compliance with Laws..........................................30
Section 4.09. Governmental Licenses.........................................30
Section 4.10. Assets........................................................30
Section 4.11. Real Property.................................................31
Section 4.12. Company Employee Plans........................................31
Section 4.13. Environmental Matters.........................................34
Section 4.14. Company Contracts.............................................34
Section 4.15. Brokers.......................................................34
Section 4.16. Intellectual Property.........................................34
Section 4.17. Working Capital...............................................35
Section 4.18. Tax Matters...................................................35
Section 4.19. Relationships with Customers and Suppliers....................36
Section 4.20. Revenues of the Company.......................................36
Section 4.21. EXCLUSIVITY OF REPRESENTATIONS................................37
Article V
ADDITIONAL AGREEMENTS
Section 5.01. Conduct of Business Prior to the Closing......................37
Section 5.02. Access to Information.........................................40
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TABLE OF CONTENTS
(continued)
PAGE
Section 5.03. Confidentiality...............................................41
Section 5.04. Regulatory and Other Authorizations; Consents.................42
Section 5.05. Bulk Sales....................................................42
Section 5.06. Risk of Loss..................................................42
Section 5.07. Certain Services and Benefits Provided by Affiliates..........42
Section 5.08. Further Action................................................42
Section 5.09. Ancillary Agreements..........................................43
Section 5.10. Maintenance of Records........................................43
Section 5.11. Obtaining Consents............................................44
Section 5.12. Deletion of Non-Transferred Software..........................44
Section 5.13. Equipment Leases..............................................44
Section 5.14. Notice of Certain Events......................................45
Section 5.15. Nortel Networks Software License..............................45
Section 5.16. Supplementary Rights..........................................45
Section 5.17. Certain Cash Adjustments......................................45
Section 5.18. Certain Obligations regarding Licensed IPLA IP................45
Section 5.19. Other Marks...................................................46
Section 5.20. Assignment Back...............................................46
Section 5.21. License Agreements............................................47
Section 5.22. Company Entities..............................................47
Article VI
EMPLOYEE MATTERS
Section 6.01. Employee Matters..............................................47
Article VII
TAX MATTERS
Section 7.01. Tax Matters...................................................48
Section 7.02. Procedure.....................................................49
Article VIII
CONDITIONS TO CLOSING
Section 8.01. Conditions to Obligations of Nortel Networks..................50
Section 8.02. Conditions to Obligations of the Company......................51
TABLE OF CONTENTS
(continued)
PAGE
Article IX
TERMINATION AND WAIVER
Section 9.01. Termination...................................................52
Section 9.02. Effect of Termination.........................................52
Section 9.03. Waiver........................................................52
Article X
INDEMNIFICATION
Section 10.01. Indemnification by the Company................................52
Section 10.02. Indemnification by Nortel Networks............................53
Section 10.03. Limitations on Indemnification................................54
Section 10.04. Notification of Claims........................................55
Section 10.05. Exclusive Remedies............................................56
Section 10.06. No Special Damages............................................56
Article XI
GENERAL PROVISIONS
Section 11.01. Survival......................................................56
Section 11.02. Expenses......................................................57
Section 11.03. Notices.......................................................57
Section 11.04. Public Announcements..........................................57
Section 11.05. Headings......................................................58
Section 11.06. Disclosure Schedules..........................................58
Section 11.07. Severability..................................................58
Section 11.08. Entire Agreement..............................................58
Section 11.09. Assignment....................................................59
Section 11.10. No Third-Party Beneficiaries..................................59
Section 11.11. Amendment.....................................................59
Section 11.12. Governing Law.................................................59
Section 11.13. Counterparts..................................................59
Section 11.14. No Presumption................................................59
Section 11.15. Specific Performance..........................................59
EXHIBITS
A. Assumption Agreements
B. Bills of Sale
C. Members' Agreement
D. Principles for Transferring Employees
E. Subcontract Agreement
F. OEM Supply Agreement No. 021896
G. IWS/MWS Software License Agreement
H. Relationship Agreement
I. Employee Loan Agreement
J. Services Agreement
K. Transition Services Agreement
L. Intellectual Property License Agreement
M. Multimedia Work Station Intellectual Property License Agreement
N. Voice Over IP Interface and IWS License Agreement
O. Trademark License Agreement
P. Assignments of Trademark
Q. Assignment of Patents Agreement
R. Nortel Networks Lab Software License Schedule
S. Real Estate License Agreements
COMPANY DISCLOSURE SCHEDULE
NNI DISCLOSURE SCHEDULE
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT is made and entered into as of June 11,
2004, by and between Volt Delta Resources, LLC, a Nevada limited liability
company (the "Company"), and Nortel Networks Inc., a Delaware corporation
("Nortel Networks").
RECITALS
WHEREAS, Nortel Networks or its Affiliates and the Company or its
Subsidiaries own certain properties, assets and goodwill that are primarily used
or held for use in connection with their respective Directory and Operator
Services businesses;
WHEREAS, Nortel Networks and its Affiliates and the Company and its
Affiliates desire to combine their respective directory and operator services
businesses;
WHEREAS, the Company desires to acquire the Assets and to assume the
Assumed Liabilities in exchange for Membership Interests (each as defined
below); and
WHEREAS, the parties desire to effect the transactions described above,
to make certain representations and warranties and to enter into certain
agreements and undertakings with respect thereto.
NOW, THEREFORE, in consideration of the mutual covenants,
representations and warranties, and subject to the terms and conditions
contained herein, the parties hereto agree as follows:
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 claim, action, suit, arbitration, inquiry, audit,
proceeding or investigation by or before any Governmental Authority.
"Administrative Services Software" means any financial, human resources
and corporate administrative and management information systems and Software,
and general infrastructure-related systems and Software, including general
Software development and design tools and databases (as distinguished from and
excluding any applications or operating information systems and Software
embodied in or used in the design, development, manufacture, maintenance,
operation and testing of the Products).
"Affiliate" means, with respect to any specified Person, any other
Person who or that, directly or indirectly through one or more intermediaries,
Controls, is Controlled by or is under common Control with such specified
Person.
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"Agreement" means this Agreement, including all exhibits and schedules
hereto, and all amendments hereto.
"Ancillary Agreements" means the Assumption Agreements, the Bills of
Sale, the Members' Agreement, the General Supply Agreement, the Relationship
Agreement, the Subcontract Agreement, the Employee Loan Agreement, the Services
Agreement, the Transition Services Agreement, the License Agreements, the
Trademark Assignment, the Trademark License Agreement, the Real Estate License
Agreements, the Nortel Networks Software License, the Patent Assignment and the
IWS/MWS Software License Agreement.
"Applicable Law" means, with respect to any Person, any U.S. or
foreign, federal, state, provincial or local, law, statute, ordinance,
regulation, rule, code, order, common law, other requirement or rule of law or
stock exchange rule applicable to such Person or any of its respective
properties, assets, officers, directors, employees, independent contractors,
consultants or agents.
"Assets" means all right, title and interest of Nortel Networks and the
Nortel Contributing Entities in and to the following assets, properties and
rights:
(a) Transferred Equipment;
(b) Business Information;
(c) Employee Information;
(d) the Transferred Intellectual Property;
(e) the tangible embodiment of the Transferred Software (as such is
embodied in or used in or for Products) (the "Tangible Software"), including
user manuals, specifications, flow charts and source code therefor;
(f) the Nortel Networks Contracts;
(g) permits, licenses, waivers and authorizations from or with any
Governmental Authority listed or described in Section 1.01(a) of the NNI
Disclosure Schedule;
(h) Business Software; and
(i) Inventory.
Notwithstanding the foregoing, the Assets shall not include any
Excluded Assets.
"Assumed Liabilities" means all Liabilities of Nortel Networks and the
Nortel Contributing Entities in respect of the Assets or the Transferring
Employees arising on or after the Effective Time (excluding any Retained
Liabilities) whether or not accrued, including:
(a) any Liability arising on or after the applicable Employment
Transfer Time which relates to or arises from or in connection with the
Company's employment or the
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employment by any of its Subsidiaries (including coverage under the Company
Benefit Plans) of Transferring Employees;
(b) any Liability arising on or after the Effective Time under the
Nortel Networks Contracts (other than any Liability arising out of or relating
to a breach or default of a Nortel Networks Contract that occurred prior to the
Effective Time);
(c) any Liability arising on or after the Effective Time with respect
to the Transferred Intellectual Property and the Tangible Software (other than
Liabilities arising from Nortel Networks' and its Affiliates' exercise of rights
granted under Section 2.05 of the Intellectual Property License Agreement); and
(d) Liabilities for, or related to any obligation for, any Tax that the
Company or any Company Entity bears under Article VII of this Agreement.
"Assumption Agreements" means the Assumption Agreements to be executed
by the parties thereto on the Closing Date, substantially in the forms of
Exhibit X-0, Xxxxxxx X-0 and Exhibit A-3.
"Xxxx of Sale" means the Bills of Sale and Conveyance to be executed by
the parties thereto on the Closing Date, substantially in the forms of Exhibit
B-1, Exhibit B-2 and Exhibit B-3.
"Business Day" means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by Applicable Law to be closed in
New York, New York, USA or Xxxxxxx, Xxxxxxx, Xxxxxx.
"Business Employees" means employees of Nortel Networks or a Nortel
Contributing Entity listed in Section 3.10(b) of the NNI Disclosure Schedule.
"Business Information" means copies of all books, records, files, sales
and promotional literature, customer lists and other sales-related materials and
documentation of Nortel Networks and the Nortel Contributing Entities available
in paper or on current databases used or held for use primarily with respect to
the Nortel Networks Business, including product documentation, marketing
materials, brochures, training materials, records relating to the maintenance of
the Assets and the development, sale, licensing, maintenance or servicing of the
Products, and the tangible embodiment of the Transferred Trade Secrets, as and
to the extent reasonably and readily under the control of any Business Employee,
but in each case, excluding all books, records, files and documentation relating
to employees of Nortel Networks or its Affiliates other than the Employee
Information.
"Business Plan" means the business plan attached as Exhibit C to the
Members' Agreement.
"Business Software" means Corporate Desktop Software, Single Use
Desktop Software and Other Business Software and the Contracts therefor.
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"Canadian Company Entity" means Volt Delta Company, an unlimited
liability company organized pursuant to the laws of Nova Scotia, Canada.
"Canadian Nortel Contributing Entities" means Nortel Networks Limited,
a corporation organized pursuant to the laws of Canada, and Nortel Networks
Technology Corporation, a corporation organized pursuant to the laws of Canada.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Business" means the supply of systems (hardware and software)
that interface to switching systems, directory listing information and enhanced
information database management services, and maintenance services, to companies
and IT outsourcing.
"Company Contract" means (i) each of the Contracts listed on Section
1.01(c) of the Company Disclosure Schedule of the Company Business, and (ii) any
non-competition agreement or any other agreement or obligation that purports to
limit in any material respect the manner in which, or the localities in which,
all or any material portion of the Company Business, has been, is or is proposed
to be conducted.
"Company Disclosure Schedule" means the Company Disclosure Schedule
delivered by the Company to Nortel Networks on the date hereof.
"Company Entities" means the Canadian Company Entity and the Mexican
Company Entity.
"Confidential Information" means any business, marketing, technical,
scientific or other information disclosed by any party which, at the time of
disclosure, is designated as confidential (or like designation), is disclosed in
circumstances of confidence, or would be understood by a party, exercising
reasonable business judgment, to be confidential. It is understood that
Confidential Information includes design documentation, implementation details,
Trade Secrets, pricing and sales information, business plans, marketing plans,
research plans, financial data, forecasts, computer programs, code, algorithms,
inventions, know-how, recording techniques, budgets and projections, business
processes and systems and customer, supplier and personnel information.
"Contract" means any note, bond, mortgage, indenture, guarantee, other
evidence of indebtedness, license, lease, option, contract, subcontract,
undertaking, covenant, agreement or other instrument or document.
"Control" means, as to any Person, the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise. The term "Controlled"
shall have a correlative meaning.
"Corporate Desktop Software" means Software licensed to Nortel Networks
as of the Closing Date which Software is (i) installed on personal computers
forming part of the Transferred Equipment, (ii) listed or described in Section
1.01(c) of the NNI Disclosure Schedule, and (iii) licensed under one or more
agreements, which, by their current terms, permit Nortel Networks to transfer to
the purchaser of such computers forming part of the Transferred
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Equipment the license to use such Software, while also permitting Nortel
Networks to retain the license to use such Software on such other computers
retained by Nortel Networks.
"Dollar" and "$" mean lawful money of the United States.
"Effective Time" means 12:01 a.m. Eastern Standard Time on the Closing
Date.
"Employee Information" means the employee data relating to the
Transferring Employees listed or scheduled in Section 3.10(b) of the NNI
Disclosure Schedule, to the extent such employee data may be disclosed or
transferred consistent with Applicable Law.
"Employee Loan Agreement" means the Employee Loan Agreement to be
executed by the parties thereto on the Closing Date, substantially in the form
of Exhibit I.
"Employment Agreement" means a written employment agreement between the
applicable party or one of such party's Affiliates and the applicable employee
which comprehensively sets forth such employee's terms and conditions of
employment in a form other than the standard form of employment offer which such
party or Affiliate generally utilizes with respect to its other employees.
"Environmental Law" means any Applicable Law currently in effect and
any judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to pollution or
protection of the environment, health, safety or natural resources, including to
the use, handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Materials.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required under or issued pursuant to any
Environmental Law.
"Equipment" means computer hardware (including personal and other
computers), office furnishings and fixtures, and telecommunications, robotic,
manufacturing, testing, design and other equipment, excluding in all cases any
Intellectual Property Rights covering, embodied in or connected to any of the
foregoing.
"Equipment Leases" means those Equipment leases listed or described in
Section 1.01(e)(i) of the NNI Disclosure Schedule.
"Excluded Assets" means:
(a) all claims, causes of action and rights of Nortel Networks or any
of its Affiliates against any third party with respect to any Retained
Liabilities or any other Liabilities for which the Company is indemnified by
Nortel Networks, or for which Nortel Networks or any Nortel Contributing Entity
is otherwise responsible, under this Agreement (including, without limitation,
rights of set-off, rights to refunds and rights of recoupment from or against
any such third party);
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(b) Nortel Networks' and each Nortel Contributing Entity's minute
books, stock ledgers and Tax records and any other books, records and documents
of Nortel Networks or any Nortel Contributing Entity which is not Business
Information;
(c) all rights of Nortel Networks and the Nortel Contributing Entities
under this Agreement, the Parent Agreement, the Ancillary Agreements and the
Retained Contracts;
(d) all rights to Tax refunds, credits or similar benefits relating to
the Assets or the Nortel Networks Business allocable to Nortel Networks or the
Nortel Contributing Entities under Article VII;
(e) other than as provided in Section 5.07, any rights of the Nortel
Networks Business to receive from Nortel Networks corporate overhead and shared
services, including without limitation, treasury, legal, tax, human resources,
risk management, finance and group purchasing plans;
(f) all cash, cash equivalents, bank accounts, prepaid expenses,
accounts receivable and other current assets of the Nortel Networks Business;
(g) all stock or equity interests in any Person;
(h) all rights and assets relating to or otherwise intended to fund, in
whole or in part, any Liabilities or obligations under any Nortel Networks
Benefit Plan;
(i) any and all Intellectual Property Rights owned by or licensed to
Nortel Networks or any Nortel Contributing Entity (and any tangible embodiments
of any such property), except for the Transferred Intellectual Property, the
rights to the Business Software, the rights licensed to Nortel Networks and the
Nortel Contributing Entities under Third Party Licenses, the Tangible Software
and the rights licensed to the Company under the License Agreements;
(j) rights in any real property, whether owned or leased, other than
the rights described in the Real Estate License Agreements;
(k) any and all Equipment owned by or licensed to Nortel Networks or
any Nortel Contributing Entity, except for the Transferred Equipment;
(l) all Software owned by or licensed to Nortel Networks or any Nortel
Contributing Entity, except for Business Software, rights to Software under the
Third Party Licenses, the rights to Software licensed to the Company under the
License Agreements and the Tangible Software, it being understood that, for the
avoidance of doubt, the Transferred Software is not an Excluded Asset;
(m) the Network Identifiers;
(n) any books, records, files, documentation or data relating to
employees of Nortel Networks or its Affiliates, except for Employee Information;
and
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(o) any other assets set forth in Section 1.01(e)(ii) of the NNI
Disclosure Schedule.
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"General Supply Agreement" means the OEM Supply Agreement No. 021896 to
be executed by the parties thereto on the Closing Date, substantially in the
form of Exhibit F.
"Governmental Authority" means any U.S. or foreign, federal, state,
provincial or local 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 any natural or artificial substance
(whether in the form of solid, gas, vapor or liquid alone or in combination with
any other substance), including petroleum, petroleum products, petroleum
by-products or breakdown products, radioactive materials, asbestos in any form
that is friable or polychlorinated biphenyls that is regulated as a pollutant,
contaminant or hazardous substance, material or waste under any Environmental
Law.
"Intellectual Property License Agreement" means the Intellectual
Property License Agreement to be executed by the parties thereto on the Closing
Date, substantially in the form of Exhibit L.
"Intellectual Property" or "Intellectual Property Rights" means all
proprietary and intellectual property rights, in any jurisdiction, whether owned
or held for use under license, including such rights in and to: (i) trademarks,
service marks, brand names, distinguishing guises, trade dress, trade names,
words, symbols, color schemes, business names, internet domain names and other
indications of origin (collectively, "Trademarks"); (ii) patents and pending
patent applications (including all provisionals, divisionals, continuations,
continuations-in-part, re-examination and reissue patents), utility models,
inventors' certificates and invention disclosures (collectively, "Patents");
(iii) trade secrets and other confidential or non-public business or technical
information, including ideas, formulas, compositions, program devices,
compilations, patterns, discoveries and improvements, know-how, show-how,
manufacturing and production methods, processes and techniques, and research and
development information; drawings, designs, specifications, plans, proposals and
technical and system data; analytical models, investment and lending strategies
and records, financial and other products; financial, marketing and business
data, pricing and cost information; business and marketing plans and customer
and supplier lists and information; in each case whether patentable,
copyrightable or not (collectively, "Trade Secrets"); (iv) software computer
programs and databases, including all object code, source code, algorithms,
subroutines, specifications, data and documentation and all translations,
compilations, arrangements, adaptations, and derivative works thereof, in each
case whether patentable, copyrightable or not, and all documentation and
embodiments thereof in all forms of media (collectively, "Software"); (v) all
copyrights, including copyright registrations and applications to register
copyrights, including for writings and other works of authorship,
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product documentation, marketing materials, brochures and training materials
(collectively, "Copyrights"); (vi) mask works or integrated circuit topographies
(collectively, "Mask Works"); (vii) industrial designs ("Industrial Designs");
and (viii) rights to limit the access, use or disclosure of Confidential
Information by any Person; in each case including all registrations of, and
applications to register, any of the foregoing with any Government Authority and
any renewals or extensions thereof; the goodwill associated with each of the
foregoing; and any claims or causes of action or defenses arising out of or
related to any of the foregoing.
"Inventory" means raw materials, work-in-process and finished goods,
supplies, parts, spare parts and other inventory (including in transit, or
consignment or in the possession of a third Person) to the extent dedicated to,
embodied in or constituting products used in the Nortel Networks Business and
owned by Nortel Networks or any of the Nortel Contributing Entities.
"IRS" means the United States Internal Revenue Service.
"IWS/MWS Software License Agreement" means the IWS/MWS Software License
Agreement to be executed by the parties thereto on the Closing Date,
substantially in the form of Exhibit G.
