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FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission File Number: 0-10018
DSC COMMUNICATIONS CORPORATION
-----------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 54-1025763
- --------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Coit Road, Plano, Texas 75075
----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(214) 519-3000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Number of Shares Outstanding
Title of Each Class as of October 31, 1994
- --------------------------------- ---------------------------------
Common Stock, $.01 Par Value 113,356,237
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- ------------
(Unaudited)
<S> <C> <C>
Assets
------
CURRENT ASSETS
Cash and cash equivalents..................................................... $ 109,240 $ 154,888
Marketable securities......................................................... 211,635 158,920
Receivables................................................................... 165,760 139,962
Inventories................................................................... 152,709 122,869
Contract development costs.................................................... 12,674 5,978
Other current assets.......................................................... 29,452 19,414
----------- -----------
Total current assets..................................................... 681,470 602,031
----------- -----------
PROPERTY AND EQUIPMENT, at cost................................................. 477,115 380,480
Less accumulated depreciation
and amortization............................................................. (233,264) (200,697)
----------- -----------
243,851 179,783
----------- -----------
LONG-TERM RECEIVABLES........................................................... 20,102 16,515
CAPITALIZED SOFTWARE DEVELOPMENT COSTS.......................................... 36,961 33,485
COST IN EXCESS OF NET ASSETS OF
BUSINESSES ACQUIRED, NET...................................................... 47,974 50,317
OTHER........................................................................... 31,046 18,286
----------- -----------
Total assets......................................................... $ 1,061,404 $ 900,417
=========== ===========
Liabilities and Shareholders' Equity
------------------------------------
CURRENT LIABILITIES
Accounts payable.............................................................. $ 56,475 $ 48,450
Accrued liabilities........................................................... 126,563 112,993
Customer advances............................................................. 10,308 15,712
Income taxes payable.......................................................... 16,042 4,460
Current portion of long-term debt............................................. 12,252 13,664
----------- -----------
Total current liabilities................................................ 221,640 195,279
----------- -----------
LONG-TERM DEBT, net of current portion.......................................... 11,944 56,748
NONCURRENT INCOME TAXES
AND OTHER LIABILITIES.......................................................... 55,124 30,590
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, issued -
118,263 in 1994 and 60,047 in 1993;
outstanding - 113,274 in 1994 and
55,018 in 1993............................................................... 1,183 600
Additional capital............................................................ 605,625 558,222
Unrealized losses on securities,
net of income taxes......................................................... (2,517) --
Retained earnings ............................................................ 211,516 102,435
----------- -----------
815,807 661,257
Treasury stock, at cost, 4,989 shares in 1994
and 5,029 shares in 1993...................................................... (43,111) (43,457)
----------- -----------
Total shareholders' equity................................................. 772,696 617,800
----------- -----------
Total liabilities and
shareholders' equity............................................... $ 1,061,404 $ 900,417
=========== ===========
</TABLE>
See the accompanying Notes to Condensed Consolidated Financial Statements.
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DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- ------------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue..................................... $260,601 $187,971 $691,049 $512,840
Cost of revenue............................. 134,140 106,412 354,706 290,921
-------- -------- -------- --------
Gross profit.............................. 126,461 81,559 336,343 221,919
-------- -------- -------- --------
Operating costs and expenses:
Research and product development.......... 33,559 22,193 87,175 63,331
Selling, general and administrative....... 35,579 27,921 100,087 80,555
Other operating costs..................... 949 2,371 5,827 6,077
-------- -------- -------- --------
Total operating costs and expenses...... 70,087 52,485 193,089 149,963
-------- -------- -------- --------
Operating income ......................... 56,374 29,074 143,254 71,956
Interest expense............................ 629 1,530 1,313 4,790
Interest income............................. (4,473) (975) (12,037) (3,552)
Other (income) expense, net................. 1,625 (2,123) 3,922 (891)
-------- -------- -------- --------
Income before income taxes.............. 58,593 30,642 150,056 71,609
Income taxes................................ 15,397 7,354 40,975 18,713
-------- -------- -------- --------
Net income ............................. $ 43,196 $ 23,288 $109,081 $ 52,896
======== ======== ======== ========
Income per share (1)........................ $ 0.37 $ 0.22 $ 0.94 $ 0.52
======== ======== ======== ========
Average shares used in computation (1)...... 116,820 107,960 116,614 102,636
</TABLE>
(1) On April 27, 1994, the Board of Directors declared a two-for-one
stock split, effected in the form of a 100% stock dividend, to
shareholders of record on May 11, 1994. All average shares
and income per share data presented for 1993 have been
restated to retroactively reflect the stock split.
See the accompanying Notes to Condensed Consolidated Financial Statements.
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DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------
1994 1993
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................... $ 109,081 $ 52,896
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization............................ 38,876 32,577
Amortization of capitalized software
development costs..................................... 15,244 13,229
Income tax benefit related
to stock options...................................... -- 3,000
Increase in current and long-term receivables................ (30,385) (31,952)
Increase in inventories...................................... (29,840) (38,861)
Decrease in customer advances................................ (5,404) (32,527)
Other, including changes in current
payables and other assets.................................. 20,825 25,306
Increase in noncurrent income taxes
and other liabilities...................................... 24,534 15,682
--------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES................................. 142,931 39,350
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities........................... (289,632) --
Proceeds from sales and maturities of marketable
securities................................................. 232,025 --
Purchases of property and equipment.......................... (99,031) (54,117)
Additions to capitalized software
development costs.......................................... (18,720) (15,110)
Purchase of long-term investment security.................... (12,500) --
Other........................................................ (1,129) 6,142
--------- ---------
NET CASH USED FOR
INVESTING ACTIVITIES................................. (188,987) (63,085)
--------- ---------
</TABLE>
(Continued)
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DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Continued)
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------
1994 1993
--------- --------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Long-term borrowings......................................... -- 20,070
Payments of long-term borrowings............................. (11,323) (15,926)
Proceeds from the sale of common stock
under stock programs....................................... 11,926 19,672
Redemptions of 8% subordinated
convertible debentures..................................... (1,696) --
Other........................................................ 1,501 (755)
--------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES................................. 408 23,061
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS...................... (45,648) (674)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............... 154,888 69,839
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..................... $ 109,240 $ 69,165
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid................................................ $ 1,453 $ 5,941
========= =========
Income taxes paid............................................ $ 9,944 $ 3,690
========= =========
</TABLE>
See the accompanying Notes to Condensed Consolidated Financial Statements.
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DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 1994 and 1993 and December 31, 1993
(Unaudited)
BASIS OF PRESENTATION
The accompanying unaudited Condensed Consolidated Financial Statements reflect,
in the opinion of management, all adjustments necessary to present fairly the
Company's financial position, results of operations and cash flows. Such
adjustments are of a recurring nature unless otherwise disclosed herein.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to rules and regulations promulgated by
the Securities and Exchange Commission. However, the Company believes that the
disclosures contained herein are adequate to make the information presented not
misleading. Quarterly consolidated financial results may not be indicative of
annual consolidated financial results.
The Company has not paid or declared a cash dividend on its common stock since
its organization.
Certain prior year's financial statement information has been reclassified to
conform with the current year financial statement presentation.
These unaudited financial statements should be read in conjunction with the
audited financial statements and accompanying notes included in the Company's
1993 Annual Report to Shareholders for the year ended December 31, 1993.
INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- -----------
<S> <C> <C>
Raw Materials . . . . . . . . . . $ 54,393 $ 47,845
Work in Process . . . . . . . . . . 7,783 12,471
Finished Goods . . . . . . . . . . 90,533 62,553
-------- --------
$152,709 $122,869
======== ========
</TABLE>
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CREDIT AGREEMENT
On February 24, 1994, the Company entered into an uncollateralized revolving
credit facility, which expires on February 24, 1997, with two banks providing
for borrowings up to $50,000,000. The maximum borrowings available are reduced
by the value of outstanding letters of credit issued by the banks on behalf of
the Company up to $25,000,000. Borrowings under the facility bear interest at
the prime rate or at 0.75% to 1.50% above the LIBOR rate. A commitment fee of
0.35% on the daily average unused portion of the facility is also assessed.
The agreement contains various financial covenants. There have been no
borrowings under the credit facility during the nine months ended September 30,
1994. Letters of credit issued by the banks under this agreement on behalf of
the Company were approximately $7,136,000 at September 30, 1994.
DEBT
On January 14, 1994, the Company called for the redemption of all of the
outstanding 8% subordinated convertible debentures. The debentures were
convertible, at the option of the holder, into shares of the Company's common
stock at $54.50 per share. In February 1994, $34,720,000 of debentures were
converted into approximately 637,000 shares of common stock, and $1,696,000 of
debentures were redeemed for cash.
INCOME TAX EXPENSE
The Company's income tax expense includes foreign, state (primarily related to
Puerto Rico) and federal income taxes. The estimated effective income tax rate
is based upon estimates for the full year for a number of variables including,
among other things, forecasted income, a deduction for gains by employees from
exercises of stock options and the degree to which net operating losses may be
utilized. The effective tax rate for the first nine months of 1994 declined to
27% compared to 28% for the first half of 1994 as various estimates for the
full year changed. As these variables are finalized at the end of 1994, the
effective tax rate could change again, and an adjustment to Additional Capital
could be made relating to the tax benefits realized from stock option
deductions.
COMMON STOCK
On April 27, 1994, the shareholders approved an increase in the number of
authorized shares of common stock from 100 million to 250 million shares. In
addition, on April 27, 1994 the Board of Directors authorized a two-for-one
stock split, effected in the form of a 100% stock dividend, to shareholders of
record on May 11, 1994. The par value of common stock was not changed from
$0.01. The stock split
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resulted in the issuance of 56,004,000 new shares of common stock and the
transfer of $560,040 from Additional Capital to Common Stock, representing the
par value of the shares issued. All 1993 average shares and per share data
have been restated to retroactively reflect the stock split.
COMMITMENTS AND CONTINGENCIES
Contingent Liabilities
The Company periodically sells customer receivables and operating leases under
agreements which contain recourse provisions. The Company could be obligated
to repurchase receivables and operating leases which were previously sold on a
partial recourse basis, the terms of which allow the Company to limit its risk
of loss to $3,644,000 at September 30, 1994. The Company has guarantees of
$13,142,000 outstanding at September 30, 1994 supporting Company and
third-party performance bonds to customers and others, of which $7,136,000 were
collateralized by letters of credit issued under the Company's credit facility.
The Company believes it has adequate reserves for any ultimate losses
associated with these contingencies.
The Company enters into forward foreign exchange contracts to hedge certain
receivables and firm contracts for delivery of products and services which are
denominated in foreign currencies. At September 30, 1994, the Company had
forward foreign exchange contracts of $20,480,000 to hedge future receipts in
such currencies. Gains and losses related to the forward contracts are
recognized as part of the cost of the underlying transactions being hedged.
Forward foreign exchange contracts generally have maturities of one year or
less and contain an element of risk that the counterparty may be unable to meet
the terms of the agreement. However, the Company minimizes such risk exposure
by limiting the counterparty to major financial institutions. Management
believes the risk of incurring such losses is remote, and any losses therefrom
would be immaterial.
For information regarding litigation, refer to Part II - Other Information,
Item 1. "Legal Proceedings".
SUBSEQUENT EVENT
On October 21, 1994, the Company announced the signing of a definitive
agreement to acquire all of the outstanding stock of NKT Elektronik A/S ("NKT
Elektronik") for approximately $145 million in cash from its parent company,
NKT Holding A/S. NKT Elektronik is a manufacturer of optical transmission
equipment and is located in Copenhagen, Denmark. The NKT Elektronik business
being acquired had revenue in excess of $100 million in 1993. The transaction
is expected to be completed by the end of November 1994.
8
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Results of Operations
- ---------------------
For the three months ended September 30, 1994, the Company reported revenue of
$260.6 million and net income of $43.2 million, or $0.37 per share, compared to
revenue of $188.0 million and net income of $23.3 million, or $0.22 per share,
for the three months ended September 30, 1993. For the nine months ended
September 30, 1994, the Company recorded revenue of $691.0 million and net
income of $109.1 million, or $0.94 per share, compared to revenue of $512.8
million and net income of $52.9 million, or $0.52 per share, for the first nine
months of 1993. All average shares and income per share data presented for
1993 have been restated to retroactively reflect the stock split. See "Common
Stock" in Notes to Condensed Consolidated Financial Statements for further
information.
Revenue for the 1994 third quarter and first nine months increased 39% and 35%,
respectively, compared to the same periods in 1993. The growth in revenue was
primarily the result of continuing strong demand for switching products and
higher deliveries of access products. In particular, deliveries of switching
products to cellular customers experienced substantial growth. Gross profit as
a percentage of revenue was approximately 49% for both the third quarter and
nine month period ended September 30, 1994 compared to 43% for each of the same
periods last year. Favorable product content, higher business levels, and
continued improvement in operating efficiencies all contributed to this
improvement. The Company's gross margin percentage can vary significantly from
period to period due to changes in the relative mix of product deliveries,
including software enhancements.
Research and product development expense in the third quarter of 1994 and 1993
was $33.6 million, or 13% of revenue, and $22.2 million, or 12% of revenue,
respectively. Research and product development expense for the nine months
ended September 30, 1994 was $87.2 million, or 13% of revenue, compared to
$63.3 million, or 12% of revenue, for the first nine months in 1993. These
increases in research and product development expense represent the Company's
ongoing commitment to develop new products and enhance existing products
across all strategic product areas.
Selling, general and administrative expense was $35.6 million and $100.1
million in the third quarter of 1994 and the nine months ended September 30,
1994, respectively, compared to $27.9 million and $80.6 million, respectively,
for the same periods in 1993. As a percentage of revenue, selling, general and
administrative expense for both the
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three months and nine months ended September 30, 1994 declined to 14% from 15%
and 16%, respectively, in the same periods of 1993.
Income before income taxes for the third quarter and first nine months of 1994
was favorably impacted by an increase in interest income and substantially
lower interest expense. Interest income for the three months and nine months
ended September 30, 1994 increased by $3.5 million and $8.5 million,
respectively, from the same periods in 1993 due primarily to the investment of
the proceeds from the November 1993 equity offering in marketable securities.
Interest expense for the three and nine months ended September 30, 1994
declined $0.9 million and $3.5 million, respectively, from the same periods in
1993. This was primarily due to the conversion of substantially all of the
Company's outstanding subordinated convertible debentures in 1993 and early
1994 into shares of the Company's common stock.
The Company's estimated effective income tax rate was 26% and 27% for the three
month and nine month periods ended September 30, 1994, respectively. See
"Income Tax Expense" in Notes to Condensed Consolidated Financial Statements
for further information.
The Company's future quarterly and annual operating results may be affected by
a number of factors, including the timing and ultimate receipt of orders from
certain customers which continue to constitute a large portion of the Company's
revenue; the successful enhancement of existing products; introduction and
market acceptance of new products on a timely basis; mix of products sold;
product costs; manufacturing lead times; and changes in general economic
conditions, any of which could have an adverse impact on operations.
Financial Condition and Liquidity
- ---------------------------------
The Company's cash and cash equivalents at September 30, 1994 were $109.2
million compared to $154.9 million at December 31, 1993 while marketable
securities were $211.6 million at September 30, 1994 compared to $158.9 million
at December 31, 1993. The Company's investment activities are limited to
investments in high credit quality securities and do not include significant
speculative market activities with a high degree of risk.
Cash of $142.9 million was generated from operating activities during the first
nine months of 1994. This was primarily the result of strong earnings and an
increase in non-debt liabilities, partially offset by growth in inventories and
receivables due to increased business levels. Inventories grew $29.8 million
due primarily to a higher level of finished goods built to support existing
customer order backlog and additional customer requirements for the last three
months of 1994 and early 1995.
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During the first nine months of 1994, the Company invested $99.0 million in
property and equipment. The Company's rapid business expansion during 1993 and
1994 and expected future domestic and international growth have and will
continue to increase capital requirements, including facilities and
manufacturing and development equipment. The Company has initiated a major
facilities expansion plan at its current campus location. The Company
purchased 148 acres of land near its present campus location for approximately
$16.4 million. In addition, construction of a warehouse and an office building
began on a portion of the new land which is expected to be completed by mid
1995 and cost approximately $50 million. Also, in July 1994 the Company
purchased a previously leased building on its campus for approximately $5
million. It is anticipated that 1994 capital requirements for the full year
could be between $120 million and $140 million. Also included in investing
activities in the first nine months of 1994 is the purchase of $12.5 million of
long-term interest bearing investment securities collateralized by U.S.
Treasury obligations.
Financing activities during the nine months ended September 30, 1994 included
proceeds of $11.9 million from the issuance of the Company's common stock under
stock programs. Additionally, the Company made $11.3 million of scheduled
payments on long-term borrowings during the nine months ended September 30,
1994. The Company periodically finances facilities and equipment requirements
under operating leases. During the first nine months of 1994, future minimum
operating lease obligations increased significantly primarily due to the
Company's expansion into new facilities under long-term leases in California
and the United Kingdom and certain new short-term facilities leases.
As discussed in the Notes to Condensed Consolidated Financial Statements, in
February 1994 debenture holders converted approximately $34.7 million of
debentures into approximately 637,000 shares of common stock, and approximately
$1.7 million of debentures were redeemed for cash.
In February 1994, the Company entered into a new unsecured revolving credit
facility, which expires on February 24, 1997, providing for borrowings up to
$50.0 million. The maximum available borrowings are reduced by the value of
outstanding letters of credit issued on behalf of the Company up to $25.0
million. The agreement contains various financial covenants. There have been
no borrowings under the credit facility during the nine months ended September
30, 1994. At September 30, 1994, the Company could borrow up to $42.9 million
under the credit agreement, net of outstanding letters of credit. See "Credit
Agreement" in Notes to Condensed Consolidated Financial Statements for further
information.
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As discussed in the Notes to Condensed Consolidated Financial Statements, in
October 1994 the Company signed a definitive agreement to acquire all of the
outstanding stock of NKT Elektronik for approximately $145 million in cash. The
transaction is expected to be completed by the end of November 1994.
The Company believes that for the short-term its existing cash, short-term
investments and available credit facilities will be adequate to support the
Company's expected business growth, including working capital expansion,
necessary capital expenditure requirements, operating lease obligations,
scheduled debt payments and the purchase of NKT Elektronik. The Company is
currently reviewing various long-term financing alternatives and is
considering, to the extent necessary, entering into a long-term financing
arrangement during 1995.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Litigation
On January 26, 1994, C. L. Grimes, a shareholder of the Company, filed
a suit in Delaware Chancery Court (the "Court"), derivatively purportedly on
behalf of the Company as the real party in interest and as a shareholder of the
Company, seeking a declaration that the Employment Agreement of James L.
Donald, his Executive Income Continuation Plan, and the 1990 Long-Term
Incentive Compensation Plan, as it applies to Mr. Donald, as well as other
employment benefits of Mr. Donald are null and void. The defendants in the
suit are Mr. Donald, all current non-employee directors, and two former
directors of the Company. The Company itself is a nominal defendant. The
plaintiff contends that Mr. Donald's employment contract contains an improper
delegation of the Board of Directors' authority to Mr. Donald and excess
payments. The suit also contends that the salary and benefits established for
Mr. Donald pursuant to the Donald agreements referred to above and by the
Company's Board of Directors are excessive and constitute a diversion and waste
of corporate assets. The suit seeks an injunction restraining Mr. Donald from
exercising any stock options, taking any action to implement any of the Donald
agreements, or declaring a constructive termination of his employment, and also
seeks unspecified damages against the defendants and Grimes' legal fees. On
June 1, 1994, Mr. Grimes filed a first amended and supplemental complaint,
which adds claims of various defects in the Company's proxy statement
transmitted to stockholders in connection with its Annual Meeting held on April
27, 1994. The plaintiff seeks a decree from the Court that the proxy statement
in so far as it relates to the Company's 1994 Long Term Incentive Plan (the
"LTIP") and actions taken pursuant to the proxy statement with respect to the
LTIP are null and void and seeks to enjoin the Company from implementing the
LTIP. All defendants have filed answers denying Grimes' amended claims and
have moved to dismiss such claims. An oral hearing on the motions to dismiss
was held on September 21, 1994, but the judge has not ruled on the motions.
All defendants intend to vigorously contest all claims.
