<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
NOVEMBER 16, 1994
_________________
RAYCHEM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 2-15299 94-1369731
(State or other jurisdiction of (Commission File (IRS Employer
incorporation or organization) Number) Identification No.)
300 CONSTITUTION DRIVE, MENLO PARK, CA 94025-1164
(Address of principal executive offices) (Zip code)
(415) 361-4180
(Registrant's telephone number, including area code)
<PAGE> 2
RAYCHEM CORPORATION
ITEM 2. DISPOSITION OF ASSETS
On November 16, 1994, the company and L M Ericsson, a Swedish
telecommunications company, formed a joint venture for the development,
manufacture, and marketing of fiber-optic communications systems for telephone
access networks worldwide. The joint venture, called "Ericsson Raynet," has
taken over and is continuing the operations of the company's Raynet subsidiary,
and is headquartered in Menlo Park, California. Ericsson Raynet has been
organized as a partnership under Delaware law; Raynet will hold the company's
interest in the joint venture. Ericsson representatives will constitute a
majority of the Board of Managers of the joint venture.
In forming the joint venture, Raychem sold certain specified assets of its
Raynet subsidiary to Ericsson in exchange for $40 million. Ericsson
contributed the purchased assets to the joint venture, and Raynet contributed
substantially all of its remaining assets and liabilities to the joint venture.
Funding of the joint venture will initially be provided by the partners,
generally 51% by Ericsson and 49% by Raynet.
During the first five to eight years of operation, subject to various
conditions, substantially all of the profits of the joint venture up to $156
million will be allocated to Raynet; thereafter profits of the joint venture
will be shared 51/49 by Ericsson and Raynet, respectively. Ericsson's share of
the joint venture's losses will be capped at $25 million for the fiscal year
ending June 30, 1995. During the fiscal year ending June 30, 1996, up to $19.6
million of losses will be allocated to Ericsson and Raynet in a 51/49 ratio;
additional losses, if any, of up to $10 million will be allocated 100% to
Raynet; and additional losses, if any, will again be allocated to Ericsson and
Raynet in a 51/49 ratio.
BellSouth Enterprises Inc. (BSE) had financed a portion of the software
development work at Raynet and held a royalty interest in the software related
revenues of Raynet. With the creation of the joint venture, this royalty
payment was reconfigured. Raychem is required to pay BSE $10 million in 1994,
and to make two additional payments of $10 million each over the next two
calendar years. Raychem has agreed to make other royalty payments to BSE
contingent upon the revenues and earnings performance of the joint venture. At
such time as the joint venture achieves profitability, these royalty payments
could approximate 36% of Raychem's distributions from the joint venture.
Ericsson has a right to purchase Raynet's interest in the joint venture at a
fixed price for a limited period beginning November 16, 1996; and Ericsson and
Raynet have call and put rights, respectively, on Raynet's interest in the
joint venture exercisable at fair market value at any time after July 1, 1999.
If any of these options are exercised, Raychem has agreed to pay BSE a portion
of the purchase price received.
<PAGE> 3
RAYCHEM CORPORATION
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS
(a) Financial Statements of Businesses Acquired
None.
(b) Pro Forma Financial Information
It is impractical to file the required pro forma financial
information at the time of filing of this report. The
required financial statements will be filed on or about
December 23, 1994, and in any event within 60 days
of the date of this report.
(c) Exhibits
2(a) Formation Agreement dated as of October 10, 1994
2(b) Amendment to Formation Agreement dated as of
November 16, 1994
2(c) Joint Venture Agreement dated as of
November 16, 1994
<PAGE> 4
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.
RAYCHEM CORPORATION
-------------------
(Registrant)
Date: November 30, 1994 /s/ RAYMOND J. SIMS
----------------- -----------------------------------
Raymond J. Sims
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ DEIDRA D. BARSOTTI
------------------------------------
Deidra D. Barsotti
Vice President and
Corporate Controller
(Principal Accounting Officer)
<PAGE> 1
EXHIBIT 2(a)
================================================================================
FORMATION AGREEMENT
Among
TELEFONAKTIEBOLAGET L M ERICSSON
ERICSSON GE MOBILE COMMUNICATIONS INC.
ERICSSON GE HOLDING INC.
RAYCHEM CORPORATION
and
RAYNET CORPORATION
Dated as of October 10, 1994
================================================================================
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1
Definitions
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
BellSouth Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Contributed Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Contributed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Encumbrance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Environmental Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Guarantee Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Hazardous Substance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Included Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Included Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Joint Venture Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
JV Transaction Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Material Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Permit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Permitted Encumbrance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Raychem Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Revolver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Tax or Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Third Party Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 2
ACTIONS TO BE TAKEN AT THE CLOSING
2.1. The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2. Actions at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3. Instruments of Conveyance and
Transfer, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
2.4. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.5. Foreign Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.6. Post-Closing Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF RAYCHEM AND RAYNET
3.1. Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.3. No Conflicts; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4. Equity Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.5. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.6. Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.7. Condition of the Included Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.8. Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.9. Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.10. Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.11. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.12. Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.13. Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.14. Brokers and Intermediaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.15. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.16. Employee Benefit Plans and Arrangements . . . . . . . . . . . . . . . . . . . . . . . 17
3.17. Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.18. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.19. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.20. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.21. Permits, Licenses, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.22. Restrictions on Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.23. Arrangements with Raychem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.24. BellSouth Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.25. Entire Raynet Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
ERICSSON, EGE AND EHU
4.1. Corporate Organization; Authority . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.2. No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.3. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.4. Brokers and Intermediaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.5. Restriction on Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 5
COVENANTS
5.1. Access to Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.2. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.3. Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.4. Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.5. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.6. Liability for Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.7. Reasonable Best Efforts in Good Faith
to Consummate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.8. Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.9. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.10. Stamp Taxes, Duties, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.11. Required Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.12. Acquisition of Rights to Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 30
5.13. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.14. Release of BellSouth Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.15. Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 6
CONDITIONS TO CLOSING
6.1. Conditions to the Obligations of
Ericsson, EGE and EHU. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.2. Conditions to the Obligations of Raychem
and Raynet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 7
TERMINATION
7.1. Bases for Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 8
INDEMNIFICATION, CONTRIBUTION AND SURVIVAL
8.1. Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . 38
8.2. Indemnification by Raychem and Raynet . . . . . . . . . . . . . . . . . . . . . . . . 39
8.3. Indemnification by Ericsson, EGE and EHU . . . . . . . . . . . . . . . . . . . . . . . 40
8.4. Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.5. Limitation of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
iii
<PAGE> 5
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 9
MISCELLANEOUS
9.1. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.3. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.4. Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.5. Bulk Transfer Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.6. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.7. Section and Other Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.8. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.9. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.10. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.11. Benefits Only to Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.12. Consultation and Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
iv
<PAGE> 6
EXHIBITS
<TABLE>
<S> <C>
1 Joint Venture Agreement
2 Guarantee Agreement
3 Release of BellSouth Agreements
4 Opinion of Counsel to Raychem and Raynet
5 Opinion of Counsel to Ericsson, EGE and EHU
ANNEXES
A Included Assets
B Excluded Contracts
SCHEDULES
1 Ongoing BellSouth Arrangements
3.3 Raychem and Raynet consents
3.4 Raynet equity interests
3.5 Exceptions to Financial Statements
3.9 Changes subsequent to June 30, 1994
3.10 Raynet Real Property
3.11 Raynet litigation
3.12 Raynet compliance with laws, etc.
3.13 Raynet Material Contracts
3.15 Raynet Tax matters
3.16 Raynet Employee Benefit Plans
3.17 Raynet Intellectual Property Rights
3.18 Raynet Environmental matters
3.19 Raynet Insurance Policies
3.21 Raynet Permits, Licenses, etc.
3.23 Raychem Arrangements
4.2 EGE Conflicts, etc.
4.3 EGE Consents
5.5 Exceptions to Conduct of Business in ordinary course
</TABLE>
v
<PAGE> 7
FORMATION AGREEMENT
This Formation Agreement, dated as of October 10, 1994 among
Telefonaktiebolaget L M Ericsson, a corporation organized under the laws of the
Kingdom of Sweden ("Ericsson"), Ericsson GE Mobile Communications Inc., a
corporation organized under the laws of the State of Delaware ("EGE"), Ericsson
GE Holding Inc., a corporation organized under the laws of the State of
Delaware ("EHU"), Raychem Corporation, a corporation organized under the laws
of the State of Delaware ("Raychem"), and Raynet Corporation, a corporation
organized under the laws of the State of California ("Raynet").
W I T N E S S E T H:
WHEREAS, Raychem and Ericsson desire to establish a joint
venture; and
WHEREAS, EGE is a wholly-owned subsidiary of a corporation of
which Ericsson owns all of the Class A Common Stock which is entitled to elect
80% of the directors thereof; and
WHEREAS, EHU is a wholly-owned subsidiary of EGE; and
WHEREAS, EHU and Raynet desire to form a joint venture ("JV")
to carry on the business heretofore conducted by Raynet and Raynet GmbH through
the contribution to JV of the Purchased Assets and the Contributed Assets and
the assumption by JV of the Contributed Liabilities, all as more specifically
provided herein;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, the
parties hereto hereby agree as follows:
ARTICLE 1
Definitions
For purposes of this Agreement, the following terms shall have
the meanings set forth below:
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under common
control with such other Person; provided,
<PAGE> 8
however, that for purposes of this Agreement JV shall not be deemed to be an
Affiliate of or controlled by any of the Parties.
"Agreement" means this Formation Agreement, as it may be
amended from time to time pursuant to Section 9.1 hereof, and the Annexes and
Schedules listed in the table of contents hereto.
"BellSouth Agreements" means the Technology Agreement between
Raychem, Raynet, Raynet International, Inc. and BellSouth Enterprises, Inc.
("BellSouth"), dated June 24, 1993 and any other existing agreement or
arrangement entered into by Raynet or any of its subsidiaries with BellSouth or
any of its Affiliates, other than ongoing commercial arrangements described on
Schedule 1 hereto.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contributed Assets" means the Included Assets remaining
after removing therefrom the Purchased Assets.
"Contributed Liabilities" means each and every one of the
Included Liabilities.
"Control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), when used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through ownership of voting securities, by contract or otherwise.
"Encumbrance" means any mortgage, deed of trust, lien, pledge,
easement, hypothecation, assignment, security interest or any other encumbrance
or restriction of any type whatsoever.
"Environmental Law" mean any Federal, state, local or foreign
law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, legal doctrine, order, judgment, decree,
injunction, requirement or agreement with any governmental entity relating to
(x) the protection, preservation or restoration of the environment (including,
without limitation, air, water vapor, surface water, groundwater, drinking
water supply, surface land, subsurface land, plant and animal life or any other
natural resource) or to human health or safety or (y) the exposure to, or the
use, storage, recycling, treatment, generation, transportation, processing,
handling, labeling,
2
<PAGE> 9
production, release or disposal of Hazardous Substances, in each case as
amended and as in effect on the Closing Date. The term Environmental Law
includes, without limitation, (i) the Federal Comprehensive Environmental
Response Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act, the Federal Water Pollution Control Act of 1972, the
Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource
Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste
Amendments thereto), the Federal Solid Waste Disposal and the Federal Toxic
Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act,
the Federal Occupational Safety and Health Act of 1970, each as amended and as
in effect on the Closing Date, and (ii) any common law or equitable doctrine
(including, without limitation, injunctive relief and tort doctrines such as
negligence, nuisance, trespass and strict liability) that may impose liability
or obligations for injuries or damages due to, or threatened as a result of,
the presence of, effects of or exposure to any Hazardous Substance.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Guarantee Agreement" means the Guarantee Agreement, to be
dated as of the Closing Date, among Raychem, Ericsson and JV in substantially
the form attached hereto as Exhibit 2.
"Hazardous Substance" means any substance presently or
hereafter listed, defined, designated or classified as hazardous, toxic,
radioactive or dangerous, or otherwise regulated, under any Environmental Law.
Hazardous Substance includes any substance to which exposure is regulated by
any government authority or any Environmental Law including, without
limitation, any toxic waste, pollutant, contaminant, hazardous substance, toxic
substance, hazardous waste, special waste, industrial substance or petroleum or
any derivative or by-product thereof, radon, radioactive material, asbestos or
asbestos containing material, urea formaldehyde foam insulation, lead or
polychlorinated biphenyls.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Included Assets" means all of Raynet's cash, marketable
securities, short-term investments, accounts receivable, notes receivable,
inventories of raw materials, work-in-process, finished goods, demonstration
and consignment inventory, products, samples, Real Property, machinery,
equipment, furniture, desks, typewriters, computers, tools,
3
<PAGE> 10
office supplies, fixtures, leasehold improvements, Intellectual Property
Rights, Permits, rights under contracts and agreements, rights under Insurance
Policies (other than the right to refunds of premiums), choses in action,
rights to Tax refunds (other than income and franchise Tax refunds) for
transactions and events occurring after June 30, 1994, goodwill as a going
concern including all rights to the use of the name "Raynet," rights under
express or implied warranties from suppliers, customer lists, educational and
promotional materials, files, job histories, production records, laboratory and
testing records, correspondence, plans, drawings, designs, patterns, computer
software, employment records, the shares of stock of Raynet GmbH and all other
assets of or belonging to Raynet at the Closing Date, whether or not recorded
on the books of Raynet, specifically excepting and excluding, however, prepaid
income taxes and rights to Tax refunds for transactions and events occurring
prior to July 1, 1994, the shares of stock of Raynet's subsidiaries (other than
Raynet GmbH), the stock of Raylan Corporation and rights under the contracts
listed in Annex B hereto. A detailed list of all of the Included Assets (as of
June 30, 1994) is set forth on Annex A hereto.
"Included Liabilities" means all of Raynet's liabilities and
obligations as of the Closing Date, whether or not recorded on the books of
Raynet, including but not limited to liabilities to Raychem and its Affiliates
incurred in the ordinary course of business, accounts payable, accrued payroll
and related compensation expense to employees, liabilities under the Revolver,
customer deposits, liabilities for Taxes (other than income and franchise
taxes) for transactions and events occurring after June 30, 1994 and
liabilities under contracts, leases and agreements, specifically excepting and
excluding, however, all liabilities for products sold prior to the Closing Date
alleged to be defective for any reason, liabilities for alleged infringement of
Intellectual Property Rights of others arising from products sold prior to the
Closing Date, liabilities for income and franchise Taxes, liabilities for Taxes
for transactions and events occurring prior to July 1, 1994, liabilities for
amounts borrowed by Raynet prior to July 1, 1994 under the Revolver,
liabilities under Environmental Laws that exist, arise or are incurred on or
prior to the Closing Date, liabilities for the use of Hazardous Substances
prior to the Closing Date, and liabilities under the contracts listed in Annex
B hereto.
"Information" means all information (whether written or oral)
furnished (whether before or after the date hereof) by any of the Parties or
any of its Representatives to any other Party hereto or its Representatives and
all
4
<PAGE> 11
analyses, compilations, forecasts, studies or other documents prepared by a
Party or its Representatives in connection with its review of the transactions
contemplated hereby which contain or reflect any such information, excluding
information which (i) is or becomes publicly available other than as a result
of disclosure by the receiving Party or its Representatives or (ii) is or
becomes available to the receiving Party on a nonconfidential basis from a
source (other than a Party or its Representatives) which, to the best of the
receiving Party's knowledge after due inquiry, is not prohibited from
disclosing such information to the receiving Party by a legal, contractual or
fiduciary obligation.
"Intellectual Property Rights" means patents, trademarks,
trade names, product names, service marks, copyrights, applications for any of
the foregoing, trade secrets, proprietary information, inventions, methods,
designs, processes, manufacturing methods, procedures, formulae, know-how and
all other proprietary property rights and interests including all goodwill
associated therewith and any licenses relating thereto.
"Joint Venture Agreement" means the Joint Venture Agreement,
to be dated as of the Closing Date, between EHU and Raynet in substantially the
form attached hereto as Exhibit 1.
"JV Transaction Agreements" means the Joint Venture Agreement
and the Guarantee Agreement.
"Material Adverse Effect" means a material adverse effect on
the assets, businesses, condition (financial or otherwise), operations or
prospects of Raynet and its subsidiaries considered as a whole.
"Material Contract" has the meaning set forth in Section 3.13.
"Parties" means Ericsson, EGE, EHU, Raychem and Raynet and
their respective successors and permitted assigns.
"Permit" means any permit, license, approval or authorization
of any Federal, state, local or foreign governmental or regulatory agency or
authority.
"Permitted Encumbrance" means (i) any Encumbrance for Taxes
(other than income taxes) either not yet due and payable or being contested in
good faith by appropriate proceedings and for which adequate reserves have been
provided and (ii) mechanic's, materialmen's, workmen's, warehouse-
5
<PAGE> 12
men's and other similar liens incurred in the ordinary course of business with
respect to obligations which are not past due or which are being contested in
good faith by appropriate proceedings and for which adequate reserves have been
provided.
"Person" means an individual, corporation, partnership, trust
or unincorporated organization or a government or any agency or political
subdivision thereof.
"Properties" means all Real Properties presently or at any
time previously owned or leased by Raynet or any of its subsidiaries.
"Purchased Assets" means assets of Raynet having a book value
(in accordance with the accounting principles followed by Raynet in its
Financial Statements referred to in Section 3.5) of $40,000,000 that are
selected at the Closing by Raynet from among the assets identified as Purchased
Assets on Annex A hereto.
"Raychem Arrangements" means all agreements and arrangements
between Raynet and its subsidiaries, on the one hand, and Raychem and its
Affiliates (other than Raynet and its subsidiaries), on the other hand.
"Real Property" means any parcel of real property, together
with (i) all buildings, facilities and other structures and improvements
thereon, (ii) all rights, privileges, hereditaments and appurtenances
benefiting or pertaining to such real property or to any of such buildings,
facilities or other structures or improvements, and (iii) to the extent
constituting real property under applicable law, all fixtures, installations,
machinery, equipment and other property attached thereto or located thereon.
"Representatives" means all of the directors, officers,
employees, Affiliates and other representatives (including, without limitation,
financial advisors, attorneys and accountants) or agents of a Person.
"Return" means any return, report, estimate, declaration,
information return or statement of any nature with respect to Taxes, any
declaration of estimated Tax or any Tax report.
"Revolver" means the Revolving Credit Agreement between Raynet
and Raychem International Manufacturing Corporation dated as of July 1, 1987,
as amended.
6
<PAGE> 13
"Tax" or "Taxes" means any Federal, state, local or foreign
income, business, occupation, environmental, gross receipts, ad valorem,
alternative or add-on minimum tax, profits, severance, franchise, license,
transfer, sales, use, value added, payroll, employment, withholding, property
(real or personal), production, excise and similar taxes (including interest,
penalties or additions to such taxes and any interest in respect of such
penalties or additions).
"Third Party Claim" means any claim made by any third party
which is to be the basis for a claim for indemnification hereunder.
ARTICLE 2
ACTIONS TO BE TAKEN AT THE CLOSING
2.1. The Closing. The closing of the transactions provided
for in this Article 2 (herein called the "Closing") shall take place at the
offices of Sullivan & Cromwell, 125 Broad Street, New York, New York 10004
U.S.A., at 10:00 a.m., local time, on the fifth business day following the
satisfaction of the conditions set forth in Sections 6.1(b) and 6.2(b), or at
such other time and place as the Parties shall mutually agree. The date of the
Closing is referred to in this Agreement as the "Closing Date".
2.2. Actions at Closing. At the Closing, subject to the
terms and conditions of this Agreement, the applicable Parties hereby agree to
take the following actions in the following order, all of which (except (a) and
(b), which shall occur first) shall be deemed to occur simultaneously:
(a) Raynet shall sell, convey, transfer, assign and
deliver to EHU all of its right, title and interest in and to the
Purchased Assets.
(b) In consideration of the sale of the Purchased Assets,
EHU shall pay to Raynet $40,000,000.
(c) EHU shall contribute to JV all of its right, title and
interest in and to the Purchased Assets, and JV shall assume and agree
to pay, perform and discharge when due the Assumed Liabilities.
(d) Raynet shall contribute to JV all of its right, title and
interest in and to the Contributed Assets, and JV shall assume and
agree to pay, perform and discharge when due the Contributed
Liabilities.
7
<PAGE> 14
(e) EHU and Raynet shall execute and deliver the Joint
Venture Agreement, pursuant to which each will acquire an interest in
JV as specified therein.
(f) EHU and Raynet shall make additional capital
contributions to JV in amounts equal to 51% and 49%, respectively,
of that portion of the Revolver that represents amounts borrowed
thereunder subsequent to June 30, 1994. Raynet's capital contribution
may be in cash or by cancellation of indebtedness owed to it by JV.
(g) Raychem will cause the Revolver to be terminated insofar
as it may permit any further borrowings by JV thereunder.
2.3. Instruments of Conveyance and Transfer, Etc. At the
Closing, the applicable Parties will deliver the following documents:
(a) Raynet will deliver to EHU such deeds, bills of sale,
endorsements, certificates and instruments of assignment, conveyance
and transfer reasonably satisfactory in form and substance to EHU as
shall be necessary to vest in EHU good and marketable title to the
Purchased Assets, in each case, free and clear of any Encumbrances,
except Permitted Encumbrances.
(b) EHU will deliver to Raynet $40,000,000 by wire transfer
in same day funds for credit to Raynet, at Bank of America in San
Francisco, ABA # 1210-0035-8, Account # 12337-04777.
(c) EHU will deliver to JV such deeds, bills of sale,
endorsements, certificates and instruments of assignment, conveyance
and transfer reasonably satisfactory in form and substance to the
Parties as shall be necessary to vest in JV all of EHU's right, title
and interest in the Purchased Assets.
(d) Raynet will deliver to JV such deeds, bills of sale,
endorsements, certificates and instruments of assignment, conveyance
and transfer reasonably satisfactory in form and substance to the
Parties as shall be necessary to vest in JV good and marketable title
to the Contributed Assets, in each case, free and clear of any
Encumbrances, except Permitted Encumbrances.
(e) JV will deliver to EHU or Raynet, as the case may be,
such instruments of assumption as shall be reasonably satisfactory in
form and substance to the Par-
8
<PAGE> 15
ties as shall be necessary for JV to assume the Contributed
Liabilities.
2.4. Further Assurances. If at any time at or after the
Closing any Party shall consider or be advised that any further deeds, other
instruments of conveyance and transfer, assignments, assumptions or assurances
in law or any other things are necessary, desirable or proper to vest, perfect
or confirm in JV, of record or otherwise, the title to any assets, properties
or rights acquired or to be acquired by reason of, or as a result of, the
transfers to be effected at the Closing, or to perfect or confirm the
assumption by JV of the liabilities or obligations to be assumed by it at the
Closing, each of the Parties agrees to execute and deliver all such deeds,
instruments, assignments, assumptions and assurances in law and to do all
things necessary, desirable or proper to vest, perfect or confirm title to the
applicable assets, properties or rights or to confirm the assumption of the
applicable liabilities and otherwise to carry out the purposes of this
Agreement.
