EXHIBIT 2.6
EXECUTION COPY
PURCHASE AND SALE AGREEMENT
BETWEEN
Nortel Networks Inc.
("Seller")
AND
Zhone Technologies, Inc.
("Buyer")
August 24, 2001
TABLE OF CONTENTS
Page
----
ARTICLE I ASSET PURCHASE..........................................2
1.1 Purchase and Sale of Assets; Assumption of Liabilities..2
1.2 Purchase Price and Related Matters......................7
1.2A Pre-Closing Actions.....................................9
1.3 The Closing............................................10
1.4 Assignment of Contracts and Rights.....................12
1.5 Excluded Liabilities...................................16
1.6 Additional Transferred Purchase Orders.................17
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER...............18
2.1 Organization, Qualification and Corporate Power........18
2.2 Affiliates of Seller...................................19
2.3 Title to Property......................................19
2.4 Authority..............................................20
2.5 Noncontravention.......................................21
2.6 Owned and Leased Real Property.........................22
2.7 Intellectual Property..................................22
2.8 Contracts..............................................24
2.9 Warranties and Claims..................................25
2.10 Litigation.............................................25
2.11 Labor Matters..........................................26
2.12 Employee Benefits......................................26
2.13 Legal Compliance.......................................28
2.14 Brokers' Fees..........................................28
2.15 No Other Agreements to Sell the Acquired Assets........28
2.16 Investment.............................................29
2.17 Financial Information..................................29
2.18 Permits................................................30
2.19 Transactions with Interested Persons...................30
2.20 Customers..............................................30
2.21 No Implied Warranties..................................30
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER...............30
3.1 Organization...........................................31
3.2 Authorization of Transaction...........................31
3.3 Noncontravention.......................................32
3.4 Broker's Fees..........................................33
3.5 Litigation.............................................33
3.6 Financing..............................................33
3.7 Employee Benefit Plans.................................34
3.8 Offer of Employment....................................34
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ARTICLE IV INDEMNIFICATION........................................35
4.1 Indemnification by Seller..............................35
4.2 Indemnification by Buyer...............................36
4.3 Claims for Indemnification.............................36
4.4 Survival...............................................39
4.5 Limitations............................................39
4.6 Treatment of Indemnification Payments..................42
ARTICLE V FURTHER AGREEMENTS......................................42
5.1 Warranties on Products.................................42
5.2 Access to Information; Record Retention; Cooperation...42
5.3 Covenant Not to Compete................................46
5.4 Nondisclosure..........................................47
5.5 Disclosure Generally...................................48
5.6 Certain Employee Matters...............................48
5.7 Taxes..................................................51
5.8 Deletion of Non-Transferred Software...................52
5.9 Further Assurances.....................................52
5.10 Additional Purchases, Sales and Services...............52
5.11 Transfer of Inventory..................................53
5.12 Risk of Loss...........................................53
5.13 Post Closing Orders....................................54
ARTICLE VI MISCELLANEOUS..........................................55
6.1 Press Releases and Announcements.......................55
6.2 No Third Party Beneficiaries...........................55
6.3 Action to be Taken by Affiliates.......................56
6.4 Entire Agreement.......................................56
6.5 Succession and Assignment..............................56
6.6 Counterparts...........................................56
6.7 Headings...............................................56
6.8 Notices................................................57
6.9 Governing Law..........................................58
6.10 Amendments and Waivers.................................58
6.11 Severability...........................................58
6.12 Expenses...............................................59
6.13 Specific Performance...................................59
6.14 Submission to Jurisdiction.............................59
6.15 Bulk Transfer Laws.....................................60
6.16 Construction...........................................60
6.17 Incorporation of Exhibits and Schedules................61
6.18 Facsimile Signature....................................61
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Disclosure Schedule
Exhibits:
Exhibit A - Form of IP Agreement
Exhibit B - Form of Trademark License Agreement
Exhibit C - Form of Xxxx of Sale
Exhibit D - Form of Trademark Assignment Agreement
Exhibit E - Form of Assumption Agreement
Exhibit F1 - Form of Promissory Note (Q&CW Inventory)
Exhibit F2 - Form of Promissory Note (Inventory)
Exhibit F3 - Form of Promissory Note (Referral Fees and Fixed Assets)
Exhibit G1 - Form of Security Agreement (Q&CW Inventory)
Exhibit G2 - Form of Security Agreement (Inventory)
Exhibit G3 - Form of Security Agreement (Referral Fees and Fixed Assets)
Exhibit H - Form of Transition Services Agreement
Exhibit I - Form of Loaned Employee Agreement
Exhibit J - Form of Supply Agreement
Exhibit K - Form of Subcontracting Agreement
Exhibit L - Form of Interoperability Agreement
Exhibit M - Form of Equipment Lease Agreement
Exhibit N - Form of Real Estate Sublease
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TABLE OF DEFINED TERMS
DEFINED TERM SECTION
------------ -------
1060 Forms 1.2(e)
AccessNode Known Product Deficiencies Program 1.5
Accredited Investor 2.16
Acquired Assets 1.1(a)
Additional Taxes 1.4(d)
Additional Transferred Purchase Orders 1.6
Affiliates 6.3
Agreed Amount 4.3(b)
Agreement Preliminary Statement
Ancillary Agreements 1.3(b)(viii)(I)
Arbitrator 1.2(d)
Asset Allocation Schedule 1.2(b)
Assumed Liabilities 1.1(d)(viii)
Assumed Liability Claims 4.2(d)
Assumption Agreement 1.1(d)
Business Day 1.4(d)
Buyer Preliminary Statement
Buyer Assumed Purchase Orders 1.1(a)(iii)(C)
Buyer Employee Plan 3.7
Buyer Employment Claims 5.6(b)
Buyer Fraud Claims 4.1(e)
Buyer General Claims 4.1(a)
Buyer Indemnified Parties 4.1
Buyer Material Adverse Effect 3.3(d)
Buyer Organizational Claims 4.1(c)
Claim Notice 4.3(b)
Claimed Amount 4.3(b)
Closing 1.3(a)
Closing Date 1.3(a)
COBRA 5.6(a)(i)
Code 1.2(b)
Competitive Business 5.3
Contracts 1.1(a)(iii)
Corporate Desktop Software 2.7(d)(iv)
Customers 1.1(a)(v)
Damages 4.1
Deferred Asset 1.4(a)
Deferred Transfer 1.4(c)
Deficiency Notice 5.11
Desktop Software 2.7(d)(iv)
Disclosure Schedule Article II
Dispute Notice 1.2(c)
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DEFINED TERM SECTION
------------ -------
ECMs 5.4
Effective Time 1.3(a)
Employee Information 1.1(a)(vii)
Equipment 1.1(a)(ii)
Excluded Liabilities 1.5
Excluded Liability Claims 4.1(b)
Financing Documents 1.3(b)(v)
Financing Statements 1.3(b)(iv)
Governmental Entity 2.5(b)
Hire Date 5.6(a)(iii)
Indemnified Party 4.3(a)
Indemnifying Party 4.3(a)
Information 5.2(a)
Inventory 1.1(a)(i)
Inventory Delivery Record 5.11
Intellectual Property 2.7(d)(i)
IP Agreement Introduction
Leave Employee 5.6(d)
Loaned Employee 5.6(e)
Loaned Employee Agreement 1.3(b)(viii)(D)
Noncompetition Party 5.3
Non-Purchase Money Security Agreement 1.3(b)(iv)
Non-Transferable Third Party Software Licenses 2.7(d)(ii)
Nortel Networks Companies 5.3
Ordinary Course of Business 2.3(c)
Parent 1.1(a)
Parties Preliminary Statement
Permits 2.18
Permitted Liens 2.3(c)
Post-Closing Claims 4.2(b)
Post-Closing Purchase Orders 1.1(a)(iii)(C)
Product Employee 2.12(c)
Product Financial Information 2.17
Product Material Adverse Effect 2.1
Products Introduction
Promissory Notes 1.2(a)(ii)
Purchase Money Financing Statements 1.2A
Purchase Money Security Agreements 1.2A
Purchase Price 1.2(a)
Purchase Price Adjustment 1.6
Q&CW Purchase Orders 1.1(a)(iii)(C)
Raleigh Facilities 1.1(a)(i)
Repair Inventory 1.1(a)(i)
Securities Act 2.16
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DEFINED TERM SECTION
------------ -------
Security Agreement 1.3(b)(iv)
Security Interest 2.3(c)
Seller Preliminary Statement
Seller Employee Plan 2.12(a)
Seller Employment Claims 5.6(a)
Seller Fraud Claims 4.2(f)
Seller General Claims 4.2(a)
Seller Indemnified Parties 4.2
Seller Organizational Claims 4.2(e)
Seller Retained Purchase Orders 1.1(b)(ii)
Seller's knowledge 5.5
Tangible Personal Property 1.1(a)(ii)
Trademark Agreement Introduction
Transferable Third Party Software Licenses 2.7(d)(iii)
Transferred Employees 3.8
Transferred Purchase Orders 1.1(a)(iii)(C)
WARN 5.6(a)(i)
Warranty and Repair Obligations 1.1(d)(iv)
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PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT ("Agreement") is entered into as of August
24, 2001 between Nortel Networks Inc., a Delaware corporation ("Seller"), and
Zhone Technologies, Inc., a Delaware corporation ("Buyer"). Seller and Buyer are
referred to together herein as the "Parties."
INTRODUCTION
WHEREAS, Seller is engaged in the business of manufacturing, selling and
supporting copper digital loop carriers, consisting of its AccessNode ABM shelf,
AccessNode CDS shelf, AccessNode Express, Universal Edge 9000 DLC access shelf
and Universal Edge 9000 Remote access shelf product lines (the "Products");
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to sell
to Buyer, certain assets of Seller relating to the manufacture, sale and support
of the Products subject to the assumption of related liabilities upon the terms
and subject to the conditions set forth herein; and
WHEREAS, Buyer desires to license from Seller, and Seller desires to
license to Buyer, certain of the intellectual property related to the Products
on the terms and conditions set forth in that certain Intellectual Property
Agreement in the form attached hereto as Exhibit A (the "IP Agreement") and that
certain Trademark License Agreement in the form attached hereto as Exhibit B
(the "Trademark Agreement").
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Parties agree as follows:
ARTICLE I
ASSET PURCHASE
1.1 Purchase and Sale of Assets; Assumption of Liabilities.
(a) Transfer of Assets. On the basis of the representations,
warranties, covenants and agreements set forth in this Agreement, as of the
Effective Time, Seller shall sell, convey, assign, transfer and deliver (or,
with respect to clause (iv) below, cause Nortel Networks Limited ("Parent") to
sell, convey, assign, transfer and deliver) to Buyer, and Buyer shall purchase
and acquire from Seller (or Parent, as the case may be), all of its right, title
and interest in and to certain of the assets, rights, contracts and business of
Seller (or Parent, as the case may be) at the Closing Date which are utilized in
the manufacture, sale and support of the Products, as set forth below (the
"Acquired Assets"), free and clear of all Security Interests:
(i) The inventory of finished goods and semi-finished goods
(requiring final testing) relating to the Products on hand in Raleigh, North
Carolina (the "Raleigh Facilities"), in transit or in the distribution system of
Seller on the Closing Date, all as set forth on Schedule 1.1(a)(i)(A) (the
"Inventory"), together with spare parts and repair inventory related to the
Products, as such spare parts and repair inventory are set forth on Schedule
1.1(a)(i)(B) (the "Repair Inventory");
(ii) (A) The test and lab equipment, machinery and tools, all
as set forth on Schedule 1.1(a)(ii)(A), and (B) the other tangible personal
property pertaining to the manufacture, sale and support of the Products, all as
set forth on Schedule 1.1(a)(ii)(B) (the items set forth in subclause (A) and
subclause (B) above, collectively, the "Equipment," and together with the
Inventory, the "Tangible Personal Property"), and all representations,
warranties and 2
guarantees, if any, express or implied, existing for the benefit of Seller in
connection with the Equipment to the extent transferable;
(iii) The following contracts, or portions thereof relating to
the Products (collectively, the "Contracts"):
(A) agreements with customers for the purchase of the
Products, all as set forth on Schedule 1.1(a) (iii)(A);
(B) leases and other agreements related to the
Products, including Transferable Third Party Software Licenses and licenses for
Desktop Software, all as set forth on Schedule 1.1(a)(iii)(B); and
(C) those certain purchase orders for the sale of
Products (1) received by Seller on or prior to the Closing Date, all as set
forth on Schedule 1.1(a)(iii)(C) (the "Transferred Purchase Orders"), which
include Seller's purchase orders from Qwest Communications Corporation and Cable
and Wireless Barbados (the "Q&CW Purchase Orders"), and (2) received by Seller
or Buyer after the Closing Date pursuant to contractual obligations of Seller
existing as of the Closing Date, but excluding any purchase orders pursuant to
the agreements listed on Schedule 1.1(a)(iii)(A) and any purchase orders for the
sale of inventory held by Seller in excess of the inventory sold to Buyer
hereunder (the "Post-Closing Purchase Orders", and together with the Transferred
Purchase Orders, the "Buyer Assumed Purchase Orders");
(iv) All trademarks, trademark registrations and trade names
which are specific to the Products (together with the goodwill associated
therewith), all as set forth on Schedule 1.1(a)(iv);
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(v) All customer information with respect to the Products,
including information relating to sales, installed base, equipment shipped,
products under warranties, duration of warranties and point of sale information
to the extent such information is in existence on the Closing Date, for the
customers listed on Schedule 1.1(a)(v) (the "Customers");
(vi) All training materials, vendor lists, catalogs, research
material, quality control data, product history information, product plans and
roadmaps, configuration guides, and sales and marketing material which are
specific to the Products, including the web-based training module, and with
respect to items listed in this clause (vi) above that relate both to products
of Seller that are not being conveyed hereunder as well as to the Products,
copies of such items as they relate to the Products; and
(vii) The Employee data related to Transferred Employees, all
as set forth in Section 2.12(c) of the Disclosure Schedule (the "Employee
Information").