On July 20, 1993, the Company filed suit against Advanced Fibre
Communications ("AFC"), a California corporation; Quadrium Corporation
("Quadrium"), a California corporation; Alan E. Negrin ("Negrin"); and Henri
Sulzer ("Sulzer") in the United States District Court for the Eastern District
of Texas, Marshall Division, Civil Action No. 2-93CV126. The Company seeks a
declaratory judgment that Negrin and Sulzer are not entitled to any stock
options or cash payments under the Company's 1990 Stock Option and Cash Payment
Plan because of these
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defendants' alleged breaches of certain employment-related agreements entered
into with the Company. The Company further seeks a declaration that AFC's
products, including the UMC 1000 Digital Loop Carrier, are the proprietary
property of the Company under the terms of certain Proprietary Information
Agreements or certain Consulting Agreements with Quadrium. The Company also
seeks unspecified damages for breach of contract, civil conspiracy, and
tortious interference. The individual defendants have both filed counterclaims
whereby they claim entitlement to certain stock options and cash payments under
several of the Company's stock option plans. AFC has also filed a counterclaim
alleging that the Company has violated the Sherman Antitrust Act and a
California statutory antitrust act known as the Cartwright Act. AFC further
claims that the Company has (a) tortiously interfered with existing and
prospective contractual relationships, (b) committed industrial espionage and
misappropriation, (c) trespassed on AFC's business premises, (d) converted
certain property of AFC, and (e) committed unfair competition. AFC also seeks
a declaratory judgment that it owns all rights to its product, the UMC Digital
Loop Carrier. AFC asks the court to award unspecified actual damages, treble
damages under the antitrust statutes, punitive damages, injunctive relief, and
attorneys' fees. Although the outcome of litigation is inherently uncertain,
the Company believes that it has valid and substantial claims against all of
the defendants and valid defenses to all of the counterclaims. The case is
still in discovery, and the Company intends to vigorously prosecute its claims
and defend all of the defendants' counterclaims.
On May 25, 1994, the Company filed suit against DGI Technologies, Inc.
("DGI"), a Texas corporation, in the United States District Court for the
Northern District of Texas, Dallas Division. The Company alleges that DGI has
engaged in unfair competition under the Lanham Act and the common law by
trading on DSC's reputation and by misleading customers about DGI's research
and development efforts. The Company further alleges that DGI has
misappropriated DSC trade secrets regarding digital trunk interface cards and
microprocessor cards. The Company seeks damages for DGI's prior actions and
permanent injunctive relief. DGI has brought counterclaims for alleged
violations of federal antitrust statutes, tortious interference, industrial
espionage, misappropriation of trade secrets, trespass, conversion and unfair
competition. DGI's antitrust counterclaims are based upon allegations that
DSC's claims constitute "sham" litigation, that DSC's statements to customers
about the impact of their use of DGI products on DSC warranties are unlawful
attempts to exclude competition and that DSC has unlawfully tied the sale of
its microprocessors to the sale of other products. The balance of DGI's
counterclaims are based upon certain investigative procedures employed by DSC
in connection with this controversy. DGI asks the Court to award unspecified
actual damages, treble damages under
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antitrust statutes, punitive damages, injunctive relief and attorneys fees.
Finally, DGI seeks declaratory relief that DGI's sales of microprocessors do
not violate any proprietary rights of DSC or any applicable law. Although the
outcome of litigation is inherently uncertain, the Company believes that it has
valid and substantial claims against DGI and valid defenses to DGI's
counterclaims. The case is still in discovery, and the Company intends
vigorously to prosecute its claims and to defend all of DGI's counterclaims.
The Company does not believe that the ultimate resolution of any of
these suits will have a material adverse effect on its consolidated financial
position.
The Company is also a party to other legal proceedings which, in the
opinion of management, are not expected to have a material adverse effect on
the Company's consolidated financial position.
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<PAGE> 16
Item 6. Exhibits and Reports on Form 8-K.
A. Exhibits.
2. Stock Purchase Agreement By and Among DSC Communications
Corporation, NKT Holding A/S, and NKT Elektronik A/S, dated
as of October 20, 1994.
11. Computation of Income Per Share.
27. Financial Data Schedule.
B. Reports on Form 8-K.
No reports on Form 8-K have been filed during the three months ended
September 30, 1994.
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<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DSC COMMUNICATIONS CORPORATION
Dated: November 14, 1994 By: /s/ Kenneth R. Vines
----------------------------
Kenneth R. Vines
Vice President and
Controller, duly
authorized officer and
principal accounting
officer
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<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
2. Stock Purchase Agreement By and Among DSC Communications
Corporation, NKT Holding A/S, and NKT Elektronik A/S, dated
as of October 20, 1994.
11. Computation of Income Per Share.
27. Financial Data Schedule.
</TABLE>
<PAGE> 1
Exhibit 2
STOCK PURCHASE AGREEMENT
BY AND AMONG
DSC COMMUNICATIONS CORPORATION,
NKT HOLDING A/S, and
NKT ELEKTRONIK A/S
Dated as of October 20, 1994
<PAGE> 2
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of
October 20, 1994, by and among DSC COMMUNICATIONS CORPORATION, a Delaware
corporation ("Acquiror"), NKT HOLDING A/S, a corporation organized and existing
under the laws of the Kingdom of Denmark (the "Seller"), and NKT ELEKTRONIK
A/S, a corporation organized and existing under the laws of the Kingdom of
Denmark (the "Company").
Seller owns all of the outstanding capital stock of the Company.
This Agreement contemplates a transaction in which the Acquiror will
acquire from Seller, and Seller will sell to the Acquiror, all of the
outstanding capital stock of the Company at a purchase price stated herein.
NOW, THEREFORE, in consideration of the premises and the mutual promises herein
made, and in consideration of the representations, warranties, and covenants
herein contained, the Parties agree as follows.
ARTICLE I
STOCK PURCHASE
SECTION 1.01. STOCK PURCHASE.
On the terms and subject to the conditions contained in this
Agreement, Seller shall sell, assign, transfer, convey and deliver to Acquiror,
and Acquiror shall purchase, acquire and accept for delivery from Seller, all
of the outstanding shares of common stock, DKK 1000 par value per share of the
Company (the "Company Common Stock") for the consideration specified below in
this Section 1.01 (the "Stock Purchase"). The Acquiror agrees to pay to the
Seller at the Closing One Hundred Forty-Five Million United States Dollars (US$
145,000,000.00) plus or minus the amount of any adjustment provided in Section
1.04 hereof (the "Purchase Price").
SECTION 1.02. CLOSING.
Subject to the terms and conditions of this Agreement, the closing of
the Stock Purchase and the other transactions described herein (the "Closing")
will take place on November 15, 1994, or as soon as practicable after
satisfaction of the latest to occur or, if permissible, waiver of the
conditions set forth in Article VII hereof, at the offices of the Seller,
Brondby, Denmark, unless another date or place is agreed to in writing by the
parties hereto (the date on which the Closing occurs being referred to herein
as the "Closing Date"). At the Closing, (i) the Seller will deliver to
Acquiror the various certificates, instruments, and documents referred to in
this Agreement, (ii) Acquiror will deliver to the Seller the various
certificates, instruments, and documents
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<PAGE> 3
referred to in this Agreement, (iii) the Seller will deliver to Acquiror stock
certificates representing all of the outstanding shares of Company Common
Stock, endorsed in blank or accompanied by duly executed assignment documents,
and (iv) Acquiror will deliver to the Seller the Purchase Price less the
Escrowed Amount (as defined below) by wire transfer to an account of Seller at
Den Danske Bank in Copenhagen, Denmark, to be designated by Seller at least
five days prior to Closing.
SECTION 1.03. ESCROW.
(a) Prior to the Closing, Acquiror, Seller and Den Danske Bank,
Copenhagen, Denmark, or another mutually acceptable financial institution (the
Escrow Agent") shall enter into an Escrow Agreement (herein so called)
substantially in the form of Exhibit A attached hereto, whereby Acquiror and
Seller shall agree that the Escrowed Amount shall be deposited into and held in
escrow under and pursuant to the Escrow Agreement.
(b) "Escrowed Amount" shall be an amount equal to seven percent
(7%) of the Purchase Price.
SECTION 1.04. PURCHASE PRICE ADJUSTMENT.
The Purchase Price shall be adjusted as provided in this Section 1.04.
Attached as Schedule 1.04 is an unaudited September 30, 1994 balance sheet of
the Company and its consolidated subsidiaries, which also depicts pro forma
adjustments as of September 30, 1994 to eliminate the Excluded Businesses and
Excluded Assets and to make certain other agreed adjustments, resulting in the
Adjusted Balance column (the "Pro Forma Balance Sheet") depicted on said
Schedule. If the Shareholders' equity shown on the Pro Forma Balance Sheet is
not properly stated in accordance with Danish GAAP (as herein defined). The
Purchase Price will be adjusted downward or upward in an amount equal to the
amount of any changes in shareholders equity.
(a) Prior to the Closing Date, the Seller shall cause
Deloitte & Touche to audit the Pro Forma Balance Sheet and to prepare and
deliver to the Seller and Acquiror a draft report thereon (the "Draft Pro Forma
Balance Sheet") prepared by Deloitte & Touche in accordance with Danish
accounting principles ("Danish GAAP") applied on a basis consistent with the
preparation of the 1993 Audited Balance Sheet (as hereinafter defined) (i) as
if the Company's fiscal year had ended September 30, 1994; (ii) with the
deferred tax accounts as of September 30, 1994 and expense for Taxes for the
nine-month period ended September 30, 1994 calculated on the basis that the
Company is not jointly taxed with the NKT Group for such period for purposes of
calculating liabilities in respect of Taxes and that the Company and the
Continuing Subsidiaries are jointly taxed, and (iii) giving effect on a pro
forma basis to transfers of the Excluded Businesses and the Excluded Assets to
be made prior to Closing in the manner directed
2
<PAGE> 4
by Seller. The Draft Pro Forma Balance Sheet shall contain explanatory notes
regarding the effect of adjustments made pursuant to clauses (i) through (iii)
above. Deloitte & Touche shall conduct the audit in accordance with Danish
auditing standards as though the Company's fiscal year had ended on September
30, 1994.
(b) If the Acquiror has any objections to the Draft Pro Forma
Balance Sheet, it will deliver a detailed statement describing its objections
to the Seller within 7 days after receipt thereof. The Acquiror and the Seller
will use reasonable efforts to resolve any such objections themselves. If the
Acquiror and Seller do not obtain a final resolution within 5 days after the
Seller has received the statement of objections, however, the Acquiror and the
Seller will select an accounting firm mutually acceptable to them to resolve
any remaining objections. If the Acquiror and the Seller are unable to agree on
the choice of an accounting firm, they will select an
internationally-recognized accounting firm by lot (after excluding their
respective regular outside accounting firms). The determination of any
accounting firm so selected shall be made using the same accounting principles
and practices applied by Deloitte & Touche and will be set forth in writing and
will be conclusive and binding upon the parties. The Seller will revise the
Draft Pro Forma Balance Sheet as appropriate to reflect the resolution of any
objections thereto pursuant to this Section 1.04. The "Audited Pro Forma
Balance Sheet" shall mean the Draft Audited Pro Forma Balance Sheet together
with any revisions thereto pursuant to this Section 1.04.
(c) In the event the Acquiror and Seller submit any unresolved
objections to an accounting firm for resolution as provided in Section 1.04(b)
above, the Acquiror and the Seller will share responsibility for the fees and
expenses of the accounting firm as follows:
(i) if the accounting firm resolves all of the
remaining objections in favor of the Acquiror (the
shareholders' equity as if so determined is referred to herein
as the "Low Value"), the Seller will be responsible for all of
the fees and expenses of the accounting firm;
(ii) if the accounting firm resolves all of the
remaining objections in favor of the Seller (the shareholders'
equity as if so determined is referred to herein as the "High
Value"), the Acquiror will be responsible for all of the fees
and expenses of the accounting firm; and
(iii) if the accounting firm resolves some of the
remaining objections in favor of the Acquiror and the rest of
the remaining objections in favor of the Seller (the
shareholders' equity so determined is referred to herein as
the "Actual Value"), the Seller will be
3
<PAGE> 5
responsible for that fraction of the fees and expenses of the
accounting firm equal to (x) the difference between the High
Value and the Actual Value over (y) the difference between the
High Value and the Low Value, and the Acquiror will be
responsible for the remainder of the fees and expenses.
(d) The Seller will make the work papers and back-up materials
used in preparing the Draft Pro Forma Balance Sheet, and the books, records,
and financial staff of the Company and the Company's Continuing Subsidiaries,
available to the Acquiror and its accountants and other representatives at
reasonable times and upon reasonable notice at any time during (i) the
preparation by the Seller of the Draft Pro Forma Balance Sheet, (ii) the review
by the Acquiror of the Draft Pro Forma Balance Sheet, and (iii) the resolution
by the parties of any objections thereto.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY
For purposes of this Article II, references to the Company shall be
deemed to include the Continuing Subsidiaries. Except as set forth in the
Disclosure Schedule delivered by Seller to Acquiror prior to the execution and
delivery of this Agreement (the Company Disclosure Schedule"), which identifies
exceptions by specific Section references, Seller hereby represents and
warrants to Acquiror as follows (provided, however, that the following
representations and warranties do not apply with respect to the Excluded
Businesses or the Excluded Assets):
SECTION 2.01. ORGANIZATION AND QUALIFICATION.
The Company and each of the Continuing Subsidiaries are corporations
duly organized, validly existing and in good standing under the Laws of their
respective jurisdictions of incorporation, have all requisite corporate or
other power and authority to own, lease and operate their properties and to
carry on their business as it is now being conducted and are duly qualified and
in good standing to do business in each jurisdiction in which the nature of the
business conducted by them or the ownership or leasing of their properties
makes such qualification necessary, except where the failure would not have a
Company Material Adverse Effect.
SECTION 2.02. ORGANIZATIONAL DOCUMENTS.
The Company has heretofore furnished or made available to Acquiror
complete and correct copies of the current resume of the Danish Commerce and
Companies Agency ("DCCA") which reflects the current Articles of Association of
the Company and all other organizational documents of the Company and each of
its subsidiaries, each as amended or restated and currently in effect. Neither
the Company nor any of the Continuing Subsidiaries is in
4
<PAGE> 6
violation of any of the provisions of such organizational documents, except for
violations which would not have a Company Material Adverse Effect.
SECTION 2.03. CAPITALIZATION; SUBSIDIARIES.
(a) Authorized and Outstanding Capital. The share
capital of the Company amounts to DKK 101,100,000.00 represented by 101,100
shares of Company Common Stock, all of which are duly authorized, validly
issued, fully paid and non-assessable and which were not issued in violation
of any preemptive rights created by statute, the Company's organizational
documents or any agreement to which the Company is a party or is bound; (y) no
shares of Company Common Stock were held in the treasury of the Company; and
(z) no shares of Company Common Stock were reserved for any purpose. Except as
set forth above, there are no other authorized shares of capital stock. Each
of the outstanding shares of capital stock of the Company was issued in
compliance in all material respects with all applicable laws concerning the
issuance of securities.
(b) No Investments. The Company does not directly or
indirectly own, nor has the Company agreed to purchase or otherwise acquire,
any of the capital stock of, or other equity interests in, or any interest
convertible into or exchangeable or exercisable for, capital stock of, or other
equity interests in, any corporation, partnership, joint venture or other
business association or entity which interests or stock in such entity
represents 5% or more of the total outstanding interests or stock of such
entity other than the subsidiaries or entities of the Company described in
Section 2.03 of the Company Disclosure Schedule. There are no agreements,
arrangements or commitments of any character (contingent or otherwise) pursuant
to which any person is or may be entitled to receive any of the revenues or
earnings, or any payment based thereon or calculated in accordance therewith,
of the Company.
(c) Subsidiaries. Section 2.03 of the Company
Disclosure Schedule sets forth for each subsidiary of the Company (i) its name
and jurisdiction of incorporation, (ii) the number of shares of authorized
capital stock of each class of its capital stock, (iii) the number of issued
and outstanding shares of each class of its capital stock, the names of the
holders thereof, and the number of shares held by each such holder, and (iv)
the number of shares of its capital stock held in treasury. All of the issued
and outstanding shares of capital stock of each subsidiary of the Company have
been duly authorized and are validly issued, fully paid, and nonassessable.
Either the Company or one of its subsidiaries holds of record and owns
beneficially all of the outstanding shares of each subsidiary of the Company as
depicted on Section 2.03 of the Company Disclosure Schedule, free and clear of
any restrictions on transfer, Tax liens, security interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands. There
are no outstanding or
5
<PAGE> 7
authorized options, warrants, purchase rights, conversion rights, exchange
rights, or other contracts or commitments that could require the Company or any
of its subsidiaries to sell, transfer, or otherwise dispose of any capital
stock of any of its subsidiaries or that could require any subsidiary of the
Company to issue, sell, or otherwise cause to become outstanding any of its own
capital stock. There are no outstanding stock appreciation, phantom stock,
profit participation, or similar rights with respect to any Continuing
Subsidiary of the Company. There are no proxies, or other agreements or
understandings with respect to the voting of any capital stock of any
continuing subsidiary of the Company. Except as set forth in Section 2.03 of
the Company Disclosure Schedule, none of the Company and its subsidiaries
controls directly or indirectly or has any direct or indirect equity
participation in any corporation, partnership, trust, or other business
association which is not a subsidiary of the Company and which participation is
5% or greater of the total outstanding equity participation in such entity.
(d) Ownership of Company Common Stock. Seller is the
true and lawful owner, of record and beneficially, of all of the Company's
share capital, and at Closing, all shares of Company Common Stock shall be free
and clear of any liens, restrictions, security interests, claims, rights of
another, or encumbrances. None of the shares of Company Common Stock are
subject to any outstanding options, warrants, calls, or similar rights of any
other person to acquire the same; none of the shares of Company Common Stock
are subject to any restrictions on transfer thereof; and Seller has the full
power and authority to convey, and will convey to Acquiror at Closing, good and
marketable title to the shares of Company Common Stock free and clear of any
liens, restrictions, security interests, claims, rights of another, or
encumbrances.
SECTION 2.04. AUTHORITY.
The Company and Seller each have the requisite corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by the Company and Seller and the
consummation by the Company and Seller of the transactions contemplated hereby
have been duly authorized by the Boards of Directors of the Company and Seller,
respectively, and no other corporate proceedings on the part of the Company or
Seller are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company and Seller and, assuming the due authorization,
execution and delivery by Acquiror, constitutes legal, valid and binding
obligations of the Company and Seller, enforceable against each in accordance
with its terms, except as may be subject to the effect of any applicable
bankruptcy, insolvency (including, without limitation, all Laws relating to
fraudulent transfers), reorganization, moratorium or
6
<PAGE> 8
similar Laws affecting creditors' rights generally and subject to the effect of
general principles of equity (whether considered in a proceeding in equity or
at law) (collectively, the "Bankruptcy and Equity Exception").
SECTION 2.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by
Seller and the performance of this Agreement by the Seller and the Company
shall not, subject to (x) obtaining the consents, approvals, authorizations and
permits of, and making filings with or notifications to, any governmental,
quasi-governmental or regulatory authority, domestic or foreign ("Governmental
Entities") described in Section 2.05(b) of the Company Disclosure Schedule, and
(y) obtaining the consents, approvals, authorizations or permits described in
Section 2.05(b) of the Company Disclosure Schedule, (i) conflict with or
violate the organizational documents of Seller or the Company or any subsidiary
of the Company, (ii) conflict with or violate any law, statute, ordinance,
rule, regulation, order, judgment or decree (collectively, "Laws") applicable
to Seller or the Company or any subsidiary of the Company or by which any of
their material properties are bound, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on any of the properties or assets of Seller or the Company or
any subsidiary of the Company pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Seller or the Company or any subsidiary of the Company is a
party or by which Seller or the Company or any subsidiary of the Company or any
of their material properties are bound or affected ("Third Party Contracts")
and which are listed in Section 2.11 of the Company Disclosure Schedule (or
indicated thereon as material contracts that have not been listed) and which
breach or default (together with all other such breaches or defaults) would
have a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by
Seller and the Company do not, and the performance of this Agreement by Seller
and the Company shall not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Entities or
third parties pursuant to any Third Party Contracts except (i) the consents,
approvals, authorizations or permits described in Section 2.05(b) of the
Company Disclosure Schedule, or (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not adversely affect the ability of Seller and the Company to consummate,
or prevent or delay the consummation of, the transactions contemplated by this
Agreement.
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<PAGE> 9
SECTION 2.06. PERMITS; COMPLIANCE.