2.5. Foreign Subsidiaries. From time to time after the
Closing Date, Raynet's subsidiaries in the U.K., Belgium, Spain and France will
make arrangements with Ericsson to sell their assets and transfer their
employees to Ericsson's subsidiaries in these countries. The precise
arrangements will be established by Ericsson and Raychem prior to the Closing
Date.
2.6. Post-Closing Audit. Promptly after the Closing, the
Joint Venture will assist Raynet in preparing a balance sheet which shall set
forth the book value of the Included Assets and the Included Liabilities as of
the Closing Date, and a profit and loss statement of Raynet and its
subsidiaries (including only those operations that were attributable to the
Included Assets and the Included Liabilities) for the period from July 1, 1994
to the Closing Date, in each case in accordance with the same accounting
principles as those used in the preparation of the Financial Statements
referred to in Section 3.5 and excluding any revaluation or readjustment as a
result of the consummation of the transactions contemplated by this Agreement.
Such balance sheet and profit and loss statement shall be audited by Price
Waterhouse and shall be furnished, within 60 days after the Closing, in draft
form, together with the notes thereto and the draft report of Price Waterhouse
thereon, to EHU, which will have a 30-day period, commencing upon its receipt
thereof, to complete a review thereof. If EHU shall notify Raynet of any
objections thereto, such objections shall be resolved as promptly as possible.
Upon resolution of any disputes relating thereto, such balance sheet and
9
<PAGE> 16
profit and loss statement shall be finalized and the report of Price Waterhouse
thereon shall be signed and delivered to the Parties.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF RAYCHEM AND RAYNET
Raychem and Raynet jointly and severally represent and
warrant to Ericsson, EGE, EHU and JV as follows:
3.1. Corporate Organization. Raychem and Raynet are
corporations duly organized, validly existing and in good standing under the
laws of their respective jurisdictions of incorporation, and each has all
requisite corporate power and authority to own and lease its properties and to
carry on its business as currently being conducted. Raynet is duly qualified
to do business as a foreign corporation and is in good standing in all
jurisdictions where the failure to be so qualified would have a Material
Adverse Effect.
3.2. Authority. Each of Raychem and Raynet has full power
and authority to execute and deliver this Agreement and each of the other JV
Transaction Agreements to which it is a party and to consummate and perform the
transactions to be consummated or performed by it hereunder and thereunder.
The execution, delivery and performance by each of Raychem and Raynet of this
Agreement and the other JV Transaction Agreements to which it is a party have
been duly authorized by all necessary corporate action on the part of Raychem
and Raynet. This Agreement constitutes a valid and legally binding obligation
of Raychem and Raynet, and each of the other JV Transaction Agreements to which
Raychem or Raynet is a party when executed and delivered will constitute a
valid and legally binding obligation of such company, in each case enforceable
against such company in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and other similar
laws of general applicability relating to or affecting creditors' rights and to
general equity principles.
3.3. No Conflicts; Consents. Except as set forth on Schedule
3.3, the execution and delivery of this Agreement by Raychem and Raynet and the
execution and delivery of each of the other JV Transaction Agreements by
Raychem and Raynet to which either is a party and the consummation by Raychem
and Raynet of the transactions contemplated hereby and thereby will not (i)
violate any law, rule, regulation, order, judgment or decree applicable to
Raychem or Raynet;
10
<PAGE> 17
(ii) violate any provision of the certificate of incorporation or by-laws of
Raychem or Raynet; (iii) result in any breach of or default under, or entitle
any party to terminate, cancel or accelerate, any mortgage, indenture, lease,
agreement or other contract or commitment to which Raychem or Raynet is a party
or by which Raychem or Raynet or any of Raychem's or Raynet's property is bound
(including, without limitation, the Material Contracts); or (iv) result in the
creation or imposition of any Encumbrance other than a Permitted Encumbrance
upon any of the Included Assets; and no consent, license, approval or
authorization of, or registration or declaration with, any governmental
authority, agency, bureau or commission, or any third party, is required to be
obtained or made in connection with the execution, delivery, performance,
validity and enforceability of this Agreement or any JV Transaction Agreement
or the sale or transfer of the Included Assets as contemplated hereby.
3.4. Equity Interests. Except as set forth on Schedule 3.4,
neither Raynet nor any of its subsidiaries has any equity interest in any other
corporation, joint venture, partnership or other entity.
3.5. Financial Statements. (a) Raynet has delivered to EGE
the audited consolidated financial statements of Raynet and its subsidiaries
for each of the fiscal years ended June 30, 1992, June 30, 1993 and June 30,
1994, together with the Notes to such financial statements (the "Financial
Statements"). Each of the audited balance sheets included in the Financial
Statements fairly presents the consolidated financial position of Raynet and
its subsidiaries as of its date and each of the audited consolidated statements
of operations and cash flows included in the Financial Statements fairly
presents the consolidated results of operations and cash flows of Raynet and
its subsidiaries for the periods set forth therein, in each case in accordance
with United States generally accepted accounting principles consistently
applied (except as otherwise disclosed in the relevant Financial Statements)
during the periods involved.
(b) Except to the extent set forth or reflected or reserved
against in the balance sheet of June 30, 1994 (the "1994 Balance Sheet")
included in the Financial Statements or as set forth on Schedule 3.5, as of
June 30, 1994, Raynet had no liabilities or obligations, whether absolute,
accrued, contingent, known, unknown or otherwise.
3.6. Inventory. All inventories of Raynet are, in the case
of raw materials, of a quality and specification conforming to the usual
standards of materials used in con-
11
<PAGE> 18
nection with the business of Raynet and, in the case of work-in-progress and
finished goods, of merchantable quality, workmanship and material, and meeting
all applicable contractual requirements. As of June 30, 1994, all obsolescent,
discontinued and slow moving items had been written down on the 1994 Balance
Sheet to realizable value on a going-concern basis in accordance with U.S.
generally accepted accounting principles.
3.7. Condition of the Included Assets. Raynet owns all
personal property reflected on the 1994 Balance Sheet and all personal property
acquired by it since the date thereof (except such property as has been
disposed of in the ordinary course of business consistent with past practice),
free and clear of any Encumbrances, except Permitted Encumbrances. All of the
physical assets, including machinery and equipment, which are Included Assets,
are in good operating condition and repair, normal wear and tear excepted.
3.8. Accounts Receivable. All accounts receivable of Raynet
or its subsidiaries shown on the 1994 Balance Sheet, and all accounts
receivable arising thereafter shown in the books of Raynet, represent bona fide
transactions and arose in the ordi- nary course of business and are fully
collectible, except to the extent a bad debt reserve has been established for
such accounts receivable.
3.9. Absence of Certain Changes or Events. Except as set
forth on Schedule 3.9, since June 30, 1994, Raynet and its subsidiaries have
conducted their businesses in the ordinary course consistent with past
practice, and (i) there has not been any material adverse change in the assets,
businesses, condition (financial or otherwise), operations, results of
operations or prospects of Raynet or any of its subsidiaries, or any
development or combination of developments which have resulted or are
reasonably likely to result in any such change, (ii) neither Raynet nor any of
its subsidiaries has suffered any material damage, destruction or other
casualty loss (whether or not covered by insurance), (iii) there has not been
any transaction or event of the type described in Section 5.5, which, if such
transaction or event occurred after the date hereof, would constitute a
violation of Section 5.5, and (iv) there has not been any loss or threatened
loss of any material supplier or customer of Raynet or its subsidiaries.
3.10. Real Property. Neither Raynet nor any of its
subsidiaries has a fee interest in any Real Property. Schedule 3.10 sets forth
a complete and accurate description of all Real Property in which Raynet or its
subsidiaries, as
12
<PAGE> 19
the case may be, has a leasehold interest (the "Leased Properties"). Except as
set forth in Schedule 3.10 and except for Permitted Encumbrances, (i) Raynet or
its subsidiaries, as the case may be, has good and valid leasehold estates in
the Leased Properties pursuant to the leases listed in Schedule 3.10, (ii) the
leases listed in Schedule 3.10 are enforceable in accordance with their
respective terms, (iii) there exists no dispute, claim, event of default or
event that, after notice or passage of time or both, would become an event of
default under any lease listed in Schedule 3.10, (iv) there is no condemnation,
appropriation or recapture proceeding pending or, to Raynet's knowledge,
threatened with respect to any Leased Property, and (v) there are no unrecorded
options to purchase all or any part of any Leased Property.
3.11. Litigation. Except as set forth on Schedule 3.11,
there is no action, claim, suit, proceeding or investi- gation ("Action")
pending or, to the knowledge of Raynet, threatened against Raynet or any of its
subsidiaries or relating to their respective assets or properties or against
Raychem relating to Raynet. There are no unsatisfied judgments or outstanding
orders, injunctions, decrees, stipulations or awards (whether rendered by a
court, an administrative agency or by an arbitrator) against Raynet or any of
its subsidiaries or against any properties or assets of Raynet or any of its
subsidiaries. There are no facts known to Raynet which could reasonably be
expected to give rise to any Action with respect to which an adverse
determination would be reasonably likely and, if adversely determined, could
reasonably be expected to have a Material Adverse Effect.
3.12. Compliance with Law. Except as set forth on Schedule
3.12, each of Raynet and its subsidiaries is, and has during the last three
years been, in material compliance with all applicable laws, regulations,
rules, orders, judgments, decrees and other requirements imposed by Federal,
state, local or foreign governmental authority applicable to it in the
operation or ownership of its business or the Included Assets. Except as set
forth on Schedule 3.12, neither Raynet nor any of its subsidiaries has during
the last three years received any notice or citation for noncompliance with any
of the foregoing.
3.13. Contracts. Except as set forth in Schedule 3.13,
neither Raynet nor any of its subsidiaries is a party to or bound by, and none
of their properties, assets or operations is subject to, any contract that is
of a type described below:
13
<PAGE> 20
(a) any lease agreement (whether as lessor or lessee)
relating to personal property, other than those lease agreements which
do not in any case provide for a rental of more than $25,000 (or the
equivalent in any other currency) per year;
(b) any license agreement, assignment or contract
(whether as licensor or licensee, assignor or assignee) relating to
any of the Intellectual Property Rights (other than computer software
used in the ordinary course of business at an annual cost of not more
than $12,500);
(c) any employment agreement, consulting agreement or
severance agreement;
(d) any sales order or other agreement, or group of
related sales orders or other agreements, for the sale of goods,
materials, supplies, machinery, capital assets or services in excess
of $25,000 (or the equivalent in any other currency);
(e) any purchase order or other agreement, or group of
related purchase orders or other agreements, for the purchase of
goods, materials, supplies, machinery, capital assets or services in
excess of $50,000 (or the equivalent in any other currency);
(f) any agreement, not covered in subsections (d) or (e)
above, with any distributor, dealer, sales agent or representative
providing for payments in excess of $10,000 (or the equivalent in any
other currency);
(g) any agreement with any manufacturer, supplier or
customer, not covered in subsections (d) or (e) above, with respect to
the sale of merchandise, including agreements with respect to
discounts, allowances, rebates or sharing of royalties providing for,
or otherwise reasonably expected to require, payments in excess of
$10,000 (or the equivalent in any other currency);
(h) any collective bargaining or other agreement with any
labor union;
(i) any agreement granting to any Person a right at such
Person's option to purchase or acquire any asset or property of Raynet
with a value in excess of $10,000 (or the equivalent in any other
currency), other than inventory in the ordinary course of business;
14
<PAGE> 21
(j) any agreement granting any Person an Encumbrance on
any Included Asset, including, without limitation, any factoring
agreement or agreement for the assignment of accounts receivable or
inventory;
(k) any agreement that creates a joint venture or
partnership with any other Person;
(l) any indenture, mortgage, note, bond or other evidence
of indebtedness, any credit or similar agreement under which it has
borrowed any money, and any guarantee of or agreement to acquire any
such obligation of any other Person;
(m) any agreement for the construction or modification of
any building or structure or for the incurrence of any related capital
expenditure involving amounts in excess of $25,000 (or the equivalent
in any other currency);
(n) any agreement which restricts it from entering into
any new or existing line of business or any agreement which contains
geographic restrictions on its ability to conduct business activities;
(o) any contract or agreement relating to clean-up,
abatement or other actions in connection with the remediation of any
liabilities relating to Hazardous Substances;
(p) any agreement relating to the acquisition or
disposition of a material amount of assets (by way of merger,
consolidation, purchase, sale or otherwise);
(q) except as set forth on Schedule 3.3, any agreement
requiring prior consent to assignment of such agreement;
(r) any agreement not entered into on arms' length terms;
(s) any other contract material to the business of Raynet
or its subsidiaries.
Correct and complete copies of all written contracts,
agreements and licenses (and true and complete written summaries of all oral
contracts, agreements and licenses) required to be listed on Schedule 3.13
(collectively referred to herein as the "Material Contracts") have been made
available to EGE or its counsel before the date hereof. Except as otherwise
set forth in Schedule 3.13, (i) each
15
<PAGE> 22
Material Contract is valid, in full force and effect and enforceable in
accordance with its terms, (ii) Raynet and its subsidiaries have complied in
all material respects with the provisions of all the Material Contracts and are
not in material default thereunder, and (iii) to the knowledge of Raynet there
has not occurred any material default or material non-compliance by others
under any of the Material Contracts.
3.14. Brokers and Intermediaries. Raychem has not employed
any broker, finder, advisor or intermediary in connection with the
transactions contemplated by this Agreement which would be entitled to a
broker's, finder's or similar fee or commission in connection therewith or
upon the consummation thereof, except such as would be payable by Raychem.
3.15. Tax Matters. (a) Except as set forth in Schedule
3.15, for periods, transactions and events occurring after June 30, 1994: (i)
all Returns that are required to be filed by or with respect to Raynet or its
subsidiaries, the Purchased Assets or the Contributed Assets have been duly
filed and are complete and accurate in all material respects, (ii) all Taxes
due on or before the Closing Date, and all Taxes due with respect to the
Returns referred to in clause (i) have been paid in full, (iii) all
deficiencies asserted or assessments made as a result of examinations by the
Internal Revenue Service or the appropriate state, local or foreign taxing
authority of the Returns referred to in clause (i) have been paid in full, (iv)
no issues that have been raised by the relevant taxing authority in connection
with the examination of any of the Returns referred to in clause (i) are
currently pending, and (v) no waivers of statutes of limitation have been given
by or requested with respect to any Taxes of Raynet or its subsidiaries.
(b) No tax is required to be withheld pursuant to Section
1445 of the Code as a result of the transfers described in Section 2.3 hereof.
(c) As a result of the transactions contemplated by this
Agreement, neither EHU nor JV will be obligated to or will assume any
obligation from Raynet or its subsidiaries to make a payment to an individual
that would be a "parachute payment" to a "disqualified individual" as those
terms are defined in Section 280G of the Code without regard to whether such
payment is reasonable compensation for personal services performed or to be
performed in the future.
16
<PAGE> 23
(d) Except as set forth in Schedule 3.15, there are no liens
or security interests on any of the assets of Raynet that arose in connection
with any failure (or alleged failure) to pay any Taxes.
3.16. Employee Benefit Plans and Arrangements. (a) All
domestic benefit plans, contracts or arrangements (regardless of whether they
are funded or unfunded) covering current employees or former employees of
Raynet and domestic employees of Raynet International, Inc. (the "Employees"),
including, but not limited to, "employee benefit plans" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and plans of deferred compensation (the "Benefit Plans"),
are listed in Schedule 3.16(a). True and complete copies of all Benefit Plans,
including, but not limited to, any trust instruments and insurance contracts
forming a part of any Benefit Plans, and all amendments thereto have been
provided or made available to Ericsson.
(b) All employee benefit plans, other than "multiemployer
plans" within the meaning of Section 3(37) or 4001(a)(3) of ERISA, covering
Employees (the "Plans"), to the extent subject to ERISA, are in material
compliance with ERISA. Each Plan which is an "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA ("Pension Plan") and which is
intended to be qualified under Section 401(a) of the Code, has been amended to
comply with the provisions of the Tax Reform Act of 1986, or will be amended
prior to the end of the remedial amendment period, and has received a favorable
determination letter from the Internal Revenue Service, and the Company is not
aware of any circumstances likely to result in revocation of any such favorable
determination letter. There is no material pending or threatened litigation
relating to the Plans. To the best of their respective knowledge, neither
Raychem, Raynet nor any Subsidiary has engaged in a transaction with respect to
any Plan that, assuming the taxable period of such transaction expired as of
the date hereof, could subject the Company or any of its Subsidiaries to a tax
or penalty imposed by either Section 4975 of the Code or Section 502(i) of
ERISA.
(c) No liability under Subtitle C or D of Title IV of ERISA
has been or is expected to be incurred by Raychem, Raynet or any Subsidiary
with respect to any ongoing, frozen or terminated "single-employer plan",
within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any of them, or the single-employer plan of any entity which is
considered one employer with the Company under Section 4001 of ERISA or Section
414 of the Code (an "ERISA Affiliate"). Raychem, Raynet and the Subsidiaries
17
<PAGE> 24
have not incurred and do not expect to incur any withdrawal liability with
respect to a multiemployer plan under Subtitle E of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate). No
notice of a "reportable event", within the meaning of Section 4043 of ERISA for
which the 30-day reporting requirement has not been waived, has been required
to be filed for any Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof; provided that the transactions pursuant to
this Agreement may result in a reportable event, which the parties agree will
be timely filed.
(d) All contributions required to be made under the terms of
any Benefit Plan have been timely made or have been reflected on the Raynet
Closing Balance Sheet. Neither any Pension Plan nor any single-employer plan
of an ERISA Affiliate has an "accumulated funding deficiency" (whether or not
waived) within the meaning of Section 412 of the Code or Section 302 of ERISA
and no ERISA Affiliate has an outstanding funding waiver. Neither Raychem,
Raynet nor any of its Subsidiaries has provided, or is required to provide,
security to any Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
(e) Prior to the events contemplated by this Agreement, none
of the Benefit Plans was a multiemployer plan.
(f) Neither Raynet nor Raynet International, Inc. has any
obligations for retiree health and life benefits under any Benefit Plan, except
as set forth on Schedule 3.16. There are no restrictions on the rights of
Raychem or Raynet or the Subsidiaries to amend or terminate any such Benefit
Plan without incurring any liability thereunder. All liabilities for retiree
medical and life benefits provided to employees retiring on or before the
Closing Date will remain the responsibility of Raychem.
3.17. Intellectual Property. Schedule 3.17 lists all
patents, trademarks, trade names, product names, service marks, copyrights and
applications for any of the foregoing included in Intellectual Property Rights
owned, licensed or used by Raynet or any of its subsidiaries or otherwise used
in or relating to their respective businesses. Except as set forth in Schedule
3.17, none of such Intellectual Property Rights has been assigned, transferred
or licensed by Raynet or any of its subsidiaries to or from any third party,
and such Intellectual Property Rights are owned free and clear of all
Encumbrances. All such Intellectual Property Rights registered with or issued
by the United States Patent and Trademark Office or any appropriate office in
other ju-
18
<PAGE> 25
risdictions have been duly registered and issued and such registrations and
issued patents have been properly maintained and/or renewed in accordance with
all applicable laws, rules and regulations and all fees associated therewith
have been paid. Except as otherwise set forth on Schedule 3.17 and except for
possible interference proceedings of which Raychem and Raynet have no
knowledge, the validity, enforceability and exclusive right of Raynet and its
subsidiaries to such Intellectual Property Rights have not been challenged by
others, nor is there any pending or threatened claim involving any of such
Intellectual Property Rights. No other Person is infringing or has infringed,
misappropriated or otherwise violated any Intellectual Property Rights of
Raynet or any of its subsidiaries. Raynet has no knowledge of any
infringement, misappropriation or other violation of any Intellectual Property
Right of any Person which might occur as a result of the continued operation by
JV of the business of Raynet and its subsidiaries as now conducted. No aspect
of the Intellectual Property Rights of Raynet and its subsidiaries is subject
to any outstanding order, ruling, decree, injunction, judgment or stipulation
by or with any court, arbitrator or administrative agency, or any restriction
or arrangement affecting the free and unrestricted use by Raynet or any
subsidiary or is used contrary to the provisions of any licensing or other
agreement. Raynet and its subsidiaries possess all Intellectual Property
Rights necessary for the conduct of the business of Raynet and its subsidiaries
as currently conducted.
3.18. Environmental Matters. Except as set forth on Schedule
3.18, (i) Raynet and its subsidiaries have conducted their respective
businesses in compliance with all applicable Environmental Laws, including,
without limitation, having all permits, licenses and other approvals and
authorizations necessary for the operation of their respective businesses as
presently conducted, (ii) the Properties do not contain any Hazardous Substance
as a result of any activity of Raynet or any of its subsidiaries in amounts
exceeding the levels permitted by applicable Environmental Laws, (iii) neither
Raynet nor Raychem nor any of Raynet's subsidiaries has received any notices,
demand letters or requests for information from any Federal, state, local or
foreign governmental entity or third party indicating that Raynet or any of its
subsidiaries may be in violation of, or liable under, any Environmental Law in
connection with the ownership or operation of their businesses, (iv) there are
no civil, criminal or administrative actions, suits, demands, claims, hearings,
investigations or proceedings pending or threatened, against Raynet or any of
its subsidiaries relating to any violation, or alleged violation, of any
Environmental Law, (v) no reports have been filed, or are re-
19
<PAGE> 26
quired to be filed, by Raynet or any of its subsidiaries concerning the release
of any Hazardous Substance or the threatened or actual violation of any
Environmental Law, (vi) no Hazardous Substance has been disposed of, released
or transported in violation of any applicable Environmental Law from any of the
Properties as a result of any activity of Raynet or any of its subsidiaries
during the time such Property was owned, leased or operated by Raynet or any of
its subsidiaries, (vii) there have been no environmental investigations,
studies, audits, tests, reviews or other analyses regarding compliance or
noncompliance with any applicable Environmental Law conducted by or which are
in the possession of Raychem or Raynet relating to the activities of Raynet or
its subsidiaries which have not been delivered to EGE prior to the date hereof,
(viii) there are no underground storage tanks on, in or under any of the
Properties and no underground storage tanks have been closed or removed from
any Properties during the time such Property was owned, leased or operated by
Raynet or any of its subsidiaries, (ix) there is no asbestos or asbestos
containing material present in any Property, and no asbestos has been removed
from any Property during the time such Property was owned, leased or operated
by Raynet or any of its subsidiaries, (x) none of the Properties has been used
at any time as a sanitary landfill or hazardous waste disposal site during the
time such Property was owned, leased or operated by Raynet or any of its
subsidiaries and (xi) neither Raynet, its subsidiaries nor the Properties are
subject to any material liabilities or expenditures (fixed or contingent)
relating to any suit, settlement, court order, administrative order, regulatory
requirement, judgment or claim asserted or arising under any Environmental Law.