"Knowledge of the Company" or "Company's knowledge" means the actual
knowledge of any of the individuals listed in Section 1.01(k) of the Company
Disclosure Schedule, in each case without specific investigation or inquiry by
such person; provided that, with respect to any such Person that is an attorney,
such knowledge shall not be deemed to include any information that is covered by
the attorney-client privilege.
"Knowledge of Nortel Networks" or "Nortel Networks' knowledge" means
the actual knowledge of any of the individuals listed in Section 1.01(k) of the
NNI Disclosure Schedule, in each case without specific investigation or inquiry
by such person; provided that, with respect to any such Person that is an
attorney, such knowledge shall not be deemed to include any information that is
covered by the attorney-client privilege.
"Liabilities" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or undeterminable, including those arising under any Applicable Law,
Action or Governmental Order and those arising under any Contract.
"License" means any license, permit, certification, qualification or
franchise issued by any Governmental Authority.
"License Agreements" means the Intellectual Property License Agreement,
the MWS License Agreement and the VoIP License Agreement.
"Licensed Intellectual Property" means the Intellectual Property Rights
licensed to the Company under the License Agreements.
"Licensed IPLA IP" means the Intellectual Property Rights licensed
under the Intellectual Property License Agreement.
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"Lien" shall mean any mortgage, deed or trust, pledge, hypothecation,
security interest, encumbrance, claim, lien, lease or charge of any kind.
"Material Adverse Effect" means, with respect to the Nortel Networks
Business or any Person, as applicable, any effect that is, or would reasonably
be expected to be, material and adverse to the business, results of operations
or the financial condition of the Nortel Networks Business or such Person and
its Subsidiaries taken as a whole, as applicable, but shall not include any
effect relating to (i) changes after the date hereof in laws, regulations or
interpretations thereof by any applicable Governmental Authorities that affect
in general the Nortel Networks Business or the businesses in which such Person
and its Subsidiaries are engaged, as applicable, (ii) this Agreement, the Parent
Agreement, the Ancillary Agreements and the transactions, or any announcement of
the transactions, contemplated hereby and thereby, (iii) actions or omissions of
a party to this Agreement taken with the prior express written consent of the
other parties to this Agreement, and (iv) changes in general economic
conditions, or the occurrence of other events or developments affecting
generally the industries in which the Nortel Networks Business is conducted or
such Person and its Subsidiaries conduct their businesses, as applicable,
except, in the case of the foregoing clauses (i) and (iv), to the extent that
such changes, events or developments have an adverse effect on the financial
condition, business or results of operations of the Nortel Networks Business or
such Person and its Subsidiaries taken as a whole, as applicable, that is
materially greater than the adverse effect on comparable entities.
"Members' Agreement" means the Members' Agreement to be executed by the
parties thereto on the Closing Date, substantially in the form of Exhibit C,
including all Exhibits thereto.
"Membership Interests" means the limited liability company interests,
including any ownership interests representing the right to vote or share in the
profits or losses, of the Company.
"Mexican Company Entity" means Volt Delta Resources of Mexico, S. de
X.X. de C.V. , a company organized pursuant to the laws of Mexico.
"Mexican Nortel Contributing Entity" means Nortel Networks de Mexico
S.A. de C.V., a corporation organized pursuant to the laws of Mexico.
"MWS License Agreement" means the Multimedia Work Station Intellectual
Property License Agreement to be executed by the parties thereto on the Closing
Date, substantially in the form of Exhibit M.
"Network Identifiers" means all internet protocol addresses and
networks used in the Nortel Networks Business, including, DNS domain names,
e-mail addresses, world wide web (www) and http addresses, network names,
network addresses and services (such as mail or website) whether or not used or
currently in service, and including, without limitation, all registrations
relating thereto in or with all registration bodies or organizations.
"NNI Disclosure Schedule" means the NNI Disclosure Schedule delivered
by Nortel Networks to the Company on the date hereof.
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"Nortel Networks Business" means the supply of systems (hardware and
software), as well as support, maintenance and associated professional services,
for directory-and-operator-services applications and platform operator
workstation-executable solutions from a database via operator positions or
automation systems. For avoidance of doubt, the Nortel Networks Business does
not include on-switch functions of a Traffic Operator Position System switching
system, including, but not limited to, automatic call distribution ("ACD")
functionality, call control, queuing, agent and automation resource management,
signaling, protocols, and third-party billing.
"Nortel Networks Contracts" means (i) the Third Party Licenses,
Equipment Leases, rights under sales and purchase orders, and each of the other
Contracts and offers, bids, proposals and quotes listed on Section 1.01(n) of
the NNI Disclosure Schedule, and (ii) any non-competition agreement or any other
agreement or obligation that purports to limit in any respect the manner in
which, or the localities in which, all or any portion of the Nortel Networks
Business, has been or is currently being conducted.
"Nortel Contributing Entities" means the Canadian Nortel Contributing
Entities, the Mexican Nortel Contributing Entity and the Other Nortel
Contributing Entities.
"Nortel Networks Lab Software License" means the Nortel Networks Lab
Software License Schedule in the form of Exhibit R.
"Other Business Software" means Software licensed to Nortel Networks as
of the Closing Date, which Software is (i) used exclusively in the Nortel
Networks Business as of the Closing Date, (ii) listed or described in Section
1.01(o)(i) of the NNI Disclosure Schedule and (iii) licensed under one or more
agreements, which, by their current terms, permit Nortel Networks to assign a
portion of such Software to the purchaser of the Nortel Networks Business, while
also permitting Nortel Networks to retain the license to the balance of such
Software.
"Other Marks" means the Trademarks or other terms listed in Section
1.01(o)(ii) of the NNI Disclosure Schedule.
"Other Nortel Contributing Entities" means Nortel Networks (Ireland)
Limited, a corporation organized pursuant to the laws of Ireland, and Nortel
Networks (CALA) Inc., a Florida corporation.
"Parent Agreement" means the Parent Agreement executed by VIS and
Nortel Networks as of the date hereof.
"Patent Assignment" means the Assignment of Patents Agreement to be
executed by the parties thereto on the Closing Date, substantially in the form
of Exhibit Q.
"Patent Cross Licenses" means the reciprocal patent and patent rights
cross licenses between Nortel Networks or any of its Affiliates, on the one hand
and third Persons on the other hand.
"Permitted Encumbrance" means any restrictions, limitations or
conditions contained in (a) the Nortel Networks Contracts or Contracts for any
Business Software or (b)
10
non-exclusive licenses granted (i) under Patent Cross Licenses or (ii) to third
Persons (other than to those Persons listed in Section 1.01(p)(i) of the NNI
Disclosure Schedule, but subject to the exceptions set forth on such Schedule)
in the ordinary course of business under Transferred Intellectual Property that
do not materially restrict Nortel Networks or the Nortel Contributing Entities
from using the Transferred Intellectual Property; it being understood that, in
each case, such encumbrances are not security interests.
"Permitted Liens" means the following Liens: (a) Liens for Taxes,
assessments or other governmental charges or levies not yet due or that are
being contested in good faith; (b) statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics, materialmen and other Liens imposed by Law,
in each case, for amounts not yet due; (c) Liens incurred or deposits made in
the ordinary course of business in connection with worker's compensation,
unemployment insurance or other types of social security; (d) minor defects of
title, easements, rights-of-way, restrictions and other similar charges or
encumbrances not interfering with the ordinary conduct of the Nortel Networks
Business or the Company Business, as applicable; and (e) Liens incurred in the
ordinary course of business securing Liabilities that are not, individually or
in the aggregate, material.
"Person" means any natural person, general or limited partnership,
corporation, limited liability company, firm, association or other legal entity.
"Product Component" means a component of a Product sold by or on behalf
of the Company, which component (a) was manufactured by or on behalf of the
Company after the Closing Date, (b) is identical in all material respects to a
component used within a Product sold or distributed by Nortel Networks or a
Nortel Contributing Entity prior to the Closing Date, and (c) is used within the
Product sold by or on behalf of the Company in a manner identical in all
material respects to the manner in which such component was used within the
Product by Nortel Networks or a Nortel Contributing Entity prior to the Closing
Date.
"Products" means the products of the Nortel Networks Business listed in
Section 1.01(p)(ii) of the NNI Disclosure Schedule, including all versions,
releases and modules thereof reasonably available at a Nortel Networks facility
or installed at any of the Nortel Networks Business' customers' facilities.
"Real Estate License Agreements" means the Real Estate License
Agreements to be executed by the parties thereto on the Closing Date,
substantially in the form of Exhibit S-1 and Exhibit S-2.
"Relationship Agreement" means the Relationship Agreement to be
executed by the parties thereto on the Closing Date, substantially in the form
of Exhibit H.
"Retained Contracts" means all Contracts of Nortel Networks and the
Nortel Contributing Entities that are not included among the Nortel Networks
Contracts.
"Retained Liabilities" means all Liabilities of Nortel Networks and the
Nortel Contributing Entities other than the Assumed Liabilities, including:
11
(a) all Liabilities arising or which by their terms are to be observed,
paid, discharged or performed prior to the Effective Time with respect to the
Nortel Networks Contracts;
(b) all Liabilities of Nortel Networks and its Affiliates under this
Agreement, the Parent Agreement, the Ancillary Agreements or the Retained
Contracts;
(c) except as otherwise set forth in Section 6.01(a) or (b), Exhibit D
or the Employee Loan Agreement and where Liabilities arise from the failure of
the Company or any of its Subsidiaries to satisfy its obligations under Section
6.01(a) or (b), Exhibit D or the Employee Loan Agreement, all Liabilities
relating to or arising from or in connection with (i) the Nortel Networks
Benefit Plans or any other similar plans, programs, arrangements or policies
that are maintained, contributed to or required to be contributed to by Nortel
Networks or any other Person that, together with Nortel Networks, is treated as
a single employer under Section 414(b), (c) or (m) of the Code; (ii) Nortel
Networks or any Nortel Contributing Entity's employment (including coverage
under the Nortel Networks Benefit Plans) of the Transferring Employees that
arise or accrue prior to such Transferring Employees' Employment Transfer Time;
and (iii) Nortel Networks or any Nortel Contributing Entity's employment of any
Business Employee who does not become a Transferring Employee pursuant to this
Agreement;
(d) Liabilities for, or related to any obligation for, any Tax that
Nortel Networks or any Nortel Contributing Entity bears under Article VII of
this Agreement;
(e) Liabilities of Nortel Networks, the Nortel Contributing Entities
and their Affiliates relating to indebtedness for borrowed money, accounts
payable, accrued liabilities and guarantees by Nortel Networks or the Nortel
Contributing Entities and their Affiliates of indebtedness for borrowed money;
(f) all Liabilities arising or resulting from any act, circumstance,
event or omission that occurred prior to the Effective Time with respect to the
Nortel Networks Business, including (i) with respect to the ownership and
operation of the Assets and any Liabilities arising under Environmental Law with
respect to any of the facilities utilized for the conduct of the Nortel Networks
Business (excluding any increases in any Liabilities arising under Environmental
Law resulting from any event occurring, or circumstance arising, after the
Closing Date, including any change in Applicable Law or the enforcement thereof,
or from any action or omission of any Person other than Nortel Networks or its
Subsidiaries; and (ii) in respect of any claims of customers of the Nortel
Networks Business or other third parties against the Company, Nortel Networks or
the Nortel Contributing Entities, including those resulting in an Action,
whether asserted prior to or after the Effective Time, with respect to any
Product that was installed prior to the Effective Time, and not modified by any
Person other than Nortel Networks and its Subsidiaries (provided that such
limitation shall not apply if a modification was made that did not in any way
form the basis for such claim), and whether such Product was used or operated
prior to or after the Effective Time; provided that any Liability resulting from
the misuse of any such Product or any act or omission of any Person other than
Nortel Networks and its Subsidiaries on or after the Effective Time relating to
such Product shall not be a Retained Liability);
12
(g) all Liabilities arising out of the operation or conduct by Nortel
Networks or any of its Affiliates of any business other than the Nortel Networks
Business;
(h) Liabilities (other than with respect to Taxes which shall be
allocated pursuant to Article VII), if and to the extent payable, arising prior
to the Effective Time in respect of Permitted Liens and Permitted Encumbrances
on the Assets; and
(i) Liabilities to the extent relating to, or arising out of, any
Excluded Asset, or to the extent arising out of the distribution to, or
ownership by, Nortel Networks or any of its Affiliates of the Excluded Assets or
the realization of the benefits of any Excluded Asset.
"Services Agreement" means the Services Agreement to be executed by VIS
and the Company on the Closing Date, substantially in the form of Exhibit J.
"Shares Purchase Agreements" means the Shares Purchase Agreement among
the Canadian Nortel Contributing Entities and Nortel Networks and the Shares
Purchase Agreement between the Mexican Nortel Contributing Entity and Nortel
Networks, in each case to be executed by the parties thereto on the Closing
Date.
"Single Use Desktop Software" means Software licensed to Nortel
Networks as of the Closing Date that is (i) licensed under a freely
transferable, shrink-wrap or click-wrap license agreement for use on a single
computer that is installed on personal computers forming part of the Transferred
Equipment, and (ii) listed or described in Section 1.01(s) of the NNI Disclosure
Schedule.
"Subcontract Agreement" means the Subcontract Agreement to be executed
by the parties thereto on the Closing Date, substantially in the form of Exhibit
E.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, limited liability company, trust or estate of which (or in which) more
than 50% of (a) the issued and outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such entity or (b) the
interest in the capital or profits of such entity is at the time directly or
indirectly owned or controlled by such Person, by such Person and one or more of
its other Subsidiaries or by one or more of such Person's other Subsidiaries.
"Tax" or "Taxes" means any and all taxes, charges, fees, levies,
imposts, duties or other assessments of any kind whatsoever, imposed by or
payable to any federal, state, provincial, local, or foreign Tax authority,
including, without limitation, any gross income, net income, franchise, profits,
gross receipts, estimated, ad valorem, value added, sales, use service, customs,
real or personal property, capital stock, license, payroll, withholding,
employment, social security, workers' compensation, unemployment compensation,
utility, severance, production, excise, stamp, occupation, premium, windfall
profits, occupancy, transfer and gains taxes, together with any interest and any
penalties or additions to tax.
"Tax Returns" means all returns, reports (including, without
limitation, elections, declarations, disclosures, schedules, estimates and
information returns) and other information required to be supplied to a Tax
authority relating to Taxes.
13
"Third Party Licenses" means those licenses from third parties for
Software contained in the Products that are listed in Section 1.01(t)(i) of the
NNI Disclosure Schedule.
"Trademark Assignment" means the Assignments of Trademark to be
executed by the parties thereto on the Closing Date, substantially in the form
of Exhibit P.
"Trademark License Agreement" means the Trademark License Agreement to
be executed by the parties thereto on the Closing Date, substantially in the
form of Exhibit O.
"Transfer Taxes" mean all goods and services, sales, use, land
transfer, gross receipt, documentary, value-added, stamp duties and all other
similar taxes, duties, registration charges or other like charges together with
any interest, penalties, additions to tax, or additional amounts imposed with
respect thereto.
"Transferred Copyrights" means those registered and unregistered
copyrights, and copyright registrations included within Intellectual Property
Rights that are (i) owned by Nortel Networks or the Nortel Contributing Entities
as of the Closing Date and (ii) used exclusively in the Nortel Networks Business
as of the Closing Date in (x) the Transferred Software and (y) any Software,
databases, documents or other materials that are listed in Section 1.01(t)(ii)
of the NNI Disclosure Schedule.
"Transferred Equipment" means the furniture, fixtures, machinery and
other tangible personal property listed in Section 1.01(t)(iii) of the NNI
Disclosure Schedule.
"Transferred Intellectual Property" means (i) the Transferred
Trademarks; (ii) the Transferred Copyrights; (iii) the Transferred Trade
Secrets; (iv) the Transferred Software; and (v) the Transferred Patents.
"Transferred Patents" means the Patents included within Intellectual
Property Rights that are (i) owned by Nortel Networks or the Nortel Contributing
Entities as of the Closing Date and (ii) listed in Section 1.01(t)(iv) of the
NNI Disclosure Schedule.
"Transferred Software" means all Intellectual Property Rights in that
certain Software that is (i) owned by Nortel Networks or the Nortel Contributing
Entities as of the Closing Date and (ii) used exclusively in the design,
development, manufacture, maintenance, operation and testing of the Products as
of the Closing Date, including the Software listed in Section 1.01(t)(v) of the
NNI Disclosure Schedule.
"Transferred Trade Secrets" means all Trade Secrets included within
Intellectual Property Rights that are (i) owned by Nortel Networks or the Nortel
Contributing Entities as of the Closing Date and (ii) used exclusively in the
design, development, manufacture, maintenance, operation and testing of the
Products as of the Closing Date, including any such Confidential Information and
Trade Secrets embodied in the Transferred Software.
"Transferred Trademarks" means all registered Trademarks included
within Intellectual Property Rights that are (i) owned by Nortel Networks or the
Nortel Contributing Entities as of the Closing Date, (ii) used exclusively in
the Nortel Networks Business as of the
14
Closing Date and (iii) listed in Section 1.01(t)(vi) of the NNI Disclosure
Schedule, solely in the jurisdictions listed in such Section.
"Transition Services Agreement" means the Transition Services Agreement
to be executed by Nortel Networks and the Company on the Closing Date,
substantially in the form of Exhibit K.
"VoIP License Agreement" means the Voice Over IP Interface and IWS
License Agreement to be executed by the parties thereto on the Closing Date,
substantially in the form of Exhibit N.
"VIS" means Volt Information Sciences, Inc., a New York corporation.
Section 1.02. Other Defined Terms. The following terms have the
meanings defined for such terms in the Sections set forth below:
TERM SECTION
---- -------
ACD 1.01
Assigned Back IP 5.20
Canadian Shares 2.03(a)
Cash Adjustment 5.17
Closing 2.04
Closing Date 2.04
Company Preamble
Company Commonly Controlled Entity 4.12(a)
Company Benefit Plans 4.12(a)
Company Entity Shares 2.03(b)
Company Financial Statements 4.05(a)
Company Indemnified Parties 10.02
Company Leased Real Property 4.11(a)
Company Owned Real Property 4.11(b)
Company Pension Plan 4.12(a)
Contribution Interests 2.03(d)
Copyrights 1.01
Disclosing Party 5.03(a)
Employment Transfer Time Exhibit D
ERISA 3.10(a)
Exhibit D 6.01(a)
Financial Statements 3.04(a)
Holdings 4.04(a)
Indemnified Party 10.04(a)
Indemnifying Party 10.04(a)
Industrial Designs 1.01
Leave Employee 3.10(b)
Losses 10.01(a)
Mask Works 1.01
Mexican Shares 2.03(b)
Nortel Networks Preamble
Nortel Networks Benefit Plans 3.10(a)
Nortel Indemnified Parties 10.01(a)
15
Nortel Networks Critical Employee Exhibit D
Nortel Networks Key Employee 3.10(e)
Nuco 4.04(a)
Patents 1.01
Pension Plan 3.10(a)
Purchase Price 2.03(e)
Recipient Party 5.03(a)
Representative 5.03(a)
Software 1.01
Straddle Period 7.01(d)
Tangible Software 1.01
Termination Date 9.01(b)
Trademarks 1.01
Trade Secrets 1.01
Transferred Contracts 5.11(b)
Transferring Employees Exhibit D
Working Capital 4.17
Section 1.03. Terms Generally. (a) Words in the singular shall include
the plural and vice versa, and words of one gender shall include the other
genders as the context requires, (b) the term "hereof," "herein," and "herewith"
and words of similar import shall, unless otherwise stated, be construed to
refer to this Agreement and not to any particular provision of this Agreement,
and Article, Section, paragraph, Exhibit and Schedule references are to the
Articles, Sections, paragraphs, Exhibits and Schedules to this Agreement unless
otherwise specified and (c) the word "including" and words of similar import
when used in this Agreement shall mean "including, without limitation," unless
otherwise specified.