(a) The Company and the Continuing Subsidiaries possess
all franchises, grants, authorizations, licenses, permits, easements,
variances, exemptions, consents, certificates, approvals and orders necessary
for the Company and its subsidiaries to own, lease and operate its properties
or to carry on its business as it is now being conducted (the "Company
Permits") except where the failure to possess such Company Permits would not
have a Company Material Adverse Effect. The Company has taken no action which
would render any of the Company Permits to be invalid, and no suspension or
cancellation of any of the Company Permits is pending or, to the Company's
knowledge, threatened. Neither the Company nor any of its subsidiaries is in
conflict with, or in default or violation of, any Law applicable to the Company
or any of its subsidiaries or by which any of their material properties are
bound or affected or any of the Company Permits, except where such conflict,
default, or violation would not have a Company Material Adverse Effect. Neither
the Company nor any of its subsidiaries has failed to remedy any such
previously existing conflict, default or violation, except where such failure
to remedy would not have a Company Material Adverse Effect. Since December 31,
1992, neither the Company nor any of its subsidiaries has received written or
oral notice from any Governmental Entity of any such conflict, default or
violation which has not been corrected or which cannot be corrected in the
ordinary course without material cost.
(b) The Company and the Continuing Subsidiaries have
filed all forms, reports, statements, and other documents required to be filed
with any Governmental Entities, except where the failure to file such forms,
reports, statements or other documents under this paragraph (b) would not have
a Company Material Adverse Effect; provided, that this representation shall not
apply to matters addressed in Section 2.12 or 2.13, which shall be governed by
such Section 2.12 or 2.13, respectively.
SECTION 2.07. FINANCIAL INFORMATION; BOOKS AND RECORDS.
(a) The Company has caused to be prepared in accordance
with Danish GAAP (i) its 1993 and 1992 Annual Accounts, which includes
consolidated balance sheets, as of December 31, 1993 and 1992, of the Company
and its consolidated subsidiaries (the "Audited Balance Sheets") and the
related consolidated profit and loss accounts and consolidated cash flow
analysis of the Company and its consolidated subsidiaries for each of the two
fiscal years ended December 31, 1993 and 1992 (the Audited Balance Sheets and
such profit and loss accounts, cash flow analysis and related notes and
schedules being hereinafter referred to collectively as the "Audited
Accounts"), and (ii) the unaudited consolidated balance sheet and the related
unaudited consolidated profit and loss account for the nine month period ended
September 30, 1994 (such interim financial statements being hereinafter
referred to collectively as the "Unaudited Accounts" and, collectively with the
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<PAGE> 10
Audited Accounts, the "Financial Statements"). A true and complete copy of
each of the Financial Statements has been delivered to Acquiror and is included
as Section 2.07 to the Company Disclosure Schedule. The Audited Accounts have
been audited by Deloitte & Touche. Once the Audited Pro Forma Balance Sheet
exists, it shall be deemed substituted for the unaudited balance sheet
contained in the Unaudited Accounts for the purposes of this Section 2.07 and
in Section 2.08 (except for contingent liabilities).
(b) The Financial Statements (i) have been prepared from
the books and records of the Company and (ii) fairly present in all material
respects the financial position of the Company and the results of its
operations and its cash flows as of and for the respective time periods in
conformity with Danish GAAP applied on a consistent basis, except that the
Unaudited Accounts (prior to substitution of the Pro Forma Balance Sheet) are
subject to normal year-end adjustments, the absence of footnotes and other
presentation discrepancies. The Financial Statements are deemed to fairly
present in all material respects the financial position of the Company and the
results of its operations and its cash flows if and to the extent such
Financial Statements were prepared in conformity with Danish GAAP.
(c) The financial books and records of the Company have
been maintained in accordance with reasonable business practices.
SECTION 2.08. ABSENCE OF UNDISCLOSED LIABILITIES.
The Company has no liabilities or obligations (whether accrued,
absolute or contingent), including but not limited to liabilities for Taxes (as
defined in Section 2.12(d)), that are not reflected or accrued on, or reserved
against in or reflected in, the Unaudited Accounts except for liabilities or
obligations incurred since September 30, 1994, in the ordinary course of
business and consistent with past practice and except for liabilities or
obligations which do not have a Company Material Adverse Effect.
SECTION 2.09. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as contemplated hereby, (a) since September 30, 1994, the
Company and its subsidiaries have conducted its business only in the ordinary
course and in a manner consistent with past practice, and (b) since September
30, 1994, there has not been: (i) any damage, destruction or loss (not covered
by insurance) with respect to any material physical asset of the Company or any
of its Continuing Subsidiaries; (ii) any change by the Company in its
accounting methods, principles and practices, except any such change after the
date of this Agreement required by a change in Danish GAAP adopted after the
date of this Agreement; (iii) any declaration, setting aside or payment of any
dividends or distributions in respect of shares of Company Common Stock or any
redemption, purchase or other acquisition of any of the Company's
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<PAGE> 11
securities or any other payment (excluding those for goods, services and rent
consistent with past practices) by the Company to any of its affiliates
(excluding the Company's Continuing Subsidiaries); (iv) any increase in the
benefits under, or the establishment or amendment of, any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including, without limitation, the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to directors, officers or employees
of the Company or any of its subsidiaries, except for increases in salaries or
wages payable or to become payable in the ordinary course of business and
consistent with past practice to employees of the Company or any of its
subsidiaries; (v) any transaction or contract material to the Company, or any
commitment to do the same, entered into by the Company other than in the
ordinary course of business and consistent with past practice; (vi) any
transfer, mortgage, pledge, encumbrance or disposition by the Company or any of
its subsidiaries of any of their assets, other than in the ordinary course of
business and consistent with past practice; (vii) any cancellation or writing
off as worthless and uncollectible any inventory, debt, note or account
receivable of the Company or any of its subsidiaries other than in the ordinary
course of business; (viii) any receipt by the Company or any of its
subsidiaries of written or oral notice that any contract, agreement or
arrangement the cancellation of which would have a Company Material Adverse
Effect, to which it is a party has been or may be canceled; (ix) any
individual capital expenditure by the Company or any of its subsidiaries or
commitment to make such capital expenditure in excess of DKK 1,300,000; (x) any
payment or incurring of liability to pay any Taxes, assessments, fees,
penalties, interest or other governmental charges, other than those arising and
discharged or to be discharged in the ordinary course of business and
consistent with past practice; (xi) any loans in excess of DKK 1,000,000 made
by the Company or any of its subsidiaries to any person or entity (other than
by the Company to a subsidiary or vice versa), including but not limited to,
any employee, officer or director of the Company or any of its subsidiaries;
(xii) any incurring of indebtedness by the Company or any of its subsidiaries
for borrowed money or commitment by the Company or any of its subsidiaries to
borrow money other than in the ordinary course of business; (xiii) a Company
Material Adverse Effect; or (xiv) authorization, approval, agreement or
commitment by the Company or any of its subsidiaries to take any action
described in clauses (i) through (xiii) above.
SECTION 2.10. ABSENCE OF LITIGATION.
(a) There is no claim, action, suit, litigation,
proceeding, arbitration, or investigation of any kind to which the Company or
any of its subsidiaries are a party, at law or in equity (including actions or
proceedings seeking injunctive relief),
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<PAGE> 12
pending or, to the Company's knowledge, threatened against the Company or any
of its subsidiaries or any of their respective assets.
(b) Neither the Company nor or any of its subsidiaries is
subject to any consent decree, settlement agreement or other similar written
agreement with, or continuing order or, to the Company's knowledge,
investigation by, any Governmental Entity, or any judgment, order, writ,
injunction, decree or award of any Governmental Entity or arbitrator,
including, without limitation, cease-and-desist or other orders, in each case
in this paragraph (b) which relates to the business conducted by the Company or
any of its subsidiaries or is otherwise applicable to the Company or any of its
subsidiaries or to any of their officers or directors in connection with the
business conducted by the Company or any of its subsidiaries.
SECTION 2.11. CONTRACTS; NO DEFAULT.
(a) Section 2.11(a) of the Company Disclosure Schedule
sets forth as of the date of this Agreement a list of each contract or
agreement of the Company and its Continuing Subsidiaries in effect on the date
hereof (together with the contracts and agreements listed in Section 2.11(b) of
the Company Disclosure Schedule and the contracts and agreements not so listed
but referred to therein as material contracts not so listed, the "Company
Contracts"):
(i) involving an aggregate payment or commitment by the
Company or any third party per contract or agreement of more than a
commitment of DKK 3,000,000 during the 12-month period ending
September 30, 1994 or more than DKK 3,000,000 during the remaining
term thereof from and after the date hereof;
(ii) concerning a partnership or joint venture with
another person;
(iii) concerning employment or consulting arrangements with
the Company's (A) directors or officers, (B) employees other than the
officers and directors of the Company providing for annual
compensation in excess of DKK 350,000 to such persons, or (C)
providing for severance payments to any such directors, officers or
employees and which are listed in the immediately preceding clause
(B).
(iv) involving agreements or commitments with any
Governmental Entity (other than for the sale and purchase of goods or
services in the ordinary course of business);
(v) (A) involving any contract with independent
contractors or consultants (or similar arrangements) for the
development, directly or indirectly, of intellectual property
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or any rights thereto and involving a reasonably expected aggregate
payment or commitment of more than DKK 300,000 for the 12-month period
ended September 30, 1994 or DKK 300,000 during the remaining term
thereof from and after the date of this Agreement and which are not
cancelable without penalty or without payment and (B) involving any
contract with independent contractors or consultants (or similar
arrangements) for other than the development of intellectual property
or rights thereto and involving a reasonably expected aggregate
payment or commitment of more than DKK 1,300,000 for the 12-month
period ended September 30, 1994 or DKK 1,300,000 during the remaining
term thereof from and after the date of the Agreement and which are
not cancelable without penalty or without payment;
(vi) involving any distributor or manufacturer's
representative, sales agency, data processing or insurance brokerage
agreements which are not cancelable without penalty upon thirty or
fewer days' notice;
(vii) involving commitments for uncompleted capital
expenditures in excess of DKK 1,300,000 for any single project;
(viii) involving agreements or instruments relating to the
extension of credit not in the ordinary course of business and
consistent with past practice;
(ix) involving agreements of guaranty by the Company and
the Continuing Subsidiaries in respect of any obligation for borrowed
money or otherwise (except for the benefit of the Company's Continuing
Subsidiaries);
(x) with any affiliate of the Company (excluding the
Company's Continuing Subsidiaries);
(xi) involving all other contracts, agreements,
commitments, or arrangements (including arrangements with sole source
suppliers) whether or not made in the ordinary course of business
which are material to the Company or the conduct of its business or
the absence of which would have a Company Material Adverse Effect; and
(xii) involving the purchase, sale or hedge of foreign
exchange, commodities or similar matters.
The Company has made available to Acquiror, or given access to Acquiror to
inspect, copies of all written Company Contracts (including all amendments
thereto). Section 2.10(a) of the Company Disclosure Schedule includes a
description of all material terms of all unwritten Company Contracts.
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(b) Section 2.11(b) of the Company Disclosure Schedule
lists each contract or agreement to which the Company or any of its
subsidiaries is a party limiting the right of the Company or any of its
subsidiaries prior to the Closing Date, or Acquiror or any of its affiliates at
or after the Closing Date, to engage in, or to compete with any person in, any
business, including each contract or agreement containing exclusivity
provisions restricting the geographical area in which, or the method by which,
any business may be conducted by the Company or any of its subsidiaries prior
to the Closing Date, or Acquiror or any of its affiliates after the Closing
Date.
(c) Each Company Contract, and each other contract or
agreement of the Company which would have been required to be disclosed in
Section 2.11(a) of the Company Disclosure Schedule had such contract or
agreement been entered into prior to the date of this Agreement, is in full
force and effect and is a legal, valid and binding contract or agreement of the
Company (subject to the Bankruptcy and Equity Exception) and there is (i) no
default (or any event which, with the giving of notice or lapse of time or
both, would be a default) by the Company or any other party, in the timely
performance of any obligation to be performed or paid under any of the Company
Contracts or any such other contract or agreement which is likely to result in
a Company Material Adverse Effect, (ii) to the Company's knowledge, no threat
of cancellation or termination of any Company Contract, or (iii) no written or
oral modification or amendment and there exists no ongoing negotiations in
respect of a material change to any Company Contract, except as specifically
described in Section 2.11(a) of the Company Disclosure Schedule.
SECTION 2.12. EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) Section 2.12(a) of the Company Disclosure Schedule
lists each employee benefit plan, program, arrangement and contract applicable
to employees of the Company to which the Company has contributed or under which
the Company has any material liability (the "Company Benefit Plans").
(b) The Company is not a party to or bound by any
collective bargaining or other labor union contract. There is no pending or,
to the Company's knowledge, threatened labor dispute, strike or work stoppage
against the Company which may interfere with the business activities of the
Company.
SECTION 2.13. TAXES.
(a) (i) All Returns (as defined below) in respect of
Taxes (as defined below) required to be filed by or on behalf of the Company
prior to the date hereof have been timely filed; (ii) all Taxes required to be
shown on such Returns or otherwise due or payable by the Company prior to the
date of this Agreement have been timely paid and all payments of estimated
Taxes required
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to be made by or on behalf of the Company under any provision of state, local
or foreign law prior to the date of this Agreement for the current taxable
years of the Company have been made; (iii) all such Returns have been prepared
in compliance with applicable laws and customary practice in all material
respects; (iv) no adjustment relating to any of such Returns has been proposed
in writing by any Tax authority; (v) there are no outstanding subpoenas with
respect to any Returns of the Company or the Taxes reflected on such Returns;
(vi) there are no pending or, to the Company's knowledge, threatened actions or
proceedings for the assessment or collection of Taxes against the Company or,
to the Company's knowledge, any corporation that was included in the filing of
a Return with the Company on a consolidated, combined or unitary basis with
respect to any period for which such corporation was so included; (vii) there
are no Tax liens on any assets of the Company other than liens for Taxes not
yet due or payable or which the Company is contesting in good faith through
appropriate proceedings which are disclosed in Section 2.12(a) of the Company
Disclosure Schedule; (viii) all Taxes required to be withheld, collected or
deposited by the Company prior to the date hereof have been timely withheld,
collected or deposited and, to the extent required prior to the date hereof,
have been paid to the relevant Tax authority; and (ix) the books and records of
the Company reflect reserves that are adequate for the payment of all Taxes not
yet due and payable that are properly accruable thereon as of the date hereof
(including Taxes being contested).
(b) (i) Section 2.13(b) of the Company Disclosure
Schedule indicates the most recent Danish income Tax Return for which an audit
has been completed and indicates all such Danish income Tax Returns that
currently are the subject of audit; (ii) the Company has provided Acquiror with
an accurate description of the unwritten tax allocation arrangement to which
the Company is a party; and (iii) Section 2.13(b) of the Company Disclosure
Schedule sets forth information with respect to the Company as of December 31,
1993 regarding the aggregate tax basis of the Company in its assets.
(c) For purposes of this Agreement, "Tax" or "Taxes"
shall mean any and all taxes, charges, fees, levies, and other governmental
assessments and impositions of a similar kind, payable to any federal, state,
local or foreign governmental taxing authority or agency, including, without
limitation, (i) income, franchise, profits, gross receipts, minimum,
alternative minimum, estimated, ad valorem, value added, sales, use, service,
real or personal property, capital stock, license, payroll, withholding,
disability, employment, social security, workers compensation, unemployment
compensation, utility, severance, production, excise, stamp, occupation,
premiums, windfall profits, transfer and gains taxes, (ii) customs duties,
imposts, charges, levies or other similar assessments of any kind, and (iii)
interest, penalties and additions to tax imposed with respect thereto; and
"Returns" shall mean any and all returns, reports, and information statements
with
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respect to Taxes required to be filed with the Tax authorities or any other
Governmental Entity or Tax authority or agency, whether domestic or foreign,
including, without limitation, consolidated, combined and unitary tax returns.
SECTION 2.14. CUSTOMERS.
Seller and the Company do not know that any customer or supplier of
Company that is listed on Section 2.14 of the Company Disclosure Schedule will
cease to do business with the Company after the consummation of the
transactions contemplated hereby in the same manner as previously conducted
with the Company. The Company has not received any notice of any disruption
(including delayed deliveries or allocations by suppliers) in the availability
of the materials or products used by the Company nor is any Company aware of
any facts which could lead it to believe that the business of any Company will
be subject to any such disruption which would cause a Company Material Adverse
Effect.
SECTION 2.15. CERTAIN BUSINESS PRACTICES AND REGULATIONS.
Neither the Company or any of its subsidiaries, nor any of their
officers, directors, its stockholders, employees or agents has, on behalf of or
for the benefit of the Company or any of its subsidiaries, (i) made or agreed
to make any contribution, payment or gift to any customer, supplier,
governmental official, employee or agent where either the contribution, payment
or gift or the purpose thereof was illegal under any Law, (ii) established or
maintained any unrecorded fund or asset for any purpose or made any false
entries on its books and records for any reason, or (iii) made or agreed to
make any contribution, or reimbursed any political gift or contribution made by
any other person, to any candidate for federal, state or local public office in
violation of any Law. In addition, the Company and its subsidiaries have (a)
complied with all applicable Laws relating to employee and civil rights and
relating to employment opportunities and (b) filed in a timely manner all
reports and documents required to be filed with Governmental Entities (and the
information contained therein was correct and complete in all material
respects) under such Laws, except (in either case) where the failure to so
comply or file would not have a Company Material Adverse Effect.
SECTION 2.16. INSURANCE.
The policies of casualty and liability insurance and other insurance
maintained by the Company: (a) are with insurance companies believed by the
Company to be financially capable and reputable; (b) are in full force and
effect; (c) are sufficient for compliance by the Company in all material
respects with all requirements of law and of all material agreements to which
the Company is a party; (d) are, to the Company's knowledge, valid and
outstanding policies enforceable against the insurer (except for
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the Bankruptcy and Equity Exception); (e) provide insurance coverage believed
by the Company to be adequate for the operation and ownership of the businesses
and assets of the Company; and (f) provide that they will remain in full force
and effect through the respective expiration dates of such policies.
SECTION 2.17. POTENTIAL CONFLICTS OF INTEREST.
To the best knowledge of the officers and directors of the Company,
none of the officers or directors of the Company, or any entity controlled by
any of the foregoing or any member of the immediate family of any of the
foregoing and, with respect to subparagraphs (b), (c), (d), (e) and (f) of this
Section, to the best of the Company's knowledge none of the other employees of
the Company with salaries from the Company in excess of DKK 1,000,000 or a
member of their immediate families:
(a) owns, directly or indirectly, any interest in (except
for stock holdings up to five percent (5%) held solely for investment
(rather than control) purposes in securities which are listed on a
national securities exchange or which are regularly traded in the
over-the-counter market), or is an owner, sole proprietor,
stockholder, partner, director, officer, employee, provider,
consultant or agent of any person which is a competitor, lessor,
lessee or customer of, or supplier of goods or services to, the
Company (other than other Companies within the NKT Group), except
where the value to such individual of any such arrangement with the
Company has been less than DKK 1,000,000 in the last 12 months;
(b) owns directly or indirectly, in whole or in part, any
real property, leasehold interests, tangible property or intangible
property with a fair market value of DKK 1,000,000 or more which the
Company currently uses in its business;
(c) to the Company's knowledge, has any cause of action
or other suit, action or claim whatsoever against, or owes any amount
to the Company, except for claims in the ordinary course of business,
such as for accrued vacation pay, accrued benefits under Company
Benefit Plans, reimbursement of expenses and similar matters;
(d) has sold to, or purchased from, the Company any
assets or property for consideration in excess of DKK 1,000,000 in the
aggregate since January 1, 1992;
(e) is a party to any contract or participates in any
arrangement, written or oral, pursuant to which the Company provides
office space to any such individual or entity or provides services of
any nature to any such individual or entity, except where such
individual is an employee of the Company, in each case, where the
amount involved has been greater than DKK 1,000,000 in the last 12
months or is
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reasonably expected to be greater than DKK 1,000,000 in the 12 months
following the date hereof; or
(f) has, since January 1, 1992, engaged in any other
transaction with the Company where the amount involved was greater
than DKK 1,000,000 or was otherwise material to the business or
operations of the Company (other than in connection with such person's
employment relationship, if any).
As used in this Section 2.17, a person's immediate family shall mean
such person's spouse, parents, children, siblings, mothers and fathers-in-law,
sons and daughters-in-law, and brothers and sisters-in-law. As used in this
Section 2.17, an officer shall mean all persons who are above the level of
vice-president.
SECTION 2.18. REAL PROPERTY; LEASES.
(a) Section 2.18(a) of the Company Disclosure Schedule
lists all of the Real Property (as defined below) currently owned by the
Company or used by the Company in the course of the Company's business, and all
such Real Property is adequate for the uses for which it is currently devoted
by the Company.
(b) All buildings, structures, fixtures and other
improvements on the Real Property are in adequate repair (ordinary wear and
tear excepted), and are adequate for the uses to which they are currently
devoted by the Company. All such buildings, structures, fixtures and
improvements on the Real Property conform in all material respects to all Laws.