3.19. Insurance. Through insurance policies procured by
Raychem, Raynet and its subsidiaries maintain insurance on their respective
properties, business and personnel in amounts and covering such risks as
prudent managers in similar businesses in similar circumstances would maintain,
and accurate summaries of all such insurance policies (the "Insurance
Policies") have been made available to EGE. Schedule 3.19 contains an accurate
list of all Insurance Policies.
3.20. Disclosure. Neither this Agreement nor any of the
schedules or other attachments hereto contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained herein or therein not misleading. All financial projections and
forecasts prepared by Raychem and/or Raynet and delivered to EGE have been
prepared in good faith using assumptions believed by Raychem and Raynet to be
reasonable, and nothing has come to
20
<PAGE> 27
the attention of Raychem or Raynet to cause them to believe that such
assumptions are no longer reasonable.
3.21. Permits, Licenses, Etc. Raynet and its subsidiaries
possess all material Permits currently required for the operation of their
respective businesses and all such Permits are in full force and effect and are
complied with in all material respects. Schedule 3.21 sets forth a complete
and accurate list of all material Permits of Raynet and its subsidiaries.
Except as set forth in Schedule 3.21, neither Raychem nor Raynet nor any of its
subsidiaries has received written notice or otherwise has knowledge that any
governmental or regulatory agency or authority contemplates or intends to
cancel or terminate any material Raynet Permit and, except as set forth on
Schedule 3.21, no consent or approval of any governmental or regulatory agency
or authority is required under any such material Raynet Permit in connection
with the transactions contemplated by this Agreement. Neither Raynet nor any
of its subsidiaries has engaged in any activity which is reasonably likely to
cause a revocation or suspension of any material Permit.
3.22. Restrictions on Conduct of Business. Neither Raychem
nor Raynet nor any of its subsidiaries is a party to any noncompetition
agreement or other restriction or prohibition which, following the Closing,
would restrict or prohibit the JV from conducting the business of Raynet and
its subsidiaries as presently conducted.
3.23. Arrangements with Raychem. Schedule 3.23 sets forth an
accurate summary of all of the Raychem Arrangements, including the type of
services provided, the cost to Raynet of such individual services and the
aggregate cost to Raynet of such services for the fiscal year 1993-1994.
Schedule 3.23 also sets forth the amounts outstanding pursuant to the revolving
credit agreement between Raynet and Raychem and pursuant to any other financing
arrangement between Raynet and its subsidiaries, on the one hand, and Raychem
and its Affiliates (other than Raynet) on the other hand. Except as set forth
on Schedule 3.23, (i) each Raychem Arrangement is valid, in full force and
effect and enforceable in accordance with its terms, and (ii) each party
thereto has complied in all material respects with the provisions of the
Raychem Arrangements and is not in material default thereunder.
3.24. BellSouth Agreements. The execution and performance of
the Settlement and Release Agreement described in Section 5.14 will have no
adverse effect whatsoever upon JV.
21
<PAGE> 28
3.25. Entire Raynet Business. The Included Assets and the
Included Liabilities are sufficient to enable JV to carry on after the Closing
the business of Raynet and Raynet GmbH as presently conducted.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
ERICSSON, EGE AND EHU
Ericsson, EGE and EHU jointly and severally represent and
warrant to Raychem, Raynet and JV as follows:
4.1. Corporate Organization; Authority. Ericsson, EGE and
EHU are corporations duly organized, validly existing and in good standing
under the laws of their respective jurisdictions of incorporation. Each of
Ericsson, EGE and EHU has full power and authority to execute and deliver this
Agreement and each of the other JV Transaction Agreements to which it is a
party and to consummate and perform the transactions to be consummated or
performed by it hereunder and thereunder. The execution, delivery and
performance by each of EGE and EHU of this Agreement and the other JV
Transaction Agreements to which it is a party have been duly authorized by all
necessary corporate action on the part of EGE and EHU. The execution, delivery
and performance by Ericsson of this Agreement and the other JV Transaction
Agreements to which it is a party is subject to approval by Ericsson's Board of
Directors. This Agreement constitutes a valid and legally binding obligation
of EGE and EHU, and each of the other JV Transaction Agreements to which
Ericsson, EGE or EHU is a party, and this Agreement when duly authorized by
Ericsson, when executed and delivered will constitute a valid and legally
binding obligation of such company, in each case enforceable against such
company in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
4.2. No Conflicts. Except as set forth on Schedule 4.2, the
execution and delivery of this Agreement by Ericsson, EGE and EHU and the
execution and delivery of each of the other JV Transaction Agreements by
Ericsson, EGE and EHU to which either is a party and the consummation by
Ericsson, EGE and EHU of the transactions contemplated hereby and thereby will
not (i) violate any law, rule, regulation, order, judgment or decree applicable
to Ericsson, EGE or EHU; (ii) violate any provision of the certificate of
22
<PAGE> 29
incorporation, by-laws or other charter documents of Ericsson, EGE or EHU; or
(iii) result in any breach of or default under, or entitle any party to
terminate, cancel or accelerate, any mortgage, indenture, lease, agreement or
other contract or commitment to which Ericsson, EGE or EHU is a party or by
which Ericsson, EGE or EHU or any of Ericsson's, EGE's or EHU's property is
bound.
4.3. Consents. Except as set forth on Schedule 4.3, no
consent, license, approval or authorization of, or registration or declaration
with, any governmental authority, agency, bureau or commission or any third
party is required to be obtained or made by Ericsson, EGE or EHU in
connection with the execution, delivery, performance, validity and
enforceability of this Agreement or any JV Transactions Agreement.
4.4. Brokers and Intermediaries. Neither Ericsson, EGE nor
EHU has employed any broker, finder, advisor or intermediary in connection with
the transactions contemplated by this Agreement which would be entitled to a
broker's, finder's or similar fee or commission in connection therewith or upon
the consummation thereof.
4.5. Restriction on Conduct of Business. Neither Ericsson,
EGE nor EHU nor any of their subsidiaries is a party to any non-competition
agreement or other restriction or prohibition which, following the Closing,
would restrict or prohibit JV from conducting the business of Raynet and its
subsidiaries as presently conducted.
ARTICLE 5
COVENANTS
5.1. Access to Books and Records. Prior to the Closing Date,
EGE and EHU may, through their Representatives, make or cause to be made such
investigations as they may deem necessary or advisable regarding the
businesses, assets, liabilities, books and records to be transferred at the
Closing to EHU or JV or to be held after the Closing by JV, provided that such
investigation shall not unreasonably interfere with the conduct of the
businesses of Raychem or Raynet, as the case may be. Upon reasonable notice to
Raychem or Raynet, Raychem or Raynet, as the case may be, will make reasonable
arrangements to grant to all such employees, agents and representatives
(including without limitation as aforesaid) full access to the aforesaid
businesses, assets, liabilities, books and records, and the personnel having
custody of or otherwise knowledgeable in respect to any of
23
<PAGE> 30
the foregoing, it being understood that all information disclosed pursuant to
this Section 5.1 in connection with such investigations shall be subject to
the Confidentiality Agreement. No such investigation shall have any effect on
the representations, warranties, covenants or agreements of the Parties
hereto.
5.2. Confidentiality. It is hereby agreed that, except as
otherwise expressly provided herein:
(a) Each Party and its Representatives (i) will keep all
Information confidential and will not (except as required by
applicable law, regulation or legal process, and only after compliance
with paragraph (c) below), without the prior written consent of the
affected Parties hereto, disclose any Information in any manner
whatsoever, and (ii) will not use any Information other than in
connection with the transactions contemplated hereby; provided,
however, that a Party may reveal the Information to its
Representatives (i) who need to know the Information for the purpose
of evaluating the transactions contemplated hereby, (ii) who are
informed by such Party of the confidential nature of the Information
and (iii) who agree to act in accordance with the terms hereof. Each
Party will cause its Representatives to observe the terms hereof and
will be responsible for any breach hereof by any of its
Representatives.
(b) Each Party and its Representatives will not (except as
required by applicable law, regulation, legal process or stock
exchange regulation, and only after compliance with paragraph (c)
below), without the prior written consent of the affected Parties,
disclose to any Person the fact that the Information exists or has
been made available, that such Party is considering the transactions
contemplated hereby or any other similar transactions or that
discussions or negotiations are taking or have taken place concerning
the transactions contemplated hereby or any term, condition or other
fact relating to the transactions contemplated hereby or such
discussions or negotiations, including, without limitation, the status
thereof.
(c) In the event that a Party or its Representatives is
requested pursuant to, or required by, applicable law, regulation or
legal process to disclose any of the Information to a third party, it
will notify the other Parties hereto who are affected thereby promptly
so that they may seek a protective order or other appropriate remedy
or, in their sole discretion, waive
24
<PAGE> 31
compliance with the terms hereof. In the event that no such
protective order or other remedy is obtained, or that such Party
waives compliance with the terms hereof, the other Party will furnish
only that portion of the Information which it is advised by counsel is
legally required and will exercise all reasonable efforts to obtain
reliable assurance that confidential treatment will be accorded the
Information.
(d) If this Agreement is terminated, at any time thereafter
upon the request of a Party or any of its Representatives, the other
Parties will either (i) promptly destroy all copies of the written
Information in their or their Representatives' possession and confirm
such destruction to the requesting Party in writing, or (ii) promptly
deliver to the requesting Party, at its expense, all copies of the
written Information in its or its Representatives' possession. Any
oral Information will continue to be subject to the terms hereof.
5.3. Announcements. Upon the execution of this Agreement,
Ericsson and Raychem will issue a joint press release in such form as shall be
mutually agreed to. Thereafter, each of Ericsson, EGE, EHU, Raychem and Raynet
agrees that, except as may be required by applicable law, regulation or stock
exchange rule or except as counsel to such Party shall consider necessary in
order to comply with SEC regulations regarding disclosure, it will not issue
any press release or other public announcement of this Agreement or any of the
transactions contemplated hereby without the prior written consent of the other
(such consent not to be unreasonably withheld), nor will it, except as may be
required by applicable law or regulation or stock exchange rule or except as
counsel to such Party shall consider necessary in order to comply with SEC
regulations regarding disclosure, publicly announce any material development
relating to any of the foregoing without such prior consent (such consent not
to be unreasonably withheld), provided that the foregoing shall not restrict
Raychem and EGE and their respective subsidiaries from communicating with their
respective employees, customers, suppliers and relevant governmental agencies
as may be reasonably necessary under the circumstances.
5.4. Acquisition Proposals. From the date hereof until the
earlier of (i) the termination of this Agreement pursuant to Article 7 hereof
and (ii) the Closing Date, neither Raychem nor any of its Affiliates nor any of
the respective officers and directors of Raychem or any of its Affiliates
shall, and Raychem will cause its employees,
25
<PAGE> 32
agents and representatives (including without limitation any investment banker,
attorney, accountant, auditor or investigator retained by Raychem or any of its
Affiliates) not to, initiate, solicit or engage, directly or indirectly, in any
negotiations of or concerning any inquiries or the making of any proposals with
respect to any merger, consolidation, exchange, scheme of arrangement or
similar transaction involving, or any sale or disposition of all or any
significant portion of the assets of or any equity interest in Raynet (an
"Acquisition Proposal"), or provide any confidential information or data to any
Person relating to an Acquisition Proposal. Raychem will immediately cease and
cause to be terminated any existing discussions or negotiations with any
Persons (other than a Party hereto or its representatives) conducted heretofore
with respect to any of the foregoing. Promptly after the Closing, Raychem will
request each Person having heretofore executed a confidentiality agreement in
connection with its consideration of any such transaction to return or destroy
all confidential information heretofore furnished to such Person by or on
behalf of Raychem.
5.5. Conduct of Business. From the date hereof to the
Closing, Raychem and Raynet will operate the business of Raynet and its
subsidiaries only in the ordinary course of business consistent with past
practice and shall use their reasonable efforts to preserve and maintain their
properties, businesses and relationships with suppliers, customers, employees,
agents and others having business dealings with them relating to Raynet.
Without limiting the generality of the foregoing, and, except as otherwise
expressly contemplated by this Agreement or set forth on Schedule 5.5, during
the period from the date of this Agreement to the Closing, without the prior
written consent of EGE, neither Raynet nor any of its subsidiaries will:
(a) create, incur, or assume any material debt, liability or
obligation, direct or indirect, whether accrued, absolute, contingent
or otherwise, other than in the ordinary course of business consistent
with past practice;
(b) waive or release any rights of material value;
(c) transfer, sell or otherwise convey any material assets,
other than the sale of inventory in the ordinary course of business
consistent with past practice;
26
<PAGE> 33
(d) mortgage, pledge, subject to any lien, claim or charge or
other Encumbrance (other than Permitted Encumbrances) any of its
assets or in any way create or consent to the creation of any title
condition affecting such assets;
(e) with respect to its directors, officers or employees:
(i) materially increase the rate or terms of
compensation payable or to become payable to any of them,
(ii) pay or agree to pay any pension, retirement
allowance or other employee benefit not required by any
existing plan, agreement or arrangement to any of them,
(iii) commit itself to any additional pension,
profit sharing, bonus, incentive, deferred compensation, stock
purchase, stock option, stock appreciation right, group
insurance, severance pay, retirement or other employee benefit
plan, agreement or arrangement, or increase the rate or terms
of any such plan, agreement or arrangement which presently
exists, to the extent applicable to any of them, or
(iv) enter into any written employment or severance
agreement with or for the benefit of them;
(f) amend or terminate any Material Contract (other than the
Bellsouth Agreements), other than in the ordinary course of business
consistent with past practice;
(g) make or become obligated to make any capital expenditures
or enter into any commitments therefor, except for capital
expenditures not exceeding $25,000 (or the equivalent in any other
currency) made in the ordinary course of business consistent with past
practice;
(h) make any material alteration in the manner of keeping its
books, accounts or records, or in the accounting practices therein
reflected, except as required by law or generally accepted accounting
principles;
27
<PAGE> 34
(i) transfer, terminate or permit the lapse of or fail to pay
any fee that becomes due on any of its rights under any of the
Intellectual Property Rights;
(j) enter into any transaction or agreement of any kind
between Raynet on the one hand, and Raychem or its Affiliates (other
than Raynet) on the other hand or, except as provided in Section 5.9
and except in the ordinary course of business, amend, or increase the
amounts outstanding under any Raychem Arrangement;
(k) make any tax election or compromise any national,
Federal, state, provincial, local or other tax liability that could
have an effect on the tax liability of JV or on EHU after the Closing;
(l) enter into any other transaction or take any other action
other than in the ordinary course of business consistent with past
practice;
(m) make any payment of dividends or other distributions; or
(n) agree or otherwise commit to take any of the actions
referred to in subsections (a) - (m) above.
5.6. Liability for Taxes. Raychem and Raynet shall be
jointly and severally liable for and indemnify EHU and JV for all Taxes imposed
on Raynet in respect of any period or periods ending, or transactions or events
occurring, prior to July 1, 1994. Raychem and Raynet shall be jointly and
severally liable for and indemnify EHU and JV for all income and franchise
Taxes imposed on Raynet in respect of the period from July 1, 1994 to the
Closing Date. The obligations of the parties set forth in this Section 5.6
shall be unconditional and absolute and shall remain in effect without
limitation as to time.
5.7. Reasonable Best Efforts in Good Faith to Consummate.
Subject to the terms and conditions herein provided, Ericsson, EGE, EHU,
Raychem and Raynet each hereby covenants to the others that it shall use its
reasonable best efforts in good faith to take or cause to be taken as promptly
as practicable all action necessary or desirable on its part to permit the
consummation of the transactions contemplated by this Agreement and to
cooperate fully with the others to that end. Raychem and Raynet will use their
reasonable best efforts to obtain all consents, waivers and clearances of all
third parties necessary or advisable to consummate and make effective the
transactions contemplated by this Agreement. If any contract, commitment or
other
28
<PAGE> 35
agreement relating to the Included Assets (an "Assigned Contract") is by its
terms or by virtue of its subject matter not assignable, or if Raynet has not
been able to obtain prior to Closing the consent required to assign any
Assigned Contract, and such Assigned Contract is not a contract marked on
Schedule 3.3 as a contract that must have been assigned on or before the
Closing Date, Raychem and Raynet agree to use their reasonable efforts after
the Closing to convey to JV the benefits thereof, including, without
limitation, at the reasonable request of EHU and in such manner as EHU shall
reasonably specify (so long as permitted by law and not in violation of the
Assigned Contract in question), taking all such reasonable action (including
without limitation appointing JV attorney-in-fact for Raynet or subcontracting
with JV to effect a "pass-through" of the rights and obligations that will
remain with Raynet) and doing or causing to be done all such things as shall be
reasonably necessary or proper (i) to assure that the rights and obligations of
Raynet under such Assigned Contract shall be preserved for the benefit of JV,
and (ii) to facilitate receipt of the consideration to be received by Raynet in
and under any such Assigned Contract, which consideration Raynet shall hold for
the benefit of, and upon request of JV shall deliver to, JV. To the extent
that any of the Included Assets are not capable of being validly assigned or
transferred without the consent or waiver of the other party thereto or the
issuer thereof, or if such assignment or transfer would constitute a breach
thereof or a violation of any law, decree, order or governmental regulation,
this Agreement shall not constitute an assignment or transfer thereof.
5.8. Filings. Ericsson and Raychem have filed Notification
and Report Forms under the HSR Act with the Federal Trade Commission and the
Antitrust Division of the Department of Justice with respect to this Agreement
and the transactions contemplated hereby and shall use their respective best
efforts to respond as promptly as practicable to all inquiries received from
the Federal Trade Commission or the Antitrust Division for additional
information or documentation. The Parties shall use their respective
reasonable best efforts to promptly take all such action as may be necessary
under United States Federal, state and other laws applicable to or necessary
for the consummation of the transactions contemplated hereby, and will file
and, if appropriate, use their reasonable efforts to have declared effective or
approved all documents and notifications with all governmental or regulatory
authorities that it deems necessary or appropriate for the consummation of the
transactions contemplated hereby. The Parties shall use their reasonable best
efforts to promptly take all such actions as may be necessary or appropriate
under the laws and directives of
29
<PAGE> 36
the European Union for the consummation of the transactions contemplated
hereby.
5.9. Expenses. Whether or not the transactions contemplated
by this Agreement are consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby
(including fees and disbursements of financial advisors, accountants and
attorneys) shall be paid (i) by Raychem, if such costs or expenses are incurred
by or on behalf of Raychem or Raynet (and such costs and expenses shall not be
considered Included Liabilities if incurred by Raynet), and (ii) by Ericsson,
EGE or EHU, if such costs or expenses are incurred by or on behalf of Ericsson,
EGE or EHU.
5.10. Stamp Taxes, Duties, etc. All sales, transfer, filing,
recordation and similar taxes and fees (including all real estate transfer
taxes and conveyance and recording fees, if any), and all stamp taxes,
registration taxes, duties or other charges arising from or associated with the
transactions contemplated hereby shall be borne by Raynet and shall not be
included in the Included Liabilities.
5.11. Required Notices. At all times prior to the Closing
Date, Ericsson, EGE and Raychem shall promptly, upon obtaining knowledge
thereof, give written notice to each other of (i) any facts or circumstances or
the occurrence of any event or the failure of any event to occur, which will,
or could reasonably be expected to, result in (x) a Material Adverse Effect,
(y) a material adverse effect on such person's or any of its Affiliates'
ability to consummate the transactions contemplated hereby or to satisfy its
obligations hereunder, or (z) a material breach of any representation or
warranty made by such person or any of its Affiliates in this Agreement, (ii)
any failure by such person or any of its Affiliates to comply in all material
respects with any covenant, condition or agreement contained in this Agreement,
(iii) any material complaints, investigations, proceedings or hearings of any
governmental authority or agency with respect to this Agreement, Raynet, the
Included Assets or the transactions contemplated hereby, and (iv) any
institution or threat of institution of any litigation or similar action with
respect to this Agreement, Raynet, the Included Assets or the consummation of
the transactions contemplated hereby.
5.12. Acquisition of Rights to Confidentiality. At the
Closing, Raychem and Raynet shall assign to JV, to the extent assignable, their
rights under any confidentiality agreements between or on behalf of Raychem or
Raynet and
30
<PAGE> 37
Persons other than Ericsson and any of its Affiliates that were entered into in
connection with or relating to a possible sale of the business of Raynet or any
part thereof, including, without limitation, the right to enforce all terms of
such confidentiality agreements. At the Closing, Raychem shall deliver to JV
executed copies of all such confidentiality agreements.
5.13. Insurance. Raynet shall keep the Insurance Policies
referred to in Section 3.19 or substantially equivalent insurance policies in
full force and effect up to the Closing and Raychem or Raynet shall pay all
premiums in respect thereto covering all periods up to and including the
Closing Date. Raynet shall assign to JV all its assignable rights and claims
under all Insurance Policies of Raynet. To the extent that any claim that
Raynet has or may have pursuant to such Insurance Policies is not assignable,
JV and Raynet shall cooperate to pursue such claim and all amounts recovered by
Raychem or Raynet pursuant to such policies shall immediately be paid to JV.
5.14. Release of BellSouth Agreements. Raychem and Raynet
shall, at the Closing, enter into a Settlement and Release Agreement, in
substantially the form attached hereto as Exhibit 5, whereby BellSouth shall
(i) fully and irrevocably release all Encumbrances it may have against the
Included Assets, and (ii) acknowledge that it has no claims for royalties or
any other claims whatsoever against JV, or the Included Assets.
5.15. Employee Matters.
(a) Employment. EHU shall cause JV to employ
substantially all persons who, immediately prior to the Closing Date,
are (i) active employees of Raynet and domestic employees of Raynet
International, Inc., (ii) inactive employees of Raynet on temporary
leave due to jury duty, vacation, or annual two-week national military
duty, and (iii) employees of Raychem on short-term disability,
long-term disability, maternity or paternity leaves or leaves under
the Family and Medical Leave Act of 1993 ("Inactive Employees").
Such employment shall be comparable employment and shall be
effective as of the Closing Date (with the exception of employees in
category (iii) above who will only be employed effective once they
return actively to work, at the same base compensation rate and with
generally similar responsibilities as applicable to such employees
immediately prior to the Closing Date. Employees of Raynet and its
subsidiaries who become em-
31
<PAGE> 38
ployees of JV are hereinafter referred to as "Transferred Employees."