Article II
CONTRIBUTION
Section 2.01. Contribution. (a) On the terms and subject to the
conditions set forth in this Agreement, at the Closing, Nortel Networks shall
cause the Canadian Nortel Contributing Entities to sell, convey, assign,
transfer and deliver to the Canadian Company Entity, and the Company shall cause
the Canadian Company Entity to purchase, acquire and accept from the Canadian
Nortel Contributing Entities, all of the Canadian Nortel Contributing Entities'
right, title and interest in and to the Assets, free and clear of Liens other
than Permitted Liens and Liens created by or through the Canadian Company
Entity; provided, however, that the Canadian Company Entity is not acquiring any
interest in, under or to, and for all purposes hereunder the term "Assets" shall
not be deemed to include, the Excluded Assets.
(b) On the terms and subject to the conditions set forth in this
Agreement, at the Closing, Nortel Networks shall cause the Mexican Nortel
Contributing Entity to sell, convey, assign, transfer and deliver to the Mexican
Company Entity, and the Company shall cause the Mexican Company Entity to
purchase, acquire and accept from the Mexican Nortel Contributing Entity, all of
the Mexican Nortel Contributing Entity's right, title and interest in and to the
Assets, free and clear of Liens other than Permitted Liens and Liens created by
or through the
16
Mexican Company Entity; provided, however, that the Mexican Company Entity is
not acquiring any interest in, under or to, and for all purposes hereunder the
term "Assets" shall not be deemed to include, the Excluded Assets.
(c) On the terms and subject to the conditions set forth in this
Agreement, at the Closing immediately following the transfers of Assets set
forth in Sections 2.01(a) and (b) and the transfer of the Company Entity Shares
set forth in Section 2.03(c), Nortel Networks shall, and shall cause the Other
Nortel Contributing Entities to, sell, convey, assign, transfer and deliver to
the Company, and the Company shall, and the Company shall purchase, acquire and
accept from Nortel Networks and the Other Nortel Contributing Entities, all of
Nortel Networks' and the Other Nortel Contributing Entities' right, title and
interest in and to the Assets and the Company Entity Shares owned by Nortel
Networks, free and clear of Liens other than Permitted Liens and Liens created
by or through the Company; provided, however, that the Company is not acquiring
any interest in, under or to, and for all purposes hereunder the term "Assets"
shall not be deemed to include, the Excluded Assets.
Section 2.02. Assumption and Exclusion of Liabilities. (a) On the terms
and subject to the conditions set forth in this Agreement, at the Closing, the
Company shall, and the Company shall cause each of the Company Entities to,
assume, and shall become obligated to pay, perform and discharge when due, all
of the Assumed Liabilities.
(b) Nortel Networks and the Nortel Contributing Entities shall retain,
and shall be responsible for paying, performing and discharging when due, and
the Company shall not assume or have any responsibility for, the Retained
Liabilities.
Section 2.03. Issuance of Shares and Membership Interests. (a) At the
Closing concurrently with the transfer of Assets set forth in Section 2.01(a),
the Company shall cause the Canadian Company Entity to issue to the Canadian
Nortel Contributing Entities, and the Canadian Nortel Contributing Entities
shall receive on their own behalf, 99,999 shares of common stock, without par
value, of the Canadian Company Entity (the "Canadian Shares") in exchange for
the contribution of the Assets.
(b) At the Closing concurrently with the transfer of Assets set forth
in Section 2.01(b), the Company shall cause the Mexican Company Entity to issue
to the Mexican Nortel Contributing Entity, and the Mexican Nortel Contributing
Entity shall receive on its own behalf, 99% of the outstanding equity of the
Mexican Company Entity (the "Mexican Shares" and together with the Canadian
Shares, the "Company Entity Shares") in exchange for the contribution of the
Assets.
(c) Pursuant to the terms and conditions of the Shares Purchase
Agreements, at the Closing immediately following the issuances of Company Entity
Shares set forth in Sections 2.03(a) and (b) the Canadian Nortel Contributing
Entities and the Mexican Contributing Entity shall transfer the Canadian Shares
and the Mexican Shares, respectively, to Nortel Networks in exchange for the
cash consideration set forth in the Shares Purchase Agreements.
(d) At the Closing immediately following the transfers set forth in
Sections 2.01(a) and (b) and Section 2.03(c), the Company shall issue to Nortel
Networks, and
17
Nortel Networks shall receive on its own behalf and on behalf of the Other
Nortel Contributing Entities, a number of Membership Interests (the
"Contribution Interests") representing twenty four percent (24%) of all
Membership Interests, on a fully-diluted basis, outstanding immediately
following the Closing in exchange for the contribution of the Assets and the
Company Entity Shares.
(e) The value of the Contribution Interests plus the amount of Assumed
Liabilities to the extent accrued for Tax purposes as of the Closing Date (the
"Purchase Price") shall be allocated among the Assets and the Intellectual
Property Rights licensed under the Intellectual Property License Agreement and
the MWS License Agreement in the statutory jurisdictions in which the Assets or
such Intellectual Property Rights, as applicable, reside as of the Closing Date
in accordance with Section 2.03(e) of the NNI Disclosure Schedule. The gross
fair market value of the assets of the Company shall be allocated among such
assets as of the Closing Date in accordance with Section 2.03(e) of the Company
Disclosure Schedule. Such allocations shall be based upon a valuation for the
Company's assets (post-transaction) as determined by one or more mutually agreed
upon Persons. If the parties can reach agreement on one Person, then the payment
of the expenses incurred for such valuation shall be shared equally by the
parties. Otherwise, the parties shall each pay the expenses incurred for such
valuation by the Person retained by that party. The Company and Nortel Networks
shall each use their reasonable best efforts to cause such Person(s) to complete
such valuation by August 23, 2004, and the Company and Nortel Networks shall use
their reasonable best efforts to agree on such allocations promptly thereafter.
The Company and Nortel Networks shall each (and Nortel Networks shall cause each
Nortel Contributing Entity to, and the Company shall cause each Company Entity
to) report the federal, state, provincial and local income and other tax
consequences of the transactions contemplated by this Agreement in a manner
consistent with such allocation. Except as otherwise required by law, neither
the Company nor Nortel Networks shall (and Nortel Networks shall cause its
Affiliates not to, and the Company shall cause its Affiliates not to) take a
position inconsistent with such allocations on any Tax Return, before any
governmental agency charged with the collection of any income tax or in any
proceeding relating thereto. Each of Nortel Networks and the Company shall
cooperate with the other in preparing relevant IRS forms and any equivalent
statements for filing consistent with such allocations within a reasonable
period before their filing due dates.
Section 2.04. Closing. Subject to the terms and conditions of this
Agreement, the transactions contemplated by this Article II shall take place at
a closing (the "Closing") to be held at 10:00 a.m., New York City time, on
August 2, 2004, or if the conditions to the obligations of the parties set forth
in Article VIII have not been satisfied by such date, as soon as practicable
after such conditions shall have been satisfied, at the offices of Cleary,
Gottlieb, Xxxxx & Xxxxxxxx located at Xxx Xxxxxxx Xxxxx, Xxx Xxxx, XX 00000, or
at such other time or on such other date or at such other place as Nortel
Networks and the Company may mutually agree upon in writing (the day on which
the Closing takes place being the "Closing Date").
Section 2.05. Closing Deliveries by Nortel Networks. At the Closing,
Nortel Networks shall deliver or cause to be delivered to the Company:
(a) an executed counterpart of each of the Ancillary Agreements to
which it or any Nortel Contributing Entity is a party;
18
(b) certificates representing the Company Entity Shares, duly endorsed
in blank or with duly executed stock powers attached in proper form for transfer
in accordance with Section 2.01(c); and
(c) any documents required pursuant to Section 5.08 or Section 5.11.
Section 2.06. Closing Deliveries by the Company. (a) At the Closing,
the Company shall deliver or cause to be delivered to Nortel Networks:
(i) certificates representing the Membership Interests in accordance
with Section 2.03(d);
(ii) an executed counterpart of each of the Ancillary Agreements to
which it, VIS or any Company Entity is a party;
(iii) A statement in the form described in Treasury Regulations
section 1.1445-11T(d)(2), signed under penalties of perjury by a duly
authorized officer of VIS, certifying that fifty percent (50%) or more of
the gross assets of the Company do not consist of U.S. real property
interests, or that ninety percent (90%) of the value of the gross assets
of the Company do not consist of U.S. real property interests plus cash or
cash equivalents; and
(iv) any documents required pursuant to Section 5.08.
(b) At the Closing, the Company shall cause to be delivered to the
Canadian Nortel Contributing Entities and the Mexican Nortel Contributing Entity
certificates representing the Company Entity Shares, duly endorsed in blank or
with duly executed stock powers attached in proper form for transfer in
accordance with Sections 2.03(a) and (b).
Section 2.07. Accounting. To the extent that after the Closing (a) the
Company receives any payment that is for the account of Nortel Networks
according to the terms of this Agreement, the Company shall promptly deliver
such amount to Nortel Networks, and (b) Nortel Networks receives any payment
that is for the account of the Company according to the terms of this Agreement,
Nortel Networks shall promptly deliver such amount to the Company.
Article III
REPRESENTATIONS AND WARRANTIES OF NORTEL NETWORKS
Except as otherwise set forth in the NNI Disclosure Schedule and except
for matters relating to Excluded Assets or Retained Liabilities, Nortel Networks
represents and warrants to the Company as follows:
Section 3.01. Incorporation and Authority of Nortel Networks and the
Nortel Contributing Entities. Each of Nortel Networks and the Nortel
Contributing Entities is a corporation duly formed, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
necessary corporate power and authority to own, lease and operate its
properties, to carry on its business as it is now being conducted, to enter into
this Agreement,
19
the Parent Agreement and the Ancillary Agreements to which it is or will be a
signatory, to carry out its respective obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby. Nortel Networks
and each of the Nortel Contributing Entities is duly qualified or licensed to do
business as a foreign corporation and is in good standing under the laws of each
state or other jurisdiction in which the nature of either the ownership or use
of the Assets or the conduct of the Nortel Networks Business requires such
qualification. The execution, delivery and performance by each of Nortel
Networks and the Nortel Contributing Entities of this Agreement, the Parent
Agreement and each Ancillary Agreement to which it is or will be a signatory
have been duly authorized by all requisite corporate action on the part of
Nortel Networks or such Nortel Contributing Entity, as the case may be. This
Agreement is, and upon execution the Parent Agreement and each Ancillary
Agreement to which it is or will be a signatory will be, duly executed and
delivered by Nortel Networks or the Nortel Contributing Entities, and (assuming
due authorization, execution and delivery by VIS, the Company or the Company
Entities that are signatories thereto) this Agreement constitutes, and upon
execution the Parent Agreement and the Ancillary Agreements to which it is a
signatory will constitute, legal, valid and binding obligations of Nortel
Networks or the Nortel Contributing Entities that are signatories thereto,
enforceable against Nortel Networks or such Nortel Contributing Entities in
accordance with their terms, except as such enforcement may be limited by
applicable anti-trust, bankruptcy, insolvency, reorganization and similar laws
affecting generally the enforcement of the rights of contracting parties and
subject to a court's discretionary authority with respect to the granting of a
decree ordering specific performance or other equitable remedies, and further
subject to the Currency Act (Canada) precluding a court in Canada from awarding
a judgment for an amount expressed in a currency other than Canadian dollars.
Section 3.02. No Conflict. The execution, delivery and performance of
this Agreement by Nortel Networks and the execution, delivery and performance of
the Parent Agreement and the Ancillary Agreements by Nortel Networks and/or the
Nortel Contributing Entities that are a party thereto and the consummation by
Nortel Networks and the Nortel Contributing Entities of the transactions
contemplated hereby and thereby, do not and will not: (a) violate or conflict
with the articles, other constituent documents or By-laws of Nortel Networks or
any Nortel Contributing Entity; (b) conflict with or violate any Applicable Law
or Governmental Order applicable to Nortel Networks or any Nortel Contributing
Entity (assuming the satisfaction of the condition in Section 8.01(b)); (c)
result in any material breach of, or constitute a material default (or event
which with the giving of notice or lapse of time, or both, would become a
default) under, or give to any Person any material rights of termination,
purchase, amendment, acceleration or cancellation of any material Contract to
which Nortel Networks or any Nortel Contributing Entity is a party; or (d)
result in the imposition or creation of any Lien (other than a Permitted Lien)
upon any of the Assets.
Section 3.03. Consents and Approvals. The execution and delivery of
this Agreement by Nortel Networks and the execution and delivery of the Parent
Agreement and the Ancillary Agreements by Nortel Networks and/or the Nortel
Contributing Entities that are a party thereto, do not, and the performance of
this Agreement by Nortel Networks, the performance of the Parent Agreement and
the Ancillary Agreements by Nortel Networks and/or the Nortel Contributing
Entities that are a party thereto and the consummation by Nortel Networks and
the Nortel Contributing Entities of the transactions contemplated hereby and
20
thereby will not, require any consent, approval, authorization or other action
by, or filing with or notification to, any Governmental Authority.
Section 3.04. Financial Information; No Undisclosed Liabilities. (a)
Section 3.04 of the NNI Disclosure Schedule sets forth the unaudited management
statements of the Nortel Networks Business, including a statement of assets and
liabilities as of December 31, 2003, and as of March 31, 2004 and a statement of
operations and a statement of cash flows, each for the year ended December 31,
2003 and for the three-month period ended March 31, 2004 (collectively, the
"Financial Statements"). Except as shown or provided for in the Financial
Statements or as otherwise described in Section 3.04 of the NNI Disclosure
Schedule, such Financial Statements (i) have been prepared in accordance with
the accounting principles and books and records of Nortel Networks; (ii) are
prepared in accordance with U.S. GAAP applied consistently with past practice;
and (iii) present fairly, in all material respects, the financial position or
results of operations, as the case may be, for the Nortel Networks Business as
of the date or for the period indicated.
(b) The Nortel Networks Business has no material Liabilities that have
not been expressly disclosed or otherwise expressly described in any Section of
the NNI Disclosure Schedule.
Section 3.05. Absence of Material Adverse Effect. Since December 31,
2003 to the date of this Agreement, except (i) for transfers of assets that
would not constitute the Assets if they had not been transferred or (ii) to the
extent relating to actions taken pursuant to the transactions contemplated by
this Agreement, (a) there has not been any Material Adverse Effect on the Nortel
Networks Business; (b) the Nortel Networks Business has been conducted in the
ordinary course and consistent with past practice; and (c) except in the
ordinary course of business, there has not been any sale, assignment, transfer
or other disposition of or license of any tangible or intangible assets used
exclusively in the design, development, manufacture, maintenance, operation and
testing of the Products.
Section 3.06. Absence of Litigation. (a) There are no Actions pending
or, to the Knowledge of Nortel Networks, threatened, against the Nortel Networks
Business or any of the Assets or that challenge or may have the effect of
preventing, denying, making illegal or otherwise interfering with the
transactions contemplated hereby. There are no Tax Actions pending that if
successful would result in a Lien on the Assets, other than Permitted Liens.
(b) Neither Nortel Networks nor any Nortel Contributing Entity has
received any written notice during the two (2) years prior to the date hereof of
material Actions seeking to restrict or limit the work of, or disclosure of
information by, current or former employees of Nortel Networks or the Nortel
Contributing Entities with respect to the Transferred Intellectual Property or
Licensed IPLA IP.
Section 3.07. Compliance with Laws. Neither Nortel Networks nor any
Nortel Contributing Entity has received any written notice that it is, and to
the Knowledge of Nortel Networks neither Nortel Networks nor any Nortel
Contributing Entity is, in material violation of any Applicable Law or
Governmental Order applicable to the Nortel Networks Business or any Asset.
21
Section 3.08. Governmental Licenses. Neither Nortel Networks nor any
Nortel Contributing Entity has received any written notice that it fails to hold
any, and to the Knowledge of Nortel Networks, each of Nortel Networks and the
Nortel Contributing Entities holds all, material Licenses necessary for the
operation of the Nortel Networks Business as currently operated, and to the
Knowledge of Nortel Networks, each of Nortel Networks and the Nortel
Contributing Entities is in compliance with the terms of such material Licenses.
Section 3.09. The Assets. (a) Except for the Excluded Assets and
subject to Section 5.07, the Assets collectively include all of the assets,
properties and rights that are primarily used by Nortel Networks and the Nortel
Contributing Entities in the conduct of the Nortel Networks Business as it is
currently conducted.
(b) Nortel Networks and the Nortel Contributing Entities, in the
aggregate, hold good title to or have valid leasehold interests in all of the
Assets free and clear of any and all Liens, except (i) Permitted Liens and (ii)
Liens created by or through the Company.
(c) Notwithstanding anything to the contrary herein, no representation
or warranty is made under this Section 3.09 with respect to the Transferred
Intellectual Property, the representations and warranties with respect to which
are set forth in Section 3.14.
Section 3.10. Employee Benefit Matters. (a) Section 3.10(a) of the NNI
Disclosure Schedule contains an accurate and complete list of all pension plans
(including each "employee pension benefit plan" (as defined in Section 3(2) of
the United States Employee Retirement Income Security Act of 1974, as amended
("ERISA") (a "Pension Plan")), supplemental pension plans, profit sharing plans,
savings plans, retirement savings plans, bonus plans, incentive compensation
plans, deferred compensation plans, stock purchase plans, stock option or other
equity based plans, phantom stock plans, vacation plans, leave of absence plans,
employee assistance plans, automobile leasing/subsidy/allowance plans,
redundancy or severance plans, relocation plans, family support plans,
retirement plans, medical, health, hospitalization or life insurance plans,
including retiree health and life plans, disability plans, sick leave plans,
retention plans, compensation arrangements, including any base salary
arrangements, overtime, on-call or call-in policies, death benefit plans,
Employment Agreements with Mexico Employees and Nortel Networks Key Employees,
employee benefit plans (including each "employee welfare benefit plan (as
defined in Section 3(1) of ERISA)) and any other similar plans, programs,
arrangements or policies that are maintained, contributed to or required to be
contributed to by Nortel Networks or any of Nortel Networks' Affiliates with
respect to Business Employees (collectively, the "Nortel Networks Benefit
Plans"), which are material. Nortel Networks has made available to Company a
true and complete copy of the plan document or summary plan description of each
of the Nortel Networks Benefit Plans, which are material (including, for the
avoidance of doubt, any Employment Agreements with Mexico Employees and Nortel
Networks Key Employees), or if such plan document or summary plan description
does not exist, an accurate, written summary of such material Nortel Networks
Benefit Plans. As of the date hereof, there is no plan or commitment, whether
legally binding or not, to create any additional material Nortel Networks
Benefit Plan or materially modify, change or terminate any existing material
Nortel Networks Benefit Plan. Other than claims by Business Employees for
benefits received in the ordinary course under Nortel Networks Benefit Plans,
there are no material Actions by or on behalf of Business Employees pending
against Nortel
22
Networks or any Nortel Contributing Entity with respect to the Nortel Networks
Benefit Plans and, to the Knowledge of Nortel Networks, no such Actions have
been threatened.