(c) No portion of the Real Property or any building,
structure, fixture or improvement thereon is the subject of, or affected by,
any condemnation, eminent domain or inverse condemnation proceeding currently
instituted or pending, and the Company has no knowledge that any of the
foregoing are, or will be, the subject of, or affected by, any such proceeding.
(d) The Real Property has access to such electric, gas,
water, sewer and telephone lines, and public streets as are adequate for the
uses to which the Real Property is currently devoted by the Company.
(e) Section 2.18(e) of the Company Disclosure Schedule
lists and briefly describes all leases and other Documents (as defined below)
under which the Company is lessee or lessor of any material Asset (as defined
below), or holds, manages or operates any material Asset owned by any third
party, or under which any material Asset owned by the Company is held, operated
or managed by a third party. The Company is the owner and has valid rights in
respect of all material third-party-owned Assets purported to be granted by the
Documents described in Section 2.18(e) of the Company Disclosure Schedule to it
and is the owner of all
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equipment, machinery and other Assets owned by the Company and leased or used
by third parties as described in such Section, in each case subject to the
Documents but free and clear of all other Encumbrances (as defined below).
Each such lease and other Document is in full force and effect and constitutes
a legal, valid and binding obligation of, and is legally enforceable against,
the Company, and to the Company's knowledge, the other parties thereto, subject
to the Bankruptcy and Equity Exception. The Company has in all material
respects performed all obligations thereunder required to be performed by it to
date. The Company is not and, to the Company's knowledge, no other party is in
default in any material respect under any of the foregoing, and there has not
occurred any event which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute such a default.
All of the material Assets subject to such Documents are in adequate condition
and repair, normal wear and tear excepted. For purposes of this Section
2.18(e), a material Asset shall mean any Asset having a fair market value or
replacement cost in excess of DKK 3,000,000.
(f) For purposes of Sections 2.18 and 2.19 only: "Real
Property" means the real property owned or used by the Company as of September
30, 1994, and any additional real property owned or used since that date and
set forth on Section 2.18(a) of the Company Disclosure Schedule; "Encumbrance"
means any mortgage, lien, pledge, encumbrance, security interest, deed of
trust, option, encroachment, reservation, order, decree, judgment, condition,
restriction, charge, claim or equity of any kind (except for (i) liens for
taxes not yet due and payable, (ii) zoning restrictions, minor defects or
irregularities in title, easements, rights-of-way and similar restrictions of
record on Real Property, none of which materially and adversely affects the use
or value of such property, (iii) landlord liens, (iv) liens of carriers,
warehousemen, mechanics, and materialmen, incurred in the ordinary course of
business, (v) liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance, and
other types of social security or to secure the performance of bids, tenders,
statutory obligations, performance or surety bonds, and other similar
obligations, (vi) liens described in Section 2.18 of the Company Disclosure
Schedule, and (vii) restrictions on transfer of securities imposed by
applicable securities laws); "Assets" means tangible assets of every kind,
including, without limitation, real and personal property; and "Documents"
means any leases and other agreements or documents governing the Company's
rights and obligations with respect to Assets owned by the Company or Assets
owned by third parties and leased or used by the Company.
SECTION 2.19. TITLE TO ASSETS.
Except as otherwise noted in Section 2.19 of the Company Disclosure
Schedule, the Company is the sole owner of and has, and
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at the Closing Date will have, good title to all of its owned assets, free and
clear of all Encumbrances. All material tangible assets of the Company are in
adequate operating condition and repair, normal wear and tear excepted.
SECTION 2.20. NO INFRINGEMENT OR CONTEST.
Section 2.20 of the Company Disclosure Schedule (i) identifies each
fictitious business name, trademark, service mark, trade name, copyright and
all registrations and applications for any of the foregoing owned by the
Company; (ii) lists each patent and all registrations and patent applications
owned by the Company; and (iii) lists all contracts and other agreements to
which the Company is a party, either as licensee or licensor, for each such
item of intellectual property. None of the Company's employees or its
affiliates (other than its subsidiaries and joint ventures), including, any of
its stockholders, has any ownership interest (other than as a stockholder of
the Company) in any patent, invention, industrial model, process, design,
registration, application, know-how, or other technical data, trade secret or
other business information used by the Company. All patents, copyrights,
trademarks, including state, federal and foreign registrations and
applications, and other rights and property listed in Section 2.20 of the
Company Disclosure Schedule are properly registered in the jurisdictions
indicated and are in full force and effect. The Company owns or has the right
to use all patents, inventions, copyrights, trademarks, service marks, and any
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), trade names,
trade dress, labels and logos developed or used in connection with the business
now operated by it. The Company has taken reasonable security measures to
protect the secrecy, confidentiality and value of its trade secrets, and to the
best of the Company's knowledge, none of the Company's material trade secrets
have been used, divulged or appropriated for the benefit of any person other
than the Company or to the detriment of the Company. The Company has not
received any notice of infringement of or conflict with asserted rights of
others with respect to any of the foregoing, and there is no claim, action,
suit or proceeding pending or, to the Company's knowledge, threatened or
reasonably anticipated against the Company with respect thereto. The Company
is not required to pay any royalty to anyone with respect to any patent,
invention, copyright, know-how, trademark, service mark, trade name, trade
dress, label or logo owned or used by the Company. The Company's trademarks,
service marks, trade names, trade dress, labels and logos described in Section
2.20 of the Company Disclosure Schedule are sufficient for the conduct of its
business as now conducted by it.
SECTION 2.21. BANKS; ATTORNEYS-IN-FACT.
Section 2.21 of the Company Disclosure Schedule sets forth a complete
list showing the name of each bank or other financial
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institution in which the Company has accounts (including a list of the names of
all persons currently authorized to draw thereon or to have access thereto).
Such list also shows the name of each person holding a power of attorney from
the Company and a brief description thereof.
SECTION 2.22. BROKERS.
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company.
SECTION 2.23. ENVIRONMENTAL MATTERS.
(a) The Company has complied and is in compliance with,
and the portion of the Real Property and improvements thereon occupied by the
Company during the Company's occupation thereof have been and are in compliance
with, all Environmental Laws (as defined below), except in either case where
the failure to comply would not have an Environmental Adverse Effect (as
defined below) on the Company.
(b) There are no pending or, to the Company's knowledge,
threatened actions, suits, claims, legal proceedings or other proceedings
affecting the Company based on, and the Company has not directly or indirectly
received any formal or informal notice of any complaint, order, directive,
citation, notice of responsibility, notice of potential responsibility, or
information request from any governmental authority or any other person or
entity, and the Company does not know of any incidents which are reasonably
likely to form the basis for any such actions or notices, arising out of or
attributable to: (i) the current or past presence at any part of the Real
Property of Hazardous Materials (as defined below); (ii) the current or past
release or threatened release by the Company into the environment from the Real
Property (including, without limitation, into any storm drain, sewer, septic
system or publicly owned treatment works) of any Hazardous Materials; (iii) the
off-site treatment or disposal of Hazardous Materials by or for the Company or
its subsidiaries; (iv) any facility operations, procedures or designs of the
Company which do not conform to requirements of the Environmental Laws; or (v)
any violation of Environmental Laws at any part of the Real Property during the
Company's occupation thereof or otherwise arising from the Company's activities
involving Hazardous Materials, in each case in clauses (i) through (v) other
than those which would not in the aggregate have an Environmental Adverse
Effect on the Company.
(c) The Company has been duly issued, and currently has
and will maintain through the Closing Date, all permits, licenses, certificates
and approvals required under any Environmental Law the failure to have or
maintain which would have an Environmental
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Adverse Effect. A true and complete list of such permits, licenses,
certificates and approvals issued to and now maintained by the Company, all of
which are valid and in full force and effect, is set out in Section 2.23(c) of
the Company Disclosure Schedule. Except in accordance with such permits,
licenses, certificates and approvals, there has been no discharge by the
Company of any material regulated by such permits, licenses, certificates or
approvals, nor any other Hazardous Discharge (as defined below) by or for the
Company.
(d) The Real Property contains no underground storage
tanks, or underground piping associated with such tanks, used currently or in
the past for the storage, throughput or other management of Hazardous Materials
other than those for which Seller has assumed financial responsibility.
(e) The Company has furnished to Acquiror accurate and
complete information in the Company's possession consisting of any assessment
of compliance (or noncompliance) by the operations of the Company or its
properties with Environmental Laws.
(f) The Company will promptly furnish to Acquiror written
notice of any Hazardous Discharge by or for the Company or of any actions or
notices described in Section 2.23(b) occurring after the date hereof and prior
to the Closing Date which are not disclosed on the Company Disclosure Schedule.
(g) To the Company's knowledge, neither PCBs (as defined
below) owned by the Company nor asbestos-containing materials owned by the
Company are present on or in the Real Property.
(h) "Environmental Laws" means any Laws, including any
regulations or orders promulgated pursuant to such Laws previously in effect or
in effect at the Closing Date, relating to the protection of human health or
the environment, to noise control, or to the generation, production, use,
storage, treatment, transportation, disposal, release, spilling, leaking,
discharging or emitting of Hazardous Materials; "Environmental Adverse Effect"
means any situation involving compliance and/or non-compliance with
Environmental Laws that, individually or when taken with all other such
situations, could result in any losses, costs, damages, liabilities, expenses
or payments by the Company in connection with the remediation of any such
situation and/or any fines, taxes, assessments, fees, penalties, losses, costs,
damages, liabilities, expenses or other payments related thereto in excess of
DKK 3,000,000; "Hazardous Materials" means any wastes, substances or materials
(whether solids, liquids or gases) that are deemed hazardous, toxic, pollutants
or contaminants, including, without limitation, substances defined as
"hazardous wastes," "hazardous substances," "toxic substances," "radioactive
materials," or other similar designations in, or otherwise subject to
regulation under, any Environmental Laws, and includes PCBs, asbestos, and
petroleum and petroleum products (including, without limitation, crude oil or
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any fraction thereof); "Hazardous Discharge" means any emission, spill, release
or discharge (whether on Real Property, on property adjacent to the Real
Property, or at any other location or disposal site) into or upon the air, soil
or improvements, surface water or ground water, or the sewer, septic system, or
waste treatment, storage or disposal systems servicing the Real Property, in
each case of Hazardous Materials used, stored, generated, treated or disposed
of at the Real Property; and "PCBs" means polychlorinated biphenyls.
SECTION 2.24. DISCLOSURE.
No representation or warranty by the Company or Seller, and no
certificate, schedule or exhibit furnished or to be furnished to Acquiror
pursuant to this Agreement, contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary in
order to make the statements contained therein, in light of all information so
furnished to Acquiror, not misleading. Information that has been provided to
Acquiror concerning projected sales, profits, future products or other expected
future business activities or financial results of the Company and its
Continuing Subsidiaries prior to the execution of this Agreement is not
warranted. Acquiror acknowledges that it is intimately familiar with the risks
associated with the industry in which the Company and its Continuing
Subsidiaries operate, and with the circumstances that may cause projections to
not be realized.
SECTION 2.25. CHANGE IN CONTROL.
Neither the Company nor any of its Continuing Subsidiaries is a party
to any contract, agreement or understanding which contains a "change in
control" or similar provision. Except as set forth in this Agreement, the
consummation of the transactions contemplated by this Agreement will not
(either alone or upon the occurrence of any additional acts or events) result
in any payment (whether of severance pay or otherwise) becoming due from the
Company or any of its Continuing Subsidiaries to any person.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF ACQUIROR
Except as set forth in the Disclosure Schedule delivered by Acquiror
to the Company prior to the execution and delivery of this Agreement (the
"Acquiror Disclosure Schedule"), which shall identify exceptions by specific
Section references, Acquiror hereby jointly and severally represents and
warrants to Seller as follows:
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SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
The Acquiror is a corporation duly organized, validly existing and in
good standing under the Laws of the jurisdiction of its incorporation, has all
requisite corporate or other power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted.
SECTION 3.02. CERTIFICATE OF INCORPORATION AND BY-LAWS.
The Acquiror is not in violation of any of the provisions of its
Certificate of Incorporation or By-Laws.
SECTION 3.03. AUTHORITY.
The Acquiror has the requisite corporate power and authority to
execute and deliver this Agreement, and to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Acquiror, and the consummation by Acquiror of
the transactions contemplated hereby, have been duly authorized by the Board of
Directors of Acquiror and no other corporate proceedings on the part of
Acquiror are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Acquiror and, assuming the due authorization, execution and
delivery by Seller and the Company, constitute legal, valid and binding
obligations of Acquiror, enforceable against it in accordance with its terms,
except as may be subject to the Bankruptcy and Equity Exception.
SECTION 3.04. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by
Acquiror does not, and the performance of this Agreement by Acquiror shall not,
subject to obtaining the consents, approvals, authorizations or permits
described in Section 3.04(b) of the Acquiror Disclosure Schedule, (i) conflict
with or violate the Certificate of Incorporation or By-Laws of Acquiror, (ii)
conflict with or violate any Laws applicable to Acquiror or by which any of its
properties is bound or affected, or (iii) result in any breach of or constitute
a default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of Acquiror pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Acquiror is a party or by
which Acquiror or any of its respective properties is bound or affected.
(b) The execution and delivery of this Agreement by
Acquiror does not, and the performance of this Agreement by Acquiror shall not,
require any consent, approval, authorization or
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permit of, or filing with or notification to, any Governmental Entities,
except (i) for the consents, approvals, authorizations or permits
described in Section 3.04(b) of the Acquiror Disclosure Schedule or (ii) where
the failure to obtain such consents, approvals, authorizations or permits, or
to make such filings or notifications, would not adversely affect the ability
of Acquiror to consummate, or prevent or delay the consummation of, the
transactions contemplated by this Agreement.
SECTION 3.05. BROKERS.
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Acquiror or any of the affiliates.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.01. AFFIRMATIVE COVENANTS.
The Company hereby covenants and agrees that the Company will and the
Seller hereby covenants and agrees to cause the Company to, from the date of
this Agreement until the Closing Date, unless otherwise expressly contemplated
by this Agreement or consented to in writing by Acquiror:
(a) operate its business in the usual and ordinary course
consistent with past practice;
(b) use its best efforts to preserve intact its business
organization and assets (subject to the operation of its business in
the ordinary course), maintain its rights and franchises necessary for
the operation of its business in the ordinary course, retain the
services of its officers and key employees and maintain the
relationships with its customers and suppliers;
(c) keep in full force and effect liability and other
insurance and bonds comparable in amount and scope of coverage to that
currently maintained;
SECTION 4.02. NEGATIVE COVENANTS OF THE COMPANY.
Except as expressly contemplated by this Agreement, or otherwise
consented to in writing by Acquiror, from the date of this Agreement until the
Closing Date the Company shall not, and Seller shall cause the Company to not
do any of the following:
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(a) engage in any practice, take any action or enter into
any transaction other than in the ordinary course of business and
consistent with past practice, including, without limitation, taking
any of the actions enumerated in Section 2.09 hereof or becoming a
party to any agreement of the type referred to in clauses (i) (except
with customers and suppliers in the ordinary course of business) (ii),
(iii), (vii), (viii), (ix) (x) or (xi) of Section 2.11(a) hereof.
(b) neither Seller nor the Company shall offer any of the
shares of Company Common Stock or any capital stock of any of its
subsidiaries (or a material part of its assets in one transaction or a
series of transactions) for sale, or solicit offers to buy any shares
of Company Common Stock or any capital stock of any of its
subsidiaries (or a material part of its assets in one transaction or
in a series of related transactions), or hold discussions with any
party (other than Acquiror) looking toward such an offer or
solicitation or toward a merger or consolidation of the Company or any
of its subsidiaries with or into another entity or any similar
transaction. Seller shall not, and shall not allow the Company to,
and the Company shall not, enter into any agreement with any party
other than Acquiror with respect to the sale or other disposition of
any of the capital stock or (other than in the ordinary course of
business) the assets of the Company or any of its subsidiaries or with
respect to any merger, consolidation, or similar transaction involving
the Company or any of its subsidiaries.
SECTION 4.03. ACCESS AND INFORMATION.
For so long as this Agreement is in effect, the Company shall
(and shall cause its subsidiaries to), and Seller shall cause the Company to,
afford to Acquiror and its officers, employees, accountants, consultants, legal
counsel and other representatives reasonable access during normal business
hours to all information concerning the business, properties, contracts,
records and personnel of the Company or Its subsidiaries as Acquiror may
reasonably request so as to allow Acquiror to complete its due diligence
investigation.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. APPROPRIATE ACTION; CONSENTS; FILINGS; OTHER.
(a) Seller, the Company and Acquiror shall use their
respective best efforts to (i) take, or cause to be taken, all appropriate
action, and do, or cause to be done, all things necessary, proper or advisable
under applicable Law or otherwise to consummate and make effective the
transactions contemplated by this
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Agreement as promptly as practicable, (ii) obtain from any Governmental
Entities any consents, licenses, permits, waivers, approvals, authorizations or
orders required to be obtained or made by Acquiror, Seller or the Company or
any of their subsidiaries for the authorization, execution and delivery of this
Agreement and the consummation of the transactions contemplated herein,
including, without limitation, the Stock Purchase, and (iii) make all necessary
filings, and thereafter make any other required submissions, with respect to
this Agreement and the Stock Purchase required under any other applicable Law;
provided that Acquiror, Seller and the Company shall cooperate with each other
in connection with the making of all such filings, including providing copies
of all such documents to the non-filing party and its advisors prior to filing
and, if requested, to accept all reasonable additions, deletions or changes
suggested in connection therewith. Seller, the Company and Acquiror shall
furnish to each other all information required for any application or other
filing to be made pursuant to the rules and regulations of any applicable Law
in connection with the transactions contemplated by this Agreement.
(b) (i) Seller, the Company and Acquiror shall give
(or shall cause their respective subsidiaries to give) any notices to third
parties, and use, and cause their respective subsidiaries to use, best efforts
to obtain any third party consents, (A) necessary, proper or advisable to
consummate the transactions contemplated in this Agreement, (B) disclosed or
required to be disclosed in the Company Disclosure Schedule or the Acquiror
Disclosure Schedule, as the case may be, or (C) required to prevent a Company
Material Adverse Effect from occurring prior to or after the Closing Date or an
Acquiror Material Adverse Effect from occurring after the Closing Date.
(ii) In the event that either party shall fail to
obtain any third party consent described in subsection (b)(i) above, such party
shall use best efforts, and shall take any such actions reasonably requested by
the other party hereto, to minimize any adverse effect upon the Company and
Acquiror, their respective subsidiaries, and their respective businesses
resulting, or which could reasonably be expected to result after the Closing
Date, from the failure to obtain such consent.
(c) From the date of this Agreement until the Closing
Date, Seller, the Company and Acquiror shall promptly notify one another in
writing of any pending or, to the knowledge of Seller, the Company or Acquiror,
threatened action, proceeding or investigation by any Governmental Entity or
any other person (i) challenging or seeking damages in connection with the
Stock Purchase or (ii) seeking to restrain or prohibit the consummation of the
Stock Purchase or otherwise limit the right of Acquiror or its subsidiaries to
own or operate all or any portion of the businesses or assets of the Company.
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SECTION 5.02. UNAUDITED FINANCIAL INFORMATION.
Until the Closing Date, the Company will cause to be prepared (and
furnish to Acquiror) as promptly as possible on a monthly basis unaudited
balance sheets, first dated as of October 31, 1994, and the related unaudited
statement of profit and loss of the Company for the respective year-to-date
periods (such balance sheets and statements of profit and loss being
collectively referred to in this Agreement as the "Unaudited Monthly
Statements"). The Unaudited Monthly Statements will be prepared from the books
and records of the Company and will present, the financial position of the
Company and the results of its operations as of and for the respective time
periods in accordance with internal Company accounting methods and standards
currently used for monthly statements.
SECTION 5.03. UPDATE DISCLOSURE; BREACHES.
From and after the date of this Agreement until the Closing Date, each
party hereto shall promptly notify the other party hereto by written update to
its Disclosure Schedule of (i) the occurrence, or non-occurrence, of any event
the occurrence, or non-occurrence, of which would, or would reasonably be
likely to, cause any condition to the obligations of any party to effect the
Stock Purchase and the other transactions contemplated by this Agreement not to
be satisfied in any material respect, or (ii) the failure of the Company or
Acquiror, as the case may be, to comply with or satisfy in any material respect
any covenant, condition or agreement to be complied with or satisfied by it
pursuant to this Agreement which would, or would reasonably be likely to,
result in any condition to the obligations of any party to effect the Stock
Purchase and the other transactions contemplated by this Agreement not to be
satisfied; provided, however, that the delivery of any notice pursuant to this
Section 5.03 shall not cure any breach of any representation or warranty
requiring disclosure of such matter prior to the date of this Agreement or
otherwise limit or affect the rights and remedies available hereunder to the
party receiving such notice.