Transferred Employees shall be entitled to participate in
certain employee benefit arrangements to the extent pro- vided in
subsections (b) through (g) below.
(b) The Raychem Employee Stock Purchase Plan shall no
longer be available to any Transferred Employees effective as of the
Closing Date.
(c) Active participation by Transferred Employees in the
Taxsaver Investment Plan shall cease effective December 31, 1994.
Accounts of such employees shall remain in the Taxsaver Investment
Plan and be treated in accordance with the terms of that Plan.
(d) Notwithstanding the foregoing, the parties hereto
agree that Raychem shall process the regular payrolls and perform all
other related payroll maintenance and human resources information
system functions as JV's agent with respect to the Transferred
Employees through December 31, 1994. Raychem shall provide the
Transferred Employees with benefits under all employee welfare benefit
plans within the meaning of Section 3(2) of ERISA substantially the
same as those provided to the Transferred Employees immediately prior
to the Closing for the period beginning on the Closing Date and ending
on December 31, 1994. In addition, Raychem shall be responsible for
all obligations and liabilities relating to each Inactive Employee
until such employee returns to work and becomes a Transferred Employee
in accordance with Section 5.15.(a) The Joint Venture shall reimburse
Raychem for the costs associated with such benefits on the same terms
and conditions as currently in effect, subject to the additional terms
in Section 5.15(g).
(e) Transferred Employees will continue to participate in
the Raychem Pension Plan for the period from the Closing Date through
December 31, 1994. Effective as of January 1, 1995, EHU or Ericsson
shall cover Transferred Employees who participated in the Raychem
Pension Plan under a defined benefit plan sponsored by EHU or Ericsson
or its affiliates. (Such Transferred Employees are referred to
hereinafter as the "Retirement Plan Employees.") The plan covering
the Retirement Plan Employees (the "Transferee Pension Plan") shall
(A) provide a benefit equal to the "frozen" accrued benefit of the
Retirement Plan Employees under the Raychem Pension Plan (whether
vested or unve-
32
<PAGE> 39
sted) as of December 31, 1994 (the "Frozen Benefit") and satisfy all
legal obligations associated with such Frozen Benefit, (B) grant
Retirement Plan Employees vesting service credit for service with JV
for purposes of vesting in the Frozen Benefit, (C) recognize for
purposes of vesting and eligibility thereunder the service of the
Retirement Plan Employees which was recognized under the Raychem
Retirement Plan, (D) entitle Retirement Plan Employees to earn benefit
service credit under the Transferee Pension Plan from the date of
entry and (E) provide, upon the transfer of assets referred to below,
that the accrued benefits of the Retirement Plan Employees under the
Transferee Pension Plan shall in no event be less than their accrued
benefits under the Raychem Pension Plan as of the Closing Date. The
Joint Venture shall reimburse Raychem in respect of the continued
participation of the Retirement Plan Employees for the period from the
Closing Date through December 31, 1994 at the rate of 4.35% of base
compensation for such Retirement Plan Employees (the same rate
currently in effect).
Raychem shall cause to be transferred from the trust under the
Raychem Retirement Plan to the trust under the Transferee Pension Plan
assets in the form of cash and cash equivalents, the value of which
shall be equal to (x) the "accumulated benefit obligation" (as defined
in Statement of Financial Accounting Standards No. 87) of the
Retirement Plan Employees under such Raychem Retirement Plan as of
December 31, 1994, calculated using the actuarial assumptions
recommended by two actuaries selected by Ericsson and Raychem,
respectively, and approved by Ericsson and Raychem prior to Closing or
(y) no more than the amount permitted to be transferred in accordance
with Section 414(1) of the Code. With respect to the Raychem
Retirement Plan, the excess, if any, of the amount described in clause
(x) of the preceding sentence over the amount described in clause (y)
therein, is referred to herein as the "Pension Shortfall Amount". On
the date of any transfer from the Raychem Retirement Plan to the
Transferee Pension Plan, Raychem shall pay to EHU the Pension
Shortfall Amount, if any, in cash or cash equivalents.
The amount to be transferred shall be equitably adjusted to
take into account (i) benefit payments made from the Raychem
Retirement Plan to the Retirement Plan Employees after the Closing
Date but prior to the date of transfer, and (ii) actual turnover
patterns for five years following the Closing Date.
33
<PAGE> 40
(f) Effective as of January 1, 1995, EHU or Ericsson
shall, or shall cause JV to, provide Transferred Employees with
benefit arrangements that are substantially equivalent to the benefit
arrangements provided from time to time to employees of EGE ("Ericsson
Benefit Plans"). Transferred Employees shall be given credit under
the Ericsson Benefit Plans for service with Raynet and Raychem (to the
extent recognized under the Raychem Benefits Plans) for purposes of
eligibility, vesting and waiting periods, but in no event for purposes
of benefits accruals under the Transferee Pension Plan.
(g) In providing the services and benefits referred to in
Section 5.15(d) and the coverage referred to in Section 5.15(e),
Raychem agrees to act in a reasonable manner consistent with its
practices with respect to Raynet employees prior to the Closing Date.
The JV shall reimburse Raychem for all reasonable costs incurred by it
in providing such benefits and coverage during the period from the
Closing Date through December 31, 1994, as such costs are agreed upon
by Ericsson and Raychem, and to indemnify Raychem against and hold it
harmless from any claims made by or on behalf of Transferred Employees
with respect to the period from the Closing Date through December 31,
1994.
ARTICLE 6
CONDITIONS TO CLOSING
6.1. Conditions to the Obligations of Ericsson, EGE and EHU.
The obligations of Ericsson, EGE and EHU under this Agreement shall be subject
to the satisfaction at or prior to the Closing of each of the following
conditions, unless waived as provided in Section 9.1:
(a) Representations, Warranties and Agreements. All
representations and warranties made herein by Raychem or Raynet shall
be true and correct in all material respects on the date hereof and
(except as contemplated hereby) at and as of the Closing Date with the
same effect as though made at and as of such date, and each of Raychem
and Raynet shall have performed in all material respects all covenants
and agreements required by this Agreement and the JV Transaction
Agreements to be performed by it at or prior to the Closing Date. EGE
shall have received from Raychem and Raynet certificates, dated the
Closing Date and signed by au-
34
<PAGE> 41
thorized officers of Raychem and Raynet, to the foregoing effect.
(b) Authorizations, Approvals and Consents. The mandatory
waiting period under the HSR Act (including any ex- tension thereof)
shall have expired, the required approval by the European Union shall
have been obtained, the approval of Ericsson's Board of Directors
shall have been received and the authorizations, approvals, consents
and other items referred to in Schedule 3.3 as being Closing
conditions shall have been obtained.
(c) Litigation. No court or governmental agency of competent
jurisdiction shall have entered and maintained in effect an injunction
or other similar order against consummation of any of the transactions
contemplated by this Agreement, and no action or proceeding shall have
been instituted and remain pending before a court or other
governmental body (i) by any governmental agency or public authority
to restrain or prohibit or otherwise challenge the transactions
contemplated by this Agreement or (ii) by any Person seeking a remedy
reasonably likely to have a Material Adverse Effect, nor shall any
governmental agency or public authority have notified any party to
this Agreement that consummation of the transactions contemplated by
this Agreement would constitute a violation of the laws, rules or
regulations of the United States or any state or foreign jurisdiction
and that it intends to commence proceedings to restrain or otherwise
challenge the consummation of the transactions contemplated by this
Agreement, unless such agency or authority shall have withdrawn such
notice prior to the Closing Date.
(d) Execution of JV Transaction Agreements. The JV
Transaction Agreements shall have been executed and delivered by all
parties thereto (other than EGE and EHU, as applicable) and shall be
in full force and effect.
(e) Opinion of Counsel as to Raychem and Raynet. EGE shall
have received an opinion or opinions, dated the Closing Date, from
United States counsel to Raychem and Raynet reasonably satisfactory to
EGE substantially in the form attached hereto as Exhibit 4.
(f) Validity of Transactions. All legal and other
proceedings or matters in connection with the transactions
contemplated hereby and all opinions, certificates and other
instruments incident to such transac-
35
<PAGE> 42
tions shall be reasonably satisfactory in form and substance to EGE as
it shall reasonably require to carry out the provisions of this
Agreement.
(g) BellSouth Release. EGE shall have received an executed
copy of the Settlement and Release Agreement in substantially the form
attached hereto as Exhibit 3.
6.2. Conditions to the Obligations of Raychem and Raynet.
The obligations of Raychem and Raynet under this Agreement shall be subject
to the satisfaction at or prior to the Closing of each of the following
conditions, unless waived as provided in Section 9.1:
(a) Representations, Warranties and Agreements. All
representations and warranties made herein by Ericsson, EGE and EHU
shall be true and correct in all material respects on the date hereof
and (except as contemplated hereby) at and as of the Closing Date with
the same effect as though made at and as of such date, and each of
Ericsson, EGE and EHU shall have performed in all material respects
all covenants and agreements required by this Agreement and the JV
Transaction Agreements to be performed by it at or prior to the
Closing Date. Raychem shall have received from Ericsson, EGE and EHU
certificates, dated the Closing Date and signed by authorized officers
of EGE and EHU, to the foregoing effect.
(b) Authorization, Approvals and Consents. The waiting
period under the HSR Act (including any extensions thereof) shall
have expired, the required approval by the European Union shall have
been obtained, the approval of Ericsson's Board of Directors shall
have been received and the authorizations, approvals, consents and
other items referred to in Schedule 4.3 as being Closing conditions
shall have been obtained.
(c) Litigation. No court or governmental agency of competent
jurisdiction shall have entered and maintained in effect an injunction
or other similar order against consummation of any of the transactions
contemplated by this Agreement, and no action or proceeding shall have
been instituted and remain pending before a court or other
governmental body by any governmental agency or public authority to
restrain or prohibit or otherwise challenge the transactions
contemplated by this Agreement, nor shall any governmental agency or
public authority have notified any party to this Agreement that
consummation of the transactions contemplated
36
<PAGE> 43
by this Agreement would constitute a violation of the laws, rules or
regulations of the United States, any state or foreign jurisdiction
and that it intends to commence proceedings to restrain or otherwise
challenge the consummation of the transactions contemplated by this
Agreement, unless such agency or authority shall have withdrawn such
notice prior to the Closing Date.
(d) Execution of JV Transaction Agreements. The JV
Transaction Agreements shall have been executed and delivered by all
parties thereto (other than Raychem and Raynet) and shall be in full
force and effect.
(e) Opinion of Counsel as to Ericsson, EGE and EHU. Raychem
shall have received an opinion or opinions, dated the Closing Date,
from counsel to Ericsson, EGE and EHU reasonably satisfactory to
Raychem substantially in the form attached hereto as Exhibit 5.
(f) Validity of Transactions. All legal and other
proceedings or matters in connection with the transactions
contemplated hereby and all opinions, certificates and other
instruments incident to such transactions shall be reasonably
satisfactory in form and substance to Raychem as it shall reasonably
require to carry out the provisions of this Agreement.
(g) BellSouth Release. Raynet shall have executed the
Settlement and Release Agreement in substantially the form attached
hereto as Exhibit 3.
ARTICLE 7
TERMINATION
7.1. Bases for Termination. This Agreement may be terminated
at any time prior to the Closing:
(a) by mutual written consent of Ericsson and Raychem;
(b) by either Ericsson or Raychem (the "Non-Defaulting
Party") if there has been a material breach of any representation,
warranty, covenant or agreement on the part of Raychem or Raynet, on
the one hand, or Ericsson or EHU, on the other hand, respectively (the
"Defaulting Party"), set forth in this Agreement; provided, however,
that the Non- Defaulting Party shall not have the right to terminate
this Agreement until after it has given written notice to the
Defaulting Party of
37
<PAGE> 44
the breach in question and expressing the Non-Defaulting Party's
intention so to terminate this Agreement as a result thereof, and the
Defaulting Party has subsequently failed to cure such breach within 10
days of the Defaulting Party's receipt of said notice; or
(c) by either Ericsson or Raychem if the Closing shall not
have occurred on or before December 31, 1994 or such other date as
Ericsson and Raychem shall agree upon in writing, otherwise than on
account of a material breach of this Agreement by the terminating
Party or any of its subsidiaries.
7.2. Effect of Termination. In the event of termination of
this Agreement by either Ericsson or Raychem as provided in Section 7.1, this
Agreement shall forthwith become null and void and there shall be no liability
or obligation on the part of Ericsson, EGE, EHU, Raychem or Raynet or their
respective Affiliates, officers, directors or employees except to the extent
that such termination results from the breach in any material respect by a
Party of any of its representations, warranties, covenants or agreements set
forth in this Agreement and except that the provisions of Sections 5.2, 5.9,
7.2, 9.2, 9.4, 9.6, 9.9, 9.11 and 9.12 shall survive any termination of this
Agreement.
ARTICLE 8
INDEMNIFICATION, CONTRIBUTION AND SURVIVAL
8.1. Survival of Representations and Warranties. The
representations and warranties of Ericsson, EGE, EHU, Raychem and Raynet set
forth in this Agreement or in any certificate delivered by either of them
pursuant to this Agreement (except those set forth in Sections 3.1, 3.2, 3.15
and 4.1, which shall survive for the appropriate statute of limitations) shall
survive the Closing and the consummation of the transactions contemplated
hereby for a period of three years after the Closing and will then and
thereupon terminate. No claim shall be made by any Person by virtue of or
arising out of or resulting from or relating to the breach of any such
representation or warranty unless written notice of such claim shall have been
given on or prior to the date on which such representation or warranty shall
expire, in which event each such representation and warranty shall, solely with
respect to such claim and all other claims arising out of the same specific
facts or circumstances, survive until such claims are resolved and all
obligations with respect thereto are satisfied. All covenants
38
<PAGE> 45
and agreements of the Parties herein shall survive the Closing without any
limitation.
8.2. Indemnification by Raychem and Raynet. Raychem and
Raynet hereby jointly and severally agree to indemnify and hold harmless
Ericsson, EGE, EHU and JV (and each of their respective directors, officers and
Affiliates and their respective successors and permitted assigns) on an
after-tax basis from and against any and all losses, obligations, deficiencies,
liabilities, claims, damages, costs and expenses (including without limitation
the amount of any settlement entered into pursuant hereto and all reasonable
legal and other expenses incurred in connection with the investigation,
prosecution or defense of any matter indemnified pursuant hereto)
(collectively, "Damages") which any such indemnified party may sustain, suffer
or incur directly or indirectly and which result from, arise out of, are caused
by or relate to (a) the breach by Raychem or Raynet of any representation,
warranty, covenant or agreement made by it in this Agreement or in any
agreement or instrument executed and delivered by it pursuant hereto or (b) any
liability not included in the Included Liabilities (which indemnification shall
be funded promptly upon notice from the indemnified party). Without limiting
the generality of preceding sentence, Raychem and Raynet hereby jointly and
severally agree to indemnify and hold Ericsson, EGE, EHU and JV (and each of
their respective directors, officers and Affiliates and their respective
successors and permitted assigns) harmless from and against any and all
damages, losses, liabilities, actions, claims, costs and expenses (including,
without limitation, removal costs, remediation costs, fines, penalties,
expenses of investigation, government submissions, studies and ongoing
monitoring, and reasonable attorney's fees) directly or indirectly based upon,
arising out of, resulting from or relating to (i) any violation on or prior to
the Closing of any Environmental Law by Raynet or its subsidiaries or their
predecessors or any of their employees, representatives, agents or any other
person or entity acting on behalf of Raynet (including, without limitation, any
failure to obtain or comply with any permit, license or other approval or
authorization under the provisions of any Environmental Law), (ii) any and all
liabilities, obligations or claims under any Environmental Law arising out of
or otherwise in respect of any act, omission, event, condition or circumstance
occurring or existing in connection with the ownership or operation of the
business of Raynet or its subsidiaries or the Properties on or prior to the
Closing (including, without limitation, liabilities, obligations or claims
relating to (x) investigation, removal, remediation, containment, cleanup or
abatement of the presence, release or threatened release of any Hazardous
Substance,
39
<PAGE> 46
whether on-site or off-site, and (y) any claim by any third party, including,
without limitation, alleged non-compliance, tort suits for personal or bodily
injury, natural resource or property damage or injunctive relief) and (iii) any
and all expenditures required to be incurred by JV (x) to enable JV to operate
the business of Raynet as conducted on the Closing Date in compliance with all
applicable Environmental Laws and (y) to repair and restore all damage to any
building, land or property of JV or any third party arising out of or relating
to the removal, remediation, cleanup or abatement of the actual or threatened
presence or release of any Hazardous Substance existing on or prior to the
Closing in connection with the ownership or operations of Raynet or any of its
subsidiaries or the Properties. Notwithstanding the foregoing or anything
contained in Section 3.18, neither Raychem nor Raynet shall have any
responsibility for liabilities under Environmental Law that arise or are
incurred or exist only after the Closing Date or liabilities for the use of
Hazardous Substances after the Closing Date. Notwithstanding the foregoing,
neither Raychem nor Raynet shall have any duty to provide indemnification
hereunder to the extent that the Insurance Policies included in the Included
Assets cover the Damages claimed. JV shall use its best efforts to secure all
available relief under such Insurance Policies.
8.3. Indemnification by Ericsson, EGE and EHU. Ericsson, EGE
and EHU hereby jointly and severally agree to indemnify and hold harmless
Raychem, Raynet and JV (and each of their respective directors, officers and
Affiliates and their respective successors and permitted assigns) on an
after-tax basis from and against any and all Damages which any such indemnified
party may sustain, suffer or incur directly or indirectly and which result
from, arise out of, are caused by or relate to the breach by Ericsson, EGE or
EHU of any representation, warranty, covenant or agreement made by it in this
Agreement or in any agreement or instrument executed and delivered by it
pursuant hereto.
8.4. Claims. Any claim for indemnity under Sections 8.2, or
8.3 hereof shall be made by written notice from the indemnified party to the
indemnifying party specifying in reasonable detail the basis of the claim.
When an indemnified party seeking indemnification under Sections 8.2 or 8.3
receives notice of any Third Party Claims which is to be the basis for a claim
for indemnification hereunder, the indemnified party shall give written notice
within a reasonable period thereof to the indemnifying party reasonably
indicating (to the extent known) the nature of such claims and the basis
thereof. Any failure by the indemnified party to provide such notice shall not
affect the indemnifying
40
<PAGE> 47
party's obligations hereunder, except to the extent of any material liability
caused by such delay. Upon notice from the indemnified party, the
indemnifying party may, but shall not be required to, assume the defense of any
such Third Party Claim, including its compromise or settlement, and the
indemnifying party shall pay all reasonable costs and expenses thereof and
shall be fully responsible for the outcome thereof; provided, however, that the
indemnifying party may not settle or compromise any Third Party Claim without
the indemnified party's prior written consent (which consent shall not be
unreasonably withheld). The indemnifying party shall give written notice to
the indemnified party as to its intention to assume the defense of any such
Third Party Claim within ten (10) business days after the date of receipt of
the indemnified party's notice in respect of such Third Party Claim. If an
indemnifying party does not, within ten (10) business days after the
indemnified party's notice is given, give written notice to the indemnified
party of its assumption of the defense of the Third Party Claim, the
indemnifying party shall be deemed to have waived its rights to control the
defense thereof. If the indemnified party assumes the defense of any Third
Party Claim because of the failure of the indemnifying party to do so in
accordance with this Section 8.5, the indemnifying party shall pay all
reasonable costs and expenses of such defense and shall be fully responsible
for the outcome thereof. The indemnifying party shall have no liability with
respect to any compromise or settlement thereof effected without its prior
written consent (which consent shall not be unreasonably withheld).
8.5. Limitation of Liabilities. Neither Raychem or Raynet,
on the one hand, nor Ericsson, EGE or EHU, on the other hand, shall be
obligated to provide indemnification under Section 8.2(a) or 8.3, respectively,
unless the aggregate amount of all claims for which any party is liable under
Section 8.2(a) or 8.3, respectively, exceeds $250,000, in which case such party
shall be liable for all such amounts. In no event shall the liability of
Raychem and Raynet, on the one hand, or Ericsson, EGE and EHU, on the other
hand, under this Article 8 exceed $10,000,000.
ARTICLE 9
MISCELLANEOUS
9.1. Amendments and Waivers. This Agreement may be amended
or modified in whole or in part at any time prior to the Closing by an
instrument in writing executed by each of the Parties in the same manner as
this Agreement. In
41
<PAGE> 48
addition, any Party may, at its option, by an instrument in writing executed in
the same manner as this Agreement, waive or extend the time for the fulfillment
of any or all of the conditions herein contained to which its obligations
hereunder are subject. No failure by any Party to take any action with respect
to a breach of this Agreement or a default by another Party shall constitute a
waiver of the former Party's right to enforce any provision of this Agreement
or to take action with respect to such breach or default or any subsequent
breach or default. Waiver by any Party of any breach or failure to comply with
any provision of this Agreement by another Party shall not be construed as, or
constitute, a continuing waiver of such provisions, or a waiver of any other
breach of or failure to comply with any other provisions of this Agreement.
9.2. Notices. All notices, requests, consents, demands,
instructions, approvals and other communications hereunder shall be in writing
and shall be validly given, made or served, if delivered personally or sent by
mail, recognized courier service, telex or telefax (confirmed by mail or
recognized courier service in the case of telefaxes), and shall be deemed
effective when actually received, as follows:
(a) If to Ericsson, EGE or EHU, to:
Telefonaktiebolaget L M Ericsson
Telefonplan
S-126 25 Stockholm
Sweden
Attention: Johan Brundell, Esq.
Fax: 011 46 8 719-4735
With copies to:
Ericsson GE Mobile Communications Inc.
1 Triangle Drive
P.O. Box 13969
Research Triangle Park,
Raleigh, NC 27709
Attention: Mans Ekelof, Esq.
Fax: 919 990-7453
and
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Richard R. Howe, Esq.
Fax: 212 558-3588
42
<PAGE> 49
(b) If to Raychem or Raynet, to:
Raychem Corporation
300 Constitution Drive, Mail Stop 120/8502
Menlo Park, California 94025-1164
Attention: General Counsel
Fax: 415 361-4305
With a copy to:
Heller Ehrman White & McAuliffe
525 University Avenue
Palo Alto, California 94301-1900
Attention: Sarah A. O'Dowd, Esq.
Fax: 415 324-0638
(c) If to JV, to:
Ericsson Raynet
155 Constitution Drive
Menlo Park, California 94025-1106
Attention: Chief Executive Officer
Fax: 415 324-6668
With copies to EHU and Raynet as above provided
or to such other address or addresses as any party may from time to time
designate in writing delivered in a like manner to the other parties hereto.