(b) Excluded Assets. It is expressly understood and agreed that the
Acquired Assets shall not include Seller's right, title and interest in and to
the following:
(i) All Product inventory of raw material and work in
process;
(ii) Those certain purchase orders booked by Seller on or
prior to the Closing Date which are deliverable to customers on a commercially
reasonable basis on or prior to September 30, 2001, all of which are set forth
on Schedule 1.1(b)(ii) (the "Seller Retained Purchase Orders") and all Product
inventory of finished goods and semi-finished goods (requiring final testing)
relating to the Products on hand at the Raleigh Facilities, in transit or in the
distribution system of Seller on the Closing Date required to satisfy the Seller
Retained
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Purchase Orders (it being understood by the Parties that the Seller Retained
Purchase Orders shall exclude the Q&CW Purchase Orders);
(iii) All Product inventory of finished goods and semi-finished
goods (requiring final testing) specific to the AccessNode Express product line;
(iv) All other products of Seller, including the Universal
Edge 9000i access shelf and Universal Edge 9000 DMS access shelf product lines;
(v) (A) The contractual rights in those certain Contracts
listed on Schedule 1.1(b)(v) related to Seller's business that are not specific
to the manufacture or sale of the Products and (B) all other assets relating to
the manufacture, sale or support of the Products other than those specifically
identified in Section 1.1(a) above, including without limitation the accounts
receivable and other receivables of Seller (whether or not billed) relating to
the Products; and
(vi) The employee data, including records, pertaining to
Transferred Employees, except for the Employee Information.
(c) Instruments of Conveyance and Transfer. On the Closing Date, Seller
shall deliver or cause to be delivered to Buyer:
(i) A Xxxx of Sale in substantially the form attached hereto
as Exhibit C;
(ii) A Trademark Assignment Agreement in substantially the
form attached hereto as Exhibit D; and
(iii) Such other deeds, bills of sale, endorsements, consents,
assignments and other good and sufficient instruments of conveyance and
assignment as the
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Parties and their respective counsel shall deem necessary or appropriate or as
may be required by the jurisdiction of organization of Seller or Buyer to vest
in Buyer all right, title and interest of Seller, subject to Section 1.4, in and
to the Acquired Assets.
(d) Assumed Liabilities. On the Closing Date, Buyer shall deliver to
Seller an undertaking (the "Assumption Agreement"), in the form attached hereto
as Exhibit E, pursuant to which Buyer, on and as of the Closing Date, shall
assume and agree to pay, perform and discharge when due, upon the terms and
subject to the conditions of this Agreement, the following liabilities and
obligations:
(i) All liabilities and obligations of Seller under the
Contracts other than liabilities and obligations arising from a breach, default
or violation of a Contract (other than breaches of warranty) by Seller;
(ii) All liabilities and obligations (A) in respect of any
Acquired Asset arising or incurred by Buyer on and after the Closing Date, and
(B) in respect of Products sold or to be sold pursuant to Buyer Assumed Purchase
Orders;
(iii) All liabilities and obligations of Seller which arise on
account of Buyer's use of the Acquired Assets and/or the manufacture, sale or
support of any Products manufactured and/or sold and/or supported by Buyer on
and after the Closing Date;
(iv) All liabilities and obligations of Seller to provide
Customers with (A) software and hardware warranty or maintenance services (both
during the warranty period and after the warranty period) for Products
manufactured and sold to Customers, (B) repair and replacement services, (C)
technical support and (D) software support, including software upgrades,
excluding liabilities and obligations for (1) Seller's service and support
plans, as listed
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on Schedule 1.5(a), and (2) Seller's AccessNode Known Product Deficiencies
Program, as described on Schedule 1.5(b) (all liabilities and obligations
assumed pursuant to this clause (iv), as set forth on Schedule 1.1(d)(iv), the
"Warranty and Repair Obligations");
(v) All liabilities and obligations under the licenses for
the Desktop Software;
(vi) All liabilities and obligations in respect of employee
relations and benefits expressly assumed by Buyer pursuant to Section 5.6;
(vii) All training liabilities and obligations related to the
Products, all as set forth on Schedule 1.1(d)(vii); and
(viii) All other liabilities and obligations listed on Schedule
1.1(d)(viii). The liabilities and obligations assumed by Buyer in accordance
with this Section 1.1(d) are sometimes hereinafter referred to as the "Assumed
Liabilities."
1.2 Purchase Price and Related Matters.
(a) Purchase Price. Subject to adjustment as provided in Section 1.6,
the purchase price to be paid by Buyer for the Acquired Assets shall be
THIRTY-NINE MILLION ONE HUNDRED FORTY-THREE THOUSAND FOUR HUNDRED THIRTY-SIX
DOLLARS ($39,143,436) (the "Purchase Price"), which shall be payable as follows:
(i) Buyer shall pay Seller at the Closing by wire transfer or
other delivery of immediately available funds an amount equal to FIVE MILLION
DOLLARS ($5,000,000.00); and
(ii) Buyer shall deliver to Seller three (3) Secured
Promissory Notes in the forms attached hereto as Exhibits F1, F2 and F3 (the
"Promissory Notes") in an aggregate
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amount equal to THIRTY-FOUR MILLION ONE HUNDRED FORTY-THREE THOUSAND FOUR
HUNDRED THIRTY-SIX DOLLARS ($34,143,436). For the avoidance of doubt, the
Parties intend that the dollar amount of the Promissory Notes in the aggregate
shall equal the sum of (A) 100% of Seller's standard cost for the Inventory used
to fulfill the Q&CW Purchase Orders (as reflected in Exhibit F1), (B) 75% of
Seller's standard cost for the Inventory (as reflected in Exhibit F2, which
excludes such Inventory used to fulfill the Q&CW Purchase Orders) and (C)
referral fees of 4% of the aggregate invoice price of the Transferred Purchase
Orders, excluding the Q&CW Purchase Orders, plus $1,030,880 (as reflected in
Exhibit F3).
(b) Allocation. As soon as practicable following the Closing Date,
Buyer shall deliver to Seller an allocation schedule (the "Asset Allocation
Schedule") allocating the portion of the Purchase Price and the Assumed
Liabilities attributable to the sale of Acquired Assets by Seller among the
Acquired Assets of Seller as of the Closing Date. The Asset Allocation Schedule
shall be prepared in accordance with the rules under Section 1060 of the
Internal Revenue Code of 1986, as amended (the "Code"), and the Treasury
Regulations promulgated thereunder. The Parties recognize that the Purchase
Price and Assumed Liabilities do not include Buyer's acquisition expenses and
that Buyer will allocate such expenses appropriately.
(c) If Seller disagrees with the Asset Allocation Schedule, Seller
shall give Buyer a written notice (a "Dispute Notice") explaining in reasonable
detail the basis of such disagreement within thirty (30) Business Days (as
defined below) after Seller's receipt of the Asset Allocation Schedule and such
disagreement shall be resolved as provided below in this Section. If Seller
agrees in writing with the Asset Allocation Schedule or if Seller does not
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timely give Buyer a Dispute Notice, the Asset Allocation Schedule shall be
final, binding and conclusive on Seller.
(d) Buyer and Seller shall use commercially reasonable efforts for a
period of thirty (30) Business Days following a Dispute Notice to resolve any
disagreement. If Buyer and Seller have been unable to resolve the disagreement
by the end of such period, a mutually agreed upon expert (the "Arbitrator")
shall be retained to make a determination on the matter in dispute. The
determination of the Arbitrator shall be final, binding and conclusive on the
Parties. The fees and expenses of the Arbitrator shall be borne equally by Buyer
and Seller.
(e) Seller and Buyer agree to act in accordance with the computations
and allocations contained in the Asset Allocation Schedule in any relevant tax
returns or filings (including any forms or reports required to be filed pursuant
to Section 1060 of the Code, the Treasury Regulations promulgated thereunder or
any provisions of local, state and foreign law ("1060 Forms")), and to cooperate
in the preparation of any 1060 Forms and to file such 1060 Forms in the manner
required by applicable law.
1.2A Pre-Closing Actions. Prior to the Closing, Buyer shall deliver to
Seller (i) a Security Agreement related to the security interest of Seller in
the Inventory used to fulfill the Q&CW Purchase Orders, in the form attached
hereto as Xxxxxxx X0, (xx) a Security Agreement related to the security interest
of Seller in the Inventory (excluding the Inventory used to fulfill the Q&CW
Purchase Orders), in the form attached hereto as Exhibit G2 (collectively, the
"Purchase Money Security Agreements"), and (iii) such UCC financing statements
as may be required by Seller to perfect security interests granted to Seller
pursuant to the Purchase Money
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Security Agreements, in such form as prepared by Seller (the "Purchase Money
Financing Statements").
1.3 The Closing.
(a) Time and Location. The closing of the transactions contemplated
by this Agreement ("Closing") shall take place at the offices of Xxxx and Xxxx
LLP in Boston, Massachusetts, commencing at 10:00 a.m., local time, on August
24, 2001 (the "Closing Date"), and the Closing shall be deemed effective as of
12:01 a.m. on the Closing Date (the "Effective Time"), except (i) for the risk
of loss related to the Acquired Assets, pursuant to Section 5.12 the Effective
Time shall be deemed to be 5:00 p.m., local time, on the Closing Date, and (ii)
for Buyer's employment of the Transferred Employees, pursuant to Section 5.6 the
Effective Time shall be deemed to be 12:01 a.m. on August 25, 2001.