(b) Section 3.10(b) of the NNI Disclosure Schedule sets forth with
respect to each Business Employee: (i) name, (ii) home address, (iii) continuous
service date, (iv) position, (v) annual base salary, (vi) vacation accrual rate,
(vii) accrued unused vacation days and the base salary equivalent for such
vacation days, (viii) work location, including street address, city, state or
province and country, (ix) target incentive compensation, (x) other regular
compensation or allowances, (xi) language preference with respect to Canadian
Employees, (xii) Capital Accumulation and Retirement Plan (CARP) participation
for Canadian Employees, (xiii) telecommuting status and (xiv) visa status. In
addition, if any Business Employee is on leave approved by Nortel Networks or
recognized under Applicable Law, including parental or pregnancy leave, military
leave, or leave related to receipt of short-term or long-term disability
benefits or workers' compensation benefits (a "Leave Employee"), Section 3.10(b)
of the NNI Disclosure Schedule will so indicate, along with the type of leave
and the expected date of return to work, if available.
(c) Except for any obligations under the Nortel Networks Benefit Plans
listed on Section 3.10(a) of the NNI Disclosure Schedule, neither Nortel
Networks nor any of the Nortel Contributing Entities has any obligation to
provide health, life insurance or death benefits with respect to Business
Employees beyond their termination of employment or service, other than as
required under Section 4980B of the Code or other Applicable Law.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby, whether alone or in
combination with another event (whether contingent or otherwise) will (i)
entitle any Business Employee to any payment; (ii) increase the amount of
compensation due to any Business Employee; or (iii) accelerate the vesting or
funding of any compensation, stock incentive or other benefit of any Business
Employee, in each case other than any entitlements, increases or acceleration
pursuant to Applicable Law or the Nortel Networks Benefit Plans listed on
Section 3.10(a) of the NNI Disclosure Schedule.
(e) Except as set forth on Section 3.10(e) of the NNI Disclosure
Schedule, neither Nortel Networks nor the Nortel Contributing Entities have
received any written notice from any Business Employee listed on Section 3.10(e)
of the NNI Disclosure Schedule ("Nortel Networks Key Employee") or any Nortel
Networks Critical Employees stating such employee's current or future intention
to resign from or terminate his or her employment with Nortel Networks or a
Nortel Contributing Entity, as applicable.
(f) Neither Nortel Networks nor any of the Nortel Contributing Entities
is a party to any collective bargaining agreement with any labor union or
representative applicable to (i) Business Employees or (ii) employees of Nortel
Networks or the Nortel Contributing Entities who perform services used by the
Nortel Networks Business which restrict Nortel Networks or the Nortel
Contributing Entities from relocating or closing the Nortel Networks Business.
There are not currently pending and, during the past two (2) years, there have
not been any questions concerning representation or certification proceedings or
petitions seeking a representation or certification proceeding or determination
before any Governmental Authority or, to the
23
Knowledge of Nortel Networks, threatened to be brought or filed before any
Governmental Authority involving the Business Employees. To the Knowledge of
Nortel Networks, there is not any campaign currently being conducted to solicit
cards or authorizations from Business Employees to be represented by any labor
organization. There are not currently and, during the past two (2) years, there
have not been any strikes, picketing, slowdowns, lockouts or work stoppages
involving the Business Employees and, to the Knowledge of Nortel Networks, no
such actions are threatened.
(g) There are no (i) material grievances or (ii) Actions or
Governmental Orders related to the employment of the Business Employees pending
against Nortel Networks or any of the Nortel Contributing Entities or, to the
Knowledge of Nortel Networks, threatened. Nortel Networks and each of the Nortel
Contributing Entities is, to the Knowledge of Nortel Networks, in compliance in
all material respects with Applicable Laws and Governmental Orders with respect
to the employment of the Business Employees; provided that, for the avoidance of
doubt, no representation or warranty is made under this Section 3.10(g) with
respect to the Nortel Networks Benefit Plans, the sole representations and
warranties with respect to which are made in Section 3.10(a).
(h) Nortel Networks represents that evading liability within the
meaning of Section 4069(a) of ERISA is not a principal purpose for Nortel
Networks' entering into the transactions contemplated by this Agreement.
Section 3.11. Environmental Matters. (a) Neither Nortel Networks nor
any Nortel Contributing Entity has received any written notice that it is not,
and to the Knowledge of Nortel Networks each of Nortel Networks and the Nortel
Contributing Entities is, in compliance with all applicable material
Environmental Laws relating to the Nortel Networks Business or the Assets and
has obtained and is in compliance with all material Environmental Permits
relating to the Nortel Networks Business or the Assets.
(b) There are no written claims pursuant to any Environmental Law
pending or, to the Knowledge of Nortel Networks, threatened relating to the
Nortel Networks Business or the Assets.
Section 3.12. Nortel Networks Contracts. (a) To the Knowledge of Nortel
Networks, each of the Nortel Networks Contracts is valid, binding, in full force
and effect, and enforceable by Nortel Networks or the Nortel Contributing Entity
that is a party thereto in accordance with its terms (subject to bankruptcy,
insolvency, reorganization and other laws affecting generally the enforcement of
the rights of contracting parties and subject to a court's discretionary
authority with respect to the granting of a decree ordering specific performance
or other equitable remedies).
(b) Neither Nortel Networks nor any Nortel Contributing Entity that is
a party thereto has received written notice (i) that it is in breach or default
in any material respect under any of the Nortel Networks Contracts or (ii) that
any party to any Nortel Networks Contract intends to cancel or terminate any
Nortel Networks Contract or not to exercise any renewal or extension options or
rights under any Nortel Networks Contract.
24
(c) To the Knowledge of Nortel Networks, none of the parties to the
Nortel Networks Contracts is in material breach thereof and Nortel Networks has
not provided written notice that the other party is in payment default
thereunder.
Section 3.13. Brokers. 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, the Parent Agreement and
the Ancillary Agreements based upon arrangements made by or on behalf of Nortel
Networks.
Section 3.14. Intellectual Property. (a) Nortel Networks or a Nortel
Contributing Entity is the owner of all right, title and interest or has a valid
transferable license to use, free and clear of all Liens other than Permitted
Liens and Permitted Encumbrances, all of the Transferred Intellectual Property,
provided that, for the avoidance of doubt, no representation or warranty is made
under this Section 3.14(a) with respect to the non-infringement or
misappropriation of the Intellectual Property Rights of any third Person, the
sole representations and warranties with respect to which are made in Section
3.14(b).
(b) Except as set forth in Section 3.14(b) of the NNI Disclosure
Schedule, neither Nortel Networks nor any of the Nortel Contributing Entities
has received any written notice during the two (2) years prior to the Closing
Date, and there are no pending, or to the Knowledge of Nortel Networks,
threatened material Actions that assert that the Products or the operation of
the Nortel Networks Business infringe the Intellectual Property Rights of any
third Person, and, to the Knowledge of Nortel Networks, there are no valid
grounds for any such Actions, it being understood that Nortel Networks has not
conducted any investigation regarding whether the Products do or would infringe
any claims of any Patent covered by any Patent Cross License. To the Knowledge
of Nortel Networks, the Products do not infringe the Intellectual Property
Rights of any Person.
(c) Except for the Third Party Licenses, Contracts relating to the
Business Software, the rights under the License Agreements and the Patent Cross
Licenses and as set forth in Section 3.14(c) of the NNI Disclosure Schedule,
there are no agreements or obligations relating to Intellectual Property Rights,
written or oral, that are material to the design, development, manufacture,
maintenance, operation and testing of the Products; provided that Contracts for
Administrative Services Software and for third party Software which is
commercially or freely available are not applicable for purposes of this Section
3.14(c).
(d) Except as set forth in Section 3.14(d) of the NNI Disclosure
Schedule, to the Knowledge of Nortel Networks, there are no infringements by any
third Person of any Transferred Intellectual Property and, to the Knowledge of
Nortel Networks, no third Person has misappropriated any Transferred Trade
Secrets.
(e) Nortel Networks and the Nortel Contributing Entities have in place
corporate policies relating to the protection of material Intellectual Property
Rights. Neither Nortel Networks nor any of the Nortel Contributing Entities has
received any written notice during the two (2) years prior to the Closing Date,
of Actions that assert that any current or former employee of Nortel Networks or
any Nortel Contributing Entity has any rights to any Transferred Intellectual
Property made, developed, conceived, created or written by such employee during
25
the period of his employment by Nortel Networks or the Nortel Contributing
Entity (as applicable).
(f) Subject to Section 5.07, the Transferred Intellectual Property,
together with the Licensed Intellectual Property, the Business Software, the
rights under Third Party Licenses and any other Intellectual Property licensed
under any Ancillary Agreement, include all of the material Intellectual Property
Rights, other than rights under the Patent Cross Licenses, that are used by
Nortel Networks and the Nortel Contributing Entities for the design, development
and manufacture of the Products as currently designed, developed and
manufactured by Nortel Networks and the Nortel Contributing Entities; provided
that Trademarks, Network Identifiers, Administrative Services Software and
rights under licenses to third party Software which are commercially or freely
available are not applicable for purposes of this Section 3.14(f); and provided,
further that, for the avoidance of doubt, no representation or warranty is made
under this Section 3.14(f) with respect to the non-infringement or
misappropriation of the Intellectual Property Rights of any third Person, the
sole representations and warranties with respect to which are made in Section
3.14(b).
(g) No Patent Cross License requires the Company to make any party to
such Patent Cross License aware of, or to provide, the tangible embodiment of
any Transferred Intellectual Property or technical information or assistance
supporting Transferred Intellectual Property.
Section 3.15. Relationships with Customers and Suppliers. Section 3.15
of the NNI Disclosure Schedule sets forth: (a) a list of customers of the Nortel
Networks Business representing at least 95% of revenues of the Nortel Networks
Business for the fiscal year ended December 31, 2002 or for the fiscal year
ended December 31, 2003; and (b) a list of suppliers to the Nortel Networks
Business representing at least 95% in volume of purchases from all suppliers to
the Nortel Networks Business for the fiscal year ended December 31, 2002 or for
the fiscal year ended December 31, 2003. Neither Nortel Networks nor any Nortel
Contributing Entity has received any written notice from any of such customers
to the effect that, and to the Knowledge of Nortel Networks, neither Nortel
Networks nor any Nortel Contributing Entity has received any notice from any of
such customers to the effect that, any customer will or will seek to stop,
decrease the rate of, or change the terms (whether related to payment, price or
otherwise) with respect to, buying materials, products or services from the
Nortel Networks Business (whether as a result of the consummation of the
transactions contemplated hereby or otherwise). Neither Nortel Networks nor any
Nortel Contributing Entity has received any written notice from any of its
suppliers to the effect that, and to the Knowledge of Nortel Networks, neither
Nortel Networks nor any Nortel Contributing Entity has received any notice from
any of such suppliers to the effect that, any supplier will stop, decrease the
rate of, or change the terms (whether related to payment, price or otherwise)
with respect to, supplying materials, products or services to the Nortel
Networks Business (whether as a result of the consummation of the transactions
contemplated hereby or otherwise).
Section 3.16. Inventory and Supplies. The inventory and supplies of
Nortel Networks and the Nortel Contributing Entities that are part of the Assets
were acquired in the ordinary course of business.
26
Section 3.17. EXCLUSIVITY OF REPRESENTATIONS. THE REPRESENTATIONS AND
WARRANTIES MADE BY NORTEL NETWORKS IN THIS AGREEMENT ARE IN LIEU OF AND ARE
EXCLUSIVE OF ALL OTHER REPRESENTATIONS AND WARRANTIES, INCLUDING ANY IMPLIED
WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT, VALIDITY,
COMPLETENESS, AND FITNESS FOR A PARTICULAR PURPOSE. NORTEL NETWORKS HEREBY
DISCLAIMS ANY SUCH OTHER OR IMPLIED REPRESENTATIONS OR WARRANTIES,
NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO THE COMPANY OR ANY OF ITS
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES OF ANY DOCUMENTATION
OR OTHER INFORMATION (INCLUDING ANY FINANCIAL PROJECTIONS OR OTHER SUPPLEMENTAL
DATA).
Article IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as otherwise set forth in the Company Disclosure Schedule, the
Company represents and warrants to Nortel Networks as follows:
Section 4.01. Incorporation and Authority of the Company and the
Company Entities. The Company is a limited liability company duly formed,
validly existing and in good standing under the laws of the State of Nevada. The
Company has all necessary limited liability company power and authority to own,
lease and operate its properties, to carry on its business as it is now being
conducted, to enter into this Agreement and the Ancillary Agreements to which it
is or will be a signatory, to carry out its respective obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
Each of the Company Entities is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has all necessary corporate power and authority to own, lease
and operate its properties, to carry on its business as it is now being
conducted, to enter into the Ancillary Agreements to which it is or will be a
signatory, to carry out its obligations thereunder and to consummate the
transactions contemplated hereby and thereby. The Company and each of the
Company Entities is duly qualified or licensed to do business as a foreign
corporation and is in good standing under the laws of each state or other
jurisdiction in which the nature of either the ownership or use of its assets
and properties or the conduct of the Company Business requires such
qualification. The execution, delivery and performance by each of the Company
and the Company Entities of this Agreement and each Ancillary Agreement to which
it is or will be a signatory have been duly authorized by all requisite limited
liability company or corporate action on the part of the Company or such Company
Entity, as the case may be. This Agreement is, and upon execution each Ancillary
Agreement to which it is or will be a signatory will be, duly executed and
delivered by the Company or the Company Entities, and (assuming due
authorization, execution and delivery by Nortel Networks or the Nortel
Contributing Entities that are signatories thereto) this Agreement constitutes,
and upon execution the Ancillary Agreements to which it is a signatory will
constitute, legal, valid and binding obligations of the Company or the Company
Entities that are signatories thereto, enforceable against the Company or such
Company Entities in accordance with their terms, except as such enforcement may
be limited by applicable anti-trust, bankruptcy, insolvency, reorganization and
similar laws affecting generally
27
the enforcement of the rights of contracting parties and subject to a court's
discretionary authority with respect to the granting of a decree ordering
specific performance or other equitable remedies.
Section 4.02. No Conflict. The execution, delivery and performance of
this Agreement by the Company and the execution, delivery and performance of the
Ancillary Agreements by the Company and/or the Company Entities that are a party
thereto and the consummation by the Company and the Company Entities of the
transactions contemplated hereby and thereby, do not and will not: (a) violate
or conflict with the articles of organization, operating agreement or other
constituent documents of the Company or any Company Entity; (b) conflict with or
violate any Applicable Law or Governmental Order applicable to the Company or
any Company Entity (assuming the satisfaction of the condition in Section
8.02(b)); (c) result in any material breach of, or constitute a material default
(or event which with the giving of notice or lapse of time, or both, would
become a default) under, or give to any Person any material rights of
termination, purchase, amendment, acceleration or cancellation of, or result in
the creation of any Lien (other than Permitted Liens) on any of the material
assets or properties of the Company pursuant to, any material Contract relating
to such assets or properties to which the Company, any Company Entity or any of
their respective Subsidiaries is a party or by which any of such assets or
properties is bound.
Section 4.03. Consents and Approvals. The execution and delivery of
this Agreement by the Company and the execution and delivery of the Ancillary
Agreements by the Company and/or the Company Entities that are a party thereto,
do not, and the performance of this Agreement by the Company, the performance of
the Ancillary Agreements by the Company and/or the Company Entities that are a
party thereto and the consummation by the Company and the Company Entities of
the transactions contemplated hereby and thereby will not, require any consent,
approval, authorization or other action by, or filing with or notification to,
any Governmental Authority.
Section 4.04. Capitalization; Subsidiaries. (a) The Company has one
Membership Interest issued and outstanding, and no other limited liability
company interests of the Company have been reserved for possible future
issuance. All of the issued Membership Interests are duly authorized, validly
issued, fully paid, non-assessable and free of preemptive rights. The Company
has no commitments to issue or deliver Membership Interests other than pursuant
to this Agreement. All of the issued capital or other equity securities of the
Company are owned by Volt Delta Resources Holdings, Inc., a Nevada corporation
("Holdings"), free and clear of any Lien. All of the issued share capital or
other equity securities of Holdings are owned by Nuco I, Ltd., a Nevada
corporation ("Nuco"), free and clear of any Lien. All of the issued share
capital or other equity securities of Nuco are owned by VIS, free and clear of
any Lien. Except as set forth above, there are no (i) limited liability company
interests, shares of capital stock or other voting securities of Holdings, Nuco
or the Company reserved, issued or outstanding, (ii) preemptive or other
outstanding rights, subscriptions, options, warrants, stock appreciation rights,
redemption rights, repurchase rights, convertible securities or other
agreements, arrangements or commitments of any character granted by Holdings,
Nuco or the Company relating to, or the value of which is determined by
reference to, the issued or unissued capital or other ownership interest of
Holdings, Nuco or the Company or (iii) any other securities or obligations
convertible or exchangeable into or exercisable for, or giving any Person a
right to
28
subscribe for or acquire, any securities of Holdings, Nuco or the Company, and
no securities or obligations evidencing such rights are authorized, issued or
outstanding. None of Holdings, Nuco nor the Company has outstanding any bonds,
debentures, notes or other obligations, the holders of which have the right to
vote (or convertible into or exercisable for securities having the right to
vote) on any matter. All Membership Interests to be issued in connection with
the transactions contemplated by this Agreement will, when issued in accordance
with the terms hereof, have been duly authorized, validly issued, fully paid,
non-assessable, free and clear of all Liens and free of preemptive rights. As of
the date hereof, there are no stockholder or member agreements, voting trusts or
other agreements or understandings to which VIS, Nuco or Holdings is a party or
by which any such Person is bound relating to the voting of any of the capital
of Holdings, Nuco or the Company.
(b) Schedule 4.04 of the Company Disclosure Schedule sets forth for
each Subsidiary of the Company (i) its name and jurisdiction of incorporation,
(ii) the number of shares of authorized capital stock of each class of its
capital stock, and (iii) the number of issued and outstanding shares of each
class of its capital stock, the names of the holders thereof, and the number of
shares held by each such holder. All of the issued and outstanding shares of
capital stock of each Subsidiary of the Company have been duly authorized and
are validly issued, fully paid, and nonassessable. Except as set forth on
Schedule 4.04 of the Company Disclosure Schedule, the Company holds of record
and owns beneficially all of the outstanding shares of capital stock of each
Subsidiary of the Company, free and clear of any Lien (other than Permitted
Liens). Except as set forth on Schedule 4.04 of the Company Disclosure Schedule,
there are no (i) limited liability company interests, shares of capital stock or
other voting securities of any Subsidiary of the Company reserved, issued or
outstanding, (ii) preemptive or other outstanding rights, subscriptions,
options, warrants, stock appreciation rights, redemption rights, repurchase
rights, convertible securities or other agreements, arrangements or commitments
of any character granted by any Subsidiary of the Company relating to, or the
value of which is determined by reference to, the issued or unissued capital or
other ownership interest of such Subsidiary or (iii) any other securities or
obligations convertible or exchangeable into or exercisable for, or giving any
Person a right to subscribe for or acquire, any securities of any Subsidiary of
the Company, and no securities or obligations evidencing such rights are
authorized, issued or outstanding. No Subsidiary of the Company has outstanding
any bonds, debentures, notes or other obligations, the holders of which have the
right to vote (or convertible into or exercisable for securities having the
right to vote) on any matter. As of the date hereof, there are no stockholder or
member agreements, voting trusts or other agreements or understandings to which
the Company or any Subsidiary of the Company is a party or by which any such
Person is bound relating to the voting of any of the capital of any Subsidiary
of the Company. Except as listed on Schedule 4.04 of the Company Disclosure
Schedule, the Company and its Subsidiaries do not own, directly or indirectly,
beneficially or of record, any shares of capital stock or other security of any
other Person or any other investment in any Person.