9.3. Assignment. Except as otherwise expressly provided
herein, none of the Parties shall assign this Agreement or any rights, benefits
or obligations hereunder without the prior written consent of the other
Parties. Any attempt to so assign or delegate any of the foregoing without
such consent shall be void. Notwithstanding the foregoing, prior to the
Closing Date, Raynet may merge with and into Raynet International, Inc., a
California corporation that is a wholly owned subsidiary of Raynet, which
company thereupon shall succeed to the rights and obligations of Raynet
hereunder. As used herein, "Raynet" includes Raynet International, Inc.
9.4. Guarantees. (a) Ericsson hereby irrevocably and
unconditionally guarantees the due and punctual payment of all amounts required
to be paid by EHU hereunder and the performance in accordance with their terms
of all liabilities and obligations of EHU hereunder; provided, however, that
the obligations of Ericsson pursuant to this guarantee shall be subject to the
same limitations as apply
43
<PAGE> 50
to the obligations of EHU set forth herein. This guarantee shall be a
continuing guarantee of payment and performance, and not a guarantee of
collection only. This guarantee is absolute and continuing, and the
obligations and liabilities of Ericsson hereunder shall be primary and not
secondary. This guarantee shall extend to, and Ericsson waives any notice with
respect to, any modification, amendment or waiver by Ericsson or EHU of any
provision of this Agreement which is made in accordance with the provisions of
Section 9.1 hereof. The obligations of Ericsson under this guarantee may be
enforced directly against Ericsson and Ericsson waives presentation to, demand
for payment from or protest to EHU of any of the obligations hereby granted,
and also waives notice of protest for non-payment or other satisfaction.
(b) Raychem hereby irrevocably and unconditionally guarantees
the due and punctual payment of all amounts required to be paid by Raynet
hereunder and the performance in accordance with their terms of all liabilities
and obligations of Raynet hereunder; provided, however, that the obligations of
Raychem pursuant to this guarantee shall be subject to the same limitations as
apply to the obligations of Raynet set forth herein. This guarantee shall be a
continuing guarantee of payment and performance, and not a guarantee of
collection only. This guarantee is absolute and continuing, and the
obligations and liabilities of Raychem hereunder shall be primary and not
secondary. This guarantee shall extend to, and Raychem waives any notice with
respect to, any modification, amendment or waiver by Raychem or Raynet of any
provision of this Agreement which is made in accordance with the provisions of
Section 9.1 hereof. The obligations of Raychem under this guarantee may be
enforced directly against Raychem, and Raychem waives presentation to, demand
for payment from or protest to Raynet of any of the obligations hereby
guaranteed, and also waives notice of protest for non-payment or other
satisfaction.
9.5. Bulk Transfer Laws. The Parties hereby waive, on behalf
of EHU and JV and their respective successors and assigns, compliance by Raynet
and EHU with the provisions of any so-called "bulk transfer law" of any
jurisdiction in connection with the transfer of the Purchased Assets or
Contributed Assets to EHU and JV. Raychem and Raynet shall jointly and
severally indemnify and hold harmless EHU and JV against any and all
liabilities that may be asserted by third parties against EHU or JV to the
extent such liabilities result from noncompliance by it with any such bulk
transfer law.
44
<PAGE> 51
9.6. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF
DELAWARE; PROVIDED, HOWEVER, THAT IF SUCH STATE'S CHOICE OF LAW PROVISIONS
INDICATE THAT ANOTHER JURISDICTION'S LAWS ARE APPLICABLE, SUCH CHOICE OF LAW
PROVISIONS WILL NOT BE APPLICABLE.
9.7. Section and Other Headings. Headings of the articles,
sections and subsections of this Agreement are inserted for convenience only
and shall not be deemed to constitute a part hereof.
9.8. Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument, and each fully executed counterpart shall be deemed an
original.
9.9. Entire Agreement. This Agreement constitutes the entire
and only agreement between the Parties relating to the subject matter hereof.
Any and all prior arrangements, representations, promises, understandings and
conditions in connection with said matter and any representations, promises or
conditions not expressly incorporated herein or expressly made a part hereof
shall not be binding upon any Party.
9.10. Severability. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable,
such illegality, invalidity or unenforceability shall not affect any other
provisions of this Agreement.
9.11. Benefits Only to Parties. Nothing expressed by or
mentioned in this Agreement is intended or shall be construed to give any
Person other than the Parties and JV and their respective successors or assigns
any legal or equitable right, remedy or claim under or in respect of this
Agreement or any provision herein contained, this Agreement and all conditions
and provisions hereof being intended to be and being for the sole and exclusive
benefit of the Parties and JV and their respective successors and assigns and
for the benefit of no other Person.
9.12. Consultation and Arbitration.
(a) The Parties agree that they shall attempt to resolve in
good faith disputes arising in connection with this Agreement or any Exhibit
hereto. Each Party agrees to designate for this purpose a representative who
is authorized to make decisions on such Party's behalf. A dispute
45
<PAGE> 52
shall be referred by a Party for consultation between the Parties by delivering
written notice to the other Party briefly stating the nature of the dispute and
requesting consultation.
(b) In the event that, upon the expiration of sixty (60)
calendar days after receipt of the notice referred to in Section 9.12(a), the
Parties are unable to resolve the matter in dispute, and if the matter relates
to any alleged breach of any representation, warranty, covenant or agreement in
this Agreement or any Exhibit hereto, then the dispute shall be resolved in the
manner provided in Section 9.12(c).
(c) Any dispute with respect to an alleged breach of any
representation, warranty, covenant or agreement in this Agreement, including
any dispute relating to the construction or interpretation of the rights and
obligations of any Party, which is not resolved through consultation as
provided in Section 9.12(a) and (b), shall be resolved by an arbitration
proceeding conducted in accordance with the following:
(i) The arbitration proceeding shall be governed by the rules
of the American Arbitration Association ("AAA");
(ii) The arbitrators shall be qualified by education and
training to pass upon the particular matter to be decid- ed;
(iii) There shall be three (3) arbitrators, one of whom shall
be selected by the Party seeking to initiate arbitration, one by the
other Party and the third by the two arbitrators so selected;
(iv) The arbitration proceeding shall take place in a
location in the United States selected by majority vote of the
arbitrators;
(v) The Parties shall agree in advance as to the manner in
which the arbitration panel shall promptly hear witnesses and
arguments, review documents and otherwise conduct the arbitration
proceedings. Both Parties shall receive notice of the subject of the
arbitration, and the arbitration shall not be binding on the Parties
with respect to any matters not specified in such notice. Should the
Parties fail to reach an agreement as to the conduct of such
proceedings, the arbitration panel shall formulate its own procedural
46
<PAGE> 53
rules and promptly commence the arbitration proceedings;
(vi) The arbitration proceedings shall be conducted as
expeditiously as possible with due consideration for the complexity of
the dispute in question. The arbitration panel shall issue its
decision in writing within forty-five (45) calendar days from the
hearing of final arguments by the Parties;
(vii) The arbitration award shall be given in writing and
shall be final and binding on the Parties with respect to the subject
matter identified in the notice called for by Section 9.12(c)(v), and
not subject to any appeal and shall deal with the question of costs of
arbitration;
(viii) Judgment upon the award may be entered in any court
having jurisdiction or, application may be made to such court for a
judicial recognition of the award or an order of enforcement thereof,
as the case may be;
(ix) The Parties shall not submit a dispute subject to this
Section 9.12(c) to any federal, state, local or foreign court or
arbitration association except as may be necessary to enforce the
arbitration procedures of this Section 9.12(c) or to enforce the award
of the arbitration panel, and if court proceedings to stay litigation
or compel arbitration under the Federal Arbitration Act (Title 9,
U.S.C.) or similar state or foreign legislation are necessary, the
Party who unsuccessfully opposes such proceedings shall pay all
associated costs, expenses and attorneys' fees which are reasonably
incurred by the other Party; and
(x) The Parties shall keep confidential the arbitration
proceedings and the terms of any arbitration award, except as may be
otherwise required by law.
47
<PAGE> 54
IN WITNESS WHEREOF, each of the Parties has caused this
Agreement to be duly executed on its behalf by one of its officers thereunto
duly authorized, all as of the date and year first above written.
TELEFONAKTIEBOLAGET L M ERICSSON
By: /s/ ROLF NORDSTROM
-------------------------------------------
Name: Rolf Nordstrom
Title: Vice President
ERICSSON GE HOLDING MOBILE COMMUNICATIONS INC.
By: /s/ ROLF NORDSTROM
-------------------------------------------
Name: Rolf Nordstrom
Title: Vice President
ERICSSON GE HOLDING INC.
By: /s/ ROLF NORDSTROM
-------------------------------------------
Name: Rolf Nordstrom
Title:
RAYCHEM CORPORATION
By: /s/ ROBERT J. SALDICH
-------------------------------------------
Name: Robert J. Saldich
Title: CEO/President
RAYNET CORPORATION
By: /s/ R. G. KELSCH
-------------------------------------------
Name: R. G. Kelsch
Title: President
<PAGE> 55
EXHIBITS, ANNEXES, AND SCHEDULES
NOTE: The following EXHIBITS, ANNEXES, and SCHEDULES to the FORMATION
AGREEMENT dated as of October 10, 1994, have not been included in this filing:
EXHIBITS
2 Guarantee Agreement
3 Release of BellSouth Agreements
4 Opinion of Counsel to Raychem and Raynet
5 Opinion of Counsel to Ericsson, EGE and EHU
ANNEXES
A Included Assets
B Excluded Contracts
SCHEDULES
1 Ongoing BellSouth Arrangements
3.3 Raychem and Raynet consents
3.4 Raynet equity interests
3.5 Exceptions to Financial Statements
3.9 Changes subsequent to June 30, 1994
3.10 Raynet Real Property
3.11 Raynet litigation
3.12 Raynet compliance with laws, etc.
3.13 Raynet Material Contracts
3.15 Raynet Tax matters
3.16 Raynet Employee Benefit Plans
3.17 Raynet Intellectual Property Rights
3.18 Raynet Environmental matters
3.19 Raynet Insurance policies
3.21 Raynet Permits, Licenses, etc.
3.23 Raychem Arrangements
4.2 EGE Conflicts, etc.
4.3 EGE Consents
5.5 Exceptions to Conduct of Business in ordinary course
A copy of the omitted EXHIBITS, ANNEXES, and SCHEDULES above will be furnished
supplementally to the United States Securities and Exchange Commission upon
request.
<PAGE> 1
Exhibit 2(b)
AMENDMENT TO FORMATION AGREEMENT
This AMENDMENT TO FORMATION AGREEMENT ("Amendment") is made
and entered into as of November 16, 1994 by and among Telefonaktiebolaget L M
Ericsson, a corporation organized under the laws of the Kingdom of Sweden
("Ericsson"), Ericsson GE Mobile Communications Inc., a corporation organized
under the laws of the State of Delaware ("EGE"), Ericsson GE Holding Inc., a
corporation organized under the laws of the State of Delaware ("EHU"), Raychem
Corporation, a corporation organized under the laws of the State of Delaware
("Raychem"), and Raynet International, Inc., a corporation organized under the
laws of the State of California ("Raynet"), and the successor to Raynet
Corporation which was merged with and into Raynet on November 15, 1994.
W I T N E S S E T H:
WHEREAS, the parties to this Amendment are parties to or, in
the case of Raynet, the successor of a party to, a Formation Agreement dated as
of October 10, 1994 (the "Agreement"); and
WHEREAS, the parties desire to amend the Agreement in certain
respects;
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
Definitions
Capitalized terms used herein without definition have the
meanings assigned in the Agreement.
ARTICLE 2
Amendments to Agreement
The Agreement is amended as follows:
2.1 The definition of "Included Assets" is amended by
deleting the final sentence thereof, which reads: "A detailed list of all of
the Included Assets (as of June 30, 1994) is set forth on Annex A hereto."
2.2 The definition of "Included Liabilities" is amended
by inserting after the words "all liabilities for products sold prior to the
Closing Date alleged to be defective for any reason" the words "(to the extent
in excess of reserves on Raynet's balance sheet as of the Closing Date)."
<PAGE> 2
2.3 Section 2.2(c) is amended by deleting the words "and
JV shall assume and agree to pay, perform and discharge when due the Assumed
Liabilities."
2.4 Section 2.3(e) is amended by replacing the words "EHU
or Raynet, as the case may be," with the word "Raynet."
2.5 Section 2.5 is amended as follows:
(a) The words "transfer their customer contracts and
personal property leases," are inserted after the words "make arrangements with
Ericsson to."
(b) The word "assets" is replaced by the words
"fixed assets and inventories (in each case at their net book value)".
(c) The words "prior to the Closing Date" are
replaced by the words "as soon as practicable after the Closing Date."
(d) The following is added at the end of the Section:
"During the period from and after the Closing and prior to the actual
transfer of such employees, the fully burdened costs associated with
the employees of Raynet's subsidiary in Belgium shall be for the
account of and reimbursed by the JV and the fully burdened cost
associated with the employees of Raynet's subsidiaries in U.K., Spain
and France shall be for the account of and reimbursed by the Ericsson
subsidiaries in those countries.
2.6 Section 2.6 is amended by replacing the words "Joint
Venture" with the word "JV."
2.7 Paragraph (a) of Section 3.5 is amended by adding the
following after the first sentence: "A copy of Raynet's June 30, 1994
Financial Statements is set forth in Schedule 3.5."
2.8 Section 3.16 is amended as follows:
(a) All references to "the Company" are changed to
read "Raynet."
(b) All references to "Subsidiary" or "Subsidiaries"
are changed to read "subsidiary" or "subsidiaries" as the case may be.
(c) In paragraph (a), the reference to Schedule
3.16(a) is amended to refer to Schedule 3.16.
-2-
<PAGE> 3
(d) In paragraph (d), the words "Raynet Closing
Balance Sheet" are replaced by the words "balance sheet as of the Closing
Date."
(e) In paragraph (f), the words "Neither Raynet nor
Raynet International, Inc. has any" are replaced by the words "Raynet has no."
2.9 Section 3.23 is amended by deleting the sentence
which reads:
"Schedule 3.23 also sets forth the amounts outstanding pursuant to the
revolving credit agreement between Raynet and Raychem and pursuant to
any other financing arrangement between Raynet and its subsidiaries,
on the one hand, and Raychem and its Affiliates (other than Raynet) on
the other hand."
2.10 Section 3.24 is amended by adding the following
sentence at the end thereof: "Except for the ongoing BellSouth agreements
listed in Schedule 1, there are no ongoing contracts or agreements with
BellSouth that will be binding upon the JV after the Closing."
2.11 Section 5.1 is amended as follows:
(a) The words "employees, agents and representatives"
are replaced by the word "Representatives."
(b) The words "the Confidentiality Agreement" are
replaced by the words "Section 5.2."
2.12 Section 5.14 is amended by changing the reference to
Exhibit 5 to read Exhibit 3.
2.12 Section 5.15 is amended as follows:
(a) In clause (iii) of paragraph (a), the word
"Raychem" is replaced by the word "Raynet."
(b) In paragraph (d), the word "Joint Venture" is
replaced by the word "JV."
2.13 Section 6.2 is amended by replacing the words "by
authorized officers of EGE and EHU" by the words "by authorized officers of
Ericsson, EGE and EHU."
2.14 Section 9.3 is amended by replacing the last sentence
with the following: "When used in this Agreement, the word 'Raynet' means
Raynet Corporation and Raynet International, Inc. together, for all purposes,
including the representations made in Article 3."
-3-
<PAGE> 4
ARTICLE 3
No Other Changes; Counterparts
3.1 Except as expressly set forth herein, the Agreement
remains in full force and effect in accordance with its terms.
3.2 This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and each fully executed counterpart shall be deemed an original.
IN WITNESS WHEREOF, each of the Parties has caused this
Amendment to be duly executed on its behalf by one of its officers thereunto
duly authorized, all as of the date and year first above written.
TELEFONAKTIEBOLAGET L M RAYCHEM CORPORATION
ERICSSON
By: /s/ JOHAN BRUNDELL By: /s/ RAYMOND SIMS
------------------------ ------------------------
Name: Johan Brundell Name: Raymond Sims
Title: Director of Ericsson Title: Senior Vice President/CFO
Legal Services
ERICSSON GE MOBILE RAYNET CORPORATION
COMMUNICATIONS INC.
By: /s/ JOHAN BRUNDELL By: /s/ R. G. KELSCH
------------------------ ------------------------
Name: Johan Brundell Name: R. G. Kelsch
Title: Vice President and Attorney- Title: President
in-fact
ERICSSON GE HOLDING INC.
By: /s/ JOHAN BRUNDELL
------------------------
Name: Johan Brundell
Title: Vice President and Attorney-in-fact
-4-
<PAGE> 1
EXHIBIT 2(c)
================================================================================
JOINT VENTURE AGREEMENT
Between
RAYNET INTERNATIONAL, INC.
and
ERICSSON GE HOLDING INC.
Dated as of November 16, 1994
================================================================================
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C> <C>
ARTICLE I
DEFINITIONS
-----------
1.1. Certain Definitions. . . . . . . . . . . . . . . . 2
Affiliate . . . . . . . . . . . . . . . . . . . . 2
Agreed Value . . . . . . . . . . . . . . . . . . . 2
Agreement . . . . . . . . . . . . . . . . . . . . 2
Annual Budget . . . . . . . . . . . . . . . . . . 2
Auditors . . . . . . . . . . . . . . . . . . . . . 2
Bankruptcy . . . . . . . . . . . . . . . . . . . . 2
Bankruptcy Code . . . . . . . . . . . . . . . . . 3
Board of Managers . . . . . . . . . . . . . . . . 3
Book Value . . . . . . . . . . . . . . . . . . . . 4
Business Plan . . . . . . . . . . . . . . . . . . 4
Capital Account . . . . . . . . . . . . . . . . . 4
Capital Account Adjustments . . . . . . . . . . . 4
Capital Account Net Income . . . . . . . . . . . . 4
Capital Account Net Losses . . . . . . . . . . . . 4
Capital Contribution . . . . . . . . . . . . . . . 4
Capital Expenditures . . . . . . . . . . . . . . . 4
Closing . . . . . . . . . . . . . . . . . . . . . 4
Code . . . . . . . . . . . . . . . . . . . . . . . 5
Contributed Assets . . . . . . . . . . . . . . . . 5
Contributed Liabilities . . . . . . . . . . . . . 5
Control . . . . . . . . . . . . . . . . . . . . . 5
Depreciation . . . . . . . . . . . . . . . . . . . 5
Encumbrance . . . . . . . . . . . . . . . . . . . 5
EHU Member . . . . . . . . . . . . . . . . . . . . 6
Fair Market Value . . . . . . . . . . . . . . . . 6
Fiscal Year . . . . . . . . . . . . . . . . . . . 6
Incremental Loss for 1995 . . . . . . . . . . . . 6
Incremental Loss for 1996 . . . . . . . . . . . . 6
Initial Capital Contribution . . . . . . . . . . . 6
Maximum Agreed Loss . . . . . . . . . . . . . . . 6
Member . . . . . . . . . . . . . . . . . . . . . . 6
Net Book Value . . . . . . . . . . . . . . . . . . 6
1995 Fiscal Year . . . . . . . . . . . . . . . . . 6
1996 Fiscal Year . . . . . . . . . . . . . . . . . 6
Offer Notice . . . . . . . . . . . . . . . . . . . 7
Offered Partnership Interest . . . . . . . . . . . 7
Partner . . . . . . . . . . . . . . . . . . . . . 7
Partnership . . . . . . . . . . . . . . . . . . . 7
Partnership Assets . . . . . . . . . . . . . . . . 7
Partnership Interest . . . . . . . . . . . . . . . 7
Partnership Law . . . . . . . . . . . . . . . . . 7
Percentage Interest . . . . . . . . . . . . . . . 7
Person . . . . . . . . . . . . . . . . . . . . . . 8
Purchased Assets . . . . . . . . . . . . . . . . . 8
Raynet Member . . . . . . . . . . . . . . . . . . 8
Remaining Partner . . . . . . . . . . . . . . . . 8
Restructuring Costs . . . . . . . . . . . . . . . 8
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
<S> <C> <C>
Revolver . . . . . . . . . . . . . . . . . . . . . 8
Selling Partner . . . . . . . . . . . . . . . . . 8
Statement of Accounting Principles . . . . . . . . 8
Stub Period . . . . . . . . . . . . . . . . . . . 8
Stub Period Loss . . . . . . . . . . . . . . . . . 8
Target Amount . . . . . . . . . . . . . . . . . . 9
Target Date . . . . . . . . . . . . . . . . . . . 9
Tax" or "Taxes . . . . . . . . . . . . . . . . . . 9
Tax Matters Partner . . . . . . . . . . . . . . . 9
Third-Party Interest . . . . . . . . . . . . . . . 9
Third Party Offeree . . . . . . . . . . . . . . . 9
Transfer . . . . . . . . . . . . . . . . . . . . . 9
Treasury Regulations . . . . . . . . . . . . . . . 9
U.S. GAAP . . . . . . . . . . . . . . . . . . . . 9
U.S. GAAP Net Income . . . . . . . . . . . . . . . 10
U.S. GAAP Net Losses . . . . . . . . . . . . . . . 10
ARTICLE II
FORMATION
---------
2.1. Establishment of Partnership . . . . . . . . . . . 10
2.2. Name . . . . . . . . . . . . . . . . . . . . . . . 10
2.3. Offices . . . . . . . . . . . . . . . . . . . . . 10
2.4. Purposes . . . . . . . . . . . . . . . . . . . . . 10
2.5. Term . . . . . . . . . . . . . . . . . . . . . . . 10
2.6. Ownership of Property . . . . . . . . . . . . . . 11
2.7. Status of EHU and Raynet . . . . . . . . . . . . . 11
ARTICLE III
CONTRIBUTIONS
-------------
3.1. Initial Capital Contributions . . . . . . . . . . 11
3.2. Additional Cash Contributions . . . . . . . . . . 12
3.3. Capital Accounts . . . . . . . . . . . . . . . . . 13
ARTICLE IV
ALLOCATIONS
-----------
4.1. Capital Account Net Income and Capital Account
Net Losses . . . . . . . . . . . . . . . . . . . . 14
4.2. Allocation of Capital Account Net Income and
Capital Account Net Losses . . . . . . . . . . . . 15
4.3. Adjustment to Capital Accounts . . . . . . . . . . 18
ARTICLE V
DISTRIBUTIONS
-------------
5.1. Distributions . . . . . . . . . . . . . . . . . . 18
5.2. Distributions on Liquidation . . . . . . . . . . . 19
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
<S> <C> <C>
ARTICLE VI
ACCOUNTING AND RECORDS
----------------------
6.1. Books and Records . . . . . . . . . . . . . . . . 19
6.2. Financial Reports . . . . . . . . . . . . . . . . 20
6.3. Tax Returns and Information . . . . . . . . . . . 21
6.4. Fiscal Year . . . . . . . . . . . . . . . . . . . 24
6.5. Withholdings . . . . . . . . . . . . . . . . . . . 24
ARTICLE VII
MANAGEMENT OF THE PARTNERSHIP
-----------------------------
7.1. Board of Managers . . . . . . . . . . . . . . . . 24
7.2. Meetings, Quorum and Voting . . . . . . . . . . . 26
7.3. Unanimous Decisions . . . . . . . . . . . . . . . 27
7.4. Officers of the Partnership . . . . . . . . . . . 29
7.5. Business Plan; Accounting Principles . . . . . . . 30
7.6. Annual Budget . . . . . . . . . . . . . . . . . . 31
7.7. Bank Accounts . . . . . . . . . . . . . . . . . . 32
7.8. Insurance . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VIII
TRANSFER OF PARTNERSHIP INTERESTS
---------------------------------
8.1. Restrictions on Transfer . . . . . . . . . . . . . 32
8.2. Intercompany Transfers . . . . . . . . . . . . . . 33
8.3. Transfers to Unaffiliated Persons; Right of First
Refusal. . . . . . . . . . . . . . . . . . . . . . 34
8.4. Call Options . . . . . . . . . . . . . . . . . . . 35
8.5. Put Option . . . . . . . . . . . . . . . . . . . . 36
8.6. Determination of Option Price . . . . . . . . . . 36
ARTICLE IX
DEFAULTS
--------
9.1. Events of Default . . . . . . . . . . . . . . . . 39
9.2. Remedies Upon Default . . . . . . . . . . . . . . 40
ARTICLE X
TERMINATION
-----------
10.1. Termination. . . . . . . . . . . . . . . . . . . . 41
10.2. Winding-up . . . . . . . . . . . . . . . . . . . . 42
10.3. Purchase Option Upon Bankruptcy of a Partner . . . 44
ARTICLE XI
MISCELLANEOUS
-------------
11.1. Relationship of Parties. . . . . . . . . . . . . . 45
11.2. Waiver of Partition. . . . . . . . . . . . . . . . 45
11.3. Business Activities. . . . . . . . . . . . . . . . 45
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
<S> <C> <C>
11.4. Amendments and Waivers . . . . . . . . . . . . . 46
11.5. Entire Agreement . . . . . . . . . . . . . . . . 47
11.6. Severability . . . . . . . . . . . . . . . . . . 47
11.7. Notices . . . . . . . . . . . . . . . . . . . . . 47
11.8. Counterparts . . . . . . . . . . . . . . . . . . 49
11.9. GOVERNING LAW . . . . . . . . . . . . . . . . . . 49
11.10. Arbitration and Consultation on Disputes . . . . 49
</TABLE>
iv
<PAGE> 6
JOINT VENTURE AGREEMENT
THIS JOINT VENTURE AGREEMENT made and entered into as of
November 16, 1994 by and between Raynet International, Inc., a California
corporation ("Raynet"), and Ericsson GE Holding Inc., a Delaware corporation
("EHU").