(b) Actions at the Closing. At the Closing:
(i) Seller shall deliver to Buyer an executed Xxxx of Sale
and Trademark Assignment Agreement and such other instruments of conveyance as
Buyer may reasonably request in order to effect the sale, transfer, conveyance
and assignment to Buyer of valid ownership of the Acquired Assets;
(ii) Buyer shall deliver to Seller an executed Assumption
Agreement and such other instruments as Seller may reasonably request in order
to effect the assumption by Buyer of the Assumed Liabilities;
(iii) Buyer shall pay to Seller by wire transfer or other
delivery of immediately available funds the cash consideration set forth in
Section 1.2(a)(i) above;
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(iv) Buyer shall deliver to Seller a Security Agreement
related to the security interest of Seller in the Equipment in the form attached
hereto as Exhibit G3 (the "Non-Purchase Money Security Agreement" and, together
with the Purchase Money Security Agreements, the "Security Agreements") and such
UCC financing statements as may be required by Seller to perfect security
interests granted to Seller pursuant to the Non-Purchase Money Security
Agreement, in such form as prepared by Seller (together with the Purchase Money
Financing Statements, the "Financing Statements");
(v) Buyer shall deliver to Seller the Promissory Notes
(together with the Security Agreements and the Financing Statements, the
"Financing Documents");
(vi) Seller shall deliver to Buyer, or otherwise provide Buyer
access to and control of, all of the Acquired Assets of a tangible nature;
(vii) Buyer shall furnish to Seller, in proper form as
presented by Seller, all resale, exempt use or other certificates as may be
applicable to the transactions contemplated by this Agreement;
(viii) Buyer and Seller shall enter (or Seller shall cause
Parent to enter) into the following ancillary agreements:
(A) IP Agreement;
(B) Trademark Agreement;
(C) Transition Services Agreement in the form
attached hereto as Exhibit H;
(D) Loaned Employee Agreement in the form attached
hereto as Exhibit I ("Loaned Employee Agreement");
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(E) Supply Agreement in the form attached hereto as
Exhibit J;
(F) Subcontracting Agreement in the form attached
hereto as Exhibit K;
(G) Interoperability Agreement in the form attached
hereto as Exhibit L;
(H) Equipment Lease Agreement in the form attached
hereto as Exhibit M; and
(I) Real Estate Sublease in the form attached hereto
as Exhibit N (the agreements set forth in this Section 1.3(b)(viii) are
sometimes referred to herein as the "Ancillary Agreements");
(ix) Buyer and Seller shall execute and deliver to each other
a cross-receipt evidencing the purchase and sale of the Acquired Assets; and
(x) Each of Seller and Buyer shall provide an officer's
certificate to the other Party, certifying (A) that the attached certificate of
incorporation of such Party is true and correct; (B) that the attached bylaws of
such Party are true and correct; (C) that the attached resolutions of the board
of directors of such Party authorizing the transactions contemplated by this
Agreement are true and correct and have not been repealed, amended or modified,
and (D) that the signature of the authorized officer set forth on such
certificate is true and correct.
1.4 Assignment of Contracts and Rights.
(a) Anything in this Agreement to the contrary notwithstanding, this
Agreement shall not constitute an agreement to assign or otherwise sell, convey
or transfer any Acquired Asset, or to enter into any other agreement or
arrangement with respect thereto, if an
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attempted assignment, sale, conveyance or transfer thereof, or entering into any
such agreement or arrangement, without the consent of a third party, would
constitute a breach of, or other contravention under, any agreement to which
Seller is a party, be ineffective with respect to any third party or in any way
materially adversely affect the rights of Seller or Buyer thereunder. With
respect to any such Acquired Asset (the "Deferred Asset"), promptly after the
date hereof, Seller shall use commercially reasonable efforts, with Buyer's
reasonable assistance, to obtain the written consent of the other parties to any
such Deferred Asset for the assignment thereof to Buyer, or written confirmation
from such parties reasonably satisfactory in form and substance to Buyer
confirming that such consent is not required; provided that neither Seller nor
Buyer shall be required to make any payments or agree to any material
undertakings in connection therewith.
(b) If the consent or confirmation is not obtained with respect to
any such Deferred Asset, as among the Parties, Buyer shall obtain, to the extent
possible, through a mutually agreeable subcontracting or subleasing arrangement
or otherwise, and subject to applicable laws and regulations and the terms of
such Deferred Asset, the claims, rights and benefits of Seller and, to the
extent possible, assume the obligations under such Deferred Asset in accordance
with this Agreement, and Seller shall enforce at the request of and for the
benefit of Buyer, at Buyer's sole expense and with Buyer assuming Seller's
obligations, any and all claims, rights and benefits of Seller against any third
party thereto arising from any such Deferred Asset (including the right to elect
to terminate such Deferred Asset (as it may specifically relate to the Products)
in accordance with the terms thereof upon the request of Buyer).
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(c) Until such time as either (i) Buyer has been provided with a
mutually agreeable subcontracting or subleasing arrangement pursuant to clause
(b) above, or (ii) such Deferred Asset has been transferred to Buyer pursuant to
Section 1.4(f) below (a "Deferred Transfer"), each Deferred Asset shall be held
for Buyer's benefit and the Acquired Assets constituting Deferred Assets shall
be managed and operated by Seller for Buyer's benefit and account in the manner
hereinafter provided from the Closing to the time of the respective Deferred
Transfers, with all gains, income, losses, taxes or other items generated
thereby to be for Buyer's account. Notwithstanding the provisions of Article IV,
Seller shall not have any liability to Buyer arising out of the management or
operation by Seller of any Acquired Asset constituting Deferred Assets, other
than for gross negligence or willful misconduct.
(d) Buyer shall reimburse Seller and shall hold Seller harmless from
and against all liabilities incurred or asserted as a result of Seller's
post-Closing direct or indirect ownership, management, operation or sale (other
than to Buyer) of the Deferred Assets, including, without limitation, the amount
of any additional taxes (the "Additional Taxes") incurred by Seller (whether
currently or in the future) as a result of the direct or indirect ownership,
management, operation or sale (other than to Buyer) of the Deferred Assets after
the Closing Date. For purposes of this Section 1.4(d), the amount of Additional
Taxes of Seller shall be computed as if Seller's sole activities were limited to
the ownership, management, operation or sale (other than to Buyer) of the
Deferred Assets. Such reimbursement shall be made by Buyer and received by
Seller within fifteen (15) Business Days of Buyer's receipt of any xxxx, claim,
invoice or other request for payment from Seller together with reasonable
support therefor, provided that Buyer shall have the right to dispute, at
Buyer's own expense, any non-
14
income tax assessment or proposed assessment relating to the Deferred Assets
pursuant to applicable law and, in such event, payment for the disputed amount
(plus interest and penalties assessed as a result of such dispute) shall not be
due prior to resolution of the dispute or, if sooner, at the time that Seller is
required to pay the tax associated with the assessment or proposed assessment.
In the event that Buyer disputes any non-income tax assessment pursuant hereto,
Seller shall cooperate therewith in all reasonable respects; provided, however,
that Buyer shall reimburse Seller for all reasonable expenses in connection
therewith. In the event that Seller receives a refund of any taxes attributable
to its ownership of the Deferred Assets which taxes were paid or borne by Buyer,
Seller shall promptly submit such refund to Buyer. For purposes of this
Agreement, "Business Day" shall mean any day other than a Saturday or Sunday or
a day on which banking institutions located in New York, New York are permitted
or required by law, executive order or governmental decree to remain closed.
(e) From the Closing to the date of the Deferred Transfer or the
sublicense or sublease pursuant to clause (b) above, Seller shall hold the
Deferred Assets and hold or operate the Acquired Assets constituting the
Deferred Assets only in the ordinary course substantially consistent with past
practice; provided, however, that Seller shall not be required to finance the
operations of the manufacture, sale or support of the Products, directly or
indirectly. Subject to applicable law and regulations, Seller shall, in respect
of any Deferred Assets, use all commercially reasonable efforts to follow and
implement the reasonable written instructions and policies of Buyer relating to
the holding of the Deferred Assets.
(f) The bills of sale, endorsements, consents, assignments and other
good and sufficient instruments of conveyance and assignment relating to the
relevant Acquired Assets as
15
are necessary under applicable law in order to transfer effectively such
Deferred Assets, free and clear of all Security Interests (except for Security
Interests which were created for Buyer's benefit during the period the Deferred
Assets were being held for Buyer's benefit), will be delivered to Buyer on the
date which is ten (10) Business Days after all approvals relating to any such
Deferred Asset or the transfer thereof shall have been obtained or on such other
date as the Parties hereto may mutually agree.
1.5 Excluded Liabilities. Notwithstanding any other provision of this
Agreement, except for the Assumed Liabilities specified in Section 1.1(d), Buyer
shall not assume, or otherwise be responsible for, any liabilities or
obligations of Seller, whether actual or contingent, matured or unmatured,
liquidated or unliquidated, or known or unknown, whether arising out of
occurrences prior to, at or after the date hereof, including without limitation,
(a) all liabilities and obligations arising from Seller's service and support
plans, as listed on Schedule 1.5(a), (b) all liabilities and obligations arising
from Seller's AccessNode Known Product Deficiencies Program, as described on
Schedule 1.5(b) (the "AccessNode Known Product Deficiencies Program"), (c) all
federal, state, local and foreign taxes of any kind of Seller, including without
limitation any such taxes relating to the manufacture, sale or support of the
Products prior to the Closing (other than taxes relating to the Buyer Assumed
Purchase Orders), (d) all liabilities and obligations arising from any breach,
default or violation of any Contract by Seller prior to the Closing (other than
breaches of warranty), (e) all liabilities and obligations arising from any
violation or alleged violation by Seller of any federal, state, local or foreign
environmental or public health and safety law of any kind, including without
limitation any such violation or alleged violation relating to the manufacture,
sale or support of the Products prior to the Closing,
16
(f) with respect to Products no longer within the warranty period, all
liabilities and obligations arising from any claim of design or other defect
with respect to any Product manufactured, sold or supported by Seller, (g) all
liabilities and obligations arising from any injury to individuals or property
as a result of the ownership, possession or use of any Product that was
manufactured, sold or supported by Seller, and (h) except for the Contracts
listed on Schedule 1.1(a)(iii)(A), all liabilities and obligations to return any
Product that was manufactured, sold or supported by Seller (other than for
warranty or maintenance work) (provided that, in the case of this clause (h), in
the event Buyer agrees in its sole discretion to accept such a return, Seller
shall not be responsible for any resulting liabilities or obligations)
(collectively, "Excluded Liabilities"). For the avoidance of doubt, the Parties
agree that, notwithstanding anything to the contrary in this Section 1.5, Buyer
shall remain liable for all Assumed Liabilities, including without limitation
the Warranty and Repair Obligations.
1.6 Additional Transferred Purchase Orders. Within thirty (30) days after
the Closing Date, Seller shall prepare and deliver to Buyer a revised Schedule
1.1(a)(iii)(C) to include any purchase orders for the sale of Products received
by Seller on or prior to the Closing Date but not listed on Schedule
1.1(a)(iii)(C) up to a maximum aggregate invoice price of $250,000 (the
"Additional Transferred Purchase Orders"). The Purchase Price shall be increased
by an amount equal to 4% of the aggregate invoice price of the Additional
Transferred Purchase Orders, not to exceed $10,000 (the "Purchase Price
Adjustment"). The Purchase Price Adjustment shall be paid by Buyer to Seller by
wire transfer or other delivery of available funds within sixty (60) days after
the Closing Date.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the disclosure schedule attached hereto (the
"Disclosure Schedule"), Seller represents and warrants to Buyer as of the date
hereof as follows:
2.1 Organization, Qualification and Corporate Power. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is duly qualified to conduct business under the
laws of each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its activities, in each case as they relate to
the manufacture, sale or support of the Products, makes such qualification
necessary, except for any such failures to be qualified that would not
reasonably be expected to have a Product Material Adverse Effect. For purposes
of this Agreement, "Product Material Adverse Effect" means any change, effect or
circumstance that (a) would have the effect of materially impairing Seller's
ability to manufacture, sell or support the Products, considered as a group, or
(b) materially impairs the ability of Seller to consummate the transactions
contemplated by this Agreement or any event or condition that would, with the
passage of time, constitute such a change, effect or circumstance; provided,
however, that a Product Material Adverse Effect shall not include any adverse
change, effect or circumstance (i) primarily arising out of or resulting
primarily from actions expressly contemplated by the Parties in connection with
this Agreement, including without limitation, the origination or modification of
contract manufacturing relationships by any of the Parties with respect to the
Products, or (ii) that is primarily attributable to the announcement or
performance of this Agreement or the transactions contemplated by this
Agreement.
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2.2 Affiliates of Seller. There are no subsidiaries or other Affiliates of
Seller that own or otherwise have any contractual rights to any of the Acquired
Assets, except with respect to the Intellectual Property, which rights are held
by Parent.
2.3 Title to Property.
(a) Seller (and Parent, with respect to the trademarks and trademark
registrations set forth in Section 1.1(a)(iv)) has and will transfer to Buyer
good and valid title to, or a valid and binding leasehold interest in, the
Acquired Assets, free and clear of any Security Interests. Upon consummation of
the transactions contemplated by this Agreement, Buyer will acquire good and
valid title to, or a valid and binding leasehold interest in, all of the
Acquired Assets, free and clear of any Security Interests.
(b) The Inventory is new and unused and has not been damaged. The
Equipment is in good operating condition (normal wear and tear excepted) and to
the knowledge of Seller has been maintained in accordance with customary
industry practice. Seller is in material compliance with applicable laws and
regulations relating to its construction, use and operation, other than where
the failure to have complied would not reasonably be expected to have a Product
Material Adverse Effect.