Section 4.05. Financial Information; No Undisclosed Liabilities. (a)
Section 4.05 of the Company Disclosure Schedule sets forth the unaudited balance
sheet of the Company as of, and the related statements of income, changes in
members' equity and cash flows of the Company for the year ended, November 2,
2003, and the unaudited balance sheet of the Company as of, and the related
statements of income, changes in members' equity and cash flows of the Company
for the three months ended, January 30, 2004 (collectively, the "Company
29
Financial Statements"). Such Company Financial Statements (i) are prepared in
accordance with GAAP, (ii) are prepared consistently with past practice and
(iii) present fairly, in all material respects, the financial positions of or
results of operations for the Company, as the case may be, as of the dates or
for the periods indicated, as the case may be.
(b) The Company has no material Liabilities that have not been
expressly disclosed or otherwise expressly described in any Section of the
Company Disclosure Schedule.
Section 4.06. Absence of Material Adverse Effect. Since November 2,
2003 to the date of this Agreement, except to the extent relating to actions
taken pursuant to the transactions contemplated by this Agreement, (a) there has
not been any Material Adverse Effect on the Company or any of its Subsidiaries;
(b) the Company Business has been conducted in the ordinary course and
consistent with past practice; and (c) except in the ordinary course of
business, there has not been any sale, assignment, transfer or other disposition
of or license of any tangible or intangible assets used exclusively in the
design, development, manufacture, maintenance, operation or testing of the
Company's products.
Section 4.07. Absence of Litigation. (a) There are no material Actions
pending or, to the Knowledge of the Company, threatened, against the Company or
any of its Subsidiaries or that challenge or may have the effect of preventing,
denying, making illegal or otherwise interfering with the transactions
contemplated hereby.
(b) Neither the Company nor any of its Subsidiaries has received any
written notice during the two (2) years prior to the date hereof of material
Actions seeking to restrict or limit the work of, or disclosure of information
by, current or former employees of the Company or any of its Subsidiaries with
respect to the Company's Intellectual Property Rights.
Section 4.08. Compliance with Laws. The Company has not received any
written notice that the Company or any of its Subsidiaries is, and to the
Knowledge of the Company, the Company and its Subsidiaries are not, in material
violation of any Applicable Law or Governmental Order applicable to the Company
Business.
Section 4.09. Governmental Licenses. The Company holds all material
Licenses necessary for the operation of the Company Business as currently
operated and to the Knowledge of the Company, is in compliance with the terms of
such material Licenses.
Section 4.10. Assets. (a) The Company holds good title to or has valid
leasehold interests, free and clear of any and all Liens (other than Permitted
Liens and Permitted Encumbrances), in all of the assets, properties and rights
that are used by the Company in the conduct of the Company Business as it is
currently conducted, and such assets, properties and rights constitute all of
the assets, properties and rights that are used by the Company in, or necessary
for, the conduct of the Company Business as it is currently conducted.
(b) All of the administrative and corporate services and benefits that
the Company receives from VIS and its Affiliates are included among the services
to be provided to the Company pursuant to the terms of the Services Agreement.
30
(c) The Company has not committed to make any capital expenditures
(including entering into rental or lease agreements) in excess of $2,000,000 in
the aggregate (other than in the ordinary course of business consistent with
past practice).
Section 4.11. Real Property. (a) Each parcel of real property set forth
in Section 4.11(a) of the Company Disclosure Schedule, which lists all real
property leased or occupied by the Company Business (the "Company Leased Real
Property"), is leased or occupied by the Company, free and clear of all Liens
(other than Permitted Liens). The Company Leased Real Property constitutes all
of the leased or occupied real property that is primarily used by the Company in
the conduct of the Company Business.
(b) The Company represents and warrants to Nortel Networks as of the
date hereof with respect to each parcel of real property set forth in Section
4.11(b) of the Company Disclosure Schedule, which lists certain real property
owned by the Company (the "Company Owned Real Property"), that:
(i) the Company has not made any other agreement to lease, sell,
mortgage or otherwise encumber the Company Owned Real Property (or any
portion thereof), or given any other Person an option to purchase or rights
of first refusal over, all or any part of the Company Owned Real Property;
(ii) the Company has good title to the Company Owned Real Property and
none of the Company Owned Real Property is subject to any Lien; and
(iii) the Company Owned Real Property is (as to physical plant and
structure) structurally sound, in good operating condition and repair,
ordinary wear and tear excepted, and is adequate for the uses to which it
is being put.
Section 4.12. Company Employee Plans. (a) Section 4.12(a) of the
Company Disclosure Schedule contains an accurate and complete list of all
pension plans (including each "employee pension benefit plan" (as defined in
Section 3(2) of ERISA (a "Company Pension Plan")), supplemental pension plans,
profit sharing plans, savings plans, retirement savings plans, bonus plans,
incentive compensation plans, deferred compensation plans, stock purchase plans,
stock option or other equity based plans, phantom stock plans, vacation plans,
leave of absence plans, employee assistance plans, automobile
leasing/subsidy/allowance plans, redundancy or severance plans, relocation
plans, family support plans, retirement plans, medical, health, hospitalization
or life insurance plans, including retiree health and life plans, disability
plans, sick leave plans, retention plans, compensation arrangements, including
any base salary arrangements, overtime, on-call or call-in policies, death
benefit plans, Employee Agreements with any of the executives set forth on
Section 5.01(b)(xiii) of the Company Disclosure Schedule, employee benefit plans
(including each "employee welfare benefit plan" (as defined in Section 3(1) of
ERISA)) and any other similar plans, programs, arrangements or policies that are
maintained, contributed to or required to be contributed to by the Company or
any other Person (including any person or entity that, together with the
Company, is treated as a single employer under Section 414(b), (c) or (m) of the
Code (each, a "Company Commonly Controlled Entity")), with respect to which the
Company or any of its Subsidiaries may have any liability, or in which any
current or former employee, consultant or director of the Company participates
31
(collectively, the "Company Benefit Plans"), which are material. The Company has
made available to Nortel Networks, to the extent applicable, copies of (i) the
most recent annual report on Form 5500 filed with the IRS with respect to each
Company Benefit Plan, (ii) the most recent summary plan description for each
Company Benefit Plan, (iii) each currently effective trust agreement, insurance
or group annuity contract or other funding or financing arrangement forming part
of any Company Benefit Plan and (iv) Employee Agreements with any of the
executives set forth on Section 5.01(b)(xiii) of the Company Disclosure
Schedule. As of the date hereof, neither the Company nor any of its respective
Subsidiaries has made any plan or commitment, whether legally binding or not, to
create any additional material Company Benefit Plan or materially modify, change
or terminate any existing material Company Benefit Plan. Neither the Company nor
any Company Commonly Controlled Entity has any liability, whether contingent or
absolute, under Title IV of ERISA or Section 412 or 4971 of the Code.
(b) With respect to each Company Benefit Plan: (i) if intended to
qualify under Section 401(a), 401(k) or 403(a) of the Code or under any
Applicable Law of any Governmental Authority outside of the United States, each
of such plan and the related trust has received a favorable determination letter
from the IRS or required approval of a Regulatory Agency of a foreign
jurisdiction that has not been revoked and (A) the consummation of the
transaction contemplated hereby will not adversely affect such qualification or
exemption and (B) to the Knowledge of the Company, no event or circumstance
exists that has or would be reasonably likely to adversely affect such
qualification or exemption, except for any such events or circumstances that
would not result in liability to the Company in excess of $100,000; (ii) it has
been operated and administered in compliance with its terms and all Applicable
Law in all material respects, except for operational or administrative defects
that would not, individually or in the aggregate with respect to all Company
Benefit Plans taken as a whole, result in liability to the Company in excess of
$100,000; (iii) there are no pending or threatened material Actions against, by
or on behalf of any Company Benefit Plans (other than routine claims for
benefits); (iv) to the Knowledge of the Company, no material breaches of
fiduciary duty have occurred; (v) to the Knowledge of the Company, no non-exempt
prohibited transaction within the meaning of Section 406 of ERISA or Section
4975 of the Code or any other similar Applicable Law of any jurisdiction outside
the United States has occurred; (vi) no material Lien imposed under the Code,
ERISA or any other Applicable Law exists; and (vii) all material contributions,
material premiums and material expenses to or in respect of such Company Benefit
Plan have been timely paid in full or, to the extent not yet due, have been
adequately accrued in all material respects on the Company Financial Statements.
No Company Benefit Plan, or the Company or any Subsidiary with respect to any
Company Benefit Plan, is under audit or is the subject of an Action by the IRS,
the U.S. Department of Labor, the Pension Benefit Guarantee Corporation or any
other Governmental Authority, nor to the Knowledge of the Company is any such
audit or Action pending or threatened.
(c) Neither the Company nor any of its Subsidiaries has incurred or
reasonably expects to incur, either directly or indirectly (including as a
result of an indemnification obligation), any liability under Title I of ERISA
or the penalty, excise tax or joint and several liability provisions of the Code
or any other Applicable Law relating to employee benefit plans, which is
material, and to the Knowledge of the Company, no event, transaction or
condition has occurred, exists or is expected to occur which could result in any
such material liability to the Company or any of its Subsidiaries.
32
(d) No Company Benefit Plan is, and neither the Company nor any
Subsidiary thereof contributes to or has any material liability or obligation
with respect to any, (A) "multiemployer plan" (within the meaning of Section
3(37) of ERISA), (B) "multiple employer plan" (within the meaning of Section
413(c) of the Code) or (C) any single employer plan or other pension plan
subject to Title IV or Section 302 of ERISA or Section 412 of the Code.
(e) Except for any obligations under the Company Benefit Plans listed
on Section 4.12(a) of the Company Disclosure Schedule, neither the Company nor
any of its Subsidiaries has any obligation to provide health, life insurance, or
death benefits with respect to current or former employees, consultants or
directors of the Company or any of its Subsidiaries beyond their termination of
employment or service, other than as required under Section 4980B of the Code or
other Applicable Law.
(f) Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, either alone or in
combination with another event (whether contingent or otherwise) will (i)
entitle any current or former employee, consultant or director of the Company or
any of its Subsidiaries or any group of such employees, consultants or directors
to any payment; (ii) increase the amount of compensation due to any such
employee, consultant or director; or (iii) accelerate the vesting or funding of
any compensation, stock incentive or other benefit of any such employee,
consultant or director, in each case other than any entitlements, increases or
acceleration pursuant to Applicable Law or the Company Benefit Plans listed on
Section 4.12(a) of the Company Disclosure Schedule. Neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, either alone or in combination with another event (whether
contingent or otherwise) will cause any compensation to fail to be deductible
under Section 162(m), or any other provision of the Code or any similar
Applicable Law or regulation, in each case, except in the case where it would
not cause a material liability.
(g) Neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement with any labor union or representative. There
are not currently pending and, during the past two (2) years, there have not
been any questions concerning representation or certification proceedings or
petitions seeking a representation or certification proceeding or determination
before any Governmental Authority or, to the Knowledge of the Company,
threatened to be brought or filed before any Governmental Authority involving
the employees of the Company or any of its Subsidiaries. To the Knowledge of the
Company, there is not any campaign currently being conducted to solicit cards or
authorizations from employees of the Company or its Subsidiaries to be
represented by any labor organization. There are not currently and, during the
past two (2) years, there have not been any strikes, picketing, slowdowns,
lockouts or work stoppages involving employees of the Company or any of its
Subsidiaries and, to the Knowledge of the Company, no such actions are
threatened.
(h) There are no (i) material grievances or (ii) Actions or
Governmental Orders related to the employment or engagement or termination of
employment of employees, former employees, contractors, consultants, officers or
directors of the Company or any of its Subsidiaries pending against the Company
or any of its Subsidiaries, and, to the Knowledge of the Company, there are none
threatened. The Company and each of its Subsidiaries is, to the Knowledge of the
Company, in compliance in all material respects with Applicable Laws and
33
Governmental Orders with respect to the employment or engagement of employees,
contractors, consultants, officers and directors of the Company and such
Subsidiaries; provided that, for the avoidance of doubt, no representation or
warranty is made under this Section 4.12(h) with respect to the Company Benefit
Plans, the sole representations and warranties with respect to which are made in
Sections 4.12(a) to (d).
(i) Except as set forth on Section 4.12(i) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries have received any
written notice from any executive listed on Section 5.01(b)(xiii) of the Company
Disclosure Schedule stating such executive's current or future intention to
resign from or terminate his or her employment with the Company, VIS or any of
their respective Subsidiaries, as applicable.
Section 4.13. Environmental Matters. (a) The Company has not received
any written notice that it is not, and to the Knowledge of the Company it is, in
compliance with all applicable material Environmental Laws and has obtained and
is in compliance with all material Environmental Permits.
(b) There are no written claims pursuant to any Environmental Law
pending or, to the Knowledge of the Company, threatened relating to the Company
or the assets or properties that are used by the Company in the conduct of the
Company Business.
Section 4.14. Company Contracts. (a) To the Knowledge of the Company,
each of the Company Contracts is valid, binding, in full force and effect, and
enforceable by the Company in accordance with its terms (subject to bankruptcy,
insolvency, reorganization and other laws affecting generally the enforcement of
the rights of contracting parties and subject to a court's discretionary
authority with respect to the granting of a decree ordering specific performance
or other equitable remedies);
(b) the Company has received no written notice (i) that it is in breach
or default in any material respect under any of the Company Contracts or (ii)
that any party to any Company Contract intends to cancel or terminate any
Company Contract or not to exercise any renewal or extension options or rights
under any Company Contract;
(c) to the Knowledge of the Company, no other party to any of the
Company Contracts is in breach or default in any material respect thereunder;
and
(d) other than the Company Contracts, there are no other material
contracts or agreements to which the Company is a party.
Section 4.15. Brokers. Except for fees or commissions that will be paid
by the Company to Xxxxxx Xxxxxx & Co. Inc., which fees will be paid or accrued
prior to the Closing, no broker, finder or investment banker is entitled to a
fee or commission in connection with the transactions contemplated by this
Agreement, the Parent Agreement and the Ancillary Agreements based upon
arrangements made by or on behalf of the Company.
Section 4.16. Intellectual Property. (a) To the Knowledge of the
Company, no claims have been received by the Company or VIS in writing during
the two (2) years prior to
34
the date hereof that the products of the Company infringe the Intellectual
Property Rights of any third party.
(b) To the Knowledge of the Company, there are no material agreements
or obligations relating to Intellectual Property Rights of the Company, written
or oral, that are material to the design, development or manufacture of the
products of the Company Business.
(c) To the Knowledge of the Company, no Person is engaging in any
activity that infringes in any material respect upon the Intellectual Property
Rights of the Company.
Section 4.17. Working Capital. The Company has Working Capital in
excess of $1,000,000. "Working Capital" means, with respect to the Company, all
current assets of the Company less all current Liabilities of the Company.
Section 4.18. Tax Matters. (a) The Company has duly and timely filed
all Tax Returns required to be filed for the Company and its Subsidiaries; and
such Tax Returns are complete and accurate and correctly reflect the Tax
liability required to be reported thereon. Such Tax Returns do not contain a
disclosure statement under Section 6662 of the Code (or any predecessor
provision or comparable provision of state, local or foreign law).
(b) The Company has paid or adequately provided in the Company
Financial Statements for all Taxes of the Company and its Subsidiaries (whether
or not shown on any Tax Return) accrued through the date of such Company
Financial Statements. All Taxes of the Company and its Subsidiaries accrued
following the end of the most recent period covered by the Company Financial
Statements have been accrued in the ordinary course of business of the Company
and any such Taxes due on or before the Closing Date have been, or will be, paid
on or before such date.
(c) No claim for assessment or collection of Taxes is being asserted
against the Company or any Subsidiary, and neither the Company nor any
Subsidiary is a party to any pending action, proceeding or investigation by any
governmental taxing authority. There is no such threatened action, proceeding or
investigation. There are no agreements or applications by or including the
Company or any Subsidiary for the extension of the time for filing any tax
return or paying any Tax nor have there been any waivers of any statutes of
limitation for the assessment of any Taxes. U.S. federal income tax returns of
(or that include) the Company have been audited through October 30, 1998. VIS
has extended the statute of limitations for fiscal years 1999, 2000 and 2001
until December 31, 2005.
(d) Neither the Company nor any Subsidiary (i) has been a member of any
affiliated group filing a consolidated federal income Tax Return or any
combined, unitary or similar Tax Return and (ii) has any liability for the Taxes
of any other person as defined in Section 7701(a)(1) of the Code under Treas.
Reg. ss.1.1502-6 (or any similar provision of state, local, or foreign law), as
a transferee or successor, by contract, or otherwise.
(e) No claim has ever been made by a taxing authority in a jurisdiction
where the Company and its Subsidiaries do not file Tax Returns that it is or may
be subject to taxation by that jurisdiction.
35
(f) Neither the Company nor any of its Subsidiaries is a party to or
bound by any tax indemnity, tax sharing or tax allocation agreement.
(g) None of the Company's Subsidiaries is or has been a "U.S. real
property holding corporation" (as defined in Section 897(c)(2) of the Code) at
any time during the five years preceding the date hereof (or such shorter period
as may be specified by Section 897(c)(1)(A)(ii) of the Code). Less than fifty
percent (50%) of the Company's gross assets consist of U.S. real property
interests within the meaning of Section 897(c)(1)(A) of the Code, or less than
ninety percent (90%) of the value of the gross assets of the Company consist of
U.S. real property interests plus cash or cash equivalents.
(h) The Company and each of its Subsidiaries have not engaged in any
"listed" or otherwise reportable transaction within the meaning of Treasury
Regulations Section 1.6011-4(b) or otherwise been included on a Tax Return on
which such a transaction has been or should have been reported.
(i) The Company and its Subsidiaries have withheld from its employees
and timely paid to the appropriate Taxing authorities proper and accurate
amounts through all periods in compliance with all employee Tax withholding
provisions of all Applicable Laws.
(j) The conversion of the Company from a Nevada corporation to a Nevada
limited liability company did not give rise to any U.S. federal income, state,
local or foreign tax liability.
Section 4.19. Relationships with Customers and Suppliers. Section 4.19
of the Company Disclosure Schedule sets forth: (a) a list of customers of the
Company Business representing at least 95% of revenues of the Company Business
for the fiscal year ended November 2, 2003; and (b) a list of suppliers to the
Company Business representing at least 95% in volume of purchases from all
suppliers to the Company Business for the fiscal year ended November 2, 2003.
The Company has not received any written notice from any of its customers that
are party to one or more of the Company Contracts to the effect that, and to the
Knowledge of the Company, the Company has not received any notice from any of
such customers to the effect that, any customer will or will seek to stop,
decrease the rate of, or change the terms (whether related to payment, price or
otherwise) with respect to, buying materials, products or services from the
Company Business (whether as a result of the consummation of the transactions
contemplated hereby or otherwise). The Company has not received any written
notice from any of its suppliers that are party to one or more of the Company
Contracts to the effect that, and to the Knowledge of the Company, the Company
has not received any notice from any of such suppliers to the effect that, any
supplier will stop, decrease the rate of, or change the terms (whether related
to payment, price or otherwise) with respect to, supplying materials, products
or services to the Company Business (whether as a result of the consummation of
the transactions contemplated hereby or otherwise).
Section 4.20. Revenues of the Company. Except as set forth in Section
4.20 of the Company Disclosure Schedule, all of the revenues reported by VIS as
attributable to its Computer Systems segment in its audited consolidated
financial statements at and for the fiscal
36
year ended November 2, 2003, were generated from assets and properties legally
or beneficially owned by the Company and its Subsidiaries.