W I T N E S S E T H :
WHEREAS, EHU, Raychem Corporation, a Delaware corporation
("Raychem"), Telefonaktiebolaget L M Ericsson, a corporation organized under
the laws of the Kingdom of Sweden ("Ericsson"), and Ericsson GE Mobile
Communications Inc., a Delaware corporation ("EGE"), and Raynet Corporation, a
California corporation, have entered into a Formation Agreement, dated as of
October 10, 1994 (the "Formation Agreement");
WHEREAS, effective November 15, 1994, Raynet Corporation was
merged into Raynet, and Raynet succeeded to the rights and obligations of
Raynet Corporation under the Formation Agreement; and
WHEREAS, the parties to the Formation Agreement entered into
an Amendment thereto dated as of November 16, 1994; and
WHEREAS, the name of each of EGE and EHU is expected to be
changed on or before January 1, 1995 to delete "GE" therefrom; and
WHEREAS, Raynet and EHU desire to form a general partnership
under the laws of the State of Delaware to conduct the business previously
conducted by Raynet for the term and upon the conditions hereinafter set forth;
<PAGE> 7
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. Certain Definitions. For all purposes of this
Agreement, the following terms have the following meanings:
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under common
control with such other Person; provided, however, that for purposes of this
Agreement neither of the Partners nor any of their Affiliates shall be deemed
to be an Affiliate of the Partnership.
"Agreed Value" means, with respect to any asset contributed to
the Partnership, the fair market value of such asset as agreed by the Partners;
the Agreed Value of the Purchased Assets shall be $40,000,000; the Agreed Value
of the Contributed Assets shall be $38,431,373.
"Agreement" means this Joint Venture Agreement, as it may be
amended from time to time pursuant to Section 11.4 hereof.
"Annual Budget" has the meaning specified in Section 7.6.
"Auditors" means Price Waterhouse or such other firm of
independent certified public accountants as the Board of Managers shall
hereafter select as the auditors for the Partnership.
"Bankruptcy" means, with respect to any Partner, the happening
of any of the following:
2
<PAGE> 8
(i) The appointment by a court of competent jurisdiction of a
trustee, trustees, receiver, receivers, custodian or custodians under
the Bankruptcy Code to administer all or a substantial portion of its
assets (including its Partnership Interest);
(ii) The filing by such Partner of a voluntary petition for
relief under the Bankruptcy Code or the filing of a pleading in any
court of record admitting in writing its inability to pay its debts as
they become due;
(iii) The making by such Partner of a general assignment for
the benefit of creditors;
(iv) The failure by such Partner to pay, or the admission in
writing of its inability or unwillingness to pay, its debts generally
as they became due;
(v) The filing by such Partner of an answer admitting the
material allegations of, or its consenting to, or defaulting in
answering, an involuntary petition for relief filed against it in any
proceeding under the Bankruptcy Code; or
(vi) The entry by any court of competent jurisdiction of an
order, judgment or decree granting relief against such Partner in a
proceeding under the Bankruptcy Code which remains unstayed and in
effect for a period of 60 consecutive days.
"Bankruptcy Code" means the United States Bankruptcy Code, 11
U.S.C. Section 101 et seq., as amended from time to time.
"Board of Managers" means the Board of Managers of the
Partnership established pursuant to Section 7.1.
3
<PAGE> 9
"Book Value" means, with respect to any Partnership Asset, for
the purpose of calculating the Capital Accounts of the Partners, the adjusted
basis of such Partnership Asset for federal income tax purposes, except that
the Book Value of any asset contributed by a Partner to the Partnership shall
be an amount equal to the Agreed Value of such asset at the time of its
contribution.
"Business Plan" has the meaning specified in Section 7.5(a)
hereof.
"Capital Account" means, with respect to any Partner, the
Capital Account maintained for such Partner in accordance with Section 3.3
hereof.
"Capital Account Adjustments" means adjustments that cause
Capital Account Net Income or Capital Account Net Loss to differ from U.S. GAAP
Net Income or U.S. GAAP Net Loss.
"Capital Account Net Income" has the meaning specified in
Section 4.1(a) hereof.
"Capital Account Net Losses" has the meaning specified in
Section 4.1(a) hereof.
"Capital Contribution" means the amount of cash and the Agreed
Value of assets contributed to the capital of the Partnership by a Partner with
respect to such Partner's Partnership Interest.
"Capital Expenditures" means all expenditures that are
capitalized, pursuant to U.S. generally accepted accounting principles, by the
Partnership for financial reporting purposes.
"Closing" means the closing contemplated by the Formation
Agreement.
4
<PAGE> 10
"Code" means the Internal Revenue Code of 1986, as amended.
"Contributed Assets" has the meaning set forth in Article I of
the Formation Agreement.
"Contributed Liabilities" has the meaning set forth in Article
I of the Formation Agreement.
"Control" (including, with correlative meanings, the terms
"control", "controlling", "controlled by" and "under common control with"), as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such Person, whether through ownership of voting securities, by contract or
otherwise.
"Depreciation" means, for the purposes of calculating the
Capital Accounts of the Partners, all deductions attributable to depreciation,
amortization or cost recovery with respect to Partnership Assets having a
useful life exceeding one year; provided, however, that with respect to any
Partnership Asset whose tax basis differs from its Book Value, Depreciation
shall be an amount that bears the same ratio to such Book Value as the
depreciation, amortization or other cost recovery deduction for such period
with respect to such asset for federal income tax purposes bears to its
adjusted tax basis at the date the Partnership Asset was contributed.
"Encumbrance" means any mortgage, deed of trust, lien, pledge,
easement, hypothecation, assignment, security interest or any other encumbrance
or restriction of any type whatsoever.
5
<PAGE> 11
"EHU Member" means a Member of the Board of Managers appointed
by EHU.
"Fair Market Value" means, with respect to the Partnership,
any Partnership Interest or any assets of the Partnership for all purposes
other than Capital Contributions, the value thereof determined in accordance
with Section 8.6 hereof.
"Fiscal Year" has the meaning specified in Section 6.4 hereof.
"Incremental Loss for 1995" has the meaning specified in
Section 3.2(c) hereof.
"Incremental Loss for 1996" has the meaning specified in
Section 4.2(b)(iii).
"Initial Capital Contribution" means, with respect to each of
EHU and Raynet, the initial Capital Contribution made by such Partner pursuant
to Section 3.1 hereof.
"Maximum Agreed Loss" means $49,019,608 plus (i) any
Restructuring Costs approved and designated as such by the Board of Managers
incurred in the 1995 Fiscal Year; and (ii) any Third-Party Interest incurred in
the 1995 Fiscal Year.
"Member" means a member of the Board of Managers.
"Net Book Value" means Book Value less all Depreciation taken
into account with respect to such asset through such date.
"1995 Fiscal Year" means the period commencing on the Closing
Date and ending on June 30, 1995.
"1996 Fiscal Year" means the period commencing July 1, 1995
and ending on June 30, 1996.
6
<PAGE> 12
"Offer Notice" has the meaning specified in Section 8.3 hereof.
"Offered Partnership Interest" has the meaning specified in
Section 8.3 hereof.
"Partner" means EHU and Raynet and any successor to either and
any additional Person who becomes a partner in the Partnership in accordance
with the provisions of this Agreement.
"Partnership" means the general partnership created by this
Agreement.
"Partnership Assets" means all right, title and interest of
the Partnership in and to the tangible and intangible assets of the Partnership
and any property (real or personal) or estate acquired in exchange for any such
assets.
"Partnership Interest" means the entire ownership interest of
a Partner in the Partnership at the relevant time, including the right of such
Partner to any and all benefits to which a Partner may be entitled as provided
in this Agreement, together with the obligations of such Partner to comply with
all terms and provisions of this Agreement.
"Partnership Law" means the Uniform Partnership Law of the
State of Delaware, Chapter 15 of Title 6 of the Delaware Code 1935, as in
effect on the date hereof, excluding any amendment thereto subsequent to the
date hereof that would be applicable to the Partnership only in the absence of
a provision in this Agreement to the contrary, unless such amendment is
satisfactory to the Partners as evidenced by a writing to such effect.
"Percentage Interest" means 51% with respect to EHU and 49%
with respect to Raynet.
7
<PAGE> 13
"Person" means an individual, corporation, partnership, trust
or unincorporated organization or a government or any agency or political
subdivision thereof.
"Purchased Assets" has the meaning set forth in Article I of
the Formation Agreement.
"Raynet Member" means a Member of the Board of Managers
appointed by Raynet.
"Remaining Partner" has the meaning specified in Section 8.3
hereof.
"Restructuring Costs" means any costs incurred by the
Partnership due to (i) physical relocation of functions, (ii) major reduction
of workforce due to change in business strategies, or (iii) reduction of
workforce or other restructuring costs due to the creation of the Partnership.
"Revolver" has the meaning set forth in Article I of the
Formation Agreement.
"Selling Partner" has the meaning specified in Section 8.3
hereof.
"Statement of Accounting Principles" means the statement of
accounting principles adopted by the Partnership pursuant to Section 7.5(c)
hereof.
"Stub Period" means the period from July 1, 1994 to the
Closing Date.
"Stub Period Loss" means the U.S. GAAP Net Loss, if any, that
the Partnership would have suffered during the Stub Period if the Partnership
had been formed pursuant to the Formation Agreement on July 1, 1994.
8
<PAGE> 14
"Target Amount" means $156,568,627 of U.S. GAAP Net Income
plus the result obtained by dividing (a) the sum of the Incremental Loss for
1995 and the Incremental Loss for 1996 by (b) 0.51.
"Target Date" means June 30, 2000 or, if the Partnership's
cumulative revenues between July 1, 1994 and June 30, 2000 are at least
$2,131,400,000, then June 30, 2003, treating, for this purpose, consolidated
revenues recorded by Raynet and its subsidiaries during the Stub Period.
"Tax" or "Taxes" means only U.S. federal, state, local or
foreign income or franchise tax or taxes.
"Tax Matters Partner" has the meaning specified in Section 6.3
hereof.
"Third-Party Interest" means interest expense paid or payable
to a person other than Raynet or its affiliates or EHU or its affiliates.
"Third Party Offeree" has the meaning specified in Section 8.3
hereof.
"Transfer" means the sale, assignment, transfer or other
disposition or conveyance of a legal or beneficial interest, directly or
indirectly, but shall not include a pledge with respect to all or a portion of
a Partnership Interest unless and until action is taken to foreclose on such
pledge.
"Treasury Regulations" means the regulations issued under the
Code that are in effect at the date of the Closing.
"U.S. GAAP" means U.S. generally accepted accounting
principles consistently applied in accordance with the Statement of Accounting
Principles.
9
<PAGE> 15
"U.S. GAAP Net Income" means the net income of the Partnership
determined in accordance with U.S. GAAP.
"U.S. GAAP Net Losses" means the net loss of the Partnership
determined in accordance with U.S. GAAP.
ARTICLE II
FORMATION
2.1. Establishment of Partnership. Raynet and EHU hereby
establish a general partnership under the Partnership Law for the purposes set
forth in this Article II.
2.2. Name. The name of the Partnership shall be "Ericsson
Raynet."
2.3. Offices. The principal office of the Partnership shall
be at 155 Constitution Drive, Menlo Park, California 94025-1106, or at such
other place as the Board of Managers may from time to time designate. The
Partnership may maintain additional offices at such other places as the Board
of Managers shall from time to time designate.
2.4. Purposes. The purposes of the Partnership shall be as
follows: The Partnership will supply products and systems for narrowband,
broadband and wideband networks around the world, as set forth in the Business
Plan and mission statements as agreed upon by the Partners from time to time,
and shall conduct such other business and activities as the Partners determine
from time to time.
2.5. Term. The Partnership shall commence as of the date
hereof and shall continue for a term of 50 years from the date hereof unless
earlier terminated pursuant to Section 10.1
10
<PAGE> 16
hereof; provided, however, that if at least 30 days prior to the expiration of
such term the Partners agree in writing to amend this Agreement to extend such
term, then the term shall be as so extended unless further amended pursuant to
this Section 2.5.
2.6. Ownership of Property. Legal title to all assets,
rights and property, whether real, personal or mixed, conveyed to or held or
acquired by the Partnership shall reside in the Partnership and shall be
conveyed only in the name of the Partnership, and no Partner, individually,
shall have any ownership of such assets, rights and property.
2.7. Status of EHU and Raynet. Each of EHU and Raynet agrees
that it will not engage in any business, own any assets or become liable for
any liabilities or obligations except in connection with the holding of its
respective Partnership Interest; provided, however, that Raynet may continue to
own the assets that it owned prior to the date hereof, and may continue to be
liable for the liabilities that it was liable for prior to the date hereof
until they have been fully paid, performed and discharged.
ARTICLE III
CONTRIBUTIONS
3.1. Initial Capital Contributions. Subject to the terms and
conditions of the Formation Agreement, (i) EHU has contributed to the
Partnership all of its right, title and interest in and to the Purchased
Assets, (ii) Raynet has contributed to the Partnership all of its right, title
and interest in and to the Contributed Assets, and (iii) the
11
<PAGE> 17
Partnership has assumed the Contributed Liabilities, in each case in the manner
set forth in the Formation Agreement.
3.2. Additional Cash Contributions.
(a) The Partners have made additional Capital Contributions to
the Partnership, as set forth in Section 2.2(f) of the Formation Agreement.
(b) The Partners agree to make additional Capital
Contributions at such times and in such amounts as shall be determined by the
Board of Managers pursuant to Section 7.3. Except as set forth in subsections
(c) and (d) below, all Capital Contributions shall be made by EHU with respect
to 51% and by Raynet with respect to 49% of the total amount thereof.
(c) If the sum of (i) the Stub Period Loss, if any, and (ii)
U.S. GAAP Net Losses for the 1995 Fiscal Year, if any, exceeds the Maximum
Agreed Loss, then within 30 days after the amount of the U.S. GAAP Net Losses
for the 1995 Fiscal Year has been determined and audited by the Auditors, or
earlier if practicable, Raynet shall make a Capital Contribution to the
Partnership in the amount of 51% of such excess (the "Incremental Loss for
1995"); the Partnership shall thereupon make a distribution to EHU of the same
amount.
(d) If there is an Incremental Loss for 1996, then within
30 days after the amount of the U.S. GAAP Net Losses for the 1996 Fiscal Year
has been determined and audited by the Auditors, Raynet shall make a Capital
Contribution to the Partnership in the amount of such Incremental Loss for
1996; the Partnership shall thereupon make a distribution to EHU of the same
amount.
12
<PAGE> 18
(e) Until Raynet has received all distributions required
pursuant to Section 5.1(b)(i) hereof, the Partners shall make additional
Capital Contributions to the extent that the cash available for distributions
pursuant to Section 5.1(b)(i) hereof is insufficient to pay such distributions.
3.3. Capital Accounts. A separate capital account (a
"Capital Account") shall be established and maintained for each Partner during
the term of the Partnership in accordance with federal income tax accounting
principles. The initial balance of each Partner's Capital Account shall equal
the Agreed Value of the Initial Capital Contribution of such Partner. Each
Partner's Capital Account thereafter shall be (i) increased by (A) the amount
of Capital Account Net Income allocated to such Partner and (B) the amount of
cash and the Agreed Value of tangible or intangible assets contributed to the
Partnership by such Partner as a Capital Contribution and (ii) decreased by (A)
the amount of any Capital Account Net Losses allocated to such Partner and (B)
the amount of distributions to such Partner. Each Partner's Capital Account
shall be determined in accordance with the capital accounting rules set forth
in Treasury Regulations Section 1.704-1(b)(2)(iv) and shall, as provided in
Section 4.3 hereof, be adjusted upon the occurrence of certain events as
provided in Treasury Regulations Section 1.704-1(b)(2)(iv)(f). A transferee of
all (or a portion) of a Partnership Interest shall succeed to the Capital
Account (or portion of the Capital Account) attributable to the transferred
Partnership Interest.
13
<PAGE> 19
ARTICLE IV
ALLOCATIONS
4.1. Capital Account Net Income and Capital Account Net
Losses. (a) "Capital Account Net Income" and "Capital Account Net Losses"
shall be the net income or net losses (including capital gains, income and gain
exempt from tax, and items of loss, deduction or expense not deductible from
Partnership income or capitalized into the basis of Partnership property),
respectively, of the Partnership determined for each Fiscal Year in accordance
with the accounting method followed for federal income tax purposes, except
that (i) in computing Capital Account Net Income and Capital Account Net
Losses, all depreciation and cost recovery shall be deemed equal to
Depreciation, and (ii) gain or loss on the sale or other disposition of a
Partnership Asset shall be determined by reference to Net Book Value.
(b) Whenever a proportionate part of the Capital Account Net
Income or Capital Account Net Losses is allocated to a Partner, every item of
income, gain, loss, deduction or credit entering into the computation of such
Capital Account Net Income or Capital Account Net Losses or arising from the
transactions with respect to which such profits or losses were realized shall
be credited or charged to such Partner; provided, however, that any gain
treated as ordinary income pursuant to Sections 1245 or 1250 of the Code, or
any successor or similar provision thereto ("recapture income") shall be
allocated to the Partners who were allocated the corresponding depreciation
deductions.
14
<PAGE> 20
(c) If a Partner's Partnership Interest is increased or
decreased during any Fiscal Year by transfer to a third party or otherwise,
Capital Account Net Income and Capital Account Net Losses attributable to such
Partnership Interest for such Fiscal Year shall be apportioned between the
transferor and transferee or computed as to such Partners, as the case may be,
ratably on a daily basis, unless the Partners agree on another method permitted
under the Code and applicable Treasury Regulations.
4.2. Allocation of Capital Account Net Income and Capital
Account Net Losses.
(a) Capital Account Net Income equals the sum of U.S. GAAP
Net Income and Capital Account Adjustments and shall be allocated to the
Partners as follows:
(i) U.S. GAAP Net Income shall be allocated 99.375% to Raynet
and .625% to EHU until the cumulative amount of U.S. GAAP Net Income
allocated to Raynet pursuant to this Section 4.2(a)(i) equals from
time to time, the cumulative amount distributed to Raynet pursuant to
Section 5.1(b)(i), and thereafter in accordance with each Partner's
respective Percentage Interest; and
(ii) Capital Account Adjustments shall be allocated according
to each Partner's respective Percentage Interest.
(b) Capital Account Net Losses equals the sum of U.S. GAAP
Net Losses and Capital Account Adjustments and shall be allocated to the
Partners as follows, and in the following order:
(i) U.S. GAAP Net Losses shall be allocated 100% to EHU until
the amount allocated to EHU pursuant to this Section 4.2(b)(i) equals
51% of the Stub Period Loss, if
15
<PAGE> 21
any, but in no event shall the amount allocated to EHU pursuant to
this Section 4.2(b)(i) exceed 51% of the Maximum Agreed Loss;
(ii) With respect to the 1995 Fiscal Year, U.S. GAAP Net
Losses shall be allocated 100% to EHU until the amount allocated
pursuant to this Section 4.2(b)(ii) equals 51% of the amount
determined by subtracting the Stub Period Loss, if any, from the
Maximum Agreed Loss, and thereafter 100% to Raynet;
(iii) With respect to the 1996 Fiscal Year, U.S. GAAP Net
Losses shall be allocated (A) according to each Partner's respective
Percentage Interest until the amount allocated pursuant to this
Section 4.2(b)(iii) equals $19,607,843 (plus the sum of Restructuring
Costs and Third-Party Interest incurred during the 1996 Fiscal Year),
(B) thereafter 100% to Raynet until the amount allocated pursuant to
this Section 4.2(b)(iii) equals $29,607,843 (plus the sum of
Restructuring Costs and Third-Party Interest incurred during the 1996
Fiscal Year) (51% of the amount, if any, allocated pursuant to this
clause B is the "Incremental Loss for 1996"), and thereafter according
to each Partner's respective Percentage Interest;
(iv) After the 1996 Fiscal Year, U.S. GAAP Net Losses shall
be allocated in accordance with each Partner's respective Percentage
Interest; and
(v) For all periods including and following the date of the
Closing, Capital Account Adjustments shall be
16
<PAGE> 22
allocated according to each Partner's respective Percentage Interest.