(c) For purposes of this Agreement, "Security Interest" means any
claim, mortgage, pledge, security interest, encumbrance, charge or other lien of
any kind (whether arising by contract or by operation of law or otherwise),
other than (i) mechanic's, materialmen's, landlord's and similar liens, (ii)
liens arising under worker's compensation, unemployment insurance, social
security, retirement and similar legislation, (iii) liens on goods in transit
incurred pursuant to documentary letters of credit, in each case arising in the
ordinary
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course of business consistent in all material respects with past custom and
practice of the manufacture, sale and support of the Products ("Ordinary Course
of Business"), (iv) liens for taxes not yet due and payable, (v) liens for taxes
which are being contested in good faith and by appropriate proceedings, and (vi)
liens arising solely by action of Buyer (such items set forth in clauses (i)
through (vi) above, the "Permitted Liens"). Seller hereby agrees that Buyer's
right to indemnification under Article IV shall apply to any Damages of Buyer
arising out of or resulting from the Permitted Liens; provided that the
limitations set forth in Sections 4.5(b)(ii) and 4.5(b)(iv) shall not apply to
such Damages.
2.4 Authority. Seller (or Parent, with respect to the IP Agreement and
Trademark Agreement) has all requisite corporate power and authority to execute
and deliver this Agreement and the Ancillary Agreements and to perform its
obligations hereunder and thereunder. The execution and delivery of this
Agreement and the Ancillary Agreements by Seller (or Parent, as the case may be)
and the performance by Seller (or Parent, as the case may be) of its obligations
hereunder and thereunder and the consummation by Seller (or Parent, as the case
may be) of the transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action on the part of Seller (or
Parent, as the case may be). This Agreement has been, and, when executed, each
Ancillary Agreement will be, duly and validly executed and delivered by Seller
(or Parent, as the case may be) and, assuming this Agreement and each Ancillary
Agreement constitutes or will constitute, as the case may be, the valid and
binding agreement of Buyer, such agreement constitutes or will constitute, as
the case may be, a valid and binding obligation of Seller (or Parent, as the
case may be), enforceable against Seller (or Parent, as the case may be) in
accordance with its terms, except as
20
enforceability may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors generally and by equitable principles, including those
limiting the availability of specific performance, injunctive relief and other
equitable remedies and those providing for equitable defenses.
2.5 Noncontravention. Neither the execution and delivery of this Agreement
or the Ancillary Agreements by Seller (or Parent, as the case may be), nor the
consummation by Seller (or Parent, as the case may be) of the transactions
contemplated hereby or thereby, will:
(a) Conflict with or violate any provision of the charter or bylaws
of Seller (or Parent, as the case may be);
(b) Require on the part of Seller (or Parent, as the case may be) any
filing with, or any permit, authorization, consent or approval of, any foreign,
federal, state or local court, arbitrational tribunal, administrative agency or
commission or other governmental or regulatory authority or agency (a
"Governmental Entity"), except for any filing, permit, authorization, consent or
approval which if not obtained or made would not reasonably be expected to have
a Product Material Adverse Effect;
(c) Conflict with, result in a breach of, constitute (with or without
due notice or lapse of time or both) a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify or cancel, or
require any notice, consent or waiver under, any Contract, except for (i) those
consents which have previously been obtained, (ii) those consents identified in
Section 2.5(c) of the Disclosure Schedule, or (iii) any conflict, breach,
default, acceleration, right to accelerate, termination, modification,
cancellation, notice, consent or waiver that would not reasonably be expected to
have a Product Material Adverse Effect;
21
(d) Result in the imposition of any Security Interest upon the
Acquired Assets; or
(e) Violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Seller (or Parent, as the case may be) or any of or its
properties or assets, except for any violation that would not reasonably be
expected to have a Product Material Adverse Effect.
2.6 Owned and Leased Real Property. The Acquired Assets do not include any
real property or any leased or subleased real property.
2.7 Intellectual Property.
(a) Except for the agreements listed in Section 2.7(a) of the
Disclosure Schedule and the Non-Transferable Third Party Software Licenses, the
Transferable Third Party Software Licenses, the Supply Agreement and the IP
Agreement, to Seller's knowledge there are no other agreements or obligations
relating to the Intellectual Property utilized in the Products that are material
to the Products taken as a whole.
(b) To Seller's knowledge, except as set forth in Section 2.7(b) of
the Disclosure Schedule, no written notice of claims has been received by Seller
during the past two (2) years that the manufacture or support of the Products
has infringed any patent, trademark, trade name, service xxxx or copyright of
any third party.
(c) To Seller's knowledge, Seller has performed the obligations
required to be performed by it under the terms of any agreement pursuant to
which Seller has rights in any Intellectual Property used in the manufacture,
sale or support of the Products, except for any failure to perform that is not
reasonably likely to result in a Product Material Adverse Effect, and
22
neither Seller nor, to Seller's knowledge, any third party is in default under
any such agreement, except for any default that is not reasonably likely to
result in a Product Material Adverse Effect.
(d) For purposes of this Agreement:
(i) "Intellectual Property" means all intellectual property
in any jurisdiction, including: (A) all trademarks, service marks, brand names,
certification marks, trade dress, assumed names, business names, trade names and
other indications of origin; (B) patents and patent rights; (C) trade secrets
and other confidential or non-public business information, including ideas,
formulas, compositions, inventor's notes, discoveries and improvements,
know-how, manufacturing and production processes and techniques, and research
and development information (whether or not patentable), invention disclosures,
unpatented blue prints, drawings, specifications, designs, plans, proposals and
technical data, business and marketing plans, and customer lists and
information; (D) writings and other copyrightable works of authorship, including
computer programs, databases and documentation therefor, and all copyrights to
any of the foregoing; (E) integrated circuit topographies and mask works; (F)
moral rights; (G) features of shape, configuration, pattern or ornament and
design registrations or patents; and (H) registrations of, and applications to
register, any of the foregoing with any Governmental Entity and any renewals or
extensions thereof;
(ii) "Non-Transferable Third Party Software Licenses" means
Seller's rights and obligations under software license agreements with third
parties covering software which is (A) used by Seller in the design,
development, manufacture, testing or sale of the Products as well as elsewhere
in the business of Seller, (B) not assignable by Seller under the
23
terms of the software license agreement or (C) listed under the heading
"Non-Transferable Third Party Software Licenses" in Section 2.7(a) to the
Disclosure Schedule;
(iii) "Transferable Third Party Software Licenses" means
Seller's rights and obligations under software license agreements with third
parties covering software which is (A) used exclusively by Seller in the design,
development, manufacture, testing or sale of the Products, (B) assignable by
Seller to Buyer and (C) listed under the heading "Transferable Third Party
Software Licenses" in Section 2.7(a) to the Disclosure Schedule; and
(iv) "Desktop Software" means (A) software licensed to Seller
under a transferable corporate license which, as of the Closing Date, is
installed on personal computers constituting part of the Equipment and which are
listed or described in Section 2.7(d)(iv) of the Disclosure Schedule ("Corporate
Desktop Software"), and (B) software licensed to Seller under a transferable,
shrink-wrap or click-wrap license agreement for use on a single computer that
is, as of the Closing Date, installed on personal computers constituting part of
the Equipment and which is listed or described in Section 2.7(d)(iv) of the
Disclosure Schedule.
2.8 Contracts.
(a) Seller has made available to Buyer (i) a summary (which is true
and correct in all material respects) of each written contract relating solely
to Buyer's assumption of the applicable Assumed Liabilities and (ii) a true and
correct copy of each written Contract, except that contractual terms and
provisions relating to other products manufactured, sold or supported by Seller
and not relating to the Products have not been summarized or provided (as the
case may be).
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(b) Each Contract is a legal, valid, binding and enforceable
obligation of Seller and, to Seller's knowledge, of each other party thereto
(except as the foregoing may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors generally and by equitable principles,
including those limiting the availability of specific performance, injunctive
relief, and other equitable remedies and those providing for equitable
defenses), and there exist no defaults of Seller, or, to Seller's knowledge, any
other party thereto, except for any such failures to be legal, valid, binding
and enforceable or defaults that would not reasonably be expected to have a
Product Material Adverse Effect. As of the date of this Agreement, Seller has
not received written notice that any party to a Contract intends to terminate
the Contract to which it is a party.
2.9 Warranties and Claims. Other than as set forth in the standard form of
warranties, or the extensions made to such warranties, set forth in Section
2.9(a) of the Disclosure Schedule, Seller has not made any written or other
binding warranty or representation with respect to any of the Products. Section
2.9(b) of the Disclosure Schedule sets forth the open and closed customer call
reports relating to the Products as of August 22, 2001. Other than as set forth
in Section 2.9(b) of the Disclosure Schedule, from January 1, 2000 through
August 22, 2001, Seller, to its knowledge, has not received written notice of
any warranty claim relating to the manufacture, sale or support of the Products
that is reasonably likely to have a Product Material Adverse Effect.
2.10 Litigation. Except as set forth in Section 2.10 of the Disclosure
Schedule, there is no (a) judgment, order, decree, stipulation or injunction
binding upon Seller or its property or business and relating to the Acquired
Assets, or (b) claim, complaint, action, suit, proceeding,
25
hearing or investigation relating to the Acquired Assets of or in any
Governmental Entity or before any arbitrator to which Seller is a party or, to
Seller's knowledge, which has been threatened in writing against Seller that, in
the case of either clause (a) or (b), is reasonably likely to have a Product
Material Adverse Effect.
2.11 Labor Matters. Seller is not a party to or bound by any collective
bargaining agreement relating to the manufacture, sale or support of the
Products, nor has Seller experienced, since January 1, 2000, nor are there
threatened, to Seller's knowledge, any material strikes, grievances, claims of
unfair labor practices, claims under any employee dispute resolution procedure
or other collective bargaining disputes relating to the manufacture, sale or
support of the Products. Seller has no knowledge of any organizational effort
being made or threatened since January 1, 2000 by or on behalf of any labor
union with respect to Transferred Employees. Seller is in compliance with
applicable laws and regulations respecting labor, employment, fair employment
practices, work place safety and health, terms and conditions of employment and
wages and hours with respect to Transferred Employees, except for any failure to
so comply that would not reasonably be expected to have a Product Material
Adverse Effect, and there are no pending claims, suits or proceedings against
Seller under such applicable laws and regulations with respect to Transferred
Employees, except for such claims, suits or proceedings that would not
reasonably be expected to have a Product Material Adverse Effect.
2.12 Employee Benefits.
(a) Section 2.12(a) of the Disclosure Schedule contains a complete
and accurate list of all Seller Employee Plans. For purposes of this Agreement,
"Seller Employee Plan" means any pension plan, supplemental pension plan, profit
sharing plan, savings plan,
26
retirement savings plan, bonus plan, incentive compensation plan, deferred
compensation plan, stock purchase plan, stock option plan, vacation plan, leave
of absence plan, employee assistance plan, automobile leasing/subsidy/allowance
plan, financial counseling plan, redundancy or severance plan, relocation plan,
family support plan, retirement plan, medical, health, hospitalization or life
insurance plan, disability plan, sick leave plan, death benefit plan, or any
similar employee benefit or compensation plan, program, agreement, arrangement
or policy, which is maintained, or contributed to, by Seller or any of its
Affiliates for the benefit of the Transferred Employees. Seller has provided
Buyer with a true and complete copy of the plan document or summary plan
description of each Seller Employee Plan or, if such plan document or summary
plan description does not exist, an accurate written summary of such Seller
Employee Plan. No promises or commitments have been made by Seller to amend or
terminate any Seller Employee Plan, to increase or decrease the compensation or
benefits thereunder or to establish any new Seller Employee Plan, except as
required by applicable law or regulation or as disclosed in the applicable plan
document, summary plan description or written summary. Each Seller Employee Plan
has been administered in accordance with its terms and Seller has met its
obligations with respect to such Seller Employee Plan, except for any failure to
so administer or so meet its obligations that would not reasonably be expected
to have a Product Material Adverse Effect. Seller and the Seller Employee Plans
are in compliance with currently applicable laws and regulations, except for any
failure to so comply that would not reasonably be expected to have a Product
Material Adverse Effect.