Section 4.21. EXCLUSIVITY OF REPRESENTATIONS. THE REPRESENTATIONS AND
WARRANTIES MADE BY THE COMPANY IN THIS AGREEMENT ARE IN LIEU OF AND ARE
EXCLUSIVE OF ALL OTHER REPRESENTATIONS AND WARRANTIES, INCLUDING ANY IMPLIED
WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT, VALIDITY,
COMPLETENESS, AND FITNESS FOR A PARTICULAR PURPOSE. THE COMPANY HEREBY DISCLAIMS
ANY SUCH OTHER OR IMPLIED REPRESENTATIONS OR WARRANTIES, NOTWITHSTANDING THE
DELIVERY OR DISCLOSURE TO NORTEL NETWORKS, THE NORTEL CONTRIBUTING ENTITIES OR
ANY OF THEIR OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES OF ANY
DOCUMENTATION OR OTHER INFORMATION (INCLUDING ANY FINANCIAL PROJECTIONS OR OTHER
SUPPLEMENTAL DATA).
Article V
ADDITIONAL AGREEMENTS
Section 5.01. Conduct of Business Prior to the Closing.
(a) Unless the Company otherwise agrees in writing, and except (1) as
otherwise set forth herein, (2) as relates to Excluded Assets or Retained
Liabilities, (3) as set forth in Section 5.01(a) of the NNI Disclosure Schedule
or (4) as required by Applicable Law, between the date hereof and the Closing
Date, Nortel Networks shall (and shall cause the Nortel Contributing Entities
to) conduct the Nortel Networks Business, including its relationships with
customers and suppliers, only in the ordinary course, consistent with past
practice and in material compliance with all Applicable Law and shall preserve
and keep intact its assets and properties. Subject to the foregoing and by way
of amplification and not limitation, Nortel Networks shall not (and shall cause
the Nortel Contributing Entities not to) permit the Nortel Networks Business to
do any of the following without the prior written consent of the Company:
(i) make any material change in the conduct of the Nortel Networks
Business;
(ii) distribute, sell, assign, transfer, lease or otherwise dispose of
any interest in any of the Assets other than Inventory which is sold or
used and replenished in the ordinary course of business, consistent with
past practice;
(iii) grant any Lien (other than a Permitted Lien or a Permitted
Encumbrance) on any Asset (whether tangible or intangible) unless any such
Lien is removed prior to the Closing;
(iv) amend in any material respect (or enter into) any Nortel Networks
Contract (or agreement that would be a Nortel Networks Contract), other
than as necessary for the maintenance of property relating to the Nortel
Networks Business;
37
(v) enter into any labor or collective bargaining agreement or, through
negotiation or otherwise, make any commitment or incur any liability to any
labor organization with respect to the Business Employees, except where not
doing so would have a Material Adverse Effect on the Nortel Networks
Business;
(vi) grant any general or uniform increase in the rates of pay or
benefits of any Business Employees or any material increase in the salary
or benefits of any Business Employee or grant any bonus to any Business
Employee, unless such increase or bonus is pursuant to a Nortel Networks
Benefit Plan listed on Section 3.10(a) of the NNI Disclosure Schedule, or
enter into any employment or severance agreement with any Business
Employee, except as required under Applicable Law or any Nortel Networks
Benefit Plan listed on Section 3.10(a) of the NNI Disclosure Schedule;
provided, however, that notwithstanding the foregoing, the Mexican Nortel
Contributing Entity shall be permitted to enter into a termination
agreement, which will provide for full severance, with any Mexico Employee
who refuses to voluntarily resign employment from the Mexican Nortel
Contributing Entity as of the applicable date for employment with the
Mexican Company Entity or payroll service as provided in Exhibit D-2
("Mexican Hire Date");
(vii) dispose of or permit to lapse any Transferred Intellectual
Property or any Patents included within the Licensed IPLA IP;
(viii) adopt, enter into, terminate or amend any Nortel Networks
Benefit Plan which is applicable solely to the Business Employees;
(ix) terminate the employment of any Business Employee for reasons
other than such employee's misconduct or unsatisfactory performance or,
with respect to Canadian Employees, for just cause under Applicable Law or
transfer any Business Employee outside of the Nortel Networks Business;
provided, however, that notwithstanding the foregoing, the Mexican Nortel
Contributing Entity shall be permitted to terminate the employment of or
transfer outside of the Nortel Networks Business any Mexico Employee who
refuses to voluntarily resign employment from the Mexican Nortel
Contributing Entity as of the Effective Time;
(x) remove any tangible Assets (other than Inventory) located at one of
Nortel Networks' facilities in Raleigh, North Carolina, Rochester, New York
or Xx. Xxxxxxx, Xxxxxx, Xxxxxx from such facility; or
(xi) authorize, or commit or agree to take, any of the foregoing
actions.
(b) Unless Nortel Networks otherwise agrees in writing, and except (1)
as otherwise set forth herein, (2) as set forth in Section 5.01(b) of the
Company Disclosure Schedule or (3) as required by Applicable Law, between the
date hereof and the Closing Date, the Company shall conduct the Company
Business, including its relationships with customers and suppliers, only in the
ordinary course, consistent with past practice and in material compliance with
all Applicable Law and shall preserve and keep intact its assets and properties.
Subject to the foregoing and by way of amplification and not limitation, the
Company shall not
38
permit the Company Business to do any of the following without the prior written
consent of the Nortel Networks:
(i) make any material change in the conduct of the Company Business;
(ii) distribute, sell, assign, transfer, lease or otherwise dispose of
any interest in any of the Company's assets (other than inventory which is
sold or used and replenished in the ordinary course of business, consistent
with past practice) that are material, individually or in the aggregate, to
the Company Business taken as a whole;
(iii) grant any Lien (other than a Permitted Lien or a Permitted
Encumbrance) on any assets (whether tangible or intangible) that are
material, individually or in the aggregate, to the Company Business taken
as a whole, unless any such Lien is removed prior to the Closing;
(iv) amend in any material respect (or enter into) any Company Contract
(or agreement that would be a Company Contract), other than as necessary
for the maintenance of property relating to the Company Business;
(v) incur indebtedness or provide any loans, guarantees or other
extensions of credit in excess of $2,000,000 in the aggregate (other than
trade payables or extensions of credit or indebtedness incurred in the
ordinary course of business consistent with past practice); provided,
however, that indebtedness incurred in order to fund the capital
expenditures referenced in the proviso in Section 5.01(b)(vi) hereof shall
not be subject to such limitation;
(vi) make or commit to make any capital expenditures (including
entering into rental or lease agreements) in excess of $2,000,000 in the
aggregate (other than in the ordinary course of business consistent with
past practice); provided, however, that additional capital expenditures
required for the performance of new business awarded to the Company after
the date hereof shall not be subject to such limitation;
(vii) amend the articles of organization, the operating agreement or
other charter documents of the Company or any of its Subsidiaries, except
as expressly contemplated by this Agreement or the Members' Agreement;
(viii) merge with or into, or acquire all or substantially all of the
business of, another Person;
(ix) issue, purchase or redeem any securities of the Company or change
the capitalization of the Company;
(x) materially restructure the Company Business, including a single or
series of related workforce reductions in excess of 25% of the Company's
total workforce; or
(xi) enter into any labor or collective bargaining agreement or,
through negotiation or otherwise, make any commitment or incur any
liability to any labor organization with respect to the employees of the
Company or any of its Subsidiaries,
39
except where not doing so would have a Material Adverse Effect on the
Company or its Subsidiaries;
(xii) adopt, enter into, terminate or amend any Company Benefit Plan in
a manner which affects the employees of the Company or any of its
Subsidiaries in any material respect, except as expressly contemplated by
this Agreement;
(xiii) grant any material increase in salary or benefits, except in the
ordinary course of business consistent with past practice, or enter into or
amend in any material respect any employment or severance contract,
arrangement or agreement with any officer or director of the Company or any
of its Subsidiaries or any of the executives set forth on Section
5.01(b)(xiii) of the Company Disclosure Schedule, or terminate the
employment of any such executive for reasons other than such executive's
misconduct or unsatisfactory performance or transfer any such executive
outside of the Company or any of its Subsidiaries; or
(xiv) authorize, or commit or agree to take, any of the foregoing
actions.
Section 5.02. Access to Information.
(a) From the date hereof until the Closing (upon reasonable advance
notice to Nortel Networks) during normal business hours, so that an
uninterrupted and efficient transfer of the Nortel Networks Business may be
accomplished, Nortel Networks shall cause the officers, directors, employees,
auditors and agents of the Nortel Networks Business to (i) afford the officers,
employees and authorized agents and representatives of the Company reasonable
access, during normal business hours, to the offices, properties, books and
records of the Nortel Networks Business and (ii) furnish to the officers,
employees and authorized agents and representatives of the Company such
available additional financial and operating data and other information
regarding the Nortel Networks Business as the Company may from time to time
reasonably request (excluding information relating to Taxes); provided, however,
that Nortel Networks shall not be required to provide (or cause to be provided)
any such information or access to the extent that such information or access
would cause Nortel Networks or any Nortel Contributing Entity to violate any
Applicable Law, legal privilege or legal obligations, including confidentiality
restrictions, applicable to it, and such information or access shall not include
records or data related to Business Employees other than the Employee
Information; provided, further, however, that Nortel Networks shall use its
reasonable efforts to obtain any necessary consents in order to provide the
Company with any information or access that Nortel Networks is not required to
provide because of contractual restrictions by which it is bound.
(b) From the date hereof until the Closing (upon reasonable advance
notice to the Company) during normal business hours the Company shall cause the
officers, directors, employees, auditors and agents of the Company Business to
(i) afford the officers, employees and authorized agents and representatives of
Nortel Networks reasonable access, during normal business hours, to the offices,
properties, books and records of the Company Business and (ii) furnish to the
officers, employees and authorized agents and representatives of Nortel Networks
such available additional financial and operating data and other information
regarding the Company Business as Nortel Networks may from time to time
reasonably request; provided,
40
however, that the Company shall not be required to provide (or cause to be
provided) any such information or access to the extent that such information or
access would cause the Company to violate any Applicable Law, legal privilege or
legal obligations, including confidentiality restrictions, applicable to it;
provided, further, however, that the Company shall use its reasonable efforts to
obtain any necessary consents in order to provide Nortel Networks with any
information or access that the Company is not required to provide because of
contractual restrictions by which it is bound. After the Closing, the Company
shall provide Nortel Networks with sixty (60) days prior written notice of any
disposition, transfer or destruction of any of the Company's financial or
accounting books and records relating to the Nortel Networks Business, and the
Company shall provide Nortel Networks a reasonable opportunity to copy such
books and records prior to any such disposition, transfer or destruction.
Section 5.03. Confidentiality. (a) Each party shall treat as
confidential all Confidential Information furnished by the other party (the
"Disclosing Party") to such receiving party (the "Recipient Party") or its
directors, officers, employees, agents, advisors or Affiliates or
representatives of its agents, advisors or Affiliates (each of the foregoing,
other than the Recipient Party, a "Representative"), whether furnished before or
after the date of this Agreement, regardless of the form in which such
Confidential Information is communicated or maintained, and all notes, reports,
analyses, compilations, studies, files or other documents or material, whether
prepared by the Recipient Party or others, which are based on, contain or
otherwise reflect such Confidential Information; provided that after the Closing
the Company shall not be required to treat as confidential, information
primarily relating to the Nortel Networks Business which would otherwise be
deemed as Confidential Information. Furthermore, Nortel Networks agrees that
after the Closing all Confidential Information comprised within the Assets
constitutes Confidential Information of the Company, and Nortel Networks agrees
to treat such information as confidential. Notwithstanding the foregoing, the
Recipient Party and its Representatives shall not be required to treat as
confidential, subject to any limitations in any of the Ancillary Agreements to
which the Recipient Party is a party, information that (i) is or becomes
available to the public lawfully, other than as a result of a disclosure by the
Recipient Party or a Representative of the Recipient Party in breach of this
Section 5.03; (ii) was available to the Recipient Party or a Representative of
the Recipient Party, or has become available to the Recipient Party or a
Representative of the Recipient Party, on a non-confidential basis from a source
other than the Disclosing Party or its Representatives, provided that the source
of such information was not bound by a confidentiality agreement with the
Disclosing Party or any of its Representatives with respect to such material, or
otherwise prohibited from transmitting the information to the Recipient Party or
such Representative of the Recipient Party by a contractual, legal or fiduciary
obligation; and (iii) the Recipient Party or a Representative of the Recipient
Party independently developed without reference to Confidential Information or
any derivative thereof. A Party may disclose Confidential Information if
required of such Party under Applicable Law; provided that the Recipient Party
shall have disclosed only to the extent required by such Applicable Law, shall
have promptly notified the Disclosing Party of any effort to compel disclosure
prior to any such disclosure, and reasonably cooperates and assists with the
Disclosing Party's lawful attempts to prevent disclosure and/or obtain a
protective order.
(b) Notwithstanding anything previously stated to either party by the
other party or included in any agreement between the parties, either party (and
each employee,
41
representative, or other agent of either party) may disclose to any and all
Persons, without any limitation, the tax treatment and tax structure of this
transaction, as well as materials detailing the tax treatment and tax structure.
However, specific details of the transaction not necessary to an understanding
of the tax treatment and tax structure shall not be disclosed, including
descriptions of the Assets and the identity of the parties involved.
Section 5.04. Regulatory and Other Authorizations; Consents. (a) Each
party hereto shall use commercially reasonable efforts to obtain all
authorizations, consents, orders and approvals of all Governmental Authorities
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. The parties
hereto will not take any action that would have the effect of delaying,
impairing or impeding the receipt of any required approvals or the satisfaction
of any condition in Article VIII.
(b) If required by Applicable Law, the Company and Nortel Networks, as
applicable, each agrees to make, or cause its Affiliates to make, any filings or
applications required under such Applicable Law with respect to the transactions
contemplated hereby within five (5) Business Days after the date hereof and to
supply promptly any additional information and documentary material that may be
requested pursuant to such Applicable Law.
Section 5.05. Bulk Sales. The Company hereby waives compliance by
Nortel Networks and the Nortel Contributing Entities with any applicable bulk
sale or bulk transfer laws of any jurisdiction in connection with the
contribution of the Nortel Networks Business to the Company. Nortel Networks
shall indemnify and hold harmless the Company against any and all Liabilities
that may be asserted by third parties against the Company as a result of
noncompliance by Nortel Networks or any Nortel Contributing Entity with any such
bulk transfer law.
Section 5.06. Risk of Loss. Any risk of loss or damage to the Assets
shall be borne by Nortel Networks prior to the Effective Time. At the Effective
Time, title to the Assets and risk of loss or damage shall be deemed to have
passed to the Company.
Section 5.07. Certain Services and Benefits Provided by Affiliates. The
Company acknowledges that the Nortel Networks Business receives from Nortel
Networks and its Affiliates certain administrative and corporate services and
benefits, including: computer and information processing services; finance,
accounting and payroll services; facilities management services, treasury
services (including banking, insurance, administration, taxation and internal
audit); general administrative services; executive and management services;
legal services; and human resources services. The Company further acknowledges
that, except as otherwise expressly provided in the Ancillary Agreements, all
such services and benefits shall cease, and any agreement in respect thereof
shall terminate, as of the Closing Date.
Section 5.08. Further Action. (a) Until the Closing, the parties shall
use their best efforts to cause and facilitate the prompt satisfaction of all
conditions in Article VIII.
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(b) From and after the Closing Date, all of the parties hereto shall
execute and deliver such documents and other papers and take such further
actions as may be reasonably required to carry out the provisions of this
Agreement, the Parent Agreement and the Ancillary Agreements and give effect to
the transactions contemplated hereby and thereby. Without limiting the
foregoing, from and after the Closing (i) Nortel Networks shall (and shall cause
the Nortel Contributing Entities to) do all things necessary, proper or
advisable under Applicable Law as requested by the Company to put the Company in
effective possession, ownership and control of the Assets, and the Company shall
cooperate with Nortel Networks for such purpose and (ii) the Company shall do
all things necessary, proper and advisable under Applicable Law as requested by
Nortel Networks (A) to put Nortel Networks (or such other Person as Nortel
Networks shall indicate) in effective possession, ownership and control of all
assets not included within the Assets and (B) to assure that the Company, rather
than Nortel Networks or any Nortel Contributing Entity, is the obligor in
respect of all Assumed Liabilities, and Nortel Networks shall cooperate with the
Company for such purposes. The Company shall, upon the request of Nortel
Networks, make the Transferring Employees available and cooperate in all
respects with Nortel Networks and its Affiliates in the preparation for, or
defense of, any lawsuit, arbitration or other Action (whether disclosed or not
disclosed in the NNI Disclosure Schedule) filed or claimed by or against Nortel
Networks, its Affiliates, agents, directors, officers and employees, whether
currently pending or asserted in the future, concerning the operation or conduct
of the Nortel Networks Business prior to the Closing Date (including by making
Transferring Employees available to provide information and discovery
documentation, take depositions and testify); provided, however, that Nortel
Networks shall reimburse the Company for all costs that it shall incur under
this sentence (including all costs relating to the loss of the services of any
Transferring Employee for any period of time), and such availability of
Transferring Employees shall not materially interfere with their
responsibilities to the Company. Nortel Networks shall, upon the request of the
Company, make its employees available and cooperate in all respects with the
Company and its Affiliates in the preparation for, or defense of, any lawsuit,
arbitration or other Action (whether disclosed or not disclosed in the Company
Disclosure Schedule) filed or claimed by or against the Company, its Affiliates,
agents, directors, officers and employees, whether currently pending or asserted
in the future, concerning the operation of the Nortel Networks Business prior to
the Closing Date, the Nortel Networks Contracts, the Products, the Assets, the
Transferred Intellectual Property or the Licensed Intellectual Property
(including by making such employees available to provide information and
discovery documentation, take depositions and testify); provided, however, that
the Company shall reimburse Nortel Networks for all costs that it shall incur
under this sentence (including all costs relating to the loss of the services of
any of its employees for any period of time), and such availability of its
employees shall not materially interfere with their responsibilities to Nortel
Networks.
Section 5.09. Ancillary Agreements. On the Closing Date, Nortel
Networks and the Company shall, Nortel Networks shall cause the Nortel
Contributing Entities to, and the Company shall cause VIS and the Company
Entities to, execute and deliver each of the Ancillary Agreements to which such
entity is a party.
Section 5.10. Maintenance of Records. (a) Without prejudice to the
scope of the Assets, Nortel Networks shall (and shall cause each Nortel
Contributing Entity to) (i) for a period of at least three (3) years from the
Closing Date, retain, at Nortel Networks' sole expense, all records and
documents relating to the Nortel Networks Business or the Assets that have not
43
been transferred at the Closing to the Company, (ii) notify the Company before
disposing of any such records and (iii) make available to the Company, at the
Company's expense, at reasonable times and upon request therefor, all such
records to the extent not so disposed of. For the avoidance of doubt, no records
or documents relating to Transferring Employees (other than the Employee
Information) shall be subject to this provision.
(b) The Company shall (i) for a period of at least three (3) years from
the Closing Date, retain, at the Company's sole expense, all records and
documents relating to the Nortel Networks Business or the Assets transferred at
Closing to the Company, (ii) notify Nortel Networks before disposing of any such
records and (iii) make available to Nortel Networks, at Nortel Networks'
expense, at reasonable times and upon request therefor, all such records to the
extent not disposed of.
Section 5.11. Obtaining Consents. (a) Before, at and after the Closing,
Nortel Networks shall use its reasonable efforts to obtain, as soon as
practicable, the consent of each Person that is required to transfer to the
Company the rights and obligations under each Nortel Networks Contract; provided
however, Nortel Networks shall be under no obligation to compromise any right,
asset or benefit or to expend any amount or incur any Liability in seeking such
consents and the failure to obtain any or all of such consents shall not entitle
the Company to terminate this Agreement or not to complete the transactions
contemplated hereby.