(c) Notwithstanding Sections 4.2(a) and (b) hereof, for Tax
purposes but not for purposes of crediting or charging Capital Accounts,
depreciation or gain or loss realized by the Partnership with respect to any
property that was contributed to the Partnership or that was held by the
Partnership at a time when the Book Value of the Partnership Assets was
adjusted, in a manner consistent with Treasury Regulations Section
1.704-1(b)(2)(iv)(g), for allocations pursuant to Section 4.3 hereof, shall be
allocated between the Partners in a manner which takes into account the
differences between the adjusted basis for federal income tax purposes to the
Partnership of its interest in such property and the Agreed Value of such
interest at the time of its contribution or revaluation. In making such
allocations the Partnership shall use the method permitted by the Code and
Treasury Regulations which has the effect of minimizing the differences, if
any, between (i) the Capital Account Net Income or Capital Account Net Losses
allocated to EHU and (ii) the income or losses allocated to EHU for federal
income tax purposes. In particular, (i) depreciation, amortization, and other
cost recovery deductions reflecting the excess of the tax basis of the
Contributed Assets over their Agreed Value at the date of the Closing shall be
allocated to Raynet; (ii) Raynet's share of gain or loss upon a taxable
disposition of any or all of the Contributed Assets shall reflect such excess
tax basis, adjusted to account for allocations of deductions pursuant to clause
(i); and (iii) corresponding treatment shall apply in
17
<PAGE> 23
respect of property acquired by the Partnership to the extent that the tax
basis of such property reflects, in whole or in part, such excess tax basis of
any Contributed Property.
4.3. Adjustment to Capital Accounts. Immediately before any
distribution pursuant to Section 10.2(c)(iii) hereof, the Partnership shall
revalue the Capital Accounts by allocating gain or loss for Capital Account
purposes as if the Partnership sold all of its assets for Fair Market Value.
Such gain or loss shall be included in Capital Account Net Income or Capital
Account Net Losses and shall be allocated in accordance with Section 4.2 of
this Agreement.
ARTICLE V
DISTRIBUTIONS
5.1. Distributions. (a) The Partnership shall make the
distributions required pursuant to Section 3.2(c) and (d), if any.
(b) After the distributions made pursuant to Section 5.1(a)
the Partnership shall make distributions in respect of each Fiscal Year to the
Partners as follows:
(i) First, to Raynet in an amount equal to 100% of the
Partnership's U.S. GAAP Net Income for such Fiscal Year until the sum
of the amounts distributed to Raynet pursuant to this Section
5.1(b)(i) equals the Target Amount; provided, however , that no amount
shall be distributed pursuant to this Section 5.1(b)(i) with respect
to U.S. GAAP Net Income attributable to any period after the Target
Date;
18
<PAGE> 24
(ii) Thereafter, at such times and in such amounts as shall
be determined by the Board of Managers, to each Partner in proportion
to such Partner's Percentage Interest. Distributions for each Fiscal
Year shall be made as promptly as practicable after the end of such
Fiscal Year but in no event later than 45 days after the end of such
Fiscal Year.
5.2. Distributions on Liquidation. Any distribution pursuant
to Section 10.2(c)(iii) hereof shall be made to each Partner first in an amount
equal to the positive balance in each Partner's respective Capital Account
after allocation of any Capital Account Net Income or Capital Account Net
Losses (including any gain or loss resulting from the allocation provided by
Section 4.3 hereof) for the period ending on the date of such distribution, and
thereafter in accordance with each Partner's respective Percentage Interest.
ARTICLE VI
ACCOUNTING AND RECORDS
6.1. Books and Records. The Partnership shall keep or cause
to be kept at the Partnership's principal office separate books of account for
the Partnership (including a record as to each Partner's Capital Account) which
shall show a true, accurate and complete record of each transaction of the
Partnership, including but not limited to, all costs and expenses incurred, all
charges made, all credits made and received and all income derived in
connection with the operation of the business of the Partnership, each in
accordance with U.S. generally accepted accounting principles consistently
applied, and copies of all
19
<PAGE> 25
product sale, lease and license contracts and the names of all customers. The
Partnership shall also keep or cause to be kept at the Partnership's principal
office separate books of account for the Partnership which shall show the same
items in accordance with federal income tax accounting principles. Each
Partner or its duly authorized representative shall, at its sole expense, have
the right, at any time upon reasonable notice to the Partnership, to examine,
copy and audit (including by an independent accounting firm) the Partnership's
books and records during normal business hours. The Partnership's books and
records shall be filed and preserved for a period of at least seven years or
such longer period as required by any applicable law. Raynet may share
information with BellSouth Corporation and/or Raychem's lenders.
6.2. Financial Reports. (a) The Partnership shall prepare
and deliver to each Partner as promptly as practicable, and in any event not
later than twelve days after the end of each fiscal month, a statement
detailing net income or loss for the Partnership and an analysis of Capital
Account activity for that month. The Partnership shall prepare and deliver to
each Partner as promptly as practicable, and in any event not later than 30
days after the close of each fiscal quarter and 45 days after the end of each
Fiscal Year, a financial report of the business and operations of the
Partnership, prepared in accordance with U.S. GAAP, relating to such period
(subject in the case of interim statements to normal year-end audit adjustments
and other adjustments noted therein), including a balance sheet, a statement of
income (loss) and a statement of Partners' capital
20
<PAGE> 26
(deficiency), which, in the case of the report furnished after the close of the
Fiscal Year, shall be audited by the Auditors. The report furnished after the
close of the Fiscal Year shall include a statement of cash flows and
allocations to the Partners of the Partnership's taxable income, gains, losses,
deductions, credits and the balance in each Partner's Capital Account. As
promptly as practicable, and in any event within 20 days after the close of
each fiscal quarter, and 45 days after the close of the Fiscal Year, the
Partnership shall prepare and deliver to Raynet sufficient financial
information and analysis to allow Raychem to satisfy reporting requirements of
the Securities Exchange Commission, including without limitation, the
requirements of Management's Discussion and Analysis.
(b) The Partnership shall also prepare and deliver to EHU
after the close of each fiscal quarter and the end of each Fiscal Year a
financial report of the Partnership prepared in accordance with the "FIRE"
financial reporting system of Ericsson, which, in the case of the report
furnished after the end of the Fiscal Year, shall thereafter be audited by the
Auditors. Such reports shall be delivered to EHU in accordance with the normal
reporting schedule established by Ericsson.
(c) The Partnership shall provide to the Partners on a
quarterly basis forecasts of operating results and cash flows in the same
format as Ericsson uses for its other U.S. subsidiaries.
6.3. Tax Returns and Information. (a) EHU is hereby
designated "Tax Matters Partner", as defined in the Code, for the Partnership
and shall be so designated in each federal information return filed on behalf
of the Partnership. The Tax
21
<PAGE> 27
Matters Partner shall not be liable to the Partnership or any other Partner for
any act or omission taken or suffered by it in such capacity in good faith in
the belief that such act or omission is in or is not opposed to the best
interests of the Partnership; provided, however, that such act or omission does
not constitute fraud, a willful violation of law or a willful violation of this
Agreement.
(b) The Board of Managers shall cause to be prepared all
income and other required federal, state, local and foreign tax returns for the
Partnership, shall cause the same to be sent (together with related work
papers) to each Partner for review at least 30 days prior to filing and shall
cause the same to be timely filed with extension by the appropriate authorities
but not beyond December 15th (unless due without extension after December
15th), unless otherwise agreed by all Partners.
(c) Within 20 days of receipt, the Tax Matters Partner (or
any other Partner receiving such notification) shall give to the other Partner
written notice of the receipt from any taxing authority of any notification of
an audit or investigation of the Partnership and shall keep the other Partner
fully informed as to the status of any audit of the Partnership's tax affairs
and all proceedings in connection therewith. Each Partner shall have the right
to (i) participate in any audit or administrative proceeding relating to the
determination of any item of taxation relating to the Partnership and (ii)
participate in any discussions with the Internal Revenue Service relating to
any item of Partnership taxation. The Tax Matters Partner shall not enter into
any settlement or compromise of any issue related to
22
<PAGE> 28
any item of Partnership taxation or agreement extending the statute of
limitations on behalf of Raynet without the consent of Raynet. In the event
that a Partner notifies the Tax Matters Partner of its intention to represent
itself or to obtain its own tax counsel or accountants to represent it in
connection with any examination of Partnership items affecting that Partner,
any related proceeding or any proposed adjustment relating thereto, the Tax
Matters Partner shall supply that Partner and its tax counsel and accountants,
at that Partner's sole cost and expense, with copies of all written
communications received by the Tax Matters Partner with respect thereto,
together with such other information and documents as they may reasonably
request in connection therewith, and the Tax Matters Partner shall cooperate
with that Partner and its tax counsel and accountants, at that Partner's sole
cost and expense, in connection with any separate representation.
(d) Except as otherwise specifically provided herein, the
Partnership shall make any and all tax accounting and reporting elections and
adopt such procedures as the Board of Managers may from time to time determine.
In the event that the Board of Managers shall be unable to agree on any such
election within 10 days after the issue is first presented to the Board of
Managers, the determination shall be promptly referred to the Auditors who
shall be instructed to make the determination within 10 days thereafter. The
Auditors' determination shall be final and binding on the Partners and the
Partnership. In making such determination, unless otherwise agreed by the
Partners, the Auditors shall be instructed to make such elections which have
23
<PAGE> 29
the effect of accelerating the present value of deductions or deferring the
present value of income for tax purposes.
6.4. Fiscal Year. The Fiscal Year of the Partnership shall
be the period of 12 calendar months ending on June 30 in each year, unless
required to be changed by the Code or otherwise agreed pursuant to Section 7.3
hereof.
6.5. Withholdings. Each Partner hereby agrees that,
notwithstanding anything herein to the contrary, the Partnership shall be
entitled, upon advice of counsel and after consultation with the affected
Partner, to withhold from such Partner and pay over to the Internal Revenue
Service or any foreign, state or local governmental taxing authority any sums
required and necessary to be withheld to prevent any liability or contingent
liability on the part of the Partnership or any Partner, and the amounts
withheld and paid over shall be deemed to have been distributed to such Partner
from whom any such amounts have been withheld.
ARTICLE VII
MANAGEMENT OF THE PARTNERSHIP
7.1. Board of Managers. (a) The business and affairs of the
Partnership shall be managed under the direction of the Board of Managers.
(b) The Board of Managers shall at all times consist of not
less than five nor more than seven Members, the number to be established by the
unanimous joint election of EHU and Raynet prior to the first meeting of the
Board. In the absence of unanimity, the number of Members shall be five. A
majority of
24
<PAGE> 30
the Members shall be EHU Members and the remainder shall be Raynet Members.
Each Member shall serve until his or her resignation, removal by his or her
appointor or death.
(c) Any Member who expects to be unable to attend a meeting
of the Board of Managers because of absence, illness or otherwise may appoint
any Person to be a Deputy Member to act in his or her stead, and such appointee
while he or she holds office as Deputy Member shall, in the event of absence
therefrom of his or her appointor, be entitled to attend meetings of the Board
of Managers and to vote thereat and to do, in the place and stead of his or her
appointor, any other act or thing which his or her appointor is permitted or
required to do by virtue of being a Member as if the Deputy Member were the
appointor, other than appointment of another Deputy Member. Each Deputy Member
shall vacate office ipso facto if and when his or her appointor ceases to be a
Member or removes the appointee from office. Any appointment or removal
hereunder of a Deputy Member shall be effected by notice in writing signed by
the Member making the same.
(d) Vacancies on the Board of Managers arising for any reason
shall be filled as soon as practicable by the Partner that appointed the Member
previously holding the position, and each Partner will use its best efforts to
fill any vacancy within thirty (30) days. The Partner electing the replacement
Member shall promptly notify the other Partner of the name of the new Member.
(e) Either Partner may remove, for any reason, at any time,
any Member appointed by it (but not any Member appointed by
25
<PAGE> 31
the other Partner), and no action by the other Partner shall be necessary for
such removal.
7.2. Meetings, Quorum and Voting. (a) At least four regular
meetings of the Board of Managers shall be held in each Fiscal Year, at such
times and places as shall be established by the Board of Managers. The times
and places of such meetings shall be scheduled prior to the beginning of each
fiscal year. Special meetings of the Board of Managers may be called by any
Member upon fourteen days' notice, specifying the purpose or purposes of the
meeting, to all Members. The Board of Managers may take action by unanimous
written consent. Meetings may be held by telephone if all members
participating in the meeting are able to hear and be heard by each other.
Notice of any meeting may be waived by a Member at any time, whether before or
after the meeting, and shall be deemed waived by any Member who attends or
participates by telephone in the meeting. Materials to be considered at any
meeting of the Board shall be distributed to the Members at least seven days
prior to the meeting, and draft minutes of each meeting shall be distributed to
the Members within thirty days of the meeting.
(b) Two Members, including at least one EHU Member and one
Raynet Member, shall constitute a quorum for the transaction of business at any
meeting of the Board of Managers; provided, however, that if a Raynet Member or
Deputy Raynet Member shall fail to be present at two consecutive regular
meetings of the Board of Managers in respect of which due notice is given, the
presence of a Raynet Member or Deputy Raynet Member shall not be necessary for
a quorum at the next succeeding regular meeting.
26
<PAGE> 32
At each meeting, the EHU Members present shall be entitled to cast collectively
a total number of votes equal to EHU's Percentage Interest, and the Raynet
Members present shall be entitled to cast collectively a total number of votes
equal to Raynet's Percentage Interest. The manner in which such votes are cast
shall be determined by a majority of the EHU Members or Raynet Members, as the
case may be, who are present at the meeting. Except as provided in Section 7.3
hereof, the approval of a majority of the votes cast at a meeting of the Board
of Managers at which a quorum is present or unanimous written consent shall be
required for a decision of the Board of Managers.
(c) The Board of Managers shall elect one of the EHU Members
as Chairman of the Board of Managers.
(d) The Board of Managers may establish such committees as it
deems appropriate and each Partner shall be entitled to be represented on any
such committee in the same proportion as it is represented on the Board of
Managers.
7.3. Unanimous Decisions. Notwithstanding any other
provisions of this Agreement, the following actions shall not be taken or
agreed to be taken by the Partnership unless approved by all of the votes cast
at a meeting of the Board of Managers at which a quorum is present or by the
unanimous written consent of all Members:
(a) any merger or consolidation involving the Partnership;
27
<PAGE> 33
(b) any sale, pledge or acquisition of any assets, other than
in the ordinary course of business or as otherwise contemplated in
the Annual Budget;
(c) any request for additional Capital Contribution to be
made by EHU and Raynet, unless required in accordance with Section
3.2(c), (d) or (e);
(d) any material changes in or additions to the business of
the Partnership from the scope of business set forth in Article II;
(e) any Capital Expenditures or development expenses
exceeding by more than 10% the amounts contemplated in the Annual
Budget or $1 million, whichever is less;
(f) any incurrence of indebtedness for borrowed money or
indebtedness evidenced by notes, bonds, debentures or similar
instruments constituting obligations of the Partnership in excess
of $1 million in the aggregate at any time outstanding, other than
borrowings under lines of credit previously approved by the Board
of Managers pursuant to this Section 7.3(f);
(g) except as provided by Section 5.1 hereof, any
distribution to EHU or Raynet;
(h) the approval of the Business Plan or the Annual Budget or
any material deviations therefrom, or the incurrence of any
Restructuring Costs;
(i) determination of compensation, benefits, perquisites and
other incentives for executive officers of the Partnership, other
than in the ordinary course of business consistent with past
practice or in accordance with
28
<PAGE> 34
the standards prevailing in Ericsson's subsidiaries in the United
States;
(j) any material transaction or agreement between the
Partnership and any Partner (or its Affiliates);
(k) the appointment or change of the Auditors for the
Partnership;
(l) the adoption or amendment of the Statement of Accounting
Principles;
(m) the admission of additional Partners to the Partnership;
(n) the voluntary termination or dissolution of the
Partnership;
(o) any change in the Partnership's Fiscal Year except as
required by the Code;
(p) the determination of the times and places of regular
meetings of the Board of Managers; and
(q) the filing of a voluntary petition under the Bankruptcy
Code.
In the event that the Partnership proposes to undertake to
admit an additional Partner or Partners, Raynet shall be permitted to provide
written notice to BellSouth Corporation of the Partnership's intention to do
so, describing the price and terms of such proposed admissions and identifying
the officers of the Partnership who may be contacted regarding such matters and
their respective mailing addresses.
7.4. Officers of the Partnership. (a) The officers of the
Partnership shall consist of the Chief Executive Officer and such other
officers as the Board of Managers may appoint from
29
<PAGE> 35
time to time. Each officer shall have such powers and authority and shall
serve for such term as shall be established by the Board of Managers.
(b) The Board of Managers will adopt guidelines specifying
those matters that will be subject to the operational control of the executive
officers of the Partnership and those that will require action by the Board of
Managers.
(c) Subject to subsection (b) above, the day-to-day
operations of the Partnership will be managed by the executive officers of the
Partnership under the direction of the Chief Executive Officer, who will report
directly to the Board of Managers.
7.5. Business Plan; Accounting Principles. (a) The
Partnership shall adopt and maintain in effect at all times a Business Plan
(the "Business Plan") setting forth the plans for the development of the
business of the Partnership. The Business Plan covering the five-year period
beginning July 1, 1994 shall be agreed upon by the Partners prior to the
execution of this Agreement and shall be presented to and adopted by the Board
of Managers.
(b) Hereafter, a proposed updated Business Plan, in scope and
detail comparable to that of the initial Business Plan, shall be prepared
during each year under the direction of the Chief Executive Officer and the
financial officers of the Partnership. The updated Business Plan prepared in
1995 shall cover the three-year period beginning January 1, 1996. Each updated
Business Plan shall be submitted to each Member no later than ten business days
prior to the regular Board of Managers
30
<PAGE> 36
meeting held in the second quarter of the fiscal year preceding the period to
which such updated Business Plan relates, for consideration at such meeting.
The Board of Managers shall vote upon the updated Business Plan (including any
modifications required by it) at such meeting. Upon approval of the initial
Business Plan and each updated Business Plan by the Board of Managers, the
Partnership shall implement and shall conduct its affairs in accordance with
such initial or updated Business Plan (as it may be duly amended).
(c) The Partnership shall adopt and maintain in effect at
all times a Statement of Accounting Principles specifying the Partnership's
standards and elections in applying U.S. generally accepted accounting
principles for Partnership accounting purposes, including without limitation
the determination of U.S. GAAP Net Income or Loss. The Partnership shall adopt
as its initial Statement of Accounting Principles a statement of the U.S.
generally acceptable accounting principles used by Raynet at June 30, 1994.
7.6. Annual Budget. A proposed Annual Budget for the
Partnership (the "Annual Budget"), in scope and detail agreed to by the
Partners, but in any event in at least the scope and detail set forth in the
initial Annual Budget to be agreed to by the Partners prior to the execution of
this Agreement and adopted by the Board of Managers, for each calendar year
commencing after July 1, 1995, shall be prepared (consistent with the Business
Plan as it relates to such year) under the direction of the Chief Executive
Officer and financial officers of the Partnership and submitted to each Member
no later than ten days prior to the
31
<PAGE> 37
regular Board of Managers meeting held in the fourth quarter of the calendar
year prior to the calendar year for which such Annual Budget applies. The
Board of Managers shall vote upon the Annual Budget for each calendar year
(including any modifications required by it) during the fourth quarter of the
preceding calendar year. Upon approval by the Board of Managers, the
Partnership shall implement and shall conduct its affairs in accordance with
such Annual Budget.
7.7. Bank Accounts. The Partnership shall maintain bank
accounts in such banks as the Board of Managers may designate exclusively for
the deposit and disbursement of all funds of the Partnership. All funds
received by the Partnership shall be promptly deposited in such accounts.
7.8. Insurance. The Partnership shall be insured on its own
behalf in the Ericsson insurance program with insurers who maintain an A.M.
Best rating of "A" or better for all property, liability and workers'
compensation insurance and such other insurance as shall be required under
applicable mortgages, leases, agreements and other instruments and statutes, or
as determined by the Board of Managers.
ARTICLE VIII
TRANSFER OF PARTNERSHIP INTERESTS
8.1. Restrictions on Transfer. Except as otherwise set forth
in this Article VIII, neither Partner may Transfer or subject to any
Encumbrance all or any part of its Partnership Interest, except with the prior
written consent of the other Partner or as otherwise permitted by the terms of
this Agreement,
32
<PAGE> 38
and any attempt so to Transfer or subject to any Encumbrance any Partnership
Interest shall be void.
8.2. Intercompany Transfers. Each of EHU and Raynet may
Transfer all (but not less than all) of its Partnership Interest provided that
(i) the transferee is a direct or indirect subsidiary of Ericsson or Raychem,
as the case may be, and at least 80 percent of the total outstanding voting
securities of such subsidiary is held directly or indirectly by Ericsson or
Raychem, as the case may be, (ii) the transferee agrees in writing to be bound
by the terms of this Agreement to the same extent as the transferor, and (iii)
the transfer would not result in a termination of the Partnership under Section
708 of the Code. In the event that such a transfer is proposed, the transferor
shall notify the other Partner of the identity of such transferee and provide
such other information concerning the proposed transfer as the other Partner
may reasonably request. In the event a transfer is prohibited because it would
cause a termination of the Partnership under Section 708 of the Code, the
Partner that proposed such transfer may make it in two stages at least 12
months, but not more than 13 months, apart so long as such transfer does not
cause a termination. No transfer of a Partnership Interest by either Partner
in accordance with this Section 8.2 shall release the transferring Partner from
any of its obligations or liabilities under this Agreement, and it shall remain
jointly and severally liable for all obligations and liabilities of the
transferee hereunder. Any permitted transferee pursuant to this Section 8.2
shall have the same rights and obligations as the applicable transferor.