(b) There are no claims (except claims for benefits payable in the
normal operation of the Seller Employee Plans), suits or proceedings against or
involving any Seller
27
Employee Plan or asserting any rights or claims to benefits under any Seller
Employee Plan, or, to Seller's knowledge, investigations by any Governmental
Entity involving any Seller Employee Plan, except for any such claims, suits,
proceedings or investigations that would not reasonably be expected to have a
Product Material Adverse Effect.
(c) Section 2.12(c) to the Disclosure Schedule contains a complete
and accurate list of certain employees of Seller that are employed in the
manufacture, sale or support of the Products ("Product Employees") and sets
forth with respect to each employee: (i) name, (ii) home address, (iii)
position, (iv) base salary or hourly rate of pay, as applicable, (v) work
location, (vi) service date and (vii) visa status (if any) and (viii) leave
status (if any).
2.13 Legal Compliance. Seller is in compliance with all applicable laws
(including rules and regulations thereunder) of any federal, state, local or
foreign government, or any Governmental Entity, currently in effect with respect
to the manufacture, sale or support of the Products, except where the failure to
comply therewith would not reasonably be expected to have a Product Material
Adverse Effect. Seller has not received written notice of any pending action,
suit, proceeding, hearing, investigation, claim, demand or notice relating to
the manufacture, sale or support of the Products alleging any failure to so
comply, other than those not reasonably expected to have a Product Material
Adverse Effect.
2.14 Brokers' Fees. Seller has no liability or obligation to pay any fees
or commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement.
2.15 No Other Agreements to Sell the Acquired Assets. None of Seller, its
Affiliates or any of its officers or directors has any commitment or legal
obligation, absolute or contingent,
28
to any other person or entity other than Buyer to sell, assign, transfer or
effect a sale of any of the Acquired Assets(other than in the Ordinary Course
of Business or as contemplated by this Agreement).
2.16 Investment. Seller (a) understands that the Promissory Notes have not
been, and will not be, registered under the Securities Act of 1933, as amended
(the "Securities Act"), or under any state securities laws, and are being
offered and sold in reliance upon federal and state exemptions for transactions
not involving any public offering, (b) is acquiring the Promissory Notes for
investment purposes, and not with a view to the distribution thereof, (c) is a
sophisticated investor with knowledge and experience in business and financial
matters, (d) has received certain information concerning Buyer and has had the
opportunity to obtain additional information as desired in order to evaluate the
merits and risks inherent in holding the Promissory Notes, (e) is able to bear
the economic risk and lack of liquidity inherent in holding the Promissory
Notes, and (f) is an "Accredited Investor" within the meaning of Rule 501(a) of
Regulation D under the Securities Act.
2.17 Financial Information. Seller has delivered to Buyer historical
revenue and direct expense (excluding the allocation of certain administrative
and other overhead expenses of Seller) information relating to the manufacture,
sale and support of the Products for the 12-month period ended December 31, 2000
(the "Product Financial Information"). The Product Financial Information has
been prepared by Seller in good faith and presents fairly, in all material
respects, the information provided. The Product Financial Information was not
prepared in accordance with United States generally accepted accounting
principles.
29
2.18 Permits. Seller has, and is operating in compliance with, all
licenses, franchises, permits and similar authorizations (collectively,
"Permits") required by law to be obtained by Seller to sell and support the
Products and to operate its facility located at 0000 Xxxxxxxx Xxxxxxx,
Xxxxxxxxxx, Xxxxxxx, other than where the failure to have such permit or operate
in compliance therewith would not reasonably be expected to have a Product
Material Adverse Effect. Section 2.18 of the Disclosure Schedule lists all such
Permits. Prior to the Effective Time, all Products were manufactured by third
party contract manufacturers.
2.19 Transactions with Interested Persons. Except with respect to the
Nortel Networks Companies and Arris Group, Inc., Seller does not own, either
directly or indirectly, any material equity interest (which for the purpose of
this Section shall mean 20% of the outstanding voting securities) in any
Customer, or any organization which has an agreement with Seller relating to the
manufacture, sale or support of the Products.
2.20 Customers. Schedule 1.1(a)(v) lists all current and, to Seller's
knowledge, all former customers of the Products.
2.21 No Implied Warranties. The Parties hereto acknowledge and agree that
no representation, warranty, covenant or agreement has been made or relied upon
by any Party hereto other than those expressly set forth in this Agreement or
the Ancillary Agreements. Seller specifically disclaims any and all implied
warranties, including without limitation any implied warranty of merchantability
or fitness for a particular purpose.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as of the date hereof as follows:
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3.1 Organization. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation.
3.2 Authorization of Transaction. Buyer has all requisite corporate power
and authority to execute and deliver this Agreement, the Ancillary Agreements
and the Financing Documents to which it is a party, and to perform its
obligations hereunder and thereunder. The execution and delivery by Buyer of
this Agreement, the Ancillary Agreements and the Financing Documents to which it
is a party, and the performance by Buyer of this Agreement, the Ancillary
Agreements and the Financing Documents to which it is a party, and its
obligations hereunder and thereunder and the consummation by Buyer of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of Buyer. This
Agreement has been, and, when executed, each Ancillary Agreement and Financing
Document to which it is a party will be, duly and validly executed and delivered
by Buyer and, assuming this Agreement, and each Ancillary Agreement constitutes
or will constitute, as the case may be, the valid and binding obligation of
Seller (or Parent, as the case may be), such agreement constitutes or will
constitute, as the case may be, a valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium or other similar laws relating to or affecting the rights of
creditors generally and by equitable principles, including those limiting the
availability of specific performance, injunctive relief and other equitable
remedies and those providing for equitable defenses.
31
3.3 Noncontravention.Neither the execution and delivery by Buyer of this
Agreement or the Ancillary Agreements or the Financing Documents to which it is
a party, nor the consummation by Buyer of the transactions contemplated hereby
or thereby, will:
(a) Conflict with or violate any provision of the charter or bylaws
of Buyer;
(b) Require on the part of Buyer any filing with, or permit,
authorization, consent or approval of, any Governmental Entity, other than any
filing, permit, authorization, consent or approval which if not obtained or made
would not reasonably be expected to have a Buyer Material Adverse Effect;
(c) Conflict with, result in a breach of, constitute (with or without
due notice or lapse of time or both) a default under, result in the acceleration
of, create in any party any right to accelerate, terminate, modify or cancel, or
require any notice, consent or waiver under, any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest or other
arrangement to which Buyer is a party or by which Buyer is bound or to which any
of its assets are subject, other than any conflict, breach, default,
acceleration, right to accelerate, termination, modification, cancellation,
notice, consent or waiver which would not reasonably be expected to have a Buyer
Material Adverse Effect; or
(d) Violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Buyer or any of its properties or assets, other than
any violation which would not reasonably be expected to have a Buyer Material
Adverse Effect. For purposes of this Agreement, "Buyer Material Adverse Effect"
means any change, effect or circumstance that (i) is materially adverse to the
assets, financial condition or results of operations of Buyer, taken
32
as a whole (other than changes that are the result of economic factors affecting
the economy as a whole or changes that are the result of factors affecting the
industry or specific markets in which Buyer competes), or (ii) materially
impairs the ability of Buyer to consummate the transactions contemplated by this
Agreement; provided, however, that a Buyer Material Adverse Effect shall not
include any adverse change, effect or circumstance (A) primarily arising out of
or resulting primarily from actions expressly contemplated by the Parties in
connection with this Agreement, including without limitation, the origination or
modification of contract manufacturing relationships by any of the Parties with
respect to the Products, or (B) that is primarily attributable to the
announcement or performance of this Agreement or the transactions contemplated
by this Agreement.
3.4 Broker's Fees. Buyer has no liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement.
3.5 Litigation. There are no actions, suits, claims or legal,
administrative or arbitratorial proceedings pending against, or, to Buyer's
knowledge, threatened against, Buyer which would adversely affect Buyer's
performance under this Agreement or the consummation of the transactions
contemplated by this Agreement.
3.6 Financing. Buyer has, and at the Closing will have, sufficient sources
of financing in order to consummate the transactions contemplated by this
Agreement and to fulfill its obligations hereunder, including without limitation
payment to Seller of the Purchase Price at the Closing and at each of the
payment dates of the Promissory Notes. Buyer has obtained the necessary consents
of its lenders related to the execution and delivery of the Financing
33
Documents, including consents, if necessary, to provide Seller with a first
priority security interest in the collateral referenced in the Security
Agreement.
3.7 Employee Benefit Plans. For purposes of this Agreement, "Buyer
Employee Plan" means any pension plan, supplemental pension plan, profit
sharing plan, savings plan, retirement savings plan, bonus plan, incentive
compensation plan, deferred compensation plan, stock purchase plan, stock option
plan, vacation plan, leave of absence plan, employee assistance plan, automobile
leasing/subsidy/allowance plan, financial counseling plan, redundancy or
severance plan, relocation plan, family support plan, retirement plan, medical,
health, hospitalization or life insurance plan, disability plan, sick leave
plan, death benefit plan, or any similar employee benefit or compensation plan,
program, agreement, arrangement or policy, which is maintained, or contributed
to, by Buyer or any Buyer Affiliate for the benefit of Buyer's employees located
in the United States. Buyer has provided Seller with a document entitled
"Welcome to the Benefits Zhone H.R.", which contains a true and complete summary
of each material Buyer Employee Plan. Buyer has made no promises or commitments
to amend or terminate or to increase or decrease the compensation or benefits
under any Buyer Employee Plan described in "Welcome to the Benefits Zhone H.R."
or to establish any new material Buyer Employee Plan, except as required by
applicable law or regulation or as disclosed in "Welcome to the Benefits Zhone
H.R."
3.8 Offer of Employment. Buyer has made an offer of employment to each
Product Employee by means of an offer letter, the form of which is set forth in
Schedule 3.8(a). Schedule 3.8(b) sets forth the names of all Product Employees
who have accepted such employment offers and such employees shall hereafter be
referred to as "Transferred
34
Employees." Buyer's employment of the Transferred Employees has been duly and
validly authorized by all necessary corporate action on the part of Buyer.
ARTICLE IV
INDEMNIFICATION
4.1 Indemnification by Seller. Subject to the terms and conditions of this
Article IV, from and after the Closing, Seller shall indemnify Buyer and its
Affiliates, successors and assigns and persons serving as officers, directors,
partners, members, managers, stockholders, employees and agents thereof
(collectively, "Buyer Indemnified Parties") in respect of, and hold the Buyer
Indemnified Parties harmless against, any and all debts, obligations and other
liabilities, monetary damages, fines, fees, penalties, interest obligations,
deficiencies, losses, costs and expenses (including without limitation
reasonable attorneys' fees and expenses) (collectively, "Damages") incurred or
suffered by the Buyer Indemnified Parties resulting from, relating to or
constituting:
(a) Other than Excluded Liability Claims, Buyer Organizational
Claims, Buyer Employment Claims and Buyer Fraud Claims (each as defined below),
any (i) misrepresentation or breach of warranty of Seller contained in this
Agreement or (ii) failure to perform any covenant or agreement of Seller
contained in this Agreement ("Buyer General Claims");
(b) Any Excluded Liability ("Excluded Liability Claims");
(c) Any breach of the organizational representations and warranties
set forth in Sections 2.1, 2.2, 2.3(a), 2.4 and 2.16 hereof (the "Buyer
Organizational Claims");
(d) Any Buyer Employment Claims; or
35
(e) Actual fraud by Seller ("Buyer Fraud Claims").
4.2 Indemnification by Buyer. Subject to the terms and conditions of this
Article IV, from and after the Closing, Buyer shall indemnify Seller and its
Affiliates, successors and assigns and persons serving as officers, directors,
partners, members, managers, stockholders, employees and agents thereof
(collectively, "Seller Indemnified Parties") in respect of, and hold the Seller
Indemnified Parties harmless against, any and all Damages incurred or suffered
by the Seller Indemnified Parties resulting from, relating to or constituting:
(a) Other than Post-Closing Claims, Seller Employment Claims, Assumed
Liability Claims, Seller Organizational Claims or Seller Fraud Claims (each as
defined below), any (i) misrepresentation or breach of warranty of Buyer
contained in this Agreement or (ii) failure to perform any covenant or agreement
of Buyer contained in this Agreement ("Seller General Claims");
(b) The conduct of the manufacture, sale or support of the Products
from and after the Closing ("Post-Closing Claims");
(c) Any Seller Employment Claims;
(d) Any Assumed Liability ("Assumed Liability Claims");
(e) Any breach of the organizational representations and warranties
set forth in Sections 3.1, 3.2 and 3.6 hereof (the "Seller Organizational
Claims"); or
(f) Actual fraud by Buyer ("Seller Fraud Claims").