(b) At least five (5) Business Days before the Closing, Nortel Networks
shall deliver a written notice to the Company setting forth a complete list of
the Nortel Networks Contracts in respect of which Nortel Networks has obtained
the consent of each Person that is required to transfer to the Company the
rights and obligations under each such Nortel Networks Contract (the
"Transferred Contracts"). The delivery of such notice shall not relieve any
party of its obligations under the first sentence of Section 5.11(a). Nortel
Networks and the Company shall cooperate in any lawful arrangement to provide
that the Company shall receive all benefits and be responsible for all
Liabilities under each Nortel Networks Contract not included among the
Transferred Contracts until all necessary consents are obtained and the full
transfer thereof is effective. The fact that the transfer of any Asset or the
assumption of any Liability requires the consent of a third party shall in no
way alter the foregoing rights and responsibilities of the parties. Nothing in
this Agreement shall be construed as an attempt to assign or as requiring Nortel
Networks or a Nortel Contributing Entity to assign or to cause the assignment of
any Nortel Networks Contract which, as a matter of Applicable Law, is not
assignable in whole or in part without consent, unless the consent shall have
been given.
Section 5.12. Deletion of Non-Transferred Software. The Company agrees
that, following the Closing Date, the Company shall not use any items of
Software loaded on the Transferred Equipment as of the Closing Date which is not
Business Software, Tangible Software or Transferred Software or which is not
licensed under any Ancillary Agreement. The Company shall, as soon as is
reasonably practical, and in any event no later than forty-five (45) days
following the Closing Date, delete all such non-transferred and non-licensed
Software from any of the Transferred Equipment on which it is installed.
Section 5.13. Equipment Leases. (a) Subject to the receipt of any
required consent, Nortel Networks and the Nortel Contributing Entities shall
assign and transfer to the
44
Company the Equipment Leases. If any such consent is not obtained for any
Equipment Lease prior to the Closing Date, each of the Company, Nortel Networks,
and the Nortel Contributing Entity who is a party thereto shall use commercially
reasonable efforts to enter into alternative, lawful arrangements pursuant to
which the Company shall, effective as of the Closing, have the benefits and the
obligations associated with the Equipment Leases for which no such consent is
obtained.
(b) The Company shall be responsible and shall pay Nortel Networks and
the Nortel Contributing Entities for any and all costs and Liabilities arising
from the assignment and transfer of the Equipment Leases referred to above.
Section 5.14. Notice of Certain Events. Until the Closing, each party
shall promptly notify the other party in writing of any fact, change, condition,
circumstance or occurrence or nonoccurrence of any event of which it is aware
that will or is reasonably likely to result in any of the conditions set forth
in Article VIII becoming incapable of being satisfied.
Section 5.15. Nortel Networks Software License. With respect to those
Assets identified in Section 1.10(t)(iii) of the NNI Disclosure Schedule, the
Company shall comply with, and be subject to, the requirements of the Nortel
Networks Lab Software License with respect to such Assets.
Section 5.16. Supplementary Rights. In the event that Nortel Networks
has inadvertently omitted to include in the Transferred Intellectual Property
any Trademark, Software, Copyright or Trade Secret that (i) is owned by Nortel
Networks or any Nortel Contributing Entity after the Closing Date and (b) is
used exclusively in, or exclusively covers, the design, development,
manufacture, maintenance, operation or testing of the Products as of the Closing
Date, then such omitted Trademark, Software, Copyright or Trade Secret shall
nonetheless constitute Transferred Intellectual Property and shall be assigned
hereunder.
Section 5.17. Certain Cash Adjustments. Nortel Networks shall, on the
Closing Date, pay to the Company, by wire transfer of immediately available
funds to an account designated by the Company, the sum of the following amounts
(collectively, the "Cash Adjustment"):
(a) an amount equal to the base salary for the vacation days accrued
and unused as of the Closing Date as set out in Section 3.10(b) of the NNI
Disclosure Schedule and updated pursuant to Section 6.01(e) with respect to the
US Transferring Employees and the Canadian Transferring Employees whose
Employment Transfer Time is on the Closing Date; and
(b) an amount equal to the customer deposits for maintenance contracts
of the Nortel Networks Business collected and outstanding as of the Closing
Date.
Section 5.18. Certain Obligations regarding Licensed IPLA IP. (a) On
the Closing Date, Nortel Networks shall deliver, or shall cause Nortel Networks
Limited to deliver, to the Company the tangible embodiment of the Software
comprised within the Licensed IPLA IP (as such is embodied in or used in or for
IPLA Products), including user manuals, specifications, flow charts and source
code therefor.
45
(b) For a period of one (1) year following the Closing Date, to the
extent the Company requires technical assistance in connection with a specific
component of Licensed IPLA IP and the Company can identify a then-current
employee of Nortel Networks who was directly involved in the development of such
component, then Nortel Networks shall provide access to such employee of Nortel
Networks; provided, however, that the Company shall reimburse Nortel Networks
for all costs that it shall incur under this sentence (including all costs
relating to the loss of the services of any of its employees for any period of
time), and such availability of its employees shall not materially interfere
with their responsibilities to Nortel Networks.
Section 5.19. Other Marks. Neither Nortel Networks nor any Nortel
Contributing Entity makes any representations or warranties with respect to the
Other Marks and specifically disclaims any representations and warranties as to
the existence, validity or enforceability of the Other Marks and as to any
ownership or rights of Nortel Networks or any Nortel Contributing Entity
therein. Subject to the first sentence of this Section 5.19, effective as of the
Closing Date, Nortel Networks will not, and will cause each Nortel Contributing
Entity not to, for a period of three (3) years from the Closing Date, claim any
trademark rights in the Other Marks with respect to products substantially
similar to the Products or oppose Company's registration of any of the Other
Marks in any jurisdiction.
Section 5.20. Assignment Back. In the event that at any time between
the Closing Date and the date of the Option Closing (as defined in the Members'
Agreement), the Company becomes a party to a legal proceeding in which it is
alleged that a Product Component infringes one or more issued patents of a third
party and such third party patents were licensed to Nortel Networks or a Nortel
Contributing Entity prior to the Closing Date for use by Nortel Networks under a
Patent Cross License, then the Company may, at the Company's sole option, assign
for a price of $1.00 (one dollar), and Nortel Networks shall (or shall cause one
of its Affiliates to) accept assignment of, those Intellectual Property Rights
previously assigned to the Company hereunder that are used in the design,
development, manufacture, maintenance, operation and testing of such Product
Component (the "Assigned Back IP"); provided, that immediately following such
assignment, Nortel Networks (or the applicable Nortel Networks Affiliate) shall
grant the Company an exclusive (subject to Section 2.05 of the Intellectual
Property License Agreement), sublicenseable, transferable, royalty-free license
to use such Assigned Back IP for any purpose. Such license is and will be made
on an "as is" basis, and Nortel Networks and each Nortel Contributing Entity
hereby expressly disclaim and shall disclaim any and all express and implied
warranties of any kind, including, without limitation, implied warranties of
merchantability or fitness for a particular purpose and warranties of validity
and non-infringement. For the avoidance of doubt, (a) the only representations
and warranties made as to the Assigned Back IP are the representations regarding
Nortel Networks' and the Nortel Contributing Entity's use thereof prior to the
Closing Date as expressly set forth in Section 3.14 of this Agreement and (b)
nothing in this Section 5.20 is intended or shall be implied to be a sublicense
of Nortel Networks' or any Nortel Contributing Entity's rights under any Patent
Cross License or a representation that the assignment back and license
arrangement contemplated by this Section 5.20 shall enable the Company to make
the Products after the Closing Date. It is understood that the Company's use of
the Assigned Back IP shall be at its sole and exclusive risk and none of Nortel
Networks or any Nortel Contributing Entity shall have any liability therefor.
The Company shall indemnify and hold harmless the Nortel Indemnified
46
Parties from and against, and agrees to promptly defend any Nortel Indemnified
Party from and reimburse any Nortel Indemnified Party for, any and all Losses
which such Nortel Indemnified Party may at any time suffer or incur, or become
subject to, as a result of the transactions contemplated by this Section 5.20 or
the Company's use or licensing of any Assigned Back IP.
Section 5.21. License Agreements. To the extent that Nortel Networks
holds any license or other contractual rights in or to any of the Licensed
Intellectual Property, such license or contractual rights shall, upon the
Effective Time, be subject to the rights granted to the Company under the
License Agreements to the same extent as if Nortel Networks had been a party to
each of the License Agreements. Nortel Networks shall be subject to all of the
restrictions set forth in the License Agreements to the same extent as Nortel
Networks Limited.
Section 5.22. Company Entities. If either of the Company Entities is
not a corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation as of the date hereof, the Company
shall take any and all actions necessary to cause each such Company Entity to be
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation prior to the Closing Date.
Article VI
EMPLOYEE MATTERS
Section 6.01. Employee Matters. (a) The Company agrees to comply, and
to cause any of its Subsidiaries or, with respect to Mexico Employees, any
payroll service who may employ any of the Business Employees on or after the
Closing Date to comply, with the provisions set forth in Exhibit D, including
Exhibit D-1 et seq. and all schedules thereto (collectively, "Exhibit D"), with
regard to the treatment of the Business Employees.
(b) Nortel Networks and the Company agree as to certain employment and
employee benefit matters, including the allocation of responsibility for certain
associated liabilities, as set forth in Exhibit D.
(c) Nortel Networks shall not, and shall cause the Nortel Contributing
Entities to not, without the prior written consent of the Company, for the two
(2) year period following the Closing, directly or indirectly through any third
Person, solicit for employment or engagement or hire or engage, any Business
Employee, who is offered and rejects employment or continued employment, as
applicable, with the Company or the relevant Company Entity pursuant to this
Agreement, or any of the Transferring Employees who continue employment with or
voluntarily terminate employment with the Company or its Subsidiaries; provided,
however, that nothing in this clause (c) shall prevent Nortel Networks or the
Nortel Contributing Entities, whether directly or indirectly through any third
Person, from (x) conducting generalized searches that are not focused on such
individuals or (y) hiring or engaging such individuals identified through such
generalized searches, and provided further that, notwithstanding the foregoing,
during the two (2) year period following the Closing the Mexican Nortel
Contributing Entity shall be permitted to solicit for employment or engagement
or hire or engage, either directly or indirectly, any Mexico Employee who
refuses to voluntarily resign employment from the Mexican Nortel Contributing
Entity as of the Mexican Hire Date.
47
(d) For a period of two (2) years following the Closing, the Company
shall not, and shall cause its Subsidiaries to not, directly or indirectly
through any third Person, except with Nortel Networks' prior written consent,
solicit for employment or engagement or hire or engage any of the employees of
Nortel Networks or the Nortel Contributing Entities who continue employment with
or voluntarily terminate employment with Nortel Networks or the Nortel
Contributing Entities, as applicable, any Business Employees who are offered and
reject employment or continued employment with the Company or the relevant
Company Entity pursuant to this Agreement or any Mexico Employees who refuse to
voluntarily resign employment from the Mexican Nortel Contributing Entity as of
the Mexican Hire Date. Notwithstanding the foregoing, nothing in this Section
6.01(d) shall prevent the Company or any of its Subsidiaries, whether directly
or indirectly through any third Person, from (i) conducting generalized searches
that are not focused on such employees or former employees of Nortel Networks or
the Nortel Contributing Entities or (ii) hiring or engaging such employees or
former employees of Nortel Networks or the Nortel Contributing Entities
identified through such generalized searches; provided that, notwithstanding the
foregoing, during the two (2) year period following the Closing, neither the
Company nor any of its Subsidiaries may, either directly or indirectly through
any third Person hire or engage any Mexico Employees who refuse to voluntarily
resign employment from the Mexican Nortel Contributing Entity as of the Mexican
Hire Date, whether such employees are identified through generalized searches or
otherwise.
(e) Not less than two (2) Business Days prior to the Closing Date,
Nortel Networks shall provide the Company with an updated version of Section
3.10(b) to the NNI Disclosure Schedule reflecting any changes in the data
therein that have or will have occurred between the date hereof and the Closing.
Article VII
TAX MATTERS
Section 7.01. Tax Matters. (a) Nortel Networks and the Company agree
that the Purchase Price is exclusive of any Transfer Taxes. The Company shall
pay directly to the appropriate taxing authority, within the time specified
therefore, all applicable Transfer Taxes payable in connection with the
transactions contemplated in this Agreement, provided that, if any such Transfer
Taxes are required to be collected, remitted or paid by Nortel Networks or any
Nortel Contributing Entity or any agent thereof (as requested by Nortel Networks
or any Nortel Contributing Entity), the Company shall pay such Transfer Taxes to
Nortel Networks, any Nortel Contributing Entity or any such agent, as
applicable, at the Closing or thereafter, as applicable, as requested of or by
Nortel Networks. The Company shall complete and execute resale or other
exemption certificates with respect to the inventory items sold hereunder and
shall provide Nortel Networks with an executed copy thereof. The Company shall
prepare such certificates in a form that meets the legal requirements of the
states, localities or other taxing jurisdictions in which the inventory is
located.
(b) Nortel Networks and the Company agree to treat all payments made
either to or for the benefit of the other under any indemnity provisions of this
Agreement and for any misrepresentations or breach of warranty or covenants as
adjustments to the Purchase Price for
48
Tax purposes and that such treatment shall govern for purposes hereof, including
adjustments to the capital accounts as appropriate.
(c) Subject to Section 7.01(a) of this Agreement, (i) Nortel Networks
and the Nortel Contributing Entities, as the case may be, shall bear all Taxes
of any kind relating to the Assets or the conduct or operation of the Nortel
Networks Business for all Tax periods or portions thereof ending on or before
the Closing Date and (ii) the Company or the Members thereof, as appropriate,
shall bear all Taxes relating to the Assets or the conduct or operation of the
Nortel Networks Business for all Tax periods or portions thereof beginning after
the Closing Date.
(d) For purposes of this Agreement, any real property, sales, use,
value added, consumption, goods and services, stock transfer, stamp duties, ad
valorem and similar Taxes with respect to the Assets or the conduct or operation
of the Nortel Networks Business shall be allocated between portions of a Tax
period that includes (but does not end on) the Closing Date (a "Straddle
Period") in the following manner: (i) in the case of a Tax imposed in respect of
property and that applies ratably to a Straddle Period, the amount of Tax
allocable to a portion of the Straddle Period shall be the total amount of such
Tax for the period in question multiplied by a fraction, the numerator of which
is the total number of days in such portion of such Straddle Period and the
denominator of which is the total number of days in such Straddle Period, and
(ii) in the case of sales, value-added and similar transaction-based Taxes with
respect to the Assets or the conduct or operation of the Nortel Networks
Business (other than Transfer Taxes allocated under Section 7.01(a) of this
Agreement), shall be allocated to the portion of the Straddle Period in which
the relevant transaction occurred.
(e) Nortel Networks shall be entitled to any refunds or credits of
Taxes relating to the Assets or the Nortel Networks Business for any taxable
period (or portion thereof) ending on or prior to the Closing Date. The Company
or the Members thereof, as appropriate, shall be entitled to any refunds or
credits of Taxes relating to the Assets or the Nortel Networks Business for any
taxable period (or portion thereof) beginning after the Closing Date.
(f) The Company agrees to take all necessary steps to cause the Company
Entities to be treated as disregarded entities for U.S. federal income tax
purposes as of the date of their formation.
Section 7.02. Procedure. The Company and Nortel Networks or any Nortel
Contributing Entity shall promptly inform each other in writing (within sixty
(60) days after receiving notice thereof or a reasonable earlier time if an
earlier response is required by Applicable Law) of any assessment, notice of
deficiency, determination, or other equivalent formal notification by a taxing
authority of an asserted additional Tax liability in respect of all Taxes
indemnified pursuant to the terms of this Agreement, such that the party so
informed shall have the maximum amount of time within which to review and/or
prepare any required response. Any legal proceedings or any other action by or
against Nortel Networks or any Nortel Contributing Entity with respect to such
asserted Liability will be under Nortel Networks' or such Nortel Contributing
Entity's direction; provided, however, that the Company shall be kept reasonably
informed concerning the progress of such legal proceedings or other action.
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Article VIII
CONDITIONS TO CLOSING
Section 8.01. Conditions to Obligations of Nortel Networks. The
obligations of Nortel Networks 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; Covenants. (i) Each of the
representations and warranties of the Company contained in Article IV
(disregarding all references to materiality and Material Adverse Effect) shall
be true and correct (A) as of the Closing Date as though restated on and as of
such date or (B) if made as of a date specified therein, as of such date, except
for any inaccuracies that, taken in the aggregate, would not have a Material
Adverse Effect on the Company; provided, however, that the representations and
warranties of the Company contained in Section 4.04 and Section 4.17 shall be
true and correct, and the representations and warranties of the Company
contained in Section 4.05 shall be true and correct in all material respects.
Nortel Networks shall have received a certificate from the Company signed by a
duly authorized officer of the Company to the foregoing effect.
(ii) Each of the representations and warranties of VIS contained in the
Parent Agreement (disregarding all references to materiality and Material
Adverse Effect) shall be true and correct (A) as of the Closing Date as
though restated on and as of such date or (B) if made as of a date
specified therein, as of such date, except for any inaccuracies that, taken
in the aggregate, would not have a Material Adverse Effect on VIS;
provided, however, that the representations and warranties of VIS contained
in Section 2.04 of the Parent Agreement shall be true and correct. Nortel
Networks shall have received a certificate from VIS signed by a duly
authorized officer of VIS to the foregoing effect.
(iii) The covenants, obligations, conditions and agreements contained
in this Agreement to be complied with by the Company on or before the
Closing shall have been complied with in all material respects, except that
the Company shall have complied in all respects with its obligations under
Article II hereof, and Nortel Networks shall have received a certificate
from the Company signed by a duly authorized officer of the Company to the
foregoing effect.
(iv) The covenants, obligations, conditions and agreements contained in
the Parent Agreement to be complied with by VIS on or before the Closing
shall have been complied with in all material respects, and Nortel Networks
shall have received a certificate from VIS signed by a duly authorized
officer of VIS to the foregoing effect.
(b) Competition and Antitrust. Any waiting period under Applicable Law
relating to competition or antitrust in connection with the transactions
contemplated hereby shall have expired or shall have been terminated. All other
authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of other waiting periods imposed by, any Governmental
Authority necessary for the consummation of the transactions contemplated by
this Agreement shall have been obtained or filed or shall have occurred.
50
(c) No Governmental Order. There shall be no Governmental Order in
existence that prohibits the transactions contemplated by this Agreement or
renders it unlawful to consummate such transactions.
(d) Ancillary Agreements. Each of VIS, the Company and the Company
Entities shall have executed and delivered to Nortel Networks each of the
Ancillary Agreements to which it is a party.
(e) Company Entities. The Company shall have complied with all of its
obligations in Section 5.22.
Section 8.02. Conditions to Obligations of the Company. The obligations
of the Company 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; Covenants. (i) Each of the
representations and warranties of Nortel Networks contained in Article III
(disregarding all references to materiality and Material Adverse Effect) shall
be true and correct (A) as of the Closing Date as though restated on and as of
such date or (B) if made as of a date specified therein, as of such date, except
for any inaccuracies that, taken in the aggregate, would not have a Material
Adverse Effect on the Nortel Networks Business; provided, however, that the
representations and warranties of Nortel Networks contained in Section 3.05(a)
and 3.09(b) shall be true and correct in all respects, and the representations
and warranties of Nortel Networks contained in Section 3.04(a) shall be true and
correct in all material respects. The Company shall have received a certificate
from Nortel Networks signed by a duly authorized officer to the foregoing
effect.