33
<PAGE> 39
8.3. Transfers to Unaffiliated Persons; Right of First
Refusal. After July 1, 1999, each Partner may Transfer all (but not less than
all) of its Partnership Interest in accordance with this Section 8.3. In the
event either Partner (the "Selling Partner") desires to Transfer its
Partnership Interest (the "Offered Partnership Interest") to a third party (the
"Third Party Offeree"), it shall first offer to sell the Offered Partnership
Interest to the other Partner (the "Remaining Partner"), at a price and upon
terms no less favorable to the Remaining Partner than those offered by such
Third Party Offeree, by giving written notice (the "Offer Notice") to the
Remaining Partner of its desire to Transfer the Offered Partnership Interest,
the identity of such Third Party Offeree and the material terms of the proposed
Transfer of the Offered Partnership Interest. Within 30 days after receipt of
the Offer Notice, the Remaining Partner shall notify the Selling Partner in
writing as to whether it accepts or rejects such offer. In the event that the
Remaining Partner accepts such offer, it or its designee shall consummate the
acquisition of the Offered Partnership Interest no later than 180 days after
notifying the Selling Partner of its acceptance thereof. In the event that the
Remaining Partner rejects such offer, the Selling Partner shall have the right
to Transfer the Offered Partnership Interest to such Third Party Offeree
pursuant to the terms set forth in the Offer Notice unless within 20 days after
receipt of the Offer Notice, the Remaining Partner notifies the Selling Partner
in writing that it is withholding its consent (which consent shall not be
unreasonably withheld) to the Transfer of the Offered
34
<PAGE> 40
Partnership Interest to such Third Party Offeree. The withholding of consent
shall be deemed to be reasonable if, and only if, it is based upon a reasonable
assessment of the financial strength of the Third Party Offeree. If the Third
Party Offeree shall not have consummated the acquisition of the Offered
Partnership Interest within 180 days following the rejection of such offer by
the Remaining Partner, then the provisions of this Section 8.3 shall again
apply.
8.4. Call Options.
(a) Raynet hereby grants to EHU the irrevocable option (the
"First Call Option"), to purchase and acquire from Raynet (or any transferee of
Raynet), on the terms set forth herein, all (but not less than all) of Raynet's
Partnership Interest, at an aggregate purchase price equal to the sum of (a)
$139,331,500 and (b) 51% of the Target Amount less (c) 51% of any distributions
previously made to Raynet pursuant to Section 5.1(b)(i). EHU may exercise the
First Call Option at any time during the period beginning at the second
anniversary of the Closing Date and ending on the 21st day thereafter by giving
notice in writing to Raynet, which notice shall specify a purchase date not
more than 30 days after the date of such notice. Payment shall be made in two
installments: at least one-half on the purchase date and the remainder on the
third anniversary of the Closing Date. The amount of the second installment
shall accrue interest at the prime rate, as published in The Wall Street
Journal, or its equivalent.
(b) Raynet hereby grants to EHU the irrevocable option (the
"Second Call Option") to purchase and acquire from Raynet
35
<PAGE> 41
(or any transferee of Raynet), on the terms set forth herein, all (but not less
than all) of Raynet's Partnership Interest, at an aggregate purchase price (the
"Option Price") determined as set forth in Section 8.6. The Second Call Option
may be exercised by EHU at any time after July 1, 1999 by written notice (which
shall be irrevocable) of such exercise to Raynet. The Option Price shall be
determined and the purchase shall occur as provided in Section 8.6.
8.5. Put Option. EHU hereby grants to Raynet the
irrevocable option (the "Put Option") to require EHU to purchase and acquire
from Raynet (or any transferee of Raynet), on the terms set forth herein, all
(but not less than all) of Raynet's Partnership Interest at the Option Price.
The Put Option may be exercised by Raynet at any time after July 1, 1999 by
written notice (which shall be irrevocable) of such exercise to EHU. The
Option Price shall be determined and the purchase shall occur as provided in
Section 8.6
8.6. Determination of Option Price. In the event of any
exercise by EHU of the Second Call Option or by Raynet of the Put Option, EHU
and Raynet will use their best efforts to agree upon a valuation for the total
equity of the Partnership. If EHU and Raynet do not agree on such valuation
following three meetings during the 60 days after notice of exercise has been
given, then the Chief Executive Officers of Ericsson and Raychem, or their
personal designates (who shall be senior corporate executives), shall meet on
at least three occasions during the next succeeding 30 day period to attempt to
reach an agreement as to such valuation, which shall be based on the principles
36
<PAGE> 42
outlined below. If agreement is not reached after the above 60 and 30 day
periods, then each Chief Executive Officer will present to the other a final
valuation signed by the Chief Executive Officer. The Chief Executive Officers
will then appoint a mutually agreeable investment bank, commercial bank or
other appraiser of recognized international standing with experience in the
valuation of United States business enterprises, which will serve as the
appraiser (at the joint expense of EHU and Raynet). The appraiser will have a
60 day period to value the equity of the Partnership as of the date of notice
of exercise consistent with the principles outlined below and shall determine
which of the two final valuations is closest to the fair market value of the
Partnership in the judgment of the appraiser, and such party's final valuation
shall be deemed to be the fair market value of the Partnership. The Option
Price shall be the fair market value of the Partnership as so determined
multiplied by the Percentage Interest of Raynet plus any amount determined
pursuant to paragraph (c) below. The appraiser shall follow the following
principles in determining the value of the Partnership Interest being sold:
(a) The appraiser shall determine the valuation of 100% of
the equity of the Partnership.
(b) Subject to (c) below, the purchasing partner shall pay an
amount equal to the product arrived at by multiplying the value in
(a) above times the percentage ownership of the selling partner;
i.e., no minority discount shall be taken.
(c) If, at the time of the valuation, the cumulative income
of the Partnership has not reached the Target Amount,
37
<PAGE> 43
the appraiser shall determine the fair market value of the Target
Amount, based upon the probability that the income of the Partnership
will reach the Target Amount before the Target Date and applying an
appropriate discount rate, and the payment amount calculated pursuant
to (b) above shall be adjusted by adding 51% of the fair market value
of the Target Amount to the amount payable to Raynet.
(d) The business shall be valued taking into account the
benefits of any services provided by, any commercial relationships
with, or any technology licensed between the business and either of
the partners. The services, products or technology in question shall
be regarded as being available on a continuing basis, beyond the
purchase of the selling partner's equity. In no event shall the
commercial terms and conditions, termination provisions or transfer
rights or restrictions related to the specific services, products or
technologies by and between the partners and the business (however
limited in duration) be deemed to diminish the value of the business
provided, however, that the partners may agree in writing during the
life of the business to exclude certain services from the valuation
process.
(e) The appraiser shall be granted complete access to the
books, records and personnel of the business, and to such additional
information as it reasonably requests.
(f) The closing shall be held within 60 days of the date of
the appraiser's determination. The purchasing party may decide, at
its sole election, to pay the purchase price
38
<PAGE> 44
either at the closing or in five equal annual principal installments:
(i) the unpaid portion shall accrue interest at a
variable rate equal to the prime rate as published in The Wall
Street Journal from time to time;
(ii) prepayment may be made at any time without
penalty; and
(iii) the balance shall be paid in full at the end
of the fifth year.
(g) The parties will cooperate in structuring the purchase
transaction so as to maximize any tax and financial benefits
to both parties.
ARTICLE IX
DEFAULTS
9.1. Events of Default. An "Event of Default" shall be
considered to have occurred with respect to a Partner (the "Defaulting
Partner") if:
(a) Such Partner fails to make a Capital Contribution
required of it pursuant to Section 3.2 hereof and such failure
continues for five days after such Partner has been given written
notice thereof by the other Partner or by the Board of Managers;
(b) Such Partner fails to perform or violates any other
material term or condition of this Agreement (other than as set forth
in subsection (a) above) and such failure or violation continues for
20 days after such Partner has been given written notice thereof by
the other Partner or
39
<PAGE> 45
the Board of Managers; provided that nothing herein shall limit the
Defaulting Partner's obligation to pay damages for such breach during
such cure period; or
(c) Such Partner otherwise causes the dissolution of the
Partnership in contravention of the terms of this Agreement.
9.2. Remedies Upon Default. (a) Upon the occurrence and
during the continuance of an Event of Default, the non- defaulting Partner (the
"Non-Defaulting Partner") may elect:
(i) to seek to enjoin such default or to obtain specific
performance of the Defaulting Partner's obligations; or
(ii) to terminate the Partnership as provided in Section 10.1
hereof, in which event the affairs of the Partnership shall be wound
up as provided in Section 10.2 hereof.
(b) The election of a remedy specified under Section 9.2(a)
hereof shall be made by giving notice (a "Default Notice") to the Defaulting
Partner at any time that the Event of Default has occurred and is continuing.
If an election pursuant to Section 9.2(a)(i) hereof is made to seek an
injunction, specific performance or other equitable relief and a final judgment
in such action is rendered denying such equitable remedy, then, the
Non-Defaulting Partner may elect to pursue the remedy specified in Section
9.2(a)(ii) hereof to the extent such remedy is available unless, prior to the
giving of such notice, the Defaulting Partner has cured the Event of Default in
question in full and no other Event of Default with respect to such Partner
40
<PAGE> 46
has occurred and is continuing or the final judgment denying equitable relief
specifically held that there was no Event of Default.
(c) The election of any remedy pursuant to this Section 9.2
shall not for any purpose be deemed to be a waiver of any other remedy
available under applicable law.
(d) The Defaulting Partner shall be liable to the Partnership
and to the Non-Defaulting Partner for any and all losses, claims, damages,
costs and expenses (including, without limitation, reasonable legal fees and
tax costs) suffered or incurred by the Partnership or the Non-Defaulting
Partner as a result of such Event of Default.
ARTICLE X
TERMINATION
10.1. Termination. The Partnership shall be dissolved and
its affairs wound up pursuant to Section 10.2 hereof upon the first to occur of
any of the following events (each, an "Event of Termination"):
(a) the expiration of the term of the Partnership set forth
in Section 2.5 hereof;
(b) the execution by the Partners of a unanimous written
consent to the dissolution;
(c) the Bankruptcy of a Partner, unless such Partner's
Partnership Interest is purchased pursuant to Section 10.3 hereof or
the other Partner has consented to a continuation of the Partnership
with the successor or successors, including, without limitation, the
representative of the
41
<PAGE> 47
bankrupt Partner's estate or a court-appointed trustee, receiver or
custodian and any mediate or immediate transferee therefrom of such
bankrupt Partner admitted as a new Partner; or
(d) the election of the Non-Defaulting Partner pursuant to
Section 9.2(a)(ii) hereof to terminate the Partnership upon the
occurrence and during the continuance of an Event of Default.
10.2. Winding-up. Upon the occurrence of an Event of
Termination, the Partnership affairs shall be wound up as promptly as
practicable as follows:
(a) The Board of Managers shall cause to be prepared a
statement of the assets and liabilities of the Partnership as of the
date of dissolution.
(b) The assets of the Partnership shall be liquidated as
promptly as possible, and receivables collected, all in an orderly and
businesslike manner so as not to involve undue sacrifice. If any
assets are sold to a Partner or an Affiliate of a Partner, such assets
shall be sold at an arm's-length price and on arm's-length terms.
(c) The proceeds of liquidation under Section 10.2(b) hereof
and all other assets of the Partnership shall be applied and
distributed as follows in the following order of priority:
(i) to the payment of the debts and liabilities of
the Partnership (including all amounts owed to any Partner or
any Affiliate of a Partner) and the expenses of liquidation;
42
<PAGE> 48
(ii) to establish any reserves that the Board of
Managers, in accordance with sound business judgment, deems
reasonably necessary for any contingent or unforeseen
liabilities or obligations of the Partnership, which reserves
may be paid over to an escrow agent selected by the Board of
Managers to be held by such agent for the purpose of (x)
distributing such reserves in payment of the aforementioned
contingencies and (y) upon the expiration of such period as
the Board of Managers may deem advisable, distributing the
balance thereof in the manner provided in this Section
10.2(c);
(iii) to the Partners in accordance with Section 5.2
hereof. Any distribution pursuant to Section 5.2 hereof shall
be made no later than (A) the end of the Partnership taxable
year in which the liquidation of the Partnership occurs or (B)
if later, within 90 days after the date of such liquidation.
Distributions pursuant to Section 5.2 hereof may be
distributed to a trust established for the benefit of the
Partners for the purposes of liquidating Partnership assets,
collecting amounts owed to the Partnership and paying any
contingent or unforeseen liabilities or obligations of the
Partnership or of any Partner arising out of or in connection
with the Partnership. The assets of any such trust shall be
distributed to the Partners from time to time, in the
reasonable discretion of the Board of Managers, in the same
proportions as the amount
43
<PAGE> 49
distributed to such trust by the Partnership would otherwise
have been distributed to the Partners pursuant to this
Agreement.
(d) The Partners shall otherwise comply with all requirements
of applicable law pertaining to the winding-up of the Partnership.
10.3. Purchase Option Upon Bankruptcy of a Partner. (a)
Upon obtaining actual knowledge of the Bankruptcy of a Partner, the other
Partner shall have the right, by giving notice (a "Bankruptcy Notice") thereof,
to purchase or cause its designee to purchase the Partnership Interest of such
bankrupt Partner and continue the business of the Partnership as a successor
business entity without liquidation of the Partnership's affairs. The purchase
price payable for such Partnership Interest shall be its Fair Market Value, as
determined pursuant to Section 8.6 hereof.
(b) Upon the giving of a Bankruptcy Notice, a determination
of the Fair Market Value of the Partnership Interest of the bankrupt Partner as
of the date of the Bankruptcy Notice shall be made in accordance with Section
8.6 hereof. The non- bankrupt Partner shall, within 10 days following such
determination, notify the bankrupt Partner as to whether it or its designee
elects to purchase the bankrupt Partner's Partnership Interest.
(c) The Purchase of a Partner's Partnership Interest under
this Section 10.3 shall be consummated within 180 days of the giving of the
Bankruptcy Notice. The applicable purchase price shall be payable in cash in
immediately available funds.
44
<PAGE> 50
ARTICLE XI
MISCELLANEOUS
11.1. Relationship of Parties. Except as otherwise expressly
provided in this Agreement, no Partner, acting alone, shall have any authority
to act for, or undertake to assume any obligations or responsibility on behalf
of, any other Partner or the Partnership. No Partner shall be responsible or
liable for any indebtedness or obligation of any other Partner incurred either
before or after the execution of this Agreement, except as to those joint
responsibilities, liabilities, debts or obligations incurred or assumed
pursuant to the terms of this Agreement. Notwithstanding any other provision
of this Agreement, no Partner shall be under any obligation, as a fiduciary or
otherwise, to cause any Member appointed by it to approve or disapprove any
transaction or to take or omit to take any action, regardless of the interests
of the Partnership or the other Partner in respect of such transaction or
action, and the Members may approve or disapprove any such proposed transaction
or action in their sole and absolute discretion.
11.2. Waiver of Partition. Except as may be otherwise
provided by law in connection with the winding up, liquidation and dissolution
of the Partnership, each Partner hereby irrevocably waives any and all rights
that it may have to maintain an action for partition of any of the Partnership
assets.
11.3. Business Activities. The Partnership will supply
products and systems for narrowband, broadband and wideband networks around the
world, as set forth in the Business
45
<PAGE> 51
Plan and Mission Statements as agreed upon by the Partners from time to time.
These systems will be accompanied by appropriate network management and
operations support systems. The systems will be directed primarily at the
needs of residential and medium size business customers. EHU and Raynet and
their Affiliates shall operate the Partnership in such a way as to maximize
sales and to optimize the profit opportunities of the Partnership. Nothing
contained in the Agreement shall preclude or restrict Ericsson and its
Affiliates from engaging in any activities in which they are engaged on the
date of this Agreement and any natural extensions and outgrowths thereof that
are not included in the purposes of the Partnership.
11.4. Amendments and Waivers. This Agreement may be amended
or modified only by an instrument in writing executed by each of the Partners.
No Partner shall be released from its obligations hereunder without the written
consent of each other Partner. The observance of any terms of this Agreement
may be waived (either generally or in particular instances) by the Partner
entitled to enforce such term, but any such waiver shall be effective only if
in writing signed by the Partner against which such waiver is to be asserted.
No failure by any Partner to take any action with respect to a breach of this
Agreement or a default by another Partner shall constitute a waiver of the
former Partner's right to enforce any provision of this Agreement or to take
action with respect to such breach or default or any subsequent breach or
default. Waiver by any Partner of any breach or failure to comply with any
provision of this Agreement by another Partner shall not be construed as, or
constitute, a
46
<PAGE> 52
continuing waiver of such provisions, or a waiver of any other breach of or
failure to comply with any other provisions of this Agreement.
11.5. Entire Agreement. This Agreement, together with the
Formation Agreement and the Guarantee Agreement, constitutes the entire and
only agreements between the Parties and their Affiliates relating to the
subject matter hereof. Any and all prior arrangements, representations,
promises, understandings and conditions in connection with said matter and any
representations, promises or conditions not expressly incorporated herein or
expressly made a part hereof shall not be binding upon any Party.
11.6. Severability. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable,
such illegality, invalidity or unenforceability shall not affect any other
provisions of this Agreement.
11.7. Notices. All notices, requests, consents, demands,
instructions, approvals and other communications hereunder shall be in writing
and shall be validly given, made or served, if delivered personally or sent by
recognized courier service, telex or telefax, and shall be deemed effective
when actually received, as follows:
47
<PAGE> 53
(a) If to EHU to:
Ericsson GE Holding Inc.
1 Triangle Drive
P.O. Box 13969
Research Triangle Park,
Raleigh, North Carolina 27709
Attention: Mans Ekelof, Esq.
Fax: 919 990-7453
With copies to:
Telefonaktiebolaget L M Ericsson
Telefonplan
S-126 25 Stockholm
Sweden
Attention: Johan Brundell, Esq.
Fax: 011 46 8 719-4735
and
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Richard R. Howe, Esq.
Fax: 212 558-3588
(b) If to Raynet to:
Raynet International, Inc.
c/o Raychem Corporation
300 Constitution Drive, Mail Stop 120/8502
Menlo Park, California 94025-1164
Attention: General Counsel
Fax: 415 361-4305
With a copy to:
Heller Ehrman White & McAuliffe
525 University Avenue
Palo Alto, California 94301-1900
Attention: Sarah A. O'Dowd, Esq.
Fax: 415 324-0638
(e) If to Partnership to:
Ericsson Raynet
155 Constitution Drive
Menlo Park, California 94025-1106
Attention: Chief Executive Officer
Fax: 415 324-6668
48
<PAGE> 54
or to such other address or addresses as any party may from time to time
designate in writing delivered in a like manner to the other parties hereto.
11.8. Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument, and each fully executed counterpart shall be deemed an
original.
11.9. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF
DELAWARE; PROVIDED, HOWEVER, THAT IF SUCH STATE'S CHOICE OF LAW PROVISIONS
INDICATE THAT ANOTHER JURISDICTION'S LAWS ARE APPLICABLE, SUCH CHOICE OF LAW
PROVISIONS WILL NOT BE APPLICABLE.
11.10. Arbitration and Consultation on Disputes.
(a) The Partners agree that they shall attempt to resolve in
good faith disputes arising in connection with this Agreement. Each Partner
agrees to designate for this purpose a representative who is not a member of
the Board of Managers and who is authorized to make decisions on such Partner's
behalf. A dispute shall be referred by a Partner for consultation between the
Partners by delivering written notice to the other Partner briefly stating the
nature of the dispute and requesting consultation.
(b) In the event that, upon the expiration of sixty (60)
calendar days after receipt of the notice referred to in Section 11.10(a), the
Partners are unable to resolve the matter in dispute, and if the matter relates
to any alleged breach of this Agreement, including any dispute relating to the
49
<PAGE> 55
construction or interpretation of the rights and obligations of any Partner,
then the dispute shall be resolved in the manner provided in Section 11.10(c).
(c) Any dispute with respect to an alleged breach of this
Agreement, including any dispute relating to the construction or interpretation
of the rights and obligations of any Partner, which is not resolved through
consultation as provided in Section 11.10(a) and (b), shall be resolved by an
arbitration proceeding conducted in accordance with the following:
(i) The arbitration proceeding shall be governed by the rules
of the American Arbitration Association ("AAA");
(ii) The arbitrators shall be qualified by education and
training to pass upon the particular matter to be decided;
(iii) There shall be three (3) arbitrators, one of whom shall
be selected by the Partner seeking to initiate arbitration, one by the
other Partner and the third by the two arbitrators so selected;
(iv) The arbitration proceeding shall take place in a
location in the United States selected by majority vote of the
arbitrators;
(v) The Partners shall agree in advance as to the manner in
which the arbitration panel shall promptly hear witnesses and
arguments, review documents and otherwise conduct the arbitration
proceedings. Both Partners shall receive notice of the subject of the
arbitration, and the arbitration shall not be binding on the Partners
with
50
<PAGE> 56
respect to any matters not specified in such notice. Should the
Partners fail to reach an agreement as to the conduct of such
proceedings, the arbitration panel shall formulate its own procedural
rules and promptly commence the arbitration proceedings;
(vi) The arbitration proceedings shall be conducted as
expeditiously as possible with due consideration for the complexity of
the dispute in question. The arbitration panel shall issue its
decision in writing within forty-five (45) calendar days from the
hearing of final arguments by the Partners;
(vii) The arbitration award shall be given in writing and
shall be final and binding on the Partners with respect to the subject
matter identified in the notice called for by Section 11.10(c)(v), and
not subject to any appeal and shall deal with the question of costs of
arbitration;
(viii) Judgment upon the award may be entered in any court
having jurisdiction or, application may be made to such court for a
judicial recognition of the award or an order of enforcement thereof,
as the case may be;
(ix) The Partners shall not submit a dispute subject to this
Section 11.10(c) to any federal, state, local or foreign court or
arbitration association except as may be necessary to enforce the
arbitration procedures of this Section 11.10(c) or to enforce the
award of the arbitration panel. If court proceedings to stay
litigation or compel arbitration under the Federal Arbitration Act
(Title 9, U.S.C.) or similar state or foreign legislation are
51
<PAGE> 57
necessary, the Partner who unsuccessfully opposes such proceedings
shall pay all associated costs, expenses and attorneys' fees which are
reasonably incurred by the other Partner; and
(x) The Partners shall keep confidential the arbitration
proceedings and the terms of any arbitration award, except as may be
otherwise required by law.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers as of the day
and year first above written.
RAYNET INTERNATIONAL, INC.
By: /s/ R. G. KELSCH
-----------------------------------
Name: R. G. Kelsch
Title: President
ERICSSON GE HOLDING INC.
By: /s/ JOHAN BRUNDELL
-----------------------------------
Name: Johan Brundell
Title: Vice President and Attorney-in-fact
52