SECTION 5.04. PUBLIC ANNOUNCEMENTS.
Acquiror and Seller shall consult with each other before issuing, and
use their good faith efforts to agree upon the contents of, any press release
or otherwise making any public statements with respect to the Stock Purchase
and shall not issue any such press release or make any such public statement
prior to such consultation, except as may be required by Law, by the rules of
the Copenhagen Stock Exchange or by any listing agreement with the NASDAQ/NM.
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SECTION 5.05. (RESERVED).
SECTION 5.06. RESIGNATIONS OF DIRECTORS AND OFFICERS.
Seller shall cause all directors and officers of the Company that are
employed by Seller to deliver their written resignations as directors and
officers of the Company to the Company, which resignations shall be effective
at or before the Closing and shall be in form and substance satisfactory to
Acquiror. Each such resignation shall state that the Company is not in any way
indebted or obligated to the resigning party for termination pay, loans,
advances, or otherwise except for accrued salary.
SECTION 5.07. DIVESTITURE OF EXCLUDED BUSINESSES AND EXCLUDED ASSETS.
(a) On or prior to the Closing Date, the Company shall
transfer and divest itself of all interest in the Excluded Businesses and
Excluded Assets in such a manner that the transfer and divestiture shall have
no impact not reflected on the Pro Forma Balance Sheet. The changes in the
Company's assets and liabilities resulting from such transfers are depicted on
Schedule 1.04 hereof.
(b) Seller shall assume and be responsible for all
liabilities and obligations (i) arising prior to or from and after the Closing
Date of the Excluded Businesses including all Taxes relating to or arising from
or in connection with the transfer of the Excluded Businesses and Excluded
Assets unless accrued on the Pro Forma Balance Sheet or unless included in a
purchase price adjustment under Section 1.04, or (ii) arising from or in
connection with the operation of the Excluded Businesses or Excluded Assets
together the "Assumed Obligations").
SECTION 5.08. COMPANY DEBT.
Prior to the Closing Date, the Seller shall have made a contribution
to the capital of the Company in an amount sufficient to pay all "Loan From
Group" so that on the Closing Date the amount of "Loan From Group" will be
zero. Seller warrants that, prior to Closing, it will pay in cash to the
Company any amounts it received from Company in payment of Loan from Group (as
reflected on Schedule 1.04) subsequent to September 30, 1994.
SECTION 5.09. INTERIM SERVICES.
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If the Acquiror so requests, prior to the Closing Date, the Company
shall enter into commercially reasonable agreements whereby, Seller or a
subsidiary of Seller shall:
(i) lease to the Company the premises at the NKT campus
at Brondby, including parking, for presently occupied by the Company and the
Continuing Subsidiaries, for such time as is reasonably requested by Acquiror
pending the Company's relocation to another site;
(ii) provide data processing services at reasonable rates
of the type and quality presently provided to the Company; and
(iii) provide for such additional services as are currently
provided to the Company and the Continuing Subsidiaries by other members of the
NKT Group at fair market rates, including long-term planning services.
SECTION 5.10. NON-COMPETITION AGREEMENT.
Prior to the Closing Date, Acquiror and Seller shall enter into a
Non-Competition Agreement in the form attached hereto as Exhibit E.
SECTION 5.11. U.S. GAAP FINANCIALS.
Prior to the Closing Date, Seller shall cause the Company, at the
Company's expense, to commence preparation and delivery to Acquiror, financial
statements of the Company as follows: audited consolidated balance sheet as of
December 31, 1993 of the Company and the Company's Continuing Subsidiaries (the
"US Audited Balance Sheet") and the related audited consolidated statement of
earnings, statements of stockholders' equity and statements of cash flows of
the Company and the Company's Continuing Subsidiaries for the fiscal year ended
December 31, 1993 (the US Audited Balance Sheet and such statements of
earnings, stockholders' equity and cash flows and any related notes and
schedules being hereinafter referred to collectively as the "US Audited
Statements"), prepared in accordance with generally accepted accounting
principles in the United States and in accordance with the rules and
regulations of the U.S. Securities Exchange Commission promulgated under the
U.S. Securities Exchange Act of 1934, as amended, (collectively, "US GAAP") and
audited by Deloitte & Touche and (ii) unaudited consolidated balance sheet as
of September 30, 1994 of the Company and the Company's Continuing
Subsidiaries (the "US Unaudited Balance Sheet") and the related consolidated
statement of earnings, statements of stockholders' equity and statements of
cash flows of the Company and the Company's Continuing Subsidiaries for the
nine months ended September 30, 1994 (the US Unaudited Balance Sheet and such
statements of earnings, stockholders' equity and cash flows and any related
notes being hereinafter referred to collectively as the "US Unaudited
Statements) prepared in
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accordance with U.S. GAAP (the US Audited Financial Statements and the US
Unaudited Financial Statements being hereinafter referred to collectively as
the "US Financial Statements). Seller shall cause the US Financial Statements
to be prepared on a schedule that assures the US Financial Statement can be
delivered on time to satisfy Acquiror's SEC filing obligations (i.e. in no
event more than 45 days after Closing) but priority shall be assigned to the
audit of the Pro Forma Balance Sheet so as not to delay closing.
SECTION 5.12. NKT LOGO.
For a period of twelve (12) months from and after the Closing Date,
the Company shall have the right to continue to use the name "NKT" and all
logos and other trade dress in the sale, marketing and distribution of the
Company's goods and services in a manner consistent with the use of such name,
logos and trade dress prior to the Closing Date.
SECTION 5.13. TAX AUDITS AND RETURNS.
From and after the Closing Date Seller will allow the Acquiror and its
counsel to participate at its own expense in any audits of the Seller's joint
Tax returns to the extent that such audits relate to the Company and the
Company's Continuing Subsidiaries. The Seller will not settle any such audit
in a manner which would adversely affect the Company and the Company's
Continuing Subsidiaries after the Closing Date without the prior written
consent of the Acquiror, which consent shall not unreasonably be withheld.
Seller shall have the right to participate and consult with the Company in the
preparation of its 1994 income tax return, and the Company shall use reasonable
efforts to preserve the tax positions taken by the Company in prior years.
ARTICLE VI
INDEMNIFICATION
SECTION 6.01. INDEMNIFICATION OF ACQUIROR AND THE SELLER.
(a) If the Closing occurs, Seller agrees (and if the Closing does
not occur, Seller and the Company jointly and severally agree) to indemnify
and hold harmless Acquiror and each officer, director, employee, and affiliate
of Acquiror (and, if the Closing occurs, of the Company) collectively, the
"Acquiror Indemnified Parties"), and Acquiror agrees to indemnify and hold
harmless Seller (and, if the Closing does not occur, the Company and each
officer, director, employee, and affiliate of the Company) (collectively, the
"Seller Indemnified Parties" and, collectively with the Acquiror Indemnified
Parties, the "Indemnified Parties") from and against any and all damages,
losses, claims, liabilities, demands, charges, suits, penalties, costs, and
expenses (including court costs and reasonable attorneys' fees and expenses
incurred in investigating and preparing for any litigation or proceeding)
(collectively, "Indemnified Costs") which any of the Indemnified Parties may
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sustain, or to which any of the Indemnified Parties may be subjected, arising
out of any breach or default by the Seller or the Company (in the case of
Indemnified Costs incurred by the Acquiror Indemnified Parties) or the Acquiror
(in the case of Indemnified Costs incurred by the Seller Indemnified Parties)
of or under any of the representations, warranties, covenants, agreements, or
other provisions of this Agreement or any agreement or document executed in
connection herewith. In addition, Seller shall indemnify and hold harmless the
Acquiror's Indemnified Parties from and against any Indemnified Costs arising
out of the follows: (i) the Assumed Obligations; (ii) any Environmental Adverse
Effect on the Company in respect to the Brondby premises disclosed on section
2.23 of the Company Disclosure Schedule (the "Brondby Liabilities") (iii) all
liabilities and obligations for products delivered and services relating to the
submarine cable business performed by the Company or any of the Continuing
Subsidiaries prior to the Closing Date (the "Submarine Liabilities"), and (iii)
any Taxes not accrued on the Pro Forma Balance Sheet of any person other than
the Company or the Continuing Subsidiaries arising from the inclusion of such
entities in the joint tax returns of the Seller.
(b) Notwithstanding the foregoing, (i) the Seller shall not have
any obligation to indemnify the Acquiror Indemnified Parties from and against
any Indemnified Costs arising from breaches of representations and warranties
contained herein (A) in respect of each claim for Indemnified Costs unless the
amount of such claim is in excess of US$ 10,000 (at which point the Seller will
be obligated to indemnify the Acquiror Indemnified Parties for such Indemnified
Costs in respect of such claim relating back to the first dollar), (B) until
the Acquiror Indemnified Parties have suffered Indemnified Costs in excess of a
US$ 500,000 aggregate deductible excluding claims for Indemnified Costs which
are excluded under the immediately preceding clause (A)(after which point the
Seller will be obligated only to indemnify the Acquiror Indemnified Parties
from and against all such Indemnified Costs in excess of such US$ 500,000) (C)
subject to the provision below, there will be a US$ 15,000,000 aggregate
ceiling on the obligation of the Seller or the Company to indemnify the
Acquiror Indemnified Parties from and against Indemnified Costs other than to
the extent such Indemnified Costs arise out of breaches of Section 2.20 or, in
respect of contingent liabilities only, Section 2.08. The foregoing ceiling
shall not apply to the obligation of the Seller to indemnify the Acquiror
Indemnified Parties from and against Indemnified Costs (i) arising out of any
breach or default by the Seller or the Company of or under any of the
representations or warranties contained in Sections 2.13, 2.19, 2.23 and 2.08
(but in the case of section 2.08, only to the extent the Indemnified Costs
arise out of or in connection with Contingent Liabilities) (ii) relating to the
Assumed Obligations, the Brondby Liabilities or the Submarine Liabilities. In
no event shall Seller be obligated to pay Indemnified Costs arising out of
breaches of Sections 2.20 and 2.08 aggregating in excess of US$ 100,000,000.
There shall be no
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deductible on the obligation of the Seller to indemnify the Acquiror
Indemnified Parties from and against Indemnified Costs relating to the Assumed
Obligations.
(c) Notwithstanding the foregoing, (i) the Acquiror shall not have
any obligation to indemnify the Seller Indemnified Parties from and against any
Indemnified Costs arising from breaches or representations and warranties
contained herein (A) in respect of each claim for Indemnified Costs unless the
amount of such claim is in excess of US$ 10,000 (at which point the Acquiror
will be obligated to indemnify the Seller Indemnified Parties for such
Indemnified Costs in respect of such claim relating back to the first dollar),
(B) until the Seller Indemnified Parties have suffered Indemnified Costs in
excess of a US$ 500,000 aggregate deductible calculated without regard to the
deductible amount in the immediately preceding clause (A)(after which point the
Acquiror will be obligated only to indemnify the Seller Indemnified Parties
from and against all such Indemnified Costs in excess of such US$ 500,000) and
(C) there will be a US$ 15,000,000 aggregate ceiling on the obligation of the
Acquiror to indemnify the Seller Indemnified Parties from and against
Indemnified Costs.
(d) The foregoing indemnification provisions in this Section 6.01,
together with any available equitable remedies, shall be the exclusive
remedies of the Acquiror for any breach of the representations and warranties
in this Agreement, and Acquiror shall have no claims or rights of action
arising out of the Stock Purchase or the execution and delivery of this
Agreement, except pursuant to this Section 6.01.
(e) No party shall be obligated to pay indemnity for Indemnified
Costs to the extent that such Indemnified Costs have been recovered from or
paid by insurance and each party hereto waives any right of subrogation on the
part of its insurers.
(f) Any discrepancy in (i) the Pro Forma Balance Sheet which
results in a Purchase Price adjustment under Section 1.04 hereof or (ii) which
is cured by Seller shall not thereafter be included in Indemnified Costs.
(g) No claim shall be made by any Indemnified Party with respect
to any Indemnified Costs arising out of breach of any representation or
warranty unless written notice of the claim is given prior to the expiration of
the representation and warranty on which it is based as set forth in Section
9.01 herof.
SECTION 6.02. DEFENSE OF THIRD-PARTY CLAIMS.
An Indemnified Party shall give prompt written notice to the party or
parties having an obligation to indemnify and hold harmless hereunder (each an
"Indemnifying Party") of the commencement or assertion of any action,
proceeding, demand, or
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claim by a third party (collectively, a "third-party action") in respect of
which such Indemnified Party shall seek indemnification hereunder. Any failure
so to notify an Indemnifying Party shall not relieve such Indemnifying Party
from any liability that it may have to such Indemnified Party under this
Article VI unless the failure to give such notice materially and adversely
prejudices such Indemnifying Party. The Indemnifying Parties shall have the
right to assume control of the defense of, settle, or otherwise dispose of such
third-party action on such terms as they deem appropriate; provided, however,
that:
(i) The Indemnified Party shall be entitled, at
his, her, or its own expense, to participate in the defense of such third-party
action; and
(ii) The Indemnifying Parties shall obtain the
prior written approval of the Indemnified Party, which shall not be
unreasonably withheld, before entering into or making any settlement,
compromise, admission, or acknowledgement of the validity of such third-party
action or any liability in respect thereof if, pursuant to or as a result of
such settlement, compromise, admission, or acknowledgement, injunctive or other
equitable relief would be imposed against the Indemnified Party or if, in the
reasonable opinion of the Indemnified Party, such settlement, compromise,
admission, or acknowledgement could have a material adverse effect on its
business or, in the case of an Indemnified Party who is a natural person, on
his or her assets or interests (provided, however, that, in all of the above
events, the parties hereby acknowledge and agree that such a material adverse
effect shall not be deemed to have occurred if such settlement, compromise,
admission, or acknowledgement involves the payment of monetary damages only and
the Indemnifying Parties in fact pay all such damages); and
The parties hereto shall extend reasonable cooperation in connection with the
defense of any third-party action pursuant to this Article VI and, in
connection therewith, shall furnish such records, information, and testimony
and attend such conferences, discovery proceedings, hearings, trials, and
appeals as may be reasonably requested.
SECTION 6.03. DIRECT CLAIMS.
In any case in which an Indemnified Party seeks indemnification
hereunder which is not subject to Section 6.02 hereof because no third-party
action is involved, the Indemnified Party shall notify the Indemnifying Parties
in writing of any Indemnified Costs which he, she, or it claims are subject to
indemnification under the terms hereof. The failure of the Indemnified Party
to exercise promptness in such notification shall not amount to a waiver of
such claim unless the resulting delay
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materially prejudices the position of the Indemnifying Parties with respect to
such claim.
SECTION 6.04. ESCROW.
If any claim for indemnification is made by an Indemnified Party
pursuant to this Article VI prior to the Release Date (as defined in the Escrow
Agreement), such Indemnified Party may apply for payment of Indemnified Costs
in accordance with the provisions of the Escrow Agreement and this Agreement.
SECTION 6.05. NO CONTRIBUTION.
In the event the Closing occurs, Seller, and not the Company, shall be
fully liable for Indemnified Costs sustained by the Acquiror Indemnified
Parties; accordingly, Seller shall not be entitled to contribution or any other
payments from the Company for any Acquiror Indemnified Costs that Seller is
obligated to pay pursuant to this Agreement or under applicable law.
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.01. CONDITIONS TO OBLIGATIONS OF ACQUIROR AND
SELLER UNDER THIS AGREEMENT.
The respective obligations of Acquiror and the Seller to effect the
Stock Purchase and the other transactions contemplated herein shall be subject
to the satisfaction at or prior to the Closing Date of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by applicable Law:
(a) No Order. No Governmental Entity or federal or state
court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, judgment, injunction or other order (whether
temporary, preliminary or permanent), in any case which is in effect
and which prevents or prohibits consummation of the Stock Purchase or
any other transactions contemplated in this Agreement; provided,
however, that the parties shall use their best efforts to cause any
such decree, judgment, injunction or other order to be vacated or
lifted.
(b) Other Approvals. All consents, waivers, approvals
and authorizations required to be obtained, and all filings or notices
required to be made, by Acquiror, Seller and the Company prior to
consummation of the transactions contemplated in this Agreement shall
have been obtained from and made with all required Governmental
Entities.
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(c) No Challenge. There shall not be pending any action,
proceeding or investigation by any Governmental Entity (i) challenging
or seeking material damages in connection with the Stock Purchase (ii)
seeking to restrain or prohibit the consummation of the Stock Purchase
or otherwise limit the right of Acquiror or its Continuing
Subsidiaries to own or operate all or any portion of the business or
assets of the Company at and after the Closing Date.
SECTION 7.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF ACQUIROR.
The obligations of Acquiror to effect the Stock Purchase and the other
transactions contemplated herein are also subject to the following conditions,
any or all of which may be waived by Acquiror, in whole or in part, to the
extent permitted by applicable Law:
(a) Representations and Warranties. Each of the
representations and warranties of Seller and the Company contained in
this Agreement, without giving effect to any update to the Company
Disclosure Schedule under Section 5.04, shall be true and correct as
of the date of this Agreement and as of the Closing Date as though
made as of the Closing Date in all material respects (except that
where any statement in a representation or warranty expressly includes
a standard of materiality, such statement shall be true and correct),
except that those representations and warranties which address matters
only as of a particular date shall remain true and correct in all
material respects (except that where any statement in a representation
or warranty expressly includes a standard of materiality, such
statement shall be true and correct) as of such date. Acquiror shall
have received a certificate of an appropriate senior officer of Seller
to that effect.
(b) Agreements and Covenants. Seller and the Company
shall have performed or complied in all material respects with all
agreements and covenants required by this Agreement to be performed or
complied with by it at or prior to the Closing Date. Acquiror shall
have received a certificate of an appropriate senior officer of Seller
to that effect.
(c) Consents. The consent or approval of any
Governmental Entity whose consent or approval shall be required in
connection with the Stock Purchase shall have been obtained and Seller
and the Company shall have obtained the consent or approval of each
other person whose consent or approval shall be required in connection
with the Stock Purchase under all loan or credit arrangements, notes,
mortgages, indentures, leases or other agreements or instruments to
which Seller or the Company is a party other
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than consents or approvals which the failure to obtain would not have
a Company Material Adverse Effect.
(d) Opinion of Counsel. Acquiror shall have received
from independent counsel to Seller and the Company reasonably
satisfactory to Acquiror one or more opinions dated the Closing Date
substantially in the form of the opinion attached hereto as Exhibit B.
(e) Additional Agreements. The Company shall have
entered into the agreements for Interim Services described in Section
5.09 if Acquiror has so requested, and Seller shall have executed the
Non-Compete Agreement referred to in Section 5.10 hereof.
(f) Escrow Agreement Acquiror, Seller and the Escrow
Agent shall have entered into the Escrow Agreement.
Notwithstanding the foregoing, paragraphs (a) and (b) of this section
7.02 shall not operate to relieve Acquiror from its obligation to effect and
close the Stock Purchase and the other transactions contemplated hereby unless
the cumulative current and reasonably anticipated future effect on the
Company's financial condition of the breaches that would otherwise constitute a
failure of such conditions exceeds USD 7,500,000, after taking into account (i)
any correction to the shareholders' equity shown on the Company Pro Forma
Balance Sheet resulting from the procedures described in Section 1.04, (ii) any
payments made to the Company by Seller prior to the Closing Date to compensate
for such matters to the extent the effect on the Company of such breaches is
capable of being substantially eliminated by the payment of money, and (iii)
the extent to which the Seller has assumed the liability and agreed to hold the
Company harmless with respect thereto.
SECTION 7.03. ADDITIONAL CONDITIONS TO OBLIGATIONS OF SELLER.
The obligations of Seller to effect the Stock Purchase and the other
transactions contemplated in this Agreement are also subject to the following
conditions any or all of which may be waived by Seller, in whole or in part, to
the extent permitted by applicable Law:
(a) Representations and Warranties. Each of the
representations and warranties of Acquiror contained in this
Agreement, without giving effect to any update to the Acquiror
Disclosure Schedule under Section 5.04, shall be true and correct as
of the date hereof and on the Closing Date as though made as of the
Closing Date in all material respects (except that where any statement
in a representation or warranty expressly includes a statement of
materiality, such
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statement shall be true and correct) except that those
representations and warranties which address matters only as of
a particular date shall remain true and correct in all material
respects (except that where any statement in a representation or
warranty expressly includes a standard of materiality, such
statement shall be true and correct) as of such date. Seller shall
have received a certificate of an appropriate senior Officer of
Acquiror to that effect.