(ii) The covenants, obligations, conditions and agreements contained in
this Agreement to be complied with by Nortel Networks on or before the
Closing shall have been complied with in all material respects, and the
Company shall have received a certificate from Nortel Networks signed by a
duly authorized officer to the foregoing effect.
(b) Competition and Antitrust. Any waiting period under Applicable Law
relating to competition or antitrust in connection with the transactions
contemplated hereby shall have expired or shall have been terminated. All other
authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of other waiting periods imposed by, any Governmental
Authority necessary for the consummation of the transactions contemplated by
this Agreement shall have been obtained or filed or shall have occurred.
(c) No Governmental Order. There shall be no Governmental Order in
existence that prohibits the transactions contemplated by this Agreement or
renders it unlawful to consummate such transactions.
(d) Ancillary Agreements. Nortel Networks and each of the Nortel
Contributing Entities shall have executed and delivered to the Company each of
the Ancillary Agreements to which they are a party.
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(e) Cash Adjustment. Nortel Networks shall have paid to the Company the
Cash Adjustment.
Article IX
TERMINATION AND WAIVER
Section 9.01. Termination. This Agreement may be terminated at any time
prior to the Closing (except as limited as to time in paragraph (b) below):
(a) by the mutual written consent of Nortel Networks and the Company;
(b) by Nortel Networks or the Company, if the Closing shall not have
occurred prior to August 31, 2004 (the "Termination Date"); 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 prior to such date;
(c) by Nortel Networks in the event a condition set forth in Section
8.01 becomes incapable of being fulfilled; or
(d) by the Company in the event a condition set forth in Section 8.02
becomes incapable of being fulfilled.
Section 9.02. Effect of Termination. In the event of the 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 any party hereto,
except (a) as set forth in Section 5.03 and Section 11.02 and (b) nothing herein
shall relieve either party from Liability for any breach hereof or failure to
perform hereunder.
Section 9.03. Waiver. At any time prior to the Closing, any party may
(a) extend the time for the performance of any of the obligations or other acts
of any other party hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto or (c)
waive compliance with any of the agreements or conditions 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.
Article X
INDEMNIFICATION
Section 10.01. Indemnification by the Company. (a) After the Closing,
the Company shall indemnify and hold harmless Nortel Networks, its Affiliates
and their respective directors, officers, employees, consultants, shareholders,
agents and representatives, and all successors and assigns of the foregoing
(collectively, the "Nortel Indemnified Parties") from and against, and agrees to
promptly defend any Nortel Indemnified Party from and reimburse any Nortel
Indemnified Party for, any and all losses, damages, costs, expenses,
Liabilities, obligations and claims of any kind (including any Action brought by
any Governmental
52
Authority or Person and including reasonable attorneys' fees and other legal
costs and expenses reasonably incurred) (collectively, "Losses"), which such
Nortel Indemnified Party may at any time suffer or incur, or become subject to,
as a result of:
(i) the inaccuracy of any representations or warranties made by the
Company in or pursuant to this Agreement or in the certificates delivered
pursuant to Section 8.01(a)(i) or (a)(iii);
(ii) any failure by the Company or a Company Entity to carry out,
perform, satisfy and discharge any of the Company's or any Company Entity's
covenants, agreements, undertakings, Liabilities or obligations under this
Agreement or the Ancillary Agreements to which it is a party (other than
the Subcontract Agreement, the Relationship Agreement, the General Supply
Agreement, the IWS/MWS Software License Agreement, the Transition Services
Agreement and the Real Estate License Agreements);
(iii) any Assumed Liabilities;
(iv) any amounts for which the Company is liable under Article VII; and
(v) the Company's or any of its Affiliates' or sublicensees' exercise
of its rights granted under any License Agreement, Licensee's (as defined
in the applicable License Agreement) or any of its Affiliates' or
sublicensees' use of any Licensed Intellectual Property and Licensee's or
any of its Affiliates' or sublicensees' use or other disposition of any
product incorporating any Licensed Intellectual Property; provided that the
Company shall have no obligation to indemnify under this Section
10.01(a)(v) if such Loss is covered by clause (f) of the definition of
"Retained Liabilities."
(b) The parties hereby agree that any amount payable by the Company
pursuant to Section 10.01(a)(i) hereof, or Section 10.01(a)(ii) hereof with
respect to obligations to be performed prior to the Closing, shall be equal to
the product of (i) such amount without regard to this Section 10.01(b),
multiplied by (ii) a fraction, the numerator of which shall be one, and the
denominator of which shall be one minus the percentage representing the
aggregate percentage of all Membership Interests, on a fully-diluted basis,
represented by the Membership Interests held by Nortel Networks and its
Affiliates, determined in each case at the time such payment is made by the
Company.
Section 10.02. Indemnification by Nortel Networks. After the Closing,
Nortel Networks shall indemnify and hold harmless the Company, its Affiliates
and their respective directors, officers, employees, consultants, shareholders,
agents and representatives, and all successors and assigns of the foregoing
(collectively, the "Company Indemnified Parties") from and against, and agrees
to promptly defend any Company Indemnified Party from and reimburse any Company
Indemnified Party for, any and all Losses which such Company Indemnified Party
may at any time suffer or incur, or become subject to, as a result of:
(a) the breach of any representations or warranties made by Nortel
Networks in or pursuant to this Agreement or in the certificates delivered
pursuant to Section 8.02(a)(i) or (a)(ii);
53
(b) any failure by Nortel Networks or a Nortel Contributing Entity to
carry out, perform, satisfy and discharge any of its covenants, agreements,
undertakings, Liabilities or obligations under this Agreement, the Parent
Agreement or the Ancillary Agreements to which it is a party (other than the
Subcontract Agreement, the Relationship Agreement, the General Supply Agreement,
the IWS/MWS Software License Agreement, the Transition Services Agreement and
the Real Estate License Agreements);
(c) any Retained Liabilities;
(d) any amounts for which Nortel Networks is liable under Article VII;
and
(e) Nortel Networks' or any of its Affiliates' or sublicensees'
exercise of its rights granted by the Company under any License Agreement,
Nortel Networks' or any of its Affiliates' or sublicensees' use of any
Intellectual Property Rights licensed to it by the Company under any License
Agreement and Nortel Networks' or any of its Affiliates' or sublicensees' use or
other disposition of any product incorporating any such Intellectual Property
Rights; provided that Nortel Networks shall have no obligation to indemnify
under this Section 10.02 if such Loss is covered by Section 10.01(a)(v); and
provided, further, that, for the avoidance of doubt, Nortel Networks shall have
no obligation to indemnify any Company Indemnified Party for any Loss arising
from the sale or transfer of any product incorporating such Intellectual
Property Rights that is supplied or provided to Nortel Networks or any of its
Affiliates or sublicensees by the Company or any Person acting on the Company's
behalf.
Section 10.03. Limitations on Indemnification. Notwithstanding any
other provision to the contrary:
(a) Subject to the last sentence of this paragraph, the Company shall
have no Liability for Losses under Section 10.01(a)(i) or (ii), and no claim for
indemnification of such Losses shall be made under this Article X, unless (i)
the Losses associated with each such claim exceed $20,000 and (ii) until the
aggregate of all such claims for Losses that the Company would, but for this
Section 10.03(a), have under Section 10.01(a)(i) and (ii) exceeds an amount
equal to $2,000,000, in which case the Indemnified Party (as defined below)
shall be entitled to be indemnified for all such Losses, and not merely the
excess; provided, however, that any Losses in connection with the breach by the
Company or any Company Entity, as applicable, of its representations, warranties
or covenants in Section 4.01, Section 4.04, Section 4.12(b)(i) or (ii), Section
4.17, Section 4.18, Section 6.01(a) or (b), Exhibit D, the Employee Loan
Agreement or the Subcontract Agreement shall not be subject to the limitation
described above. Notwithstanding the foregoing, any claims for indemnification
of Losses brought by any Nortel Indemnified Party under the Parent Agreement
shall be used in order to determine whether any claims for Losses brought under
Section 10.01(a)(i) or (ii) exceed the $2,000,000 threshold referred to before
the proviso in the immediately preceding sentence.
(b) Nortel Networks shall have no Liability for Losses under Section
10.02(a) or (b), and no claim for indemnification of such Losses shall be made
under this Article X, unless (i) the Losses associated with each such claim
exceed $20,000 and (ii) until the aggregate of all such claims for Losses that
Nortel Networks would, but for this Section 10.03(b), have under Section
10.02(a) and (b) exceeds an amount equal to $2,000,000, in which case the
Indemnified
54
Party shall be entitled to be indemnified for all such Losses, and not merely
the excess; provided, however, that any Losses in connection with the breach by
Nortel Networks or any Nortel Contributing Entity, as applicable, of its
representations, warranties or covenants in Section 3.01, Section 3.09(b),
Section 6.01(a) or (b), Exhibit D, the Employee Loan Agreement or the
Subcontract Agreement shall not be subject to the limitation described above.
(c) For purposes of determining whether any Indemnified Party shall be
entitled to indemnification under Section 10.01 or 10.02, as applicable, for
breach of a representation, warranty or covenant, the use of the terms
"material," "material adverse effect" or "in all material respects" (or words of
similar effect) shall be disregarded and any and all claims for such
indemnification shall be determined as if no such terms were present in such
representation, warranty or covenant.
Section 10.04. Notification of Claims. (a) A party entitled to be
indemnified pursuant to Section 10.01 or 10.02 (the "Indemnified Party") shall
promptly notify the party liable for such indemnification (the "Indemnifying
Party") in writing of any claim or demand which the Indemnified Party has
determined has given or could give rise to a right of indemnification under this
Agreement; provided, however, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations under
such Section, except to the extent that the Indemnifying Party is actually
prejudiced by the failure to give such notice.
(b) The Indemnifying Party shall have the right to, and at the request
of the Indemnified Party shall, assume the defense of any such claim or demand
asserted against the Indemnified Party and to employ counsel reasonably
acceptable to the Indemnified Party to defend any such claim; provided that such
counsel has no conflict of interest. The Indemnified Party shall have the right
to participate in (but not control) the defense of any such claim or demand at
its own expense. The Indemnifying Party shall notify the Indemnified Party in
writing, as promptly as possible after the date of the notice of claim given by
the Indemnified Party to the Indemnifying Party under Section 10.04(a), of its
election to defend in good faith any such third-party claim or demand. The
Indemnified Party shall make available to the Indemnifying Party or its agents,
all records and other material in the Indemnified Party's possession reasonably
required by the Indemnifying Party for its use in contesting any third-party
claim or demand. The Indemnifying Party shall not settle or compromise any such
claim or demand unless (i) the Indemnified Party consents, (ii) the Indemnified
Party is given a full and complete release of any and all Liability by all
relevant Persons relating thereto or (iii) the settlement or compromise would
only give rise to the payment of monetary damages and such settlement or
compromise includes no admission or concession of culpability or wrongdoing by
the Indemnified Party. In the event of any conflict between the terms of this
Section 10.04 and the terms of Section 7.02, the terms of Section 7.02 shall
govern.
(c) Provided that proper notice is duly given, if the Indemnifying
Party shall fail promptly and diligently to assume the defense thereof within 30
days of receipt of such notice, then the Indemnified Party may respond to,
contest and defend against such Action and may make in good faith any compromise
or settlement with respect thereto, and recover from the Indemnifying Party the
entire cost and expense thereof including, without limitation, reasonable
55
attorneys' fees and disbursements and all amounts paid or forgone as a result of
such action, and the settlement or compromise thereof.
(d) The indemnification required hereunder shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as and when bills or invoices are received or loss, liability,
obligation, damage or expense is actually suffered or incurred, unless the
Indemnifying Party puts forward a good faith defense to its indemnity
obligation, in which case, such payment shall be deferred until the resolution
of the conflict over the Indemnifying Party's obligation to indemnify, either by
agreement of the parties or by final, non-appealable judgment of a court of
competent jurisdiction.
Section 10.05. Exclusive Remedies. Other than for fraud or intentional
misconduct, from and after the Closing, the indemnification provisions of
Article X shall be the sole and exclusive remedies of the Company and Nortel
Networks, respectively, for the recovery of monetary damages with respect to any
breach of the representations or warranties herein or nonperformance of any
covenants and agreements herein; provided, however, that nothing in this
Agreement, the Parent Agreement or any of the Ancillary Agreements shall be
deemed to limit (or adversely affect) in any manner any right or remedy of any
Indemnified Party regarding specific performance or non-monetary damages under
this Agreement, the Parent Agreement or any of the Ancillary Agreements.
Section 10.06. No Special Damages. None of the Indemnified Parties
shall be entitled to any recovery under this Agreement for its or its
Affiliates' own special, indirect or consequential damages (including loss of
profits) or for punitive damages.
Article XI
GENERAL PROVISIONS
Section 11.01. Survival. The representations and warranties of Nortel
Networks and the Company contained in or made pursuant to this Agreement, the
Parent Agreement and the Ancillary Agreements shall terminate at the Closing,
except that (i) the representations and warranties made in Article III and
Article IV shall survive in full force and effect for a period of two (2) years
after the Closing Date and (ii) the representations and warranties made in
Section 3.01, Section 3.09(b), Section 3.10, Section 3.11, Section 4.01, Section
4.12, Section 4.13, Section 4.18 or Article VII shall survive in full force and
effect until the expiration of any applicable statutory limitation period
(giving effect to any waiver, mitigation or extension thereof). The covenants,
agreements, undertakings, Liabilities and obligations of Nortel Networks and the
Company contained in or made pursuant to this Agreement, the Parent Agreement
and the Ancillary Agreements for which indemnification is available hereunder
shall terminate two (2) years after the date as of which such covenant is to be
performed in full, except that any covenant, agreement, undertaking, Liability
or obligation in Article VII or any such Ancillary Agreement to be performed
after the Closing shall survive in full force and effect until the expiration of
any applicable statutory limitation period (giving effect to any waiver,
mitigation or extension thereof). Any claim for indemnification in respect of a
breach of representation, warranty or covenant hereunder must be made during the
survival period thereof.
56
Section 11.02. Expenses. Except as otherwise provided, the parties
shall bear their respective direct and indirect expenses incurred in connection
with the negotiation, preparation, execution and performance of this Agreement
and the transactions contemplated hereby.
Section 11.03. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by overnight courier service, by facsimile, by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 11.03):
(a) if to Nortel Networks:
Nortel Networks Inc.
0000 Xxxxx Xxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
Facsimile: (905) 863- 8386
Attention: Secretary
and a copy to:
Cleary, Gottlieb, Xxxxx & Xxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxx, Esq.
(b) if to the Company:
Volt Delta Resources, LLC
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxx and Xxxxxx X. Xxxxxxxxx, Esq.
with a copy to:
Jenkens & Xxxxxxxxx Xxxxxx Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxx, Esq. and Xxxxxxxx X. Xxxxxxxx, Esq.
Section 11.04. Public Announcements. Except as may be required by
Applicable Law or stock exchange rules, no party to this Agreement shall make
any public announcements, including announcements to any employees of the
parties or their Affiliates, in respect of this Agreement or the transactions
contemplated hereby or otherwise communicate
57
with any news media without prior notification to the other party and the
parties shall cooperate as to the timing and contents of any such announcement.
Section 11.05. Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 11.06. Disclosure Schedules. Any disclosure with respect to a
particular Section of this Agreement, the NNI Disclosure Schedule or the Company
Disclosure Schedule, as the case may be, shall be deemed to be disclosure for
other Sections of this Agreement, the NNI Disclosure Schedule or the Company
Disclosure Schedule, as the case may be, to the extent that it is reasonably
apparent from a reading of such disclosure item that it would also qualify or
apply to such other Section of this Agreement, the NNI Disclosure Schedule or
the Company Disclosure Schedule, as the case may be.
Section 11.07. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Applicable
Law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not fundamentally
changed. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the greatest extent possible.
Section 11.08. Entire Agreement. This Agreement, together with the
Parent Agreement, the Ancillary Agreements and the Confidentiality Agreements,
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 Nortel Networks, VIS and the Company with respect to
the subject matter hereof. Notwithstanding any other provision of this
Agreement, the Parent Agreement or any Ancillary Agreement, this Agreement, the
Parent Agreement and all Ancillary Agreements represent a single transaction,
which is to be implemented by the parties and their respective Subsidiaries and
Affiliates that are party to the Parent Agreement and the Ancillary Agreements.
Without limiting the generality of the foregoing, (i) each of, the Parent
Agreement and the Ancillary Agreements has been negotiated and concluded in
furtherance of, and in order to give full effect to, the single transaction
contemplated by this Agreement; and (ii) the covenants, agreements,
undertakings, Liabilities and obligations of each party or any of its
Subsidiaries or Affiliates in, the Parent Agreement and each Ancillary Agreement
have been negotiated and concluded in the light of the covenants, agreements,
undertakings, Liabilities and obligations set out in the Parent Agreement and
all of the other Ancillary Agreements. Accordingly, the alteration or
termination of one or more but not all of the Parent Agreement and the Ancillary
Agreements by any Governmental Authority under Applicable Law (including the
United States Bankruptcy Code, the Bankruptcy and Insolvency Act (Canada) and
the Companies' Creditors Arrangement Act (Canada)) shall have the effect of
rendering the single transaction in this Agreement, the Parent Agreement and all
of the Ancillary Agreements null and void and without effect. Nothing herein
contemplated however shall be interpreted so as to mean that a party to any of
this Agreement, the Parent
58
Agreement or the Ancillary Agreements is carrying on or transacting business in
any jurisdiction where it is not otherwise considered to be carrying on or
conducting business within the meaning of Applicable Law of such jurisdiction.
Section 11.09. Assignment. No party may transfer any of its rights or
obligations hereunder. Any transfer in violation of this Section 11.09 shall be
null and void.
Section 11.10. No Third-Party Beneficiaries. Except as provided in
Article X, this Agreement is for the sole 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 or entity any legal or equitable right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
Section 11.11. Amendment. This Agreement may not be amended or modified
except by an instrument in writing signed by the parties hereto.
Section 11.12. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the Applicable Law of the State of New York
without regard to its conflicts of law principles. All actions and proceedings
arising out of or relating to this Agreement shall be heard and determined
exclusively in a New York state or federal court sitting in the County of New
York, and the parties hereto hereby irrevocably submit to the exclusive
jurisdiction of such courts in any such action or proceeding and irrevocably
agree to the laying of venue in such courts and waive the defense of an
inconvenient forum to the maintenance of any such action or proceeding.
Section 11.13. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of a signature page to this Agreement by telecopier shall
be as effective as delivery of a manually executed counterpart of this
Agreement.
Section 11.14. No Presumption. This Agreement shall be construed
without regard to any presumption or rule requiring construction or
interpretation against the party drafting or causing any instrument to be
drafted.
Section 11.15. Specific Performance. The parties hereto agree that
irreparable damage would occur if any of the provisions of Section 5.03 of this
Agreement were not performed in accordance with their specific terms or
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of Section 5.03 of this
Agreement and to enforce specifically the terms and provisions thereof, in
addition to any other remedy to which they are entitled at law or in equity.
59
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
NORTEL NETWORKS INC.
By: /s/ Xxxxx Xxxxxx
---------------------------------
Name: Xxxxx Xxxxxx
Title: General Manager, TDM and
DOS Portfolios
VOLT DELTA RESOURCES, LLC
By: /s/ Xxxxxxx Xxxx
---------------------------------
Name: Xxxxxxx Xxxx
Title: Chairman
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Vice President