4.3 Claims for Indemnification.
(a) Third-Party Claims. All claims for indemnification made under
this Agreement resulting from, related to or arising out of a third-party claim
against an Indemnified
36
Party shall be made in accordance with the following procedures. A person
entitled to indemnification under this Article IV (an "Indemnified Party") shall
give prompt written notification to the person from whom indemnification is
sought (the "Indemnifying Party") of the commencement of any action, suit or
proceeding relating to a third-party claim for which indemnification may be
sought or, if earlier, upon the assertion of any such claim by a third party. As
soon as practicable after delivery of such notification, and in any event no
later than 20 days thereafter, the Indemnifying Party may, upon written notice
thereof to the Indemnified Party, assume control of the defense of such action,
suit, proceeding or claim with counsel reasonably satisfactory to the
Indemnified Party. If the Indemnifying Party does not assume control of such
defense, the Indemnified Party shall control such defense. The party not
controlling such defense may participate therein at its own expense; provided
that if the Indemnifying Party assumes control of such defense and the
Indemnified Party reasonably concludes, based on advice from counsel, that the
Indemnifying Party and the Indemnified Party have conflicting interests with
respect to such action, suit, proceeding or claim, the reasonable fees and
expenses of counsel to the Indemnified Party solely in connection therewith
shall be considered Damages for purposes of this Agreement; provided, however,
that in no event shall the Indemnifying Party be responsible for the fees and
expenses of more than one counsel for all Indemnified Parties. The party
controlling such defense shall keep the other party advised of the status of
such action, suit, proceeding or claim and the defense thereof and shall
consider recommendations made by the other party with respect thereto. The
Indemnified Party shall not agree to any settlement of such action, suit,
proceeding or claim without the prior written consent of the Indemnifying Party,
which shall not be unreasonably withheld, conditioned or delayed.
37
The Indemnifying Party shall not agree to any settlement of such action, suit,
proceeding or claim that does not include a complete release of the Indemnified
Party from all liability with respect thereto or that imposes any liability or
obligation on the Indemnified Party without the prior written consent of the
Indemnified Party, which shall not be unreasonably withheld, conditioned or
delayed.
(b) Procedure for Other Claims. An Indemnified Party wishing to
assert a claim for indemnification under this Article IV which is not subject to
Section 4.3(a) shall deliver to the Indemnifying Party a written notice (a
"Claim Notice") which contains (i) a description and the amount (the "Claimed
Amount") of any Damages incurred by the Indemnified Party, (ii) a statement that
the Indemnified Party is entitled to indemnification under this Article IV and a
reasonable explanation of the basis therefor, and (iii) a demand for payment in
the amount of such Damages. As soon as practicable after delivery of a Claim
Notice, and in any event no later than 20 days thereafter, the Indemnifying
Party shall deliver to the Indemnified Party a written response in which the
Indemnifying Party shall: (I) agree that the Indemnified Party is entitled to
receive all of the Claimed Amount (in which case such response shall be
accompanied by a payment by the Indemnifying Party to the Indemnified Party of
the Claimed Amount, by check or by wire transfer), (II) agree that the
Indemnified Party is entitled to receive part, but not all, of the Claimed
Amount (the "Agreed Amount") (in which case such response shall be accompanied
by a payment by the Indemnifying Party to the Indemnified Party of the Agreed
Amount, by check or by wire transfer), or (III) contest that the Indemnified
Party is entitled to receive any of the Claimed Amount. If the Indemnifying
Party in such response contests the payment of all or part of the Claimed
Amount, the Indemnifying Party and the
38
Indemnified Party shall use good faith efforts to resolve such dispute. If such
dispute is not resolved within 30 days following the delivery by the
Indemnifying Party of such response, the Indemnifying Party and the Indemnified
Party shall each have the right to submit such dispute to a court of competent
jurisdiction in accordance with the provisions of Section 6.14.
4.4 Survival.
(a) The representations and warranties of Seller and Buyer set forth
in this Agreement shall survive the Closing and the consummation of the
transactions contemplated hereby and continue until the eighteen-month
anniversary of the Closing Date, at which time they shall expire.
Notwithstanding the foregoing, (i) the representations and warranties of Seller
contained in Sections 2.1, 2.2, 2.3(a), 2.4 and 2.16 and of Buyer contained in
Sections 3.1, 3.2 and 3.6 shall survive the Closing and the consummation of the
transactions contemplated hereby without limitation.
(b) Any valid claim that is properly asserted in writing pursuant to
Section 4.3 prior to the expiration as provided in Section 4.4(a) of the
representation or warranty that is the basis for such claim shall survive until
such claim is finally resolved and satisfied.
4.5 Limitations.
(a) Except with respect to Buyer Fraud Claims and Seller Fraud Claims
and except as contemplated by Section 6.13 hereof, the rights of the Indemnified
Parties under this Article IV shall be the sole and exclusive remedies of the
Indemnified Parties and their respective Affiliates with respect to claims
resulting from or relating to any misrepresentation, breach of warranty or
failure to perform any covenant or agreement contained in this Agreement or
otherwise relating to the transactions that are the subject of this Agreement.
Without limiting
39
the generality of the foregoing sentence, in no event shall Seller or Buyer, its
successors or permitted assigns be entitled to claim or seek rescission of the
transactions consummated under this Agreement.
(b) Notwithstanding anything to the contrary contained in this
Agreement:
(i) The value of any Tangible Personal Property in connection
with a claim for Damages pursuant to this Article IV shall not exceed the value
at the Closing Date of such Tangible Personal Property, as set forth on Schedule
1.1(a)(i)(A), Schedule 1.1(a)(i)(B) (it being agreed to and understood that the
value of the Repair Inventory for the purposes of this Section 4.5(b)(i) shall
be deemed to be zero dollars), Schedule 1.1(a)(ii)(A), or Schedule
1.1(a)(ii)(B), as the case may be;
(ii) The aggregate liability of Seller for the sum of all
Damages payable to the Buyer Indemnified Parties under this Article IV shall not
exceed an amount equal to $36,017,770; provided, however, that the foregoing
limitation shall not apply to any Excluded Liability Claims, Buyer
Organizational Claims, Buyer Employment Claims or Buyer Fraud Claims;
(iii) The aggregate liability of Buyer for the sum of all
Damages payable to the Seller Indemnified Parties under this Article IV shall
not exceed an amount equal to $36,017,770; provided, however, that the foregoing
limitation shall not apply to any Post-Closing Claims, Seller Employment Claims,
Assumed Liability Claims, Seller Organizational Claims or Seller Fraud Claims;
(iv) No claims for indemnification shall be made under this
Agreement against Seller, and no indemnification shall be payable to any Buyer
Indemnified Party, with
40
respect to Buyer General Claims until the aggregate amount of all Damages
relating to Buyer General Claims exceeds $1,000,000, at which point Seller shall
be obligated to indemnify the Buyer Indemnified Parties from and against all
such Damages and not just amounts in excess of $1,000,000; and
(v) No claims for indemnification shall be made under this
Agreement against Buyer, and no indemnification shall be payable to any Seller
Indemnified Party, with respect to Seller General Claims until the aggregate
amount of all Damages relating to Seller General Claims exceeds $1,000,000, at
which point Buyer shall be obligated to indemnify the Seller Indemnified Parties
from and against all such Damages and not just amounts in excess of $1,000,000.
(c) In no event shall any Indemnifying Party be responsible and
liable for any Damages or other amounts under this Article IV that are
consequential, in the nature of lost profits, diminution in value, damage to
reputation or the like, special or punitive or otherwise not actual Damages.
Buyer and Seller shall use commercially reasonable efforts to pursue all legal
rights and remedies available in order to minimize the Damages for which
indemnification is provided to the Parties under this Article IV.
(d) The amount of any Damages for which indemnification is provided
under this Article IV shall be reduced by any related recoveries to which the
Indemnified Party is entitled under insurance policies or other related payments
received or receivable from third parties and any tax benefits actually received
by the Indemnified Party or any of its Affiliates or for which the Indemnified
Party or any of its Affiliates is eligible on account of the matter resulting in
such Damages or the payment of such Damages.
41
4.6 Treatment of Indemnification Payments. All indemnification payments
made under this Agreement shall be treated by the Parties as an adjustment to
the Purchase Price. Seller may elect to set-off any indemnification payments
against amounts outstanding from time to time under the Promissory Notes or
other amounts owed by Buyer to Seller, and in such event Seller shall only be
obligated to pay liabilities under this Article IV in excess of amounts
available for such set off. Buyer may elect to set-off any indemnification
payments against amounts owed by Seller to Buyer, and in such event Buyer shall
only be obligated to pay liabilities under this Article IV in excess of amounts
available for such set off.
ARTICLE V
FURTHER AGREEMENTS
5.1 Warranties on Products.
(a) Buyer shall perform the Warranty and Repair Obligations following
the Closing Date.
(b) Seller shall, concurrently with the Closing, transfer to Buyer at
no cost the Repair Inventory, free and clear of all Security Interests.
5.2 Access to Information; Record Retention; Cooperation.
(a) Access to Information. Subject to compliance with applicable laws
and regulations regarding classified information and security clearance,
following the Closing, each Party shall afford to the other Party and to the
other Party's Affiliates, authorized accountants, counsel and other designated
representatives reasonable access (including using commercially reasonable
efforts to give access to third parties possessing information and providing
reasonable access to its own employees who are in possession of relevant
information) and duplicating
42
rights during normal business hours in a manner so as to not unreasonably
interfere with the conduct of business to all non-privileged records, books,
contracts, instruments, documents, correspondence, computer data and other data
and information (excluding records, documents and data pertaining to Seller's
employees, other than Employee Information) (collectively, "Information") within
the possession or control of such Party or its Affiliates, relating to the
manufacture, sale or support of the Products prior to the Closing, insofar as
such access is reasonably required by the other Party. Information may be
requested under this Section 5.2(a) for, without limitation, financial reporting
and accounting matters, preparing financial statements, preparing and filing of
any tax returns, prosecuting any claims for refund, defending any tax claims or
assessment, preparing securities law or exchange filings, prosecuting, defending
or settling any litigation, environmental matter or insurance claim, performing
this Agreement and the transactions contemplated hereby (including, without
limitation, the Warranty and Repair Obligations and the Post-Closing Purchase
Orders), and all other proper business purposes.
(b) Access to Personnel. Following the Closing, each Party shall use
commercially reasonable efforts to make available to the other Party, upon
written request, such Party's and its Affiliates' officers, directors, employees
and agents to the extent that such persons may reasonably be required in
connection with any legal, administrative or other proceedings in which the
requesting Party may from time to time be involved relating to the manufacture,
sale or support of the Products prior to the Closing or for any other matter
referred to in Section 5.2(a).
43
(c) Reimbursement. A Party providing Information or personnel to
another Party under Sections 5.2(a) or (b) shall be entitled to receive from the
recipient, upon the presentation of invoices therefor, payments for such
amounts, relating to supplies, disbursements and other out-of-pocket expenses,
as may reasonably be incurred in providing such Information; provided, however,
that no such reimbursements shall be required for the salary or cost of fringe
benefits or similar expenses pertaining to employees or directors of the
providing Party or its Affiliates.
(d) Retention of Records. Except as otherwise required by law or
agreed to in writing by the Parties, each Party shall (and shall cause its
Affiliates to) use commercially reasonable efforts to preserve all Information
in its possession pertaining to the manufacture, sale or support of the Products
prior to the Closing until December 31, 2007. Notwithstanding the foregoing, in
lieu of retaining any specific Information, any Party may offer in writing to
the other Party to deliver such Information to the other Party and, if such
offer is not accepted within 90 days, the offered Information may be disposed of
at any time.