(b) Agreements and Covenants. Acquiror shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with
by it at or prior to the Closing Date. Seller shall have received a
certificate of an appropriate senior Officer of Acquiror to that
effect.
(c) Consents. The consent or approval of any
Governmental Entity whose consent or approval shall be required in
connection with the Stock Purchase shall have been obtained. Acquiror
shall have obtained the consent or approval of each other person whose
consent or approval shall be required in connection with the Stock
Purchase under all loan or credit arrangements, notes, mortgages,
indentures, leases or other agreements or instruments to which
Acquiror is a party other than consents and approvals which the
failure to obtain would not have an Acquiror Material Adverse Effect.
(d) Opinion of Counsel. Seller shall have received from
independent counsel to Acquiror reasonably satisfactory to Seller one
or more opinions dated the Closing Date substantially in the form
attached hereto as Exhibit C.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION.
This Agreement may be terminated at any time prior to the
Closing:
(a) by mutual written consent of Acquiror and Seller;
(b) by Acquiror or Seller at any time after January 31,
1995 (or such later date as shall have been agreed to in writing by
Acquiror and Seller) if any condition precedent to such party's
obligations to consummate the Stock Purchase has not by such date been
satisfied; provided, however, that this Agreement may be extended not
more than 60 days by either party by written notice to the other party
if the Stock Purchase shall not have been consummated as a direct
result of the other party having failed by such date to receive all
approvals or consents from Governmental Entities required to be
obtained by such party with respect to the Stock Purchase;
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provided further, however that the party seeking to terminate this
Agreement pursuant to this Section 8.01(b) may do so only if such
terminating party shall not have breached in any material respect its
obligations under this Agreement in any manner that shall have caused
the failure of such condition to be satisfied;
(c) by Acquiror if there has been a material breach by
Seller or the Company of any of its covenants or agreements contained
in this Agreement, or if any of the representations and warranties of
Seller or the Company are not true and correct in all material
respects (except that where any statement in a representation or
warranty expressly includes a standard of materiality, such statement
shall be true and correct) where such breach, after giving full effect
to the final sentence of Section 7.02, relieves Acquiror of its
obligation to close the Stock Purchase;
(d) by Seller if there has been a material breach by
either of Acquiror of any of its covenants or agreements contained in
this Agreement, or if any of the representations and warranties of
Acquiror are not true and correct in all material respects (except
that where any statement in a representation or warranty expressly
includes a standard of materiality, such statement shall be true and
correct);
(e) by either Acquiror or Seller if any decree, permanent
injunction, judgment, order or other action by any court of competent
jurisdiction or any Governmental Entity preventing or prohibiting
consummation of the Stock Purchase shall have become final and
nonappealable; or
(f) by either Acquiror or Seller if circumstances arise
which make it impossible, in the reasonable judgment of either
Acquiror or Seller, as the case may be, for a condition to such
party's obligation to effect the Stock Purchase and the other
transactions contemplated herein (after giving full effect to the
final sentence of Section 7.02), as set forth in Article VII, to be
satisfied prior to January 31, 1995 (or any 60-day extension under
Section 8.01(b)); provided, however, that the right to terminate this
Agreement under this Section 8.01(f) shall not be available to any
party whose act or failure to act or whose breach of any obligation
under this Agreement is responsible for such circumstances arising.
(g) by Acquiror at any time prior to November 4, 1994 if
Acquiror is not satisfied in its sole discretion with the results of
its due diligence investigation with respect to (i) Company
liabilities arising out of the items beside which an asterisk appears
on the Company Disclosure Schedule, and (ii) contingent liabilities of
the Company and the Continuing Subsidiaries that are not indemnified
by the Seller (the "Open Issues"). Notwithstanding the foregoing, the
Acquiror may not
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elect to terminate this Agreement pursuant to this section 7.02(g)
unless the cumulative effect and reasonably expected future effect on
the Company's financial condition of the Open Issues would exceed USD
5,000,000. In addition, in the event Acquiror desires to terminate the
Agreement under this Section 7.02(g), then it will negotiate in good
faith with Seller to determinate a manner in which (i) Seller shall be
solely liable for such adverse effects, (ii) Seller will indemnify
Acquiror for such adverse effects, or (iii) Acquiror becomes satisfied
neither it nor the Company will suffer such adverse effects.
SECTION 8.02. EXPENSES.
Whether or not the Stock Purchase is consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expense; provided, however, that Seller and Acquiror shall be responsible for
one-half of any share transfer or stamp taxes in Denmark related to the Stock
Purchase; however the Acquiror's liability for such taxes shall not exceed 0.5%
of the Purchase Price.
SECTION 8.03. AMENDMENT.
This Agreement may be amended by the parties hereto in writing at any
time prior to the Closing.
SECTION 8.04. WAIVER.
At any time prior to the Closing Date, any party hereto may (a) extend
the time for the performance of any of the obligations or other acts of the
other party hereto, (b) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any document delivered
pursuant hereto and (c) waive compliance by the other party with any of the
agreements or conditions contained herein. Any such extension or waiver shall
be valid only if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
AFTER CLOSING.
All of the representations and warranties of the Seller and the
Company contained in this Agreement shall survive the Closing hereunder and
continue in full force and effect for a period of one year thereafter;
provided, however, that the representations and warranties contained in
Sections 2.13, 2.20 and 2.23 above shall
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survive the Closing hereunder and continue in full force and effect for a
period of five, three and twenty years, respectively. All of the
representations and warranties of the Acquiror contained in this Agreement
shall survive the Closing hereunder and continue in full force and effect for a
period of one year thereafter.
SECTION 9.02. NOTICES.
All notices and other communications given or made pursuant hereto
shall be in writing and shall be deemed to have been duly given or made as of
the date delivered, mailed or transmitted, and shall be effective upon actual
receipt, if delivered personally or by courier, mailed by registered or
certified mail (postage prepaid, return receipt requested) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like changes of address) or sent by electronic transmission to the
telecopier number specified below:
(a) If to Acquiror:
DSC Communications Corporation
1000 Coit Road
Plano, TX 75075-5813
Telecopier: (214) 519 - 4339
Attention: President and Chief Executive Officer
With copies to (which shall not constitute notice) to:
Baker & McKenzie
2001 Ross Avenue
Suite 4500
Dallas, TX 75201
Telecopier No.: 214/978-3099
Attention: John J. Kendrick, Esq.
Mogens Gaarden
Pontoppidan, Philip & Partners
Vognmagergade 7
DK-1120
Copenhagen, Denmark
Telecopier: 45 33 13 56 43
(b) If to the Seller:
NKT Holding A/S
NKT Alle 1.
DK-2605 Brondby
Denmark
Telecopier No.: 45 43 96 18 20
Attention: President and Chief Executive Officer
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<PAGE> 42
With copies to (which shall not constitute notice) to:
Jan Schans Christensen
Bech-Bruun & Trolle
Norre Farimagsgade 3
1364 Copenhagen
Denmark
Telecopier: 45 33 15 25 55
Willcox & Savage, P.C.
1800 NationsBank Center
One Commercial Place
Norfolk Virginia 23510
Telecopier No.: (804) 628-5566
Attention: Keith C. Cuthrell, Jr.
(c) If to the Company:
NKT Elektronik A/S
NKT Alle 85
Dk-2605 Brondby
Denmark
Telecopier No.: 45 43 63 13 20
Attention: President and Chief Executive Officer
With copies to, if such notice is prior to the
Closing (which shall not constitute notice) to:
Jan Schans Christensen
Bech-Bruun & Trolle
Norre Farimagsgade 3
1364 Copenhagen
Denmark
Telecopier 45 33 15 25 55
Willcox & Savage, P.C.
1800 NationsBank Center
One Commercial Place
Norfolk Virginia 23510
Telecopier No.: (804) 628-5566
Attention: Keith C. Cuthrell, Jr.
SECTION 9.03. CERTAIN DEFINITIONS.
For purposes of this Agreement, the term
(a) "Acquiror Material Adverse Effect" shall mean any
change or effect that, individually or when taken together with all such other
changes or effects, is or is reasonably likely to be materially adverse to the
financial condition, business, results of
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operations or prospects of Acquiror and its subsidiaries, taken as a whole.
(b) "affiliate" means a person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the first mentioned person;
(c) "best efforts" shall mean, as to a party hereto, an
undertaking by such party to perform or satisfy an obligation or duty or
otherwise act in a manner reasonably calculated to obtain the intended result
by action or expenditure not disproportionate or unduly burdensome in the
circumstances, which means, among other things, that such party shall not be
required to (i) expend funds other than for payment of the reasonable and
customary costs and expenses of employees, counsel, consultants,
representatives or agents of such party in connection with the performance or
satisfaction of such obligation or duty or other action or (ii) institute
litigation or arbitration as a part of its best efforts;
(d) "business day" shall mean any day other than a day on
which banks in New York, New York or Copenhagen, Denmark, are authorized or
obligated to be closed;
(e) "Company Continuing Subsidiaries" shall mean all
subsidiaries of the Company which are listed in Section 2.03 of the Company
Disclosure Schedule except for NKT Jyderup A/S and Draka-NKT Optical Cable A/S.
(f) "Company Material Adverse Effect" shall mean any
change or effect that, individually or when taken together with all other such
changes or effects, is or is reasonably likely to be materially adverse to the
financial condition, business, results of operations or prospects of the
Company and the Continuing Subsidiaries taken as a whole.
(g) "control" (including the terms "controlled by" and
"under common control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management or policies of a person, whether through the ownership of stock or
as trustee or executor, by contract or credit arrangement or otherwise;
(h) "Excluded Businesses" shall mean (i) the copper cable
business conducted by the Company directly or through NKT Jyderup A/S and (ii)
the fiber optics business conducted through the Company's investment in
Draka-NKT Optical Cable A/S.
(i) "Excluded Assets" shall mean the assets of the
Company used by the Company in operating, or through which the Company
operates, the Excluded Businesses.
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(j) "knowledge" will be deemed to be present with respect
to the Company or Acquiror, when the matter in question was brought to the
attention of or, if due diligence had been exercised, would have been brought
to the attention of, any officer of the Company or Acquiror (and with respect
to the Company, its Director of International Operations), as the case may be.
(k) "person" means an individual, corporation,
partnership, association, trust, unincorporated organization, other entity or
group (as defined in Section 13(d) of the U.S. Securities Exchange Act of
1934);
(l) "subsidiary" or "subsidiaries" of the Seller, the
Company, the Acquiror, or any other person, means any corporation, partnership,
joint venture or other legal entity of which the Seller, the Company, the
Acquiror, or such other person, as the case may be (either alone or through or
together with any other subsidiary), owns, directly or indirectly, 40% or more
of the stock or other equity interests the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body of such corporation or other legal entity.
SECTION 9.04. SEVERABILITY.
If any term or other provision of this Agreement is invalid, illegal
or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 9.05. ENTIRE AGREEMENT.
This Agreement (together with the Exhibits, the Company and Acquiror
Disclosure Schedules and the other documents delivered pursuant hereto) and the
Confidentiality Agreement constitute the entire agreement of the parties and
supersede all prior agreements and undertakings, both written and oral, between
the parties, or any of them, with respect to the subject matter hereof.
SECTION 9.06. ASSIGNMENT.
This Agreement shall not be assigned by operation of law or otherwise,
except Acquiror may assign its rights and transfer its obligations hereunder to
a subsidiary, but Acquiror shall nonetheless remain fully liable for its
obligations hereunder.
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SECTION 9.07. MUTUAL DRAFTING.
Each party hereto has participated in the drafting of this Agreement,
which each party acknowledges is the result of extensive negotiations between
the parties.
SECTION 9.08. GOVERNING LAW.
This Agreement shall be governed by and enforceable under, and
construed in accordance with, the Laws of Denmark, regardless of the Laws that
might otherwise govern under applicable principles of conflicts of law.
SECTION 9.09. MEDIATION AND ARBITRATION.
(a) If a dispute arises between any of the parties relating to
this Agreement (other than a dispute to be resolved under section 1.04(b)
hereof), the parties agree to use the following procedure prior to any party
pursuing arbitration.
(i) A meeting shall be held between the parties within
ten (10) days after a party alleges a dispute by
written notice to the other party. The meeting shall
be attended by individuals with decision making
authority regarding the dispute to attempt in good
faith to negotiate a resolution of the dispute.
(ii) If, within thirty (30) days of such meeting, the
parties have not succeeded in negotiating a
resolution of the dispute, they agree to submit the
dispute to conciliation in accordance with the
UNCITRAL Conciliation Rules in force. Any such
concialiation shall be administred by the London
Court of International Arbitration ("LCIA"). The
standard LCIA administrative procedures and Schedule
of Costs in force at the time of the conciliation
shall apply. There shall be one conciliator, chosen
from a list maintained by the Centre for Dispute
Resolution ("CEDR") in London, England. The
appointing authority shall be the LCIA.
(iii) The parties agree to participate in good faith in the
conciliation and negotiations related thereto for a
period of forty-five (45) days, provided that any
such participation and the results thereof shall be
confidential and without prejudice to the rights of
either party. If the parties are not successful in
resolving the dispute through the conciliation, then
each party shall have the
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right to initiate arbitration as set forth below.
(b) Any dispute arising out of or related to this Agreement (other
than a dispute that is to be resolved under section 1.04(b) hereof) which is
not resolved pursuant to Section 9.09 (a) hereof shall be finally settled by
arbitration in accordance with the Rules of the LCIA, which rules are deemed to
be incorporated by reference into this clause. Unless the parties otherwise
agree, the arbitration shall take place in London, England. The parties hereby
agree to exclude any right of application or appeal to the courts of said
jurisdiction in connection with any question of law arising in the course of
reference out of the award, in particular the right of appeal under Section 1
of the Arbitration Act 1979 in relation to any award made by the arbitrators
and the right to apply to the High Court under Section 2 of the Arbitration Act
1979 for the determination of any question of law arising in the course of any
arbitration proceedings hereunder. Each of the parties shall appoint one
arbitrator and the two so nominated shall in turn choose a third arbitrator. If
the arbitrators chosen by the parties cannot agree on the choice of the third
arbitrator within a period of fourteen (14) days after their nomination, then
the third arbitrator shall be appointed by the Court of the LCIA.
(c) The arbitration shall be conducted in the English language.
The relevant documents in other languages shall be translated into English if
the arbitrators so direct. In arriving at their award, the arbitrators shall
give effect insofar as possible to the desire of the parties that the dispute
or controversy be resolved in accordance with good commercial practice and
principles of fairness and equity, and shall make every effort to find a
solution to the dispute in the provisions of this Agreement and shall give full
effect to all parts hereof. However, if a solution cannot be found in the
provisions of this Agreement, the arbitrators shall apply the law of Denmark.
(d) The parties agree that after either has filed a Request for
Arbitration, they shall, upon request, make discovery and disclosure of all
written materials relevant to the subject of the dispute. The arbitrators shall
make the final determination as to any discovery disputes between the parties.
Examination of witnesses at the hearings by the parties, their legal counsel
and by the arbitrators shall be permitted. A written transcript of the hearing
may be ordered by either of the parties at its own expense.
(e) The award of a majority of the arbitrators shall be final and
binding upon the parties, and shall be the exclusive remedy of the parties for
all claims, counterclaims, issues or accountings presented or pled to the
arbitrators. The award shall be granted and paid in U.S. Dollars exclusive of
any tax, deduction or offset and shall include interest from the date of breach
or other violations of this Agreement until the award is fully paid, computed
at the prime commercial lending rate announced from time
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to time by Citibank, N.A., adjusted daily. The arbitrators shall have the
authority to order that all or a part of the legal or other costs, fees and
expenses of a party, including fees paid to the LCIA and the arbitrators and
the reasonable attorneys' fees, be paid by another party. Judgment upon the
award may be entered in any court having jurisdiction. An application may be
made to any such court for a judicial acceptance of the award and an order for
enforcement.
(f) Nothing in this section shall be construed to preclude any
party from seeking provisional remedies at any stage of the negotiation,
conciliation or arbitration proceedings, including but not limited to temporary
restraining orders or preliminary injunctions from any court of competent
jurisdiction which such party in good faith deems reasonably necessary for the
protection of its rights. Such preliminary relief shall not be sought as a
means of avoiding conciliation or arbitration.
SECTION 9.10. COUNTERPARTS.
This Agreement may be executed and delivered in counterparts, and by
the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 9.11. PERSONAL LIABILITY OF OFFICERS.
Each officer executing this Agreement or agreements, certificates or
other document in connection with this Agreement or the Closing, shall do so in
their representative capacity only, and shall have no personal liability on
account thereof.
SECTION 9.12. COMPANY INTERIM FINANCING.
Seller shall procure that the Company has available to it adequate
credit facilities to continue operating in the ordinary course until Closing.
SECTION 9.13 TAX TIMING
If an examination of the income tax returns of the Company or any
subsidiary for periods ending on or before December 31, 1993 results in an
increase in such company's tax liability for such period and a corresponding
decrease in such company's income tax liability for a period ending after
December 31, 1993, the Company shall pay over to Seller as an addition to the
purchase price of the shares an amount equal to the income tax benefit, net of
interest or penalties, realized by the Company in any period ending after
December 31, 1993.
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IN WITNESS WHEREOF, Acquiror, Seller and the Company have caused this
Agreement to be executed and delivered in their respective names and on their
behalf, as of the date first written above.
NKT HOLDING A/S
By: /s/ Gerhard Albrechtsen
Gerhard Albrechtsen, Chief Executive
Officer and President
By: /s/ Knud Rasmussen
Knud Rasmussen, Executive Director
NKT ELEKTRONIK A/S
By: /s/ Poul Friis
Poul Friis, Chief Executive
Officer and President
DSC COMMUNICATIONS CORPORATION
By: /s/ Peter C. Waal
Peter C. Waal, Vice President
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EXHIBIT A
ESCROW AGREEMENT
This Escrow Agreement (this "Agreement") is entered into as of October
___, 1994, by and among DSC Communications Corporation, a Delaware corporation
("DSC"), NKT Holding A/S, a corporation organized and existing under the laws
of the Kingdom of Denmark ("Seller"), and Den Danske Bank (the "Escrow Agent").
RECITALS
A. DSC, DSC Sub, a Delaware corporation and a wholly-owned
subsidiary of DSC ("Sub"), NKT Elektronik A/S, a corporation organized and
existing under the laws of the Kingdom of Denmark (the "Company"), and Seller
have entered into that certain Stock Purchase Agreement dated October ____,
1994 (the "Purchase Agreement"), a copy of which has been delivered to the
Escrow Agent, pursuant to which, among other things, (a) DSC Sub shall acquire
all of the outstanding capital stock of the Company from Seller in exchange for
US$145,000,000.00 less the amount of any adjustment provided in Section 1.04 of
the Purchase Agreement (the "Purchase Price"), (b) Seller has made certain
agreements, covenants, representations, and warranties to DSC and Sub, and (c)
Seller, has agreed to indemnify, defend, and hold harmless DSC and Sub, their
respective affiliates and the directors, officers and employees (collectively,
the "Indemnified Parties") from and against certain "Indenmified Costs" as
specified in the Purchase Agreement.
B. Pursuant to the terms of the Purchase Agreement, the parties
hereto have agreed to enter into this Agreement.
C. DSC and Seller desire to appoint the Escrow Agent to act as
such pursuant to the terms and conditions set forth herein and the Escrow Agent
desires to accept such appointment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
ESCROW AGENT
ARTICLE I
1.1 Appointment. The Escrow Agent is hereby appointed depositary
and escrow agent for the Indemnified Parties and Seller with respect to the
Escrow Fund (as hereinafter defined).
1.2 The Escrow Fund. Seller hereby directs DSC to deposit with
the
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Escrow Agent on the Closing Date (as defined in the Purchase Agreement), the
amount equal to seven percent (7%) of the Purchase Price (the "Escrow Amount").
Any interest paid on the investments contemplated by Section 5.1 hereof are
hereinafter referred to as the "Earned Proceeds." Seller hereby directs that
the Escrow Amount and the Earned Proceeds be held and disposed of by the Escrow
Agent as herein provided. The Escrow Amount and the Earned Proceeds shall
constitute the Escrow Fund hereunder (the "Escrow Fund"), which shall be held
and distributed by the Escrow Agent in accordance with the terms and conditions
of this Agreement.
1.3 Binding Obligations. Except for this Agreement, the Escrow
Agent is not a party to, nor is it bound by nor need it give any consideration
to the terms or provisions of, any agreement among the Indemnified Parties and
Seller. The only duties and responsibilities of the Escrow Agent hereunder
shall be to hold the Escrow Fund as Escrow Agent according to the terms and
provisions of this Agreement and to dispose of and deliver the Escrow Fund as
provided in this Agreement.
1.4 Acts of Escrow Agent. The Escrow Agent may in good faith act
or refrain from acting hereunder with respect to any matter referred to herein
in full reliance upon and by and with the advice of counsel selected by the
Escrow Agent and shall be fully protected in so acting or in refraining from so
acting upon the advice of such counsel. The Escrow Agent may rely upon any
documents that may be submitted to it in connection with its duties hereunder
and that it reasonably believes to be genuine and to have been signed or
presented by the proper party or parties. DSC and Seller jointly and severally
agree to indemnify the Escrow Agent against any expenses (including reasonable
attorneys' fees) or liabilities incurred by the Escrow Agent as a result of
acts taken or omitted in good faith by the Escrow Agent pursuant to the terms
and conditions hereof.
1.5 Disputes. In the event a dispute arises from conflicting
demands by the Indemnitees and Seller being made upon the Escrow Fund or any
property held by the Escrow Agent hereunder, the Escrow Agent shall have, in
addition to all other remedies which it may have at law or in equity, the right
to refuse to comply with any such demand without liability for such refusal,
until the matter in dispute has been settled by agreement of the parties or
settled or resolved in the manner described in Section 4.3 hereof and it has
received evidence thereof satisfactory to it. In the event a dispute among the
parties hereto cannot be resolved by agreement among them, the Escrow Agent may
institute a proceeding or an interpleader action with respect to the amount of
the Escrow Fund in dispute.
1.6 Litigation. The Escrow Agent shall not be required to
institute legal
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proceedings of any kind. In the event proceedings are instituted by the
Indemnified Parties against Seller or by Seller against the Indemnitees that
(a) require additional duties of the Escrow Agent, (b) require court or other
appearances by or on behalf of the Escrow Agent, or (c) require the Escrow
Agent to incur expenses or make disbursements in the resolution of contested
claims against the Escrow Fund, then the Escrow Agent shall be entitled to
reimbursement for any reasonable expenses or disbursements, and such
reimbursements shall include but not be limited to the reasonable cost of legal
services if the Escrow Agent deems it necessary to retain an attorney. The
party to this Agreement who is not successful after final resolution of such
dispute shall reimburse the Escrow Agent for the expenses and disbursements
described in this Section 1.6, or those incurred by the Escrow Agent in
connection with any interpleader action described in Section 1.5 hereof, or
those fees, expenses, or liabilities for which the Escrow Agent is entitled to
indemnification under Section 1.4 above which arise solely as a result of such
dispute.
1.7 Fees. The fees of the Escrow Agent shall be comprised of (a)
a one-time acceptance fee of $____________ and (b) an annual fee of $_________
for each full year during which the Escrow Agent holds the Escrow Fund or any
part thereof hereunder. Such fees shall be paid by DSC; provided, however,
that any fees charged by the Escrow Agent as transaction fees with respect to
investment of the cash in the Escrow Fund at the direction of the Seller as
provided in Section 5.1(b) hereof shall be paid by Seller. Notwithstanding the
foregoing (but subject to the proviso in the immediately preceding sentence),
DSC and Seller shall be jointly and severally liable to the Escrow Agent for
any fees or expenses of the Escrow Agent (including, without limitation,
reasonable attorneys' fees and court costs) required to be paid, reimbursed, or
indemnified hereunder that either the Indemnified Parties or Seller are
required to, but do not, pay.
ARTICLE II
DELIVERY OF ESCROW AMOUNT
The Escrow Agent hereby acknowledges that it will receive the Escrow
Amount and Earned Proceeds from DSC and that it will provide to Seller written
notification of receipt of the Escrow Amount and Earned Proceeds on the date of
receipt. The Escrow Agent further acknowledges its acceptance of the
authorization herein conferred and agrees to carry out and perform its duties
contained herein pursuant to the provisions of this Agreement.
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ARTICLE III
RELEASE OF ESCROW FUND
3.1 Release of Escrow Amount. On the first anniversary of the
Closing Date (the "Release Date"), Seller shall be entitled to receive from the
Escrow Fund the amount equal to the Escrow Fund then held in escrow less the
aggregate amount of all Pending Claim Amounts (as defined herein).
3.2 Procedure for Release. On or after the day that is 16
business days prior to the Release Date, the Seller shall submit to DSC and the
Escrow Agent a proposed letter of instruction (the "Release Instruction")
addressed to the Escrow Agent. The Release Instruction shall set forth the
amount of the Escrow Fund then held in escrow that Seller believes that Seller
is entitled to receive under Section 3.1 hereof, together with the calculations
by which such amounts were determined. If DSC executes the Release
Instruction, or fails to object to the calculations or amounts contained in the
Release Instruction as provided in Section 3.3 hereof, by written notice to
Seller and the Escrow Agent actually received on or before the 15th business
day following delivery to DSC of the Release Instruction, the amounts stated in
the Release Instruction shall promptly be delivered and released by the Escrow
Agent to Seller on the date that is the later of (a) the Release Date, or (b)
the earlier of (i) the date on which DSC executes the Release Instruction or
(ii) the date that is 16 business days following delivery to DSC of the Release
Instruction.
3.3 Objection. If DSC believes the calculations or amounts
contained in the Release Instruction are incorrect, it may object to the
Release Instruction by delivering written notice to Seller and the Escrow Agent
by written notice to Seller and the Escrow Agent actually received on or before
the 15th business day following the date on which the Release Instruction is
delivered to DSC, which notice shall set forth the amount of the Escrow Fund,
if any, to which DSC believes Seller is entitled, which amount shall thereupon
be promptly delivered and released by the Escrow Agent to Seller. In the event
DSC makes an objection to the Release Instruction as provided herein, the
difference between the amount of the Escrow Fund to which Seller believes that
Seller is entitled and the amount of the Escrow Fund to which DSC believes
Seller is entitled shall continue to be held in escrow until such dispute is
resolved by a written agreement among them or pursuant to Article IV hereof,
and in either such case, the amount provided in such written agreement or
decision from a proceeding to be paid to Seller shall be promptly paid to
Seller by the Escrow Agent following submission of such agreement or decision
from a proceeding to the Escrow Agent.
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3.4 Access to Information. The Escrow Agent shall, upon request
by the Indemnified Parties or Seller, make available to the requesting party
access to any books and records or other information in its possession
concerning the Escrow Fund.
3.5 Form of Release. The release of the Escrow Fund as provided
in the foregoing sections of this Article III shall be made by delivery of such
amounts to Seller. From and after such delivery, the Escrow Agent shall be
discharged from any further liability or responsibility for such amounts.
ARTICLE IV
CLAIMS AGAINST ESCROW FUND
4.1 Claim Procedures. Any claim by the Indemnified Parties for
Indemnified costs ("Claim") shall be subject to the procedural requirements set
forth in Article VI of the Purchase Agreement. On or prior to the Release Date,
DSC shall concurrently deliver to the Escrow Agent a copy of any notice to
Seller regarding any Claim (a "Claim Notice") provided, however, that the
failure of DSC to so promptly notify the Escrow Agent shall not prevent any
Indemnified Party from being indemnified or reimbursed for any Indemnified
Costs arising out of any such Claim except to the extent that the failure to so
promptly notify materially damages Seller. Each Claim Notice shall describe in
reasonable detail the basis of the Claim and shall indicate the estimated
amount of the Indemnified Costs that have been or which may be suffered by DSC
or any other Indemnified Party, which estimate may be revised from time to time
(a "Pending Claim Amount"). The Escrow Agent shall disregard any Claim Notice
not actually received on or prior to the Release Date.
4.2 Determination of Claims.
The "Determination" of a Claim shall be made as follows:
(a) Seller shall have a period of 10 days from the
receipt of any Claim Notice to dispute in whole or in part any Claim made in
the aforesaid Claim Notice in accordance with the Purchase Agreement by
delivering to DSC and the Escrow Agent within such 10 day period a written
notice (the "Dispute Notice") describing in reasonable detail the basis for the
objection.
(b) (i) If the Claim Notice does not involve a third
party action (as defined in the Purchase
Agreement) then:
(A) if Seller does not dispute in whole
or in part any Claim within the time
herein provided, such Claim or the
portion thereof which is not
disputed shall
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be deemed to have resulted in a
Determination in favor of the
applicable Indemnified Party and
Seller will be entitled to be paid
an amount out of the Escrow Fund
equal to the amount of such Claim as
estimated by such Indemnified Party
in the Claim Notice as such Claim
Notice may be revised from time to
time in accordance herewith or the
portion thereof which is not
disputed and the earnings thereon
from the date such Claim Notice was
delivered to Seller; and
(B) if Seller does dispute any Claim,
within the time period herein
provided, such Claim or portion
thereof which is disputed shall be
resolved in accordance with the
Purchase Agreement, which resolution
shall constitute a Determination.
(ii) If the Claim Notice involves a third party
action, then:
(A) if Seller does not dispute any third
party action within the time herein
provided, such third party action
shall be deemed to have resulted in
a Determination in favor of the
applicable Indemnified Party, and
the applicable Indemnified Party
will be entitled to be paid and/or
direct that the third party
asserting such third party action be
paid, an amount out of the Escrow
Fund equal to the amount of
Indemnified Costs actually incurred
by the Indemnified Party in
connection with such third party
action and the earnings thereon from
the date the applicable Claim Notice
was delivered to Seller; and
(B) if Seller does dispute the third
party action within the time herein
provided, such dispute shall be
limited to the issue of whether such
third party action is indemnifiable
under Article VI of the Purchase
Agreement, and shall be resolved in
accordance with the provisions
thereof. If such resolution is that
the third party action is not
indemnifiable, such resolution shall
constitute a Determination. If such
resolution is that the third party
action is indemnifiable, the
Determination shall be derived from
the outcome of such third
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party action.
(c) From time to time after a Determination of a Claim
pursuant to Section 4.2(b), DSC may deliver to the Escrow Agent and Seller a
certificate of an officer of DSC to the effect that (i) there has been a
previous Determination with respect to such Claim, and (ii) as a result of such
Determination the applicable Indemnified Party and/or third party is entitled
to be paid a specified amount. Such certificate shall attach a copy of the
invoice or other documentation supporting the amount of Indemnified Costs to be
paid. On the third business day after receipt of the notice from DSC, the
Escrow Agent shall deliver to DSC, such other Indemnified Party and/or any
person designated by DSC, an amount of Indemnified Costs, if any, relating to
such Claim payable to DSC or such other Indemnified Party pursuant to such
notice or certificate plus an amount equal to the earnings thereon accrued from
and after the date of the delivery of the Notice of Claim with respect to such
Claim.
4.3 Claims Pending on Release Date.
If there are pending Claims as of the Release Date, the Escrow
Agent shall continue to hold in escrow amounts equal to the aggregate of all
Pending Claim Amounts and interest thereon until the earlier of (a) the Escrow
Agent has actually received a written notice from DSC that there exist no
further Indemnified Costs in respect of such Claims or (b) Seller provides to
DSC and the Escrow Agent a notice containing evidence that it is satisfactory
to the Escrow Agent in its sole discretion that the Claim has been resolved
(and describing the resolution) or the payment of all obligations of Seller for
Indemnified Amounts with respect to any resolved claim.
DSC covenants and agrees to provide prompt notice to the Escrow Agent once it
has a reasonable basis to believe there exist no further Indemnified Costs in
respect of a Claim.
ARTICLE V
INVESTMENT AND VOTING MATTERS
5.1 Investments.
(a) Interest of any kind on or with respect to the assets
comprising the Escrow Fund shall be payable to the Escrow Agent, to be held in
escrow pursuant to this Agreement.
(b) At the direction of Seller pursuant to this Section
5.1(b), the Escrow Agent may invest cash within the Escrow Fund in one or more
of the
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following: (i) certificates of deposit issued by United States commercial
banks (other than the Escrow Agent and its affiliated banks) having capital and
surplus in excess of $1,000,000,000 and having (or its parent having) one of
the three highest debt ratings by any of Standard & Poor's Corporation or
Moody's Investors Service; (ii) not in excess of $100,000 of certificates of
deposit issued by the Escrow Agent and its affiliated banks to the extent that
the certificates of deposit are guaranteed by the Federal Deposit Insurance
Corporation; (iii) obligations of the United States Government or any agency
thereof; and (iv) obligations guaranteed by the United States Government. The
Escrow Agent shall not be liable to the Indemnitees or Seller for any claims
related to the investments or management of the Escrow Fund, provided that the
Escrow Agent complies with the directions received from Seller and the other
provisions of this Agreement. Seller hereby initially instructs the Escrow
Agent to invest all such cash in investments described in clause (iv) above.
ARTICLE VI
MISCELLANEOUS
6.1 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered, mailed or transmitted, and shall be effective
upon actual receipt, if delivered personally or by courier, mailed by
registered or certified mail (postage prepaid, return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like changes of address) or sent by electronic
transmission to the telecopier number specified below:
(a) If to DSC or DSC Sub:
DSC Communications Corporation
1000 Coit Road
Plano, TX 75075-5813
Attention: Pete Waal
With a copy (which shall not constitute notice) to:
Baker & McKenzie
2001 Ross Avenue
Suite 4500
Dallas, TX 75201
Telecopier No.: 214/978-3099
Attention: John Kendrick, Esq.
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Mogens Gaarden
Pontoppidan, Philip & Partners
Vognmagergade 7
DK-1120
Copenhagen, Denmark
Telecopier: 45 33 13 56 43
(b) If to the Seller:
NKT Holding A/S
NKT Alle 1.
DK-2605 Brondby
Denmark
Telecopier No.: 45 43 96 18 20
Attention: President and Chief Executive Officer
With copies to (which shall not constitute notice)
to:
Jan Schans Christensen
Bech-Bruun & Trolle
Norre Farimagsgade 3
1364 Copenhagen
Denmark
Telecopier: 45 33 15 25 55
Willcox & Savage, P.C.
1800 NationsBank Center
One Commercial Place
Norfolk Virginia 23510
Telecopier No.: (804) 628-5566
Attention: Keith C. Cuthrell, Jr.
(c) If to the Company:
NKT Elektronik A/S
NKT Alle 85
Dk-2605 Brondby
Denmark
Telecopier No.: 45 43 63 13 20
Attention: President and Chief Executive Officer
With copies to, if such notice is prior to the
Closing (which shall not constitute notice) to:
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<PAGE> 58
Jan Schans Christensen
Bech-Bruun & Trolle
Norre Farimagsgade 3
1364 Copenhagen
Denmark
Telecopier 45 33 15 25 55
Willcox & Savage, P.C.
1800 NationsBank Center
One Commercial Place
Norfolk Virginia 23510
Telecopier No.: (804) 628-5566
Attention: Keith C. Cuthrell, Jr.
(d) If to the Escrow Agent:
_________________________________
_________________________________
_________________________________
_________________________________
or to such other address as any party may have furnished in writing the other
parties in the manner provided above.
6.2 Parties Bound. The provisions of this Agreement shall apply
to, inure to the benefit of, and be binding upon the parties hereto and their
respective heirs, successors, assigns, administrators, executors, and other
legal Sellers. In no event may Seller assign any of its rights, privileges,
duties, or obligations hereunder. Any assignment in violation of the foregoing
shall be null and void.
6.3 Multiple Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original and all of
which shall be deemed collectively one agreement, but, in making proof hereof,
it shall never be necessary to exhibit more than one such counterpart.
6.4 Resignation and Termination. The Escrow Agent may resign as
such by delivering written notice to such effect at least 30 days prior to the
effective date of such resignation to Seller and DSC. Seller and DSC, acting
jointly, may terminate the Escrow Agent from its position as such by delivering
written notice to the Escrow Agent to such effect executed by Seller and DSC at
least 30 days prior to the effective date of such termination (unless such
termination is as a result of the Escrow Agent's breach of its obligations
hereunder, in which case
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the effective date of such termination shall be any date specified in such
notice by Seller and DSC). In the event of such resignation by or termination
of the Escrow Agent, a successor Escrow Agent shall be appointed by mutual
agreement between Seller and DSC and the Escrow Agent which has been so
terminated or has so resigned shall promptly deliver to the successor Escrow
Agent the entire Escrow Fund (together with copies of all records pertaining
thereto) upon presentation of evidence reasonably satisfactory to it of the
appointment and authorization of such successor Escrow Agent by Seller and DSC.
From and after the appointment of a successor Escrow Agent pursuant to this
Section 6.4, all references herein to the Escrow Agent shall be deemed to be to
such successor Escrow Agent.
6.5 Entire Agreement; Modifications. This Agreement and the
Purchase Agreement constitute the final, exclusive, and complete understanding
of the parties with respect to the subject matter hereof and supersede any and
all prior agreements, understandings, and discussions with respect thereto.
This Agreement may be amended with the written agreement of the Escrow Agent,
DSC, and Seller.
6.6 Captions. The captions in this Agreement are for convenience
only and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.
6.7 Governing Law. This Agreement shall be governed by and
enforceable under, and construed in accordance with, the Laws of Denmark,
regardless of the Laws that might otherwise govern under applicable principles
of conflicts of law.
6.8 Third Party Beneficiaries. Other than the Indemnified
Parties, no individual, firm, corporation, partnership, or other entity shall
be a third-party beneficiary of this Agreement.
6.9 Remedies Cumulative. The remedies of the parties under this
Agreement are cumulative and will not exclude any other remedies to which any
party may be lawfully entitled.
6.10 Severability. If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under present or future laws effective
during the term hereof, such provision shall be fully severable and this
Agreement shall be construed and enforced as if such illegal, invalid, or
unenforceable provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by such illegal, invalid, or unenforceable provision or by its
severance herefrom. Furthermore, in lieu of such illegal, invalid, or
unenforceable provision, there shall be added
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automatically as part of this Agreement a provision as similar in its terms to
such illegal, invalid, or unenforceable provision as may be possible and be
legal, valid, and enforceable.
6.11 Waiver. The waiver by Seller of a breach of this Agreement by
the Escrow Agent shall not constitute a waiver of any right or remedy Seller
may have with respect to DSC or DSC Sub under the Purchase Agreement, or
hereunder. The waiver by DSC of a breach of this Agreement by the Escrow Agent
shall not constitute a waiver of any right or remedy it may have with respect
to Seller under the Purchase Agreement, or hereunder. No delay or failure on
the part of any party hereto in exercising any right, power, or privilege under
this Agreement or under any other agreement or instrument given or entered into
in connection with or pursuant to this Agreement shall impair any such right,
power, or privilege or be construed as a waiver of any event of default
hereunder or any acquiescence therein. No single or partial exercise of any
such right, power, or privilege shall preclude the further exercise of such
right, power, or privilege, or the exercise of any other right, power, or
privilege. No waiver shall be valid against any party hereto unless made in
writing and signed by the party against whom enforcement of such waiver is
sought and then only to the extent expressly specified therein.
IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date first above written.
DSC COMMUNICATIONS CORPORATION
By:__________________________________
Name:_____________________________
Title:____________________________
NKT HOLDING A/S
By:__________________________________
Name:_____________________________
Title:____________________________
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NKT ELEKTRONIK A/S
By:_________________________________
Name:____________________________
Title:___________________________
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<PAGE> 62
EXHIBIT B
(COUNSEL FOR ACQUIROR LETTERHEAD)
______________, 1994
NKT Holding A/S
NKT Alle 1
DK-2605 Brondby
Denmark
We have acted as counsel to DSC Communications Corporation, a Delaware
corporation ("Parent"), and (DSC Sub), a Delaware corporation and a
wholly-owned subsidiary of Parent ("Sub"), in connection with the execution
and delivery of a Stock Purchase Agreement (the "Agreement"), dated as of
October __, 1994, by and among Parent, Sub, NKT Holding A/S, a corporation
organized and existing under the laws of the Kingdom of Denmark ("Seller"), and
NKT Elektronik A/S, a corporation organized and existing under the laws of the
Kingdom of Denmark (the "Company"), whereby Sub shall acquire all of the
outstanding capital stock of the Company from Seller in exchange for
US$145,000,000.00 less the amount of any adjustment provided in Section 1.04 of
the Agreement. This opinion is being furnished to you pursuant to Section
7.03(d) of the Agreement. Unless otherwise defined herein or the context
hereof otherwise requires, each term used herein with its initial letter
capitalized has the meaning given to such term in the Agreement.
We have examined and are familiar with originals or copies, certified
or otherwise authenticated to our satisfaction, of such documents and records
of Parent and Sub, and such statutes, regulations and instruments as we have
deemed necessary or advisable for the purposes of this opinion letter,
including, without limitation, (i) the Agreement, (ii) the Certificate of
Incorporation and Bylaws of Parent, and (iii) the Certificate of Incorporation
and Bylaws of Sub.