(e) Confidentiality. Each of Buyer and Seller shall hold, and shall
use commercially reasonable efforts to cause its Affiliates, consultants and
advisors to hold, in strict confidence all Information concerning the other
furnished to it by the other Party or the other Party's representatives at any
time prior to Closing or pursuant to this Section 5.2 (except to the extent that
such Information (i) is or becomes generally available to the public other than
as a result of a disclosure by the receiving Party in violation of the terms of
this Section 5.2, (ii) was within the possession of the receiving Party prior to
it being furnished to the receiving Party by or on behalf of the other Party
pursuant hereto, provided that the source of such information was
44
not known by the receiving Party at the time of receipt to be bound by a
confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the other Party or any other party with respect
to such information, (iii) is or becomes available to the receiving Party from a
source other than the other Party, provided that such source is not, to the
knowledge of the receiving Party at the time of receipt, bound by a
confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the other Party or any other party with respect
to such information, (iv) was or is independently developed by the receiving
Party without utilizing any Information or violating any of the receiving
Party's obligations under this Agreement or (v) in the case of Buyer, following
the Closing, constitutes a portion of the Acquired Assets or Assumed
Liabilities), and each Party shall not release or disclose such Information to
any other person, except its auditors, attorneys, financial advisors, bankers
and other consultants and advisors, unless compelled to disclose such
Information by judicial or administrative process or by other requirements of
law or so as not to violate the rules of any stock exchange; provided, however,
that in the case of disclosure compelled by judicial or administrative process,
the disclosing Party shall (to the extent permitted by applicable law) notify
the non-disclosing party promptly of the request or requirement so that the
non-disclosing party may seek an appropriate protective order or waive
compliance with the provisions of this Section 5.2 (e). If, in the absence of a
protective order or the receipt of a waiver hereunder, a Party is compelled to
disclose any Information by judicial or administrative process, such Party may
so disclose the Information; provided, however, that, at the written request of
the non-disclosing Party, the disclosing party shall use commercially reasonable
efforts to obtain, at the
45
expense of the non-disclosing Party, an order or other assurance that
confidential treatment will be accorded to such portion of the Information
required to be disclosed.
(f) Transition. Seller agrees not to take any action that is designed
or intended to have the effect of discouraging any actual or potential customer,
supplier or other business associate of Seller from maintaining, to the extent
applicable, the same business relationship with Buyer after the Closing as it
maintained with Seller prior to the Closing Date.
5.3 Covenant Not to Compete. Without the consent of Buyer, Seller shall
not (and shall cause each Noncompetition Party not to), on a worldwide basis,
directly or indirectly, manufacture, sell or repair, during the period
commencing on the Closing Date and continuing until (i) the first anniversary of
the Closing Date, the Universal Edge 9000 DLC access shelf, the Universal Edge
9000 Remote access shelf, the AccessNode ABM shelf or the AccessNode CDS shelf
product lines or other products substantially equivalent in the form, fit and
function of the Products or (ii) the second anniversary of the Closing Date, any
digital loop carrier or broadband digital loop carrier with a time division
multiplex network interface (collectively, a "Competitive Business"); provided,
however, that the foregoing covenants shall not prohibit, or be interpreted as
prohibiting, any Noncompetition Party from:
(a) Continuing anywhere in the world (i) the sale of inventory of
finished goods and semi-finished goods held by Seller at the Closing Date in
excess of the inventory sold to Buyer hereunder, (ii) the manufacture, sale and
support of the Universal Edge 9000i access self product lines, (iii) the
manufacture, sale and support of the Universal Edge IMAS product lines
(including the Universal Edge IMAS, Universal Edge IMAS XpressDSL and the
Universal Edge IMAS Remote), (iv) the manufacture, sale and support of the
Universal Edge 3000 product
46
line, (v) the manufacture, sale and support of the Media Gateway 9000 product
line, or (vi) the provision of support services in connection with the
AccessNode Known Product Deficiencies Program or the service and support plans;
(b) Continuing anywhere in the world in any type of business
conducted by any Noncompetition Party on the date hereof, which is not a
Competitive Business;
(c) Making equity investments in publicly owned companies which
conduct a Competitive Business, provided such investments do not confer control
of any such Competitive Business upon any Noncompetition Party; or
(d) Acquiring any person or entity which conducts a Competitive
Business if in the calendar year prior to such acquisition, the revenues of such
person or entity from its Competitive Business do not constitute more than 25%
of the total revenues of such person or entity.
For purposes of this Agreement, "Noncompetition Party" means each of
Seller, Nortel Networks Corporation and Nortel Networks Limited and each of
their direct or indirect majority-owned subsidiaries (collectively, the "Nortel
Networks Companies") while (but only while) such entity is a direct or indirect
majority-owned subsidiary of the Nortel Networks Companies, except that such
defined term shall not include "Arris Group, Inc."
5.4 Nondisclosure. For a period of eighteen (18) months following the
Closing Date, Seller agrees that it shall not, and shall cause the other Nortel
Networks Companies not to, disclose to a third party (i) the Engineering
Configuration Memoranda related to the Products ("ECMs"), as listed on Schedule
5.4, or (ii) such other proprietary documents substantially equivalent to the
ECMs; provided that the foregoing clause shall not restrict the Nortel Networks
47
Companies from (A) disclosing any portion of such documents that are applicable
to products other than the Products or (B) licensing any Intellectual Property
inherent in or referenced in such documents.
5.5 Disclosure Generally. Any information furnished in the Disclosure
Schedule shall be deemed to modify such other sections or paragraphs of Seller's
representations and warranties to the extent reasonably apparent from the
reading of the Disclosure Schedule that the disclosure qualifies such other
sections or paragraphs. The inclusion of any information in the Disclosure
Schedule shall not be deemed to be an admission or acknowledgment, in and of
itself, that such information is required by the terms hereof to be disclosed,
is material to the Product, has or would have a Product Material Adverse Effect,
or is outside the Ordinary Course of Business. For purposes of this Agreement,
the terms "to Seller's knowledge," "known by Seller" or other words of similar
meaning shall mean the actual knowledge of those persons listed on Schedule 5.5,
without any obligation of investigation, and shall not refer to the knowledge of
any other person or entity.
5.6 Certain Employee Matters.
(a) Buyer's Liabilities. Buyer shall be liable for, and shall
indemnify Seller Indemnified Parties with respect to, any Damages from or
relating to (i) Buyer's failure to offer employment to any individual listed on
Schedule 5.6(a), but excluding Damages consisting of benefits or payments under
Seller's severance plan or outplacement assistance program, the Worker
Adjustment and Retraining Notification Act ("WARN") or the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended ("COBRA"), which result from
Seller's termination of such individual's employment, (ii) Buyer's offer of
employment to any Product
48
Employee, and (iii) Buyer's employment or termination of employment of any
Transferred Employee on or after the commencement of such employee's employment
with Buyer pursuant to this Agreement ("Hire Date"), including, without
limitation, Damages relating to any claim for termination benefits or payments
from Seller which result from Buyer's termination of any Transferred Employee's
employment (the liabilities under this clause (a), collectively, the "Seller
Employment Claims").
(b) Seller's Liabilities. Seller shall be liable for, and shall
indemnify Buyer Indemnified Parties with respect to any Damages from or relating
to (i) Seller's employment or termination of employment of any Transferred
Employee prior to the Hire Date (including, without limitation, Damages with
respect to vacation accrued by a Transferred Employee during employment with
Seller), except as is otherwise provided with respect to Loaned Employees in the
Loaned Employee Agreement, (ii) Seller's termination of employment of any
Product Employee other than a Transferred Employee, or (iii) Seller's
termination of employment of any individual listed on Schedule 5.6(a), but only
to the extent that such Damages consist solely of payments or benefits under
Seller's severance plan or outplacement assistance program, WARN or COBRA (the
liabilities under this clause (b), collectively, the "Buyer Employment Claims").
(c) Transferred Employees. Except as set out below in Section 5.6(e)
and (e) with respect to Leave Employees and Loaned Employees respectively, Buyer
shall employ each Transferred Employee as of the Effective Time in accordance
with those terms and conditions set forth in Schedule 5.6(c).
(d) Leave Employees. Any Transferred Employee who is on a Seller
approved leave of absence, other than a personal leave of absence, as of the
Effective Time, as
49
set forth on Schedule 5.6(d) ("Leave Employee") shall commence employment with
Buyer under the terms and conditions set forth in Schedule 5.6(c) upon such
Leave Employee's release to return to work, provided that such employee is
released to return to work within twelve (12) months following the commencement
of such leave. Seller shall remain responsible for the adjudication of such
Leave Employee's claims under the Seller Employee Plans and for any costs and
liability associated with such Leave Employee's period of leave from the Closing
Date until such Leave Employee's Hire Date. Buyer shall cooperate with Seller
regarding the return to work from leave in respect of any such Leave Employee.
(e) Loaned Employees. Seller shall supply the services of the
Transferred Employees identified in Schedule 5.6(e) ("Loaned Employees") to
Buyer commencing as of the Effective Time pursuant to the Loaned Employee
Agreement. Each Loaned Employee shall commence employment with Buyer upon the
termination of the Loaned Employee's services under the Loaned Employee
Agreement; provided, however, that Buyer shall not be required to offer
employment to or to employ any Loaned Employee if such Loaned Employee's
employment with Seller terminates while such Loaned Employee is supplying
services under the Loaned Employee Agreement for a reason other than such Loaned
Employee's commencement of employment with Buyer. The terms and conditions of
employment set out in Schedule 5.6(c) shall apply to Loaned Employees upon their
Hire Date.
(f) No Solicitation by Seller. For a period of not less than twelve
(12) months following the Closing Date, none of the Nortel Networks Companies
shall, directly or indirectly, except with Buyer's prior written consent,
solicit for employment or hire any Transferred Employee; provided, however, that
nothing in this provision shall prevent any of the Nortel
50
Networks Companies from making generalized employment searches, by
advertisement, engaging firms to conduct searches or otherwise, and hiring
individuals identified through such searches that are not focused on Transferred
Employees; provided that for the purpose of clarification, it is understood that
Arris Group, Inc. is not included in the definition of the Nortel Networks
Companies.
(g) No Solicitation by Buyer. For a period of not less than twelve
(12) months following the Closing Date, Buyer shall not (and shall cause its
Affiliates not to), directly or indirectly, except with Seller's prior written
consent, solicit for employment or hire any individuals listed on Schedule
5.6(a); provided, however, that nothing in this provision shall prevent Buyer
from making generalized employment searches, by advertisement, engaging firms to
conduct searches or otherwise, and hiring individuals identified through such
searches that are not focused on those individuals listed on such schedule.
5.7 Taxes. Buyer agrees to timely pay all sales, use, documentary, stamp,
recording, registration, filing and other transfer taxes, fees or similar
charges, if any, due as a result of the purchase, sale or transfer of the
Acquired Assets in accordance with this Agreement, whether imposed by law on
Seller or Buyer, including without limitation any sales tax owed to the State of
Georgia. In the event that Seller remits payment for any such sales, use,
documentary, stamp, recording, registration, filing and other transfer tax, fee
or similar charge, Buyer shall reimburse Seller the amount so remitted within
ten (10) days after the date which such sales, use, documentary, stamp,
recording, registration, filing and other transfer tax, fee or similar charge
was otherwise due. Buyer agrees that it will indemnify, reimburse and hold
Seller harmless in respect of the liability for payment of, or failure to pay,
any such taxes, fees or similar charges.
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5.8 Deletion of Non-Transferred Software. Buyer agrees that, following the
Closing, Buyer shall not use any items of Corporate Desktop Software or other
third-party software loaded on the Equipment as of the Closing Date which is not
transferred to Buyer pursuant to this Agreement. Buyer shall, as soon as is
reasonably practical, and in any event no later than forty-five (45) days
following the Closing, delete all such non-transferred software from any of the
Equipment on which it is installed.
5.9 Further Assurances. At any time and from time to time after the
Closing, as and when requested by a Party hereto and at such Party's expense,
the other Party shall promptly execute and deliver, or cause to be executed and
delivered, all such documents and instruments and shall take, or cause to be
taken, all such further or other actions as such other Party may reasonably
request to evidence and effectuate the transactions contemplated by this
Agreement.
5.10 Additional Purchases, Sales and Services. In preparing this Agreement,
each of the Parties attempted in good faith to identify assets owned by Seller
and used in the manufacture or support of the Products. The Parties agree, for a
period of twelve months following the Closing Date, to negotiate on a good faith
basis (a) the sale of assets owned by Seller and used in the manufacture or
support of the Products and inadvertently not transferred as part of the
Acquired Assets and (b) the provision of services related to the Products
inadvertently not included in the Transition Services Agreement that Seller is
then able to provide on a commercially reasonable basis utilizing its then
existing resources at a cost equal to Seller's standard cost for providing such
services; provided, however, that nothing herein shall require Seller to
negotiate for the sale of or sell (x) Intellectual Property addressed in the IP
Agreement or Trademark Licensing Agreement, (y) assets defined herein as
Excluded Assets (other than
52
such Excluded Assets set forth in Section 1.1(b)(v)(B)) or (z) assets that
relate to the manufacture, sale or support of other products sold by Seller or
its Affiliates. Any such sale shall be on terms and conditions substantially
similar to those set forth in this Agreement.
5.11 Transfer of Inventory. During the period beginning on the Closing Date
and ending on October 31, 2001, Seller shall, at its sole cost and expense,
deliver the Inventory in one or more shipments to Buyer's contract manufacturer
in Raleigh, North Carolina at an address designated in writing by Buyer to
Seller. Seller shall indicate in writing with each shipment of Inventory the
type and quantity of Inventory contained in such shipment (an "Inventory
Delivery Record"). Buyer shall promptly, but in no event more than five (5)
days, after receipt of each shipment verify the type and quantity of Inventory
contained in such shipment and notify Seller in writing of any discrepancy
between the actual type and quantity of Inventory shipped versus the type and
quantity shown in the Inventory Delivery Record (it being acknowledged by Buyer
that failure to so notify Seller shall be deemed an acceptance by Buyer of the
amounts set forth in the Inventory Delivery Record) (a "Deficiency Notice"). If
Buyer delivers a Deficiency Notice and Seller does not object in writing within
five (5) days after receipt of such Deficiency Notice, Seller shall deliver to
Buyer as soon as commercially reasonable inventory of the types and in the
amounts necessary to satisfy such deficiency. If Buyer delivers a Deficiency
Notice and Seller objects in writing within five (5) days after receipt of such
Deficiency Notice, the Parties agree to negotiate in good faith to resolve the
dispute.
5.12 Risk of Loss. The Parties agree that at the Effective Time, all risk
of loss or damage to the property included in the Acquired Assets shall be borne
by Buyer notwithstanding the presence of the Acquired Assets on Seller's
property. Buyer acknowledges that it has sole
53
responsibility for insuring the Acquired Assets and forever releases Seller for
any and all acts or omissions with respect to such Acquired Assets, except for
gross negligence and intentional misconduct.
5.13 Post Closing Orders. In the event Seller receives after the Closing
Date a Post-Closing Purchase Order, Seller shall promptly notify Buyer and
validate the price set forth on the purchase order or, in the event that no
price is specified, shall provide Buyer with the relevant Customer price for the
Product ordered based on Seller's existing contractual obligations to the
Customer. To the extent permitted under the terms of the contract, Seller shall
provide Buyer with a copy of the relevant contract relating to the purchase
order, which copy shall exclude contractual terms and provisions relating to
other products manufactured, sold or supported by Seller and not relating to the
Products. In the event that 130% of Buyer's then current standard cost for such
Product is greater than the relevant Customer price, Seller shall reimburse
Buyer within a commercially reasonable period the difference between 130% of
Buyer's then current standard cost and the relevant Customer price; provided
that the aggregate reimbursement by Seller to Buyer under this Section 5.13
shall not exceed an amount equal to $2,000,000. In the event that the relevant
Customer price is greater than 130% of Buyer's then standard cost, neither
Seller nor Buyer shall be obligated to make any reimbursement to the other
Party. Notwithstanding anything to the contrary contained herein, no referral
fees shall be paid by Buyer to Seller with respect to any Post-Closing Purchase
Orders. Seller may elect to set-off any reimbursements due to Buyer under this
Section 5.13 against amounts outstanding from time to time under the Promissory
Notes or other amounts owed by Buyer to Seller, and in such event Seller shall
only be obligated to reimburse Buyer under this Section in excess of amounts
54
available for such set off. Upon request, Buyer shall provide Seller with such
documents as may reasonably be requested by Seller to verify Buyer's then
current standard costs.
ARTICLE VI
MISCELLANEOUS
6.1 Press Releases and Announcements. No Party shall issue (and each Party
shall cause its Affiliates not to issue) any press release or public disclosure
relating to the subject matter of this Agreement without the prior written
approval of the other Party; provided, however, that any Party may make any
public disclosure it believes in good faith is required by law, regulation or
stock exchange rule (in which case the disclosing Party shall advise the other
Party and the other Party shall have the right to review such press release or
announcement prior to its publication); and provided further, however, that
Seller may disclose the nature of the transactions contemplated by this
Agreement (excluding financial terms) (i) in response to any bona fide inquiries
received by Seller from third parties, including financial analysts, members of
the media, and customers of Seller, and (ii) to any employees of Seller affected
by the transactions contemplated by this Agreement.
6.2 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person (including with respect to any employee or
former employee of Seller, Buyer or any of their Affiliates, any Transferred
Employees and any Product Employees, any right to employment or contractual
employment for any specified period) other than the Parties and their respective
successors and permitted assigns and, to the extent specified herein, their
respective Affiliates; provided, however, that the provisions of Article IV are
intended for the
55
benefit of the entities and individuals specified therein and their respective
legal representatives, successors and assigns.
6.3 Action to be Taken by Affiliates. The Parties shall cause their
respective Affiliates to comply with all of the obligations specified in this
Agreement to be performed by such Affiliates. For purposes of this Agreement,
"Affiliate" shall have such meaning as defined in Rule 12b-2 of the Securities
Exchange Act of 1934, as amended.
6.4 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between Buyer, on the one hand, and
Seller, on the other hand. This Agreement supersedes any prior understandings,
agreements, or representations by or between Buyer, on the one hand, and Seller,
on the other hand, whether written or oral, with respect to the subject matter
hereof.
6.5 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party.
6.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but both of which
together shall constitute one and the same instrument.
6.7 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
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6.8 Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly delivered one Business Day
after it is sent by (a) a reputable courier service guaranteeing delivery within
one Business Day or (b) telecopy, provided electronic confirmation of successful
transmission is received by the sending Party and a confirmation copy is sent on
the same day as the telecopy transmission by certified mail, return receipt
requested, in each case to the intended recipient as set forth below:
If to Buyer: Copy to:
Zhone Technologies, Inc. Xxxxxx & Xxxxxxx
0000 Xxxxxxx Xxxxxx 00000 Xxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000 Xxx Xxxxx, XX 00000
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
Attention: Xxxx Xxxxxx Attention: Xxxxx X. Xxxxx, Esq.
Chief Financial Officer
If to Seller: Copies to:
Nortel Networks Inc. Nortel Networks Inc.
000 Xxxxxx Xxx 0000 Xxxxxxxx Xxxx.
Xxxxxxxxx, XX 00000 Xxxxxxxxxx, XX 00000-0000
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
Attention: Legal Department Attention: Xxxxxx Xxxxxxx, Esq.
Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
Any Party may give any notice, request, demand, claim, or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telex, ordinary mail, or electronic mail),
but no such notice, request, demand, claim or other communication shall be
deemed to have been duly given unless and until it actually is
57
received by the Party for whom it is intended. Any Party may change the address
to which notices, requests, demands, claims and other communications hereunder
are to be delivered by giving the other Parties notice in the manner herein set
forth.
6.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of laws of
any jurisdiction other than those of the State of Delaware.
6.10 Amendments and Waivers. The Parties may mutually amend or waive any
provision of this Agreement at any time. No amendment or waiver of any provision
of this Agreement shall be valid unless the same shall be in writing and signed
by both of the Parties. No waiver by either Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence.
6.11 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the body making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision
58
that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
6.12 Expenses. Except as otherwise specifically provided to the contrary in
this Agreement, each of the Parties shall bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby.
6.13 Specific Performance. Each Party acknowledges and agrees that the
other Party would be damaged irreparably in the event any of the provisions of
this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each Party agrees that the other Party may
be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the Parties and the matter.
6.14 Submission to Jurisdiction. Each Party (a) submits to the exclusive
jurisdiction of any state or federal court sitting in the State of Delaware in
any action or proceeding arising out of or relating to this Agreement, (b)
agrees that all claims in respect of such action or proceeding may be heard and
determined only in any such court, and (c) agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court. Each
Party waives any defense of inconvenient forum to the maintenance of any action
or proceeding so brought and waives any bond, surety or other security that
might be required of the other Party with respect thereto. Either Party may make
service on the other Party by sending or delivering a copy of the process to the
Party to be served at the address and in the manner provided for the giving of
59
notices in Section 6.8. Nothing in this Section 6.14, however, shall affect the
right of any Party to serve legal process in any other manner permitted by law.
6.15 Bulk Transfer Laws. Buyer acknowledges that Seller will not comply
with the provisions of the bulk transfer laws of any jurisdiction in connection
with the transactions contemplated by this Agreement. To induce Buyer to waive
any requirements for compliance with any such laws, Seller hereby agrees that
Buyer's rights to indemnification under Article IV shall apply to any Damages of
Buyer arising out of or resulting from the failure of Seller or Buyer to comply
with any such laws; provided that the limitations set forth in Sections
4.5(b)(ii) and 4.5(b)(iv) shall not apply to any such Damages.
6.16 Construction. The language used in this Agreement shall be deemed to
be the language chosen by the Parties hereto to express their mutual intent, and
no rule of strict construction shall be applied against any Party. Any reference
to any federal, state, local or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. All references to "$", "Dollars" or "US$" refer to currency
of the United States of America. When a reference is made in this Agreement to
Articles, Sections, Exhibits, Schedules or Disclosure Schedule, such reference
shall be to the Article or Section of, or Exhibit or Schedule or Disclosure
Schedule to, this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and are
not part of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". Any reference to "herein" or "hereof" or similar
terms shall refer to this Agreement as a whole rather than to the individual
paragraph, Section or Article.
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6.17 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
6.18 Facsimile Signature. This Agreement may be executed by facsimile
signature.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
Nortel Networks Inc.
By:_______________________________
Name:_____________________________
Title:____________________________
Zhone Technologies, Inc.
By:_______________________________
Name:_____________________________
Title:____________________________
[Signature page to Purchase and Sale Agreement]
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SCHEDULE 5.6(c)
TERMS AND CONDITIONS OF EMPLOYMENT
APPLICABLE TO TRANSFERRED EMPLOYEES
Buyer shall implement, at a minimum, the following terms and conditions
with respect to each Transferred Employee upon such Transferred Employee's Hire
Date:
1. Each Transferred Employee shall be employed in the same location as,
or a location within twenty-five (25) miles of, such employee's work
location as set out in Section 2.12(c) of the Disclosure Schedule.
2. Each Transferred Employee shall receive a base salary or hourly rate
of pay that is equal, at a minimum, to the base salary or hourly rate
of pay of such employee as set out in Section 2.12(c) of the
Disclosure Schedule.
3. Each Transferred Employee shall be employed in a position equivalent
to the position set out with respect to such employee in Section
2.12(c) of the Disclosure Schedule.
4. Each Transferred Employee whose Hire Date occurs on or before
September 30, 2001, shall be included in Buyer's 2001 year end pay
review process.
5. Buyer shall recognize the service date of each Transferred Employee as
set out in Section 2.12(c) of the Disclosure Schedule for purposes of
vesting Buyer's contributions, if any, to such employee's account in
Buyer's 401(k) plan.
6. As of the Hire Date, Buyer shall advance each Transferred Employee ten
(10) paid vacation days; provided, however, that, if any Transferred
Employee terminates employment before the first anniversary of the
Hire Date, Buyer shall be permitted to seek to recover from such
Employee any salary paid for vacation used but not accrued under
Buyer's vacation policy.
7. Each Transferred Employee (and eligible dependent, as applicable)
shall be eligible to participate in Buyer Employee Plans immediately
upon commencement of employment with Buyer. Buyer shall waive any
eligibility periods, evidence of insurability, pre-existing condition
or other limitations with respect to each Transferred Employee's
participation in and coverage under Buyer Employee Plans.
8. Notwithstanding anything herein to the contrary, for a period of six
(6) months following the Closing Date, Buyer shall provide any
Transferred Employee, whose employment Buyer terminates, with
severance pay (i) under eligibility standards that are not less
favorable than, and (ii) in an amount not less than, that
which such employee would have received under the Seller Employee Plan
which provides severance if Seller had terminated such employee's
employment as of that date.
9. For the six (6) month period following the Closing Date, Buyer shall
provide each Transferred Employee with terms and conditions of
employment which are, at a minimum, substantially the same, in the
aggregate, to those set out in this Schedule 5.6(c).