As to certain factual matters material to our opinions herein, we have
assumed the accuracy of the representations of Parent and Sub in Section 3.04
(a) (ii) of the Agreement and of one or more officers of Parent or Sub. In
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addition, we have assumed that all signatures on all documents presented to us
are genuine, that all documents submitted not new to us as originals are
accurate and complete, that all documents submitted to us as copies are true
and complete copies of the originals thereof, that all information submitted to
us not new was accurate and complete, and that all persons executing and
delivering originals or copies of documents examined by us were competent to
execute and deliver such documents. We have also assumed the due
authorization, execution and delivery by Seller and the Company of the
Agreement and that the Agreement constitutes legal, valid and binding
obligations of Seller and the Company enforceable against Seller and the
Company in accordance with their terms.
Based upon the foregoing and subject to the qualifications and
limitations set forth below, we are of the opinion that:
1. Each of Parent and Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power and authority to own, lease and operate
its properties as now owned, leased and operated and to carry on its business
as is now being conducted.
2. Each of Parent and Sub has all requisite corporate power and
authority to enter into the Agreement and to carry out its respective
obligations thereunder. The execution and delivery by Parent and Sub of the
Agreement and their consummation of the transactions described therein have
been duly authorized by all necessary corporate action on the part of Parent
and Sub, and the Agreement has been duly executed and delivered by each of
Parent and Sub and constitute legal, valid and binding obligations of Parent
and Sub enforceable against each in accordance with their terms; provided,
however, (i) that the availability in Danish courts of equitable remedies such
as injunction and specific performance is restricted under Danish law; (ii)
nothing in this opinion shall constiture an opinion that the provisions of the
Agreement would be specifically enforceable, and the enforcement of any
agreement or instrument may be limited by bankruptcy, insolvency, liquidation,
reorganization, moratorium or other laws of general application regarding or
affecting the rights of creditors, (iii) enforcement thereof is subject to
general principles of equity, regardless of whether enforcement is considered
in a proceeding at law or equity.
In rendering certain of the opinions in this Section 2, we have relied on the
opinion letter of the law firm of Pontoppidan, Philip & Partners that is
attached hereto as Exhibit A.
3. Neither the execution and delivery of the Agreement by Parent
and Sub nor the consummation by them of the transactions described therein (i)
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<PAGE> 64
violates the Certificate of Incorporation or Bylaws of Parent or the
Certificate of Incorporation or Bylaws of Sub, (ii) violates or results in a
breach of, or constitutes a default (or an event which, with the giving of
notice or lapse of time or both, would constitute a default) under, or results
in the creation of any lien upon any of the properties of Parent or Sub under,
any promissory note, bond, mortgage, indenture, or other material agreement
known to this firm to which Parent or Sub is a party or by which any of their
respective properties may be bound, (iii) violates any court or governmental
order, writ, injunction or decree known to this firm to be applicable to Parent
or Sub or any of their properties, or (iv) violates the Delaware law or any
statute or regulation of the State of Texas or the United States of America.
The preceding opinions are subject to the following qualifications and
limitations:
A. In connection with statements herein qualified by "to our
knowledge," our examination has been limited to discussions with the officers
and other representatives of Parent and Sub and we have made no independent
investigations as to the accuracy or completeness of any of the
representations, warranties, data or other information, written or oral, made
or furnished by Parent and Sub to us or to you.
B. This opinion letter is limited in all respects to the laws of
the State of Texas, the federal laws of the United States of America and the
laws of the State of Delaware, and we assume no responsibility as to the
applicability or the effect of any other laws. No opinion is expressed herein
with respect to any laws, ordinances, statutes or regulations of any county,
city or other political subdivision of the State of Texas or the State of
Delaware.
C. The opinions and statements expressed herein are limited to
the matters specifically addressed, and no opinion or statement is implied or
may be inferred beyond the matters so specifically addressed.
D. The opinions and statements expressed herein are rendered as
of the time immediately preceding the Closing, and we hereby disclaim any
obligation to advise you of, or to supplement any of our opinions or statements
because of, any changes in fact or law which might affect any of those opinions
or statements.
E. This opinion letter is solely for your benefit in connection
with the transactions described in the Agreement and may not be relied upon,
quoted or otherwise used by any other person or entity or for any other purpose
without our express written consent.
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Very truly yours,
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<PAGE> 66
EXHIBIT C
(COUNSEL FOR SELLER LETTERHEAD)
______________, 1994
DSC Communications Corporation
1000 Coit Road
Plano, Texas 75075-5813
We have acted as counsel to NKT Holding A/S, a corporation organized
and existing under the laws of the Kingdom of Denmark ("Seller"), and NKT
Elektronik A/S, a corporation organized and existing under the laws of the
Kingdom of Denmark (the "Company"), in connection with the execution and
delivery of a Stock Purchase Agreement (the "Agreement"), dated as of October
__, 1994, by and among Seller, the Company, DSC Communications Corporation, a
Delaware corporation ("DSC") and whereby DSC shall acquire all of the
outstanding capital stock of the Company from Seller in exchange for
US$145,000,000.00 less the amount of any adjustment provided in Section 1.04 of
the Agreement. This opinion is being furnished to you pursuant to Section
7.02(d) of the Agreement. Unless otherwise defined herein or the context
hereof otherwise requires, each term used herein with its initial letter
capitalized has the meaning given to such term in the Agreement.
We have examined and are familiar with originals or copies of such
documents and records of Seller and the Company and its subsidiaries listed on
Exhibit A hereto (Netman A/S, NKT Dedicom A/S and NE TMN A/S) (hereinafter
referrred to as the Subsidiaries), and such statutes, regulations and
instruments as we have deemed necessary or advisable for the purposes of this
opinion letter, including without limitation, (i) the Agreement, (ii) the
Articles of Association ("vedtaegter") and a transscript of the registration
within the Danish Commerce and Companies Agency ("sammenskrevet resume") of
Seller, and (iii) the Articles of Association ("vedtaegter") and a transscript
of the registration within the Danish Commerce and Companies Agency
("sammenskrevet resume")
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of the Company.
As to certain factual matters material to our opinions herein, we have
assumed the accuracy of the representations of Seller and the Company in the
Agreement and of one or more officers of Seller, the Company or the
Subsidiaries. In addition, we have assumed that all signatures on all
documents presented to us are genuine, that all documents submitted to us as
originals are accurate and complete, that all documents submitted to us as
copies are true and correct copies of the originals thereof, that all
information submitted to us was accurate and complete, and that all persons
executing and delivering originals or copies of documents examined by us were
competent to execute and deliver such documents. We have also assumed the due
authorization, execution and delivery of the Agreement by DSC and that the
Agreement constitutes legal, valid and binding obligations of DSC enforceable
against each in accordance with its terms.
Based upon the foregoing and subject to the limitations set forth
below, we are of the opinion that:
1. Seller, the Company and each of the Subsidiaries is a
corporation duly organized and validly existing under the laws of the Kingdom
of Denmark and has the requisite corporate power and authority to own, lease
and operate its properties as we believe they are now owned, leased and
operated and to carry on its business as we believe it is now being conducted.
2. Seller and the Company have all requisite corporate power and
authority to enter into the Agreement and to perform their obligations
thereunder. The execution and delivery by Seller and the Company of the
Agreement and their consummation of the transactions described therein have
been duly authorized by all necessary corporate action on the part of Seller
and the Company, and the Agreement has been duly executed and delivered by
Seller and the Company and constitute legal, valid and binding obligations of
Seller and the Company enforceable against each in accordance with their terms,
except, however, that (i) the availability in Danish courts of equitable
remedies, such as injunction and specific performance, is restricted under
Danish law; (ii) nothing in this opinion shall constitute an opinion that the
provisions of the Agreement would be specifically enforceable, and the
enforcement of any agreement or instrument may be limited by bankruptcy,
insolvency, liquidation, re-organization, limitation, or other laws of general
application regarding or affecting the rights of creditors; (iii) enforcement
thereof is subject to general principles of equity, regardless of whether
enforcement is considered in a proceeding at law or equity; (iv) we express no
opinion as to the legality, validity, binding nature and enforceability of the
obligations of the Company under Section 6.01 of the Agreement.
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3. Neither the execution and delivery of the Agreement by Seller
or the Company nor the consummation by them of the transactions described
therein violates the Articles of Association of Seller or the Articles of
Association of the Company.
4. To our actual knowledge, except as set forth in Section 2.11
of the Company Disclosure Schedule (as may have been updated), no actions,
suits or proceedings are pending or threatened against Seller or the Company
seeking to prevent or delay the transactions contemplated by the Agreement or
challenging any of the terms or provisions of the Agreement or seeking material
damages in connection therewith.
5. The Company has authorized, issued and outstanding 101,100
shares of capital stock, par value DKK 1000 per share ("Common Stock"), and no
other classes of capital stock or securities of the Company are authorized.
The shares of Common Stock constitute all of the issued and outstanding
securities of the Company and are duly authorized, legally and validly issued,
fully paid, and nonassessable.
6. Seller is the registered owner of 101,100 shares of Common
Stock of the Company. In the Share Ledger of the Company, there is no entry of
any liens, restrictions, security interests, claims, rights of any third party,
or encumbrances (other than rights and obligations arising under the
Agreement).
The preceding opinions are subject to the following qualifications and
limitations:
A. In connection with statements herein qualified by "to our
actual knowledge," our examination has been limited to discussions with the
officers and other representatives of Seller and the Company and we have made
no independent investigations as to the accuracy or completeness of any of the
representations, warranties, data or other information, written or oral, made
or furnished by Seller or the Company to us or to you.
B. The opinions and statements expressed herein are limited to
the matters specifically addressed, and no opinion or statement is implied or
may be inferred beyond the matters so specifically addressed.
C. The opinions and statements expressed herein does not
constitute an opinion as to whether or not any of the provisions of the
Agreement would be invalid under Danish or EU competition law.
D. The opinions and statements expressed herein are confined to
and
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<PAGE> 69
DSC Communications Corporation
_________, 1994
Page 4
given on the basis of Danish law as it exists at the date hereof and assume that
the Agreement is governed by Danish law. We have made no investigations of any
other laws than the laws of the Kingdom of Denmark as a basis for this opinion
and do not express or imply any opinion thereon.
E. The opinions and statements expressed herein are rendered as
of the time immediately preceding the Closing, and we hereby disclaim any
obligation to advise you of, or to supplement any of our opinions or statements
because of, any changes in fact or law which might affect any of those opinions
or statements.
F. This opinion letter is solely for your benefit in connection
with the transactions described in the Agreement and may not be relied upon,
quoted or otherwise used by any other person or entity or for any other purpose
without our express written consent.
Very truly yours,
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<PAGE> 70
EXHIBIT D
(NOT APPLICABLE)
<PAGE> 71
EXHIBIT E
NONCOMPETITION AGREEMENT
This Noncompetition Agreement is entered into as of __________, 1994,
by and between DSC Communications Corporation, a Delaware corporation
("Acquiror"), and NKT Holding A/S, a corporation organized and existing under
the laws of the Kingdom of Denmark (the "Seller").
RECITALS
A. NKT Elektronik A/S, a corporation organized and existing
under the laws of the Kingdom of Denmark (the "Company"), is engaged in the
business of sale, marketing, development, design, manufacture, and service of
fiber optical telecommunications transmission equipment and the design,
installation and system integration of submarine cable ("the Business");
B. Seller has agreed to sell, transfer, and convey, and
concurrently herewith is selling, transferring, and conveying, to (DSC SUB), a
Delaware corporation ("Acquiror Sub"), all of the outstanding capital stock of
the Company , pursuant to that certain Stock Purchase Agreement (the "Purchase
Agreement") dated as of October __, 1994, by and among Acquiror, Acquiror Sub,
Seller and the Company;
C. Seller possesses valuable knowledge about the Business and
operations of the Company; and
D. Acquiror has requested that Seller enter into this Agreement
as an inducement to Acquiror to enter into and consummate the transactions
contemplated by the Purchase Agreement;
NOW, THEREFORE, for and in consideration of the mutual covenants
and promises herein contained, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
1. Agreement Not to Compete. In order to protect the goodwill
and business interests of the Company, Seller shall not, during the five (5)
year period beginning on the date hereof (the "Term of Noncompetition"),
directly or indirectly own, engage in, manage, operate, join, or control, or
participate in the management, operation, or control of, or be connected as a
stockholder, director, officer, employee, agent, partner, joint venturer, or
otherwise with any business or organization which in any way competes with the
Company in the Business; provided, however, that (a) nothing herein shall
prohibit Seller from owning or participating in the ownership of or being
connected as a stockholder, partner,
E-1
<PAGE> 72
joint venturer or with any other type of ownership of an equity interest in any
entity constituting five per cent (5%) or less of all outstanding ownership
interests in such entity, and (b) nothing herein shall restrict Seller in the
conduct of any business that is included within the Business but that ceases to
be actively conducted by the Company or its subsidiaries during the Term of
Noncompetition.
2. Confidential Information.
(a) Seller acknowledges that except as provided below, the
confidential information, observations, and data obtained or possessed by them
concerning the Business of the Company will be the property of the Company and
not Seller following the Closing. Therefore, Seller agrees that it will not
disclose to any person or use for its own account any of such information,
observations, or data unless and to the extent that such information,
observations, or data become generally known to and available for use by the
public otherwise than as a result of Seller's act or omission to act. Seller
agrees to deliver to the Company, at any time the Company may request in
writing, all memoranda, notes, plans, records, reports, and other documents
(and copies thereof) relating to the Business which it may then possess or
have under its control.
(b) Notwithstanding the foregoing, the parties acknowledge and
agree that Seller shall be entitled to disclose, use and retain copies of the
information described in subparagraph (a) above in connection with: (i) the
conduct of the Excluded Business and the businesses related to the Excluded
Assets, (ii) obligations of Seller under certain contracts and agreements
relating both to the business of Seller and the Business, (iii) claims against
Seller under the Escrow Agreement, (iv) claims by or against the Seller under
Article VI of the Purchase Agreement, and (v) requirements of legal process,
law, regulation or policy of any governmental authority or order of a court of
competent jurisdiction.
3. Amendments. This Agreement may be amended or modified from
time to time, but only by a written instrument executed by all of the parties
hereto.
4. Notices. Any notices required or permitted hereunder shall be
in writing and shall be deemed given when personally delivered or when sent by
registered or certified mail, return receipt requested, addressed to the other
party at its, his or her address set forth below, or at such other address as
it or he may specify in writing:
(a) If to DSC or DSC Sub:
DSC Communications Corporation
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<PAGE> 73
1000 Coit Road
Plano, TX 75075-5813
Attention: Pete Waal
With a copy (which shall not constitute notice) to:
Baker & McKenzie
2001 Ross Avenue
Suite 4500
Dallas, TX 75201
Telecopier No.: 214/978-3099
Attention: John Kendrick, Esq.
Mogens Gaarden
Pontoppidan, Philip & Partners
Vognmagergade 7
DK-1120
Copenhagen, Denmark
Telecopier: 45 33 13 56 43
(b) If to Seller:
NKT Holding A/S
NKT Alle 1.
DK-2605 Bronby
Denmark
Telecopier No.: 45 43 96 18 20
Attention:
E-3
<PAGE> 74
With a copy (which shall not constitute notice) to:
Jan Schans Christensen
Bech-Bruun & Trolle
Norre Farimagsgade 3
1364 Copenhagen
Denmark
Telecopier: 45 33 15 25 55
Willcox & Savage, P.C.
1800 NationsBank Center
One Commercial Place
Norfolk Virginia 23510
Telecopier No.: (804) 628-5566
Attention: Keith C. Cuthrell, Jr.
5. Entire Agreement. This Agreement constitutes the entire
agreement of the parties and supersedes all prior agreements, discussions,
understandings or undertakings, both written or oral, with respect to the
subject matter hereof.
6. Assignment; Parties Bound. The Company may assign its rights
and obligations hereunder to any party succeeding to substantially all of the
business and assets of the Business. Seller may not assign any of their
obligations hereunder. Any assignment in violation of the foregoing shall be
null and void. Subject to the foregoing, this Agreement shall be binding upon
the parties hereto and shall inure to the benefit of the parties hereto and
their respective heirs, executors, administrators, legal representatives,
successors, and assigns.
7. Governing Law. This Agreement shall be governed by and be
enforceable under the laws of the Kingdom of Denmark, (regardless of the laws
that might otherwise govern under applicable principles of conflicts of law).
8. Non-waiver of Breach. A waiver by any party hereto of a
particular breach or default in connection with any provision of this Agreement
shall not be deemed a waiver of any subsequent default or breach of the same or
any other provision of this Agreement.
9. Invalid Provision. If any provision of this Agreement
(including, without limitation, any provision relating to the activities
covered by the time period of, or geographic scope of the noncompetition
covenants in Section 1 hereof) is held to be illegal, invalid, or unenforceable
under present or future laws, such provision shall be severable, and this
Agreement shall be construed
E-4
<PAGE> 75
and enforced as if such illegal, invalid, or unenforceable provision had never
comprised a part of this Agreement, and the remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by
such illegal, invalid, or unenforceable provision or by its severance herefrom.
Furthermore, in lieu of such illegal, invalid, or unenforceable provision,
there shall be added automatically as a part of this Agreement a provision as
similar in terms to such illegal, invalid, or unenforceable provision as may be
possible and be legal, valid, and enforceable, and the parties hereto hereby
request the court or any arbitrator to whom disputes relating to this Agreement
are submitted to reform the otherwise enforceable covenant in accordance with
the preceding covenant.
10. Headings. The headings in this Agreement are for purposes of
reference only and shall not be considered in construing this Agreement.
11. Attorneys' Fees. If any party hereto brings any action, at
law or in equity, to enforce or interpret the terms of this Agreement, the
prevailing party shall be entitled to recover from the other party hereto
reasonable attorneys' fees in addition to any other relief to which such party
may be entitled.
12. Enforcement of Covenants. Seller agrees that a violation on
its part of any covenant contained herein shall cause irreparable damage to the
Company and, consequently, Seller further agrees that the Company shall be
entitled, as a matter of right, to an injunction out of any court of competent
jurisdiction restraining any further violation of such covenant by Seller.
Such right to an injunction shall be cumulative and in addition to all other
remedies the Company may have at law or in equity, including, but not limited
to, recovery of damages or the right to bring an action for specific
performance of any covenant contained herein.
13. Defined Terms. All capitalized terms in this Agreement and not
otherwise defined herein shall have the meaning given them in the Purchase
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
DSC COMMUNICATIONS CORPORATION
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<PAGE> 76
By:__________________________________
Name:_____________________________
Title:____________________________
NKT HOLDING A/S
By:__________________________________
Name:_____________________________
Title:____________________________
E-6
<PAGE> 1
Exhibit 11
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Computation of Income per Share
(In thousands)
(Unaudited)
The following table sets forth the computation of shares used in the
calculation of income per share for the three and nine months ended September
30, 1994 and 1993. All 1993 amounts presented have been restated to
retroactively reflect a two-for-one stock split, effected in the form of a
100% stock dividend, declared by the Board of Directors on April 27, 1994 for
shareholders of record on May 11, 1994.
Average Shares Used in Income per Share Calculation:
- ----------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- --------------------
1994 1993 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
Weighted average
shares outstanding
during the period........... 112,684 102,296 111,850 96,564
Common share equivalents
outstanding:
Options and warrants
issued and
contingently issuable..... 5,452 7,066 6,309 8,012
Assumed purchase of
treasury shares........... (1,316) (1,402) (1,545) (1,940)
------- ------- ------- -------
Weighted average shares
used in calculation......... 116,820 107,960 116,614 102,636
======= ======= ======= =======
</TABLE>
Fully diluted income per share is not shown since the dilutive effect is less
than three percent for the three and nine months ended September 30, 1994 and
would result in antidilution for the three and nine months ended September
30, 1993.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 109,240
<SECURITIES> 211,635
<RECEIVABLES> 165,760
<ALLOWANCES> 0
<INVENTORY> 152,709
<CURRENT-ASSETS> 681,470
<PP&E> 477,115
<DEPRECIATION> (233,264)
<TOTAL-ASSETS> 1,061,404
<CURRENT-LIABILITIES> 221,640
<BONDS> 0
<COMMON> 1,183
0
0
<OTHER-SE> 771,513
<TOTAL-LIABILITY-AND-EQUITY> 1,061,404
<SALES> 691,049
<TOTAL-REVENUES> 691,049
<CGS> 354,706
<TOTAL-COSTS> 354,706
<OTHER-EXPENSES> 193,089
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,313
<INCOME-PRETAX> 150,056
<INCOME-TAX> 40,975
<INCOME-CONTINUING> 109,081
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 109,081
<EPS-PRIMARY> 0.94
<EPS-DILUTED> 0
</TABLE>
